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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-K

[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 For the fiscal year ended March 31, 2006

                                       Or

[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the transition period from       to

                        Commission File Number 000-21465

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

                MISSOURI                                          43-0988805
    (State or other jurisdiction of                            (I.R.S. Employer
     incorporation or organization)                          Identification No.)
   11432 LACKLAND ROAD, ST. LOUIS, MO                               63146
(Address of principal executive offices)                          (Zip Code)

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

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [X] Yes [ ] No

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No

Persons who respond to the collection of information contained in this form are
not required to respond unless the form displays a currently valid OMB control
number.

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. [ ]

Indicate by check mark whether the registrant is a large accelerated filer,
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [X]   Accelerated filer [ ]   Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No

As of September 30, 2005, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $699 million. 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 May 30, 2006, there were 32,371,398 shares of the registrant's Common
Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the registrant's 2006 Annual
Meeting of Shareholders, which definitive proxy statement will be filed within
120 days of the end of the registrant's fiscal year, are incorporated by
reference into Part III of this Annual Report on Form 10-K.

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                                     PART I

FORWARD-LOOKING STATEMENTS

This report contains certain statements regarding future results, performance,
expectations, or intentions that may be considered forward-looking statements
("forward-looking statements") within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements relate to, among other things,
business trends and prospects, potential future profitability, revenue growth
and cash flows, including without limitation, forward-looking statements under
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations." All statements other than statements of historical facts
included in this Form 10-K are forward-looking statements. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct. Actual results could differ materially from those projected in the
forward-looking statements as a result of risks facing us. Such risks include,
but are not limited to:

      (1)   the risk that our revenues from The Work Number may fluctuate in
            response to changes in certain economic conditions such as interest
            rates and employment trends;

      (2)   risks associated with our ability to prevent breaches of
            confidentiality or inappropriate use of data as we perform
            large-scale processing of verifications;

      (3)   risks associated with our ability to maintain the accuracy, privacy
            and confidentiality of our clients' employee data;

      (4)   risks related to our ability to increase the size and range of
            applications for The Work Number database and to successfully market
            current and future services and related to our dependence on third
            party providers to do so;

      (5)   the risk of interruption of our computer network and telephone
            operations, including potential slow-down or loss of business as
            potential clients review our operations;

      (6)   risks associated with potential challenges regarding the
            applicability of the Fair Credit Reporting Act or similar law;

      (7)   risks relating to the dependence of the market for The Work Number
            services on mortgage documentation requirements in the secondary
            market and the risk that our revenues and profitability would be
            significantly harmed if those requirements were relaxed or
            eliminated;

      (8)   risks related to the applicability of any new privacy legislation or
            interpretation of existing laws;

      (9)   the risk that our revenues from unemployment tax management services
            may fluctuate in response to changes in economic conditions;

      (10)  risks related to changes in tax laws, including work opportunity ,
            or "WOTC," and welfare to work, or "WtW," tax credits;

      (11)  the risk to our future growth due to our dependence on our ability
            to effectively integrate acquired companies and capitalize on
            cross-selling opportunities; and

      (12)  risks relating to doing business with the federal government
            following our April 2006 acquisition of PAN.

See "Item 1A. Risk Factors" for a more detailed description of many of these and
other 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 do not undertake any obligation to 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.

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ITEM 1. BUSINESS

OVERVIEW

We are a leading provider of payroll-related and human resources business
process outsourcing services. Our services enable our clients to automate and
outsource the performance of payroll and human resources business processes that
would otherwise be performed by their own in-house payroll or human resources
departments. Our clients are large and mid-size organizations, including more
than three-fourths of the Fortune 500 companies in a wide variety of industries,
as well as a number of government agencies.

Our current services include employment and income verification and other
payroll-related services, unemployment tax management services, tax credit and
incentive services, and employee assessment and talent management services.

      -     Income Verification and Employment Services. Our employment and
            income verification services, which we refer to collectively as "The
            Work Number services," are designed to help employers save time and
            effort and reduce expenses associated with many of the
            administrative tasks required to support large workforces. These
            tasks include verifying employment and income information, printing
            and distributing pay stubs and annual W-2 forms, collecting
            time-reporting data, updating employee personnel records on a
            self-service basis, and screening job applicants. As of March 31,
            2006, The Work Number database, our proprietary database of payroll
            and other human resources-related information, contained
            approximately 129.0 million employee records and had contracts to
            receive an additional 7.3 million records. Authorized users such as
            mortgage lenders, pre-employment screeners, credit issuers, social
            service agencies and others access The Work Number service and pay
            us transaction-based or monthly service fees for verification of
            employment and income information.

      -     Unemployment Tax Management Services. Through our unemployment tax
            management services, we provide unemployment insurance claims
            processing, unemployment hearing education and consultation, and
            unemployment tax planning and management services to a broad range
            of employers. These services are designed to reduce the cost of
            processing unemployment claims by human resources departments and to
            better manage the tax rate that employers are assessed for
            unemployment taxes.

      -     Tax Credit and Incentive Services. Our services in the tax credits
            and incentives segment include assisting employers with federal,
            state and local tax credits. Examples of federal tax credit services
            include integrating work opportunity, or "WOTC", and welfare to
            work, or "WtW", tax credit processing into the current hiring
            process, as well as processing all necessary forms to identify
            applicants and employees who are potential qualifiers for hiring tax
            credits. State and local tax credit services include assisting
            clients in identifying and calculating enterprise zone credits and
            job creation credits.

      -     Employee Assessment and Talent Management Services. Beginning in
            fiscal year 2007, through our employee assessment and talent
            management services, we provide testing and assessment services, as
            well as talent management services that are designed to enable
            organizations to automate and improve their human capital management
            business processes. With our employee assessment and talent
            management services, clients can electronically deliver the
            assessments to applicants and arrange the administering or
            proctoring of the assessments at pre-qualified testing centers.
            Using an online dashboard, clients can manage open positions and
            direct active applicants through the entire assessment and selection
            process, including external tests such as a drug test.

TALX services are enabled by our proprietary databases and applications that are
designed to quickly and efficiently access and process large volumes of data. We
employ web, interactive voice response, fax, document imaging and other
technologies to enhance the services offered to our clients. We can interact
with various payroll and human resources systems, and are virtually independent
of the information technology services our clients select.

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.

We have obtained a trademark registration for the name TALX and a trademark
registration for The Work Number for Everyone, The Work Number, FasTime, UC
eXpress, W-2 eXpress, Advanced HR Solutions, Performance Assessment Network,
PAN, and Vital Information for Talent Assessment with the United States Patent
and Trademark Office. In addition, TALXWare is our trademark, and I-9 eXpress,
HireXpress and FasCast are our service marks. All other trade names, trademarks
and product names in this Form 10-K are the property of their respective owners.

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We are a Missouri corporation, with our principal executive offices located at
11432 Lackland Road, St. Louis, Missouri, 63146. Our telephone number is (314)
214-7000.

AVAILABLE INFORMATION

Our Internet website address is http://www.talx.com. We have made copies of the
following reports available free of charge through our Internet website, as soon
as reasonably practicable after they have been filed with or furnished to the
Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934: our annual report on Form 10-K; quarterly
reports on Form 10-Q; current reports on Form 8-K; and amendments to those
reports. Information on our website does not constitute a part of this Report.

RECENT ACQUISITIONS

Pursuant to an acquisition agreement dated April 20, 2005, we acquired Jon-Jay
Associates, Inc., which specializes in providing unemployment cost management
services as well as an employment verification service, for approximately $24
million, including transaction costs, subject to certain post-closing
adjustments. Additionally, the acquisition agreement includes provisions for
potential earn-out payments if certain future financial performance measures are
achieved through the twelve months ending April 30, 2006 and April 30, 2007,
respectively.

Pursuant to an asset purchase agreement dated April 26, 2005, we acquired
substantially all of the assets and assumed certain of the liabilities of Glick
& Glick Consultants, LLC, which specializes in employment-related tax credit and
incentive services, for approximately $5 million, including transaction costs,
subject to certain post-closing adjustments.

Pursuant to an asset purchase agreement dated November 1, 2005, we acquired the
unemployment tax management businesses of Employers Unity, Inc., for
approximately $30 million, including transaction costs, subject to certain
post-closing adjustments.

Pursuant to an asset purchase agreement dated December 15, 2005, we acquired the
tax credit and incentives business of Business Incentives, Inc., doing business
as Management Insights, Inc., for approximately $24 million, including
transaction costs, subject to certain post-closing adjustments.

Pursuant to an acquisition agreement dated April 6, 2006, we acquired
Performance Assessment Network, Inc., or "PAN," a provider of secure,
electronic-based psychometric testing and assessments, as well as comprehensive
talent management services, for approximately $75 million, including transaction
costs, subject to certain post-closing adjustments.

The purchase prices of the acquisitions were determined based on arms'-length
negotiations, and were paid in cash financed through our Loan Agreements as
discussed in Notes 8 and 20 to our consolidated financial statements and in
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

SEGMENTS

As a result of recent acquisitions, in the third quarter of fiscal year 2006, we
determined that we operate in four business segments:

      -     The Work Number services;

      -     unemployment tax management;

      -     tax credits and incentives; and

      -     maintenance and support services related to our former customer
            premises systems business.

The presentation of segment information reflects the manner in which management
organizes segments for making operating decisions and assessing performance.
Prior period information has been reclassified to reflect the establishment of
the unemployment tax management segment and the tax credits and incentives
segment, which were previously presented together as one segment.

We are assessing the impact of the April 6, 2006 acquisition of PAN on our
current segment classifications. See "Recent Acquisitions" above.

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      THE WORK NUMBER SERVICES

The Work Number services include our employment and income verification
services, W-2 management services (which include initial distribution, reissue
and correction of W-2 forms), paperless pay services that enable employees to
electronically receive pay statement information as well as review and change
direct deposit account or W-4 information, integrated electronic time capture
and reporting services, paperless new-hire services to bring new workers on
board using electronic forms, and I-9 management services designed to help
clients electronically comply with the immigration laws that require employers
to complete an I-9 form for each new hire. The Work Number employment and income
verification service is designed to help employers save time and effort and
reduce expenses associated with many of the administrative tasks required to
support large workforces. Additionally, all services in The Work Number suite of
services provide secure web access for managers to obtain management reports,
approve certain transactions and exercise important control functions.

The Work Number. Lenders, pre-employment screeners, credit issuers, social
service agencies and other information verifiers often request organizations to
verify employment and income information that has been provided by employees or
former employees. For example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, leading purchasers of residential
mortgages in the United States, usually require independent verification of
employment and income data for the past two calendar years and a current payroll
period in connection with mortgages that they will purchase. The Work Number is
an outsourced service that enables employers to direct the third-party verifiers
to our website or to a toll-free telephone number to verify the employee's
employment status and income data. We generate substantially all of The Work
Number revenues from transaction-based or monthly fees charged to lenders,
pre-employment screeners, credit issuers, social service agencies and other
information verifiers for verification of employment and income information.

As of March 31, 2006, The Work Number database contained approximately 129.0
million employee records and had contracts to receive an additional 7.3 million
records. The Work Number database is updated on a regular basis as employers
transmit data electronically directly to us each payroll period. Employers
contract to provide this data for specified periods, generally three years. Each
employee included in our clients' payroll data represents an employment record
on The Work Number database. This payroll data is uploaded to The Work Number
database, updating each employee's record. If the employee is no longer employed
by a client, the existing record remains intact. Thus, The Work Number database
includes all our clients' current employees, as well as former employees.

W-2 eXpress. W-2 eXpress is a suite of services relating to the initial
distribution (either printed or electronic), reissue and correction of W-2 wage
and tax statement forms that we offer to existing clients and other large
employers. Using data provided by employers, we distribute original W-2 forms
(both electronically and in paper form through business alliances) to the
employees of our clients and provide an automated process to enable these
employees to request corrections to their W-2 forms and obtain additional copies
via the web, telephone or direct download into their tax preparation software.
This suite of services allows complete employee self-service, without requiring
direct interaction with the employer's payroll staff. The majority of W-2
eXpress clients are billed based upon either the number of unique W-2s or the
number of employees, generally pursuant to multi-year contracts.

ePayroll. ePayroll (or Paperless Pay) is a suite of payroll self-service
applications that enables employees, via the web or by telephone, to receive pay
statement information, access current and historical payroll information, review
and change direct deposit account or paycard information, review and change W-4
(federal and state) information, update personal information, and enroll in
selected paycard services chosen by their employer. Employers that send us
electronic transmissions of their employees' pay stubs and direct deposit data
can reduce the amount of staff required to process routine employee payroll
requests as well as reduce the cost to distribute paper pay advices.

FasTime. FasTime services are integrated time capture and reporting solutions
that work from any phone or the web and are used by large employers and the
temporary staffing industry. For large employers, FasTime collects hours worked
and exception time codes providing a user-friendly online approval and reporting
for managers. FasTime is tailored to a company's business rules and processes
and is designed to provide a comprehensive, paperless system for reporting time
and availability and the reporting and management tools for distributed offices.

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HireXpress. HireXpress is a paperless new-hire service that manages key
components of the enterprise-scale hiring process, including electronic new-hire
packets as well as the ability to monitor the completion process and provide
approvals. Employers define their new-hire packets, and HireXpress notifies new
employees and prompts them to complete their forms online using electronic
signatures. Using the Web, HireXpress can automate the new-hire packet by
creating electronic employee files. Information gathered from completed forms
can be uploaded to the client's HR/Payroll system to provide a more complete
electronic record.

I-9 eXpress. Our I-9 eXpress service is designed to help clients alleviate the
difficulties involved with complying with the Immigration Reform and Control Act
of 1986, which requires employers to complete an I-9 Employment Eligibility
Verification form for all new employees and maintain these forms for a minimum
of three years after the date of hire. Using this service, an employer can
electronically generate and store I-9 forms and generate reports to monitor
compliance. We expect this service to be fully implemented by the end of the
first quarter of fiscal year 2007.

      UNEMPLOYMENT TAX MANAGEMENT

Our unemployment tax management segment operates under the names UC eXpress,
TALX Employer Services, Johnson and Associates, Jon-Jay Associates, and
Employers Unity, which we refer to collectively as "UC eXpress". We offer a
broad suite of services designed to reduce the cost of processing unemployment
claims by human resources departments and to better manage the tax rate that
employers are assessed for unemployment taxes. These services utilize optical
character recognition, document imaging, web, fax and interactive voice response
to speed the processing of unemployment claims, with the goal of resisting
unmeritorious or illegitimate claims for unemployment compensation that have
been filed with state agencies by separated employees. These services are aimed
at relieving human resources departments of the administrative burden of
managing unemployment claims. Following an employee separation, we respond on
behalf of our client to an unemployment claim filed by the separated employee.
This includes reviewing employment records to preserve the clients' rights as an
employer. If an unemployment hearing is required, these services include client
conferences with our hearing consultants/attorneys and, upon client request,
attendance at the hearing with the employer's representative. In addition, our
field-based account management team and hearing consultants bring state-specific
unemployment tax knowledge to the client.

We also offer comprehensive employer tax services that encompass five service
areas, including unemployment tax services, unemployment tax analysis,
employment tax research and recovery, tax registrations, and employment tax
consulting (withholding and unemployment). Clients who choose TALX for tax
services collaborate with our tax analysts to monitor the clients' unemployment
tax accounts, verify tax rates and contribution reports and identify voluntary
contribution opportunities.

      TAX CREDITS AND INCENTIVES

Our services in the tax credits and incentives segment include assisting
employers with federal, state and local tax credits. Examples of federal tax
credit services include integrating work opportunity, or "WOTC", and welfare to
work, or "WtW", tax credit processing into the current hiring process, as well
as processing all necessary forms to identify applicants and employees who are
potential qualifiers for hiring tax credits. Through various acquisitions, we
have expanded our existing tax credit services, including our capabilities to
process WOTC/WtW tax credits, as well as our ability to assist clients in
identifying and calculating certain other federal, state and local tax credits
and incentives, such as enterprise zone credits and job creation credits.

Under current legislation, the WOTC and WtW credits were available to employers
through December 31, 2005, and without further Congressional action to renew the
credits, these programs have lapsed and are no longer available to our clients.
We understand that Congress is currently considering the renewal of these
programs. In the event that the lapsing of any of these programs should become
permanent, we believe we would continue for approximately six months thereafter
to earn revenues from credits in effect as of December 31, 2005. Although these
programs have historically been renewed retroactively by Congress following
their lapsing in accordance with their terms, Congress may not similarly renew
such programs in the future. Moreover, if these programs lapse, any future
renewals may not be retroactive, which means that the value of these programs to
our clients could be reduced to such an extent that they no longer desire tax
credit and incentive services. Any non-renewal of these tax credit programs, the
renewal of such programs without retroactive effect, or other adverse change in
tax legislation could adversely affect our business and results of operations.

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      MAINTENANCE AND SUPPORT SERVICES RELATED TO OUR FORMER CUSTOMER PREMISES
      SYSTEMS BUSINESS

We previously offered our products and services exclusively through licensed
software specifically developed for each client, and installed these systems at
the client's site. In 2000 we discontinued sales to new clients. Currently, we
provide system enhancements to existing clients and client 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. During 2003, we notified our maintenance
clients of our intention to discontinue all support services effective June
2005. As a result of requests from a number of clients, we have agreed to extend
these support services until December 31, 2006.

      EMPLOYEE ASSESSMENTS AND TALENT MANAGEMENT

On April 6, 2006, we acquired Performance Assessment Network, Inc., or "PAN", a
provider of secure, electronic-based psychometric testing and assessments, as
well as comprehensive talent management services. These services can be sold
together or as separate solutions.

As part of its testing and assessment services, PAN does not generate its own
tests and assessments. Instead, it presents a broad variety of third-party
offerings, providing one-stop shopping for its clients. PAN's service provides
access to more than 650 assessments on a flexible platform and a network of
thousands of testing stations. PAN's experienced psychologists consult with
clients to help them determine the most appropriate assessments for aptitudes
and competencies that best fit their open positions.

PAN also provides a broad range of talent management services that can be mapped
to the client's current hiring process. With PAN services, clients can
electronically deliver the assessments to applicants and arrange the
administering or proctoring of the assessments at pre-qualified testing centers.
Using an online dashboard, clients can manage open positions and direct active
applicants through the entire assessment and selection process, including
external tests such as a drug test. The talent management dashboard can be sold
independently of the test and assessment services.

One client, the Transportation Security Administration ("TSA"), through a
subcontract with CPS Human Resource Services, represented approximately 75% of
PAN's revenues in fiscal year 2006. In fiscal 2005, PAN derived approximately
93% of its revenues from this relationship.

Selected financial data regarding our business segments for fiscal years 2004,
2005, and 2006 is set forth in Note 17 of Notes to Consolidated Financial
Statements contained in "Item 8 - Financial Statements and Supplementary Data."
For additional information, see "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations - Overview."

SALES AND MARKETING

We employ a direct sales force and also utilize strategic marketing alliances.
We use our direct sales force and strategic alliances to develop relationships
with large employers, typically those having over 3,500 employees. We also
recently established a separate in-house sales team focusing on prospects with
less than 3,500 employees. In addition, we use our strategic alliances to help
us identify potential clients among small and mid-sized employers, typically
those with less than 3,500 employees. We also utilize a direct sales force to
market the use of The Work Number database to verifiers such as lenders and
credit issuers.

      DIRECT SALES FORCE

Our sales, service and marketing effort relies on a team approach consisting of
approximately 260 professionals in 41 U.S. cities, including regional sales vice
presidents, regional sales directors, regional client relationship directors,
regional sales managers, business development representatives, client
relationship managers, account managers, product 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 directors and regional sales
managers are responsible for presenting our service offerings to prospective
clients and negotiating for the sale of our services. Our product managers
oversee product direction and provide sales assistance. Our regional client
relationship directors, client relationship managers and account managers
service existing clients. Product consultants provide technical assistance to
regional sales managers and prospective clients during the sales process. Our
marketing personnel develop market strategies and support the sales force at all
levels.

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Additionally we have a team of professionals that manage our alliance
relationships. This team includes sales managers responsible for generating
sales through the development and management of existing alliance relationships.

Finally, we have a team dedicated to marketing the use of The Work Number
database to verifiers such as lenders and credit issuers. This team identifies
potential new verifiers and uses of the database, as well as takes steps to
promote increased utilization of the database by current verifiers.

      STRATEGIC MARKETING ALLIANCES

We have established alliances with leading providers of related payroll and
human resources outsourcing services with the goal of building the database of
records for The Work Number and extending our services relating to employees of
both large and mid-sized employers. 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 through an employee portal that incorporates a
            seamless link to our website for The Work Number. In exchange, we
            have agreed, among other things, to share revenue with Hewitt
            resulting from its referrals.

      -     Ceridian Corporation: Ceridian is a global human resources and
            payroll outsourcing company that has agreed to make The Work Number
            and selected tax management services available to its clients in
            exchange for discounted prices for tax management services and a
            share of the revenue generated by client records on The Work Number.

These and other strategic marketing alliances, such as ExcellerateHRO (a joint
venture of EDS and Towers Perrin), Convergys Corporation, ACS, Checkpoint HR,
and AON, are generally governed by non-exclusive contractual arrangements that
remain in effect for specified periods. The success of these alliances generally
will depend on the interest and commitment of these companies in promoting and
coordinating 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 features, quality, security and performance;

      -     breadth of service offerings;

      -     functionality and ease of use;

      -     company reputation for integrity and confidentiality;

      -     company financial strength; and

      -     cost of the service or product.

We have a number of competitors for our various services. Below is a summary of
the more significant competitors:

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<TABLE>
<CAPTION>
TALX Service                     Competitors
-------------------------------  -----------------------------------------------
<S>                              <C>
The Work Number Employment         -  Large employers and outsourcers who manage
Verification Services                 this function through a call center; and

                                   -  A few large employers who have established
                                      internal systems to automate employment
                                      verification.

Complementary Work Number          -  Payroll processors such as Automatic Data
Services                              Processing, Inc. (ADP), Paychex, Inc. and
                                      Ceridian Corporation.  We believe that
                                      these payroll processors are generally
                                      focused on the small- to mid-sized market.

Unemployment Tax Management        -  Large employers who manage this function
Services                              internally.

                                   -  ADP and a number of  smaller regional
                                      firms that offer unemployment tax
                                      management services.

Tax Credits and Incentives         -  ADP, First Advantage, and a number of
                                      smaller regional firms that offer tax
                                      credit and incentive services.

                                   -  Employers who manage this function
                                      internally.

Employee Assessments and Talent    -  Assessment service providers that offer
Management                            proprietary content, usually in a very
                                      limited quantity, include Previsor, Inc.,
                                      Development Dimensions International (DDI)
                                      and Brainbench, Inc.

                                   -  Human resources consulting firms that
                                      generally offer a wide range of services
                                      may include customized assessments such as
                                      AON Corporation, Watson Wyatt Worldwide,
                                      Inc. and Right Management Consulting (a
                                      subsidiary of Manpower, Inc.).

                                   -  Assessment or test publishers that have
                                      their proprietary delivery platforms, such
                                      as Devine Group, Inc., Hogan Assessments
                                      Systems, Inc. and SHL Group plc.
</TABLE>

We believe that we compete favorably in the key competitive factors that affect
our markets for The Work Number services, our unemployment tax management
services, our tax credit and incentives services, and our employee assessment
and talent management 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 or
acquire to access and deliver data. Our services are run on industry standard
databases from Oracle, Microsoft and IBM and internally developed applications.
We use a combination of Microsoft technologies for the creation, deployment and
operation of our applications, along with technologies from a number of other
companies. A few of our applications utilize a proprietary integrated visual
development environment and software system known as TALXWare. We also license
and integrate complementary technologies into our products including speech
recognition, text-to-speech, image classification, and facsimile. We license
these technologies from third-party suppliers pursuant to non-exclusive license
or resale agreements or purchase the technologies under open market arrangements
and then integrate them into our products. Some of the PAN products license
intellectual property, for varying terms, in the form of various tests which are
then implemented on or integrated with the PAN platform.

We have directed our development efforts toward enhancing and developing new
offerings for The Work Number services and tax management services. The most
recent enhancements include:

      -     extending the features and capabilities of The Work Number database,
            through new verification types;

      -     W-2 eXpress, through expanded self-service capabilities;

      -     ePayroll paystub/direct deposit services, through the addition of
            electronic W-4 management;

      -     the addition of the I-9 eXpress service;

      -     the addition of new integrated and batch interfaces and the
            expansion of social services data;

                                       9
<PAGE>

      -     HireXpress, through the expansion of the automated onboarding
            process;

      -     FasTime services, through the expansion of its automated
            paid-time-off management capabilities; and

      -     enhancing and consolidating our unemployment tax in-house claims
            processing systems.

Additionally, PAN's efforts have been focused on adding more test offerings and
introduction of Vital Information for Talent Assessment, or "VITA," its
automated talent management platform.

We incurred total product development costs of $6.3 million, $8.1 million and
$9.0 million in fiscal years 2004, 2005 and 2006, respectively. As of March 31,
2006, our total product development staff consisted of approximately 80
full-time employees. After the acquisition of PAN, our total product development
staff consisted of approximately 90 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 as being important factors 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 a
trademark registration for The Work Number for Everyone, The Work Number,
FasTime, UC eXpress, W-2 eXpress, Advanced HR Solutions, Performance Assessment
Network, PAN, and Vital Information for Talent Assessment with the United States
Patent and Trademark Office. Additionally, TALXWare is our trademark, and I-9
eXpress, HireXpress and FasCast are our service marks. We also rely on certain
patents in our employee assessment and talent management services.

We generally enter into confidentiality agreements with our officers, employees
and consultants. We also generally limit access to and distribution of our
source code, access to our databases, 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.

Third-parties have asserted in the past and, from time to time, may assert in
the future, patent, copyright, trademark and other intellectual property rights
to technologies that are important to our business. We have 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. We have not conducted an exhaustive 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.

CLIENTS

As of March 31, 2006, The Work Number database contained employee records from
over 1,500 clients, representing approximately 129.0 million present and former
employees. Additionally, as of that date, we had contracts with new clients to
provide 7.3 million records of present and former employees in backlog. These
clients typically employ over 1,000 employees. Our clients are large and
mid-size organizations, including more than three-fourths of the Fortune 500
companies in a wide variety of industries, as well as a number of government
agencies. As of March 31, 2006, our tax management business had over 9,000
clients of various sizes and operated in a broad range of industries. No client
accounted for more than 10% of total revenues in any of fiscal years 2004, 2005
or 2006.

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<PAGE>

On April 6, 2006, we acquired PAN, a provider of secure, electronic-based
psychometric testing and assessments, as well as comprehensive talent management
services. PAN has more than 1,500 clients including individual job candidates,
Global 2000 and mid-market companies, and government organizations. One client
of PAN, the TSA, through a subcontract with CPS Human Resource Services,
represented approximately 75% of PAN's revenues in fiscal year 2006. In fiscal
2005, PAN derived approximately 93% of its revenues from this relationship. For
more information, see "Item 1A. Risk Factors - PAN derives a substantial portion
of its revenues from the Federal government, which subjects us to special risks
associated with government contracts and subcontracts."

