<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                      ------------------------------------
                                   FORM 10-K

<TABLE>
<S>         <C>                                                           <C>
   [X]          Annual Report Pursuant to Section 13 or 15(d) of the
             Securities Exchange Act of 1934 For the fiscal year ended
                                   March 31, 2000
                                         Or
   [ ]        Transition Report Pursuant to Section 13 or 15(d) of the
             Securities Exchange Act of 1934 For the transition period
                                 from           to
                          Commission File Number 000-21465
</TABLE>

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

<TABLE>
<S>                                            <C>
                   MISSOURI                                      43-0988805
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                      Identification No.)
       1850 BORMAN COURT, ST. LOUIS, MO                            63146
   (Address of principal executive offices)                      (Zip Code)
                                       (314) 214-7000
                               (Registrant's telephone number,
                                    Including area code)
                 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
             Title of each class                 Name of each exchange on which registered
                     NONE                                           NONE
                 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                COMMON STOCK, $.01 PAR VALUE
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes  [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of June 1, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $74,378,339. For purpose of
this calculation only, without determining whether the following are affiliates
of the Registrant, the Registrant has assumed that (i) its directors and
executive officers are affiliates and (ii) entities controlled by such persons
are affiliates.
As of June 1, 2000 there were 5,632,496 shares of the Registrant's Common Stock
outstanding.
                      DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference portions of the definitive Proxy Statement
for the Registrant's 2000 Annual Meeting of Shareholders to be filed with the
Commission not later than 120 days after the end of the fiscal year covered by
this Form.
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                                     PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This Form 10-K (including, without limitation, Item 1 -- "Business" and
Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations") 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. All statements other than statements of
historical facts included herein are forward looking statements. Although the
Company believes that the expectations reflected in such forward looking
statements are reasonable, it 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 the Company.
Factors that have affected, and in the future could affect, the Company's actual
results and could cause such results during fiscal 2001 and beyond to differ
materially from those expressed in any Forward Looking Statements made by or on
behalf of the Company include, but are not limited to, those discussed under
Item 1 -- "Business -- Risk Factors" herein below. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by such cautionary
statements. The Company does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
uncertainties after the date hereof or to reflect the occurrence of
unanticipated events.

ITEM 1.  BUSINESS

GENERAL

     TALX Corporation ("TALX" or the "Company") provides employee self-service
solutions utilizing interactive Web, interactive voice response ("IVR"), and
computer telephony integration ("CTI") software and services to human resource,
benefits and payroll functions of large organizations such as Fortune 500
companies and federal government agencies. The Company's services and software
enable an organization's employees, managers and other authorized users
("Users") to access, input and update information without human assistance. The
Company's software and services are designed to enhance service levels, improve
productivity and reduce costs by enabling Users to perform self-service
transactions. Historically, the Company has designed and implemented "tailored"
systems that provide an organization's Users with access to databases of
information relating to that organization.

     In early 1995, the Company introduced a "branded" service, The Work Number
for Everyone(R) ("The Work Number(R)"), which is a national service providing
automated access to employment and income information from multiple
organizations. The Work Number provides automated employment and income
verification to mortgage lenders and other verifiers. Using The Work Number,
verifiers are able to confirm employment information regarding participating
employers' current and former employees, including their past three years of
salary history. The Work Number reduces an employer's cost of providing this
information and at the same time increases the timeliness and accuracy of the
delivery of such information to mortgage lenders and other verifiers.

     Tailored software and services are offered by TALX to its clients either
installed at the client's site or on an outsourced application service basis.
The Company has provided tailored software and services for installation at
clients' sites since the early 1980s. In 1993, the Company introduced its
application services business (formerly referred to as outsourced services),
which allows a client to realize the benefits of the Company's software
solutions without incurring the capital expenditures or administrative and
maintenance responsibilities of operating such a system. For application
services clients, the Company delivers solutions as an application services
provider ("ASP") by maintaining the client's database on a system at the
Company's facilities, where incoming requests for access to the information are
received.

     In addition to providing services and software, the Company formerly
provided database and document services. In August 1996, the Company determined
to pursue the divestiture of the database and document services businesses and,
accordingly, reflected the results of operations of such businesses as
discontinued

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operations. Database services included providing sales leads and pre-press
services for directory publishers, and document services included the
preparation and mailing of invoices, statements and confirmation letters for
organizations with high volume requirements. In January 1997, the document
services business was sold. In March 2000, the database business was sold.

     The Company was incorporated under Missouri law in 1973. Following the
purchase of a 20% interest in the Company by Intech Group Inc. ("Intech Group")
in 1987, the Company became primarily involved in designing and implementing
interactive communications solutions. At the time of Intech Group's initial
purchase of TALX capital stock, the Company's only other shareholders were
MiTek, Inc. ("MiTek") and Gateway Venture Partners II, L.P. ("Gateway"). In
fiscal 1994, the Company acquired from Intech Group and its affiliates, on a
pooling-of-interests basis, TALX Information Services Corporation, formerly
known as EKI, Incorporated, which was engaged in the business of providing
database and document services. As indicated above, these operations have been
divested, and the results of these operations are reflected as discontinued
operations. In July 1996, at which time Intech Group's only asset was TALX
capital stock, the Company acquired Intech Group in a merger transaction, the
practical effect of which was a tax-free distribution of Intech Group's holdings
of TALX capital stock to Intech Group's shareholders. Immediately prior to such
merger, Intech Group owned approximately 31.46% of the outstanding TALX capital
stock. At such time, the Company had 21 other shareholders, three of whom,
Gateway, MiTek and Intech Partners, L.P. ("Intech Partners"), each beneficially
owned more than ten percent of the outstanding TALX capital stock.

SERVICES AND PRODUCTS

The Work Number

     In early 1995, the Company introduced a "branded" service, The Work Number
for Everyone(R) ("The Work Number(R)"), which is a national service providing
automated access to employment and income information from multiple
organizations. The Work Number provides automated employment verification to
mortgage lenders and other verifiers. Using The Work Number, verifiers are able
to confirm employment information regarding participating employers' current and
former employees, including their past three years of income history. The Work
Number reduces an employer's cost of providing this information and at the same
time increases the timeliness and accuracy of the delivery of such information
to mortgage lenders and other verifiers. For most organizations, the process of
handling these requests is cumbersome and requires implementation of procedures
unrelated to an employer's line of business. In addition, requests can be
disruptive and divert employer resources in order to respond to telephone calls
and written requests for employment information. The Work Number reduces an
employer's cost of providing this information.

     For mortgage lenders and other verifiers, The Work Number represents a fast
and accurate way to verify both employment and salary information in one
telephone call, or web session, thereby accelerating their underwriting process
and reducing their verification cost. Additionally, The Work Number reduces the
opportunity for fraud in the loan application process, as the applicant's
employment and salary information is provided to verifiers by a source less
susceptible to fraud. The traditional employment verification process requires
the employee to provide a verifier with paper documents such as W-2 forms, tax
returns or paycheck stubs, which in the era of desktop publishing and high
quality laser printers may be susceptible to forgery, thus increasing the risk
of fraud. However, the Company believes The Work Number reduces this risk by
removing the need to rely on documents that may be supplied directly or
indirectly by the employee. Verifiers using The Work Number receive employment
verification directly from an electronic database, which contains records
provided by the employer. Due to the national scope of The Work Number, mortgage
lenders can obtain employment information from a standard source as opposed to a
number of different sources, with respect to employees of participating
employers.

     Utilizing a toll-free telephone number, or the Internet, subscribing
verifiers can choose to hear the verification information voiced back
immediately, have the complete set of information faxed directly to them at
their office, have an electronic data interchange transaction sent or receive
the information via the Internet. For non-subscribing verifiers, verification
information is available through an AT&T business 1-900 telephone

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number. An employee's income information is designed to be available for access
only to those who have been pre-authorized by such employee.

     During fiscal 2000, the Company introduced a new feature of The Work
Number, Confirmation eXpress(sm). This feature allows the Company to provide
large information service providers employment verifications on a high volume
basis.

     The Work Number generates revenues primarily from fees charged to mortgage
lenders and other verifiers for verification of employment history and salary
information and, to a lesser extent, from employer conversion and ongoing
maintenance fees.

     As of March 31, 2000, employers had contracted for specified terms,
generally three years from the date of contract, to provide approximately 36.1
million employment records of current and former employees. See "Risk Factors --
Certain Risks Associated with The Work Number" and "-- Risks Related to Use of
Confidential Information With The Work Number."

     The following table reflects the approximate total number of employment
records, which employers have contracted to provide for The Work Number for the
past three years.

<TABLE>
<CAPTION>
                                                                   TOTAL NUMBER OF
                                                                EMPLOYMENT RECORDS(1)
                                                                   (IN THOUSANDS)
                                                                ---------------------
FISCAL QUARTER                                                  ON-LINE    BACKLOG(2)
--------------                                                  -------    ----------
<S>                                                             <C>        <C>
1st Quarter 1998............................................     7,764        3,622
2nd Quarter 1998............................................    10,180        3,842
3rd Quarter 1998............................................    11,755        4,754
4th Quarter 1998............................................    13,115        4,019
1st Quarter 1999............................................    14,332        4,981
2nd Quarter 1999............................................    15,603        4,804
3rd Quarter 1999............................................    16,540        6,906
4th Quarter 1999............................................    18,285        7,546
1st Quarter 2000............................................    19,707        7,815
2nd Quarter 2000............................................    22,897        6,692
3rd Quarter 2000............................................    26,524        5,808
4th Quarter 2000............................................    30,298        5,792
</TABLE>

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

(1) Employment records include records of current and former employees (covering
    the past three years of employment history).

(2) Represents employment records under contract but not yet on-line.

Tailored Software and Services

     Tailored software and services are offered by TALX to its clients,
primarily Fortune 500 and other large organizations, either installed at the
client's site or on an outsourced application services basis. The Company has
established the broad utility of its software and services for complex business
problems in a wide variety of industries. The Company believes it is a leader in
providing such solutions for human resource, benefits and payroll applications,
which include 401(k) plan administration, benefit plan enrollment and
modification, staffing, scheduling, time reporting and payroll. The Company is
pursuing these markets both through direct sales and through strategic marketing
alliances with providers of enterprise software applications. TALX has existing
alliances with PeopleSoft, Inc. ("PeopleSoft") and SAP AG ("SAP"). Both
PeopleSoft and SAP are leading providers of enterprise-wide client/server
business applications.

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Application Services

     The Company's application services business provides tailored offsite
software and services to Fortune 500 and other large organizations which are
interested in outsourcing self-service solutions. In 1993, the Company
introduced its application services business, which allows a client to realize
the benefits of the Company's software and services without incurring the
capital expenditures or the administrative and maintenance burdens of operating
such a system. Using a toll-free telephone number, or the Internet, Users are
able to perform self-service transactions, access information and manipulate
data stored in the client's database or in the Company's systems located at the
Company's data center in St. Louis. Clients are charged a set up fee as well as
availability and transaction-based fees.

     Examples of the applications provided by the application services business
include: employee benefit plan enrollment, job posting, collection of time,
attendance and labor data, and providing the front-end to call centers with
interactive voice response and/or Web self-service capabilities.

Customer Premises Systems

     The Company has provided tailored software for installation at client sites
since the early 1980s. TALXWare is the Company's integrated visual development
environment and software system that has been designed to support the creation
and management of self-service solutions. TALXWare runs on Intel-based hardware
platforms using Microsoft's Windows NT operating system. The software supports
both Natural MicroSystems, Inc. ("NMS") and TALX computer telephony ("CT")
processing hardware. The Company also provides maintenance and support for
clients who have purchased software installed at their site. See "Technology and
Product Development."

TECHNOLOGY AND PRODUCT DEVELOPMENT

     Fundamental to all of the Company's software and services is the
integration of "best-of-class" technologies as such technologies become
available. This open architecture approach enables TALX solutions to include
popular interactive features such as computer telephony integration, speech
recognition, text-to-speech, facsimile, e-mail and client/server database
interfaces to be used in creating tailored employee service solutions for
clients. The Company's product strategy emphasizes the development of software
rather than hardware.

TALXWare

     TALXWare is an integrated visual development environment and software
system that has been designed to support the creation and management of
self-service solutions. The current release of TALXWare runs on Microsoft's
Windows NT, while previous versions run on IBM's OS/2 operating system. The two
main components of TALXWare are EasyScript and TALXWare Runtime.

     EasyScript.  EasyScript is the object-oriented visual development
environment used by the Company and its licensed clients to create, modify and
maintain self-service applications. EasyScript's object-oriented approach to
software development allows application designers to position icons on the
workspace grid to define application logic, business rules, computational
functions, telephony integration, database access, and host application screens,
and then automatically generate the underlying computer code. EasyScript
incorporates advanced editing, self-documenting, testing, and code-sharing
capabilities to expedite the development of tailored software solutions. By
providing developers the ability to cut and paste sections of one application
into another application or copy an application so it can be modified to create
a new application, EasyScript facilitates the use of reusable software modules.
The self-documenting features of EasyScript automatically create specifications,
documentation, and test plans from the applications themselves. Included with
EasyScript is the EasySim testing tool, which enables developers to test
EasyScript applications from a PC keyboard. Another key feature of EasyScript is
that it permits a single application to provide database access to users with
multiple types of self-service access devices such as the telephone, facsimile,
e-mail, telephone device for the deaf ("TDD"), Internet, corporate Intranet and
other technologies. Allowing all devices to share a common set of centralized
business rules can leverage software development across the enterprise,
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reduce development time and simplify making changes or adding enhancements.
EasyScript is licensed on a per server basis. EasyScript allows the
incorporation of software modules delivered using scripting languages such as
Microsoft(R)JScript(R), JavaScript and Microsoft(R) Visual Basic(R) Scripting
Edition (VBScript) as well as objects developed using Microsoft's Component
Object Model (COM) open software development tools such as Microsoft's Visual
Basic(R) and Visual C++.

     TALXWare Runtime.  The TALXWare Runtime software is licensed on a
concurrent user basis and is a required component of each TALX self-service
solution. The functions incorporated into the TALXWare Runtime software include
the management of self-service applications, physical resources and network
connections, as well as tracking and compiling operating statistics,
facilitating operations and storing configuration settings. These features
simplify complex deployments by eliminating the need to include such functions
within each application and allow system administrators to effect changes
without modifying the application software.

Hardware

     In addition to software, the Company provides a hardware platform as part
of a total self-service solution. TALXWare runs on open, standard Intel-based
PCs and uses both NMS and TALX proprietary CT processing hardware (the
"VP/2000"). The VP/2000 uses industry standard components such as Intel
processors and Texas Instrument digital signal processors ("DSPs") and is
capable of supporting 48 simultaneous users ("lines") in a single server and
being networked to support over 240 lines. The NMS hardware is capable of
supporting up to 96 lines in a single server.

