<PAGE>   1
                                   FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                       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 0-20284


                         CITATION COMPUTER SYSTEMS, INC.
              -----------------------------------------------------
              (Exact name of registrant as specified in its charter)

           MISSOURI                                             43-1174397
-------------------------------                           -------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                            Identification No.)

    424 SOUTH WOODS MILL ROAD, CHESTERFIELD, MISSOURI           63017
   ---------------------------------------------------------------------
       (Address of principal executive offices)               (Zip Code)

                                (314) 579-7900
                             ---------------------
              (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filled 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.

Yes  [X]        No [ ]

The number of shares outstanding of the registrant's Common Stock, par value
$0.10 per share, at November 2, 1999 was 3,867,061 shares.

Transitional small business disclosure format:         Yes [ ]  No [X]


Exhibit Index on Page 15                                            Page 1 of 15

<PAGE>   2



                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

            See pages F-1 to F-6 hereof.

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Any forward-looking statements set forth herein are necessarily subject
to significant uncertainties and risks. The words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements. Actual results could be materially different as a result of various
possibilities, including difficulties or delays in the introduction of new
products or the revision of existing products, significant changes in healthcare
regulation, economic downturns in any of CITATION Computer Systems, Inc.'s (the
"Company") markets, competitors, new entrants into the Company's markets,
increased price pressure, customer reduction caused by industry consolidation or
other factors or marketplace acceptance of Windows NT as an operating platform.

        Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

        For further discussion of risk factors, please refer to page 9 of the
Company's Form 10KSB Annual Report for the fiscal year ended March 31, 1999 as
filed with the Securities and Exchange Commission.

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999, TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

        GENERAL. The Company reported net income of $0.03 per share, or $0.1
million, for the second quarter of fiscal 2000, compared to net income of $0.05
per share, or $0.2 million in the comparable period of fiscal 1999. The decrease
in profitability from the prior year was principally the result of a higher
percentage of lower margin hardware sales which more than offset higher total
revenues and lower operating expenses.

         REVENUES. Total revenue increased 5.3% from $4.1 million for the second
quarter of fiscal 1999 to $4.3 million for the second quarter of fiscal 2000. A
12.8% increase in system sales revenue was partially offset by a 4.9% decrease
in service revenue.

         System sales revenue for the second quarter increased $0.3 million,
from $2.4 million in fiscal 1999 to $2.7 million in fiscal 2000. The 12.8%
increase in system sales was primarily attributable to revenues resulting from
the Company's new NT(R) products, C-LMB(R) AND C-COM(R), as well as increased
hardware sales from Y2K-related systems upgrades. System sales represented 57.3%
and 61.4% of total revenues for the second quarter of fiscal 1999 and 2000,
respectively.

         Service revenue for the second quarter decreased $0.1 million to $1.7
million in fiscal 2000. The 4.9% decrease was primarily due to the reduction in
sales and renewals of service contracts from existing customers. Service revenue
represented 42.7% and 38.6% of total revenues for the second quarter of fiscal
1999 and 2000 respectively.




                                                                          Page 2
<PAGE>   3

         COST OF PRODUCTS AND SERVICES SOLD AND GROSS PROFIT. Cost of products
and services sold include cost of system sales and cost of service revenues.
Cost of system sales includes hardware sold, installation and training expenses,
and software amortization costs. Cost of service revenue includes all client
service expenses plus an allocation of certain other overhead expenses. As a
percentage of total revenue, the total cost of products and services sold
increased from 44.2% in the second quarter of fiscal 1999 to 53.8% in the second
quarter of fiscal 2000. For the second quarter of fiscal 1999 and 2000, total
cost of products and services sold were $1.8 million and $2.3 million,
respectively.