EMPLOYEES

As of March 31, 2006, we employed approximately 1,751 full-time and 76 part-time
employees. As of April 30, 2006, after the acquisition of PAN, we employed
approximately 1,819 full-time and 70 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.

ITEM 1A. RISK FACTORS

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

      OUR REVENUES FROM THE WORK NUMBER MAY FLUCTUATE IN RESPONSE TO CERTAIN
      ECONOMIC CONDITIONS SUCH AS INTEREST RATES AND EMPLOYMENT TRENDS.

A significant portion of our revenues from The Work Number depends on
residential mortgage-related and employment-related activity. We charge a fee
for each request from lenders, pre-employment screeners, credit issuers, social
services agencies, and other verifiers to verify employment and income
information. Therefore, a decrease in activity within either of these segments
would reduce our overall number of transactions per record in the database. This
reduction in transactions, whether due to increases in interest rates or
otherwise, could cause our revenues and profitability to be harmed. As an
example, during a portion of fiscal year 2004, revenues for The Work Number
services were adversely affected by a slowdown in the refinancing segment of the
mortgage loan market.

      AS WE PERFORM LARGE-SCALE PROCESSING OF VERIFICATIONS, THERE IS AN
      INCREASED RISK OF BREACH OF CONFIDENTIALITY OR INAPPROPRIATE USE OF DATA,
      WHICH MAY RESULT IN DAMAGE CLAIMS AND LOSS OF CUSTOMERS.

As we seek to increase the use of The Work Number database by verifiers with
frequent need of verification, we plan to use new methods for performing the
verifications and new types of verifications. These verifiers include large
mortgage lenders, pre-employment screeners, credit issuers, social service
agencies, or other volume verifiers. These volume verifiers can obtain
verifications in large volume or "batch" transactions using different means and
requiring less proof of authorization than smaller verifiers. These volume
verifiers generally enter into contracts by which they agree that they will not
use the income verification service unless they have been authorized by the
employee to do so, or have legal authority to obtain the information. Many of
the industries that utilize The Work Number for large scale processing of
verifications have high turnover which may lead to the verifier failing to
terminate access privileges to The Work Number in a timely manner. We have the
ability to conduct regular audits of these volume verifiers to ensure compliance
with documentation requirements. However, there is a risk that the verifier may
not have the requisite authority, and that there may be claims for breach of
privacy or confidentiality against us, claims for damages by employees and
employers and resulting loss of employer relationships, which could
significantly harm our results of operations.

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

The Work Number services depend on the accuracy of highly confidential
employment and income history and other information, including social security
numbers, which employers provide to us and which we convert for use in The Work
Number and our other services. Although we have a number of protective measures
in place, any inaccuracies in such information - whether in the recording of
such information, the unauthorized access to information, or otherwise - or our
inability to keep such information confidential, may give rise to claims against
us and adversely affect our reputation or market acceptance of The Work Number
and our other services. While we continue to test our data security processes
for

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<PAGE>

weaknesses, we cannot assure you that we will not experience a breach in our
data security, which could result in such claims. Our financial condition,
results of operations and reputation may be significantly harmed if any asserted
claims were ultimately decided against us.

      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 business process outsourcing services increasingly attractive to a
greater number of large organizations, their employees and 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 services 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
payroll and 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 service areas.
Our strategy is also based in part on strategic acquisitions of businesses with
databases of employee information. If we are unable to attract and retain a
sufficient number of employer clients, if we cannot persuade them to include a
greater amount of information in the employee records they provide us, or if we
fail to develop additional applications to use this information, we may not
achieve our growth objectives.

      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 centers
against damage from fire, power loss, telecommunications failures, unauthorized
intrusion and other events. We have data processing centers located in St.
Louis, Missouri; Columbus, Ohio; Carmel, Indiana; Plano, Texas; and Ontario,
Canada, which areas have historically been vulnerable to natural disasters and
other risks, such as floods, earthquakes and tornadoes. We back up software and
related data files regularly and store the back-up files off-site at a nearby
secure facility. A portion of the data is also replicated to a secondary
facility for high availability. We cannot assure you that these measures will
eliminate the risk of extended interruption of our operations. We also rely on
voice and data carriers to provide connectivity for our customers to gain
telephone access, internet access and corporate intranet access to our services.
In addition, we rely on these same providers to provide the wide area network
necessary to connect our facilities across the United States to our data
processing centers. 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.

      IF A COURT OR REGULATOR CONCLUDES THAT THE FAIR CREDIT REPORTING ACT OR
      SIMILAR LAW APPLIES TO THE WORK NUMBER SERVICES, OUR BUSINESS AND
      PROFITABILITY COULD BE SIGNIFICANTLY HARMED.

The Fair Credit Reporting Act, which we refer to as the FCRA, applies to
"consumer reporting agencies" that engage in the practice of "assembling or
evaluating" certain information relating to consumers. While we have
historically taken the position that the FCRA does not apply to The Work Number
services, the statutory language is subject to varying interpretation, and we
are not aware of controlling legal authority to support our position. Recent
public concerns relating to, among other things, data integrity, privacy and
identity theft issues may increase the risk of action by consumers through
litigation or by the Federal Trade Commission, or the "FTC," or state regulatory
authorities, which enforce the FCRA or similar laws. If a court, the FTC, or a
state regulatory authority were to determine that the FCRA or other similar law
does apply, we could be subject to claims for substantial damages, penalties and
attorneys' fees and may experience negative publicity and reputational harm.
Additionally, compliance with the FCRA would result in some changes in the
manner in which we deliver The Work Number services. As a result, while it is
difficult to estimate the ultimate impact on us if a court or regulator
concludes that the FCRA or similar law applies to us, our business, operations,
results of operations and financial condition could be significantly 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.

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<PAGE>

We believe that residential mortgage lenders are among the most active users of
The Work Number. They utilize our services to verify employment, income and
related information. The demand for this verification is driven in part by the
requirements of the Federal National Mortgage Association, which is also known
as Fannie Mae, and the Federal Home Loan Mortgage Corporation, which is also
known as Freddie Mac, the 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 certain mortgages they
purchase. Accordingly, most lenders seek this information from mortgage
applicants. If Fannie Mae or Freddie Mac were to reduce the requirement for
employment and income data or eliminate the requirement for independent
verification thereof, our revenues and profitability would be significantly
harmed.

      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, the Gramm-Leach-Bliley Act
contains provisions protecting the privacy of consumer non-public personal
information collected by financial institutions. Additionally, federal privacy
regulations issued by the Department of Health and Human Services pursuant to
the Health Insurance Portability and Accountability Act of 1996, or "HIPAA,"
restrict the use and disclosure of individually identifiable health information.
In addition, the states are taking greater interest in privacy rights on behalf
of their residents, and a number of states have enacted privacy legislation.
These privacy regulations could impose additional costs and could limit our use
and disclosure of such information. Some states have also enacted consumer and
health information privacy protection laws.

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.

      CHANGES IN ECONOMIC CONDITIONS COULD LIMIT UNEMPLOYMENT COMPENSATION
      CLAIMS, CAUSING EMPLOYERS TO QUESTION THE VALUE OF UNEMPLOYMENT
      COMPENSATION MANAGEMENT AND LIMITING OPPORTUNITIES FOR TAX PLANNING.

A difficult economic environment and consequent staff reductions could result in
an increase in unemployment compensation claims. Conversely, as economic
conditions improve, and claims decrease, employers may question the value of our
unemployment compensation management and unemployment compensation tax planning
services. As a result of the difficult economic environment in recent years,
states with significant budget challenges may take legislative or regulatory
steps to reduce unemployment benefits, change the way benefit charges impact
employers' accounts or close tax-planning opportunities, which could reduce the
opportunities for service to employers. In such situations, our revenues could
be harmed. For example, during fiscal year 2005, changes in economic conditions
contributed to claims activity being less than we expected. As a result, we
experienced lower revenue levels in our unemployment cost management services
business during fiscal year 2005.

      CHANGES IN TAX LAW, INCLUDING THE WORK OPPORTUNITY, OR "WOTC," AND WELFARE
      TO WORK, OR "WTW," TAX CREDITS, COULD ADVERSELY IMPACT OUR BUSINESS AND
      RESULTS OF OPERATIONS.

Certain of our revenues and profits from continuing operations are derived from
our tax services businesses. At any time, the tax laws or the administrative
interpretations of those laws may be amended. Any of those new laws or
interpretations could adversely affect us. For example, the WOTC and WtW tax
credits expired on January 1, 2006. Accordingly, these tax credits are no longer
available to our clients. Federal legislation, however, has been introduced that
would combine the WOTC and the WtW tax credits and extend the combined credit
for one year. The proposal would be effective for wages paid or incurred by
employers hiring qualified individuals who begin work for an employer after
December 31, 2005 and before January 1, 2007. While Congress historically has
renewed retroactively these credits following their expiration, we cannot assure
you that Congress will renew such credits in the future. Any non-renewal of
these tax credits, renewal of such credits without retroactive effect, or other
adverse changes in tax legislation, could adversely affect our business and
results of operations.

If new statutes or regulations were adopted that restricted our business or the
ability of others to provide us with payroll and human resources information, or
existing statutes or regulations were deemed to apply to us or such third
parties, we may be required to change our activities and revise or eliminate our
services, which could significantly harm our revenues and operations.

                                       13
<PAGE>

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

We expect a portion of our growth to come from business acquisitions which we
recently consummated or which we may consummate in the future. Such acquisitions
involve certain operational, legal and financial risks. Operational risks
include the possibility that an acquisition does not ultimately provide the
benefits originally anticipated by our management, while we continue to incur
operating expenses to provide the services formerly provided by the acquired
company. Legal risks involve contract and regulatory issues. For example, some
employers may not consent to the transfer of ownership of their contracts by
which the services are provided, and some states' unemployment insurance
agencies may require changes to powers of attorney by which the employer
authorizes representation in employment matters. In the event of any loss of
employer-customers or our inability to appear before state unemployment
insurance agencies, our business and results of operations may be materially
adversely affected. Financial risks involve the incurrence of indebtedness as a
result of the acquisitions and the consequent need to service that indebtedness.
In addition, in the event we were to issue stock in connection with any
acquisitions, we would dilute the voting power and could dilute the economic
interests of existing shareholders. In carrying out our acquisition strategy, we
attempt to minimize the risk of unexpected liabilities and contingencies
associated with acquired businesses through planning, investigation and
negotiation, but there can be no assurance that we will be successful in
identifying attractive acquisition candidates or completing additional
acquisitions on favorable terms.

      PAN DERIVES A SUBSTANTIAL PORTION OF ITS REVENUES FROM THE FEDERAL
      GOVERNMENT, WHICH SUBJECTS US TO SPECIAL RISKS ASSOCIATED WITH GOVERNMENT
      CONTRACTS AND SUBCONTRACTS.

TALX and PAN have a number of prime and sub-contracts with the Federal
government, which we refer to collectively as "government contracts". For
example, one client, the Transportation Security Administration, or "TSA",
represented approximately 75% of PAN's revenues in fiscal year 2006. In fiscal
2005, PAN derived approximately 93% of its revenues from this relationship.
Following our acquisition of PAN in April 2006, we have increased exposure to
special risks that result from doing business with the United States Federal
government and some of its agencies, including acquisition integration risks.
Termination of these arrangements, or material deterioration in PAN'S relations
with the government, would have an adverse affect on our business, financial
condition and results of operations.

Among the factors that could materially adversely affect our government
contracting business are:

      -     budgetary constraints affecting Federal government spending
            generally, or specific departments or agencies in particular, and
            changes in fiscal policies or available funding;

      -     changes in U.S. Federal government programs or requirements;

      -     the adoption of new laws or regulations;

      -     delays in the payment of our invoices by government payment offices
            and, where PAN is a subcontractor, as in the case with our TSA
            contract, possible resulting delays in payments by the prime
            contractors that are its customers; and

      -     where PAN is a subcontractor, dependence on the performance by and
            actions of the prime contractor.

In addition to these appropriations, economic and political factors, which we
cannot control, Federal government agencies have special rights to reduce their
purchases under contracts, to audit and review performance, to terminate
contracts or not to extend contracts, any of which could have an adverse affect
on our financial condition and operating results. Failure to comply with
technical requirements or procurement-related laws and regulations could subject
us to penalties or liabilities, or result in termination of the government
contracts or a deterioration in the relationship. For example in the case of the
TSA, PAN has specified qualification standards and key personnel provisions that
we must satisfy. If we are acting as a subcontractor, we may be liable to the
prime contractor for costs they are unable to recover or damages they incur as a
consequence of any improperly allocated costs by us or our failure to make a
required disclosure during negotiations. If a government audit or other review
or investigation uncovers improper or illegal activities, we may be subject to
civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeitures of profits, suspension of payments, fines, and
suspension or debarment from doing business with the Federal government either
as a prime contractor or as a subcontractor. In addition, we could suffer
serious harm to our reputation if allegations of impropriety were made against
us. Any of the foregoing could have a material adverse affect on our business,
financial results or results of operations.

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<PAGE>

      IF THE SUTA DUMPING PREVENTION ACT OF 2004 APPLIES TO OUR TAX PLANNING
      SERVICES, OUR BUSINESS AND REVENUES COULD BE HARMED.

On August 9, 2004 the President signed the "SUTA Dumping Prevention Act of
2004." In the past, some employers found ways to manipulate state experience
rating systems so that these employers paid lower state employment compensation
taxes than their unemployment experience alone would have otherwise allowed.
This practice is referred to as "SUTA dumping." "SUTA" refers to state
unemployment tax acts, but has also been referred to as "state unemployment tax
avoidance." Most frequently these avoidance tactics involved mergers,
acquisitions or corporate restructurings, the legality of which depended upon
state laws. The SUTA Dumping Prevention Act of 2004 established a nationwide
minimum standard to curb SUTA dumping. The law also established penalties for
employers and their advisors who knowingly violate those state law provisions.

Our tax management services include advising clients with respect to
unemployment compensation taxes. We fully support the measures enacted in the
SUTA dumping legislation, and we believe the advice we have given since the
enactment of this legislation does not include advice to clients to take any
action which would be prohibited under the legislation. However, there can be no
assurance that we have not and will not provide advice to clients or that our
clients have not taken or will not take action which runs afoul of the SUTA
Dumping Prevention Act of 2004. We could be subject to "meaningful civil and
criminal penalties," as the statute provides, for violations of the law. We
could also be subject to negative publicity, harm to our reputation, and
strained relationships with state agencies which are important to our business
if we were accused of advising clients to take actions in violation of the SUTA
dumping guidelines, or if clients took such actions at a time when we were
providing advice on unemployment compensation taxes.

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

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

For The Work Number services, these factors include residential mortgage
activity and interest rate levels. Revenues generated from our W-2 eXpress
service are affected by seasonality, as revenues are primarily earned in our
fourth fiscal quarter. The non-renewal of certain tax credit programs, such as
WOTC or WtW, the renewal of such programs without retroactive effect, or other
adverse changes in tax legislation would cause fluctuations in our tax credit
and incentive services business. For all of our service offerings, 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;

      -     pricing pressure;

      -     the hiring and training of additional staff;

      -     the length of the sales cycle; and

      -     general economic conditions.

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

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

The business process outsourcing 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 web and corporate intranets using browser software is
rapidly evolving.

To remain competitive, we must continually change and improve our services 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
business process outsourcing services and add functionality to existing services
in response to changing market conditions and client demand.

                                       15
<PAGE>

The development of new, technologically advanced services 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
business process outsourcing services or enhancements to existing services in a
timely and cost-effective manner, or if new business process outsourcing
services do not achieve market acceptance, we could lose revenues and our
competitive position could suffer.

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

Our services involve integration with operating systems and products developed
by others and services provided by others. If any third-party software, hardware
or service, such as Microsoft Windows server products, Microsoft database
software and development tools, Oracle database software, Sun Solaris, IBM
(Informix) database software, Intel Media processing hardware, Sybase Power
Builder development tools, and testing products provided by third parties and
utilized by PAN, become unavailable for any reason, fail to integrate with our
products or fail to be supported by their respective vendors or to operate
properly, we would have to redesign our products or, in the case of PAN, attempt
to locate replacement testing products. We cannot assure you that we could
accomplish any redesign or obtain any replacements 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, in most cases,
we could locate one or more alternate suppliers. In some instances it may be
either impossible or impractical to find an alternate source for certain
products. 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
services. We cannot assure you we could accomplish any such integration in a
cost-effective manner. Significant delays in the offering of service
enhancements due to integration of technology from new suppliers could
significantly harm our revenues and profitability.

      OUR SERVICES 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, business process outsourcing 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
potential security issues, delivery of incorrect results which could harm an
employee, employer, verifier, or other users of our services, or loss or delay
in market acceptance of our services, which could significantly harm our
revenues and our reputation.

Web or other users could access without authorization or otherwise disrupt our
web and corporate intranet services. 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.

      THE LOSS OF KEY MANAGEMENT WOULD ADVERSELY AFFECT OUR BUSINESS.

Our success depends in large part upon the retention of key management,
especially William W. Canfield, the Chairman of our Board of Directors and our
President and Chief Executive Officer, who has served in that capacity for more
than 15 years. We would likely undergo a difficult transition period if we were
to lose the services of our key management, including Mr. Canfield, which would
materially and adversely affect our business and prospects.

      BECAUSE OF INTENSE COMPETITION FOR TRAINED 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. 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

                                       16
<PAGE>

new services 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.

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

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 have entered into a license to
use various interactive voice response and computer telephony technologies that
required us to make an initial payment and to pay future royalties. Further, we
have not conducted an exhaustive search to determine whether the technology we
have in our services infringes or misappropriates intellectual property held by
other third parties. We cannot provide assurance that others will not claim that
we are infringing their intellectual property rights or that we do not in fact
infringe those intellectual property rights.

Any claims asserting that our services 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 business process outsourcing services
            containing the infringing intellectual property;

      -     require us to pay substantial damage awards;

      -     damage our reputation; or

      -     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 services to avoid infringement, our revenues, results
of operations and competitive position would be harmed.

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

Our success and ability to compete is dependent in part on our ability to
protect and maintain our proprietary rights to our intellectual property. We
currently rely on a combination of trade secret, trademark and copyright laws to
establish and protect our intellectual property.

We generally enter into confidentiality agreements with our officers, employees
and consultants. We also generally limit access to and distribution of our
source code, access to our databases 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 procured
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. Efforts to address 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 services, potentially resulting in the 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 services 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.

                                       17
<PAGE>

      WE FACE COMPETITION FROM A BROAD RANGE OF COMPANIES.

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

We consider the primary competitor to The Work Number to be large employers and
outsourcers who manage employment verification through a call center or through
internal automated systems. We believe the primary competitors to other
complementary Work Number services are ADP, Paychex, Inc., and Ceridian
Corporation. We consider the primary competitor to our unemployment tax
management services to be ADP, as well as smaller regional firms that offer
similar services. We consider the primary competitors to our tax credit and
incentive services to be ADP and First Advantage, as well as smaller regional
firms that offer similar services. We consider the primary competitors to our
employee assessment and talent management services to be Previsor, Inc.,
Development Dimensions International, Brainbench, Inc., Devine Group, Inc.,
Hogan Assessments Systems, Inc., and SHL Group plc, as well as human resources
consulting firms such as AON Corporation, Watson Wyatt Worldwide, Inc., and
Right Management Consulting, a subsidiary of Manpower, Inc. Our competitors may
have more resources than we do.

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

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

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

      -     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 call a special meeting of
            shareholders or propose other actions;

      -     require unanimity for shareholders to act by written consent, in
            accordance with Missouri law;

      -     require a higher percentage of shareholders than would otherwise be
            required under Missouri law to amend, alter, change or repeal
            certain provisions of our articles of incorporation;

      -     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;

      -     authorize the issuance of preferred stock with any voting powers,
            designations, preferences and relative, participating, optional or
            other special rights, and qualifications, limitations or
            restrictions of such rights as may be specified by our Board of
            Directors, without shareholder approval; and

      -     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 VOLATILE AND COULD DROP UNEXPECTEDLY.

The market price of our common stock has been volatile. 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 or
            contracts by us or our competitors;

                                       18
<PAGE>

      -     our ability to successfully integrate acquisitions;

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

      -     changes in financial estimates by securities analysts;

      -     concerns regarding the security of our database;

      -     conditions and trends in outsourcing of tax management, human
            resources 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.

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. In January 2004, we restated our
consolidated financial statements as a result of adjustments to our customer
premises systems business. The restatement affected the fiscal years
ended March 31, 1999 through 2003 and the first two quarters of fiscal year
2004. In fiscal year 2005 we settled class action litigation, as discussed in
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Other Matters" of our 2005 Annual Report on Form 10-K,
and settled an SEC enforcement action, as described below. Such litigation could
result in substantial costs and a diversion of management attention and
resources, which would significantly harm our profitability and reputation.
These market fluctuations, as well as general economic, political and market
conditions such as recessions, may adversely affect the market price of our
common stock.

We are subject to a cease and desist order issued by the Securities and Exchange
Commission and a U.S. District Court court order and are required to advance
expenses to one of our former officers in satisfaction of indemnification
obligations in connection with a related case against that former officer.

As previously reported, on March 3, 2005, we agreed with the SEC, without
admitting or denying any liability, to pay one dollar in disgorgement and,
pursuant to a court order, to pay a $2.5 million civil penalty, and not to
violate certain provisions of the federal securities laws in the future pursuant
to the SEC cease and desist order. Our agreement resolved the SEC's
investigation into our accounting for certain items. The cease and desist order
enjoins us from committing or causing future violations of specified securities
laws. Any further violation of these laws could result in civil penalties,
including sanctions, fines and penalties, which may be more severe than if the
violation had occurred without our having entered into the order.

Our former chief financial officer is currently defending a related SEC civil
action, and any future related litigation costs for his defense will be borne by
us and not by insurance. In addition, to the extent that we are required to
indemnify him against any fines or penalties assessed against him, those amounts
would be borne by us and will not be covered by insurance. Any such costs, fines
or penalties borne by us could harm our business and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None

ITEM 2. PROPERTIES

As of March 31, 2006, we occupied approximately 561,000 square feet of office
space in 58 buildings across the country; this includes leases expiring in
fiscal year 2007 which we do not intend to renew as we consolidate our
facilities, as noted in the table below. At such date, all of our facilities
were leased and were utilized primarily for general administrative, data
processing and sales purposes. We believe our facilities have been generally
well maintained, are in good operating condition and are adequate for our
current requirements. Additionally, we had approximately 103 employees,
primarily sales-related, working out of their homes. The following table
includes descriptions of our significant facilities and, if applicable, the
specific business segment to which the property is dedicated.

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                                        SQUARE        BUSINESS
        ADDRESS           CITY AND STATE                 FACILITY TYPE                  FOOTAGE       SEGMENT
----------------------   ----------------   -----------------------------------------   -------   ----------------
<S>                      <C>                <C>                                         <C>       <C>
11432 Lackland Road      St. Louis, MO      Corporate Headquarters - Executive,          94,000     All
                                            Administrative, Data Processing and Sales

10101 Woodfield(1)       St. Louis, MO      Administrative, Data Processing and Sales    83,000     Unemployment
                                                                                                   tax management

11828 Borman Drive       St. Louis, MO      Administrative, Data Processing and Sales    46,000          All
1850 Borman Court(1)     St. Louis, MO      Administrative, Data Processing and Sales    40,000          All
3455 Mill Run Drive      Hilliard, OH       Administrative, Data Processing and Sales    20,000     Unemployment
                                                                                                   tax management

1845 Borman Court        St. Louis, MO      Call Center, Administrative                  23,000          All
One Corporate Way        Peabody, MA        Administrative and Data Processing           19,000     Unemployment
                                                                                                   tax management

191 W. Schrock Road(1)   Westerville, OH    Administrative and Data Processing           18,000     Unemployment
                                                                                                   tax management

1195 Corporate Lake(1)   St. Louis, MO      Administrative and Data Processing           15,000     Unemployment
                                                                                                   tax management

300 East McBee Ave.      Greenville, SC     Administrative, Data Processing and Sales    14,000    Tax credits &
                                                                                                    incentives

410 Rodeo Road           North Platte, NB   Administrative and Data Processing           13,000     Unemployment
                                                                                                   tax management

7903 Allison Way         Arvada, CO         Administrative and Data Processing           13,000     Unemployment
                                                                                                   tax management

3400 Waterview Pkwy.     Richardson, TX     Administrative and Sales                      9,000    The Work Number
                                                                                                      services
</TABLE>

(1)Lease expires in fiscal year 2007.

ITEM 3. LEGAL PROCEEDINGS

We are a defendant from time to time in lawsuits. Based on information currently
available, we believe that no current proceedings, individually or in the
aggregate, will have a material adverse effect upon us, our consolidated
financial position, or our results of operations.

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

None.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock trades on the Nasdaq National Market under the symbol "TALX."
On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record on January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006, to shareholders of record on December 19, 2005. The following
table sets forth the high and low sales prices of our common stock as quoted in
the Nasdaq National Market for each of the quarters since the beginning of
fiscal 2005 through the end of fiscal 2006, retroactively adjusted for the
effects of the 3-for-2 stock splits.

                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                        HIGH            LOW
                                                       ------          ------
<S>                                                    <C>             <C>
FISCAL 2005:
   First quarter...................................    $11.02          $ 9.67
   Second quarter..................................     10.94            9.00
   Third quarter...................................     13.33           10.15
   Fourth quarter..................................     16.34           10.29

FISCAL 2006:
   First quarter...................................    $21.84          $11.94
   Second quarter..................................     27.57           17.84
   Third quarter...................................     32.53           20.71
   Fourth quarter..................................     36.76           25.70
</TABLE>

On May 30, 2006, the last reported sale price on the Nasdaq National Market for
our common stock was $26.50 per share. As of May 30, 2006, there were
approximately 245 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, retroactively adjusted for the effects of the
3-for-2 stock splits:

<TABLE>
<CAPTION>
                                                          DIVIDEND
                                                          DECLARED
                                                          --------
<S>                                                       <C>
FISCAL 2005:
   First Quarter...................................       $   0.02
   Second Quarter..................................       $   0.03
   Third Quarter...................................       $   0.03
   Fourth Quarter..................................       $   0.03

FISCAL 2006:
   First Quarter...................................       $   0.03
   Second Quarter..................................       $   0.03
   Third Quarter...................................       $   0.03
   Fourth Quarter..................................       $   0.04
</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. See "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" regarding
certain contractual restrictions on our ability to pay dividends that are found
in our new loan agreement.