     The Company does not manufacture or perform significant modifications on
any hardware components. Rather, the Company's hardware production consists
primarily of final assembly and quality-control testing of materials,
components, subassemblies and systems.

Product Development

     The Company's current development efforts are directed with a view to
enhancing its current products and developing new products. The new products are
directed at the markets served by the Company's strategic marketing allies as
well as offering enhanced functionality to its existing human resources,
benefits and payroll markets. The most recent enhancements include further
extending the features and capabilities of the Company's interactive Web
software and natural speech recognition. For the markets served by the Company's
strategic marketing allies who offer enterprise-wide client/server applications,
the Company plans to expand complementary applications to more tightly integrate
and facilitate interaction between the Company's software and the allies' human
resources applications. There can be no assurance that these new enhancements or
products will progress beyond their current state of development or be
successfully marketed.

     The Company licenses and integrates complementary technologies into the
products it develops and seeks to provide "best-of-class" technologies to its
clients. Some of the features which are licensed from third party suppliers by
the Company pursuant to non-exclusive license or resale agreements ("Supplier
Agreements") or purchased under open market arrangements and then integrated
into the Company's products are speech recognition, text-to-speech, facsimile,
terminal emulation and client/server database interfaces to be used in creating
self-service solutions. See "Risk Factors -- Risks Associated with Rapid
Technological Change" for additional risks associated with the Supplier
Agreements.

     Product development costs incurred were $2.6 million, $2.1 million and $1.8
million in fiscal 1998, 1999 and 2000, respectively. The total product
development staff consisted of 20 full-time employees as of March 31, 2000. The
Company believes that significant investments in product development are
required to remain competitive. See "Risk Factors -- Risks Associated with Rapid
Technological Change."

MARKETING

     The Company's marketing strategy is to focus on targeted markets through a
direct sales force in conjunction with strategic marketing alliances. The
Company's direct sales force is based in St. Louis with

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representatives also located in Atlanta, Bethesda, Dallas, Green Bay, Phoenix
and San Francisco. The sales force is comprised of regional sales managers who
are supported by product consultants, account managers and business development
representatives. Historically, the direct sales force was responsible for
selling all of the Company's product lines. Beginning in late fiscal 1997, the
Company designated certain members of the sales force to focus solely on selling
The Work Number service. In early fiscal 1999, the Company organized a sales
team dedicated to federal government clients. The Company's sales force is
supported by a product management group which identifies and develops target
markets, manages product direction, directs marketing efforts and provides sales
assistance.

BACKLOG

     The Company's customer premises systems and application services contracts
are generally delivered within one year of contract date. As of March 31, 2000
and March 31, 1999, the Company had backlogs in these businesses of
approximately $7 million and $6 million, respectively.

STRATEGIC MARKETING ALLIANCES

     Part of the Company's strategy is to develop and maintain alliances with
companies producing complementary software products in order to obtain client
referrals and introductions, increase market exposure and reduce delivery time
and costs. The Company currently has relationships with two major software
suppliers that offer enterprise-wide business application software to the
Company's markets. The Company's most established alliance is with PeopleSoft.
The Company has a similar relationship with SAP.

     PeopleSoft, Inc.:  As one of the leading companies that has designed
     enterprise-wide client/server business applications, PeopleSoft markets
     worldwide client/server applications for human resources, payroll,
     financial accounting, manufacturing and distribution through industry
     business units such as federal government, health care, financial services
     and retail. Focusing on the human resources, benefits and payroll markets,
     the Company entered into a cooperative marketing relationship with
     PeopleSoft. The Company has self-service applications that tie directly to
     PeopleSoft's human resources, benefits and payroll applications.

     SAP AG:  As a leading global provider of client/server business application
     solutions, SAP is one of the largest and fastest growing enterprise-wide
     software application suppliers of products for financial accounting, human
     resources and manufacturing. The Company has developed a benefits
     enrollment application and a time reporting application that integrate with
     SAP's software and intends to develop additional human resource, employee
     benefits and payroll applications.

     Future customer premises systems revenues will be dependent to a
significant extent on the installed base and market success of companies with
which the Company maintains strategic market alliances and the effectiveness of
the alliances. These strategic marketing alliances are generally reflected by
non-exclusive contractual arrangements that are terminable at will. The success
of the Company is dependent on the interest and commitment of these companies to
promote and coordinate product development and marketing efforts with the
Company, which is entirely at the discretion of these companies. These companies
maintain similar relationships with certain of the Company's competitors and
also compete directly with the Company in web-enabled applications. See "Risk
Factors -- Dependence on Strategic Marketing Alliances."

     The Company has developed strategic marketing alliances related to The Work
Number. TALX has entered into marketing arrangements with five unemployment
insurance consulting organizations: Employers Unity, Inc.; Gates, McDonald and
Company; R.E. Harrington, a Division of HealthPlan Services Inc.; The Frank
Gates Companies; and Johnson & Associates. By offering The Work Number service
to their clients, these allies broaden the scope of services that they offer
their client base.

CLIENTS

     Application software solutions are tailored to meet specific client needs
for employee service solutions. The Company's strategy focuses on specific
interactive applications within large corporations and institutions.

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No single client of the Company represented 10% or more of the Company's
revenues in fiscal 1998, 1999 or 2000.

PROFESSIONAL SERVICES AND SUPPORT

     The Company believes that achieving a high level of client satisfaction is
critical to its long-term success. The Company delivers its self-service
solutions, in both the application services and customer premises systems lines
of business, through trained professionals who define specific client
requirements and, utilizing open tools and TALXWare, tailor a solution for each
client. In addition, the Company offers training and education for clients and
representatives of its strategic marketing allies. The Company also maintains a
comprehensive maintenance and support program, providing 7-day, 24-hour per day
support through a toll-free hotline, and supplemented by a web site and e-mail
access to the support staff.

COMPETITION

     The markets in which the Company sells its self-service solutions are
rapidly evolving, extremely competitive and subject to rapid technological
change. The Company expects competition to increase in the future from existing
competitors and from companies that may enter the Company's existing or future
markets with similar or substitute solutions that may be less costly or provide
better performance or functionality than the Company's products. Many of the
Company's current and potential competitors have greater name recognition,
larger installed client bases and significantly greater financial, technical,
marketing and other resources than the Company. To be successful in the future,
the Company must respond promptly and effectively to the challenges of changing
client requirements, technological change and competitors' innovations.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could materially adversely affect the
Company's business, financial condition, results of operations and business
prospects. Additionally, the Company may be required to reduce prices or
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,
the Company's operating results in the future may be adversely affected. There
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not materially adversely affect the Company's business,
financial condition, results of operations and business prospects.

     The Company competes in its markets with computer telephony (CT) system
hardware suppliers, systems integrators and major software suppliers. Companies
competing in the customer premises systems market include InterVoice-Brite,
Inc., Lucent Technologies, Inc., Periphonics Corporation (a Nortel Networks
Company), PeopleSoft, Inc. and SAP AG. The Company's business is heavily
dependent on sales to the human resources and payroll departments of large
organizations. In response to clients' desires to outsource certain aspects of
database access functionality, the Company provides services to organizations
which choose not to license software and maintain systems. This application
services business competes with employee benefit plan consulting firms and
accounting firms, including Hewitt Associates LLC, Towers Perrin, Automatic Data
Processing, Inc. (ADP), and Watson Wyatt & Company, which provide comprehensive
packages of plan design, administration and consulting services, including
automated access services. The Company also competes in the application services
business with Workscape, Inc., a company similar in services offerings as the
Company. See "Risk Factors -- Intense Competition."

     Several competitors of The Work Number have emerged: Advanced HR Solutions,
The Frick Company, and John Jay Associates. There are no significant barriers to
entry in this area and, thus, there can be no assurance that other companies
will not choose to create similar employment verification systems. Additionally,
the Company is aware of a number of employers who have established similar
systems for their internal use. The Company believes that it is the market
leader in this area, but anticipates that additional competitors will emerge,
and is unable to predict what its relative competitive position will be in a
more mature market. See "Risk Factors -- Certain Risks Associated with The Work
Number."

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PROPRIETARY RIGHTS

     The Company's success is heavily dependent upon its proprietary software
technology. Although the Company copyrights certain elements of its products,
the primary means of protecting its products and services is through
non-disclosure agreements, which provide only limited protection. As part of its
confidentiality procedures, the Company generally enters into non-disclosure
agreements with its employees, distributors and allies, subject to certain
exceptions, and limits access to and distribution of its software, documentation
and other proprietary information. The Company also seeks to protect its
software, documentation and other written materials through trade secret and
copyright laws. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use the
Company's products or technology that the Company considers proprietary, and
third parties may attempt to develop similar technology independently. In
particular, the Company provides its existing and potential distribution
partners with access to its product architecture and other proprietary
information underlying the Company's licensed software. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. Accordingly, there can be no assurance that the Company's
means of protecting its proprietary rights will be adequate or that the
Company's competitors will not independently develop similar technology.

     In the past, the Company has received and may in the future receive
communications from third parties asserting that the Company's products,
trademarks or other proprietary rights require a license of intellectual
property rights or infringe, or may infringe, on their proprietary rights. Based
on the information currently available, the Company is not aware of any valid
claims indicating that it is infringing upon the intellectual property rights of
others, or which, if infringed, would result in any material adverse effect to
the Company's financial condition or results of operations. As the number of
software products in the industry increases, and the functionality of these
products further overlaps, the Company believes that software developers may
become increasingly subject to infringement claims. Any such claims, with or
without merit, could be time consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company, or at all, which could have a
material adverse effect on the Company's business, financial condition, results
of operations and business prospects. In addition, the Company may initiate
claims or litigation against third parties for infringement of the Company's
proprietary rights or to establish the validity of the Company's proprietary
rights. Litigation to determine the validity of any claims could result in
significant expense to the Company and divert the efforts of the Company's
technical and management personnel from productive tasks, whether or not such
litigation is determined in favor of the Company. In the event of an adverse
ruling in any such litigation, the Company may be required to pay substantial
damages, discontinue the use and sale of infringing products, expend significant
resources to develop non-infringing technology or obtain licenses to infringing
technology. The failure of the Company to develop or license a substitute
technology could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects.

     The Company has obtained trademark registrations for the names TALX and
EasyScript and service mark registrations for The Work Number For Everyone(R)
and The Work Number(R) with the United States Patent and Trademark Office.
TALXWare is a trademark of the Company. Employee Central is a service mark of
the Company. The Company regards its trademarks, as well as its other
intellectual property, as having significant value and being an important factor
in the development and marketing of its products. See "Risk Factors -- Limited
Intellectual Property Protection."

DATABASE AND DOCUMENT SERVICES BUSINESSES

     In addition to providing interactive communications solutions, the Company,
in 1994, acquired its database and document services businesses. These
businesses were operated on a stand-alone basis. Further, the majority of the
operations of such businesses were located separately from the continuing
operations of the Company. See Item 2 -- "Properties."

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<PAGE>   10

     In August 1996, the Company determined to pursue the divestiture of the
database and document services businesses and, accordingly, reflected the
results of operations of such businesses as discontinued operations. The primary
reason for divesting these businesses was to enable the Company to focus its
management and financial resources towards its core software and services
business. On January 31, 1997, the Company sold substantially all of the assets
of the document services business to Sterling Direct, Inc., the largest customer
of the division. As of March 31, 2000, the Company sold substantially all of the
assets of the database business to WPZ Holdings, Inc., the parent company of one
of the largest customers of the division. See Item 7 -- "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Discontinued
Operations" and Note 3 of the Notes to Consolidated Financial Statements
contained in Item 8 herein.

EMPLOYEES

     As of March 31, 2000, the Company employed 250 full-time and 10 part-time
employees. The Company has never had a work stoppage and no employees are
represented by a labor organization. The Company considers its employee
relations to be good.

     The Company's future performance depends to a significant degree upon the
continued contributions of its officers and key management, sales and technical
personnel, many of whom would be difficult to replace. The loss of any of these
individuals could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects. In addition,
the Company's future success and ability to manage growth will be dependent upon
its ability to hire additional highly skilled employees for a variety of
management, engineering, technical and sales and marketing positions. The
competition for such personnel is intense, however, and there can be no
assurance that the Company will be able to attract, assimilate or retain
sufficient qualified personnel to achieve its future business objectives. The
failure to do so could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects. See "Risk
Factors -- Dependence on Key Personnel."

RISK FACTORS

     In addition to the other information included or incorporated by reference
in this Form 10-K, the following factors should be considered carefully.

CERTAIN RISKS ASSOCIATED WITH THE WORK NUMBER

     There are no significant barriers to entry in this area, and the Company is
aware of several other companies that have begun to market similar services:
Advanced HR Solutions, The Frick Company, and John Jay Associates. Additionally,
the Company is aware of a number of employers who have established similar
systems for their internal use. The Company believes that it is the market
leader in this area, but anticipates that additional competitors will emerge,
and is unable to predict what its relative competitive position will be in a
more mature market. In 1995, the Company began marketing The Work Number, which
provides automated responses to requests by lenders and other verifiers for
employment confirmation, employment history and salary history. Although, as of
March 31, 2000, employers had contracted to provide approximately 36.1 million
employment records of current and former employees, there can be no assurance
that additional employers will contract with the Company to provide employment
records, or that existing employers will renew their contracts with the Company,
which have limited terms.

     Revenues from The Work Number are dependent, in part, on real estate
mortgage activity and the level of interest rates. In addition, revenues are
dependent on the cooperation of contracting employers in converting employment
records to The Work Number format and referring verification requests to The
Work Number. If the market for The Work Number fails to develop or be sustained,
becomes subject to significant competition or if mortgage interest rates
increase significantly, the Company's business, financial condition, results of
operations and business prospects would be materially adversely affected.

                                       10
<PAGE>   11

RISKS RELATED TO USE OF CONFIDENTIAL INFORMATION WITH THE WORK NUMBER

     The Work Number depends on the accuracy of highly confidential information
regarding employment and salary history provided to the Company by employers and
converted by the Company for use as part of The Work Number. Although the
Company has certain protective measures in place, any inaccuracies in such
information (whether in the recording of such information or due to the
unauthorized access of information, or otherwise) or the inability by the
Company to keep such information confidential, may give rise to potential claims
against the Company and adversely affect market acceptance of The Work Number.
If any claims should be asserted which are ultimately decided adversely to the
Company, the Company's business, financial condition, results of operations and
business prospects may be materially adversely affected. See "Business --
Services and Products -- The Work Number."

