<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

[ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [Fee Required] FOR THE YEAR ENDED DECEMBER 31,
         1997.
                                       OR

[    ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [No Fee Required] FOR THE TRANSITION PERIOD 
         FROM ______ TO ______.

Commission file number 0-22010

                               THOMAS GROUP, INC.
             (Exact name of registrant as specified in its charter)

                    DELAWARE                                   72-0843540
        (State or other jurisdiction of                     (I.R.S. Employer 
         incorporation or organization)                    Identification No.)

5215 NORTH O'CONNOR BOULEVARD, SUITE 2500, IRVING, TEXAS       75039-3714
(Address of principal executive offices)                       (Zip Code)

                   (972) 869-3400
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
         Title of each class                   Name of each exchange on which registered
         -------------------                   -----------------------------------------
<S>                                            <C>
Common Stock, par value $.01 per share                          NASDAQ-NMS
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:  None

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 (Section 229.405 of this chapter) 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 February 28, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $30,401,000, based on the NASDAQ-NMS
closing price.

As of February 28, 1997, the following number of shares of the registrant's
stock were outstanding:

<TABLE>
          <S>                                    <C>
          Common Stock                           5,983,053
          Class B Common Stock                     164,174
                                               -----------
          Total                                  6,147,227
                                               ===========
</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the 1997 Annual Report to Stockholders are incorporated by
reference into Part II.  Portions of the definitive Proxy Statement for the
1998 Annual Meeting of Stockholders are incorporated by reference into Part
III.
<PAGE>   2
                                     PART I

ITEM 1.      BUSINESS.

GENERAL

         The Company provides management consulting services designed to
improve the competitiveness and profitability of the Company's clients.  The
Company's specific methodology, known as Total Cycle Time, focuses on reducing
the time spent on revenue-producing, product development and administrative
processes.  By accelerating these processes using Total Cycle Time methodology,
clients are able to improve responsiveness to customers, accelerate new product
design and introduction and increase quality and productivity, thereby
resulting in improvements in financial performance.  The Company's clients are
typically large companies, many of whom are included in the Fortune 1000.

         The need for the Company's Total Cycle Time services arises from
competitive pressures that affect most industries worldwide and require
companies to respond with faster development and supply of goods and services.
The Company believes the competitive pressures have been caused by several
factors, including shorter product life cycles, higher quality standards and
technological innovation.   Companies that rely on slow, bureaucratic
operations risk deteriorating margins, product obsolescence and loss of market
share. Past competitive advantages such as size, market position and reputation
are often no longer sufficient to maintain a leading competitive position.  As
a result, traditional management techniques, which often focus on individual
departments or functional units of a business, rather than processes, may
lessen a company's ability to quickly respond to market opportunities.

         Utilizing Total Cycle Time methodology, the Company analyzes a
client's business, assesses potential performance improvements, trains a
client's senior management and employees, and works to implement actions to
improve operating performance.  Total Cycle Time services are designed to
enable the Company's clients to achieve quantifiable results, such as improved
profitability, greater productivity, more effective asset utilization and
reduced time in developing and delivering new products to market, thereby
making clients more competitive.  Due to the Company's prior success with and
confidence in Total Cycle Time services, the Company generally provides its
clients with the option of paying the Company fixed fees or a combination of
fixed fees and incentive fees based on measurable improvements in a client's
business operations.

         The Company's Information Technologies business segment focuses on
products and services that integrate and enhance the company's business
improvement methodologies.  The Company offers SalesWare, which creates an
advanced opportunity management system that is easily embedded into a client's
information technology infrastructure.  Additionally, the Company provides
paperless warehouse and distribution systems, including software packages,
customization, installation and training services.  Its product line includes a
state-of-the-art warehouse and distribution management system featuring
advanced real-time radio frequency based receiving and cycle counting
applications.

TOTAL CYCLE TIME

         The Total Cycle Time methodology developed and employed by the Company
is used to analyze and reengineer a client's business into components of three
basic processes: the development of new products and services; the production
and delivery of goods and services; and the definition and implementation of
strategies to capitalize on fast response.  By defining such processes, the
Company is able to analyze and quantify a client's existing performance levels
using measures of time, productivity, asset utilization, cost and quality.
These measurements are then used to establish operating and financial
improvements the Company believes can be obtained by a client using existing or
reduced resources.  Total Cycle Time implementation programs typically span one
to three years.

         The Company's activities begin with the assessment of a potential
client's existing level of performance.  This assessment typically includes
site visits, interaction with management and an analysis of historical
performance.  The Company uses the results of this assessment to determine the
estimated operating and financial improvements that can be obtained by the
client using existing or reduced resources through the implementation of Total
Cycle Time.  The Company then analyzes whether a Total Cycle Time program will
generate sufficient benefits to the client prior to proceeding with a proposal.
<PAGE>   3
         The Company believes that results from the implementation of Total
Cycle Time programs will be obtained only if the senior executives of a client
are committed to change based on Total Cycle Time.  Consequently, the Company
provides a client's chief executive officer (or chief operating officer of a
business unit) and senior managers a four-day CEO workshop tailored exclusively
for the client.  The CEO workshop is often conducted at the Company's CEO
Center, a remote facility located near Baton Rouge, Louisiana.  At the CEO
workshop, a client will gain exposure to Total Cycle Time tools, help define
what the client's business is capable of achieving, identify the critical
processes/high leverage areas within the client's company, identify appropriate
measurements for each of the critical processes and learn how the improvement
of critical processes will lead to tangible results.  A key objective of the
CEO workshop is that the client build a business team commitment to improve
performance using Total Cycle Time as the driver.  See "Business - Facilities."