The following table provides information about purchases by us and our
affiliated purchasers during the quarter ended March 31, 2006 of equity
securities that are registered by us pursuant to Section 12 of the Exchange Act:

                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
                                                                               TOTAL NUMBER OF       MAXIMUM NUMBER
                                                                               SHARES PURCHASED    OF SHARES THAT MAY
                                          TOTAL NUMBER                       AS PART OF PUBLICLY    YET BE PURCHASED
                                           OF SHARES        AVERAGE PRICE      ANNOUNCED PLANS     UNDER THE PLANS OR
                 PERIOD                    PURCHASED        PAID PER SHARE     OR PROGRAMS (2)          PROGRAMS
----------------------------------------  ------------      --------------   -------------------   ------------------
<S>                                       <C>               <C>              <C>                   <C>
January 1, 2006 to January 31, 2006.....           600(1)   $         0.01                    --            2,943,300
February 1, 2006 to February 28, 2006...            --                  --                    --            2,943,300
March 1, 2006 to March 31, 2006.........            --                  --                    --            2,943,300
                                          ------------      --------------   -------------------
     Total..............................           600      $         0.01                    --            2,943,300
                                          ============      ==============   ===================
</TABLE>

(1) Represent restricted shares, after adjustment for the 3-for-2 stock split,
that were forfeited by a former employee, for which we reimbursed the former
employee. Accordingly, these share purchases are not considered a part of our
publicly-announced share repurchase program.

                                       21
<PAGE>

(2) On May 10, 2005, our Board of Directors authorized us to repurchase up to
three million shares of our stock, after adjustment for the 3-for-2 stock
splits, in the open market, or through privately negotiated transactions during
the 36-month period ending May 9, 2008, subject to market conditions and other
factors. Under this plan, we have repurchased a cumulative total of 56,700
shares of our common stock, as adjusted for the 3-for-2 stock splits. All shares
repurchased have been reissued in connection with restricted stock grants.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

This section presents our selected historical financial data and certain
additional information. As discussed below, on April 22, 2003, we sold
substantially all of the assets of our Human Resources and Benefits Application
Services business. During July 2001 we acquired Ti3, Inc. and during March 2002,
we acquired the unemployment cost management services business of Gates,
McDonald & Company and James E. Frick, Inc., d/b/a The Frick Company. On July 1,
2003, we acquired Johnson and Associates. Effective April 1, 2004, we acquired
certain businesses of Sheakley-Uniservice, Inc. and Sheakley Interactive
Services, LLC. In October 2004, we acquired TBT Enterprises, Inc., UI Advantage,
Inc. and Net Profit Inc., all of which specialize in employment-related tax
credit and incentive services. On April 20, 2005, we acquired Jon-Jay
Associates, Inc., which specializes in providing unemployment cost management
services as well as an employment verification service. On April 26, 2005, we
acquired the tax credits and incentives business of Glick & Glick Consultants,
LLC. On November 1, 2005, we acquired the unemployment tax business of Employers
Unity, Inc., and on December 15, 2005, we acquired the tax credits and
incentives business of Business Incentives, Inc., doing business as Management
Insights, Inc. On April 6, 2006, we acquired Performance Assessment Network,
Inc., or "PAN", a provider of secure, electronic-based psychometric testing and
assessments, as well as comprehensive talent management services.

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, 2006 from our consolidated
financial statements. The consolidated financial statements for, and as of the
end of, each of the years in the five-year period ended March 31, 2006 have been
audited by KPMG LLP, independent registered public accounting firm. The
financial information set forth below reflects the classification of the
database, document services and Human Resources and Benefits Application
Services businesses as discontinued operations.

The selected data in this section is not intended to replace the financial
statements. You should read carefully the financial statements included in this
Form 10-K, including the notes to the consolidated financial statements, in
conjunction with "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations." For a discussion of material uncertainties
that might cause the data reflected herein not to indicate our future financial
condition or results of operations, see "Item 1A. Risk Factors."

On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record on January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006, to shareholders of record on December 19, 2005. Earnings per
share and the weighted average number of common shares outstanding set forth
below have been retroactively adjusted for the 3-for-2 stock splits.

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED MARCH 31,
                                                             --------------------------------------------------------------
                                                              2002 (1)     2003 (1)     2004 (1)       2005        2006
                                                             ----------   ----------   ----------   ----------   ----------
                                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                          <C>          <C>          <C>          <C>          <C>
STATEMENT OF EARNINGS DATA:
Revenues:
   The Work Number services...............................   $   27,184   $   35,934   $   46,608   $   65,373   $  91,331
   Tax management services................................          848       74,645       73,667       90,208     114,420
   Customer premises systems..............................        3,480        1,708           --           --          --
   Maintenance and support................................        3,893        3,639        4,120        2,814       1,676
                                                             ----------   ----------   ----------   ----------   ---------
      Total revenues......................................       35,405      115,926      124,395      158,395     207,427
                                                             ----------   ----------   ----------   ----------   ---------
Cost of revenues:
   The Work Number services...............................        9,320       12,285       13,947       18,645      21,339
   Tax management services................................          450       38,337       37,986       45,064      55,289
   Customer premises systems..............................        2,652          997           --           --          --
   Maintenance and support................................        1,028          734        1,320        1,008         352
   Inventory write-down...................................          307           --           --           --          --
                                                             ----------   ----------   ----------   ----------   ---------
      Total cost of revenues..............................       13,757       52,353       53,253       64,717      76,980
                                                             ----------   ----------   ----------   ----------   ---------
Gross profit..............................................       21,648       63,573       71,142       93,678     130,447
                                                             ----------   ----------   ----------   ----------   ---------
Operating expenses:
   Selling and marketing..................................        6,333       18,902       23,862       27,693      32,700
   General and administrative.............................        7,454       25,180       26,052       32,845      42,658
   Restructuring charges..................................        2,627           --           --           --          --
   SEC settlement charge..................................           --           --           --        2,500          --
                                                             ----------   ----------   ----------   ----------   ---------
      Total operating expenses............................       16,414       44,082       49,914       63,038      75,358
                                                             ----------   ----------   ----------   ----------   ---------
Operating income .........................................        5,234       19,491       21,228       30,640      55,089
Other income (expense), net...............................        1,567       (1,358)        (845)      (2,725)     (4,477)
Income tax expense........................................        2,509        6,945        7,890       11,887      20,637
                                                             ----------   ----------   ----------   ----------   ---------
Earnings from continuing operations.......................        4,292       11,188       12,493       16,028      29,975
Income from discontinued operations, net..................            5        1,781          199          582         515
                                                             ----------   ----------   ----------   ----------   ---------
      Net earnings........................................   $    4,297   $   12,969   $   12,692   $   16,610   $  30,490
                                                             ==========   ==========   ==========   ==========   =========

Net earnings per common share (2):
   Basic:
      Continuing operations...............................   $     0.15   $     0.36   $     0.41   $     0.52   $     0.94
      Discontinued operations, net........................           --         0.06         0.01         0.02         0.02
                                                             ----------   ----------   ----------   ----------   ----------
         Net earnings.....................................   $     0.15   $     0.42   $     0.42   $     0.54   $     0.96
                                                             ==========   ==========   ==========   ==========   ==========
   Diluted:
      Continuing operations...............................   $     0.14   $     0.35   $     0.39   $     0.49   $     0.89
      Discontinued operations, net........................           --         0.06         0.01         0.02         0.01
                                                             ----------   ----------   ----------   ----------   ----------
         Net earnings.....................................   $     0.14   $     0.41   $     0.40   $     0.51   $     0.90
                                                             ==========   ==========   ==========   ==========   ==========

Cash dividends declared per common share..................   $     0.05   $     0.06   $     0.09   $     0.11   $     0.13
                                                             ==========   ==========   ==========   ==========   ==========

Weighted average number of common shares outstanding:
   Basic (2)..............................................   28,401,049   30,920,805   30,514,278   30,954,629   31,775,969
   Diluted (2)............................................   30,333,786   31,969,269   32,009,759   32,452,679   33,828,651
</TABLE>

<TABLE>
<CAPTION>
                                                                           MARCH 31,
                                                       ------------------------------------------------
                                                         2002      2003      2004      2005      2006
                                                       --------   -------   -------   -------   -------
                                                                        (IN THOUSANDS)
<S>                                                    <C>        <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...   $ 21,431   $ 9,409   $10,043   $19,014   $11,555
Working capital.....................................      2,862     1,616     5,996    24,816    28,491
Total assets........................................    179,819   172,795   213,990   246,919   347,545
Long-term debt plus capital leases..................     30,308    22,152    50,012    57,648   110,911
Shareholders' equity................................    115,991   123,183   133,817   151,864   186,298

ADDITIONAL INFORMATION:
Employment records in The Work Number database......     60,700    76,400    90,100   106,900   129,000
Employment records under contract (3)...............     70,200    82,000    97,200   113,100   136,300
</TABLE>

                                       23
<PAGE>

----------
(1)   In January 2004, we restated our consolidated financial statements as a
      result of adjustments to our customer premises systems business. The
      resulting restatement affected the fiscal years ended March 31, 1999
      through 2003 and the first two quarters of fiscal year 2004. The
      restatement had practically no cumulative impact on our financial results
      or financial condition. It had the effect of reducing revenues by $955,000
      for fiscal years 1999, 2000 and 2001 and increasing revenues by a similar
      amount in fiscal years 2002 and 2003. The impact on the fiscal years 2002
      and 2003 was an increase in revenues of $610,000 and $384,000,
      respectively. In addition to the revenue adjustments, the related
      commissions associated with the revenues were adjusted accordingly and the
      income tax provisions were amended to reflect the impact of these
      restatements. After adjustment for the 3-for-2 stock splits, the annual
      impact to diluted earnings per share was an increase of $0.01 for both
      fiscal years 2002 and 2003.

(2)   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 and the dilutive effect of all
      restricted stock. The weighted average number of shares is based on common
      stock outstanding for basic earnings per share and common stock
      outstanding, restricted stock outstanding, and common stock options and
      warrants for diluted earnings per share in periods when such common stock
      options and warrants are not antidilutive. On January 6, 2005, we declared
      a 3-for-2 stock split, which was effected in the form of a 50 percent
      stock dividend, payable February 17, 2005, to shareholders of record on
      January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock split,
      which was effected in the form of a 50 percent stock dividend, payable
      January 17, 2006, to shareholders of record on December 19, 2005. Earnings
      per share and the weighted average number of common shares outstanding
      have been retroactively adjusted for the 3-for-2 stock splits.

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

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

You should read this discussion together with the financial statements and other
financial information included in this Form 10-K for the year ended March 31,
2006. See "Forward-Looking Statements" and "Item 1A. - Risk Factors".

OVERVIEW

We are a leading provider of payroll-related and human resources business
process outsourcing services. Our services enable our clients to automate and
outsource the performance of payroll and human resources business processes that
would otherwise be performed by their own in-house payroll or human resources
departments. Our clients are large and mid-size organizations, including more
than three-fourths of the Fortune 500 companies in a wide variety of industries,
as well as a number of government agencies.

Our current services include employment and income verification and other
payroll-related services, unemployment tax management services, tax credit and
incentive services, and employee assessment and talent management services.

      -     Income Verification and Employment Services. Our employment and
            income verification services, which we refer to collectively as "The
            Work Number services," are designed to help employers save time and
            effort and reduce expenses associated with many of the
            administrative tasks required to support large workforces. These
            tasks include verifying employment and income information, printing
            and distributing pay stubs and annual W-2 forms, collecting
            time-reporting data, updating employee personnel records on a
            self-service basis, and screening job applicants. As of March 31,
            2006, The Work Number database, our proprietary database of payroll
            and other human resources-related information, contained
            approximately 129.0 million employee records and had contracts to
            receive an additional 7.3 million records. Authorized users such as
            mortgage lenders, pre-employment screeners, credit issuers, social
            service agencies and others access The Work Number service and pay
            us transaction-based or monthly service fees for verification of
            employment and income information.

      -     Unemployment Tax Management Services. Through our unemployment tax
            management services, we provide unemployment insurance claims
            processing, unemployment hearing education and consultation, and
            unemployment tax planning and management services to a broad range
            of employers. These services are designed to reduce the cost of
            processing unemployment claims by human resources departments and to
            better manage the tax rate that employers are assessed for
            unemployment taxes.

      -     Tax Credit and Incentive Services. Our services in the tax credits
            and incentives segment include assisting employers with federal,
            state and local tax credits. Examples of federal tax credit services
            include integrating work opportunity, or "WOTC", and welfare to
            work, or "WtW", tax credit processing into the current hiring
            process, as well as processing all necessary forms to identify
            applicants and employees who are potential qualifiers for hiring tax
            credits. State and local tax credit services include assisting
            clients in identifying and calculating enterprise zone credits and
            job creation credits.

                                       24
<PAGE>

      -     Employee Assessment and Talent Management Services. Beginning in
            fiscal year 2007, through our employee assessment and talent
            management services, we provide testing and assessment services, as
            well as talent management services that are designed to enable
            organizations to automate and improve their human capital management
            business processes. With our employee assessment and talent
            management services, clients can electronically deliver the
            assessments to applicants and arrange the administering or
            proctoring of the assessments at pre-qualified testing centers.
            Using an online dashboard, clients can manage open positions and
            direct active applicants through the entire assessment and selection
            process, including external tests such as a drug test.

TALX services are enabled by our proprietary databases and applications that are
designed to quickly and efficiently access and process large volumes of data. We
employ web, interactive voice response, fax, document imaging and other
technologies to enhance the services offered to our clients. We can interact
with various payroll and human resources systems, and are virtually independent
of the information technology services our clients select.

As a result of recent acquisitions discussed in " -- Acquisitions" below, in the
third quarter of fiscal year 2006, we determined that we operate in four
business segments. The presentation of segment information reflects the manner
in which management organizes segments for making operating decisions and
assessing performance. Prior period information has been reclassified to reflect
the establishment of the unemployment tax management segment and the tax credits
and incentives segment, which were previously presented together as one segment.

Our services and products fall within four business segments: The Work Number
services, unemployment tax management, tax credits and incentives, and customer
premises systems and related maintenance and support. The Work Number services
include our employment verification and services, W-2 eXpress, ePayroll,
FasTime, HireXpress, and I-9 eXpress; unemployment tax management includes our
employment tax consulting and claim processing operations and unemployment tax
planning services; tax credits and incentives include federal, state and local
tax credit and incentive services; and maintenance and support relates to a
business we are phasing out.

We are assessing the impact of the April 6, 2006 acquisition of Performance
Assessment Network, Inc., or PAN, on our current segment classifications. See "
-- Acquisitions" below.

On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record on January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006 to shareholders of record on December 19, 2005. Earnings per
share and weighted average number of common shares outstanding throughout this
Annual Report on Form 10-K have been retroactively adjusted for the 3-for-2
stock splits.

RECENT PERFORMANCE

We achieved record revenues and gross margin in fiscal 2006. We successfully
executed our strategies and emphasized cross-selling services to our existing
client base. We continued to make strategic acquisitions and realized
operational efficiencies as we integrated these acquisitions. Additionally, we
broadened our portfolio of services, both through innovations in-house and
through our strategic acquisitions. Our revenues rose 31 percent to $207.4
million in fiscal year 2006 compared to $158.4 million in the prior year. Our
earnings from continuing operations in fiscal 2006 increased 87 percent to $30.0
million, or $0.89 per diluted share. Earnings from continuing operations totaled
$16.0 million, or $0.49 per diluted share, in fiscal 2005.

The Work Number services achieved record revenues in fiscal year 2006,
increasing 40 percent to $91.3 million compared to $65.4 million in the prior
year. Growth in revenues was primarily attributable to the increased records in
the database, coupled with the continued broadening of our verifier base.
Additionally, the acquisitions of the Jon-Jay and Employers Unity employment
verification businesses also contributed to the increase in revenues in fiscal
year 2006. Through a program we call REACH, we are seeking to increase the
number of transactions within our existing verifier base vertically by expanding
usage with verifiers that have multiple locations and integrating our services
with the verifiers' systems and processes. Also through the REACH program, we
are seeking to increase transactions horizontally across multiple office
branches and services at verifier clients by identifying additional usages for
The Work Number database within our existing verifier base. Additionally,
through a focused marketing campaign, we have gained additional verifiers,
particularly within the consumer finance area. Gross margin for this business
improved 510 basis points to 76.6 percent from 71.5 percent the year before. The
increase in gross margin was due primarily to higher revenue levels and improved
leveraging of our operational infrastructure.

                                       25
<PAGE>

The total number of employment records on The Work Number services increased to
129.0 million at March 31, 2006 from 106.9 million a year ago, representing a 21
percent increase. Total employment records under contract, including those in
contract backlog to be added to the database, increased 21 percent to 136.3
million at March 31, 2006 from 113.1 million a year earlier.

Each employee included in our clients' payroll data represents an employment
record on The Work Number database. This payroll data is uploaded to The Work
Number database, updating each employee's record. If the employee is no longer
employed by a client, the existing record remains intact. Thus, The Work Number
database includes all our clients' current employees, as well as former
employees.

Revenues in the unemployment tax management business increased 19 percent to
$100.8 million, compared to $85.0 million in the prior year. The increase in
revenue was primarily attributable to the acquisitions in fiscal year 2006, as
noted below. The unemployment tax management business continued to be an
important contributor to our overall profitability as well as to the growth in
The Work Number services, resulting from selling those services to our
unemployment tax management client base. Gross margin in the unemployment tax
management business increased 120 basis points to 49.8 percent from 48.6 percent
in the 2005 fiscal year. The improved gross margin was primarily a result of
efficiencies achieved as acquisitions are integrated.

Revenues in the tax credits and incentives business increased 161 percent to
$13.6 million, compared to $5.2 million in the prior year. The increase in
revenue was primarily a result of our acquisitions in fiscal year 2006, as noted
below. Gross margin in the tax credits and incentives business declined to 65.4
percent from 73.8 percent in fiscal year 2005, primarily due to higher revenue
levels in fiscal year 2005 following the temporary lifting of the hiatus on Work
Opportunity and Welfare to Work tax credits in October 2004.

ACQUISITIONS

On April 6, 2006, we acquired PAN, a provider of secure, electronic-based
psychometric testing and assessments, as well as comprehensive talent management
services, for approximately $75 million, including transaction costs, subject to
certain post-closing adjustments. The purchase price was determined based on
arms'-length negotiations, and was paid in cash financed through our Loan
Agreement as discussed below in " - Liquidity and Capital Resources." The
acquisition agreement provides for indemnification of the Company by the sellers
for certain pre-closing liabilities and obligations of the business, subject to
certain limitations. An escrow account, maintained pursuant to the terms of the
escrow agreement, is also available until eighteen months following the purchase
to satisfy the indemnification obligations under the purchase agreement, subject
to certain limitations described in the acquisition agreement. Of the purchase
price, $10.0 million was paid into the escrow account. PAN had revenues of
approximately $25.0 million in its fiscal year ended March 31, 2006.

As discussed in Note 5 of Notes to Consolidated Financial Statements, effective
April 1, 2004, we acquired substantially all of the assets and assumed certain
liabilities of the unemployment compensation, employment verification and
applicant screening and hiring workflow services businesses of
Sheakley-Uniservice, Inc. and its wholly owned subsidiary, Sheakley Interactive
Services, LLC, which we refer to collectively as the "Sheakley Businesses".
Additionally, on October 15, 2004, we completed the acquisition of the stock of
TBT Enterprises, Incorporated and UI Advantage, Inc., headquartered in
Gaithersburg, Maryland, which we collectively refer to as "TBT Enterprises". On
October 25, 2004, we completed the acquisition of Net Profit, Inc.,
headquartered in Greenville, South Carolina.

On April 20, 2005, we acquired Jon-Jay Associates, Inc., which specializes in
providing unemployment cost management services as well as an employment
verification service. On April 26, 2005, we acquired the tax credits and
incentives business of Glick & Glick Consultants, LLC. Total revenues for these
businesses were approximately $12.0 million for calendar year 2004. On November
1, 2005, we acquired the unemployment tax business of Employers Unity, Inc.,
which had revenues of approximately $14.0 million in 2004. On December 15, 2005,
we acquired the tax credits and incentives business of Business Incentives,
Inc., doing business as Management Insights, Inc., which had revenues of
approximately $6.0 million in 2004.

                                       26
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On a periodic basis, we evaluate our estimates, including those
related to revenue recognition, intangible assets, capitalized software and
income taxes. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ materially from these estimates under
different assumptions or conditions.

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

REVENUE RECOGNITION: All revenues are generally recognized pursuant to annual or
multi-year contracts.

Revenues from The Work Number are realized primarily from transaction or monthly
fees and, to a lesser degree, based on up-front set-up fees and periodic
maintenance fees. Revenues for transaction fees are recognized in the period
that they are earned, based on fees charged to users at the time they conduct
verifications of employment and income. In accordance with Staff Accounting
Bulletin No. 104, the revenue for set-up fees and monthly maintenance fees is
recognized on a straight-line basis from the time the service is available to be
used by our clients through the end of the service period.

Revenue for our W-2 service is recognized evenly from the time the service is
available for use by TALX clients through the end of the service period.
Additionally, we have some clients that are billed for this service on a
transactional basis. For these clients, we recognize revenue on a monthly basis,
as transactions occur.

We charge ePayroll clients on a per-employee, per-month basis, plus an initial
set-up fee. Revenue for the initial set-up fees is recognized evenly over the
initial contract period, beginning with the date the client is "live" on our
system. Per-employee, per-month fees are recognized as revenue in the period the
service is provided.

FasTime clients are billed for initial set-up fees, monthly maintenance fees and
per transaction fees. Revenue is recognized evenly from the time the service is
available for use by our clients through the end of the service period for
set-up and maintenance fees and as services are performed for transaction-based
fees.

HireXpress clients are billed for initial set-up fees and per transaction fees
or monthly fees. Revenue is recognized evenly from the time the service is
available for use by our clients through the end of the service period for
set-up fees and as services are performed for transaction-based or monthly fees.

Revenues from our unemployment tax management services are recognized in the
period that they are earned, evenly over the life of the contract. Transaction
fees are recorded as the services are provided. Unemployment tax management
revenue that is contingent upon achieving certain performance criteria is
recognized when those criteria are met.

We realize revenues in our tax credits and incentives business on a contingent
basis, as a percentage of the tax credits and incentives delivered to our
clients. Revenues related to WOTC and WtW tax credits are recognized after the
applicable state government has certified the eligibility of the client's
employee and the employee has worked the required number of hours to receive the
credit. Revenue related to state and local tax credits and certain other federal
tax credits is recognized based on milestones achieved, calculation of the
underlying credit, or the client's utilization of the underlying credit,
depending upon the provisions of the contract.

In relationships with certain of our customers, we enter into agreements with
more than one of our service offerings included in the arrangement. When a
client contracts with us to provide more than one service, the terms of the
underlying contract itemize each service provided and the related fees for each
service. In accordance with the consensus of Emerging Issues Task Force Issue
No. 00-21, as these fee arrangements are similar to those charged to other
clients, we recognize revenue on the basis of the fair values of the underlying
services.

Deferred revenue represents the unearned portion of The Work Number set-up fees,
unemployment tax management and maintenance fees.

Commissions paid are deferred and charged to expense proportionally over the
related service period.

                                       27
<PAGE>

Direct expenses related to cost of revenues are tracked separately for each
service we provide. Incremental direct costs that are related to the origination
of a client contract are expensed as incurred.

BUSINESS COMBINATIONS AND INTANGIBLE ASSET VALUATION: In connection with the
acquisitions of Ti3, Inc.; the unemployment cost management services business of
Gates, McDonald & Company, a subsidiary of Nationwide Mutual Insurance Company;
James E. Frick, Inc., d/b/a The Frick Company; Johnson and Associates; the
Sheakley Businesses; TBT Enterprises, Incorporated and UI Advantage, Inc.; Net
Profit, Inc.; Jon-Jay Associates, Inc.; the tax credits and incentives business
of Glick & Glick Consultants, LLC; the unemployment tax business of Employers
Unity, Inc.; and the tax credits and incentives business of Business Incentives,
Inc., doing business as Management Insights, Inc., we acquired certain
identifiable intangible assets. We recorded these assets in accordance with the
Financial Accounting Standards Board SFAS No. 141, "Business Combinations."
Effective April 6, 2006, we acquired PAN. We will record this acquisition in
accordance with SFAS No. 141, "Business Combinations."

Effective April 1, 2002, we adopted the Financial Accounting Standards Board
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. We reviewed our goodwill and intangible assets as of
December 31, 2005 and determined that no impairment existed.

CAPITALIZED SOFTWARE: Software development costs are expensed as incurred until
technological feasibility is achieved, after which time they are capitalized on
a product-by-product basis. We amortize capitalized software development costs
evenly over the remaining estimated economic life of the product, generally
three to five years. We begin amortization of capitalized software development
costs when the product is available for general release to clients. We review
all capitalized software assets for impairment as of each balance sheet date.
Upon determination of any impairment, we write down the asset to the appropriate
value in the period that the impairment is determined.

INCOME TAXES: We record income taxes under the asset and liability method.
Deferred taxes arise because of different treatment between financial statement
accounting and tax accounting, known as temporary differences. We record the tax
effect of these temporary differences as deferred tax assets (generally items
that can be used as a tax deduction or credit in future periods) and deferred
tax liabilities (generally items that we received a tax deduction for, but have
not yet been recorded in the Consolidated Statement of Earnings). 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.

The above listing is not intended to be a comprehensive list of all of our
accounting policies. See Note 1 to our consolidated financial statements
contained in this Annual Report on Form 10-K which contains accounting policies
and other disclosures required by accounting principles generally accepted in
the United States of America.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 123r, "Share-Based Payments"
("SFAS No. 123r"), a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which requires companies to measure all employee
stock-based compensation awards using a fair value method and record such
expense in their consolidated financial statements. The provisions of SFAS No.
123r are effective for the first annual reporting period that begins after June
15, 2005. We have adopted this standard effective April 1, 2006 and elected the
modified-prospective transition method. Under the modified-prospective
transition method, awards that are granted, modified, repurchased or canceled
after the date of adoption should be measured and accounted for in accordance
with SFAS No. 123r. Stock-based awards that are granted prior to the effective
date should continue to be accounted for in accordance with SFAS No. 123, except
that stock option expense for unvested options must be recognized in the
statement of operations. Had we adopted SFAS No. 123r in prior periods, we
believe the impact of that standard would have approximated the impact of SFAS
No. 123 as described in the "Accounting for Stock-Based Compensation" disclosure
of pro forma net income and earnings per share in Note 1 to our consolidated
financial statements. We expect to report stock-based compensation expense of
approximately $2.0 million, net of taxes, in fiscal 2007 following the adoption
of SFAS 123r.