         The cost of system sales as a percent of system sales revenue increased
from 59.6% in the second quarter of fiscal 1999 to 72.4% in the second quarter
of fiscal 2000 due to the increased percentage of lower margin hardware sales in
the second quarter of fiscal 2000. The cost of service revenue as a percent of
service revenue increased from 23.7% in the second quarter of fiscal 1999 to
24.3% in the second quarter of fiscal 2000 due primarily to increased client
services costs. Software amortization costs of $0.4 million in the second
quarter of fiscal 1999 and $0.3 million in fiscal 2000 represented 21.2% and
13.3%, respectively, of total costs of products and services sold.

         Gross profit as a percentage of total revenues decreased from 55.8% in
the second quarter of fiscal 1999 to 46.2% in the second quarter of fiscal 2000.
The decrease in gross profit as a percentage of total revenues was primarily
attributable to the factors discussed above.

         RESEARCH AND DEVELOPMENT COSTS. Total outlays for software development
for the second quarter of fiscal 1999 and 2000 were as follows (000's):

<TABLE>
<CAPTION>
                                                 FY00              FY99
R&D EXPENSE                                      2ND QTR.          2ND QTR.
-----------                                     --------          --------
<S>                                            <C>               <C>

R&D spending                                   $   780.6         $   892.7
Less-R&D capitalized                               198.3             224.2
                                               ---------         ---------
     Total R&D expense                             582.3             668.5
Software amortization (cost of prod. sold)         310.1             384.8
                                               ---------         ---------
Total R&D expensed                             $   892.4         $ 1,053.3
                                               =========         =========
</TABLE>


         For the second quarter of fiscal years 1999 and 2000, the Company
capitalized 25.1% and 25.4%, respectively, of software development spending.

         The decrease in research and development spending in the second quarter
of fiscal 2000 compared to the second quarter of fiscal 1999 relates to the lack
of significant product enhancement programs during the current year. The Company
anticipates that research and development spending will increase in future
quarters as product enhancement programs are initiated.

         SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses as a percentage of total revenues decreased from 32.6% in the second
quarter of fiscal 1999, to 28.2%, in the second quarter of fiscal 2000. This
decrease was principally a result of the relatively fixed nature of selling and
administrative expenses in relation to the increase in revenues. Total selling
and administrative expenses decreased $0.1 million to $1.2 million in this
year's second quarter.

         OPERATING INCOME. Operating income decreased from $0.3 million in the
second quarter of fiscal 1999 to $0.2 million in the second quarter of fiscal
2000. The operating margin decreased from 6.9% to 4.5% in the second quarter of
fiscal 1999 and 2000 respectively, primarily reflecting the factors discussed
above.

         OTHER INCOME. Interest expense, net increased from expense of $11.6
thousand in the second quarter of fiscal 1999 to expense of $26.9 thousand in
the second quarter of fiscal 2000 due to a net increase in borrowings.




                                                                          Page 3
<PAGE>   4

         INCOME TAXES. The Company's effective income tax provision rate was 38%
and 40% in the second quarter of fiscal years 1999 and 2000, respectively.

COMPARISON OF SIX MONTHS ENDED SEPTEMBER 30, 1999, TO SIX MONTHS ENDED
SEPTEMBER 30, 1998

         GENERAL. The Company reported net income of $0.06 per share, or $244.6
thousand, for the first six months of fiscal 2000, compared to net income of
$0.01 per share, or $42.6 thousand in the comparable period of fiscal 1999. Net
income from ongoing operations for the six months of fiscal 1999, excluding the
loss on the sale of the financial systems business, was $85.6 thousand or $0.02
per share. The increase in profitability from the prior year was principally the
result of higher sales.

        In June 1998, the Company sold its financial systems business, including
its accounts receivable, patient billing, general ledger, accounts payable,
fixed assets, inventory control, medical records abstracting and registration
software modules, to Sterling Systems based in Pocatello, Idaho. See Note 6 to
the accompanying financial statements.

         REVENUES. Total revenues increased 15.0% from $7.5 million for the
first six months of fiscal 1999 to $8.6 million for the first six months of
fiscal 2000, which reflects a 42.5% increase in system sales revenue and an
11.4% decrease in service revenue.