         Frequently, business and cultural "barriers" restrict or hinder a
client's operating processes.  These barriers may consist of excessive
inspections, inappropriate lot/batch sizes, improper measures or a client's
view of its business as departments or functions rather than as integrated
processes.  Cultural and business process barriers appear in a wide variety of
manufacturing, project and service businesses and their removal can have a
significant, positive impact on a client's business. Because these barriers are
ingrained in a client's business and culture, they may be difficult for a
client's management to identify and address without the assistance of
experienced outside business professionals.

         At an early stage of a program's implementation, the Company analyzes
each of a client's business processes, identifies the business process and
cultural barriers restricting a client's business and determines the actions
required to remove these barriers.  As barriers to improved performance and
unnecessary steps in the business processes are removed, cycle times are
reduced and activities or actions are more rapidly and efficiently completed.

         During implementation of a Total Cycle Time program, the Company
transfers its methodology to a client.  The Company works with a client to
internalize Total Cycle Time in order to sustain a change in a client's culture
after the Company's personnel complete the bulk of the program.  The Company
grants its clients a limited license to use Total Cycle Time rights internally
following completion of a program. See "Business -- Intellectual Property."

         In response to client demand, the Company introduced a range of
"continuous improvement services," consisting in part of ongoing assessments
and upgrades to Total Cycle Time methodology for completed programs.
Continuous improvement services are designed to maintain and improve upon the
successes of the original Total Cycle Time programs.  In addition to providing
the Company with the opportunity for further client development and additional
fees, continuous improvement services provide clients with an extended means of
assessing, monitoring and improving their business utilizing Total Cycle Time.

COMPETITIVE STRATEGY

    The Company's strategy is to maintain and enhance its position in the
development and implementation of its Total Cycle Time methodology.  The
Company's strategy includes the following key elements, many of which
differentiate the Company from traditional providers of consulting services.

             Emphasize Results.  The Company often enters into incentive fee
         contracts, which make the Company's revenue from a particular program
         partially contingent upon certain results.  The Company offers
         incentive fee contracts as a means of obtaining additional contracts,
         in the belief that its willingness to structure part of its fees based
         upon the results generated for its clients differentiates it from
         competitors, who generally charge fees based on time expended
         regardless of results.  These incentive fee contracts demonstrate the
         Company's confidence that its programs will positively enhance the
         businesses of its clients.

             Target Large Clients and Multiple Program Opportunities.  The
         Company has focused its marketing efforts on companies with annual
         revenues ranging from $500 million to $50 billion, preferably with
         multiple program opportunities, in the specific industry business
         units the Company has identified.  The Company believes larger clients
         provide greater revenue opportunities because such clients are likely
         to realize greater economic benefit from the Company's services.
         Larger clients may also provide the Company the opportunity to render
         services to multiple business units within or related to the client.

             Active Involvement and Method for Continuous Improvement.  By
         implementing Total Cycle Time throughout a complete business or
         business unit in cooperation with a client's management, the Company
<PAGE>   4
         believes it can more effectively influence business culture and
         processes and provide clients with the methodology necessary for
         continuous improvement.  In contrast, traditional consulting firms
         often provide only isolated expertise in the form of written
         assessments or reports that focus on discrete functions or an isolated
         segments of a business.

             Experienced Professional Staff.  The Company employs professionals
         with extensive business management experience.  Traditional consulting
         firms often hire recent business school graduates with expertise in a
         particular subject rather than expertise in total business management.

             Program Focus.  The Company focuses on cultural and business
         process barriers rather than on subject matter barriers and functional
         units, which the Company believes have less impact on improving a
         client's performance.

CLIENTS

         The Company's clients are typically large, well-established
manufacturing, project and service companies, or distinct business units of
such companies, in North America, Europe, and the Asia/Pacific region.  Many of
the Company's clients are Fortune 1000 companies (or equivalent size non-U.S.
companies) or units thereof.  The Company has implemented Total Cycle Time
programs for the following clients, among others:

<TABLE>
<CAPTION>
DOMESTIC CLIENTS:                           
<S>                                         <C>
                                            Osram Sylvania
                                            Overhead Door
American Microsystems                       Pawnee Industries
Bell Packaging                              Pinnacle Automation
Chief Auto Parts                            Polaroid
Coleman Outdoor Products                    Rohm and Haas
Cypress Semiconductor                       LSG Skychefs/Caterair
Cyprus Amax                                 Signetics
Delco Electronics                           Tastemaker
Detroit Diesel                              Teledyne
Dresser Industries                          Texas Instruments
DSC Communications                          W.W. Grainger
Douglas Aircraft                            Wacker Chemtronic
Dover                                       Western Digital
Dresser Industries
Electronic Data Systems                     INTERNATIONAL CLIENTS:
General Electric                            ABB Asea Brown Boveri
General Motors                              Bosch Blaupunkt
GTS                                         Breuguet
Graphic Controls                            Euclid Hitachi
Gulfstream Aerospace                        Gemplus
Hillenbrand Industries                      Hilti
ITT                                         Philco Tatuapa Radio & Televisao
Johnson Electric                            Philips N.V.
Moore Business Forms                        Schindler
Motorola                                    SGS Thomson Microelectronics
National Semiconductor                      Siemens
Olivetti
</TABLE>

         There can be no assurance that in the future the Company will perform
services for any of the companies listed above.  In order to maintain and
increase its revenues, the Company will need to add new clients or expand
existing client relationships to include additional divisions or business units
of such clients.

         In 1997, two clients, LSG Skychefs and General Motors, accounted for
an aggregate of 21% of the Company's total revenues. In 1996, three clients,
LSG Skychefs, Siemens and Moore Business Forms, accounted for an aggregate of
<PAGE>   5
35% of the Company's total revenues.  In 1995, one client of the Company,
Siemens, accounted for 18% of the Company's total revenues.

SALES AND MARKETING

         In addition to direct sales efforts, the Company's services are
marketed using several methods, including:

         References and Referrals.  The Company believes that references and
referrals from clients are among its most powerful sales tools.  Even without a
direct referral, clients are frequently contacted for their evaluation of the
Company and its services.  In addition, the Company believes that each Total
Cycle Time program holds the potential for added revenues by exposing the
Company and its programs to other business units, customers and suppliers of
each client.

         Lectures and Publications.  The Company also markets its services
through lectures and publications.  Mr.  Philip Thomas is the author of five
books that provide an introduction to the value of implementing Total Cycle
Time.  These five books are Competitiveness Through Total Cycle Time, Getting
Competitive, Time Warrior, Quality Alone is Not Enough and Survival at Nodulex.
In addition, the Company promotes the publication in periodical and business
journals of articles about time-based management generally and Total Cycle Time
specifically.  Company personnel also lecture to chambers of commerce, trade
associations, and business symposia on the subject of achieving competitiveness
through the application of Total Cycle Time.

CONTRACTUAL ARRANGEMENTS

         The Company performs Total Cycle Time services for clients pursuant to
contracts generally with terms of one to three years.  Clients compensate the
Company for its services in the form of fixed fees or a combination of both
fixed and incentive fees (based on client improvements achieved).  The
Company's fee structure is based on a client's size, the complexity and
geographic deployment of a client's business, the level of improvement
opportunity available to a client and certain other factors.

         Fixed fees are recognized as revenues monthly over the term of a
program.  Incentive fees are generally based on objective measures, such as
cycle time reduction, inventory reduction, accounts receivable reduction,
profit improvement or other quantifiable objectives and are recognized as
revenues as earned under the terms of the relevant contract.  Once incentive
fees are earned, they are not refunded even if client performance subsequently
declines.  Factors such as a client's commitment to Total Cycle Time, general
business and economic cycles, and a client's product position in the
marketplace will affect the performance of the Company's clients, thus
affecting the Company's revenues from incentive fee compensation.  In 1997 and
1996, approximately 25% and 27%, respectively, of the Company's revenues were
attributable to incentive fees.

         The Company includes in its business under commitment (backlog) signed
client contracts with terms generally ranging from 18 to 24 months.  Business
under commitment, excluding Information Technologies, was $56 million at
December 31, 1997.

PROFESSIONAL STAFF

         The Company's staff of business professionals who apply Total Cycle
Time methodology are referred to by the Company as "Resultants."  For its
Resultant work force, the Company employs individuals with significant
problem-solving and managerial skills from fields including manufacturing,
engineering and finance.  The Company's Resultants typically have 15 to 20
years of business management and specific industry experience.  The Company
provides computer-based, classroom, textbook and videotape training for all new
Resultants.  The Company historically has experienced less than 10% voluntary
annual turnover of its Resultants, reflecting the stable nature of its
workforce.  The Company provides its Resultants with the opportunity to share
in the Company's profits and achieve bonuses through results-oriented
compensation  such as the Company's stock option and bonus plans.

COMPETITION

         Traditional consulting firms provide services similar in some respects
to the services provided by the Company.  Providers of such services include
A.T. Kearney, Inc., Boston Consulting Group, McKinsey & Co. and major national
accounting firms, as well as several small firms that primarily focus on
time-based management services.  Many of the
<PAGE>   6
Company's competitors have greater personnel, financial, technical and
marketing resources than the Company, and there can be no assurance that the
Company will be able to compete successfully with its existing competitors or
with any new competitors.

         The Company believes that the competitive factors most important to
its business are the unique quality of its Total Cycle Time  methodology, the
quality of its professional staff, its willingness to be compensated on an
incentive basis and its reputation for achieving targeted results.  The Company
believes that no significant competitors offer their clients the opportunity to
base fees on the results achieved.