                                       28
<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                     YEARS ENDED MARCH 31,
                                                                ------------------------------
                                                                  2004       2005      2006
                                                                --------   --------   --------
                                                                        (IN THOUSANDS)
<S>                                                             <C>        <C>        <C>
Revenues:
   The Work Number services................................     $ 46,608   $ 65,373   $ 91,331
   Unemployment tax management.............................       73,008     85,009    100,826
   Tax credits and incentives..............................          659      5,199     13,594
   Maintenance and support.................................        4,120      2,814      1,676
                                                                --------   --------   --------
      Total revenues.......................................     $124,395   $158,395   $207,427
                                                                --------   --------   --------
Gross profit:
   The Work Number services................................     $ 32,661   $ 46,728   $ 69,992
   Unemployment tax management.............................       35,217     41,309     50,243
   Tax credits and incentives..............................          464      3,835      8,888
   Maintenance and support.................................        2,800      1,806      1,324
                                                                --------   --------   --------
      Total gross profit...................................     $ 71,142   $ 93,678   $130,447
                                                                --------   --------   --------
</TABLE>

<TABLE>
<CAPTION>
                                                                          YEARS ENDED MARCH 31,
                                                                          ---------------------
                                                                          2004    2005    2006
                                                                          ----    ----    ----
<S>                                                                       <C>     <C>     <C>
Gross margin percentage by revenue category:
   The Work Number services........................................       70.1%   71.5%   76.6%
   Unemployment tax management.....................................       48.2    48.6    49.8
   Tax credits and incentives......................................       70.4    73.8    65.4
   Maintenance and support.........................................       68.0    64.2    79.0
</TABLE>

<TABLE>
<CAPTION>
                                                                       YEARS ENDED MARCH 31,
                                                                      ------------------------
                                                                      2004     2005     2006
                                                                      -----    -----    -----
<S>                                                                   <C>      <C>      <C>
PERCENTAGE OF TOTAL REVENUES
Revenues:
   The Work Number services........................................    37.5%    41.2%    44.0%
   Unemployment tax management.....................................    58.7     53.7     48.6
   Tax credits and incentives......................................     0.5      3.3      6.6
   Maintenance and support.........................................     3.3      1.8      0.8
                                                                      -----    -----    -----
      Total revenues...............................................   100.0    100.0    100.0
Cost of revenues...................................................    42.8     40.9     37.1
                                                                      -----    -----    -----
Gross margin.......................................................    57.2     59.1     62.9
                                                                      -----    -----    -----
Operating expenses:
   Selling and marketing...........................................    19.2     17.5     15.8
   General and administrative......................................    20.9     20.7     20.5
   SEC settlement charge...........................................      --      1.6       --
                                                                      -----    -----    -----
      Total operating expenses.....................................    40.1     39.8     36.3
                                                                      -----    -----    -----
Operating income...................................................    17.1     19.3     26.6
Other expense, net.................................................    (0.7)    (1.7)    (2.2)
                                                                      -----    -----    -----
   Earnings from continuing operations before income tax expense...    16.4     17.6     24.4
Income tax expense.................................................     6.3      7.5      9.9
                                                                      -----    -----    -----
   Earnings from continuing operations.............................    10.1     10.1     14.5
Discontinued operations, net.......................................     0.1      0.4      0.2
                                                                      -----    -----    -----
   Net earnings....................................................    10.2%    10.5%    14.7%
                                                                      =====    =====    =====
</TABLE>

As discussed in Note 5 of Notes to Consolidated Financial Statements, effective
April 1, 2004, we acquired substantially all of the assets and assumed certain
liabilities of the unemployment compensation, employment verification and
applicant screening and hiring workflow services businesses of
Sheakley-Uniservice, Inc. and its wholly owned subsidiary, Sheakley Interactive
Services, LLC. Additionally, on October 15, 2004, we completed the acquisition
of the stock of TBT Enterprises, Incorporated and UI Advantage, Inc.,
headquartered in Gaithersburg, Maryland, which we collectively refer to as "TBT
Enterprises." On October 25, 2004, we completed the acquisition of Net Profit,
Inc., headquartered in Greenville, South Carolina. On April 20, 2005, we
acquired Jon-Jay Associates, Inc., which specializes in providing unemployment
cost management services as well as an employment verification service. On April
26, 2005, we acquired the tax credits and incentives business of Glick & Glick
Consultants, LLC. On November 1, 2005, we acquired the unemployment tax business
of Employers Unity, Inc., and on December 15, 2005, we acquired the tax credits
and incentives business of Business Incentives, Inc., doing business as
Management Insights, Inc.

                                       29
<PAGE>

On April 22, 2003 we transferred substantially all of the assets of our Human
Resources and Benefits Application Services business to Workscape, Inc., a
Massachusetts-based provider of benefits and workforce management solutions.
Accordingly, the historical results of operations for this business have been
reclassified to earnings from discontinued operations on our consolidated
statement of earnings.

Revenues.

<TABLE>
<CAPTION>
                                                                   YEARS ENDED MARCH 31,
                                                              ------------------------------
                                                                2004       2005       2006
                                                              --------   --------   --------
                                                                     (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
The Work Number services.................................     $ 46,608   $ 65,373   $ 91,331
Unemployment tax management..............................       73,008     85,009    100,826
Tax credits and incentives...............................          659      5,199     13,594
Maintenance and support..................................        4,120      2,814      1,676
                                                              --------   --------   --------
   Total revenues........................................     $124,395   $158,395   $207,427
                                                              --------   --------   --------
</TABLE>

Total revenues increased 31.0% to $207.4 million in fiscal 2006 from $158.4
million in fiscal 2005 and $124.4 million in fiscal 2004.

      The Work Number services segment

Revenues from The Work Number services increased 39.7% to $91.3 million in
fiscal 2006 from $65.4 million in fiscal 2005 and $46.6 million in fiscal 2004.
Growth in revenues was primarily attributable to the increased records in the
database, coupled with the continued broadening of our verifier base.
Additionally, the acquisitions of the Jon-Jay and Employers Unity employment
verification businesses also contributed to the increase in revenues in fiscal
year 2006. Through a program we call REACH, we are seeking to increase the
number of transactions within our existing verifier base vertically by expanding
usage with verifiers that have multiple locations and integrating our services
with the verifiers' systems and processes. Also through the REACH program, we
are seeking to increase transactions horizontally across multiple office
branches and services at verifier clients by identifying additional usages for
The Work Number database within our existing verifier base. Finally, through a
focused marketing campaign, we have gained additional verifiers, particularly
within the consumer finance area. The increase in fiscal 2005 was due primarily
to an increase in transaction volume resulting from marketing efforts directed
to verifiers and employers, the continued growth of the database, the REACH
program, and the acquisitions of the Sheakley employment verification business
and HireXpress, our applicant screening and hiring workflow services business.

The mortgage industry, the consumer finance industry, and pre-employment
screeners are the primary revenue generators for The Work Number. Verifications
in the consumer finance area increased significantly in fiscal year 2006 as we
have focused on extending our reach to additional consumer finance lenders, such
as lenders for automobile, furniture and appliance loans. Mortgage-related
verifications declined as a percentage of total verifications in fiscal year
2005 compared to the prior year primarily as a result of overall economic
factors. The balance between mortgage-related and pre-employment-related
verification revenues began to shift back from its widest spread in the first
quarter of fiscal 2004 towards a more traditional balance towards the end of
fiscal 2004. The table below indicates the percentage of The Work Number
revenues contributed by types of verifiers during fiscal year 2005 and fiscal
year 2006.

<TABLE>
<CAPTION>
                                                                           QUARTERS ENDED
                                        -----------------------------------------------------------------------------------------
                                        JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
             REVENUE SOURCE               2004       2004        2004       2005        2005       2005        2005       2006
-------------------------------------   --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                                     <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
Pre-Employment.......................      18%        19%         18%        14%         19%        17%         18%        14%
Mortgage.............................      35         34          35         27          34         34          33         28
Consumer Finance.....................      16         21          21         24          23         28          27         22
Social Services......................      13          8           8          8           9          9           9          9
Other................................       5          5           5          2           2          2           2          1
Complementary Work Number Services...      13         13          13         25          13         10          11         26
</TABLE>

As of the end of fiscal year 2006, we had 129.0 million employment records on
The Work Number services database, a 21% increase from fiscal year 2005. Total
employment records under contract, including those in the contract backlog to be
added to the database, represented 136.3 million records, a 21% increase from
fiscal year 2005.

We generally receive regular feeds of payroll data from each client. Each
employee included in our clients' payroll data represents an employment record
on The Work Number database. This payroll data is uploaded to The Work Number

                                       30
<PAGE>

database, updating each employee's record. If the employee is no longer employed
by a client, the existing record remains intact. Thus, The Work Number database
includes all our clients' current employees, as well as former employees.

Our W-2 eXpress services also experienced strong growth in fiscal 2006 and 2005.
We had 12.1 million W-2s on our system for fiscal 2006, representing an increase
of 18.6% over fiscal 2005. W-2s on our system increased 20.0% in fiscal 2005
compared to fiscal 2004.

      Unemployment tax management segment

Revenues in the unemployment tax management business increased 19 percent to
$100.8 million, compared to $85.0 million in the prior year. The increase in
revenue was primarily attributable to the acquisitions of Jon-Jay Associates,
Inc. and Employers Unity, Inc. in fiscal year 2006. Revenues from unemployment
tax management increased 16.4% to $85.0 million in fiscal 2005 from $73.0
million in fiscal 2004 primarily as a result of our acquisition of the Sheakley
Businesses.

Unemployment tax management revenues consist of multi-year contracts that
provide a solid revenue base with upside potential through contingency billings
from tax consulting or additional billings if certain performance measures
exceed contractually set levels. Revenues may also vary if the number of claims
processed exceeds or falls below contractually set levels. Claims activity has
trended down over the last two years, but remained steady over the last half of
fiscal 2006.

      Tax credits and incentives segment

Revenues in the tax credits and incentives business increased 161 percent to
$13.6 million, compared to $5.2 million in the prior year. The increase in
revenue was primarily a result of our acquisitions of Glick & Glick Consultants,
LLC and Management Insights, Inc. in fiscal year 2006 and inclusion of a full
year of revenues from our fiscal year 2005 acquisitions of Net Profit, Inc. and
TBT Enterprises. Revenues from tax credits and incentives increased to $5.2
million in fiscal 2005 from $0.7 million in fiscal 2004 primarily as a result of
our acquisitions of Net Profit, Inc. and TBT Enterprises in fiscal 2005.

      Maintenance and support segment

Revenues from maintenance and support related to the former customer premises
systems business declined to $1.7 million in fiscal 2006, compared to $2.8
million in fiscal 2005 and $4.1 million in fiscal 2004. During 2003, we notified
our maintenance clients of our intention to discontinue all support services
effective June 2005. As a result of requests from a number of our clients, we
have agreed to extend these support services until December 31, 2006. We
anticipate revenues from maintenance and support will continue to decrease over
time from current levels.

Gross Profit and Gross Margin.

<TABLE>
<CAPTION>
                                             YEARS ENDED MARCH 31,
                                         ------------------------------
                                          2004        2005       2006
                                         -------    -------    --------
                                                 (IN THOUSANDS)
<S>                                      <C>        <C>        <C>
  The Work Number services............   $32,661    $46,728    $ 69,992
  Unemployment tax management.........    35,217     41,309      50,243
  Tax credits and incentives..........       464      3,835       8,888
  Maintenance and support.............     2,800      1,806       1,324
                                         -------    -------    --------
     Total gross profit...............   $71,142    $93,678    $130,447
                                         -------    -------    --------

Gross margin percentage by segment:
  The Work Number services............      70.1%      71.5%       76.6%
  Unemployment tax management.........      48.2       48.6        49.8
  Tax credits and incentives..........      70.4       73.8        65.4
  Maintenance and support.............      68.0       64.2        79.0
     Total gross margin percentage....      57.2%      59.1%       62.9%
</TABLE>

Total gross profit increased 39.3% to $130.4 million in fiscal 2006 from $93.7
million in fiscal 2005 and $71.1 million in fiscal 2004. Total gross margin
increased to 62.9% in fiscal 2006 from 59.1% in fiscal 2005 and 57.2% in fiscal
2004.

      The Work Number segment

The Work Number services gross profit increased 49.8% to $70.0 million in fiscal
2006 from $46.7 million in fiscal 2005 and $32.7 million in fiscal 2004. Gross
margin increased to 76.6% in fiscal 2006 from 71.5% in fiscal 2005 and 70.1% in
fiscal

                                       31
<PAGE>

2004. The increases in gross profit and gross margin were due primarily to
higher revenue levels as discussed above and improved leveraging of our
operational infrastructure.

      Unemployment tax management segment

Unemployment tax management gross profit increased 21.6% to $50.2 million, or
49.8% of corresponding revenue, in fiscal 2006 from $41.3 million, or 48.6% of
corresponding revenue, in fiscal 2005 and $35.2 million, or 48.2% of
corresponding revenue, in fiscal 2004. The increases in gross profit and gross
margin in fiscal years 2006 and 2005 were due primarily to higher revenues, as
well as cost savings realized through our consolidation of the operational
infrastructure of various acquisitions. The unemployment tax management business
has been an important contributor to our overall profitability as well as to the
growth in The Work Number Services due to success in cross-selling The Work
Number Services into the unemployment tax management client base.

      Tax credits and incentives segment

Tax credits and incentives gross profit increased 132.2% to $8.9 million, or
65.4% of corresponding revenue, in fiscal 2006 from $3.8 million, or 73.8% of
corresponding revenue, in fiscal 2005 and $0.5 million, or 70.4% of
corresponding revenue, in fiscal 2004. The increase in gross profit in fiscal
years 2006 and 2005 was due primarily to higher revenues, as well as cost
savings realized through our consolidation of the operational infrastructure of
various acquisitions. The decline in gross margin in fiscal 2006 was primarily
due to higher revenue levels increasing the gross margin in fiscal year 2005
following the temporary lifting of the hiatus on WOTC and WtW tax credits in
October 2004.

      Customer premises systems and maintenance and support segment

Customer premises systems and maintenance and support gross profit decreased to
$1.3 million from $1.8 million in fiscal 2005 and $2.8 million in fiscal 2004.
The decline in gross profit was due to the lower revenues as we continue to
phase out of this business.

Selling and Marketing Expenses. Selling and marketing expenses increased 18.1%
to $32.7 million in fiscal 2006 from $27.7 million in fiscal 2005 and $23.9
million in fiscal 2004. As a percentage of revenues, such expenses decreased to
15.8% in fiscal 2006 compared to 17.5% in fiscal 2005 and 19.2% in fiscal 2004.
The increase in expenses in fiscal 2006 was primarily due to increased
commissions and incentives, which resulted from our higher revenues, as well as
increased personnel as we developed a new sales and service team to market
directly to prospective employer clients with fewer than 3,500 employees.
Selling and marketing expenses as a percentage of revenues improved in fiscal
2006 as a result of the higher revenue levels, improved leveraging of our
selling and marketing infrastructure and our continued focus on expense control.
Increased selling and marketing expenses in fiscal 2005 were primarily due to
increased commissions and incentives, which resulted from our higher revenues,
as well as increased personnel as we developed a new sales and service team to
market directly to verifiers.

General and Administrative Expenses. General and administrative expenses
increased 29.9% to $42.7 million in fiscal 2006 from $32.8 million in fiscal
2005 and $26.1 million in fiscal 2004. The increase in general and
administrative expenses in fiscal 2006 resulted primarily from additional
amortization related to intangible assets from our recent acquisitions and the
expansion of our infrastructure to accommodate our growing business and the
financial consolidation of the acquisitions described in Notes 5 and 6 of Notes
to Consolidated Financial Statements. As a percentage of revenues, such expenses
decreased to 20.5% in fiscal 2006 compared to 20.7% in fiscal 2005 and 20.9% in
fiscal 2004.

SEC Settlement Charge. As previously disclosed, the staff of the SEC conducted
an investigation into the matters that were the subject of the restatements of
our financial statements that we had announced on December 16, 2002, and January
5, 2004. In March 2005, the U.S. District Court for the Eastern District of
Missouri entered a final judgment against us whereby we agreed, without
admitting or denying any liability, to pay $2.5 million in civil penalties and
not to violate certain provisions of the federal securities laws in the future.
In addition, the SEC entered a cease and desist order whereby we agreed, without
admitting or denying any liability, to pay one dollar in disgorgement and not to
violate certain provisions of the federal securities laws in the future.
Separately, William W. Canfield, our president and chief executive officer,
entered into a settlement with the SEC related to its investigation against him
in a related matter.

Other Income (Expense), Net. Other income (expense), net totaled $4.5 million of
other expense in fiscal 2006, compared to $2.7 million in fiscal 2005 and $0.8
million in fiscal 2004. The increases in fiscal 2006 and 2005 were due to higher
interest expense resulting from increased borrowings to fund our acquisitions in
2006 and 2005.

                                       32
<PAGE>

Income Tax Expense. Our effective income tax rate was 40.8%, 42.6%, and 38.7% in
fiscal 2006, 2005 and 2004, respectively. The SEC settlement charge, as
discussed above, was not tax deductible, causing a higher effective income tax
rate in fiscal 2005.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth (1) specified unaudited statement of operations
data (2) the gross margin percentage for each of our revenue categories, and (3)
statement of operations data expressed as a percentage of our total revenues, in
each case for each of the four quarters in fiscal 2006 and fiscal 2005. 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.

We had initially recorded the SEC settlement charge in the first quarter of
fiscal 2005 as other income (expense), net. It was reclassified to operating
expenses in the accompanying table of quarterly results of operations to conform
to current presentation to more accurately reflect the nature of this charge. As
a result of the reclassification, previously reported operating income for the
fiscal year 2005 first quarter should have been $2.8 million, as reflected in
the table below.

                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                                              QUARTERS ENDED
                                               -----------------------------------------------------------------------------------
                                               JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,  JUNE 30,  SEPT. 30,  DEC. 31,  MARCH 31,
                                                 2004      2004       2004      2005       2005      2005       2005      2006
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
Revenues:
    The Work Number services.................. $ 14,417  $  14,188  $ 15,558  $  21,210  $ 20,445  $  21,857  $ 21,904  $  27,125
    Unemployment tax management...............   20,710     21,572    20,901     21,826    23,052     23,344    26,193     28,237
    Tax credits and incentives................      190         90     2,704      2,215     2,873      2,699     3,785      4,237
    Maintenance and support...................      744        780       677        613       424        444       450        358
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
      Total revenues..........................   36,061     36,630    39,840     45,864    46,794     48,344    52,332     59,957
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Gross profit:
    The Work Number services..................   10,225     10,257    11,372     14,874    15,715     17,178    17,026     20,073
    Unemployment tax management...............    9,676     10,759    10,211     10,663    11,187     11,602    13,121     14,333
    Tax credits and incentives................       90         30     2,134      1,581     1,963      1,675     2,652      2,598
    Maintenance and support...................      512        548       424        322       337        344       350        293
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
      Total gross margin......................   20,503     21,594    24,141     27,440    29,202     30,799    33,149     37,297
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Operating expenses:
    Selling and marketing.....................    7,020      6,618     6,965      7,090     7,730      8,073     8,587      8,310
    General and administrative................    8,170      7,779     8,460      8,436    10,088     10,052    11,108     11,410
    SEC settlement charge.....................    2,500         --        --         --        --         --        --         --
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
      Total operating expenses................   17,690     14,397    15,425     15,526    17,818     18,125    19,695     19,720
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Operating income..............................    2,813      7,197     8,716     11,914    11,384     12,674    13,454     17,577
                                               ========  =========  ========  =========  ========  =========  ========  =========
Net earnings from continuing operations....... $    198  $   3,930  $  4,813  $   7,087  $  6,425  $   7,151  $  7,422  $   8,977
                                               ========  =========  ========  =========  ========  =========  ========  =========
Net earnings.................................. $    356  $   4,059  $  4,966  $   7,229  $  6,627  $   7,177  $  7,644  $   9,042
                                               ========  =========  ========  =========  ========  =========  ========  =========
Diluted earnings from continuing operations
    per share................................. $   0.01  $    0.12  $   0.15  $    0.21  $   0.19  $    0.21  $   0.22  $    0.26
                                               ========  =========  ========  =========  ========  =========  ========  =========
Diluted earnings  per share................... $   0.01  $    0.13  $   0.15  $    0.22  $   0.20  $    0.21  $   0.22  $    0.26
                                               ========  =========  ========  =========  ========  =========  ========  =========

Gross margin percentage by segment:
    The Work Number services..................     70.9%      72.3%     73.1%      70.1%     76.9%      78.6%     77.7%      74.0%
    Unemployment tax management...............     46.7       49.9      48.9       48.9      48.5       49.7      50.1       50.8
    Tax credits and incentives................     47.4       33.3      78.9       71.4      68.3       62.1      70.1       61.3
    Maintenance and support...................     68.8       70.3      62.6       52.5      79.5       77.5      77.8       81.8

PERCENTAGE OF TOTAL REVENUES:
Revenues:
    The Work Number services..................     40.0%      38.7%     39.1%      46.3%     43.7%      45.2%     41.9%      45.2%
    Unemployment tax management...............     57.5       59.0      52.4       47.6      49.3       48.3      50.0       47.1
    Tax credits and incentives................      0.5        0.2       6.8        4.8       6.1        5.6       7.2        7.1
    Maintenance and support...................      2.0        2.1       1.7        1.3       0.9        0.9       0.9        0.6
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
      Total revenues..........................    100.0      100.0     100.0      100.0     100.0      100.0     100.0      100.0
Cost of revenues..............................     43.1       41.0      39.4       40.2      37.6       36.3      36.7       37.8
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Gross margin..................................     56.9       59.0      60.6       59.8      62.4       63.7      63.3       62.2
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Operating expenses:
    Selling and marketing.....................     19.5       18.1      17.5       15.4      16.5       16.7      16.4       13.9
    General and administrative................     22.7       21.3      21.2       18.4      21.6       20.8      21.2       19.0
    SEC settlement charge.....................      6.9        --         --         --        --         --        --         --
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
      Total operating expenses................     49.1       39.4      38.7       33.8      38.1       37.5      37.6       32.9
                                               --------  ---------  --------  ---------  --------  ---------  --------  ---------
Operating income..............................      7.8       19.6      21.9       26.0      24.3       26.2      25.7       29.3
                                               ========  =========  ========  =========  ========  =========  ========  =========
Net earnings from continuing operations.......      0.6       10.7      12.1       15.5      13.8       14.8      14.2       15.0
                                               ========  =========  ========  =========  ========  =========  ========  =========
Net earnings..................................      1.0       11.1      12.5       15.8      14.2       14.8      14.6       15.1
                                               ========  =========  ========  =========  ========  =========  ========  =========
</TABLE>

See "Acquisitions" above regarding our acquisitions in fiscal years 2005 and
2006. 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 "Item 1A. Risk Factors - Our quarterly and
annual operating results may fluctuate significantly, which could cause our
stock price to decline significantly."

SEASONALITY

Revenues generated from our W-2 eXpress service, which is part of The Work
Number services segment, are particularly affected by seasonality and are
principally earned in our fourth fiscal quarter.

Revenues generated from our unemployment tax management services are generally
higher in the fourth fiscal quarter as certain client contracts allow us to bill
additional fees based upon actual annual claims volumes. Additionally, our tax
planning business has an inherent seasonality based upon the general nature of
tax services.

                                       34
<PAGE>

CONTRACTUAL OBLIGATIONS

The following table summarizes certain of our contractual obligations as of
March 31, 2006.

<TABLE>
<CAPTION>
                                                PAYMENTS DUE BY PERIOD
                                                    (IN THOUSANDS)
                                 ------------------------------------------------------
                                            LESS THAN 1    1-3       3-5      MORE THAN
                                   TOTAL       YEAR       YEARS     YEARS      5 YEARS
                                 ------------------------------------------------------
<S>                              <C>        <C>           <C>      <C>        <C>
Long-Term Debt Obligations....   $110,802   $        --   $   --   $110,802   $      --
Capital Lease Obligations.....        169            60       83         26          --
Operating Lease Obligations...     24,461         5,672    7,910      5,470       5,409
                                 --------   -----------   ------   --------   ---------
     Total....................   $135,432   $     5,732   $7,993   $116,298   $   5,409
                                 ========   ===========   ======   ========   =========
</TABLE>

      In connection with certain of our acquisitions, there are additional
      contingent payments to be calculated based on identified performance
      criteria as specified in the underlying purchase agreements. When
      determined beyond a reasonable doubt, these additional payments will be
      recorded as goodwill. As of March 31, 2006, approximately $5.4 million in
      contingent payments have been made. We estimate that additional payments
      could range up to approximately $14 million and be payable over the next
      18 months.

      Interest on long-term debt obligations is at variable rates and,
      therefore, has not been included in these contractual obligations. See
      "Liquidity and Capital Resources -- Long-term Debt -- Loan Agreement"
      below.

      As discussed below under "Liquidity and Capital Resources -- Long-term
      Debt," on May 25, 2006, we amended and restated our principal loan
      agreement and on May 25, 2006, we sold $75.0 million of secured senior
      guaranteed notes and used the proceeds to repay outstanding revolving
      loans under our loan agreement.

LIQUIDITY AND CAPITAL RESOURCES

<TABLE>
<CAPTION>
                                        YEARS ENDED MARCH 31,
                                     ----------------------------
                                       2004      2005      2006
                                     --------   -------   -------
                                           (IN THOUSANDS)
<S>                                  <C>        <C>       <C>
Net cash provided by (used in):
   Operating Activities...........   $ 21,558   $30,049   $39,370
   Investing Activities...........    (48,258)  (35,194)  (98,193)
   Financing Activities...........     25,859     7,976    53,129
</TABLE>

In recent years, we have financed our operations through cash flows from
operating activities. In addition to cash provided by operating activities, we
have access to a revolving credit facility, which we have used most recently
primarily for acquisitions. On May 25, 2006, we completed a private placement of
$75.0 million of senior guaranteed notes, as described below.

We generated cash from operating activities of $39.4 million in fiscal 2006, a
$9.4 million increase compared to $30.0 million in fiscal 2005, primarily as a
result of improved operating results.

Our principal sources and uses of cash during fiscal 2006 were as follows:

Sources:

      -     Generated $39.4 million from operations;

      -     Borrowed $138.8 million under credit arrangements to finance
            acquisitions and refinance debt; and

      -     Received proceeds of $6.9 million from the sale of short-term
            investments.

Uses:

      -     Acquisition of four businesses for a total of $87.1 million;

      -     Purchased $5.1 million in short-term investments;

      -     Repaid $85.5 million under long-term debt facilities, including debt
            refinancings; and

      -     Invested $12.9 million in property and equipment and capitalized
            software development.

Our net cash used in investing activities increased to $98.2 million in fiscal
2006 from $35.2 million in fiscal 2005. This increase was primarily due to $87.1
million of cash outlays for acquisitions and $12.9 million of investments in
property, equipment, and capitalized software, partially offset by $1.8 million
of net sales of short-term investments. At March 31, 2006, 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 during the next 18 months as we integrate the
operations of our new acquisitions and continue to invest in our data center
infrastructure.

In connection with certain of our acquisitions, there are additional contingent
payments to be calculated based on identified performance criteria as specified
in the underlying purchase agreements. When determined beyond a reasonable
doubt, these additional payments will be recorded as goodwill. In fiscal year
2006, approximately $5 million in contingent payments have been made. We
estimate that additional payments could range up to approximately $14 million
and be payable over the next 18 months.