         System sales revenue for the first six months increased by $1.6
million, from $3.7 million in fiscal 1999 to $5.3 million in fiscal 2000. The
42.5% increase in system sales was primarily attributable to new system orders
for the Company's new NT(R) products. System sales represented 49.0% of total
revenues for the first six months of fiscal 1999 and 60.7% of total revenues for
the corresponding period in fiscal 2000.

         Service revenue for the first six months decreased by $0.4 million,
from $3.8 million in fiscal 1999 to $3.4 million in fiscal 2000. Included in the
first six months of fiscal 1999 was $0.3 million service revenue from the
financial products. Service revenue represented 51.0% and 39.3% of total
revenues for the first six months of fiscal 1999 and 2000, respectively.

         COST OF PRODUCTS AND SERVICES SOLD AND GROSS PROFIT. As a percentage of
total revenue, the total cost of products and services sold increased from 46.9%
in the first six months of fiscal 1999 to 52.3% in the first six months of
fiscal 2000. The increase in cost as a percentage of revenue was primarily due
to the change in product mix and increased client services expense relating to
the Year 2000 issue. Software amortization costs of $0.9 million and $0.7
million in the six months of fiscal years 1999 and 2000 represented 25.8% and
14.6%, respectively, of total costs of products and services sold.

         Gross profit as a percentage of total revenues decreased from 53.1% in
the first six months of fiscal 1999 to 47.7% in the first six months of fiscal
2000. The decrease in gross profit as a percentage of total revenues was
primarily attributable to the factors discussed above.

         RESEARCH AND DEVELOPMENT COSTS. Total outlays for software development
for the first six months of fiscal 1999 and 2000 were as follows ($000's):

<TABLE>
<CAPTION>
                                                    FY00            FY99
R&D EXPENSE                                      SIX MONTHS      SIX MONTHS
-----------                                      ----------      ----------
<S>                                               <C>             <C>
R&D spending                                      $1,553.8        $1,698.9
Less - R&D capitalized                               404.2           428.2
                                                  --------        --------
     Total R&D expense                             1,149.6         1,270.7
Software amortization (cost of prod. sold)           659.4           909.4
                                                  --------        --------
Total R&D expensed                                $1,809.0        $2,180.1
                                                  ========        ========
</TABLE>



                                                                          Page 4

<PAGE>   5

         For the first six months of fiscal years 1999 and 2000, the Company
capitalized 25.2% and 26.0%, respectively, of software development spending.

         SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses decreased from $2.6 million in the first six months of fiscal 1999 to
$2.5 million in the first six months of fiscal 2000, a decrease of 3.3%. Total
selling and administrative expenses decreased primarily due to management's
ability to maintain strict cost controls during the first half of the fiscal
year. Selling and administrative expenses as a percentage of total revenues
decreased from 34.6% in fiscal 1999 to 29.0% in fiscal 2000.

         OPERATING INCOME. Operating income increased from $0.1 million in the
first six months of fiscal 1999, excluding the $70 thousand loss on the sale of
the financial systems business, to $0.5 million in the first six months of
fiscal 2000, primarily reflecting the increase in total revenues as well as
other factors described above.

         OTHER INCOME. Interest expense, net increased from $23.9 thousand in
the first six months of fiscal 1999 to $54.1 thousand in the first six months of
fiscal 2000 due to the higher borrowings under the Company's line of credit.

         INCOME TAXES. The Company reported an effective income tax provision
rate of 39% in the first six months of fiscal 1999 compared to an effective
income tax provision rate of 40% in the first six months of fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary source of liquidity is cash flow from operations.
At March 31, 1999 and September 30, 1999, the Company had cash and cash
equivalents in the amount of $0.2 million. Cash flows in the six months ended
September 30, 1999 reflects amounts paid for capital investments ($0.1 million),
software development costs ($0.4 million), and net repayment of long-term debt
($0.2 million), offset by cash generated from operating activities of $0.7
million.