UNCERTAINTY REGARDING POSSIBLE APPLICABILITY OF THE FCRA TO THE WORK NUMBER

     The Work Number may be subject to regulation under the Fair Credit
Reporting Act (the "FCRA"), which would have an adverse impact on the Company.
The FCRA applies to "consumer reporting agencies" which engage in the practice
of "assembling or evaluating" consumer credit information. The Company believes
that The Work Number is not a consumer reporting agency, and that the FCRA does
not apply to The Work Number. Unlike traditional consumer reporting agencies,
The Work Number receives all of its data regarding an employee from one source
-- the employer -- and does not evaluate an employee's creditworthiness.
Further, in the Company's contracts with employers, employers require The Work
Number to be named as agent for the employer. The FCRA exempts from its reach
communications of a party solely as to transactions or experiences between the
consumer and the person making the report, such as an employer's report on its
experience with its employee. The Company believes that as an agent of
employers, The Work Number is not a consumer reporting agency.

     While the Company believes its position is meritorious, there is no
controlling legal precedent, and the Federal Trade Commission, which has
authority to enforce the FCRA, or consumers with rights under the FCRA, could
disagree and seek to require the Company to comply with the FCRA, as well as
penalties and damages. Among other provisions, the FCRA requires that a consumer
reporting agency determine that there is a "permissible purpose" before
disclosure of a consumer report, and that certain notices and information be
furnished in writing to consumers as consumer reports are used. As presently
structured, the Company would have difficulty implementing these procedures, if
required, in part because The Work Number is designed to operate via interactive
voice response and the Internet, instead of paper. Further, the Company might
have to eliminate certain types of transactions, resulting in loss of revenue.
As a result, it is difficult to estimate the ultimate impact on the Company in
the event the FCRA were deemed to apply to The Work Number.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS

     The Company's revenues, margins and operating results have fluctuated in
the past, and may continue to fluctuate in the future, on an annual and
quarterly basis as a result of a number of factors. These factors include the
length of the sales cycle, the timing of orders from and shipments to clients,
delays in development and client acceptance of custom software applications, new
product introductions or announcements by the Company or its competitors, levels
of market acceptance for new products and the hiring and training of additional
staff, as well as general economic conditions. A relatively high percentage of
the Company's expenses are fixed in the short term as the Company's expense
levels are based, in part, on its expectations as to future revenues. If
revenues fall below expectations, expenditure levels could be disproportionately
high as a percentage of total net revenues, and operating results would be
immediately and adversely affected. As a result, the Company's results of
operations for any quarter may not be indicative of results for any future
period.

     Customer premises systems revenues, which until recently represented the
largest percentage of the Company's total revenues, in any quarter depend on the
volume and timing of, and the Company's ability to fill, orders received in that
quarter. Individual orders for the Company's customer premises systems typically
are for relatively large dollar amounts. The Company believes the purchase of
its customer premises systems is

                                       11
<PAGE>   12

relatively discretionary. Therefore, any downturn in any potential client's
business, or any loss or delay of individual orders for any reason, would have a
significant impact on the Company's revenues and quarterly results. In addition,
because the Company can recognize a substantial portion of its customer premises
systems revenue from transactions booked and shipped in the last weeks, or even
days, of the quarter, the magnitude of quarterly fluctuations may not become
evident until very late in a particular quarter. The Company's customer premises
systems sales cycle, including initial order, provision of services and
follow-on sales, varies substantially from client to client.

     There can be no assurance that the Company will be able to sustain its
level of total revenue or its rate of revenue growth on a quarterly or annual
basis. It is likely that, in some future quarters, the Company's operating
results will be below the Company's targets and below the expectations of stock
market analysts and investors. In such event, the price of the Company's Common
Stock could be materially adversely affected. See Item 7 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

INTENSE COMPETITION

     The markets in which the Company sells its software and services are
rapidly evolving, extremely competitive and subject to rapid technological
change. The Company expects competition to increase in the future from existing
competitors and from companies that may enter the Company's existing or future
markets with similar or substitute solutions that may be less costly or provide
better performance or functionality than the Company's products. To be
successful in the future, the Company must continue to respond promptly and
effectively to the challenges of changing client requirements, technological
change and competitors' innovations. Increased competition may result in price
reductions, reduced gross margins and loss of market share, any of which could
materially adversely affect the Company's business, financial condition, results
of operations and business prospects. Additionally, the Company may be required
to reduce prices or 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, the Company's operating results in the future may be
adversely affected. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect the
Company's business, financial condition, results of operations and business
prospects.

     The Company competes in its markets with CT system hardware suppliers,
systems integrators and major software suppliers. Companies competing in the
customer premises systems business include InterVoice-Brite, Inc., Lucent
Technologies, Inc. Periphonics, Inc. (a Nortel Networks Company), PeopleSoft,
Inc. and SAP AG. The Company's business is heavily dependent on sales to the
human resources departments of large organizations. In response to clients'
desires to outsource certain aspects of database access functionality, the
Company provides services to organizations which choose not to license software
and maintain systems. This application services business competes with employee
benefit plan consulting firms and accounting firms, including Hewitt Associates
LLC, Automatic Data Processing, Inc. (ADP), Towers Perrin, and Watson Wyatt &
Company, which provide comprehensive packages of plan design, administration and
consulting services, including automated access services. The Company also
competes in the application services business with Workscape, Inc., a company
similar in services offerings to the Company.

     Many of the Company's current and potential competitors have greater name
recognition, larger installed client bases and significantly greater financial,
technical, marketing and other resources than the Company. Any such competitor
could use its superior financial resources, market power, service or technical
resources and installed base of clients to compete effectively against the
Company. Such competition could materially adversely affect the Company's
ability to sustain current pricing levels and could have a material adverse
effect on the Company's business, financial condition, results of operations and
business prospects. See "Business -- Competition".

COMPUTER NETWORK AND TELEPHONE OPERATIONS; RISK OF INTERRUPTION

     Significant portions of the Company's operations are dependent on the
Company's ability to protect its computer equipment and the information stored
in its data processing center against damage that may be

                                       12
<PAGE>   13

caused by fire, power loss, telecommunications failures, unauthorized intrusion
and other events. The Company's data processing center is located in St. Louis,
Missouri. Software and related data files are backed-up regularly and stored
off-site. There can be no assurance that these measures are sufficient to
eliminate the risk of extended interruption in the Company's operations. The
Company also relies on local and long-distance telephone companies to provide
dial-up access, Internet and corporate intranet access to the Company's
services. The Company has not established an alternative disaster recovery
facility. Any damage or failure that interrupts the Company's operations could
have a material adverse effect on the Company's business, financial condition,
results of operations and business prospects.

RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE

     The markets for the Company's software and services are characterized by
rapid technological advancement, changes in client requirements, frequent new
product introductions and enhancements and emerging industry standards. The
Company must continually change and improve its products and 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. The introduction of products or services
embodying new technologies and the emergence of new industry standards can
render existing products and services obsolete and unmarketable. In particular,
the market for self-service applications through the Internet and corporate
Intranets using browser software is rapidly evolving. The Company's success will
depend upon its ability to enhance, on a timely and cost-effective basis, its
current products and services (e.g., to effectively add new Internet and
corporate Intranet capabilities) and to develop new products and services that
meet changing market conditions, which include changing client needs, new
competitive product and service offerings, emerging industry standards and
changing technology. There can be no assurance that the Company will be
successful in developing and marketing, on a timely and cost-effective basis or
at all, fully functional and integrated product enhancements or new products or
services that respond to technological change, updates or enhancements to third
party products or services used in conjunction with the Company's products or
services, changes in client requirements or emerging industry standards, or that
the Company's enhanced or new products and services will be accepted by clients.
Any failure by the Company to anticipate or respond adequately to changing
market conditions, or any significant delays in product or service development
or introduction, could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects.

     The current version of the Company's TALXWare software runs on Microsoft's
Windows NT operating system. The Company is therefore dependent upon the
continued viability of Windows NT and upon Microsoft's support of the Windows NT
operating system.

     The Company's products not only involve integration with operating systems
but also with products developed by others. For example, the Company has
introduced a version of TALXWare utilizing NMS standards-based computer
telephony hardware boards and software drivers. The Company believes that
marketing this product as an alternative to the VP/2000-based version of
TALXWare may provide a means to gain increased access to certain markets.
Currently, this product is available with similar, but not identical,
performance and functionality compared to the VP/2000-based version of TALXWare.
Although the Company is devoting significant resources to enhance this new
product to be a fully functional counterpart to the VP/2000-based version of
TALXWare, this project could take a year or longer. There can be no assurance
that delays in increasing the functionality of this product will not adversely
affect sales opportunities, as clients may purchase competitive standards-based
systems. Such delays would have a material adverse effect on the Company's
business, financial condition, results of operations and business prospects.

     If any of these third-party products, including Microsoft Windows NT or the
NMS boards and drivers, should become unavailable for any reason, fail in their
operation with the Company's products or fail to be supported by their
respective vendors, it would be necessary for the Company to redesign its
products. There can be no assurance that any redesign could be accomplished in a
cost-effective or timely manner. The Company or its clients could also
experience difficulties integrating the Company's products with other hardware
and software. Further, should new releases of these operating systems, computer
telephony hardware boards and software drivers, remote communications software,
database connectivity software or facsimile
                                       13
<PAGE>   14

hardware boards and software drivers occur before the Company develops products
compatible with such new releases, if ever, any resulting decline in demand for
the Company's products could have a material adverse effect on the Company's
business, financial condition, results of operations and business prospects.

     Additionally, the Company licenses and integrates complementary
technologies into the software it develops and seeks to provide the
"best-of-class" technologies to its clients. Some of the features which are
licensed from third party suppliers by the Company pursuant to non-exclusive
license or resale agreements (the "Supplier Agreements") or purchased under open
market purchase arrangements and then integrated into the Company's products are
speech recognition, text-to-speech, facsimile, terminal emulation and
client/server database interfaces used in creating software solutions. The
Company believes that if any Supplier Agreement expires or is canceled or
otherwise terminated, or if a third party supplier refuses to sell to the
Company pursuant to the existing open market purchase arrangements, as the case
may be, and the existing third party supplier refuses to enter into a subsequent
agreement or other arrangement, the Company could enter into a similar agreement
or arrangement with any number of different suppliers. However, if a new
supplier is necessary, the integration of the relevant technology from the new
supplier would require a significant amount of time, resulting in a meaningful
delay in the Company's ability to offer the particular enhancement currently
being purchased under Supplier Agreements or pursuant to open market purchase
arrangements. The Company could also experience difficulties integrating the new
supplier's technology with all of its products. Additionally, there can be no
assurance that any such integration could be accomplished in a cost-effective
manner. Significant delays in the offering of product enhancements due to
integration of technology from new suppliers could have a material adverse
effect on the Company's business, financial condition, results of operations and
business prospects. See "Business -- Services and Products" and "Business --
Technology and Product Development."

DEPENDENCE ON STRATEGIC MARKETING ALLIANCES

     Part of the Company's growth strategy is to develop and utilize alliances
with companies producing complementary software products in order to obtain
introductions or referrals to potential clients, as well as to coordinate the
development of the Company's complementary software products directly with such
companies to enhance interoperability and performance. Future customer premises
systems revenues, and to a lessor extent, application services revenues, will be
dependent on the market success of such companies and the effectiveness of the
alliances. Factors that adversely affect the revenues of these companies, such
as competition, technological changes or product failures, may have a
substantial adverse effect upon the Company's financial results. These strategic
marketing alliances are generally reflected by non-exclusive contractual
arrangements that are terminable at will. The success of the Company is
dependent on the interest and commitment of these companies to promote and
coordinate product development and marketing efforts with the Company, which is
entirely at the discretion of these companies. The Company's strategic marketing
allies maintain similar relationships with certain of the Company's competitors.
There is intense competition by other companies to establish such relationships,
and there can be no assurance that the Company will be able to maintain or
expand its network of strategic marketing alliances in the future, or that such
companies will continue to support the Company or not choose to favor one of the
Company's competitors. Additionally, these companies compete with the Company in
the interactive Web business. The loss of any of these relationships, the
inability of the Company to attract and develop new strategic marketing
alliances with other leading software companies, or adverse developments
affecting the business or prospects of such companies, could have a material
adverse effect on the Company's business, financial condition, results of
operations and business prospects. See "Business -- Technology and Product
Development," "Business -- Marketing" and "Business -- Strategic Marketing
Alliances."

LENGTHY SALES CYCLE

     Purchases of the Company's software and services are often the result of a
multi-department decision by prospective clients and generally require the
Company to engage in a lengthy sales cycle to provide a significant level of
education to prospective clients regarding the use and benefits of the Company's
self-service solutions. Due in part to the mission-critical nature of certain of
the Company's software applications

                                       14
<PAGE>   15

and the associated investment in hardware, software and consulting expenditures,
potential clients tend to be cautious in making product acquisition decisions.
For these and other reasons, the sales cycle for the Company's products and
services can range from one month to over one year and is subject to a number of
significant risks, including clients' budgetary constraints and internal
acceptance reviews, over which the Company has little or no control.
Consequently, if sales anticipated from specific clients for a particular
quarter are not realized in that quarter, the Company is unlikely to be able to
generate revenue from alternative sources in time to compensate for the
shortfall. As a result, lost or delayed sales could have a material adverse
effect on the Company's quarterly operating results. Moreover, to the extent
that significant sales occur earlier than expected, operating results for
subsequent quarters may be adversely affected.

DEPENDENCE ON KEY PERSONNEL

     The Company's future performance depends to a significant degree upon the
continued contributions of its officers and key management, sales and technical
personnel, many of whom would be difficult to replace. The loss of any of these
individuals could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects. The Company
has entered into employment agreements with William W. Canfield, its Chairman,
President and Chief Executive Officer, and certain other senior management
members. See Item 10 -- "Directors and Executive Officers of the Registrant" and
Item 11 -- "Executive Compensation." In addition, the Company's future success
and ability to manage growth will be dependent upon its ability to hire
additional highly skilled employees for a variety of management, engineering,
technical and sales and marketing positions. The competition for such personnel
is intense. There can be no assurance that the Company will be able to attract,
assimilate or retain sufficient qualified personnel to achieve its future
business objectives. The failure to do so could have a material adverse effect
on the Company's business, financial condition, results of operations and
business prospects.

RISKS OF PRODUCT DEFECTS; PRODUCT LIABILITY

     As a result of their complexity, hardware and software products may contain
undetected errors or failures when first introduced or as new versions are
released. There can be no assurance that, despite testing by the Company and
testing and use by current and potential clients, errors will not be found in
systems after implementation. The occurrence of such errors could result in loss
or delay in market acceptance of the Company's products or services, which could
have a material adverse effect on the Company's business, financial condition,
results of operations and business prospects. The Company's Internet and
corporate intranet applications may result in unauthorized access and similar
disruptive problems caused by the Internet or other users. Such unauthorized
access and other disruptions could jeopardize the security of information stored
in and transmitted through the computer systems of the Company's clients, which
may result in significant liability to the Company and deter potential clients.
The Company's license agreements with its clients typically contain provisions
designed to limit the Company's exposure to potential product liability claims.
It is possible, however, that the limitation of liability provisions contained
in the Company's license agreements may not be effective under the laws of
certain jurisdictions. Although the Company has not experienced any product
liability claims to date, the sale and support of the Company's products or
services may entail the risk of such claims. While the Company maintains
insurance for product liability risks, there can be no assurance the Company's
insurance will be adequate in the event of a material product liability claim.
Furthermore, litigation to determine the validity of any product liability
claims could result in significant expense to the Company and divert the efforts
of the Company's technical and management personnel from productive tasks,
whether or not such litigation is determined in favor of the Company. A
successful product liability claim in excess of the Company's insured limits
brought against the Company could have a material adverse effect on the
Company's business, financial condition, results of operations and business
prospects.