         The Company believes that its most significant "competitor" is the
propensity for potential clients to "self-medicate" by attempting to implement
changes in their businesses themselves, in the belief they will achieve results
comparable to those resulting from the Company's services without the
assistance of outside professionals.  The Company believes that these attempts
to self-medicate may result in limited success.  However, such attempts may
substantially lengthen the Company's sales cycle and may therefore limit
business opportunities for the Company.

         Because the Total Cycle Time methodology is not capable of being
patented, there can be no assurance that the Company will not be subject to
competition from others using substantially similar methodologies.  However,
the Company believes that its base of knowledge, experience and clients provide
it with a competitive advantage.

INTELLECTUAL PROPERTY

         The Company has secured federal registration for the service marks
"Total Cycle Time," "TCT, 5 I's Process" and "Cycles of Learning."  These
registrations expire from August 2002 to January 2003.  The Company has filed
an application for federal service mark registration for "Resultants,"  "AIP
Management," "AIP's," "SalesWare," "Actions- In-Process" and "Speed Driven
Results."  The Company has also made appropriate filings in several European
countries to secure protection of its marks in those countries.  The Company
considers each of these service marks or trademarks to be significant to the
Company's business.                                             

         The Company's proprietary methodologies have been developed over 20
years at great expense, have required considerable effort on the part of
skilled professionals, are not generally known by persons other than clients of
the Company and are considered trade secrets.  Although the Company's services
necessarily incorporate trade secrets, the Company maintains its trade secrets
in strict confidence.  As part of its standard engagement, the Company grants
clients a limited license to make internal use of certain of the Company's
proprietary methodologies following completion of a program.

         The Company has entered into nondisclosure and noncompete agreements
with Philip Thomas and substantially all of its employees.  There can be no
assurance that such agreements will deter any employee of the Company from
disclosing confidential information to third parties or from using such
information to compete with the Company in the future.

FACILITIES

         The Company's principal executive office is located in Irving, Texas,
where the Company leases approximately 25,000 square feet of office space under
a lease that expires in December 1998.  The Company is currently evaluating
several alternatives for its headquarters location.  However, the Company does
not anticipate any material increase in lease expense or interruption of its
business.  The Company also leases space for its offices in Troy, Michigan;
Frankfurt, Germany; and Singapore.  The Company believes that these facilities
are adequate for its current needs.

         The Company currently leases from Philip Thomas two 30-acre tracts of
land near Baton Rouge, Louisiana, on which the CEO Center is located.  The land
is leased pursuant to two 25 year leases entered into in December 1991 and
January 1994, respectively.  The Company owns 10 acres of adjacent land with
improvements.  These tracts of land are used for conferences, training and CEO
workshops.  The annual rental on one leased property is $6,000, and the Company
has prepaid rent on this lease through the year 2016.  The annual rental on the
second leased property is also $6,000 and is paid annually.
<PAGE>   7
EMPLOYEES

         At February 28, 1998, the Company had a total of 336 employees,
consisting of 173 full-time Resultants, 32 software programming and customer
service employees and 100 sales and administrative employees.  At February 28,
1998, the Company also retained the services of 31 Associate Resultants who
work on an as-needed basis.  The Company's employees are not represented by a
labor union nor are they subject to any collective bargaining agreement.  The
Company considers its employee relations to be good.

ITEM 2.      PROPERTIES.

         The Company's principal executive office is located in Irving, Texas.
The Company also leases space in a building adjacent to its principal executive
offices in Irving, Texas and space for its offices in Troy, Michigan; Maumee,
Ohio; Frankfurt, Germany; and Singapore.  The Company currently leases 60 acres
of land near Baton Rouge, Louisiana, on which the Company's conference and
training center ("CEO Center") is located.  The Company considers these
properties to be adequate for their business purposes.

ITEM 3.      LEGAL PROCEEDINGS.

The Company is party to a legal action styled Creative Dimensions in
Management, Inc. v. Thomas Group, Inc., filed September 17, 1996 in the United
States District Court for the Eastern District of Pennsylvania.  This matter
arises out of disputes under two agreements between the Company and Creative
Dimensions in Management, Inc. ("CDM"), a small private company with whom the
Company had an alliance.  CDM has asserted various causes of action against the
Company, including fraud, misrepresentation, breach of contract and conversion.
The Company believes that CDM's claims lack merit, and has filed counterclaims
against CDM for breach of contract, breach of implied covenant of good faith
and fair dealing, fraudulent inducement, and attorney's fees.  The Company is
contesting CDM's claims and is pursuing its counterclaims vigorously.  The
matter is in the early stage of discovery.  The plaintiff is seeking at least
$50 million in actual damages, punitive damages, an accounting, interests,
costs of suit, attorney's fees, and injunctive relief.  The Company is seeking
an undetermined amount in actual damages, punitive damages, attorney's fees,
and costs of suit.