         At March 31, 1998, the Company had cash and cash equivalents in the
amount of $0.4 million as compared to $0.2 million at September 30, 1998. Cash
flows in the six months ended September 30, 1998 reflects amounts paid for
capital investments ($0.1 million), capitalized software development costs ($0.4
million), and repayment of long-term debt, ($0.2 million), offset by cash
generated from operating activities of $0.1 million and proceeds under the line
of credit of $0.4 million. The decrease in cash generated from operating
activities from the prior year is primarily due to the decrease in deferred
service revenue ($0.6 million) and the increase in prepaid expenses ($0.3
million).

         As of September 30, 1999, the Company had a line of credit agreement
that allows the Company to borrow up to $4.0 million through 2001 with interest
at the lender's prime rate (8.25% at September 30, 1999). The line of credit is
secured by the Company's accounts receivable, inventory and general intangible
assets. The respective agreements require that certain minimum net worth and
leverage ratio requirements be maintained by the Company. The Company was in
compliance with these requirements or has obtained waivers at September 30,
1999. There were borrowings of $1.1 million outstanding under the line of credit
agreement as of September 30, 1999 which have been classified as long-term debt
on the September 30, 1999 Consolidated Balance Sheet.

         The Company believes that its cash and cash equivalents, together with
its current borrowing facilities and cash generated from operations, will be
sufficient to fund its anticipated cash requirements for at least the next 12
months. The Company's ability to meet its cash requirements on a long-term basis
will depend on profitable operations and consistent and timely collections of
its accounts receivable.



                                                                          Page 5
<PAGE>   6

YEAR 2000 ISSUE

         The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
equipment, software and devices with imbedded technology that are time sensitive
may treat years as occurring between 1900 and the end of 1999 may not
self-convert to reflect the upcoming change in the century. If not corrected,
this problem could result in system failures or miscalculations and erroneous
results by or at the Year 2000. The Company has developed a Year 2000 compliance
program to make its systems Year 2000 compliant. This program encompasses the
Company's operating information and facilities systems, its vendors and other
third parties with which the Company does business. The program includes the
following phases: awareness and inventory, detailed assessment and resolution,
testing, deployment and contingency plan development for all areas.

         The Company is utilizing resources to identify, correct, reprogram and
test both its systems used internally as well as the products it sells for Year
2000 compliance. As part of the Company's Year 2000 compliance program the
Company has: (i) identified all critical software sold and used by the Company
that requires modification for the Year 2000 and completed an estimate of the
personnel time required to complete such software modifications; (ii) received
written or oral confirmation from its telecommunications vendors that the
equipment supplied by such vendors is or will be Year 2000 compliant; (iii)
instituted a formal communication process to keep senior management apprised of
significant Year 2000 issues; and (iv) developed a schedule for completing
necessary Year 2000 modifications in a timely manner. All reprogramming efforts
and related testing have been completed. Notification has been sent to all
customers of the Company's systems regarding the Year 2000 issue and its
potential effect on those customers systems, hardware and instruments.

         The total cost of the Year 2000 project to date has been less than $150
thousand, principally related to upgraded hardware. Based on the program to
date, the Company does not expect that future costs of modifications will have a
material adverse effect on the Company's financial position, results of
operations or cash flow and that currently anticipated additional costs to be
incurred by the Company with respect to Year 2000 issues will be funded from
operating cash flows and/or the Company's line of credit. However, if all Year
2000 issues are not properly identified, or assessment, remediation and testing
are not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customer, vendors, or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems, financial position, cash flows or
results of operations.

         Because the Company believes that its internal systems are Year 2000
compliant and believes that it has or will have taken all necessary steps with
regard to customers and Company products sold to customers in a timely manner,
the Company believes that the most likely worst case scenario would result from
vendors or other third parties failing to achieve Year 2000 compliance.
Depending upon the number of third parties, their identity and the nature of the
non-compliance, the Year 2000 issue could have a material adverse effect on the
Company's financial position, cash flows or results of operations.