LIMITED INTELLECTUAL PROPERTY PROTECTION

     The Company's success is heavily dependent upon its proprietary software
technology. Although the Company copyrights certain elements of its products,
the primary means of protecting its products and

                                       15
<PAGE>   16

services is through non-disclosure agreements, which provide only limited
protection. As part of its confidentiality procedures, the Company generally
enters into non-disclosure agreements with its employees, distributors and
strategic marketing allies, subject to certain exceptions, and limits access to
and distribution of its software, documentation and other proprietary
information. The Company also seeks to protect its software, documentation and
other written materials through trade secret and copyright laws. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use the Company's products or technology
that the Company considers proprietary, and third parties may attempt to develop
similar technology independently. In particular, the Company provides certain
distributors with access to its product architecture and other proprietary
information underlying the Company's licensed software. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. Accordingly, there can be no assurance that the Company's
means of protecting its proprietary rights will be adequate or that the
Company's competitors will not independently develop similar technology.

     In the past, the Company has received and may in the future receive
communications from third parties asserting that the Company's products,
trademarks or other proprietary rights require a license of intellectual
property rights or infringe, or may infringe, on their proprietary rights. Based
on the information currently available, the Company is not aware of any valid
claims indicating that it is infringing upon the intellectual property rights of
others, or which, if infringed, would result in any material adverse effect on
the Company's financial condition or results of operations. As the number of
software products in the industry increases, and the functionality of these
products further overlaps, the Company believes that software developers may
become increasingly subject to infringement claims. Any such claims, with or
without merit, could be time consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company, or at all, which could have a
material adverse effect on the Company's business, financial condition, results
of operations and business prospects. In addition, the Company may initiate
claims or litigation against third parties for infringement of the Company's
proprietary rights or to establish the validity of the Company's proprietary
rights. Litigation to determine the validity of any claims could result in
significant expense to the Company and divert the efforts of the Company's
technical and management personnel from productive tasks, whether or not such
litigation is determined in favor of the Company. In the event of an adverse
ruling in any such litigation, the Company may be required to pay substantial
damages, discontinue the use and sale of infringing products, expend significant
resources to develop non-infringing technology or obtain licenses to infringing
technology. The failure of the Company to develop or license a substitute
technology could have a material adverse effect on the Company's business,
financial condition, results of operations and business prospects. See "Business
-- Proprietary Rights."

SIGNIFICANT SHARE OWNERSHIP; CERTAIN ANTI-TAKEOVER PROVISIONS

     To the knowledge of the Company, it's directors, officers and principal (5%
or more) shareholders, taken as a group, beneficially own in the aggregate
approximately 23.5% of the Company's outstanding Common Stock, based on
available information regarding their holdings as of June 1, 2000. Certain
principal shareholders and their representatives are directors or executive
officers of the Company. As a result of such ownership, these shareholders can
influence matters requiring approval by the shareholders of the Company,
including the election of directors, and the management and affairs of the
Company. In addition, certain provisions of Missouri law and of the Company's
Restated Articles of Incorporation, as amended ("Articles"), and Bylaws
("Bylaws") could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could also limit or depress the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. The Company is also authorized to issue preferred stock
with rights senior to, and that may adversely affect, the Common Stock, without
the necessity of shareholder approval and with such rights, preferences and
privileges as the Company's Board of Directors may determine. The Company,
however, has no present plans to issue any shares of preferred stock.

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POSSIBLE VOLATILITY OF STOCK PRICE

     The market price of the shares of Common Stock has been highly volatile and
could continue to be subject to wide fluctuations in response to factors such as
actual or anticipated variations in the Company's operating results,
announcements of technological innovations, new products or new contracts by the
Company or its competitors, developments with respect to patents, copyrights or
proprietary rights, changes in financial estimates by securities analysts,
conditions and trends in the software and other technology industries, adoption
of new accounting standards affecting the software industry, general market
conditions and other factors. Further, the stock market has experienced extreme
price and volume fluctuations that have particularly affected the market prices
of equity securities of many technology companies and that often have been
unrelated or disproportionate to the operating performance of such companies. In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such companies. Such litigation, if instituted, could result in substantial
costs and a diversion of management attention and resources, which would have a
material adverse effect on the Company's business, financial condition, results
of operations and business prospects. These market fluctuations, as well as
general economic, political and market conditions such as recessions or
international currency fluctuations, may adversely affect the market price of
the Common Stock.

NO DIVIDENDS

     The Company does not anticipate paying dividends on the Common Stock for
the foreseeable future. The Company anticipates that it will reinvest its net
income, if any, in its businesses. See Item 5 -- "Market for the Registrant's
Common Stock and Related Stockholder Matters."

ITEM 2.  PROPERTIES

     The Company's headquarters and executive offices are located in a 38,000
square foot office building located at 1850 Borman Court, St. Louis, Missouri
63146 pursuant to a lease expiring in 2002 with an annual base rental of
approximately $413,000, subject to increases for taxes, insurance and operating
expenses. The Company has entered into a lease agreement expiring in 2005 for
approximately 22,000 square feet of additional office space located near the
headquarters with an annual base rental of approximately $220,000, subject to
increases for taxes, insurance and operating expenses. The Company also leases
office space in Atlanta, Bethesda and Phoenix for sales representatives. The
Company believes its facilities have been generally well maintained, are in good
operating condition and are adequate for its current requirements. The Company
also leases space in three office buildings in St. Louis County, Missouri
related to the discontinued operations of the Company. Two of these locations
are being sub-leased, and such leases and sub-leases will terminate in 2000 and
2002. The third lease has been assigned, and will terminate in 2002.

     Significant portions of the Company's operations are dependent on the
Company's ability to protect its computer equipment and the information stored
in its data processing centers against damage that may be caused by fire, power
loss, telecommunications failures, unauthorized intrusion and other events. The
Company's data processing centers are located in St. Louis, Missouri. Software
and related data files are backed-up regularly and stored off-site. There can be
no assurance that these measures are sufficient to eliminate the risk of
extended interruption in the Company's operation. The Company also relies on
local and long-distance telephone companies to provide dial-up access and
Internet and corporate intranet access to the Company's services. The Company
has not established an alternative disaster recovery facility. Any damage or
failure that interrupts the Company's operations could have a material adverse
effect on the Company's business, financial condition, results of operations and
business prospects.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a defendant from time to time in routine lawsuits incidental
to its business. Based on the information currently available, the Company
believes that none of such current proceedings, individually or in the
aggregate, will have a material adverse effect upon the Company. See also Item 1
-- "Risk Factors -- Limited Intellectual Property Protection" and "Business --
Proprietary Rights."

                                       17
<PAGE>   18

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

     None.

                                    PART II

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

     The Company's Common Stock is listed on the Nasdaq National Market under
the symbol "TALX." The table below sets forth the high and low prices of the
Common Stock during the past two years.

<TABLE>
<CAPTION>
PERIOD                                                           HIGH      LOW
------                                                          ------    ------
<S>                                                             <C>       <C>
FISCAL 1999
  First Quarter.............................................    $ 5.94    $ 3.38
  Second Quarter............................................    $ 7.25    $ 4.13
  Third Quarter.............................................    $ 5.88    $ 3.53
  Fourth Quarter............................................    $ 7.25    $ 4.00
FISCAL 2000
  First Quarter.............................................    $ 9.38    $ 6.50
  Second Quarter............................................    $ 9.38    $ 6.88
  Third Quarter.............................................    $15.50    $ 7.31
  Fourth Quarter............................................    $21.88    $12.25
</TABLE>

     The approximate number of holders of record of the Company's Common Stock
at June 1, 2000 was 99. This number does not include shareholders for whom
shares are held in a "nominee" or "street" name.

     The Company has not paid any cash dividends and does not anticipate that it
will do so in the foreseeable future. The Company currently intends to retain
future earnings, if any, to provide funds for the growth and development of the
Company's business. Any future determination to pay dividends will be at the
discretion of the Company's Board of Directors and will be dependent upon the
Company's earnings, capital requirements and operating and financial condition,
and such other factors as the Board of Directors may deem relevant.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data presented below should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this report. The data for, and as of the end of, each of
the years in the five-year period ended March 31, 2000 are derived from the
financial statements of the Company, which financial statements have been
audited by KPMG, LLP, independent certified public accountants. The financial
statements as of March 31, 2000 and 1999, and for each of the years in the
three-year period ended March 31, 2000, and the report thereon, are included
elsewhere in this report. The selected financial data presented below for the
years ended March 31, 1997 and 1996 and as of March 31, 1998, 1997 and 1996 are
derived from audited financial statements not included in this report. The
information set forth below reflects the classification of the database and
document services businesses as discontinued operations. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements, and the notes thereto included elsewhere in this report.

                                       18
<PAGE>   19

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED MARCH 31,
                                                              --------------------------------------------------------------
                                                                 2000         1999         1998         1997         1996
                                                              ----------   ----------   ----------   ----------   ----------
                                                                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                                           <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  The Work Number...........................................  $   12,328   $    9,109   $    4,270   $    1,642   $      453
  Application services......................................       7,993        5,126        2,925        2,173          998
  Customer premises systems.................................      10,835       10,948        9,886       11,013        9,442
  Maintenance and support...................................       4,876        4,920        4,192        3,559        2,624
                                                              ----------   ----------   ----------   ----------   ----------
Total revenues..............................................      36,032       30,103       21,273       18,387       13,517
                                                              ----------   ----------   ----------   ----------   ----------
Cost of revenues:
  The Work Number...........................................       3,973        3,138        1,807          678          429
  Application services......................................       4,460        3,225        2,010          941          493
  Customer premises systems.................................       8,388        7,874        5,967        5,560        4,489
  Maintenance and support...................................       1,367        1,545        1,325        1,025          619
                                                              ----------   ----------   ----------   ----------   ----------
    Total cost of revenues..................................      18,188       15,782       11,109        8,204        6,030
                                                              ----------   ----------   ----------   ----------   ----------
      Gross margin..........................................      17,844       14,321       10,164       10,183        7,487
                                                              ----------   ----------   ----------   ----------   ----------
Operating expenses:
  Selling and marketing.....................................       7,820        8,339        7,952        5,902        4,084
  General and administrative................................       5,477        4,853        3,496        2,613        2,828
  Restructuring charge......................................          --          496           --           --           --
                                                              ----------   ----------   ----------   ----------   ----------
    Total operating expenses................................      13,297       13,688       11,448        8,515        6,912
                                                              ----------   ----------   ----------   ----------   ----------
      Operating income (loss)...............................       4,547          633       (1,284)       1,668          575
Other (income) expense, net.................................         (82)          (8)        (158)         409          395
Income tax expense (benefit)................................       1,862          239         (416)         466           57
                                                              ----------   ----------   ----------   ----------   ----------
Earnings (loss) from continuing operations..................       2,767          402         (710)         793          123
                                                              ----------   ----------   ----------   ----------   ----------
Discontinued operations:
  Loss from discontinued operations, net....................          --           --           --         (164)        (703)
  Gain (loss) on disposal of discontinued operations, net...         117           --         (374)        (900)          --
                                                              ----------   ----------   ----------   ----------   ----------
  Gain (loss) from discontinued operations, net.............         117           --         (374)      (1,064)        (703)
                                                              ----------   ----------   ----------   ----------   ----------
Earnings (loss) before extraordinary item...................       2,884          402       (1,084)        (271)        (580)
Extraordinary item..........................................          --           --           --         (971)          --
                                                              ----------   ----------   ----------   ----------   ----------
      Net earnings (loss)...................................  $    2,884   $      402   $   (1,084)  $   (1,242)  $     (580)
                                                              ==========   ==========   ==========   ==========   ==========
Basic earnings (loss) per share(1):
  Earnings (loss) from continuing operations................  $      .50   $      .07   $     (.13)  $      .18   $      .04
  Gain (loss) from discontinued operations, net.............         .02           --         (.07)        (.25)        (.21)
  Extraordinary item........................................          --           --           --         (.22)          --
                                                              ----------   ----------   ----------   ----------   ----------
      Net earnings (loss)...................................  $      .52   $      .07   $     (.20)  $     (.29)  $     (.17)
                                                              ==========   ==========   ==========   ==========   ==========
Diluted earnings (loss) per share(1):
  Earnings (loss) from continuing operations................  $      .49   $      .07   $     (.13)  $      .18   $      .04
  Gain (loss) from discontinued operations, net.............         .02           --         (.07)        (.25)        (.21)
  Extraordinary item........................................          --           --           --         (.22)          --
                                                              ----------   ----------   ----------   ----------   ----------
      Net earnings (loss)...................................  $      .51   $      .07   $     (.20)  $     (.29)  $     (.17)
                                                              ==========   ==========   ==========   ==========   ==========
Weighted average number of shares outstanding -- basic(1)...   5,559,972    5,401,345    5,291,381    4,150,404    3,228,670
Weighted average number of shares outstanding --
  diluted(1)................................................   5,657,612    5,519,435    5,291,381    4,150,404    3,228,670
</TABLE>

<TABLE>
<CAPTION>
                                                                                   AS OF MARCH 31,
                                                              ---------------------------------------------------------
                                                                2000        1999        1998        1997        1996
                                                              ---------   ---------   ---------   ---------   ---------
                                                                                   (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>         <C>         <C>

BALANCE SHEET DATA:
Cash and short-term investments............................   $   6,291   $     267   $   2,879   $   5,801   $      56
Working capital............................................      15,158       8,316       9,079      13,351      (1,261)
Net assets of business held for sale.......................          --         859       1,157         707          --
Total assets...............................................      30,133      24,564      24,121      24,072      15,844
Notes payable to bank......................................          --          --          --          --       4,243
Current installments of long-term debt and obligations
  under capital leases.....................................          --          --          --          36         726
Long-term debt and obligations under capital leases, less
  current installments.....................................          --          --          --          --         630
Stockholders' equity.......................................      23,308      20,095      19,508      20,403       5,038
</TABLE>

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

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

                                       19
<PAGE>   20

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

OVERVIEW

     The Company's revenues are derived from interactive Web, interactive voice
response ("IVR"), computer telephony integration ("CTI") software and services,
which consist of The Work Number, application services, the sale of customer
premises systems, and maintenance and support services related to those systems.