The Company has become subject to various claims and other legal matters in the
course of conducting its business.  The Company believes that neither such
claims and other legal matters nor the cost of prosecuting and/or defending
such claims and other legal matters should have a material adverse effect on
the Company's consolidated results of operations, financial condition or cash
flows.

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

         Not applicable.
<PAGE>   8
                                    PART II

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

MARKET FOR REGISTRANT'S COMMON EQUITY

         The Company's Common Stock is traded on the over the counter market on
the NASDAQ National Market System under the symbol TGIS.  The stock prices set
forth represent the highest and lowest sales prices per share of the Company's
Common Stock as reported by the NASDAQ National Market System.  The prices
reported in the following table by the NASDAQ National Market System reflect
inter-dealer prices without retail mark-up, mark-down or commissions.

<TABLE>
<CAPTION>
   Quarter Ended                        High                    Low
   -------------                        ----                    ---
<S>                                    <C>                     <C>
March 31, 1996                         $15.75                  $12.00
June 30, 1996                          $20.00                  $14.13
September 30, 1996                     $18.63                  $14.00
December 31, 1996                      $14.63                  $ 7.00
March 31, 1997                         $11.50                  $ 6.63
June 30, 1997                          $12.50                  $ 7.00
September 30, 1997                     $14.00                  $10.50
December 31, 1997                      $13.00                  $10.00
</TABLE>

         There is no established public market for the Company's Class B 
Common Stock.

HOLDERS OF RECORD

         As of February 28, 1998 there were approximately 117 holders of record
of the Company's Common Stock.

DIVIDENDS

         The Company has not paid cash dividends on its Common Stock.  The
Company intends to retain future earnings in order to provide funds for use in
the operation and expansion of the business, and, accordingly, does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.

ITEM 6.      SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.

         Selected historical and pro forma financial data appearing on page 17
of the Company's 1997 Annual Report to Stockholders is herein incorporated by
reference.

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

         Management's discussion and analysis of financial condition and
results of operations appearing on pages 18 through 22 of the Company's 1997
Annual Report to Stockholders is herein incorporated by reference.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The consolidated financial statements and notes thereto, together with
the report of independent certified public accountants thereon, appearing on
pages 23 through 38 of the Company's 1997 Annual Report to Stockholders, are
herein incorporated by reference.

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

         Not applicable.
<PAGE>   9
                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information relating to the Company's directors and nominees for
election as directors, and the information relating to executive officers of
the Company, is incorporated herein by reference from the Company's Proxy
Statement (herein so called) for its 1998 Annual Meeting of Stockholders.  It
is currently anticipated that the Proxy Statement will be publicly available
and mailed to stockholders in April 1998.

ITEM 11.     EXECUTIVE COMPENSATION.

         The discussion under "Executive Compensation" in the Company's Proxy
Statement for its 1998 Annual Meeting is incorporated herein by reference.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The discussion under "Security Ownership of Certain Beneficial Owners
and Management" in the Company's Proxy Statement for its 1998 Annual Meeting is
incorporated herein by reference.

ITEM 13      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The discussion under "Certain Transactions" in the Company's Proxy
Statement for its 1998 Annual Meeting is incorporated herein by reference.
<PAGE>   10
                                   PART IV

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

(a)      Documents filed as part of this report.

         1.      Financial Statements

                 The Consolidated Financial Statements and the Report of
         Independent Certified Public Accountants thereon are included on pages
         18 through 38 of the Company's 1997 Annual Report to Stockholders
         included as Exhibit 13 to this Form 10-K and are incorporated herein
         by reference.

         2.      Financial Statement Schedules

<TABLE>
<CAPTION>
                                                                                             SEQUENTIAL
                                                                                             ----------
                 SCHEDULE                        DESCRIPTION                                 PAGE NUMBER
                 --------                        -----------                                 -----------
                 <S>           <C>                                                           <C>
                   II.         Valuation and Qualifying Accounts and Reserves.                   ____
</TABLE>

         3.  Exhibits

<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>        <C>                                                                          <C>
                    3.1        Amended and Restated Certificate of Incorporation of the Company
                               filed August 13, 1993, with the State of Delaware Office of the
                               Secretary of State (filed as Exhibit 3.1 to the Company's Annual
                               Report on Form 10-K for the year ended December 31, 1994 
                               and incorporated herein by reference).                                      ___

                    3.2        Amended and Restated By-Laws (filed as Exhibit 3.5 to the
                               Company's 1993 Form S-1 (File No. 33-64492) and incorporated
                               herein by reference).                                                       ___

                    4.1        Specimen Certificate evidencing Common Stock (filed as Exhibit 4.1
                               to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                    4.2        Form of Warrant Issued by the Company to the Representative (filed
                               as Exhibit 4.2 to the Company's 1993 Form S-1 (File No. 33-64492)
                               and incorporated herein by reference).                                      ___

                   *4.3        Stonegate Securities letter agreement.                                      ___

                   10.1        Registration Rights Agreement dated February 23, 1990, among the
                               Company, EDS, Philip R. Thomas, individually and acting in a
                               representative capacity (filed as Exhibit 10.7 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by                ___
                               reference).