                                                                          Page 6
<PAGE>   7


PART II - OTHER INFORMATION

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

         The Company's 1999 Annual Meeting of Shareholders was held on August
19, 1999. Two matters were submitted to a vote of the shareholders of the
Company: the election of two Class 1 Directors and consideration of the
appointment of PricewaterhouseCoopers LLP to serve as independent auditors of
the Company.

         Two people were nominated to fill the two director positions voted upon
at the meeting. The nominees and the votes cast are, with respect to each,
listed below:

Nominee                        Votes For     Votes Withheld     Broker Non-Votes
-------                        ---------     --------------     ----------------
     Fred L. Brown             2,995,890        29,787                -

     Larry D. Marcus           2,987,430        38,247                -


         The nominees were elected and will serve until the 2002 Annual Meeting
of Shareholders or until their successors are duly qualified and elected. The
directors continuing in office are J. Robert Copper, James F. O'Donnell and
David T. Pieroni.

         The second measure submitted was the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the Corporation. To
approve the proposal, the affirmative vote of holders of a majority of the
shares represented in person and by proxy at the Annual Meeting was required.
The affirmative votes were 3,012,539; votes against were 5,338; abstentions were
7,800; and there were no broker non-votes. The affirmative votes equaled 99.6
percent of the shares present in person or by proxy at the Annual Meeting, and
thus the proposal was approved.

         No other matters were submitted to the shareholders of the Company.

ITEM 5.  OTHER INFORMATION

         On August 19, 1999, the Board of Directors of the Company approved the
CITATION Computer Systems, Inc. 1999 Director Stock Option Plan (the "Plan").
The Plan provides for the granting of nonqualified stock options to the
directors of the Company who are not otherwise officers or employees of the
Company. Pursuant to the terms of the Plan, eligible directors may, on an annual
basis, elect to be granted options to purchase either: (a) 10,000 shares of
Company common stock, or (b) twice the number of shares of Company common stock
purchased by the director during a Plan year, not to exceed 20,000 shares. The
purchase price for the shares subject to the options will be 100% of the market
value of the Company common stock on the date of the option grant. A total of
400,000 shares of Company common stock has been reserved for issuance under the
Plan. The purpose of the Plan is (1) to compensate directors of the Company for
their services during the preceding fiscal year, (2) to induce directors of the
Company to remain directors of the Company over the long term, (3) to align the
directors' interests in the Company's financial performance more directly with
those of the shareholders and (4) to aid the Company in competing with other
enterprises for the services of new directors. The Plan will be submitted for
approval by the shareholders of the Company at the 2000 Annual Meeting of
Shareholders.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) See Exhibit Index for list of Exhibits.

         (b) None.



                                                                          Page 7
<PAGE>   8



                                   SIGNATURES


         In accordance with the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.


                                           CITATION COMPUTER SYSTEMS, INC.

Date:    November 4, 1999                  By:  /s/Richard D. Neece
         ----------------                       --------------------------
                                           Richard D. Neece
                                           President and Chief Financial Officer



                                                                          Page 8
<PAGE>   9



                          CITATION COMPUTER SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                  September 30,  March 31,
                                                      1999         1999
                                                  ------------   --------
                                                   (unaudited)  (audited)
<S>                                              <C>          <C>
Assets
Current assets:
   Cash and cash equivalents                     $   245.2   $   203.6
   Accounts receivable:
     Trade, net                                    6,733.3     6,857.0
     Other                                           446.0       445.1
   Inventories                                       457.7       348.7
   Prepaid expenses and other current assets         309.5       369.2
   Deferred tax asset                                142.0       142.0
                                                 ---------   ---------