                                       35
<PAGE>


Pursuant to an acquisition agreement dated April 6, 2006, we acquired PAN for
approximately $75 million, including transaction costs, subject to certain
post-closing adjustments. The purchase price was determined based on
arms'-length negotiations, and was paid in cash financed through our Loan
Agreement as discussed below in " - Long-Term Debt."

Net cash provided by financing activities was $53.1 million in fiscal 2006
compared to $8.0 million in fiscal 2005. The increase was due primarily to net
borrowings under credit arrangements of $53.3 million in 2006 compared to
$7.5 million in 2005. In both years, borrowings were used to fund acquisitions.
Additionally, in fiscal 2006, we paid $3.8 million in dividends, received
$4.9 million from issuance of common stock in connection with employee benefit
plans, and repurchased stock for $1.3 million.

Our working capital increased to $28.5 million at March 31, 2006 from $24.8
million at March 31, 2005. This increase was primarily due to increased accounts
receivable as a result of our acquisitions in fiscal year 2006. Our accounts
receivable increased $11.8 million to $31.5 million at March 31, 2006, compared
to $19.7 million at March 31, 2005. The increase was primarily attributable to
significantly higher revenues in the fiscal 2006 fourth quarter compared to the
fourth quarter of the prior year.

Based on cash and cash equivalents on hand, together with anticipated cash flows
from operations, we believe we have sufficient liquidity to pay our obligations
as they become due, for at least the next 12 months.

Our business strategy contemplates that we will consider acquisitions from time
to time. We cannot assure you that we will make any such additional acquisitions
or that any such acquisitions would be successful. We expect that such
acquisitions may require that we access additional credit. As described below,
our Loan Agreement will provide funding for certain possible future acquisitions
subject to certain conditions. Except in these circumstances, we cannot assure
you that additional credit would be available on acceptable terms. Any such
additional credit would increase the risks associated with leverage, including
our ability to service indebtedness and volatility of interest rates. Also, we
have filed with the SEC a shelf registration statement regarding $125 million of
our securities. The registration statement has been declared effective by the
SEC and allows us to complete one or more offerings of our common stock,
preferred stock, depositary shares, debt securities, purchase contracts,
warrants and units from time to time in one or more public offerings. This Form
10-K shall not constitute an offer to sell or the solicitation of an offer to
buy, nor shall there be any sale of any securities registered under the
registration statement 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.

During fiscal 2006, we continued our quarterly dividend program, declaring a
$0.03 per share dividend in each of the first three quarters and a $0.04 per
share dividend in the fourth quarter, as adjusted for the effects of the 3-for-2
stock split.

We are currently under examination by the Internal Revenue Service for the tax
year ended March 31, 2004. We do not expect the results of this examination to
have a material adverse effect on our financial condition or results of
operations.

SHARE REPURCHASE PLAN

On May 10, 2005, our Board of Directors authorized us to repurchase up to three
million shares of our stock in the open market, or through privately negotiated
transactions during the 36-month period ending May 9, 2008, subject to market
conditions and other factors. Under this plan, we have repurchased a cumulative
total of 56,700 shares of our common stock, as adjusted for the 3-for-2 stock
split. All shares repurchased have been reissued in connection with restricted
stock grants.

LONG-TERM DEBT

Loan Agreement. On April 14, 2005, we entered into a secured second amended and
restated loan agreement, which we refer to as the "2005 Loan Agreement," with
LaSalle Bank National Association, as administrative agent and the lenders party
thereto, or collectively, the "Lenders," to replace the loan agreement in place
at the time, which we refer to as the "2004 Loan Agreement," and refinance in
full the $57.5 million outstanding loan balance at March 31, 2005. The 2005 Loan
Agreement established a $100.0 million revolving line of credit and provided for
the issuance of letters of credit and swingline loans.

On November 1, 2005, we amended the 2005 Loan Agreement to expand the
availability under our revolving line of credit to $150.0 million, of which
$39.2 million remained available as of March 31, 2006. On April 6, 2006, we
entered into the second amendment to the 2005 Loan Agreement which, among other
things, expanded the availability under our revolving

                                       36
<PAGE>

line of credit to $200 million. There are procedures, including limitations on
the timing and increments, associated with such a commitment increase request.
The second amendment also revised and updated other terms, including the terms
of some of the financial covenants under the Loan Agreement.

On May 25, 2006, concurrently with the issuance and sale of the $75.0 million
principal amount of Senior Guaranteed Notes due May 25, 2014, which we refer to
as the "Notes," we entered into a $150.0 million third amended and restated loan
agreement, which we refer to as the "2006 Loan Agreement," with the Lenders to
replace the 2005 Loan Agreement and refinance in full the $112.4 million
outstanding loan balance on May 25, 2006, after giving effect to the repayment
of $74.2 million of loans outstanding under the 2005 Loan Agreement from the
proceeds of the Notes. The 2006 Loan Agreement established a $150.0 million
revolving line of credit and provided for the issuance of letters of credit and
swingline loans. The 2006 Loan Agreement includes an accordion feature that
permits us to increase availability to $200 million under certain circumstances.
There are procedures, including limitations on the timing and increments,
associated with such a commitment increase request. In conjunction with the 2006
Loan Agreement, the Lenders released their security interests in our and our
subsidiaries' assets and the stock of our subsidiaries, which had existed under
the 2005 Loan Agreement.

The proceeds of loans made under the 2006 Loan Agreement may be used solely to
refinance loans outstanding under the 2005 Loan Agreement and for working
capital, permitted capital expenditures, as the source for payment of our
obligations with respect to letters of credit, to finance permitted acquisitions
meeting specified criteria, and to finance certain repurchases of our capital
stock subject to specified limitations. The 2006 Loan Agreement is absolutely
and unconditionally guaranteed by our material subsidiaries.

We may make prepayments on advances under the revolving credit facility without
penalty, provided we give at least one business day's notice, pay accrued
interest and otherwise make the applicable lenders whole. As the 2006 Loan
Agreement is a revolving credit facility, there are no scheduled minimum
principal repayments in fiscal years 2006 through 2010. All amounts outstanding
under the credit facility are due and payable on April 14, 2010.

Advances under the revolving credit facility bear interest at rates we select,
including a base rate or the LIBOR rate plus an applicable margin. The base rate
is a variable rate equal to the greater of the Lender's prime rate or the
federal funds rate plus 0.5%. The applicable margin for LIBOR rate loans will
vary from 1.00% to 1.75%. Swingline loans will bear interest at the base rate.
During the existence of an event of default, loans will bear additional interest
of 2.00% per year.

We will pay a facility fee, payable on a quarterly basis in the amount equal to
0.25% of the unused portion of the revolving credit facility. If we utilize any
letters of credit, we will pay a fronting fee equal to 0.125% of the face amount
of each letter of credit, as well as a letter of credit fee equal to the
aggregate undrawn amount of the letter of credit multiplied by the LIBOR margin
in effect on the date the letter of credit is issued. We paid the Lenders an
amendment fee equal to $50,000 on the effective date of the 2005 Loan Agreement,
an amendment fee equal to $75,000 on November 1, 2005 in connection with the
first amendment, and amendment fees in the aggregate amount of $55,000 in
connection with the second amendment.

The 2006 Loan Agreement includes certain covenants, including, without
limitation, restrictions on the use of proceeds of any loans, as described
above. The 2006 Loan Agreement also requires compliance with certain financial
covenants based on our minimum interest coverage (the ratio of EBIT minus
dividends and income tax expense to interest expense), minimum EBITDA (as
defined in the 2006 Loan Agreement and as adjusted for, among other things,
approved acquisitions) and our ratio of total indebtedness to EBITDA (as so
adjusted). The 2006 Loan Agreement also requires compliance with certain
operating and other covenants which limit, without first obtaining written
consent of the lenders, among other things, the ability of TALX and our
subsidiaries to incur additional debt (with specified exceptions), sales of
assets, changes in our capital structure, affiliate transactions, acquisitions,
and distributions to our shareholders. The 2006 Loan Agreement generally
prohibits the payment of cash dividends, except for cash dividends not in excess
of six cents per share per calendar quarter, up to a maximum of $7.5 million per
fiscal year so long as we are not in default at the time of the declaration. The
2006 Loan Agreement also contains various representations and warranties,
regarding, among others, compliance with material laws, the accuracy of
financial statements and other information delivered to the Lenders and the
absence of material changes.

In the event of a default under the 2006 Loan Agreement, the Lenders may
terminate the commitments made under the Loan Agreement, declare amounts
outstanding, including accrued interest and fees, payable immediately, and
enforce any and all rights and interests.

                                       37
<PAGE>
 Note Placement. On May 25, 2006, we entered into a Note Purchase Agreement with
several institutional investors for the issuance and sale by TALX in a private
placement of our Senior Guaranteed Notes due May 25, 2014 in an aggregate
principal amount of $75.0 million. We used the proceeds from the sale of the
Notes to repay outstanding loans in the amount of $74.2 million under the 2005
Loan Agreement.

We are required to repay the principal amount of the Notes in five annual
installments commencing on May 25, 2010 with the final payment of all principal
then outstanding on May 25, 2014. We may prepay the Notes subject to certain
restrictions and the payment of a make-whole amount. In addition, we may be
required by the holders of the Notes to prepay the Notes upon the occurrence of
a Change of Control, as defined in the Note Purchase Agreement. Under certain
circumstances, we may also be required to use proceeds of certain asset
dispositions to prepay a portion of the Notes.

Interest on the Notes of 6.89% per annum is payable semiannually until the
principal becomes due and payable, provided, that the interest rate increases by
0.45% unless we increase equity capital by $75 million before
September 30, 2006; provided further, if such increase takes place after
September 30, 2006 and before September 30, 2007, then on and after the first
day of the next fiscal quarter following the fiscal quarter in which such equity
capital was raised, such additional interest will no longer accrue and be
payable, and the interest rate on the Notes will return to 6.89% per annum,
subject in any event to the immediately following sentence. To the extent
permitted by law, upon the occurrence of an event of default, interest accrues
on any amount due at a rate equal to the greater of 8.89% or 2.0% over prime as
announced by LaSalle Bank National Association. Our obligations with respect to
the Notes and the Note Purchase Agreement are absolutely and unconditionally
guaranteed by our material subsidiaries.

The Note Purchase Agreement contains customary covenants, including compliance
with laws, maintenance of insurance, keeping of books, conduct of business,
maintenance of properties, payment of taxes, inspection of records, furnishing
of quarterly and annual financial statements, quarterly compliance certificates
and other financial information.

The Note Purchase Agreement also contains customary restrictive covenants
including certain restrictions on transactions with affiliates, our Consolidated
Net Worth (as defined in the Note Purchase Agreement), other indebtedness,
including that of guarantor subsidiaries, our ratio of Consolidated Income
Available for Fixed Charges to Consolidated Fixed Charges (as defined in the
Note Purchase Agreement), our ratio of Consolidated Debt to Consolidated
Operating Cash Flow (as defined in the Note Purchase Agreement), liens and
encumbrances, consolidations and mergers, and sales of assets.

Except as described below, upon the happening of an event of default under the
Note Purchase Agreement, the holder or holders of more than 50% in principal
amount of the Notes at the time outstanding may at any time at its or their
option, by notice or notices to us, declare all the Notes then outstanding to be
immediately due and payable. If an event of default with respect to the payment
of principal or interest on the Notes occurs, any holder or holders of the Notes
at the time outstanding affected by such event of default may at any time at its
or their option, by notice or notices to us, declare all of the Notes held by it
or them to be immediately due and payable. If an event of default with respect
to bankruptcy proceedings occurs, all of the Notes then outstanding will become
immediately due and payable without any declaration or other act on the part of
any holders of the Notes.

We have entered into an interest rate swap contract which has a notional amount
of $14.0 million at March 31, 2006. Under this contract, we pay a fixed rate of
3.72% and receive a variable rate of LIBOR, which is equal to the LIBOR rate
utilized on our outstanding revolving loans. The notional amount of our interest
rate swap contract steps down over time until its termination on March 31, 2008.
Effective April 14, 2005, in connection with the refinancing of our credit
facility existing at that time, we matched our existing interest rate swap to
our outstanding borrowings. This strategy effectively converts a portion of our
outstanding revolving loans into a fixed rate instrument over the term of the
interest rate swap contract.

The interest rate swap and related gains and losses arising on the contract are
accounted for as a cash flow hedge in accordance with SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." Specifically, changes in the
fair value of derivative instruments designated as cash flow hedges are deferred
and recorded in other comprehensive income. These deferred gains or losses are
recognized in income when the transactions being hedged are completed. We do not
use financial instruments for trading or speculative purposes.

OTHER MATTERS

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

See "Item 1A. Risk Factors" for a detailed description of various risk factors.

                                       38
<PAGE>

ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As discussed above under "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources," our credit facility bears interest at floating rates we select under
the terms of the Loan Agreement.

As of March 31, 2006, we had $110.8 million principal outstanding on our credit
facility, of which $14.0 million was hedged with an interest rate swap contract.
On an annual basis, a 100 basis point change in interest rates would result in
an approximate $1.0 million change to our annual interest expense, based on net
variable rate borrowings of $96.8 million.

                                       39
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                  ------
<S>                                                                                               <C>
TALX CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS:

Management's Report on Internal Control Over Financial Reporting...............................     41

Reports of Independent Registered Public Accounting Firm.......................................   42, 43

Consolidated Balance Sheets as of March 31, 2005 and 2006......................................     44

Consolidated Statements of Earnings for the years ended March 31, 2004, 2005 and 2006..........     45

Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended
      March 31, 2004, 2005 and 2006............................................................     46

Consolidated Statements of Cash Flows for the years ended March 31, 2004, 2005 and 2006........     47

Notes to Consolidated Financial Statements.....................................................     48
</TABLE>
<PAGE>
        Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in the Securities Exchange Act Rule
13a-15(f)). Under the supervision and with the participation of our management,
including our principal executive officer and our principal financial officer,
we assessed the effectiveness of our internal control over financial reporting
as of March 31, 2006. In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in the Internal Control - Integrated Framework.

In conducting our evaluation of the effectiveness of our internal control over
financial reporting, we have excluded the following acquisitions completed
during fiscal year 2006: Jon-Jay Associates, Inc., Glick & Glick Consultants,
LLC, Employers Unity, Inc. and Business Incentives, Inc., doing business as
Management Insights, Inc. Total revenues of these entities for the periods from
the respective acquisitions through March 31, 2006 were $19,000,000. These
entities were acquired for total consideration of $83,000,000, subject to
certain contingent purchase price adjustments. Refer to Note 5 of Notes to
Consolidated Financial Statements for further discussion of these acquisitions
and their impact on our consolidated financial results.

Our management has concluded that, as of March 31, 2006, our internal control
over financial reporting is effective based on these criteria. Our independent
registered public accounting firm, KPMG LLP, has issued an audit report on our
assessment of our internal control over financial reporting, which is included
on page 43 herein.

TALX Corporation

by: /s/  William W. Canfield            by:  /s/ L. Keith Graves
President, Chief Executive Officer      Senior Vice President, Chief Financial
and Chairman of the Board               Officer and Assistant Secretary

                                       41
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of TALX Corporation:

We have audited the accompanying consolidated balance sheets of TALX Corporation
and subsidiaries (the Company) as of March 31, 2006 and 2005, and the related
consolidated statements of earnings, shareholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
March 31, 2006. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
March 31, 2006 and 2005, and the results of their operations and their cash
flows for each of the years in the three-year period ended March 31, 2006, in
conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as of March 31, 2006, based on
criteria established in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated May 31, 2006, expressed an unqualified opinion on management's
assessment of, and the effective operation of, internal control over financial
reporting.

/s/ KPMG LLP
St. Louis, Missouri
May 31, 2006

                                       42
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of TALX Corporation:

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that TALX
Corporation and subsidiaries (the Company) maintained effective internal control
over financial reporting as of March 31, 2006, based on criteria established in
Internal Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that the Company maintained effective
internal control over financial reporting as of March 31, 2006, is fairly
stated, in all material respects, based on criteria established in Internal
Control -- Integrated Framework issued by COSO. Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2006, based on criteria established in
Internal Control -- Integrated Framework issued by COSO.

The Company acquired Jon-Jay Associates, Inc., Glick & Glick Consultants, LLC,
Employers Unity, Inc. and Business Incentives, Inc., doing business as
Management Insights, Inc., during the year ended March 31, 2006. Management
excluded from its assessment of the effectiveness of the Company's internal
control over financial reporting as of March 31, 2006, these entities' internal
control over financial reporting associated with total revenues of $19,000,000,
included in the consolidated financial statements of the Company for the periods
from the respective acquisitions through March 31, 2006. These entities were
acquired for total consideration of $83,000,000, subject to certain contingent
purchase price adjustments. Our audit of internal control over financial
reporting of the Company also excluded an evaluation of the internal control
over financial reporting of these entities.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
the Company as of March 31, 2006 and 2005, and the related consolidated
statements of earnings, shareholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended March 31, 2006, and
our report dated May 31, 2006 expressed an unqualified opinion on those
consolidated financial statements.

/s/ KPMG LLP

St. Louis, Missouri
May 31, 2006

                                       43
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                       MARCH 31,
                                                                                                ----------------------
                                                                                                   2005        2006
                                                                                                ---------    ---------
<S>                                                                                             <C>          <C>
ASSETS
Current assets:
   Cash and cash equivalents.................................................................   $  11,399    $   5,705
   Short term investments ...................................................................       7,615        5,850
   Accounts receivable, less allowance for doubtful accounts of $3,173 at March 31, 2005
       and $3,731 at March 31, 2006 .........................................................      19,718       31,527
   Unbilled receivables .....................................................................       3,713        5,911
   Prepaid expenses and other current assets ................................................       5,282        6,576
   Deferred tax assets, net .................................................................       1,683        2,580
                                                                                                ---------    ---------
      Total current assets ..................................................................      49,410       58,149
Property and equipment, net .................................................................      11,414       16,037
Capitalized software development costs, net of amortization of $4,605 in 2005 and $6,329 in
   2006 .....................................................................................       3,374        4,059
Goodwill ....................................................................................     136,143      190,232
Other intangibles, net ......................................................................      45,448       77,434
Other assets ................................................................................       1,130        1,634
                                                                                                ---------    ---------
                                                                                                $ 246,919    $ 347,545
                                                                                                =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable .........................................................................   $   2,054    $   2,257
   Accrued expenses and other liabilities ...................................................      16,502       19,219
   Dividends payable ........................................................................         835        1,289
   Deferred revenue .........................................................................       5,203        6,893
                                                                                                ---------    ---------
      Total current liabilities .............................................................      24,594       29,658
Deferred tax liabilities, net ...............................................................      10,083       17,634
Long term debt, less current portion ........................................................      57,500      110,802
Other liabilities ...........................................................................       2,878        3,153
                                                                                                ---------    ---------
      Total liabilities .....................................................................      95,055      161,247
                                                                                                ---------    ---------
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, 2005 and 2006 ................................................          --           --
   Common stock, $0.01 par value; authorized 30,000,000 shares at March 31, 2005
       and 75,000,000 shares at March 31, 2006, issued 20,922,011 shares at March 31,
      2005 and 32,225,321 at March 31, 2006 .................................................         209          322
   Additional paid-in capital ...............................................................     164,937      177,463
   Deferred compensation ....................................................................        (223)      (5,076)
   (Accumulated deficit) retained earnings ..................................................     (12,726)      13,467
   Accumulated other comprehensive income:
      Unrealized gain on interest rate swap contract, net of tax expense of $39 at March
         31, 2005 and $80 at March 31, 2006 .................................................          59          122
   Treasury stock, at cost, 42,275 shares at March 31, 2005 .................................        (392)          --
                                                                                                ---------    ---------
      Total shareholders' equity ............................................................     151,864      186,298
                                                                                                ---------    ---------
                                                                                                $ 246,919    $ 347,545
                                                                                                =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       44
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       YEARS ENDED MARCH 31,
                                                                           --------------------------------------------
                                                                               2004            2005            2006
                                                                           ------------    ------------    ------------
<S>                                                                        <C>             <C>             <C>
Revenues:
   The Work Number services ............................................   $     46,608    $     65,373    $     91,331
   Tax management services .............................................         73,667          90,208         114,420
   Maintenance and support .............................................          4,120           2,814           1,676
                                                                           ------------    ------------    ------------
      Total revenues ...................................................        124,395         158,395         207,427
                                                                           ------------    ------------    ------------
Cost of revenues:
   The Work Number services ............................................         13,947          18,645          21,339
   Tax management services .............................................         37,986          45,064          55,289
   Maintenance and support .............................................          1,320           1,008             352
                                                                           ------------    ------------    ------------
      Total cost of revenues ...........................................         53,253          64,717          76,980
                                                                           ------------    ------------    ------------
      Gross profit .....................................................         71,142          93,678         130,447
                                                                           ------------    ------------    ------------
Operating expenses:
   Selling and marketing ...............................................         23,862          27,693          32,700
   General and administrative ..........................................         26,052          32,845          42,658
   SEC settlement charge ...............................................             --           2,500              --
                                                                           ------------    ------------    ------------
      Total operating expenses .........................................         49,914          63,038          75,358
                                                                           ------------    ------------    ------------
      Operating income .................................................         21,228          30,640          55,089
                                                                           ------------    ------------    ------------
Other income (expense), net:
   Interest income .....................................................             71             224             693
   Interest expense ....................................................           (919)         (2,944)         (5,165)
   Other, net ..........................................................              3              (5)             (5)
                                                                           ------------    ------------    ------------
      Total other income (expense), net ................................           (845)         (2,725)         (4,477)
                                                                           ------------    ------------    ------------
      Earnings from continuing operations before income tax expense ....         20,383          27,915          50,612
Income tax expense .....................................................          7,890          11,887          20,637
                                                                           ------------    ------------    ------------
      Earnings from continuing operations ..............................         12,493          16,028          29,975
Discontinued operations, net of income taxes:
   Earnings (loss) from discontinued operations, net ...................            173              15              (1)
   Gain on disposal of discontinued operations, net ....................             26             567             516
                                                                           ------------    ------------    ------------
      Earnings from discontinued operations ............................            199             582             515
                                                                           ------------    ------------    ------------
         Net earnings ..................................................   $     12,692    $     16,610    $     30,490
                                                                           ============    ============    ============

Basic earnings per share:
   Continuing operations ...............................................   $       0.41    $       0.52    $       0.94
   Discontinued operations .............................................           0.01            0.02            0.02
                                                                           ------------    ------------    ------------
      Net earnings .....................................................   $       0.42    $       0.54    $       0.96
                                                                           ============    ============    ============

Diluted earnings per share:
   Continuing operations ...............................................   $       0.39    $       0.49    $       0.89
   Discontinued operations .............................................           0.01            0.02            0.01
                                                                           ------------    ------------    ------------
      Net earnings .....................................................   $       0.40    $       0.51    $       0.90
                                                                           ============    ============    ============

Weighted average number of common shares outstanding:
   Basic ...............................................................     30,514,278      30,954,629      31,775,969
   Diluted .............................................................     32,009,759      32,452,679      33,828,651
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       45
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                    YEARS ENDED MARCH 31, 2004, 2005 AND 2006
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                                                ACCU-
                                                                                               MULATED     ACCUMULATED
                                                                   ADDITIONAL      DEFERRED    DEFICIT/      OTHER
                                                     COMMON         PAID-IN         COMPEN-    RETAINED_  COMPREHENSIVE   TREASURY
                                                      STOCK         CAPITAL         SATION     EARNINGS      INCOME        STOCK
                                                    ---------  -----------------  ----------  ----------  -------------  ---------
<S>                                                 <C>        <C>                <C>         <C>         <C>            <C>
BALANCE AT MARCH 31, 2003.........................  $    140   $         162,773          --  $  (34,721) $        (158) $  (4,851)
Net earnings......................................        --                  --          --      12,692             --         --
Net unrealized gain on interest rate swap
   contract.......................................        --                  --          --          --            107         --
Total comprehensive income........................
Repurchase of 131,211 shares of common stock......        --                  --          --          --             --     (1,795)
Issuance of 239,401 shares of  treasury stock
   for benefit plans, net of tax benefit..........        --                 417          --        (932)            --      2,720
Cash dividends ...................................        --                  --          --      (2,575)            --         --
                                                   ---------   -----------------  ----------  ----------  -------------  ---------
BALANCE AT MARCH 31, 2004.........................       140             163,190          --     (25,536)           (51)    (3,926)
Net earnings......................................        --                  --          --      16,610             --         --
Net unrealized gain on interest rate swap
   contract.......................................        --                  --          --         ---            110         --
Total comprehensive income........................