                   10.2        Agreement dated July 14, 1992, by and among the Company, Philip R.
                               Thomas and EDS (filed as Exhibit 10.11 to the Company's 1993 Form
                               S-1 (File No. 33-64492) and incorporated herein by reference).              ___

                   10.5        Employment Agreement between the Company and Alex W. Young (filed           ___
                               as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
                               the year ended December 31, 1993 (the "1993 Form 10-K") and
                               incorporated herein by reference).                                          ___

                   10.6        Amendment to Employment Agreement between the Company and Alex W.           ___
                               Young (filed as Exhibit 10.13 to the Company's 1993 Form 10-K and
                               incorporated herein by reference).                                          ___
</TABLE>
<PAGE>   11
<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>         <C>                                                                        <C>
                   10.7        Employment Agreement between the Company and Leland L. Grubb, Jr. 
                               (filed as Exhibit 10.7 to the Company's 1996 Form 10-K and 
                               Incorporated herein by reference).                                          ___

                   10.8        Amended and Restated 1988 Stock Option Plan  (filed as Exhibit
                               10.14 to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                   10.9        Amended and Restated 1992 Stock Option Plan. (Filed as Exhibit
                               10.8 to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                           ___
                   10.10       401(k) Plan  (filed as Exhibit 10.16 to the Company's 1993 Form S-
                               1 (File No.  33-64492) and incorporated herein by reference).               ___

                   10.11       Form of Indemnification Agreement (filed as Exhibit 10.18 to the
                               Company's 1993 Form S-1 (File No. 33-64492) and incorporated
                               herein by reference).                                                       ___

                   10.12       First Amended and Restated Revolving Credit Loan Agreement dated
                               December 4, 1996 between Comerica Bank-Texas and the Company (filed         ___
                               as Exhibit 10.12 to the Company's 1996 Form 10-k and incorporated
                               herein by reference).

                   10.13       Supplemental Registration Rights Agreement dated April 5, 1993
                               among the Company, Allen & Company Incorporated, EDS and Philip R.
                               Thomas, individually and acting in a representative capacity
                               (filed as Exhibit 10.22 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.14       Commercial lease dated December 31, 1991 between Philip R. Thomas
                               and Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.31 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.15       Amendment No. 1 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee,
                               dated February 8, 1992 (filed as Exhibit 10.32 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by                ___
                               reference).

                   10.16       Amendment No. 2 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee,
                               dated February 1, 1993 (filed as Exhibit 10.33 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by
                               reference).                                                                 ___

                   10.17       Amendment No. 3 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.34 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.18       Registration Rights Agreement, dated as of August 18, 1993,
                               between the Company and Philip R. Thomas (filed as Exhibit 10.37
                               to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                  *10.19       Non-Employee Director Retainer Fee Plan.                                    ___
                                                                                                              
</TABLE>
-------------


<PAGE>   12
<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>         <C>                                                                         <C>
                   10.20       Commercial Lease dated February 8, 1994 between Philip R. Thomas
                               and Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.41 to the Company's registration statement on
                               Form S-1 (File No. 33-79418) and incorporated herein by                     ___
                               reference).

                 * 10.21       Employment agreement dated July 14, 1997 between the Company and            ___
                               James E. Dykes.

                 * 10.22       1997 Stock Option Plan dated April 3, 1997.                                 ___

                 * 10.23       Deferred Compensation Plan.                                                 ___

                 * 10.24       Computer Lease Agreement with Comerica Leasing Corporation.                 ___

                 * 10.25       Employment agreement dated effective January 2, 1998 and executed
                               March 6, 1998, as amended effective March 31, 1998 between the 
                               Company and Philip R. Thomas.                                               ___

                 * 13          1997 Annual Report to Stockholders.                                         ___

                 * 21          Subsidiaries of the Company.                                                ___

                 * 23          Consent of BDO Seidman, LLP.                                                ___

                   24          Power of Attorney (set forth on the signature page of this Form
                               10-K).                                                                      ___

                 * 27          Financial Data Schedule

                 * 27.396     Restated Financial Data Schedule for the three months ended March
                              31, 1996

                 * 27.696     Restated Financial Data Schedule for the three months ended June
                              30, 1996

                 * 27.996     Restated Financial Data Schedule for the three months ended September
                              30, 1996

                 * 27.1296    Restated Financial Data Schedule for the three months ended December
                              31, 1996

                 * 27.397     Restated Financial Data Schedule for the three months ended March
                              31, 1997

                 * 27.697     Restated Financial Data Schedule for the three months ended June
                              30, 1997

                 * 27.997     Restated Financial Data Schedule for the three months ended September
                              30, 1997
</TABLE>

                 ----------------
                 * Filed herewith.

(b)      Reports on Form 8-K.

         Current Report on Form 8-K filed February 24, 1998
<PAGE>   13
                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Irving, State of Texas, on March 30, 1998.

                                       THOMAS GROUP, INC.