Total current assets                               8,333.7     8,365.6

   Software development costs, net                 1,519.9     1,775.1
   Property and equipment, net                       556.6       699.1
   Long-term accounts receivable                   1,568.7     1,568.7
   Long-term deferred tax assets                     945.5     1,103.8
   Other assets                                      281.1       365.9
                                                 ---------   ---------

Total assets                                     $13,205.5   $13,878.2
                                                 =========   =========

Liabilities and shareholders' equity:
Current liabilities:
   Current portion of long-term debt             $   215.8   $   238.6
   Accounts payable                                  621.7     1,223.3
   Customer deposits                                 303.9       236.3
   Accrued bonuses and commissions                   156.5       138.8
   Other accrued liabilities                         197.1       210.3
   Deferred service revenue                        2,304.8     2,521.2
                                                 ---------   ---------

Total current liabilities                          3,799.8     4,568.5
                                                 ---------   ---------

   Long-term debt                                  1,322.1     1,491.3
                                                 ---------   ---------

   Common stock                                      384.9       383.8
   Paid-in capital                                 6,615.7     6,596.2
   Retained earnings                               1,083.0       838.4
                                                 ---------   ---------

                                                   8,083.6     7,818.4
                                                 ---------   ---------
Total liabilities and shareholders' equity       $13,205.5   $13,878.2
                                                 =========   =========
</TABLE>

        See accompanying notes to consolidated financial statements       F-1
                                                                          Page 9


<PAGE>   10




                        CITATION COMPUTER SYSTEMS, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                  Three months ended               Six months ended
                                                                     September 30,                   September 30,
                                                                  ------------------               ----------------

                                                                   1999            1998            1999            1998
                                                                 ---------      ---------       ---------        ---------
                                                                (unaudited)    (unaudited)     (unaudited)      (unaudited)
<S>                                                             <C>             <C>             <C>              <C>
Net system sales and service revenues:
   System sales                                                 $ 2,652.9       $ 2,351.6       $ 5,254.0        $ 3,687.3
   Service revenue                                                1,669.1         1,754.2         3,395.7          3,832.9
                                                                ---------       ---------       ---------        ---------
                                                                  4,322.0         4,105.8         8,649.7          7,520.2
                                                                ---------       ---------       ---------        ---------
Cost of products and service sold:
   System costs                                                   1,921.1         1,401.3         3,726.7          2,617.7
   Service costs                                                    405.7           415.0           799.5            912.0
                                                                ---------       ---------       ---------        ---------
                                                                  2,326.8         1,816.3         4,526.2          3,529.7
                                                                ---------       ---------       ---------        ---------
     Gross profit                                                 1,995.2         2,289.5         4,123.5          3,990.5

Research and development expense                                    582.3           668.5         1,149.6          1,270.7
Selling and administrative expenses                               1,217.6         1,336.7         2,512.2          2,598.8
Loss on sale of financial systems business (Note 6)                     -               -               -             70.5
                                                                ---------       ---------       ---------        ---------

Operating income                                                    195.3           284.3           461.7             50.5

Other income:
   Interest expense, net                                            (26.9)          (11.6)          (54.1)           (23.9)
   Other                                                                -             6.4             0.1             43.2
                                                                ---------       ---------       ---------        ---------
Income before income taxes                                          168.4           279.1           407.7             69.8

Provision for income taxes                                           67.4           106.7           163.1             27.2
                                                                ---------       ---------       ---------        ---------
Net income                                                      $   101.0       $   172.4       $   244.6        $    42.6
                                                                =========       =========       =========        =========

Net earnings per common share:
   Basic and diluted                                            $    0.03       $    0.05       $    0.06        $    0.01
                                                                =========       =========       =========        =========

Weighted average number of shares used in computing
   net earnings per common share:
     Basic                                                          3,848           3,815           3,845            3,813
                                                                =========       =========       =========        =========
     Diluted                                                        3,857           3,815           3,851            3,841
                                                                =========       =========       =========        =========
</TABLE>