Issuance of 317,657 shares of treasury stock
   for benefit plans, net of tax benefit..........        --               1,680          --        (612)            --      3,412
Issuance of 10,000 shares of restricted common
   stock .........................................        --                 136    $   (258)         --             --        122
Compensation expense..............................        --                  --          35          --             --         --
Issuance of 6,973,469 shares of common stock
   and 58,891 shares of treasury stock upon
   3-for-2 stock split............................        69                 (69)         --         (16)            --         --
Cash dividends ...................................        --                  --          --      (3,172)            --         --
                                                    --------  ------------------  ----------  ----------  -------------  ---------
BALANCE AT MARCH 31, 2005.........................       209             164,937        (223)    (12,726)            59       (392)
Net earnings......................................        --                  --          --      30,490             --         --
Net unrealized gain on interest rate swap
   contract.......................................        --                  --          --          --             63         --
Total comprehensive income........................
Issuance of 42,275 shares of treasury stock and
   436,769 shares of common stock for benefit
   plans, net of tax benefit......................         4               7,434          --          --             --        392
Repurchase of 37,800 shares of common stock.......        --                  --          --          --             --     (1,287)
Issuance of 158,450 shares of restricted common
   stock, net of tax benefit......................         1               4,005      (5,252)         --             --      1,287
Issuance of 68,062 shares of common stock for
   warrants, net of tax benefit ..................         1               1,194
Compensation expense..............................        --                  --         399          --             --         --
Issuance of 10,677,829 shares of common stock
   upon 3-for-2 stock split.......................       107                (107)         --         (35)            --         --
Cash dividends ...................................        --                  --          --      (4,262)            --         --
                                                    --------  ------------------  ----------  ----------  -------------  ---------
BALANCE AT MARCH 31, 2006.........................  $    322  $          177,463  $   (5,076) $   13,467  $         122  $      --
                                                    ========  ==================  ==========  ==========  =============  =========

<CAPTION>
                                                       COMPRE-         TOTAL
                                                       HENSIVE      SHAREHOLDERS'
                                                       INCOME          EQUITY
                                                    -------------   -------------
<S>                                                 <C>            <C>
BALANCE AT MARCH 31, 2003.........................                  $     123,183
Net earnings......................................  $       12,692         12,692
Net unrealized gain on interest rate swap
   contract.......................................             107            107
                                                    --------------
Total comprehensive income........................  $       12,799
                                                    ==============
Repurchase of 131,211 shares of common stock......                         (1,795)
Issuance of 239,401 shares of  treasury stock
   for benefit plans, net of tax benefit..........                          2,205
Cash dividends ...................................                         (2,575)
                                                                    -------------
BALANCE AT MARCH 31, 2004.........................                        133,817
Net earnings......................................  $       16,610         16,610
Net unrealized gain on interest rate swap
   contract.......................................             110            110
                                                    --------------
Total comprehensive income........................  $       16,720
                                                    ==============
Issuance of 317,657 shares of treasury stock
   for benefit plans, net of tax benefit..........                          4,480
Issuance of 10,000 shares of restricted common
   stock .........................................                             --
Compensation expense..............................                             35
Issuance of 6,973,469 shares of common stock
   and 58,891 shares of treasury stock upon
   3-for-2 stock split............................                            (16)
Cash dividends ...................................                         (3,172)
                                                                    -------------
BALANCE AT MARCH 31, 2005.........................                        151,864
Net earnings......................................  $       30,490         30,490
Net unrealized gain on interest rate swap
   contract.......................................              63             63
                                                    --------------
Total comprehensive income........................  $       30,553
                                                    ==============
Issuance of 42,275 shares of treasury stock and
   436,769 shares of common stock for benefit
   plans, net of tax benefit......................                          7,830

Repurchase of 37,800 shares of common stock.......                         (1,287)
Issuance of 158,450 shares of restricted common
   stock, net of tax benefit .....................                             41

Issuance of 68,062 shares of common stock for
   warrants, net of tax benefit ..................                          1,195
Compensation expense..............................                            399
Issuance of 10,677,829 shares of common stock
   upon 3-for-2 stock split.......................                            (35)
Cash dividends ...................................                         (4,262)
                                                                    -------------
BALANCE AT MARCH 31, 2006.........................                  $     186,298
                                                                    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       46
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                       YEARS ENDED MARCH 31,
                                                                -----------------------------------
                                                                  2004         2005         2006
                                                                ---------    ---------    ---------
<S>                                                             <C>          <C>          <C>
Cash flows from operating activities:
   Net earnings .............................................   $  12,692    $  16,610    $  30,490
   Adjustments to reconcile net earnings to net cash provided
      by operating activities:
      Depreciation and amortization .........................       8,211       10,624       13,242
      Non-cash compensation .................................          --           35          399
      Deferred taxes ........................................       3,108        2,518        3,235
      Net assets of business held for sale ..................         374           --           --
      Gain on swap agreement ................................          --           --          (59)
      Change in assets and liabilities, net of acquisitions:
         Accounts receivable, net ...........................       2,792       (2,990)      (7,780)
         Unbilled receivables ...............................      (1,098)      (1,999)      (1,799)
         Prepaid expenses and other current assets ..........      (7,670)       5,554       (1,149)
         Other assets .......................................        (231)         119         (702)
         Accounts payable ...................................        (186)         461           22
         Accrued expenses and other liabilities .............       4,582       (1,560)       5,992
         Deferred revenue ...................................      (1,094)         460       (2,774)
         Other liabilities ..................................          78          217          253
                                                                ---------    ---------    ---------
            Net cash provided by operating activities .......      21,558       30,049       39,370
                                                                ---------    ---------    ---------
Cash flows from investing activities:
   Additions to property and equipment ......................      (4,228)      (6,382)     (10,471)
   Change in restricted cash ................................     (38,645)      38,645           --
   Acquisitions, net of cash acquired .......................      (1,741)     (59,316)     (87,079)
   Capitalized software development costs ...................      (2,169)      (2,001)      (2,408)
   Proceeds from maturity of short-term investments .........         800           --           --
   Proceeds from sale of short-term investments .............       1,700        5,200        6,885
   Purchases of short-term investments ......................      (3,975)     (11,340)      (5,120)
                                                                ---------    ---------    ---------
      Net cash used in investing activities .................     (48,258)     (35,194)     (98,193)
                                                                ---------    ---------    ---------
Cash flows from financing activities:
   Dividends paid ...........................................      (2,435)      (3,020)      (3,809)
   Borrowings under long-term debt facility .................      38,747       18,000      138,802
   Repayments under long-term debt facility .................     (10,763)     (10,500)     (85,500)
   Issuance of common stock .................................       2,105        3,496        4,923
   Repurchase of common stock ...............................      (1,795)          --       (1,287)
                                                                ---------    ---------    ---------
      Net cash provided by financing activities .............      25,859        7,976       53,129
                                                                ---------    ---------    ---------
      Net increase (decrease) in cash and cash equivalents ..        (841)       2,831       (5,694)
Cash and cash equivalents at beginning of year ..............       9,409        8,568       11,399
                                                                ---------    ---------    ---------
Cash and cash equivalents at end of year ....................   $   8,568    $  11,399    $   5,705
                                                                =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       47
<PAGE>

                        TALX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2006

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a) Description of Business

We are a leading provider of payroll-related and human resources business
process outsourcing services. Our services enable our clients to automate and
outsource the performance of payroll and human resources business processes that
would otherwise be performed by their own in-house payroll or human resources
departments. Our clients are large and mid-size organizations, including more
than three-fourths of the Fortune 500 companies in a wide variety of industries,
as well as a number of government agencies. Our current services include
employment and income verification and other payroll-related services,
unemployment tax management services, tax credit and incentive services, and
employee assessment and talent management services. Our services are enabled by
our proprietary databases and applications that are designed to quickly and
efficiently access and process large volumes of data. We employ web, interactive
voice response, fax, document imaging and other technologies to enhance the
services offered to our clients. We can interact with various payroll and human
resources systems, but are virtually independent of the information technology
services our clients select.

      (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, 2006 consist of highly liquid money market
account deposits. We classify our short-term investments 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, 2006. Interest
income is recognized when earned. Short-term investments classified as
available-for-sale are stated at market value.

      (e) Allowance for Doubtful Accounts

We evaluate the collectibility of accounts receivable based on a combination of
factors. In cases where we are aware of circumstances that may impair a specific
customer's ability to meet its financial obligations, we record a specific
allowance against amounts due, and thereby reduce the net recognized receivable
(i.e., net of deferred revenue) to the amount we reasonably believe will be
collected. For the remaining customers, we recognize allowances for doubtful
accounts based on the length of time the aggregate receivables are outstanding,
the current business environment and historical experience.

      (f) Property and Equipment

We record property and equipment at cost less accumulated depreciation and
amortization. We depreciate property and equipment evenly over the assets'
estimated useful lives. We amortize leasehold improvements evenly over the
lesser of the useful life of the asset or lease term.

      (g) Product Development and Capitalized Software Development Costs

Software development costs are expensed as incurred until technological
feasibility is achieved, after which time they are capitalized on a
product-by-product basis. We amortize capitalized software development costs
evenly over the remaining estimated economic life of the product, generally
three to five years. We begin amortization of capitalized software

                                       48
<PAGE>

development costs when the product is available for general release to clients.
We review all capitalized software assets for impairment as of each balance
sheet date. Upon determination of any impairment, we write the asset down to the
appropriate value in the period that the impairment is determined.

      (h) Goodwill and Other Intangible Assets

We have adopted the provisions of the Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets" as of
April 1, 2002. SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually. In
accordance with SFAS 142, goodwill is reviewed for impairment based upon
reporting units.

      (i) Revenue Recognition, Unbilled Receivables and Deferred Revenue

All revenues are generally recognized pursuant to annual or multi-year
contracts.

Revenues from The Work Number are realized primarily from transaction or monthly
fees and, to a lesser degree, based on up-front set-up fees and periodic
maintenance fees. Revenues for transaction fees are recognized in the period
that they are earned, based on fees charged to users at the time they conduct
verifications of employment and income. In accordance with Staff Accounting
Bulletin No. 104, the revenue for set-up fees and monthly maintenance fees is
recognized on a straight-line basis from the time the service is available to be
used by our clients through the end of the service period.

Revenue for our W-2 service is recognized evenly from the time the service is
available for use by TALX clients through the end of the service period.
Additionally, we have some clients that are billed for this service on a
transactional basis. For these clients, we recognize revenue on a monthly basis,
as transactions occur.

We charge ePayroll clients on a per-employee, per-month basis, plus an initial
set-up fee. Revenue for the initial set-up fees is recognized evenly over the
initial contract period, beginning with the date the client is "live" on our
system. Per-employee, per-month fees are recognized as revenue in the period the
service is provided.

FasTime clients are billed for initial set-up fees, monthly maintenance fees and
per transaction fees. Revenue is recognized evenly from the time the service is
available for use by our clients through the end of the service period for
set-up and maintenance fees and as services are performed for transaction-based
fees.

HireXpress clients are billed for initial set-up fees and per transaction fees
or monthly fees. Revenue is recognized evenly from the time the service is
available for use by our clients through the end of the service period for
set-up fees and as services are performed for transaction-based or monthly fees.

Revenues from our unemployment tax management services are recognized in the
period that they are earned, evenly over the life of the contract. Transaction
fees are recorded as the services are provided. Unemployment tax management
revenue that is contingent upon achieving certain performance criteria is
recognized when those criteria are met.

We realize revenues in our tax credits and incentives business on a contingent
basis, as a percentage of the tax credits and incentives delivered to our
clients. Revenues related to WOTC and WtW tax credits are recognized after the
applicable state government has certified the eligibility of the client's
employee and the employee has worked the required number of hours to receive the
credit. Revenue related to state and local tax credits and certain other federal
tax credits is recognized based on milestones achieved, calculation of the
underlying credit, or the client's utilization of the underlying credit,
depending upon the provisions of the contract.

In relationships with certain of our customers, we enter into agreements with
more than one of our service offerings included in the arrangement. When a
client contracts with us to provide more than one service, the terms of the
underlying contract itemize each service provided and the related fees for each
service. In accordance with the consensus of Emerging Issues Task Force Issue
No. 00-21, as these fee arrangements are similar to those charged to other
clients, we recognize revenue on the basis of the fair values of the underlying
services.

                                       49
<PAGE>

Deferred revenue represents the unearned portion of The Work Number set-up fees,
unemployment tax management and maintenance fees.

Commissions paid are deferred and charged to expense proportionally over the
related service period.

Direct expenses related to cost of revenues are tracked separately for each
service we provide. Incremental direct costs that are related to the origination
of a client contract are expensed as incurred.

      (j) Concentration of Credit Risk

We sell our services and software in a variety of industries. No client
represented over 10% of revenues in fiscal 2004, 2005 or 2006. We perform
periodic credit evaluations of our clients' financial conditions and do not
require collateral. Credit losses from clients have been within our
expectations, and we believe the allowance for doubtful accounts adequately
provides for any expected losses.

      (k) Income Taxes

We record income taxes under the asset and liability method. Deferred taxes
arise because of different treatment between financial statement accounting and
tax accounting, known as temporary differences. We record the tax effect of
these temporary differences as deferred tax assets (generally items that can be
used as a tax deduction or credit in future periods) and deferred tax
liabilities (generally items that we received a tax deduction for, but have not
yet been recorded in the Consolidated Statement of Earnings). Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

      (l) Fair Value of Financial Instruments

We disclose estimated fair values for our financial instruments. A financial
instrument is defined as cash or a contract that both imposes on one entity a
contractual obligation to deliver cash or another financial instrument to a
second entity and conveys to that second entity a contractual right to receive
cash or another financial instrument from the first entity. Our financial
instruments include our credit facility. The carrying value of this credit
facility approximates fair value as its stated interest rate approximates market
rates. Estimated fair value amounts have been determined using available market
information or other appropriate valuation methodologies.

      (m) Derivative Financial Instruments

Our policy is to manage interest costs using a mix of fixed and variable rate
debt. Using interest rate swap agreements, we agree to exchange, at specified
intervals, the difference between fixed and variable interest amounts calculated
by reference to an agreed-upon notional principal amount. We do not hold or
issue any derivative financial instruments for trading or speculative purposes.

      (n) Stock-Based Compensation

We account for stock-based compensation using the intrinsic value method in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations, as permitted by
SFAS No. 123, "Accounting for Stock-Based Compensation."

We record compensation expense related to restricted stock awards over the
vesting periods of the awards and reflect the unearned portion of deferred
compensation as a separate component of shareholders' equity.

Since all of our options are granted with an option price equal to the market
price at the time of grant, we have not recognized any stock-based employee
compensation cost under our stock option plans. SFAS No. 123 requires pro forma
disclosure of the impact on earnings as if the compensation expense for these
plans had been determined using the fair value method.

                                       50
<PAGE>

Compensation cost is calculated under a straight line basis. The following table
presents our net earnings and earnings per share as reported and the pro forma
amounts that would have been reported using the fair value method under SFAS No.
123 for the years presented:

<TABLE>
<CAPTION>
                                                                                MARCH 31,
                                                                --------------------------------------
                                                                    2004           2005         2006
                                                                -----------     ----------     -------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                             <C>             <C>            <C>
Net earnings, as reported .................................     $    12,692     $   16,610     $30,490
Stock-based employee compensation cost, net of taxes ......           1,544          1,456       1,685
                                                                -----------     ----------     -------
   Net earnings, pro forma ................................     $    11,148     $   15,154     $28,805
                                                                ===========     ==========     =======

Basic earnings per share:
   Net earnings, as reported ..............................     $      0.42     $     0.54     $  0.96
   Stock-based employee compensation cost, net of taxes ...            0.05           0.05        0.05
                                                                -----------     ----------     -------
      Net earnings, pro forma .............................     $      0.37     $     0.49     $  0.91
                                                                ===========     ==========     =======

Diluted earnings per share:
   Net earnings, as reported ..............................     $      0.40     $     0.51     $  0.90
   Stock-based employee compensation cost, net of taxes ...            0.05           0.04        0.05
                                                                -----------     ----------     -------
      Net earnings, pro forma .............................     $      0.35     $     0.47     $  0.85
                                                                ===========     ==========     =======
</TABLE>

The fair value of option grants for fiscal 2004, 2005 and 2006 is estimated on
the date of the grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: expected volatility of 70%, 48%, and 50%
in fiscal 2004, 2005 and 2006, respectively; risk-free interest rate of 3.00%,
4.07%, and 3.90% in fiscal 2004, 2005 and 2006, respectively; expected life of
7.0, 7.0, and 6.0 years in fiscal 2004, 2005 and 2006, respectively; and an
expected dividend yield of 0.90%, 0.78%, and 0.63% in fiscal 2004, 2005 and
2006, respectively.

In December 2004, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 123r, "Share-Based Payments"
("SFAS No. 123r"), a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which requires companies to measure all employee
stock-based compensation awards using a fair value method and record such
expense in their consolidated financial statements. The provisions of SFAS No.
123r are effective for the first annual reporting period that begins after June
15, 2005. We have adopted this standard effective April 1, 2006 and elected the
modified-prospective transition method. Under the modified-prospective
transition method, awards that are granted, modified, repurchased or canceled
after the date of adoption should be measured and accounted for in accordance
with SFAS No. 123r. Stock-based awards that are granted prior to the effective
date should continue to be accounted for in accordance with SFAS No. 123, except
that stock option expense for unvested options must be recognized in the
statement of operations.

      (o) Management's Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ materially from those
estimates. Estimates are used when accounting for depreciation, amortization,
allowance for doubtful accounts and income taxes as well as in the evaluation of
potential losses due to impairment or pending litigation.

      (p) Litigation

When a contingency becomes probable and estimable a reserve is established in
the consolidated financial statements. To the extent not recoverable by
directors' and officers' liability insurance coverage, legal costs are expensed
as incurred.

      (q) 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

                                       51
<PAGE>

employee stock options and warrants that would have had a dilutive effect on
earnings per share and the dilutive effect of all restricted stock. The weighted
average number of shares is based on common stock outstanding for basic earnings
per share and common stock outstanding, restricted stock outstanding, and common
stock options and warrants for diluted earnings per share in periods when such
common stock options and warrants are not antidilutive.

(2) ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<TABLE>
<CAPTION>
                                                      MARCH 31,
                                              ----------------------------
                                                 2005              2006
                                              -----------      -----------
                                                     (IN THOUSANDS)
<S>                                           <C>              <C>
Accounts receivable.......................    $    22,891      $    35,258
Less allowance for doubtful accounts......          3,173            3,731
                                              -----------      -----------
                                              $    19,718      $    31,527
                                              ===========      ===========
</TABLE>

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

The following table represents activity within our allowance for doubtful
accounts for the years ended March 31, 2004, 2005 and 2006:

<TABLE>
<CAPTION>
                                                         (IN THOUSANDS)
                                                         --------------
<S>                                                      <C>
Balance at March 31, 2003.............................   $     1,183
     Additions........................................           560
     Write-offs.......................................          (647)
                                                         -----------
Balance at March 31, 2004.............................         1,096
     Additions........................................         1,045
     Acquisitions.....................................         1,506
     Write-offs.......................................          (474)
                                                         -----------
Balance at March 31, 2005.............................         3,173
     Additions........................................         1,840
     Acquisitions.....................................           185
     Write-offs.......................................         (1467)
                                                         -----------
Balance at March 31, 2006.............................   $     3,731
                                                         ===========
</TABLE>

(3) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                        RANGE OF
                                                       ESTIMATED            MARCH 31,
                                                      USEFUL LIVES    -----------------------
                                                       (IN YEARS)        2005         2006
                                                     --------------   ---------    ----------
                                                                          (IN THOUSANDS)
<S>                                                  <C>              <C>          <C>
Computer equipment................................       3-5          $  13,076    $   18,282
Office furniture and equipment....................      5-10              2,257         3,711
Software..........................................       3-5              9,078        12,959
Capitalized lease equipment.......................       3-5                 37            37
Automobile........................................        3                   7             7
Leasehold improvements............................      3-10              5,531         6,268
                                                                      ---------    ----------
                                                                         29,986        41,264
Less accumulated depreciation and amortization....                       18,572        25,227
                                                                      ---------    ----------
                                                                      $  11,414    $   16,037
                                                                      =========    ==========
</TABLE>

Depreciation and amortization expense related to property and equipment was $4.9
million, $5.5 million, and $6.7 million for the years ended March 31, 2004, 2005
and 2006, respectively.

                                       52
<PAGE>

(4) PRODUCT DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Product development costs and amortization of capitalized software development
costs for the years ended March 31, 2004, 2005 and 2006 are as follows:

<TABLE>
<CAPTION>
                                                                               MARCH 31,
                                                            -------------------------------------------------
                                                                2004              2005              2006
                                                            -------------     -------------     -------------
                                                                            (IN THOUSANDS)
<S>                                                         <C>               <C>               <C>
Product development costs charged to general and
   administrative expenses...............................   $       3,698     $       4,354     $       4,836
                                                            =============     =============     =============
Amortization of capitalized software development costs
   charged to cost of revenues...........................   $       1,594     $       1,813     $       1,724
                                                            =============     =============     =============
</TABLE>

(5) ACQUISITIONS

Pursuant to an acquisition agreement dated April 20, 2005, we acquired Jon-Jay
Associates, Inc., which specializes in providing unemployment cost management
services as well as an employment verification service, for approximately $24
million, including transaction costs, subject to certain post-closing
adjustments. Additionally, the acquisition agreement includes provisions for
potential earn-out payments if certain future financial performance measures are
achieved through the twelve months ending April 30, 2006 and April 30, 2007,
respectively.

Pursuant to an asset purchase agreement dated April 26, 2005, we acquired
substantially all of the assets and assumed certain of the liabilities of Glick
& Glick Consultants, LLC, which specializes in employment-related tax credit and
incentive services, for approximately $5 million, including transaction costs,
subject to certain post-closing adjustments.

Pursuant to an asset purchase agreement dated November 1, 2005, we acquired the
unemployment tax management businesses of Employers Unity, Inc., for
approximately $30 million, including transaction costs, subject to certain
post-closing adjustments.

Pursuant to an asset purchase agreement dated December 15, 2005, we acquired the
tax credit and incentives business of Business Incentives, Inc., doing business
as Management Insights, Inc., for approximately $24 million, including
transaction costs, subject to certain post-closing adjustments.

In connection with certain of our acquisitions, there are additional contingent
payments to be calculated based on identified performance criteria as specified
in the underlying purchase agreements. When determined beyond a reasonable
doubt, these additional payments will be recorded as goodwill. In fiscal year
2006, approximately $5 million in contingent payments have been made. We
estimate that additional payments could range up to approximately $14 million
and be payable over the next 18 months.

The following table summarizes the purchase price allocations of the estimated
fair values of the assets acquired and liabilities assumed for the acquired
businesses as of the effective dates of the acquisitions. The purchase price
allocations for Employers Unity, Inc. and Management Insights, Inc. are
preliminary, and final determinations of the required purchase accounting
adjustments will be made upon the completion of our integration plans.

<TABLE>
<CAPTION>
                                     JON-JAY ASSOCIATES,         GLICK & GLICK          EMPLOYERS UNITY,             MANAGEMENT
                                            INC.              CONSULTANTS, LLC                INC.                 INSIGHTS, INC.
                                    -----------------------------------------------------------------------------------------------
                                                                          (IN THOUSANDS)
<S>                                 <C>                      <C>                      <C>                      <C>
Cash and cash equivalents ........  $                170     $                 --     $                 --     $                 --
Accounts receivable, net .........                 1,036                      150                      955                    2,080
Other current assets .............                    53                       71                      419                      --
Property and equipment, net ......                   325                       --                      184                      105
Goodwill and intangible assets ...                26,040                    4,939                   31,705                   21,944
Other non-current assets .........                    25                       --                       --                       22
                                    --------------------     --------------------     --------------------     --------------------
   Total assets acquired .........                27,649                    5,160                   33,263                   24,151
                                    --------------------     --------------------     --------------------     --------------------
</TABLE>

                                       53
<PAGE>

<TABLE>
<S>                                 <C>                      <C>                      <C>                      <C>
Deferred revenue ..............                    1,619                       --                    2,845                       --
Current liabilities ...........                      589                      113                      352                       73
Other non-current
  liabilities .................                    2,794                       --                       --                       --
                                    --------------------     --------------------     --------------------     --------------------
   Total liabilities assumed ..                    5,002                      113                    3,197                       73
                                    --------------------     --------------------     --------------------     --------------------

   Net assets acquired ........     $             22,647     $              5,047     $             30,066     $             24,078
                                    ====================     ====================     ====================     ====================
</TABLE>

The table below reflects unaudited pro forma combined results of TALX and all
businesses acquired in fiscal years 2005 and 2006, as if the acquisitions had
occurred on April 1, 2004:

<TABLE>
<CAPTION>
                                                       2005                      2006
                                               --------------------     --------------------
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>                      <C>
Pro forma revenues .........................   $            198,528     $            225,246
Pro forma net earnings .....................                 16,065                   31,614
Pro forma basic earnings per share .........                   0.52                     0.99
Pro forma diluted earnings per share .......                   0.50                     0.93
</TABLE>

These unaudited pro forma amounts are not necessarily indicative of what the
actual combined results of operations might have been if the acquisitions had
been effective at the beginning of fiscal year 2005.

(6) GOODWILL AND OTHER INTANGIBLE ASSETS

In connection with the acquisitions of Ti3, Inc.; the unemployment cost
management services business of Gates, McDonald & Company, a subsidiary of
Nationwide Mutual Insurance Company; James E. Frick, Inc., d/b/a The Frick
Company; Johnson and Associates; the Sheakley Businesses; TBT Enterprises,
Incorporated and UI Advantage, Inc.; Net Profit, Inc., Jon-Jay Associates, Inc.,
the tax credits and incentives business of Glick & Glick Consultants LLC, the
unemployment tax management business of Employers Unity, Inc., and the tax
credits and incentives business of Business Incentives, Inc., doing business as
Management Insights, Inc., we acquired certain identifiable intangible assets.
These acquisitions enhance our existing service offerings by allowing us to
offer clients expanded services in connection with electronic time reporting,
the processing of unemployment claims, and the processing of the federal work
opportunity ("WOTC") and welfare to work ("WTW") tax credits, as well as
assisting clients in calculating certain other federal and state tax credits. We
recorded these assets in accordance with the Financial Accounting Standards
Board SFAS No. 141, "Business Combinations".

Effective April 1, 2002, we adopted the SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and
the accounting for goodwill and other intangible assets subsequent to their
acquisition. SFAS No. 142 provides that intangible assets with finite useful
lives be amortized and that goodwill and intangible assets with indefinite lives
will not be amortized, but will rather be tested at least annually for
impairment. Under the provisions of SFAS No. 142, any impairment loss identified
upon adoption of this standard is recognized as a cumulative effect of a change
in accounting principle. We reviewed our goodwill and intangible assets as of
December 31, 2004 and 2005 and determined that no impairment existed.

The following table summarizes goodwill activity by segment for years ended
March 31, 2005 and 2006:

<TABLE>
<CAPTION>
                                                   THE WORK     UNEMPLOYMENT   TAX CREDITS
                                                    NUMBER         TAX             AND          MAINTENANCE
                                                   SERVICES      MANAGEMENT     INCENTIVES       AND SUPPORT        TOTAL
                                                  ----------    -----------   --------------    ------------     ------------
                                                                          (IN THOUSANDS)
<S>                                               <C>            <C>          <C>               <C>              <C>
March 31, 2004 ................................   $   23,843     $    82,089   $        807     $         --     $    106,739
  Acquisition of the Sheakley Businesses ......        5,499          11,916             --               --           17,415
  Acquisition of TBT Enterprises ..............           --              --          5,165               --            5,165
  Acquisition of Net Profit, Inc. .............           --              --          6,210               --            6,210
  Earn-out related to prior acquisition .......           --             614             --               --              614
                                                  ----------    ------------   ------------     ------------     ------------
March 31, 2005 ................................       29,342          94,619         12,182               --         136,143
  Earn-out related to prior acquisitions ......           --              --          5,000               --           5,000
  Additional acquisition costs and
         adjustments ..........................           --             (50)         1,117               --           1,067
  Acquisition of Jon-Jay Associates, Inc. .....       11,719           6,623             --               --          18,342
</TABLE>

                                       54
<PAGE>

<TABLE>
<S>                                               <C>            <C>           <C>             <C>              <C>
  Acquisition of Glick & Glick
         Consultants, LLC .....................           --              --          2,389              --            2,389

    Acquisition of Employers Unity, Inc. ......       2, 526          13,564             --              --           16,090
    Acquisition of Management Insights, Inc. ..           --              --         11,201              --           11,201
                                                  ----------     -----------   ------------    ------------     ------------

March 31, 2006 ................................   $   43,587     $   114,756   $     31,889    $         --     $    190,232
                                                  ==========     ===========   ============    ============     ============
</TABLE>

Tax-deductible goodwill totaled $145.9 million as of March 31, 2006

The following table summarizes other intangible asset activity for years ended
March 31, 2005 and 2006:

<TABLE>
<CAPTION>
                                                         CUSTOMER       CUSTOMER       NON-     TRADE
                                                       RELATIONSHIPS     RECORDS      COMPETE    NAME    TOTAL
                                                       -------------    ---------    --------   -----   -------
                                                                              (IN THOUSANDS)
<S>                                                    <C>              <C>          <C>        <C>     <C>
GROSS CARRYING VALUES:
    March 31, 2004 .................................   $      17,838    $   2,184    $    212   $  --   $20,234
      Acquisition of the Sheakley Businesses .......          22,100           --         700      --    22,800
        Acquisition of TBT Enterprises .............           3,980           --         320      --     4,300
      Acquisition of Net Profit, Inc. ..............           3,720           --         280      --     4,000
                                                       -------------    ---------    --------   -----   -------
    March 31, 2005 .................................          47,638        2,184       1,512      --    51,334
      Acquisition of Jon-Jay Associates, Inc. ......           7,438           --          --     260     7,698
      Acquisition of Glick & Glick
             Consultants, LLC ......................           2,550           --          --      --     2,550
      Acquisition of Employers Unity, Inc. .........          15,615           --          --      --    15,615

      Acquisition of Management Insights, Inc. .....          10,743           --          --      --    10,743
                                                       -------------    ---------    --------   -----   -------

    March 31, 2006 .................................   $      83,984    $   2,184    $  1,512   $ 260   $87,940
                                                       =============    =========    ========   =====   =======

ACCUMULATED AMORTIZATION:
    March 31, 2004 .................................   $       2,415    $     293    $    139   $  --   $ 2,847
      Amortization .................................           2,696          145         198      --     3,039
                                                       -------------    ---------    --------   -----   -------
    March 31, 2005 .................................           5,111          438         337      --     5,886
      Amortization .................................           4,149          146         246      79     4,620
                                                       -------------    ---------    --------   -----   -------
    March 31, 2006 .................................   $       9,260    $     584    $    583   $  79   $10,506
                                                       =============    =========    ========   =====   =======

Weighted average lives (in years) ..................           16.54        15.00        6.54    3.00     16.29
                                                       =============    =========    ========   =====   =======
</TABLE>

Amortization of other intangible assets is projected to be $5.5 million for each
of the fiscal years ended March 31, 2007 and 2008, $ 5.4 million for the fiscal
year ended March 31, 2009, and $5.3 million for each of the fiscal years ended
March 31, 2010 and 2011.