     Revenues derived from The Work Number include fees charged to mortgage
lenders and other verifiers for verification of employment history, including
the past three years of income history of participating employers' current and
former employees, ongoing maintenance fees charged to employers and one-time
conversion fees from new employers.

     The Company's customer premises systems business provides interactive Web,
IVR, CTI software and services that enable an organization's users to access,
input and update information without human assistance. Prior to April 1, 1998,
customer premises systems revenue was generally recognized upon shipment of the
system. For all transactions entered into subsequent to April 1, 1998, the
Company has adopted the American Institute of CPA's Statement of Position 97-2
("SOP 97-2"). Under SOP 97-2, the Company recognizes hardware and software
license revenue upon shipment. Revenues for customization services are
recognized by the contract method of accounting using percentage of completion
for larger, more complex systems and the completed contract method for smaller
systems. Sales are effected through a direct sales force and in conjunction with
strategic marketing alliances. The Company provides maintenance and support
services with respect to installed customer premises systems. These services
include a 24-hour per day, 7-day a week toll-free client service line. Revenues
from maintenance and support are recognized ratably over the term of the
maintenance agreement.

     The Company's application services business provides interactive Web and
interactive voice response services to organizations that choose not to purchase
a customer premises system. The Company maintains a system on its premises that
contains a customer database and receives incoming requests for access to the
information. Revenues from application services include fees derived from
establishment of the service and transaction-based fees.

     In addition to providing software and services, the Company formerly
provided database and document services. In August 1996, the Company determined
to pursue the divestiture of the database and document services businesses and,
accordingly, reflected the results of operations of such businesses as
discontinued operations. In January 1997, the document services business was
sold and in March 2000, the database services business was sold.

                                       20
<PAGE>   21

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of operations, expressed as a
percentage of total revenues, and the percentage change in the dollar amount of
such items compared to the prior comparable period.

<TABLE>
<CAPTION>
                                                                             PERCENTAGE INCREASE
                                                                                  (DECREASE)
                                                                          --------------------------
                                                YEARS ENDED MARCH 31,     FISCAL 2000    FISCAL 1999
                                               -----------------------    OVER FISCAL    OVER FISCAL
                                               2000     1999     1998        1999           1998
                                               -----    -----    -----    -----------    -----------
<S>                                            <C>      <C>      <C>      <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  The Work Number..........................     34.2%    30.3%    20.0%       35.3%         113.3%
  Application services.....................     22.2     17.0     13.8        55.9           75.2
  Customer premises systems................     30.1     36.4     46.5        (1.0)          10.7
  Maintenance and support..................     13.5     16.3     19.7        (0.9)          17.4
                                               -----    -----    -----
     Total revenues........................    100.0    100.0    100.0        19.7           41.5
                                               -----    -----    -----
Cost of revenues:
  The Work Number..........................     11.0     10.4      8.5        26.6           73.7
  Application services.....................     12.4     10.7      9.5        38.3           60.4
  Customer premises systems................     23.3     26.2     28.0         6.5           32.0
  Maintenance and support..................      3.8      5.1      6.2       (11.5)          16.6
                                               -----    -----    -----
     Total cost of revenues................     50.5     52.4     52.2        15.2           42.1
                                               -----    -----    -----
Gross margin...............................     49.5     47.6     47.8        24.6           40.9
                                               -----    -----    -----
Operating expenses:
  Selling and marketing....................     21.7     27.8     37.4        (6.2)           4.9
  General and administrative...............     15.2     16.1     16.4        12.9           38.8
  Restructuring charge.....................       --      1.6       --      (100.0)             *
                                               -----    -----    -----
     Total operating expenses..............     36.9     45.5     53.8        (2.9)          19.6
                                               -----    -----    -----
Operating income (loss)....................     12.6      2.1     (6.0)      618.3              *
Other income (expense), net................      0.2       --      0.7       925.0          (94.9)
                                               -----    -----    -----
Earnings (loss) from continuing operations
  before income tax expense (benefit)......     12.8      2.1     (5.3)      622.2              *
Income tax expense (benefit)...............      5.1      0.8     (2.0)      679.1              *
                                               -----    -----    -----
Earnings (loss) from continuing
  operations...............................      7.7      1.3     (3.3)      588.3              *
  Discontinued operations, net.............      0.3       --     (1.8)          *              *
                                               -----    -----    -----
Net earnings (loss)........................      8.0%     1.3%    (5.1)%     617.4              *
                                               =====    =====    =====
</TABLE>

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

* Not meaningful

FISCAL YEARS ENDED MARCH 31, 2000 AND 1999

     Revenues.  Total revenues increased by 19.7%, from $30.1 million in fiscal
1999 to $36.0 million in fiscal 2000. Revenues from The Work Number increased by
35.3%, from $9.1 million in fiscal 1999 to $12.3 million in fiscal 2000, due to
an increase in the number of employment records, and related transaction volume,
on the system, the continued expansion of marketing on a nationwide basis and an
increase in pricing during the period. During the third quarter of fiscal 2000,
the Company entered into a contract to provide volume verifications from The
Work Number database. The Company has not yet realized any meaningful revenue
from this contract. Revenues from application services increased by 55.9%, from
$5.1 million in fiscal 1999 to

                                       21
<PAGE>   22

$8.0 million in fiscal 2000, due to the Company capitalizing on the trend of
some corporations to outsource their non-core functions, and an increase in
pricing during the current year. Revenues from customer premises systems
decreased by 1.0%, from $10.9 million in fiscal 1999 to $10.8 million in fiscal
2000. This decrease was due to a shift in both the Company focus and the market
from purchasing in-house systems to utilizing the Company's application
services. Revenues from maintenance and support related to the customer premises
systems remained consistent at $4.9 million for fiscal 1999 and 2000, reflecting
the support provided to an increased installed base of customer premises
systems, offset by the cancellation of maintenance on older product lines.

     Cost of Revenues.  Total cost of revenues increased by 15.2%, from $15.8
million in fiscal 1999 to $18.2 million in fiscal 2000. Cost of revenues from
The Work Number increased 26.6%, from $3.1 million in fiscal 1999 to $4.0
million in fiscal 2000, due principally to the growth in revenues, offset by
improved leveraging of personnel and infrastructure costs. Cost of revenues from
application services increased by 38.3%, from $3.2 million in fiscal 1999 to
$4.5 million in fiscal 2000. This increase in cost is attributable to the growth
in new business discussed above. Cost of revenues did not increase at the same
level as revenues, since a portion of the revenue growth was attributed to
increased pricing, with no corresponding impact on cost. Cost of revenues from
customer premises systems increased by 6.5%, from $7.9 million in fiscal 1999 to
$8.4 million in fiscal 2000. This increase in costs is primarily attributable to
an increase in fixed labor costs. Cost of revenues from maintenance and support
related to customer premises systems decreased by 11.5%, from $1.5 million in
fiscal 1999 to $1.4 million in fiscal 2000, due to improved leveraging of
personnel costs and lower cost of hardware components.

     Selling and Marketing Expenses.  Selling and marketing expenses decreased
6.2% from $8.3 million in fiscal 1999 to $7.8 million in fiscal 2000. As a
percentage of revenues, such expenses decreased from 27.8% in fiscal 1999 to
21.7% in fiscal 2000. These decreases reflect the impact of the Company's
restructuring efforts during the third quarter of fiscal 1999. In conjunction
with the reorganization, the Company reduced its workforce and closed certain
regional sales offices.

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

     Restructuring Charge.  During the third quarter of fiscal 1999, the Company
reorganized its sales and delivery operations and refocused its product line
related to its customer premises systems line of business. In conjunction with
the reorganization, the Company reduced its workforce by approximately 8% and
closed certain regional sales offices. As a result of these actions, the Company
incurred restructuring charges of $318,000 related to employee severance costs
and $178,000 of other costs.

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

     Income Tax Expense.  The Company's effective income tax rate was 37.3% in
fiscal 1999 and 40.2% in fiscal 2000. The increase in effective tax rate is due
to higher state tax rates and the expiration of certain tax credit
carryforwards. See Note 10 of the Notes to Consolidated Financial Statements.

FISCAL YEARS ENDED MARCH 31, 1999 AND 1998

     Revenues.  Total revenues increased by 41.5%, from $21.3 million in fiscal
1998 to $30.1 million in fiscal 1999. Revenues from The Work Number increased by
113.3%, from $4.3 million in fiscal 1998 to $9.1 million in fiscal 1999, due to
the continued expansion of marketing to employers and verifiers on a nationwide
basis and an increase in the number of employment records, and related
transaction volume, on the system. Revenues from application services increased
by 75.2%, from $2.9 million in fiscal 1998 to $5.1 million in

                                       22
<PAGE>   23

fiscal 1999, due to the Company capitalizing on the trend of some corporations
to outsource their non-core functions. Revenues from customer premises systems
increased by 10.7%, from $9.9 million in fiscal 1998 to $10.9 million in fiscal
1999. Management believes that the revenue increase was due principally to the
Company responding better to Web opportunities in the marketplace. Revenues from
maintenance and support related to the customer premises systems increased by
17.4%, from $4.2 million in fiscal 1998 to $4.9 million in fiscal 1999,
reflecting the support provided to an increased installed base of customer
premises systems.

     Cost of Revenues.  Total cost of revenues increased by 42.1%, from $11.1
million in fiscal 1998 to $15.8 million in fiscal 1999. Cost of revenues from
The Work Number increased 73.7%, from $1.8 million in fiscal 1998 to $3.1
million in fiscal 1999, due to the growth in revenues, offset by improved
leveraging of personnel and infrastructure costs. Cost of revenues from
application services increased by 60.4%, from $2.0 million in fiscal 1998 to
$3.2 million in fiscal 1999. The increase in cost is attributable to revenue
growth, offset by better leveraging of fixed labor and telephone and network
infrastructure costs. Cost of revenues from customer premises systems increased
by 32.0%, from $6.0 million in fiscal 1998 to $7.9 million in fiscal 1999. The
increase in costs is attributable to the increase in revenues and an increase in
labor costs. Cost of revenues from maintenance and support related to customer
premises systems increased by 16.6%, from $1.3 million in fiscal 1998 to $1.5
million in fiscal 1999, due to the growth in revenues.

     Selling and Marketing Expenses.  Selling and marketing expenses increased
4.9% from $8.0 million in fiscal 1998 to $8.3 million in fiscal 1999. As a
percentage of revenues, such expenses decreased from 37.4% in fiscal 1998 to
27.8% in fiscal 1999. The decrease in the expense as a percentage of revenues
reflects a better leveraging of selling and marketing costs as revenues
increased.

     General and Administrative Expenses.  General and administrative expenses
increased 38.8% from $3.5 million in fiscal 1998 to $4.9 million in fiscal 1999.
As a percentage of revenues, such expenses decreased from 16.4% in fiscal 1998
to 16.1% in fiscal 1999. The increase in such expenses reflects the increased
infrastructure costs of a growing business and workforce.

     Restructuring Charge.  During the quarter ended December 31, 1998, the
Company reorganized its sales and delivery operations and refocused its product
line related to its customer premises systems line of business. In conjunction
with the reorganization, the Company reduced its workforce by approximately 8%
and closed certain regional sales offices. As a result of these actions, the
Company incurred restructuring charges of $318,000 related to employee severance
costs and $178,000 of other costs.

     Other Income (Expense), Net.  Interest income decreased 76.8% from $237,000
in fiscal 1998 to $55,000 in fiscal 1999. The decrease is due to a lower average
level of invested funds during the year. Interest expense increased from $2,000
in fiscal 1998 to $57,000 in fiscal 1999, due to borrowings in the second half
of the fiscal year to expand and enhance the Company's data center and
infrastructure.

     Income Tax Expense.  The Company's effective income tax rate was 36.9% in
fiscal 1998 and 37.3% in fiscal 1999. See Note 10 of the Notes to Consolidated
Financial Statements.

DISCONTINUED OPERATIONS

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

     Effective March 31, 2000, the Company sold substantially all of the assets,
net of liabilities, of the database services business to WPZ Holdings, Inc., the
parent company of one of the division's largest customers. The sales price was
$1,273,000, which represented the current book value of the net assets sold.
                                       23
<PAGE>   24

The Company realized pre-tax and after-tax gains of $187,000 and $117,000,
respectively. See Note 3 of the Notes to Consolidated Financial Statements.

QUARTERLY RESULTS OF OPERATIONS

     The following tables set forth certain unaudited statement of operations
data for each of the four quarters in fiscal 1999 and 2000, as well as the
percentage of the Company's total revenues represented by each item. 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 the Company considers
necessary for a fair presentation of such information when read in conjunction
with the Company's financial statements and notes thereto appearing elsewhere in
this report. The Company believes that quarter-to-quarter comparisons of its
financial results should not necessarily be relied upon as an indication of
future performance.