  See accompanying notes to consolidated financial statements            F-2
                                                                         Page 10
<PAGE>   11



                        CITATION COMPUTER SYSTEMS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                                           Six months ended
                                                                                             September 30,
                                                                                     -------------------------------
                                                                                        1999                1998
                                                                                     -----------         -----------
                                                                                     (unaudited)         (unaudited)
<S>                                                                                  <C>                 <C>
Cash flows from operating activities:
Net income                                                                           $   244.6           $    42.6

Adjustments to reconcile net income to net cash provided by operating
   activities:
   Depreciation and amortization of property and equipment                               235.1               300.3
   Amortization of software development costs                                            659.4               909.4
   Non-cash charge related to sale of financial systems business                             -               538.7
   Non-cash 401K matching contribution and issuance of Directors' stock                   20.6                67.6
   Decrease in deferred income taxes                                                     158.3                79.5
   (Increase) decrease in accounts receivable                                            122.8              (434.5)
   Increase in inventories                                                              (109.0)              (75.5)
   (Increase) decrease in prepaid expenses and other assets                              144.5              (325.6)
   Decrease in accounts payable                                                         (601.6)             (191.7)
   Increase (decrease) in customer deposits                                               67.6              (161.9)
   Increase (decrease) in accrued bonuses and commissions                                 17.7                (4.0)
   Decrease in other accrued liabilities                                                 (13.2)               (4.9)
   Decrease in deferred service revenue                                                 (216.4)             (602.0)
                                                                                     ---------           ---------

Net cash provided by operating activities                                                730.4               138.0
                                                                                     ---------           ---------
Cash flows from investing activities
   Capital expenditures                                                                 ( 92.6)             (137.7)
   Software development costs                                                           (404.2)             (428.2)
                                                                                     ---------           ---------

Net cash used in investing activities                                                   (496.8)             (565.9)
                                                                                     ---------           ---------

Cash flows from financing activities:
   (Repayments) proceeds from line of credit                                             (66.9)              432.3
   Principal payments on long-term debt                                                 (125.1)             (185.0)
                                                                                     ---------            --------
Net cash provided by (used in) financing activities                                     (192.0)              247.3
                                                                                     ---------            --------

Net increase (decrease) in cash and cash equivalents                                      41.6              (180.6)

Cash and cash equivalents, beginning of year                                             203.6               419.7
                                                                                     ---------           ---------
Cash and cash equivalents, end of period                                             $   245.2           $   239.1
                                                                                     =========           =========

</TABLE>


       See accompanying notes to consolidated financial statements       F-3
                                                                         Page 11


<PAGE>   12



                          CITATION COMPUTER SYSTEMS, INC.
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                  (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                                Common Stock
                                                                ------------
                                                                              Additional
                                                      Number       Par         Paid-in       Retained
                                                    of Shares     Value        Capital       Earnings         Total
                                                    ----------  ----------    ----------    ----------     ----------
<S>                                                 <C>         <C>           <C>           <C>            <C>
Balance, March 31, 1999 (audited)                    3,838,344   $   383.8     $ 6,596.2     $   838.4      $ 7,818.4

Issuance of common stock for 401K
   company matching contribution
   (unaudited)                                          10,717         1.1          19.5             -           20.6

Net income (unaudited)                                       -                         -         244.6          244.6
                                                     ---------   ---------     ---------     ---------      ---------


Balance, September 30, 1999 (unaudited)              3,849,061   $   384.9     $ 6,615.7     $ 1,083.0      $ 8,083.6
                                                     =========   =========     =========     =========      =========
</TABLE>


      See accompanying notes to consolidated financial statements    F-4
                                                                         Page 12


<PAGE>   13



                         CITATION COMPUTER SYSTEMS, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The interim financial information as of September 30, 1999 and for the
     three and six months periods ended September 30, 1999 and 1998 is
     unaudited. Financial statement note disclosures, normally included in
     financial statements prepared in conformity with generally accepted
     accounting principles, have been omitted in this Form 10-QSB pursuant to
     the Rules and Regulations of the Securities and Exchange Commission.
     However, in the opinion of the Company, the disclosures contained in this
     Form 10-QSB are adequate to make the information presented not misleading.
     See Notes to Financial Statements as incorporated by reference in the
     Company's Annual Report on Form 10-KSB for the fiscal year ended March 31,
     1999.