(7) ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities as of March 31, 2005 and 2006 consist of
the following:

<TABLE>
<CAPTION>
                                                                                         MARCH 31,
                                                                               -------------------------------
                                                                                   2005                2006
                                                                               -------------     -------------
                                                                                       (IN THOUSANDS)
<S>                                                                            <C>               <C>
Compensation and benefits......                                                $      12,646     $      14,281
Income taxes payable...........                                                           --             1,857
Other..........................                                                        3,856             3,081
                                                                               -------------     -------------
                                                                                   $  16,502     $      19,219
                                                                               =============     =============
</TABLE>

                                       55
<PAGE>

(8) LONG-TERM DEBT

Long-term debt at March 31, 2005 and 2006 consists of:

<TABLE>
<CAPTION>
                                                    MARCH 31,
                                          -----------------------------
                                               2005              2006
                                          -------------      ----------
                                          (IN THOUSANDS)
<S>                                       <C>               <C>
 Borrowings under loan agreements.....    $      57,500     $   110,802
      Less current portion............               --              --
                                          -------------     -----------
 Long-term debt.......................    $      57,500     $   110,802
                                          =============     ===========
</TABLE>

On April 14, 2005, we entered into a secured second amended and restated loan
agreement (the "2005 Loan Agreement") with LaSalle Bank National Association, as
administrative agent and the lenders party thereto (collectively, the
"Lenders"), to replace the loan agreement in place at the time, which we refer
to as the "2004 Loan Agreement," and refinance in full the $57.5 million
outstanding loan balance at March 31, 2005. The 2005 Loan Agreement established
a $100.0 million revolving line of credit and provided for the issuance of
letters of credit and swingline loans. On November 1, 2005, we amended the 2005
Loan Agreement to expand the availability under our revolving line of credit to
$150.0 million, of which $39.2 million remained available as of March 31, 2006.

The proceeds of loans made under the 2005 Loan Agreement may be used solely to
refinance loans outstanding under the 2004 Loan Agreement and for working
capital, permitted capital expenditures, as the source for payment of our
obligations with respect to letters of credit, to pay the transaction costs of
the 2005 Loan Agreement, to finance permitted acquisitions meeting specified
criteria, and to finance certain repurchases of our capital stock subject to
specified limitations. The 2005 Loan Agreement is secured by pledges of our
stock and membership interests in, and guarantees of, our material subsidiaries
and security interests in substantially all of our assets.

Loans under the 2005 Loan Agreement mature on April 14, 2010, except that any
letters of credit may extend beyond that date if the letter of credit lender
approves and we provide sufficient collateral as security for an extended loan.
We may make prepayments on advances under the revolving credit facility without
penalty, provided we give at least one business day's notice, pay accrued
interest and otherwise make the applicable lenders whole. As the Loan Agreement
is a 5-year revolving credit facility, there are no scheduled minimum principal
repayments in fiscal years 2006 through 2010. All amounts outstanding under the
credit facility are due and payable on April 14, 2010.

Advances under the revolving credit facility bear interest at rates we select,
including a base rate or the LIBOR rate plus an applicable margin. The base rate
is a variable rate equal to the greater of the Lender's prime rate or the
federal funds rate plus 0.5%. The applicable margin for LIBOR rate loans will
vary from 1.25% to 2.00%. Swingline loans will bear interest at the base rate.
During the existence of an event of default, loans will bear additional interest
of 2.00% per year.

We paid the Lenders an amendment fee equal to $50,000 on the effective date of
the 2005 Loan Agreement and an amendment fee equal to $75,000 on November 1,
2005 in connection with the first amendment. We also will pay a facility fee,
payable on a quarterly basis in the amount equal to 0.25% of the unused portion
of the revolving credit facility. If we utilize any letters of credit, we will
pay a fronting fee equal to 0.125% of the face amount of each letter of credit,
as well as a letter of credit fee equal to the aggregate undrawn amount of the
letter of credit multiplied by the LIBOR margin in effect on the date the letter
of credit is issued.

The 2005 Loan Agreement includes certain covenants, including, without
limitation, restrictions on the use of proceeds of any loans, as described
above. The 2005 Loan Agreement also requires compliance with certain financial
covenants based on our minimum interest coverage (the ratio of EBIT minus
dividends and income tax expense to interest expense), minimum EBITDA (as
defined in the 2005 Loan Agreement and as adjusted for, among other things,
approved acquisitions and the SEC settlement charge, as discussed in Note 1) and
our ratio of total indebtedness to EBITDA (as so adjusted). The 2005 Loan
Agreement also requires compliance with certain operating and other covenants
which limit, without first obtaining written consent of the lenders, among other
things, the ability of TALX and our subsidiaries to incur additional debt (with
specified exceptions), sales of assets, changes in our capital structure,
affiliated transactions, acquisitions, and distributions to our shareholders.
The 2005 Loan Agreement generally prohibits the payment of cash dividends,
except for cash dividends not in excess of six cents per share per calendar
quarter, up to a maximum of $7.5 million per fiscal year so long as we are not
in default at the time of the declaration. The 2005 Loan Agreement also contains
various representations and warranties, regarding, among others, compliance with
material laws, the accuracy of financial statements and other information
delivered to the Lenders and the absence of material changes.

In the event of a default under the 2005 Loan Agreement, the Lenders may
terminate the commitments made under the Loan Agreement, declare amounts
outstanding, including accrued interest and fees, payable immediately, and
enforce any and all rights and interests.

                                       56
<PAGE>

(9) DERIVATIVE FINANCIAL INSTRUMENT

We have entered into an interest rate swap contract which has a notional amount
of $14.0 million at March 31, 2006. Under this contract, we pay a fixed rate of
3.72% and receive a variable rate of LIBOR, which is equal to the LIBOR rate
utilized on our outstanding revolving loans. The notional amount of our interest
rate swap contract steps down over time until its termination on March 31, 2008.
Effective April 14, 2005, in connection with the refinancing of our credit
facility existing at that time, we matched our existing interest rate swap to
our outstanding borrowings. This strategy effectively converts a portion of our
outstanding revolving loans into a fixed rate instrument over the term of the
interest rate swap contract.

The interest rate swap and related gains and losses arising on the contract are
accounted for as a cash flow hedge in accordance with SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." Specifically, changes in the
fair value of derivative instruments designated as cash flow hedges are deferred
and recorded in other comprehensive income. These deferred gains or losses are
recognized in income when the transactions being hedged are completed.

We do not use financial instruments for trading or speculative purposes.

(10) LEASES

We have non-cancelable operating leases, primarily for office space and office
equipment, that expire through fiscal 2013. Total rent expense for operating
leases was $5.3 million, $6.0 million, and $7.3 million in 2004, 2005 and 2006,
respectively.

Amortization expense associated with assets acquired under capital leases is
included in total depreciation and amortization expense.

The following is a schedule, by year, of the future minimum payments, in
thousands, under operating leases as of March 31, 2006.

<TABLE>
<S>                                                                  <C>
Fiscal Year:
   2007...................................................        $5,672
   2008...................................................         4,234
   2009...................................................         3,676
   2010...................................................         2,902
   2011...................................................         2,568
   Thereafter.............................................         5,409
                                                                 -------
Total minimum lease payments..............................       $24,461
                                                                 =======
</TABLE>

(11)  INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
                                                                           MARCH 31,
                                                        -----------------------------------------------
                                                            2004              2005              2006
                                                        -----------       --------------    -----------
                                                                          (IN THOUSANDS)
<S>                                                     <C>               <C>               <C>
Current:
   Federal............................................  $     4,242       $     7,519       $    15,161
   State and local....................................          608             1,311             2,519
Deferred:
   Federal............................................        2,614             2,604             2,602
   State and local....................................          426               453               355
                                                        -----------       -----------       -----------
      Income tax expense from continuing operations...        7,890            11,887            20,637
Discontinued operations...............................          123               380               337
                                                        -----------       -----------       -----------
   Total income tax expense...........................  $     8,013       $    12,267       $    20,974
                                                        ===========       ===========       ===========
</TABLE>

Income tax expense differed from the amounts computed by applying the federal
income tax rate of 35% in 2004, 2005 and 2006 to earnings from continuing
operations before income tax expense as a result of the following:

                                       57
<PAGE>

<TABLE>
<CAPTION>
                                                                                      MARCH 31,
                                                                         ------------------------------------
                                                                            2004          2005       2006
                                                                         ----------   ----------   ----------
                                                                                    (IN THOUSANDS)
<S>                                                                      <C>          <C>          <C>
Computed "expected" tax expense ......................................   $    7,134   $    9,770   $   17,714
Increase in income taxes resulting from:
   State and local income taxes, net of federal income tax benefit ...          672        1,147        1,868
    Adjustment for tax basis in fixed assets .........................           --           --          851
    Non-deductible SEC settlement charge .............................           --          875           --
   Travel and entertainment ..........................................           72           68          140
   Other, net ........................................................           12           27           64
                                                                         ----------   ----------   ----------
                                                                         $    7,890   $   11,887   $   20,637
                                                                         ==========   ==========   ==========
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 2005 and
2006 are presented below:

<TABLE>
<CAPTION>
                                                                                MARCH 31,
                                                                      ----------------------------
                                                                         2005               2006
                                                                      ----------       -----------
                                                                               (IN THOUSANDS)
<S>                                                                   <C>               <C>
Deferred tax assets:
   Allowance for doubtful accounts................................    $     1,057       $     1,395
   Accrual for compensated absences...............................            577             1,221
   Stock options..................................................            614               470
   Installment sale...............................................            396                --
   Other..........................................................            359               679
                                                                      -----------       -----------
      Total deferred tax assets...................................          3,003             3,765
                                                                      -----------       -----------
Deferred tax liabilities:
   Differences in capitalized software development cost methods...         (1,333)           (1,583)
   Differences in intangible asset amortization methods...........         (9,284)          (15,346)
   Differences in expense recognition methods.....................           (786)           (1,181)
   Depreciation and amortization..................................             --              (628)
   Other..........................................................             --               (81)
                                                                      -----------       -----------
      Total deferred tax liabilities..............................        (11,403)          (18,819)
                                                                      -----------       -----------
      Net deferred tax liabilities................................    $    (8,400)      $   (15,054)
                                                                      ===========       ===========
</TABLE>

An income tax benefit totaling approximately $614,000 was charged directly to
shareholders' equity in fiscal year 2005 in connection with the exercise of
stock options. In fiscal year 2006, the following approximate income tax
benefits were charged directly to shareholders' equity: $3.1 million in
connection with the exercise and/or disqualifying disposition of stock options;
$44,000 in connection with disqualifying dispositions under the Employee Stock
Purchase Plan; $40,000 in connection with restricted stock awards; and $963,000
in connection with the exercise of warrants by a third party service provider.

Deferred tax liabilities of approximately $1.1 million in fiscal year 2005 and
$3.3 million in fiscal year 2006 were set up related to stock acquisitions for
differences in the assigned values and the tax bases of acquired assets and
liabilities (other than the portion of goodwill for which amortization is not
deductible for tax purposes). This deferred tax liability is part of the
purchase accounting for the stock acquisitions, and was charged directly to
goodwill.

In assessing the realization of deferred tax assets, we consider 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. We consider the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, we believe it is more likely than not we
will realize the benefits of these deductible differences.

TALX operates within multiple taxing jurisdictions and is subject to audit in
those jurisdictions. We are currently under examination by the Internal Revenue
Service for the tax year ended March 31, 2004. We have not received any
assessments from the Internal Revenue Service related to this audit at this
time, and do not expect the results of this examination to have a material
adverse effect on our financial condition or results of operations.

                                       58
<PAGE>

(12) SHAREHOLDERS' EQUITY

On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record on January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006 to shareholders of record on December 19, 2005. Earnings per
share and weighted average number of common shares outstanding throughout these
financial statements have been retroactively adjusted for the 3-for-2 stock
splits.

TALX has adopted the 2005 Omnibus Incentive Plan that provides for the issuance
of incentive stock options, non-qualified stock options, restricted stock
grants, stock appreciation rights and performance units. The plan allows for
maximum awards of 4,500,000 shares of common stock, after adjustment for the
3-for-2 stock split. On September 25, 2005, the Board of Directors awarded
55,200 shares of restricted stock under the plan to employees and 15,000 shares
of restricted stock to our outside Directors, after adjustment for the effect of
the 3-for-2 stock split. The weighted average fair value of the restricted
shares on the date of grant was $22.39, after adjustment for the 3-for-2 stock
split. On January 24, 2006, the Board of Directors awarded 97,250 shares of
restricted stock under the plan to employees and 15,000 shares of restricted
stock to our outside Directors, after adjustment for the effect of the 3-for-2
stock split. The weighted average fair value of the restricted shares on the
date of grant was $32.92. The shares awarded to employees and outside Directors
vest evenly over five and three years, respectively. Recipients of restricted
stock pay $0.01 cash consideration per share, have the right to vote all shares
subject to the grant, and have dividend rights with respect to the shares,
whether or not the shares have vested.

TALX had previously adopted a stock option plan for employees that provided for
the issuance of a maximum of 6,860,700 shares of common stock, after adjustment
for the effect of the 3-for-2 stock splits, pursuant to incentive or
non-qualified options. Options were granted by the Board of Directors at prices
not less than fair market value as of the date of the grant. Options vested 20%
per year and expired six to ten years after the date of the grant. In fiscal
year 2006, the Board granted 11,250 options under this plan, after adjustment
for the effect of the 3-for-2 stock split. Upon adoption of the 2005 Omnibus
Incentive Plan, we can make no further awards under the previous stock option
plan.

TALX had also previously adopted a stock option plan for outside Directors that
provided for the issuance of a maximum of 326,700 shares of common stock, after
adjustment for the effect of the 3-for-2 stock splits. On May 10, 2005, the
outside Directors were awarded options in the amount of 2,812 shares each, after
adjustment for the 3-for-2 stock split, at the fair market value as of the date
of the grant. The options vest one year from the date of grant. Options
outstanding amount to 122,379 and 111,933 at March 31, 2005 and 2006,
respectively, after adjustment for the effect of the 3-for-2 stock splits.

The stock option plan for outside Directors also provided for grants of
restricted stock of a total of not more than 12,000 restricted shares per year
to the outside Directors, upon the recommendation of the Compensation Committee
of the Board of Directors. Under this plan, a total of 22,500 shares of
restricted shares were awarded to our outside Directors in fiscal 2005, after
adjustment for the effect of the 3-for-2 stock splits. The restricted shares
vest evenly over 3 years. The weighted average fair value of the restricted
shares on the date of grant was $11.49, after adjustment for the effect of the
3-for-2 stock splits. Recipients of restricted stock pay $0.01 cash
consideration per share, have the right to vote all shares subject to the grant,
and have dividend rights with respect to the shares, whether or not the shares
have vested. Upon adoption of the omnibus incentive plan, we could make no
further awards under the previous stock option plan.

                                       59
<PAGE>
After adjustment for the effect of the 3-for-2 stock splits, stock option
activity under the plans for the three years ended March 31, 2006 is as follows:

<TABLE>
<CAPTION>
                                                 WEIGHTED
                                                  AVERAGE
                                     SHARES    EXERCISE PRICE
                                   ---------   --------------
<S>                                <C>         <C>
Outstanding at March 31, 2003...   3,600,671             5.86
   Granted......................   1,138,500             7.17
   Cancelled....................    (308,060)            7.55
   Exercised....................    (353,037)            2.67
                                   ---------
Outstanding at March 31, 2004...   4,078,074             6.43
   Granted......................     425,245            11.74
   Cancelled....................    (314,752)            6.79
   Exercised....................    (453,984)            5.13
                                   ---------
Outstanding at March 31, 2005...   3,734,583             7.10
   Granted......................      25,310            14.28
   Cancelled....................     (91,013)            8.77
   Exercised....................    (556,610)            5.62
                                   ---------
Outstanding at March 31, 2006...   3,112,270             7.37
                                   =========
</TABLE>

<TABLE>
<CAPTION>
                                      OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                           ---------------------------------------------   --------------------------
                                       WEIGHTED AVERAGE
                                          REMAINING          WEIGHTED                     WEIGHTED
                           NUMBER OF   CONTRACTUAL LIFE      AVERAGE       NUMBER OF      AVERAGE
 RANGE OF EXERCISE PRICE    SHARES         (YEARS)        EXERCISE PRICE     SHARES    EXERCISE PRICE
------------------------   ---------   ----------------   --------------   ---------   --------------
<S>                        <C>         <C>                <C>              <C>         <C>
$    0.00   --     1.69      288,098          2.3         $         1.35     288,098   $         1.35
     1.69   --     3.38      185,477          3.1                   2.00     185,477             2.00
     3.38   --     5.07      240,063          4.1                   3.76     240,063             3.76
     5.07   --     6.76      406,799          6.8                   5.83     137,250             5.84
     6.76   --     8.45      625,858          5.9                   7.48     337,520             7.52
     8.45   --    10.14      590,320          7.7                   8.64     234,822             8.68
    10.14   --    11.83      518,354          5.1                  10.68     393,013            10.69
    11.83   --    15.21      243,241          8.8                  13.76      48,147            13.76
    15.21   --    16.90       14,060          5.1                  16.90          --               --
                           ---------                                       ---------
                           3,112,270                                       1,864,390
                           =========                                       =========
</TABLE>

In May 1999, we entered into an agreement with a third party, under which they
provided us with strategic advisory services. Pursuant to that agreement, we
issued them warrants to purchase a total of 68,062 shares of our common stock at
an exercise price of $3.21 per share, after adjustment for the effect of the
2005 3-for-2 stock split. All 68,062 warrants were exercised in fiscal year
2006, prior to the record date of the 2006 3-for-2 stock split.

During fiscal 1997, shareholders approved the TALX Corporation 1996 Employee
Stock Purchase Plan (ESPP), which was amended in 1998 and 2000 and amended and
restated in 2001. The ESPP allows eligible employees the right to purchase
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 2,041,875 shares of
common stock shares reserved for the ESPP, after adjustment for the effect of
the 3-for-2 stock splits, there were 613,594 shares remaining at March 31, 2006.

On May 10, 2005, our Board of Directors authorized us to repurchase up to three
million shares of our stock, after adjustment for the 3-for-2 stock split, in
the open market, or through privately negotiated transactions during the
36-month period ending May 9, 2008, subject to market conditions and other
factors. Under this plan, we have repurchased a cumulative total of 56,700
shares of our common stock, as adjusted for the 3-for-2 stock split. All shares
repurchased have been reissued in connection with restricted stock grants.

During fiscal 2001, we began paying dividends on our common stock on a quarterly
basis. After adjustment for the effect of the 3-for-2 stock splits, dividends of
$0.09, $0.11 and $0.13 per share were declared and dividends of $0.08, $0.10 and
$0.12 per share were paid to shareholders during fiscal years 2004, 2005 and
2006, respectively. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will depend upon our earnings, capital
requirements, operating and financial condition, restrictions in our Loan
Agreement, and such other factors as the board may deem relevant.

                                       60
<PAGE>

(13) 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 and the dilutive effect of all restricted stock. The weighted
average number of shares is based on common stock outstanding for basic earnings
per share and common stock outstanding, restricted stock outstanding, and common
stock options and warrants for diluted earnings per share in periods when such
common stock options and warrants are not antidilutive. As of March 31, 2005 and
2006, stock options to purchase 272,679 and 0 shares, respectively, were not
dilutive and, therefore, were not included in the computations of diluted
earnings per share amounts.

On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006 to shareholders of record on December 19, 2005. Earnings per
share and weighted average number of common shares outstanding throughout this
Annual Report on Form 10-K have been retroactively adjusted for the 3-for-2
stock splits.

<TABLE>
<CAPTION>
                                                                       YEARS ENDED MARCH 31,
                                                                  -------------------------------
                                                                      2005              2006
                                                                  ------------    ---------------
                                                                  (IN THOUSANDS, EXCEPT SHARE AND
                                                                       PER SHARE INFORMATION)
<S>                                                               <C>             <C>
BASIC EARNINGS PER SHARE:
Net earnings:
   Continuing operations ......................................   $     16,028    $        29,975
   Discontinued operations ....................................            582                515
                                                                  ------------    ---------------
      Net earnings ............................................   $     16,610    $        30,490
                                                                  ============    ===============

Weighted average number of common shares outstanding ..........     31,383,017         31,814,015
Less: weighted average number of treasury shares ..............       (428,388)           (38,046)
                                                                  ------------    ---------------
   Weighted average number of common and common
      equivalent shares outstanding ...........................     30,954,629         31,775,969
                                                                  ============    ===============

Basic earnings per common share:
   Continuing operations ......................................   $       0.52    $          0.94
   Discontinued operations ....................................           0.02               0.02
                                                                  ------------    ---------------
      Net earnings ............................................   $       0.54    $          0.96
                                                                  ============    ===============

DILUTED EARNINGS PER SHARE:
Net earnings:
   Continuing operations ......................................   $     16,028    $        29,975
   Discontinued operations ....................................            582                515
                                                                  ------------    ---------------
      Net earnings ............................................   $     16,610    $        30,490
                                                                  ============    ===============

Weighted average number of common shares outstanding ..........     31,383,017         31,814,015
Weighted average number of restricted shares ..................          9,617             46,358
Weighted average number of shares issuable under employee stock
     purchase plans............................................         16,506             10,549
Dilutive effect of the exercise of stock options ..............      1,388,966          1,995,775
Dilutive effect of the exercise of warrants ...................         82,961                 --
Less: weighted average number of treasury shares ..............       (428,388)           (38,046)
                                                                  ------------    ---------------
   Weighted average number of common and common
      equivalent shares outstanding ...........................     32,452,679         33,828,651
                                                                  ============    ===============

Diluted earnings per common share:
   Continuing operations ......................................   $       0.49    $          0.89
   Discontinued operations ....................................           0.02               0.01
                                                                  ------------    ---------------
      Net earnings ............................................   $       0.51    $          0.90
                                                                  ============    ===============
</TABLE>

                                       61
<PAGE>

(14) DISCONTINUED OPERATIONS

On April 21, 2003, the Board of Directors granted management the authority to
dispose of the Human Resources and Benefits Application Services business.
Accordingly, it was determined that this business met the requirements to be
presented as a discontinued operation.

On April 22, 2003 we transferred substantially all of the assets of our Human
Resources and Benefits Application Services business to Workscape, Inc., a
Massachusetts-based provider of benefits and workforce management solutions. The
primary product of this line of services, the benefits enrollment business,
provides a customized solution for clients' employees to enroll in an employer's
benefits programs and make changes to their personal information and benefits
elections, all by means of the Internet or by telephone. Workscape, Inc. hired
all of the employees directly related to the benefits enrollment business.

The transaction was structured as a transfer of assets under contract for sale
with no initial down-payment and the purchase price to be paid over a three-year
period, based on a client retention formula. Proceeds were anticipated to be
between $2.0 million and $6.0 million. While the contract did not specify a
minimum guaranteed amount, we secured a $2.0 million note from Workscape, Inc.
As of March 31, 2006, we had received payment in full on the note, $135,000 of
interest payments in connection with the note, and $793,000 in additional
consideration.

All assets and liabilities of this business, both the portion of the business
transferred under contract to Workscape, Inc. (approximately 90% of the assets)
and the remaining approximately 10% of assets that were transferred to another
third party, along with related transaction costs, were recorded on our
consolidated balance sheet as net assets of business held for sale. We recorded
cash received under the asset purchase agreement first to reduce the recorded
value of net assets of business held for sale and then to reflect gain on the
sale of the business.

In connection with the transfer, we provided Workscape, Inc., for agreed-upon
fees, with various transition services related to the operation of the benefits
enrollment business through December 2005. These fees, offset by costs to
deliver the service, were recorded first to reduce the recorded value of net
assets of business held for sale and then to reflect gain on the sale of the
business. As of December 31, 2005, we are no longer providing transition
services related to this business.

The historical results of operations for this business have been reclassified to
earnings from discontinued operations on our consolidated statement of earnings.

The results of operations for this business for the years ended March 31, 2004,
2005 and 2006 were as follows:

<TABLE>
<CAPTION>
                                                         MARCH 31,
                                                   --------------------
                                                    2004   2005    2006
                                                   -----   -----   ----
                                                      (IN THOUSANDS)
<S>                                                <C>     <C>     <C>
Revenues........................................   $  --   $  --   $ --
                                                   =====   =====   ====

Earnings (loss)  from discontinued operations...     281      25     (1)
Gain on disposal of discontinued operations.....      41     937    853
                                                   -----   -----   ----
   Earnings from discontinued operations........     322     962    852
Income tax expense..............................     123     380    337
                                                   -----   -----   ----
   Net earnings from discontinued operations....   $ 199   $ 582   $515
                                                   =====   =====   ====
</TABLE>

(15) EMPLOYEE BENEFIT PLAN

We sponsor a profit-sharing/401(k) plan. The plan covers substantially all of
our employees. Employees may contribute up to 50% of pre-tax compensation to the
plan. We make contributions to the plan, subject to ERISA limitations, up to
2.4% of employees' earnings. There is a three-year graded vesting schedule for
employer matching contributions. Participants direct the investment of both
employee deferral and employer matching contributions among a variety of
investment choices. The plan does not hold company stock. Total expense under
the plan for the years ended March 31, 2004, 2005 and 2006 was $831,000, $1.0
million, and $1.2 million, respectively.