                                       By: /s/ PHILIP R. THOMAS
                                          ------------------------------------
                                          Philip R. Thomas
                                          Chairman of the Board and 
                                          Chief Executive Officer



                               POWER OF ATTORNEY


         Each individual whose signature appears below constitutes and appoints
Philip R. Thomas and J. Thomas Williams, and each of them, such person's true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for such person and in such person's name, place, and stead, in
any and all capacities, to sign any and all amendments to this Form 10-K and to
file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<PAGE>   14
         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Form 10-K has been signed by the following persons
on behalf of the Registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     SIGNATURE                                     CAPACITY                                                 DATE
     ---------                                     --------                                                 ----
<S>                         <C>                                                                        <C>

/s/ PHILIP R. THOMAS
------------------------
Philip R. Thomas                Director, Chairman of the Board and Chief Executive Officer             March 31, 1998
                                                                                                        --------------

/s/ J. THOMAS WILLIAMS
------------------------
J. Thomas Williams              President and Chief Operating Officer                                   March 31, 1998
                                                                                                        --------------

/s/ JAMES E. DYKES
------------------------
James E. Dykes                  Executive Vice President of Corporate Development                       March 31, 1998
                                and Director                                                            --------------
                                
/s/ LELAND L. GRUBB, JR.
------------------------
Leland L. Grubb, Jr.            Vice President, Chief Financial Officer and Treasurer                   March 31, 1998
                                (Principal Financial and Accounting Officer)                            --------------

/s/ ALEXANDER W. YOUNG                                
------------------------
Alexander W. Young              Vice President, President of Utilities Business Unit                    March 31, 1998
                                and Director                                                            --------------
                                
/s/ JOHN T. CHAIN, JR.
------------------------
John T. Chain, Jr.              Director                                                                March 31, 1998
                                                                                                        --------------
/s/ RICHARD A. FREYTAG
------------------------
Richard A. Freytag              Director                                                                March 31, 1998
                                                                                                        --------------
</TABLE>
<PAGE>   15
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Thomas Group, Inc.
Irving, Texas

The audits referred to in our report dated March 10, 1998 relating to the
consolidated financial statements of Thomas Group, Inc., which is incorporated
in Item 8 of the Form 10-K by reference to the annual report to stockholders
for the year ended December 31, 1997 included the audits of the financial
statement schedule listed under Item 14 of this Form 10-K.  This financial
statement schedule is the responsibility of the Company's management.  Our
responsibility is to express an opinion on the financial statement schedule
based upon our audits.

In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.





                                             BDO SEIDMAN, LLP

Dallas, Texas
March 10, 1998
<PAGE>   16
                               THOMAS GROUP, INC.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                                     BALANCE AT        ADDITIONS                   BALANCE AT
                                                      BEGINNING         CHARGED                      END OF 
DESCRIPTION                                            OF YEAR        TO EXPENSES   DEDUCTIONS        YEAR
----------------------------------------------------------------   --------------- ------------   ------------
                                                                             (IN THOUSANDS)
<S>                                                    <C>             <C>          <C>              <C>
December 31, 1995
  Allowance for doubtful accounts   . . . . . . .      $   890         $  245       $   890          $   245
  Allowance for doubtful accounts, long term  . .      $ 1,500         $   --       $ 1,118          $   382

December 31, 1996
  Allowance for doubtful accounts   . . . . . . .      $   245         $  215       $   154          $   306
  Allowance for doubtful accounts, long term  . .      $   382         $  182       $    --          $   564

December 31, 1997
  Allowance for doubtful accounts                      $   306         $  231       $   196          $   341
  Allowance for doubtful accounts, long term           $   564         $   --       $   564          $   --
</TABLE>
<PAGE>   17

                                EXHIBIT INDEX
<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>        <C>                                                                          <C>
                    3.1        Amended and Restated Certificate of Incorporation of the Company
                               filed August 13, 1993, with the State of Delaware Office of the
                               Secretary of State (filed as Exhibit 3.1 to the Company's Annual
                               Report on Form 10-K for the year ended December 31, 1994 
                               and incorporated herein by reference).                                      ___

                    3.2        Amended and Restated By-Laws (filed as Exhibit 3.5 to the
                               Company's 1993 Form S-1 (File No. 33-64492) and incorporated
                               herein by reference).                                                       ___

                    4.1        Specimen Certificate evidencing Common Stock (filed as Exhibit 4.1
                               to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                    4.2        Form of Warrant Issued by the Company to the Representative (filed
                               as Exhibit 4.2 to the Company's 1993 Form S-1 (File No. 33-64492)
                               and incorporated herein by reference).                                      ___

                   *4.3        Stonegate Securities letter agreement.                                      ___

                   10.1        Registration Rights Agreement dated February 23, 1990, among the
                               Company, EDS, Philip R. Thomas, individually and acting in a
                               representative capacity (filed as Exhibit 10.7 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by                ___
                               reference).