         In the opinion of the Company, the accompanying unaudited consolidated
     financial statements include all adjustments, consisting solely of normal
     recurring adjustments, necessary to present fairly the Balance Sheet at
     September 30, 1999, the Statement of Operations for the three and six
     months ended September 30, 1999 and 1998, the Statement of Cash Flows for
     the six months ended September 30, 1999 and 1998, and the Statement of
     Shareholders' Equity for the six months ended September 30, 1999. The
     interim results, however, are not necessarily indicative of results for any
     future period.

2.   INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>



                                                SEPT. 30,     MARCH 31,
                                                  1999          1999
                                                ---------     ---------
<S>                                             <C>           <C>
         Hardware and third party software      $   247.1     $   143.7
         Field service equipment                    210.6         205.0
                                                ---------     ---------
                                                $   457.7     $   348.7
                                                =========     =========
</TABLE>

3.   COMMITMENTS AND CONTINGENCIES

         The Company from time to time is a party to certain lawsuits in the
     ordinary course of business. Management does not expect the outcome of any
     litigation to have a material adverse effect on the Company's financial
     position, results of operations, or cash flows.

4.   LONG-TERM ACCOUNTS RECEIVABLE

         The Company has provided extended payment terms to a customer in
     Singapore. At September 30, 1999, $1.6 million was outstanding.

                                                               F-5
                                                               Page 13


<PAGE>   14



5.   LONG-TERM DEBT

         As of September 30, 1999, the Company had a line of credit agreement
     that allowed the Company to borrow up to $4.0 million with interest at the
     lender's prime rate. The line of credit expires on June 1, 2001. The line
     of credit and the notes payable to banks are secured by the Company's
     accounts receivable, inventory and equipment. The respective agreements
     require that certain minimum net worth and leverage ratio requirements be
     maintained by the Company. The Company was in compliance with these
     requirements or has obtained waivers at September 30, 1999. The Company had
     $1.1 million in borrowings outstanding under the line of credit agreement
     at September 30, 1999.

6.   SALE OF FINANCIAL SYSTEMS BUSINESS

         In June 1998, the Company sold the financial software line of business,
     including its accounts receivable, patient billing, general ledger,
     accounts payable, fixed assets, inventory control, medical records
     abstracting and registration software modules to Sterling Systems based in
     Pocatello, Idaho. The transaction resulted in an after-tax loss on disposal
     of $43.7 thousand, or $0.01 per share, in the first quarter of fiscal 1999.

7.   EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE

         Reconciliation of the number of shares used in computing basic and
     dilutive earnings per common and common equivalent shares is as
     follows:

<TABLE>
<CAPTION>
                                                            Three Months Ended           Six Months Ended
                                                               September 30                September 30
                                                            ------------------           ----------------
                                                              1999        1998        1999         1998
                                                              ----        ----        ----         ----
<S>                                                       <C>          <C>          <C>          <C>
     Basic                                                3,847,569    3,815,306    3,844,762    3,813,289
     Effective of dilutive securities - stock options         9,035            -        6,663       27,836
                                                          ---------    ---------    ---------    ---------

     Diluted                                              3,856,604    3,815,306    3,851,425    3,841,125
                                                          =========    =========    =========    =========
</TABLE>


                                                                         F-6
                                                                         Page 14







<PAGE>   15





                                 EXHIBIT INDEX



Exhibit
Number                   Exhibit
------                   -------
10                       1999 Director Stock Option Plan

27 (a)                   Financial Data Schedule


                                                                         Page 15