<TABLE>
<CAPTION>
                                                                             QUARTER ENDED
                                       -----------------------------------------------------------------------------------------
                                       JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
                                         1998       1998        1998       1999        1999       1999        1999       2000
                                       --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                                            (IN THOUSANDS)
<S>                                    <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  The Work Number...................   $ 1,719     $ 2,021    $ 2,518     $ 2,850    $ 2,635     $ 2,822    $ 3,147     $ 3,724
  Application services..............       952       1,441      1,791         941      1,155       2,143      2,974       1,721
  Customer premises systems.........     2,806       2,425      2,843       2,875      3,151       2,409      2,594       2,681
  Maintenance and support...........     1,274       1,326      1,133       1,187      1,262       1,280      1,210       1,124
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total revenues..................     6,751       7,213      8,285       7,853      8,203       8,654      9,925       9,250
                                       -------     -------    -------     -------    -------     -------    -------     -------
Cost of revenues:
  The Work Number...................       664         700        871         902        905         916      1,004       1,149
  Application services..............       613         807      1,021         784        722       1,003      1,503       1,232
  Customer premises systems.........     1,726       1,736      2,302       2,110      2,179       2,001      2,135       2,073
  Maintenance and support...........       426         408        367         344        337         338        350         341
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total cost of revenues..........     3,429       3,651      4,561       4,140      4,143       4,258      4,992       4,795
                                       -------     -------    -------     -------    -------     -------    -------     -------
Gross margin........................     3,322       3,562      3,724       3,713      4,060       4,396      4,933       4,455
                                       -------     -------    -------     -------    -------     -------    -------     -------
Operating expenses:
  Selling and marketing.............     2,224       2,353      2,091       1,670      1,883       1,939      2,068       1,931
  General and administrative........     1,052       1,245      1,209       1,348      1,384       1,300      1,427       1,364
  Restructuring charge..............        --          --        496          --         --          --         --          --
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total operating expenses........     3,276       3,598      3,796       3,018      3,267       3,239      3,495       3,295
                                       -------     -------    -------     -------    -------     -------    -------     -------
Operating income (loss).............        46         (36)       (72)        695        793       1,157      1,438       1,160
                                       =======     =======    =======     =======    =======     =======    =======     =======
Gain from discontinued operations,
  net...............................        --          --         --          --         --          --         --         117
                                       =======     =======    =======     =======    =======     =======    =======     =======
Net earnings (loss).................   $    44     $    (3)   $   (60)    $   422    $   486     $   714    $   899     $   785
                                       =======     =======    =======     =======    =======     =======    =======     =======
Basic and diluted earnings (loss)
  per share:
  Earnings (loss) from continuing
    operations......................   $   .01     $  (.00)   $  (.01)    $   .08    $   .09     $   .13    $   .16     $   .12
  Gain from discontinued operations,
    net.............................        --          --         --          --         --          --         --         .02
                                       -------     -------    -------     -------    -------     -------    -------     -------
  Net earnings (loss)...............   $   .01     $  (.00)   $  (.01)    $   .08    $   .09     $   .13    $   .16     $   .14
                                       =======     =======    =======     =======    =======     =======    =======     =======
</TABLE>

                                       24
<PAGE>   25

<TABLE>
<CAPTION>
                                                                             QUARTER ENDED
                                       -----------------------------------------------------------------------------------------
                                       JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
                                         1998       1998        1998       1999        1999       1999        1999       2000
                                       --------   ---------   --------   ---------   --------   ---------   --------   ---------
<S>                                    <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
PERCENT OF TOTAL REVENUES:
Revenues:
  The Work Number...................      25.5%       28.0%      30.4%       36.3%      32.1%       32.6%      31.7%       40.3%
  Application services..............      14.1        20.0       21.6        12.0       14.1        24.8       30.0        18.6
  Customer premises systems.........      41.5        33.6       34.3        36.6       38.4        27.8       26.1        29.0
  Maintenance and support...........      18.9        18.4       13.7        15.1       15.4        14.8       12.2        12.1
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total revenues..................     100.0       100.0      100.0       100.0      100.0       100.0      100.0       100.0
                                       -------     -------    -------     -------    -------     -------    -------     -------
Cost of revenues:
  The Work Number...................       9.8         9.7       10.5        11.5       11.0        10.6       10.1        12.4
  Application services..............       9.1        11.2       12.3        10.0        8.8        11.6       15.1        13.3
  Customer premises systems.........      25.6        24.0       27.9        26.8       26.6        23.1       21.5        22.4
  Maintenance and support...........       6.3         5.7        4.4         4.4        4.1         3.9        3.6         3.7
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total cost of revenues..........      50.8        50.6       55.1        52.7       50.5        49.2       50.3        51.8
                                       -------     -------    -------     -------    -------     -------    -------     -------
Gross margin........................      49.2        49.4       44.9        47.3       49.5        50.8       49.7        48.2
                                       -------     -------    -------     -------    -------     -------    -------     -------
Operating expenses:
  Selling and marketing.............      32.9        32.6       25.2        21.2       23.0        22.4       20.8        20.9
  General and administrative........      15.6        17.3       14.6        17.2       16.8        15.0       14.4        14.7
  Restructuring charge..............        --          --        6.0          --         --          --         --          --
                                       -------     -------    -------     -------    -------     -------    -------     -------
    Total operating expenses........      48.5        49.9       45.8        38.4       39.8        37.4       35.2        35.6
                                       -------     -------    -------     -------    -------     -------    -------     -------
Operating income (loss).............       0.7        (0.5)      (0.9)        8.9        9.7        13.4       14.5        12.6
                                       =======     =======    =======     =======    =======     =======    =======     =======
Gain from discontinued operations,
  net...............................        --          --         --          --         --          --         --         1.3
                                       =======     =======    =======     =======    =======     =======    =======     =======
Net earnings (loss).................       0.7%       (0.0)%     (0.7)%       5.4%       5.9%        8.3%       9.1%        8.5%
                                       =======     =======    =======     =======    =======     =======    =======     =======
</TABLE>

     The Company's revenues, margins, and operating results have fluctuated in
the past, and are expected to continue to fluctuate in the future, on an annual
and quarterly basis, as a result of a number of factors. These factors include
the timing of orders from and shipments to clients, delays in development and
client acceptance of custom software applications, new product introductions or
announcements by the Company or its competitors, levels of market acceptance for
new products and the hiring and training of additional staff, as well as general
economic conditions. The size and timing of the Company's customer premises
systems transactions have historically varied substantially from quarter to
quarter, and the Company expects such variations to continue in future periods.
Because a significant portion of the Company's overhead is fixed in the short
term, the Company's results of operations may be adversely affected if revenues
fall below the Company's expectations.

     Revenues from application services are seasonally higher during the second
and third quarters of the Company's fiscal year due to the nature of the
services being provided. The revenues have increased on a quarter-by-quarter
comparison in fiscal 2000 over fiscal 1999, due to the Company capitalizing on
an increased trend by some corporations to outsource these services.

LIQUIDITY AND CAPITAL RESOURCES

     In recent years, the Company has financed its operations primarily through
cash flow from operations and bank lines of credit.

     The Company had a current ratio of 2.86 to 1 and 3.68 to 1 at March 31,
1999 and 2000, respectively. The Company's working capital was $8.3 million and
$15.2 million at March 31, 1999 and March 31, 2000, respectively. Total working
capital increased in fiscal 2000 due principally to the Company's earnings for
the year combined with a lower level of capital expenditures.

                                       25
<PAGE>   26

     The Company's accounts receivable increased from $6.6 million to $8.0
million from March 31, 1999 to March 31, 2000. The increase is due to increased
revenues in the fourth quarter of fiscal 2000 compared to 1999, offset by
improved account collections. As a percentage of the Company's total revenues
for the fourth quarter of each fiscal year, the accounts receivable at fiscal
year-end increased slightly from 83% at March 31, 1999, to 86% at March 31,
2000.

     The Company's capital expenditures, principally computer equipment, were
$883,000 in fiscal 2000. At March 31, 2000, the Company had no significant
capital spending or purchase commitments other than normal purchase commitments
and commitments under facilities and operating leases, but would expect capital
expenditures to increase slightly during the next fiscal year.

     In November 1998, the Company's Board of Directors authorized the Company
to repurchase up to 350,000 shares of its stock in the open market over a
two-year period. The Company repurchased 58,500 shares for $481,000 during
fiscal 2000. Cumulative shares repurchased amount to 100,087. All shares
repurchased have been reissued to fund employee stock option exercises and
employee stock purchase plan purchases.

     The Company believes that its working capital, together with its
anticipated cash flows from operations, should be sufficient to meet its working
capital and capital expenditure requirements for at least the next 12 months.
The Company has a $5,000,000 line of credit facility with a commercial bank, all
of which was available at March 31, 2000. Outstanding borrowings, if any, bear
interest at LIBOR plus 2.25% and will be secured by accounts receivable and
inventory.

     The Company's net decrease in capitalized software development costs was
$421,000 in fiscal 2000. See Notes 1 and 6 of Notes to Consolidated Financial
Statements. The Company anticipates that the capitalized software balance will
decrease slightly in future periods as amortization exceeds capitalized costs.

YEAR 2000 COMPLIANCE

     As of the date of this filing, the Company has had no reported year 2000
incidents from its clients. However, the Company may in the future be subject to
claims based on century compliance issues related to a client's enterprise
system or other products provided by third parties, custom modifications to the
Company's products made by third parties, or issues arising from the integration
of the Company's products with other products. While the Company has not been a
party to any proceeding involving its products or services in connection with
century compliance issues, there is no assurance that the Company will not in
the future be required to defend its products or services in such proceedings
against claims of century compliance issues, and any resulting liability of the
Company for damages could have a material adverse effect on the Company's
business, operating results and financial condition.

     As of the date of this filing, the Company has not experienced any year
2000 issues involving its internal use information systems. However, there is no
assurance that such century compliance problems will not arise, and if so that
such problems will not have a material adverse effect on the Company's business,
operating results and financial condition.

ITEM 7A.  QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

     The Company's current line of credit facility with a commercial bank
provides for borrowings that bear interest at LIBOR plus 2.25%. The Company had
no borrowings outstanding under this line of credit at March 31, 2000. The
Company currently believes that the effect, if any, of changes in interest rates
on the Company's financial position, results of operations and cash flows would
not be material.

                                       26
<PAGE>   27

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................   28
Consolidated Balance Sheets as of March 31, 2000 and 1999...   29
Consolidated Statements of Operations for the years ended
  March 31, 2000, 1999 and 1998.............................   30
Consolidated Statements of Stockholders' Equity for the
  years ended March 31, 2000, 1999 and 1998.................   31
Consolidated Statements of Cash Flows for the years ended
  March 31, 2000, 1999 and 1998.............................   32
Notes to Consolidated Financial Statements..................   33
</TABLE>

     See Item 7 -- "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Quarterly Results of Operations" for supplementary
financial information required by Item 302 of Regulation S-K.

                                       27
<PAGE>   28

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
TALX Corporation:

     We have audited the accompanying consolidated balance sheets of TALX
Corporation and subsidiaries as of March 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended March 31, 2000. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TALX
Corporation and subsidiaries as of March 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 2000, in conformity with generally accepted accounting
principles.

                                          KPMG LLP

St. Louis, Missouri
May 5, 2000

                                       28
<PAGE>   29

                       TALX CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                            MARCH 31, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                     MARCH 31,
                                                                --------------------
                                                                  2000        1999
                                                                --------    --------
<S>                                                             <C>         <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................    $  3,276    $    267
  Short-term investments....................................       3,015          --
  Accounts receivable, net..................................       7,980       6,552
  Inventories...............................................         832       1,262
  Work in progress, less progress billings..................       2,684       3,170
  Prepaid expenses and other current assets.................       2,404       1,299
  Deferred tax assets, net..................................         624         235
                                                                --------    --------
     Total current assets...................................      20,815      12,785
Property and equipment, net.................................       4,992       5,856
Capitalized software development costs, net of amortization
  of $4,762 in 2000 and $3,089 in 1999......................       3,401       3,822
Net assets of business held for sale........................          --         859
Deferred tax assets, net....................................          --       1,021
Other assets................................................         925         221
                                                                --------    --------
                                                                $ 30,133    $ 24,564
                                                                ========    ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $    803    $  1,075
  Accrued expenses and other liabilities....................       2,824       1,681
  Progress billings in excess of work in progress...........         931         588
  Deferred revenue..........................................       1,099       1,125
                                                                --------    --------
     Total current liabilities..............................       5,657       4,469
  Deferred tax liabilities, net.............................       1,168          --
                                                                --------    --------
     Total liabilities......................................       6,825       4,469
                                                                --------    --------
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $.01 par value; authorized 5,000,000
     shares and no shares issued or outstanding at March 31,
     2000 and 1999..........................................          --          --
  Common stock, $.01 par value; authorized 30,000,000
     shares, issued and outstanding 5,616,448 shares at
     March 31, 2000 and 5,505,017 shares at March 31,
     1999...................................................          56          55
  Additional paid-in capital................................      23,978      23,478
  Accumulated deficit.......................................        (726)     (3,432)
  Treasury stock, at cost, no shares at March 31, 2000 and
     948 shares at March 31, 1999...........................          --          (6)
                                                                --------    --------
     Total stockholders' equity.............................      23,308      20,095
                                                                --------    --------
                                                                $ 30,133    $ 24,564
                                                                ========    ========
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       29
<PAGE>   30

                       TALX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   YEARS ENDED MARCH 31, 2000, 1999, AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                         MARCH 31,
                                                            -----------------------------------
                                                              2000         1999         1998
                                                            ---------    ---------    ---------
<S>                                                         <C>          <C>          <C>
Revenues:
  The Work Number.......................................    $  12,328    $   9,109    $   4,270
  Application services..................................        7,993        5,126        2,925
  Customer premises systems.............................       10,835       10,948        9,886
  Maintenance and support...............................        4,876        4,920        4,192
                                                            ---------    ---------    ---------
     Total revenues.....................................       36,032       30,103       21,273
                                                            ---------    ---------    ---------
Cost of revenues:
  The Work Number.......................................        3,973        3,138        1,807
  Application services..................................        4,460        3,225        2,010
  Customer premises systems.............................        8,388        7,874        5,967
  Maintenance and support...............................        1,367        1,545        1,325
                                                            ---------    ---------    ---------
     Total cost of revenues.............................       18,188       15,782       11,109
                                                            ---------    ---------    ---------
     Gross margin.......................................       17,844       14,321       10,164
                                                            ---------    ---------    ---------
Operating expenses:
  Selling and marketing.................................        7,820        8,339        7,952
  General and administrative............................        5,477        4,853        3,496
  Restructuring charge..................................           --          496           --
                                                            ---------    ---------    ---------
     Total operating expenses...........................       13,297       13,688       11,448
                                                            ---------    ---------    ---------
     Operating income (loss)............................        4,547          633       (1,284)
                                                            ---------    ---------    ---------
Other income (expense):
  Interest income.......................................           85           55          237
  Interest expense......................................           (4)         (57)          (2)
  Other, net............................................            1           10          (77)
                                                            ---------    ---------    ---------
     Total other income (expense), net..................           82            8          158
                                                            ---------    ---------    ---------
     Earnings (loss) from continuing operations before
       income tax expense (benefit).....................        4,629          641       (1,126)
Income tax expense (benefit)............................        1,862          239         (416)
                                                            ---------    ---------    ---------
  Earnings (loss) from continuing operations............        2,767          402         (710)
                                                            ---------    ---------    ---------
Discontinued operations:
  Gain (loss) on disposal of discontinued operations,
     net of income taxes................................          117           --         (374)
                                                            ---------    ---------    ---------
  Net earnings (loss)...................................    $   2,884    $     402    $  (1,084)
                                                            =========    =========    =========
Basic earnings (loss) per share:
  Earnings (loss) from continuing operations............    $     .50    $     .07    $    (.13)
  Gain (loss) on disposal of discontinued operations....          .02           --         (.07)
                                                            ---------    ---------    ---------
     Net earnings (loss)................................    $     .52    $     .07    $    (.20)
                                                            =========    =========    =========
Diluted earnings (loss) per share:
  Earnings (loss) from continuing operations............    $     .49    $     .07    $    (.13)
  Gain (loss) on disposal of discontinued operations....          .02           --         (.07)
                                                            ---------    ---------    ---------
     Net earnings (loss)................................    $     .51    $     .07    $    (.20)
                                                            =========    =========    =========
Weighted average number of shares outstanding --basic...    5,559,972    5,401,345    5,291,381
Weighted average number of shares
  outstanding -- diluted................................    5,657,612    5,519,435    5,291,381
</TABLE>