                   10.2        Agreement dated July 14, 1992, by and among the Company, Philip R.
                               Thomas and EDS (filed as Exhibit 10.11 to the Company's 1993 Form
                               S-1 (File No. 33-64492) and incorporated herein by reference).              ___

                   10.5        Employment Agreement between the Company and Alex W. Young (filed           ___
                               as Exhibit 10.13 to the Company's Annual Report on Form 10-K for
                               the year ended December 31, 1993 (the "1993 Form 10-K") and
                               incorporated herein by reference).                                          ___

                   10.6        Amendment to Employment Agreement between the Company and Alex W.           ___
                               Young (filed as Exhibit 10.13 to the Company's 1993 Form 10-K and
                               incorporated herein by reference).                                          ___
</TABLE>
<PAGE>   18
<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>         <C>                                                                        <C>
                   10.7        Employment Agreement between the Company and Leland L. Grubb, Jr. 
                               (filed as Exhibit 10.7 to the Company's 1996 Form 10-K and 
                               Incorporated herein by reference).                                          ___

                   10.8        Amended and Restated 1988 Stock Option Plan  (filed as Exhibit
                               10.14 to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                   10.9        Amended and Restated 1992 Stock Option Plan. (Filed as Exhibit
                               10.8 to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                           ___
                   10.10       401(k) Plan  (filed as Exhibit 10.16 to the Company's 1993 Form S-
                               1 (File No.  33-64492) and incorporated herein by reference).               ___

                   10.11       Form of Indemnification Agreement (filed as Exhibit 10.18 to the
                               Company's 1993 Form S-1 (File No. 33-64492) and incorporated
                               herein by reference).                                                       ___

                   10.12       First Amended and Restated Revolving Credit Loan Agreement dated
                               December 4, 1996 between Comerica Bank-Texas and the Company (filed         ___
                               as Exhibit 10.12 to the Company's 1996 Form 10-k and incorporated
                               herein by reference).

                   10.13       Supplemental Registration Rights Agreement dated April 5, 1993
                               among the Company, Allen & Company Incorporated, EDS and Philip R.
                               Thomas, individually and acting in a representative capacity
                               (filed as Exhibit 10.22 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.14       Commercial lease dated December 31, 1991 between Philip R. Thomas
                               and Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.31 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.15       Amendment No. 1 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee,
                               dated February 8, 1992 (filed as Exhibit 10.32 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by                ___
                               reference).

                   10.16       Amendment No. 2 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee,
                               dated February 1, 1993 (filed as Exhibit 10.33 to the Company's
                               1993 Form S-1 (File No. 33-64492) and incorporated herein by
                               reference).                                                                 ___

                   10.17       Amendment No. 3 to Commercial Lease between Philip R. Thomas and
                               Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.34 to the Company's 1993 Form S-1 (File No.
                               33-64492) and incorporated herein by reference).                            ___

                   10.18       Registration Rights Agreement, dated as of August 18, 1993,
                               between the Company and Philip R. Thomas (filed as Exhibit 10.37
                               to the Company's 1993 Form S-1 (File No. 33-64492) and
                               incorporated herein by reference).                                          ___

                  *10.19       Non-Employee Director Retainer Fee Plan.                                    ___
                                                                                                              
</TABLE>
-------------


<PAGE>   19
<TABLE>
<CAPTION>
                    EXHIBIT                                                                            SEQUENTIAL
                     NUMBER                                DESCRIPTION                                 PAGE NUMBER
                     ------                                -----------                                 -----------
                   <S>         <C>                                                                         <C>
                   10.20       Commercial Lease dated February 8, 1994 between Philip R. Thomas
                               and Wayne Heirtzler Thomas, as owners, and the Company, as lessee
                               (filed as Exhibit 10.41 to the Company's registration statement on
                               Form S-1 (File No. 33-79418) and incorporated herein by                     ___
                               reference).

                 * 10.21       Employment agreement dated July 14, 1997 between the Company and            ___
                               James E. Dykes.

                 * 10.22       1997 Stock Option Plan dated April 3, 1997.                                 ___

                 * 10.23       Deferred Compensation Plan.                                                 ___

                 * 10.24       Computer Lease Agreement with Comerica Leasing Corporation.                 ___

                 * 10.25       Employment agreement dated effective January 2, 1998 and executed
                               March 6, 1998, as amended effective March 31, 1998 between the 
                               Company and Philip R. Thomas.                                               ___

                 * 13          1997 Annual Report to Stockholders.                                         ___

                 * 21          Subsidiaries of the Company.                                                ___

                 * 23          Consent of BDO Seidman, LLP.                                                ___

                   24          Power of Attorney (set forth on the signature page of this Form
                               10-K).                                                                      ___

                 * 27          Financial Data Schedule

                 * 27.396     Restated Financial Data Schedule for the three months ended March
                              31, 1996

                 * 27.696     Restated Financial Data Schedule for the three months ended June
                              30, 1996

                 * 27.996     Restated Financial Data Schedule for the three months ended September
                              30, 1996

                 * 27.1296    Restated Financial Data Schedule for the three months ended December
                              31, 1996

                 * 27.397     Restated Financial Data Schedule for the three months ended March
                              31, 1997

                 * 27.697     Restated Financial Data Schedule for the three months ended June
                              30, 1997

                 * 27.997     Restated Financial Data Schedule for the three months ended September
                              30, 1997
</TABLE>

                 ----------------
                 * Filed herewith.