                                       62
<PAGE>

(16) COMMITMENTS AND CONTINGENCIES

We are a defendant from time to time in lawsuits. Based on information currently
available, we believe that no current proceedings, individually or in the
aggregate, will have a material adverse effect upon us. On March 3, 2005, we
agreed with the SEC, without admitting of denying any liability, to pay one
dollar in disgorgement and, pursuant to a court order, to pay a $2.5 million
civil penalty, and not to violate certain provisions of the federal securities
laws in the future.

(17) BUSINESS SEGMENT INFORMATION

As a result of recent acquisitions, in the third quarter of fiscal year 2006, we
determined that we operate in four business segments. The presentation of
segment information reflects the manner in which management organizes segments
for making operating decisions and assessing performance. The Company's Chief
Operating Decision Maker and Board of Directors review gross profit for the
Company's business units. The Company's Chief Operating Decision Maker and Board
of Directors only review profit and loss information after gross profit on a
consolidated basis to assess performance, make overall operating decisions and
make resource allocations. The Company's business units are closely interrelated
in their activities and share services such as order entry, billing, technical
services, network facilities, telecommunications, purchasing and information
technology facilities. As a result, it is impractical and provides no value to
allocate costs of all of these services to the business units or to allocate any
of the underlying assets to the businesses. Additionally, the Company's Chief
Operating Decision Maker and its principal officers participate in a cash bonus
program which rewards performance based upon consolidated Company results.

As of March 31, 2006, the Company's operations are conducted principally through
business segments comprised of: The Work Number services, unemployment tax
management, tax credits and incentives, and maintenance and support. The Work
Number services include our employment and income verification services, W-2
management services (which include initial distribution, reissue and correction
of W-2 forms), paperless pay services that enable employees to electronically
receive pay statement information as well as review and change direct deposit
account or W-4 information, integrated electronic time capture and reporting
services, paperless new-hire services to bring new workers on board using
electronic forms, and I-9 management services designed to help clients
electronically comply with the immigration laws that requires employers to
complete an I-9 form for each new hire. Our unemployment tax management segment
includes our unemployment and claims management and unemployment tax planning
services. Tax credits and incentives includes the identification, calculation,
and processing of certain federal, state and local tax credits for our clients.
Our fourth segment, maintenance and support, relates to a business the Company
is phasing out. There are no intersegment sales, and we do not allocate assets
to the segments.

Prior period information has been reclassified to reflect the establishment of
the unemployment tax management segment and the tax credits and incentives
segment, which were previously presented together as one segment.

                                       63
<PAGE>

Summary by Business Segments:

<TABLE>
<CAPTION>
                                                                          YEARS ENDED MARCH 31,
                                                                    ---------------------------------
                                                                      2004        2005        2006
                                                                    ---------   ---------   ---------
                                                                              (IN THOUSANDS)
<S>                                                                 <C>         <C>         <C>
Net revenue:
    The Work Number services.....................................   $  46,608   $  65,373   $  91,331
    Unemployment tax management .................................      73,008      85,009     100,826
    Tax credits and incentives ..................................         659       5,199      13,594
    Maintenance and support......................................       4,120       2,814       1,676
                                                                    ---------   ---------   ---------
       Total revenue.............................................   $ 124,395   $ 158,395   $ 207,427
                                                                    =========   =========   =========
Gross profit:

    The Work Number services.....................................   $  32,661   $  46,728   $  69,992
    Unemployment tax management .................................      35,217      41,309      50,243
    Tax credits and incentives ..................................         464       3,835       8,888
    Maintenance and support......................................       2,800       1,806       1,324
                                                                    ---------   ---------   ---------
       Total gross profit........................................      71,142      93,678     130,447
Selling and marketing expenses...................................     (23,862)    (27,693)    (32,700)
General and administrative expenses..............................     (26,052)    (32,845)    (42,658)
SEC settlement charge............................................          --      (2,500)         --
                                                                    ---------   ---------   ---------
       Operating income..........................................      21,228      30,640      55,089
Net interest expense.............................................        (848)     (2,720)     (4,472)
Other income (expense)...........................................           3          (5)         (5)
                                                                    ---------   ---------   ---------
       Earnings from continuing operations before income taxes...   $  20,383   $  27,915   $  50,612
                                                                    =========   =========   =========
</TABLE>

(18) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for interest totaled $756,000, $2.6 million, and $5.1
million for the years ended March 31, 2004, 2005 and 2006, respectively. Cash
paid during the year for income taxes totaled $4.7 million, $11.5 million, and
$11.3 million for the years ended March 31, 2004, 2005 and 2006, respectively.

(19) RELATED PARTY TRANSACTION

James W. Canfield, the son of our Chairman, President and Chief Executive
Officer, is employed in a non-executive position with our Company as Director of
Product Management. Mr. Canfield has a current annual salary of $125,000 and is
eligible for a bonus of approximately $46,000 based upon certain performance
goals. This bonus can decrease or increase based on the percentage achievement
of these performance goals. Mr. Canfield is also eligible annually for an award
of restricted stock. Both the bonus and restricted stock awards are granted
under standard corporate compensation plans and are consistent with payments
made to director-level managers at Mr. Canfield's level. For fiscal 2006, Mr.
Canfield received $115,600 in salary, approximately $42,000 in bonus and 1,700
shares of restricted stock for his services to the Company.

(20) SUBSEQUENT EVENTS

ACQUISITION

Pursuant to an acquisition agreement dated April 6, 2006, we acquired
Performance Assessment Network, Inc., a provider of secure, electronic-based
psychometric testing and assessments, as well as comprehensive talent management
services, for approximately $75 million, including transaction costs, subject to
certain post-closing adjustments. The purchase price was determined based on
arms'-length negotiations, and was paid in cash financed through our 2005 Loan
Agreement as discussed above in Note 8.

                                       64
<PAGE>
 The acquisition agreement provides for indemnification of the Company by the
sellers for certain pre-closing liabilities and obligations of the business,
subject to certain limitations. An escrow account, maintained pursuant to the
terms of the escrow agreement, is also available until eighteen months following
the purchase to satisfy the indemnification obligations under the purchase
agreement, subject to certain limitations described in the acquisition
agreement. Of the purchase price, $10.0 million was paid into the escrow
account.

AMENDMENT TO LOAN AGREEMENT

On April 6, 2006, we entered into the second amendment to the 2005 Loan
Agreement which expanded the availability under our revolving line of credit to
$200 million and provided for mandatory prepayments and commitment reductions
under certain circumstances, as well as an accordion feature that permits
restoration of the $200 million availability under certain circumstances. There
are procedures, including limitations on the timing and increments, associated
with such a commitment increase request. The second amendment also revised and
updated other terms, including the terms of some of the financial covenants
under the Loan Agreement.

On May 25, 2006, concurrently with the issuance and sale of the $75.0 principal
amount of Senior Guaranteed Notes due May 25, 2014, which we refer to as the
"Notes," we entered into a $150.0 million third amended and restated loan
agreement, which we refer to as the "2006 Loan Agreement," with the Lenders to
replace the 2005 Loan Agreement and refinance in full the $112.4 million
outstanding loan balance on May 25, 2006, after giving effect to the repayment
of $74.2 million of loans from the proceeds of the Notes. The 2006 Loan
Agreement established a $150.0 million revolving line of credit and provided for
the issuance of letters of credit and swingline loans. The 2006 Loan Agreement
includes an accordion feature that permits us to increase availability to $200
million under certain circumstances. There are procedures, including limitations
on the timing and increments, associated with such a commitment increase
request. In conjunction with the 2006 Loan Agreement, the Lenders released their
security interests in our and our subsidiaries' assets and the stock of our
subsidiaries, which had existed under the 2005 Loan Agreement.

The proceeds of loans made under the 2006 Loan Agreement may be used solely to
refinance loans outstanding under the 2005 Loan Agreement and for working
capital, permitted capital expenditures, as the source for payment of our
obligations with respect to letters of credit, to pay the transaction costs of
the 2006 Loan Agreement, to finance permitted acquisitions meeting specified
criteria, and to finance certain repurchases of our capital stock subject to
specified limitations. The 2006 Loan Agreement is absolutely and unconditionally
guaranteed by our material subsidiaries.

We may make prepayments on advances under the revolving credit facility without
penalty, provided we give at least one business day's notice, pay accrued
interest and otherwise make the applicable lenders whole. As the 2006 Loan
Agreement is a revolving credit facility, there are no scheduled minimum
principal repayments in fiscal years 2006 through 2010. All amounts outstanding
under the credit facility are due and payable on April 14, 2010.

Advances under the revolving credit facility bear interest at rates we select,
including a base rate or the LIBOR rate plus an applicable margin. The base rate
is a variable rate equal to the greater of the Lender's prime rate or the
federal funds rate plus 0.5%. The applicable margin for LIBOR rate loans will
vary from 1.00% to 1.75%. Swingline loans will bear interest at the base rate.
During the existence of an event of default, loans will bear additional interest
of 2.00% per year.

We will pay a facility fee, payable on a quarterly basis in the amount equal to
0.25% of the unused portion of the revolving credit facility. If we utilize any
letters of credit, we will pay a fronting fee equal to 0.125% of the face amount
of each letter of credit, as well as a letter of credit fee equal to the
aggregate undrawn amount of the letter of credit multiplied by the LIBOR margin
in effect on the date the letter of credit is issued. In connection with the
second amendment to the 2005 Loan Agreement, we paid the Lenders amendment fees
in the aggregate amount of $55,000 on the effective date.

                                       65
<PAGE>

The 2006 Loan Agreement includes certain covenants, including, without
limitation, restrictions on the use of proceeds of any loans, as described
above. The 2006 Loan Agreement also requires compliance with certain financial
covenants based on our minimum interest coverage (the ratio of EBIT minus
dividends and income tax expense to interest expense), minimum EBITDA (as
defined in the 2006 Loan Agreement and as adjusted for, among other things,
approved acquisitions) and our ratio of total indebtedness to EBITDA (as so
adjusted). The 2006 Loan Agreement also requires compliance with certain
operating and other covenants which limit, without first obtaining written
consent of the lenders, among other things, the ability of TALX and our
subsidiaries to incur additional debt (with specified exceptions), sales of
assets, changes in our capital structure, affiliate transactions, acquisitions,
and distributions to our shareholders. The 2006 Loan Agreement generally
prohibits the payment of cash dividends, except for cash dividends not in excess
of six cents per share per calendar quarter, up to a maximum of $7.5 million per
fiscal year so long as we are not in default at the time of the declaration. The
2006 Loan Agreement also contains various representations and warranties,
regarding, among others, compliance with material laws, the accuracy of
financial statements and other information delivered to the Lenders and the
absence of material changes.

In the event of a default under the 2006 Loan Agreement, the Lenders may
terminate the commitments made under the Loan Agreement, declare amounts
outstanding, including accrued interest and fees, payable immediately, and
enforce any and all rights and interests.

NOTE PLACEMENT

On May 25, 2006, we entered into a Note Purchase Agreement with several
institutional investors for the issuance and sale by TALX in a private placement
of Senior Guaranteed Notes due May 25, 2014 (the "Notes") in an aggregate
principal amount of $75.0 million (the "Note Purchase Agreement"). We used the
proceeds from the sale of the Notes to repay outstanding loans in the amount of
$74.2 million under the 2005 Loan Agreement.

We are required to repay the principal amount of the Notes in five annual
installments commencing on May 25, 2010 with the final payment of all principal
then outstanding on May 25, 2014. We may prepay the Notes subject to certain
restrictions and the payment of a make-whole amount. In addition, we may be
required by the holders of the Notes to prepay the Notes upon the occurrence of
a Change of Control, as defined in the Note Purchase Agreement. Under certain
circumstances, we may also be required to use proceeds of certain asset
dispositions to prepay a portion of the Notes.

Interest on the Notes of 6.89% per annum is payable semiannually until the
principal becomes due and payable, provided, that the interest rate increases by
0.45% unless we increase equity capital by $75 million before September 30,
2006; provided further, if such increase takes place after September 30, 2006
and before September 30, 2007, then on and after the first day of the next
fiscal quarter following the fiscal quarter in which such equity capital was
raised, such additional interest will no longer accrue and be payable, and the
interest rate on the Notes will return to 6.89% per annum, subject in any event
to the immediately following sentence. To the extent permitted by law, upon the
occurrence of an event of default, interest accrues on any amount due at a rate
equal to the greater of 8.89% or 2.0% over prime as announced by LaSalle Bank
National Association. Our obligations with respect to the Notes and the Note
Purchase Agreement are absolutely and unconditionally guaranteed by our material
subsidiaries.

The Note Purchase Agreement contains customary covenants, including compliance
with laws, maintenance of insurance, keeping of books, conduct of business,
maintenance of properties, payment of taxes, inspection of records, furnishing
of quarterly and annual financial statements, quarterly compliance certificates
and other financial information.

The Note Purchase Agreement also contains customary restrictive covenants
including certain restrictions on transactions with affiliates, our Consolidated
Net Worth (as defined in the Note Purchase Agreement), other indebtedness,
including that of guarantor subsidiaries, our ratio of Consolidated Income
Available for Fixed Charges to Consolidated Fixed Charges (as defined in the
Note Purchase Agreement), our ratio of Consolidated Debt to Consolidated
Operating Cash Flow (as defined in the Note Purchase Agreement), liens and
encumbrances, consolidations and mergers, and sales of assets.

Except as described below, upon the happening of an event of default under the
Note Purchase Agreement, the holder or holders of more than 50% in principal
amount of the Notes at the time outstanding may at any time at its or their
option, by notice or notices to us, declare all the Notes then outstanding to be
immediately due and payable. If an event of default with respect to the payment
of principal or interest on the Notes occurs, any holder or holders of the Notes
at the time outstanding

                                       66
<PAGE>

affected by such event of default may at any time at its or their option, by
notice or notices to us, declare all of the Notes held by it or them to be
immediately due and payable. If an event of default with respect to bankruptcy
proceedings occurs, all of the Notes then outstanding will become immediately
due and payable without any declaration or other act on the part of any holders
of the Notes.

                                       67
<PAGE>

(21) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly data is set forth in the following tables.

<TABLE>
<CAPTION>
                                                                 FISCAL 2005
                                                 --------------------------------------------
                                                 JUNE 30,    SEPT. 30,   DEC. 31,   MARCH 31,
                                                   2004        2004       2004        2005
                                                 ---------   ---------   --------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>         <C>         <C>        <C>
Total revenues................................   $ 36,061    $  36,630   $ 39,840   $  45,864
Gross margin..................................     20,503       21,594     24,141      27,440
Net earnings from continuing operations.......        198        3,930      4,813       7,087
Net earnings..................................        356        4,059      4,966       7,229

Basic earnings per share:
    Net earnings from continuing operations...       0.01         0.13       0.16        0.23
    Net earnings .............................       0.01         0.13       0.16        0.23

Diluted earnings per share:
    Net earnings from continuing operations...       0.01         0.12       0.15        0.21
    Net earnings .............................       0.01         0.13       0.15        0.22
</TABLE>

<TABLE>
<CAPTION>
                                                                 FISCAL 2006
                                                 --------------------------------------------
                                                 JUNE 30,    SEPT. 30,   DEC. 31,   MARCH 31,
                                                   2005        2005       2005        2006
                                                 ---------   ---------   --------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>         <C>         <C>        <C>
Total revenues................................   $  46,794   $  48,344   $ 52,332   $  59,957
Gross margin..................................      29,202      30,799     33,149      37,297
Net earnings from continuing operations.......       6,425       7,151      7,422       8,977
Net earnings..................................       6,627       7,177      7,644       9,042

Basic earnings per share:
    Net earnings from continuing operations...        0.20        0.23       0.23        0.28
    Net earnings .............................        0.21        0.23       0.24        0.28

Diluted earnings per share:
    Net earnings from continuing operations...        0.19        0.21       0.22        0.26
    Net earnings..............................        0.20        0.21       0.22        0.26
</TABLE>

On January 6, 2005, we declared a 3-for-2 stock split, which was effected in the
form of a 50 percent stock dividend, payable February 17, 2005, to shareholders
of record on January 20, 2005. On November 14, 2005, we declared a 3-for-2 stock
split, which was effected in the form of a 50 percent stock dividend, payable
January 17, 2006 to shareholders of record on December 19, 2005. Earnings per
share and weighted average number of common shares outstanding throughout this
Annual Report on Form 10-K have been retroactively adjusted for the 3-for-2
stock splits.

                                       68
<PAGE>

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES:

Our management, including our Chairman, President and Chief Executive Officer
and our Senior Vice President, Chief Financial Officer and Assistant Secretary,
performed an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)), as of March 31, 2006,
and determined that such controls and procedures are effective as of that date
to provide reasonable assurance that the information required to be disclosed by
us in the reports we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. They have also determined in their
evaluation that there was no significant change in our internal control over
financial reporting during the quarter ended March 31, 2006 that has materially
affected or is reasonably likely to materially affect our internal control over
financial reporting.

It should be noted that while our management, including the Chairman, President
and Chief Executive Officer and the Senior Vice President, Chief Financial
Officer and Assistant Secretary, believe our disclosure controls and procedures
provide a reasonable level of assurance, they do not expect that our disclosure
controls and procedures or internal controls will prevent all error and all
fraud. A control system, no matter how well conceived or operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

The information contained in Management's Report on Internal Control over
Financial Reporting and the Report of Independent Registered Public Accounting
Firm regarding such Management's Report contained in "Item 8 - Financial
Statements and Supplementary Data" are incorporated by reference herein.

ITEM 9B. OTHER INFORMATION

As discussed above under "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- Long-Term Debt," which discussion is incorporated by reference in this Item
9B, on May 25, 2006, we completed a private sale of notes and amended and
restated our loan agreement with our lenders.

                                       69
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information regarding directors and executive officers of the Company is
contained under the captions "Nominees and Continuing Directors," "Committees
and Meetings of the Board of Directors," "Executive Officers," "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Code of Business Ethics"
included in the Proxy Statement for the 2006 Annual Meeting of Shareholders,
which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information regarding executive compensation is contained under the caption
"Executive Compensation," "Compensation Committee Interlocks and Insider
Participation," "Equity Compensation Plan Information," "Shareholder Approved
Equity Compensation," "Non-Shareholder Approved Equity Compensation,"
"Employment and Severance Agreements" and "Director Compensation" included in
the Proxy Statement for the 2006 Annual Meeting of Shareholders, which
information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

Information regarding security ownership of certain beneficial owners and
management and related stockholder matters is contained under the captions
"Equity Compensation Plan Information," "Shareholder Approved Equity
Compensation," "Non-shareholder Approved Equity Compensation," "Common Stock
Ownership of Directors, Nominees and Officers," and "Common Stock Ownership of
Certain Beneficial Owners" included in the Proxy Statement for the 2006 Annual
Meeting of Shareholders, which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information regarding certain relationships and related transactions is
contained under the caption "Certain Relationships and Related Party
Transactions" included in the Proxy Statement for the 2006 Annual Meeting of
Shareholders, which information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information regarding principal accountant fees and services is contained under
the caption "Ratification of Appointment of Independent Registered Public
Accounting Firm" included in the Proxy Statement for the 2006 Annual Meeting of
Shareholders, which information is incorporated herein by reference.

                                       70
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(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.

            We agree to furnish to the Securities and Exchange Commission a copy
            of any long-term debt instruments for which the total amount of
            securities authorized thereunder does not exceed 10% of the total
            assets of us and our subsidiaries on a consolidated basis.

                                       71
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 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

                              By:   /s/ WILLIAM W. CANFIELD
                                    --------------------------------------------
                              William W. Canfield
                              Chairman, President and Chief Executive Officer
                              (Principal Executive Officer)
                              May 31, 2006

                              By:   /s/ L. KEITH GRAVES
                                    --------------------------------------------
                              L. Keith Graves
                              Senior Vice President, Chief Financial Officer and
                              Assistant Secretary
                              (Principal Financial and Accounting Officer)
                              May 31, 2006

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, Chief Executive Officer and Director        May 31, 2006
-----------------------
William W. Canfield       (Principal Executive Officer)

/s/ L. KEITH GRAVES       Senior Vice President, Chief Financial Officer, and Assistant    May 31, 2006
-------------------
L. Keith Graves           Secretary
                          (Principal Financial Officer and Principal Accounting Officer)

/s/ RICHARD F. FORD       Director                                                         May 31, 2006
-------------------
Richard F. Ford

/s/ TONY G. HOLCOMBE      Director                                                         May 31, 2006
--------------------
Tony G. Holcombe

/s/ CRAIG E. LABARGE      Director                                                         May 31, 2006
--------------------
Craig E. LaBarge

/s/ EUGENE M. TOOMBS      Director                                                         May 31, 2006
--------------------
Eugene M. Toombs

/s/ M. STEVE YOAKUM       Director                                                         May 31, 2006
-------------------
M. Steve Yoakum
</TABLE>

                                       72
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S>           <C>
        2.1   Asset Purchase Agreement by and among TALX Corporation and Sheakley-Uniservice, Inc., Sheakley Interactive
              Services, LLC and Larry Sheakley, incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed
              April 15, 2004+

        2.2   Escrow Agreement by and among TALX Employer Services, LLC, TALX Corporation, Sheakley-Uniservice, Inc., Sheakley
              Interactive Services, LLC and LaSalle Bank National Association dated as of March 31, 2004, incorporated by
              reference to Exhibit 2.2 to our Current Report on Form 8-K filed April 15, 2004

        2.3   Transition Services Agreement by and between TALX Employer Services, LLC, TALX Corporation, Sheakley-Uniservice, Inc.,
              Sheakley Interactive Services, LLC dated as of March 31, 2004, incorporated by reference to Exhibit 2.3 to our Current
              Report on Form 8-K filed April 15, 2004 +

        2.4   Acquisition Agreement, dated April 6, 2006, by and among TALX Corporation, the shareholders of Performance Assessment
              Network, Inc., and Douglas E. Cole, as representative of such shareholders, incorporated by reference to our Current
              Report on Form 8-K filed April 7, 2006 (File No. 000-21465) +

        3.1   Restated Articles of Incorporation of TALX Corporation, as amended, incorporated by reference to Exhibit 3.1 to our
              Current Report on Form 8-K filed September 14, 2005 (File No. 000-21465)

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

        4.1   See Exhibit 3.1

        4.2   Form of Senior Guaranteed Note due 2014 (included as Exhibit 1 to Note Purchase Agreement attached as Exhibit 10.46)

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

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

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

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

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

     10.4.2   Second Amendment to TALX Corporation Outside Directors' Stock Option Plan, incorporated by reference to our Schedule
              14A filed July 23, 2004 (File No. 000-21465) ++

       10.5   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) ++

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

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

                                       73
<PAGE>

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

      10.29   TALX Corporation 2004-2006 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to
              our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-21465) ++

      10.30   First Amendment to and Complete Restatement of Split-Dollar Agreements and Related Insurance Agreements, dated
              March 31, 1999, by and among TALX Corporation, William W. Canfield, and Thomas M. Canfield and James W. Canfield,
              Trustees of the Canfield Family Irrevocable Insurance Trust U/A March 31, 1993, incorporated by reference to
              Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-21465) ++

      10.31   Form of Employment Agreement for Messrs. Chaffin, Graves, & Smith, incorporated by reference to
              Exhibit 10.1 to our Current Report on Form 8-K filed May 17, 2005 (File No. 000-21465) ++

      10.32   FY05 Incentive Bonus Plan Agreement for Corporate Officers, incorporated by reference to
              Exhibit 10.7 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 (File No. 000-21465)++

      10.33   Form of Incentive Stock Option Agreement, incorporated by reference to Exhibit 10.9 to
              our Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 (File No. 000-21465)++

      10.34   Description of Officer Perquisites, incorporated by reference to Exhibit 99.1 to
              our Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 (File No. 000-21465)++

      10.35   Schedule of Director Compensation Arrangements ++

      10.36   Schedule of Named Executive Officer Compensation Arrangements ++

      10.37   Second Amended and Restated Loan Agreement among the Company, LaSalle Bank National Association,
              as Administrative Agent, and the Lenders named therein, incorporated by reference to Exhibit 10.37 to our Annual
              Report on Form 10-K for the year ended March 31, 2005 (File No. 000-21465)

      10.38   TALX Corporation 2005 Omnibus Incentive Plan, incorporated by reference to Attachment B to
              our definitive proxy statement on Schedule 14A filed on July 22, 2005 ++

      10.39   Form of Restricted Stock Agreement (Employee), incorporated by reference to Exhibit 10.39 to
              our Current Report on Form 8-K filed on September 23, 2005 (File No. 000-21465) ++

      10.40   Form of Restricted Stock Agreement (Outside Director), incorporated by reference to Exhibit 10.40
              to our Current Report on Form 8-K filed on September 23, 2005 (File No. 000-21465) ++

      10.41   TALX Corporation 2006 - 2008 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.41
              to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 000-21465) ++

      10.42   Form of Long-Term Incentive Plan Award (included as an annex to Exhibit 10.41) ++

      10.43   Amendment dated November 1, 2005 to Second Amended and Restated Loan Agreement among the Company, LaSalle Bank
              National Association, as Administrative Agent, and the Lenders named therein, incorporated by reference from Exhibit
              10.43 to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2005 (File No. 000-21465)

      10.44   Second Amendment dated April 6, 2006 to Second Amended and Restated Loan Agreement among
              the Company, LaSalle Bank National Association, as Administrative Agent, and the Lenders named therein

      10.45   Third Amended and Restated Loan Agreement, dated as of May 25, 2006, among the Company, LaSalle Bank National
              Association, as Administrative Agent, and the Lenders named therein

      10.46   Note Purchase Agreement, dated as of May 25, 2006, among the Company and the Purchasers named therein

      10.47   Nonqualified Savings and Retirement Plan, incorporated by reference to Exhibits 4.1
              and 4.2 to our Registration Statement on Form S-8 filed on May 24, 2006 ++

       11.1   Statement regarding computation of Per Share Earnings
</TABLE>

                                       74
<PAGE>

<TABLE>
<S>           <C>
       21.1   Subsidiaries of TALX Corporation

       23.1   Consent of KPMG LLP

       31.1   Chief Executive Officer Certification required by Rule 13a-15(e) and 15d-15(e) under
              the Securities Exchange Act of 1934.

       31.2   Chief Financial Officer Certification required by Rule 13a-15(e) and 15d-15(e) under
              the Securities Exchange Act of 1934.

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

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

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

++   Represents management contract or compensatory plan or arrangement.

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

                                       75