     See accompanying notes to consolidated financial statements.
                                       30
<PAGE>   31

                       TALX CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   YEARS ENDED MARCH 31, 2000, 1999, AND 1998
                (DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                  RETAINED
                                                   ADDITIONAL     EARNINGS                    TOTAL
                                         COMMON     PAID-IN     (ACCUMULATED   TREASURY   STOCKHOLDERS'
                                          STOCK     CAPITAL       DEFICIT)      STOCK        EQUITY
                                         -------   ----------   ------------   --------   -------------
<S>                                      <C>       <C>          <C>            <C>        <C>
Balance at March 31, 1997..............  $    53    $23,036       $(2,686)     $    --       $20,403
Issuance of 17,676 shares of common
  stock upon exercise of stock
  options..............................       --         48            --           --            48
Issuance of 34,901 shares of common
  stock under employee stock purchase
  plan.................................       --        141            --           --           141
Net loss...............................       --         --        (1,084)          --        (1,084)
                                         -------    -------       -------      -------       -------
Balance at March 31, 1998..............       53     23,225        (3,770)          --        19,508
Repurchase of 41,587 shares of common
  stock................................       --         --            --         (234)         (234)
Issuance of 40,033 shares of common
  stock and 10,855 shares of treasury
  stock upon exercise of stock
  options..............................        1        134           (44)          56           147
Issuance of 31,470 shares of common
  stock and 29,784 shares of treasury
  stock under employee stock purchase
  plan.................................       --        120           (20)         172           272
Issuance of 117,482 shares of common
  stock upon exercise of warrants......        1         (1)           --           --            --
Net earnings...........................       --         --           402           --           402
                                         -------    -------       -------      -------       -------
Balance at March 31, 1999..............       55     23,478        (3,432)          (6)       20,095
Repurchase of 58,500 shares of common
  stock................................       --         --            --         (481)         (481)
Issuance of 61,065 shares of common
  stock and 41,598 shares of treasury
  stock upon exercise of stock
  options..............................        1        271          (143)         329           458
Issuance of 29,959 shares of common
  stock and 17,850 shares of treasury
  stock under employee stock purchase
  plan.................................       --        229           (35)         158           352
Issuance of 20,407 shares of common
  stock upon exercise of warrants......       --         --            --           --            --
Net earnings...........................       --         --         2,884           --         2,884
                                         -------    -------       -------      -------       -------
Balance at March 31, 2000..............  $    56    $23,978       $  (726)     $    --       $23,308
                                         =======    =======       =======      =======       =======
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       31
<PAGE>   32

                       TALX CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   YEARS ENDED MARCH 31, 2000, 1999, AND 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED MARCH 31,
                                                             --------------------------------
                                                               2000        1999        1998
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
  Net earnings (loss)....................................    $  2,884    $    402    $ (1,084)
  Adjustments to reconcile net earnings (loss) to net
     cash provided by operating activities:
     Depreciation and amortization.......................       3,986       3,071       2,556
     Discontinued operations, net........................         859         298        (450)
     Deferred taxes......................................       1,800         239        (651)
     Change in assets and liabilities:
       Accounts receivable...............................      (1,428)        (50)       (373)
       Inventories.......................................         430         190         (74)
       Work in progress, less progress billings, net.....         486      (1,250)        392
       Prepaid expenses and other current assets.........      (1,105)       (545)        (20)
       Income tax refund receivable......................          --          14         181
       Other assets......................................        (704)        (66)         64
       Accounts payable..................................        (272)       (703)        633
       Accrued expenses and other liabilities............       1,143         (21)        230
       Progress billings in excess of work in progress,
          net............................................         343         412         141
       Deferred revenue..................................         (26)        168         (24)
                                                             --------    --------    --------
          Net cash provided by operating activities......       8,396       2,159       1,521
                                                             --------    --------    --------
Cash flows from investing activities:
  Additions to property and equipment....................        (883)     (3,399)     (2,302)
  Capitalized software development costs.................      (1,818)     (1,557)     (2,294)
  Proceeds from maturity of short-term investments.......          --          --       4,117
  Purchases of short-term investments....................      (3,015)         --          --
                                                             --------    --------    --------
          Net cash used in investing activities..........      (5,716)     (4,956)       (479)
                                                             --------    --------    --------
Cash flows from financing activities:
  Payments on capitalized lease obligations..............          --          --         (36)
  Issuance of common stock...............................         810         419         189
  Repurchase of common and preferred stock...............        (481)       (234)         --
                                                             --------    --------    --------
          Net cash provided by financing activities......         329         185         153
                                                             --------    --------    --------
          Net increase (decrease) in cash and cash
            equivalents..................................       3,009      (2,612)      1,195
Cash and cash equivalents at beginning of year...........         267       2,879       1,684
                                                             --------    --------    --------
Cash and cash equivalents at end of year.................    $  3,276    $    267    $  2,879
                                                             ========    ========    ========
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       32
<PAGE>   33

                       TALX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            MARCH 31, 2000 AND 1999

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

     TALX Corporation ("TALX" or the "Company") provides interactive Web,
interactive voice response ("IVR"), computer telephony integration ("CTI")
software and services to large organizations such as Fortune 500 companies and
federal government agencies. The Company's services and software enable an
organization's employees, customers, vendors and business partners ("Users") to
access, input and update information without human assistance. The Company's
services and software enhance service levels, improve productivity and reduce
costs by enabling Users to perform self-service transactions. Historically, the
Company has designed and implemented "tailored" systems that provide an
organization's Users with access to databases of information relating to that
organization.

     The Work Number(R) is a national service providing automated access to
information from multiple organizations. The Work Number provides automated
responses to requests by mortgage lenders or other verifiers for confirmation of
employment information about a participating employer's current and former
employees.

     Tailored software and services are offered by TALX to its clients either
installed on customers' premises or on an outsourced services basis. The Company
has provided tailored software and services installed at customers' premises
since the early 1980s. In 1993, the Company introduced its application services
business (formerly referred to as outsourced services) which allows a client to
realize the benefits of the Company's software and services without incurring
the administrative or maintenance responsibilities of operating such a system.
For application services clients, the Company maintains the client's database on
a system at the Company's facilities, where incoming requests for access to the
information are received.

(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

     The Company considers all highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents.

(d) Short-term Investments

     Short-term investments at March 31, 2000, consist of U.S. government agency
debt instruments. The Company classifies its debt and marketable equity
securities in one of two categories: available-for-sale or held-to-maturity.
Held-to-maturity securities are those securities which the Company has the
ability and intent to hold until maturity. All other securities are classified
as available-for-sale. All of the Company's securities were classified as
available-for-sale at March 31, 2000. Interest income is recognized when earned.
Debt securities classified as available-for-sale are stated at market value.
There were no short-term investments at March 31, 1999.

(e) Inventories

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

                                       33
<PAGE>   34
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

(f) Property and Equipment

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

(g) Product Development and Capitalized Software Development Costs

     Product development costs are charged to operations as incurred. Software
development costs are expensed as incurred until technological feasibility is
achieved, after which they are capitalized on a product-by-product basis.
Amortization of capitalized software development costs is the greater of the
amount computed using (i) the ratio that current gross revenues for a product
bear to the total of current and anticipated future gross revenues for that
product or (ii) the straight-line method over the remaining estimated economic
life of the product. Amortization of capitalized software development costs
starts when the product is available for general release to clients.

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

     Revenues from The Work Number are recognized from fees charged to Users for
verifications of employment history and salary and from employer conversion and
maintenance fees. Prior to April 1, 1998, customer premises systems revenue was
generally recognized upon shipment of the system. For all transactions entered
into subsequent to April 1, 1998, the Company has adopted the American Institute
of CPA's Statement of Position 97-2 ("SOP 97-2"). Under SOP 97-2, the Company
recognizes hardware and software license revenue upon shipment. Revenues for
customization services are recognized by the contract method of accounting using
percentage of completion for larger, more complex systems and the completed
contract method for smaller systems. Application services revenue is recognized
as the services are provided. Revenue from maintenance contracts is deferred and
recognized ratably over the maintenance period. Deferred maintenance revenue
represents the unearned portion of maintenance fees.

(i) Concentration of Credit Risk

     The Company sells its software and services in a variety of industries. No
client represented over 10% of revenues in fiscal 1998, 1999 or 2000. The
Company performs periodic credit evaluations of its clients' financial condition
and generally does not require collateral; however, it maintains a security
interest in hardware until payment is received. Credit losses from clients have
been within management's expectations, and management believes the allowance for
doubtful accounts adequately provides for any expected losses.

(j) Income Taxes

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

                                       34
<PAGE>   35
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

(k) Fair Value of Financial Instruments

     The Company discloses estimated fair values for its financial instruments.
A financial instrument is defined as cash or a contract that both imposes on one
entity a contractual obligation to deliver cash or another financial instrument
to a second entity and conveys to that second entity a contractual right to
receive cash or another financial instrument from the first entity.

(l) Stock Option Plans

     The Company records stock-based compensation over the vesting period for
the difference between the quoted market price of an award at the date of grant
and the exercise price of the option, if any. The Company provides pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants made in 1995 and later years as if the fair-value-based method had been
applied.

(m) Management's Use of Estimates

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

(n) Net Earnings (Loss) 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. The weighted average number of shares is based on common
stock outstanding for basic earnings (loss) per share and common stock
outstanding and common stock options and warrants for diluted earnings (loss)
per share in periods when such common stock options and warrants are not
antidilutive.

(2) RESTRUCTURING CHARGE

     During the quarter ended December 31, 1998, the Company reorganized its
sales and delivery operations and refocused its product line, related to its
customer premises systems line of business. In conjunction with the
reorganization, the Company reduced its workforce by approximately 8% and closed
certain regional sales offices. As a result of these actions, the Company
incurred restructuring charges of $318,000 related to employee severance costs
and $178,000 of other costs. These items are reflected in the line item
"restructuring charge" on the statement of operations and $0 and $159,000 are
reflected in accrued expenses on the balance sheet at March 31, 2000 and 1999,
respectively.

(3) DISCONTINUED OPERATIONS

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

                                       35
<PAGE>   36
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

net of tax, in the amount of $550,000 and $374,000, respectively. No additional
provision for loss was necessary as of March 31, 1999.

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

     The Company has classified the database business as a discontinued
operation and has reclassified the prior period's statements of operations to
reflect this change.

     Summary balance sheet data of the database business as of March 31, 2000
and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                ----------------
                                                                 2000      1999
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Current assets..............................................    $   --    $  901
Property and equipment, net.................................        --       407
Other assets................................................        --        63
                                                                ------    ------
  Total assets..............................................        --     1,371
Current liabilities, including provision for loss of $39 in
  1999......................................................        --       512
                                                                ------    ------
Net assets of business held for sale........................    $   --    $  859
                                                                ======    ======
</TABLE>

     The results of operations for the database business for the years ended
March 31, 2000, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                                        MARCH 31,
                                                                --------------------------
                                                                 2000      1999      1998
                                                                ------    ------    ------
                                                                      (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
Revenues....................................................    $4,800    $4,075    $4,284
                                                                ======    ======    ======
Gain (loss) on disposal.....................................       187        --      (592)
Income tax expense (benefit)................................        70        --      (218)
                                                                ------    ------    ------
  Gain (loss) on disposal, net..............................       117        --      (374)
                                                                ------    ------    ------
  Net earnings (loss).......................................    $  117    $   --    $ (374)
                                                                ======    ======    ======
</TABLE>

                                       36
<PAGE>   37
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

(4) ACCOUNTS RECEIVABLE

     Accounts receivable consist of the following:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                ----------------
                                                                 2000      1999
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Accounts receivable.........................................    $8,350    $6,707
Less allowance for doubtful accounts........................       370       155
                                                                ------    ------
                                                                $7,980    $6,552
                                                                ======    ======
</TABLE>

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

(5) PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                 RANGE OF
                                                                ESTIMATED          MARCH 31,
                                                               USEFUL LIVES    -----------------
                                                                (IN YEARS)      2000       1999
                                                               ------------    -------    ------
                                                                                (IN THOUSANDS)
<S>                                                            <C>             <C>        <C>
Computer equipment.........................................         3-5        $ 6,510    $5,724
Office furniture and equipment.............................        5-10          1,339     1,310
Leasehold improvements.....................................        3-10          3,206     3,138
                                                                               -------    ------
                                                                                11,055    10,172
Less accumulated depreciation and amortization.............                      6,063     4,316
                                                                               -------    ------
                                                                               $ 4,992    $5,856
                                                                               =======    ======
</TABLE>

(6) PRODUCT DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     Product development costs and amortization of capitalized software
development costs for the years ended March 31, 2000, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                        MARCH 31,
                                                                --------------------------
                                                                 2000      1999      1998
                                                                ------    ------    ------
                                                                      (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
Product development costs charged to general and
  administrative expenses...................................    $   --    $  588    $  322
                                                                ======    ======    ======
Amortization of capitalized software development costs......    $2,239    $1,573    $1,558
                                                                ======    ======    ======
</TABLE>

                                       37
<PAGE>   38
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

(7) ACCRUED EXPENSES AND OTHER LIABILITIES

     Accrued expenses and other liabilities for the years ended March 31, 2000
and 1999 consist of the following:

<TABLE>
<CAPTION>
                                                                    MARCH 31,
                                                                ------------------
                                                                 2000       1999
                                                                -------    -------
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
Accrued compensation and benefits...........................    $ 1,864    $   736
Other.......................................................        960        945
                                                                -------    -------
                                                                $ 2,824    $ 1,681
                                                                =======    =======
</TABLE>

(8) FINANCING ARRANGEMENTS

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

(9) LEASES

     The Company has noncancellable operating leases, primarily for office space
and office equipment, that expire through fiscal 2006 and provide for purchase
or renewal options.

     Total rent expense for operating leases, including contingent rentals, was
$1,063,000, $932,000, and $708,000 in 2000, 1999 and 1998, respectively.

     Future minimum lease payments under noncancellable operating leases as of
March 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
<S>                                                           <C>
Fiscal Year:
  2001......................................................      $1,030
  2002......................................................         959
  2003......................................................         597
  2004......................................................         117
  2005......................................................          90
  Thereafter................................................          54
                                                                  ------
     Total minimum lease payments...........................      $2,847
                                                                  ======
</TABLE>

                                       38
<PAGE>   39
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

(10) INCOME TAXES

     Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
                                                                          MARCH 31,
                                                                -----------------------------
                                                                 2000       1999       1998
                                                                -------    -------    -------
                                                                       (IN THOUSANDS)
<S>                                                             <C>        <C>        <C>
Current:
  Federal...................................................    $    52    $    --    $    --
  State and local...........................................         10         --         --
Deferred:
  Federal...................................................      1,510        209       (383)
  State and local...........................................        290         30        (33)
                                                                -------    -------    -------
     Income tax expense (benefit) before discontinued
       operations...........................................      1,862        239       (416)
Discontinued operations.....................................         70         --       (218)
                                                                -------    -------    -------
       Total income tax expense (benefit)...................    $ 1,932    $   239    $  (634)
                                                                =======    =======    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                        MARCH 31,
                                                                --------------------------
                                                                 2000      1999      1998
                                                                ------    ------    ------
                                                                      (IN THOUSANDS)
<S>                                                             <C>       <C>       <C>
Computed "expected" tax expense (benefit)...................    $1,574    $  218    $ (383)
Increase (decrease) in income taxes resulting from:
  State and local income taxes, net of federal income tax
     benefit................................................       198        20       (22)
  Other, net................................................        90         1       (11)
                                                                ------    ------    ------
                                                                $1,862    $  239    $ (416)
                                                                ======    ======    ======
</TABLE>

                                       39
<PAGE>   40
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
2000 and 1999 are presented below:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                ----------------
                                                                 2000      1999
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Deferred tax assets:
  Allowance for doubtful accounts...........................    $  142    $  115
  Valuation allowance on inventory..........................        65        27
  Accrual for compensated absences..........................        49        40
  Accrual for loss on discontinued operations...............        --        14
  Differences in expense recognition methods................       139        --
  Differences in depreciation and amortization..............       142        41
  Restructuring charge and other reserves...................        --       160
  Net operating loss and tax credit carryforwards...........       240     2,308
                                                                ------    ------
     Total deferred tax assets..............................       777     2,705
                                                                ------    ------
Deferred tax liabilities:
  Differences in capitalized software development cost
     methods................................................     1,310     1,414
  Differences in expense recognition methods................        11        20
  Differences in depreciation and amortization..............        --        15
                                                                ------    ------
     Total deferred tax liabilities.........................     1,321     1,449
                                                                ------    ------
     Net deferred tax assets (liabilities)..................    $ (544)   $1,256
                                                                ======    ======
</TABLE>

     In assessing the realization of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Certain net operating
loss carryforwards are available to offset future taxable income. In order to
fully realize the deferred tax assets, the Company will need to generate future
taxable income of approximately $72,000 prior to the expiration of the net
operating loss carryforwards in 2013. Taxable income (loss) of the Company for
the years ended March 31, 2000, 1999 and 1998 was $5,860,000, $624,000 and
$(3,294,000), respectively. Based upon the level of historical taxable income
and projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences.

     At March 31, 2000, the Company has net operating loss carryforwards for
federal income tax purposes of $72,000, which are available to offset future
federal taxable income, if any, through 2013. In addition, the Company has
alternative minimum tax credit carryforwards of approximately $200,000 which are
available to reduce future federal regular income taxes, if any, over an
indefinite period.

(11) STOCKHOLDERS' EQUITY

     TALX has adopted an incentive stock option plan for employees which
provides for the issuance of a maximum of 930,000 shares of common stock.
Options are granted by the Board of Directors at prices not less

                                       40
<PAGE>   41
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

than fair market value as of the date of the grant. Certain options are 100%
vested upon grant. The remaining options vest 20% per year and expire six to 10
years after the date of the grant.

     Activity under the plans for the three years ended March 31, 2000 is as
follows:

<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                                                              AVERAGE
                                                                SHARES     EXERCISE PRICE
                                                                -------    --------------
<S>                                                             <C>        <C>
Outstanding at March 31, 1997...............................    341,211        $4.62
Granted -- 1998.............................................     53,700         4.98
Cancelled -- 1998...........................................    (18,774)        5.11
Exercised -- 1998...........................................    (17,676)        2.24
                                                                -------
Outstanding at March 31, 1998...............................    358,461        $4.72
Granted -- 1999.............................................    319,000         5.56
Cancelled -- 1999...........................................    (73,514)        5.49
Exercised -- 1999...........................................    (53,743)        3.52
                                                                -------
Outstanding at March 31, 1999...............................    550,204        $5.22
Granted -- 2000.............................................    189,200         8.37
Cancelled -- 2000...........................................    (35,220)        6.66
Exercised -- 2000...........................................    (99,808)        4.46
                                                                -------
Outstanding at March 31, 2000...............................    604,376        $6.22
                                                                =======
</TABLE>

     TALX has adopted a stock option plan for outside directors which provides
for the issuance of a maximum of 80,000 shares of common stock. Options are
granted in the amount of 1,500 shares each to outside directors at prices not
less than fair market value as of the date of the grant, which is April 1 of
each year. The options vest one year from the date of grant. Options outstanding
amount to 12,000 and 18,000 at March 31, 1999 and 2000, respectively.

     The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant date for awards in fiscal 1998 consistent with the provisions of SFAS No.
123, the Company's net loss and net loss per share would have been impacted by
an immaterial amount (less than $.01 per share). The effect for fiscal 1999
would be to reduce net earnings by $235,000 or $.04 per share, based on the
weighted average fair value of options granted of $3.10 per option. The effect
for fiscal 2000 would be to reduce net earnings by $156,000 or $.03 per share,
based on the weighted average fair value of options granted of $8.37 per option.

     The Company made calculations under SFAS No. 123 reflecting only options
granted in fiscal 1998, 1999 and 2000. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 was not reflected in the
determination of the impact, because compensation cost is reflected over the
options' vesting period of six to 10 years and compensation cost for options
granted prior to April 1, 1995 is not considered. The fair value of option
grants for fiscal 2000, 1999 and 1998 is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: expected volatility of 86%, 65% and 85% in fiscal 2000, 1999 and
1998, respectively; risk-free interest rate of 6.00%, 5.00% and 6.19% in fiscal
2000, 1999 and 1998, respectively; expected life of 4.5, 4.5 and six years in
fiscal 2000, 1999 and 1998, respectively; and an expected dividend yield of 0.0%
in all periods.

                                       41
<PAGE>   42
                       TALX CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                            MARCH 31, 2000 AND 1999

<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>
$3.85 -- 4.46................    101,128           1.2             $ 3.89         87,118         $3.87
$4.46 -- 5.95................    187,500           7.9             $ 5.26         43,300         $5.20
$5.95 -- 7.44................    147,748           6.5             $ 6.51         44,838         $6.70
$7.44 -- 8.93................    145,000           8.7             $ 7.88          8,500         $7.66
$10.41 -- 11.90..............     15,000           9.6             $11.00              0         $0.00
$11.90 -- 13.39..............      3,000           9.8             $13.38              0         $0.00
$13.39 -- 14.38..............      5,000           9.8             $14.38              0         $0.00
                                 -------                                         -------
                                 604,376                                         183,756
                                 =======                                         =======
</TABLE>

     During fiscal 1997, shareholders approved the TALX Corporation 1996
Employee Stock Purchase Plan (ESPP), which was amended in 1998. 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 200,000 shares of common stock shares reserved for the
ESPP, there were 52,751 shares remaining at March 31, 2000, with 47,809, 61,254
and 34,901 shares issued in fiscal 2000, 1999 and 1998, respectively.

(12) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts for the Company's cash and cash equivalents,
short-term investments, trade receivables, income tax refund receivable,
accounts payable and accrued expenses approximate fair value because of the
short-term maturity of these instruments. The carrying amounts of notes payable
to bank, long-term debt, and capital lease obligations approximate fair value
because the interest rates vary with or approximate market rates.

(13) EMPLOYEE BENEFIT PLAN

     The Company sponsors a profit-sharing/401(k) plan. The plan covers
substantially all of the Company's employees. The Company makes contributions to
the plan, subject to ERISA limitations, up to 2.4% of employees' earnings. Total
expense under the plan for the years ended March 31, 2000, 1999 and 1998 was
$219,000, $197,000 and $146,000, respectively.

(14) COMMITMENTS AND CONTINGENCIES

     The Company is involved in certain litigation matters arising in the normal
course of business. In the opinion of Company management, these matters will not
have a material adverse effect on the accompanying consolidated financial
statements.

(15) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Cash paid during the year for interest totaled $4,000, $57,000 and $2,000
for the years ended March 31, 2000, 1999 and 1998, respectively.

                                       42
<PAGE>   43

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

     Not Applicable.

                                       43
<PAGE>   44

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding directors and executive officers of the Company is
contained under the caption "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" included in the Proxy Statement for
the 2000 Annual Meeting of Stockholders, 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" and "Election of Directors -- Director Compensation" included in
the Proxy Statement for the 2000 Annual Meeting of Stockholders, which is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information regarding security ownership of certain beneficial owners and
management is contained under the captions "Common Stock Ownership of Directors,
Nominees, and Officers" and "Common Stock Ownership of Certain Beneficial
Owners," included in the Proxy Statement for the 2000 Annual Meeting of
Stockholders, which 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 Transactions,"
included in the Proxy Statement for the 2000 Annual Meeting of Stockholders,
which is incorporated herein by reference.

                                    PART IV

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

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

           (1)  Financial Statements

             See Item 8 -- Index to Consolidated Financial Statements

           (2)  Financial Statement Schedules

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

           (3)  Exhibits

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

     (b)  Reports on Form 8-K

        No reports on Form 8-K were filed by the Registrant during the fiscal
        quarter ended March 31, 2000.

                                       44
<PAGE>   45

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                          TALX CORPORATION

                                                /s/ WILLIAM W. CANFIELD
                                          By:
                                          --------------------------------------

                                                 Chairman, President, Chief
                                               Executive Officer and Director

Date: June 28, 2000

     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>
<C>                                            <S>                                  <C>
           /s/ WILLIAM W. CANFIELD             Chairman, President,                 June 28, 2000
---------------------------------------------  Chief Executive Officer and
             William W. Canfield               Director
                                               (Principal Executive Officer)

             /s/ RICHARD F. FORD               Director                             June 28, 2000
---------------------------------------------
               Richard F. Ford

            /s/ CRAIG E. LABARGE               Director                             June 28, 2000
---------------------------------------------
              Craig E. LaBarge

            /s/ EUGENE M. TOOMBS               Director                             June 28, 2000
---------------------------------------------
              Eugene M. Toombs

             /s/ M. STEVE YOAKUM               Director                             June 28, 2000
---------------------------------------------
               M. Steve Yoakum

             /s/ CRAIG N. COHEN                Chief Financial Officer              June 28, 2000
---------------------------------------------
               Craig N. Cohen

             /s/ L. KEITH GRAVES               Principal Accounting Officer         June 28, 2000
---------------------------------------------
               L. Keith Graves
</TABLE>

                                       45
<PAGE>   46

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                            DESCRIPTION
 -------                           -----------
<S>        <C>
 2.1*      Agreement and Plan of Merger, dated as of July 15, 1996, by
           and between the Company And Intech Group Inc. +
 3.1****   Restated Articles of Incorporation of the Company, as
           amended
 3.2       Intentionally Omitted
 3.3*      Bylaws of the Company
 4.1       See Exhibits 3.1 and 3.2
 4.2****   Warrant Agreement dated as of October 22, 1996 among the
           Company, First Albany Corporation and Principal Financial
           Securities, Inc.
10.1*      TALX Corporation 1988 Incentive Stock Option Plan ++
10.2*      Form of Incentive Stock Option Agreement ++
10.3*      TALX Corporation Amended and Restated 1994 Stock Option
           Plan ++
10.4*      Form of Non-Qualified Stock Option Agreement ++
10.5       Intentionally Omitted
10.6*      TALX Corporation Outside Directors' Stock Option Plan ++
10.7*****  Form of Director Stock Option Agreement
10.8       Intentionally Omitted
10.9       Intentionally Omitted
10.10*     Lease dated March 28, 1996 by and between the Company 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"
10.11**    Lease dated August 23, 1993 by and between the Prudential
           Insurance Company of America, a New Jersey corporation and
           EKI Incorporated
10.12*     Registration Rights Agreement dated March 15, 1994 among the
           Company, Intech Group Inc. and Intech Partners, L.P.
10.13**    Amended and Restated Preferred Stock Purchase Agreement
           dated December 23, 1988 Among the Company, MiTek Industries,
           Inc., Intech Group Inc., Gateway Venture, Zinsmeyer Trusts
           Partnership, and Missouri Venture Partners, L.P.
10.14**    Securities Purchase Agreement dated November 28, 1990 among
           the Company, MiTek Industries, Inc., Intech Group Inc.,
           Gateway Venture Partners II, L.P., and Zinsmeyer Trusts
           Partnership
10.15*     Amendment and Waiver Agreement dated as of July 28, 1996
           between the Company, Intech Group, Inc., Intech Partners,
           L.P., MiTek Industries, Inc., Gateway Venture Partners II,
           L.P., Zinsmeyer Trusts Partnership and the Missouri State
           Employee's Retirement System.
10.16      Intentionally Omitted
10.17      Intentionally Omitted
10.18      Intentionally Omitted
10.19*     Debenture Purchase Agreement dated May 11, 1990 among the
           Company, Intech Group, Inc., MiTek Industries, Inc., Gateway
           Venture Partners II, L.P., Zinsmeyer Trusts Partnership, H.
           Richard and Gloria Grodsky, W. Gary and Debra Lowe, Michael
           and Della Smith and John E. and Janet B. Tubbesing
10.20      Intentionally Omitted
10.21***   Employment Agreement between TALX Corporation and Mr.
           Canfield ++
</TABLE>

                                       46
<PAGE>   47

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                            DESCRIPTION
 -------                           -----------
<S>        <C>
10.22      Intentionally Omitted
10.23***   Employment Agreement between TALX Corporation and Mr.
           Smith ++
10.24***   Employment Agreement between TALX Corporation and Mr.
           Cohen ++
10.25      Southwest Bank Line of Credit Note 11.1 Statement re
           Computation of Per Share Earnings
11.1       Statement re Computation of Per Share Earnings
21.1*      Subsidiaries of the Company
23.1       Consent of KPMG LLP
27.1       Financial Data Schedule
</TABLE>

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

*     Incorporated by reference to exhibit with corresponding number to the
      Company's Registration Statement on Form S-1 (File No. 333-10969)

**   Incorporated by reference to exhibit with corresponding number to Amendment
     No. 1 to the Company's Registration Statement on Form S-1 (File No.
     333-10969)

***  Incorporated by reference to exhibit with corresponding number to Amendment
     No. 2 to the Company's Registration Statement on Form S-1 (File No.
     333-10969)

**** Incorporated by reference to exhibit with corresponding number to the
     Company's Annual Report on Form 10-K for the year ended March 31, 1997
     (File No. 000-21465)

***** Incorporated by reference to exhibit with corresponding number to the
      Company's Annual Report on Form 10-K for the year ended March 31, 1998
      (File No. 000-21465)

+     The registrant undertakes to furnish supplementally a copy of any omitted
      schedule to the Commission upon request.

++   Represents management contract or compensatory plan or arrangement.

                                       47