<PAGE>   1
                                   FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
     (Mark One)
        [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 1998

                                       OR

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

                         Commission file number: 0-20284

                         CITATION COMPUTER SYSTEMS, INC.

               (Exact name of company 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, SUITE 200                          63017
         CHESTERFIELD, MISSOURI                                 (Zip Code)
    (Address of principal executive offices)

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

        Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:
                    COMMON STOCK, PAR VALUE $0.10 PER SHARE

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                      ---    ---

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of Company's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-K. X
                                                                             ---


Company's revenue for the fiscal year ended March 31, 1998, were $16,640,000.

On July 7, 1998, the aggregate market value of the Company's voting stock held
by non-affiliates was $10,949,429.

On July 7, 1998, there were 3,811,490 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Company.

Part II incorporates information by reference from the Annual Report to
Shareholders for the fiscal year ended March 31, 1998. Part III incorporates
information by reference from the definitive Proxy Statements to be used in
connection with the Company's Annual Meeting of Shareholders and to be filed no
later than 120 days after Company's fiscal year end.

<PAGE>   2



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

THE COMPANY

         CITATION Computer Systems, Inc. ("CITATION" or the "Company") was
organized in 1979 as a Missouri corporation. The Company's principal executive
office is located at 424 South Woods Mill Road, Suite 200, Chesterfield,
Missouri 63017 (a suburb of St. Louis) and its telephone number is (314)
579-7900.

         In June 1998, the Company announced the sale of its suite of
administrative products to allow it to focus on its clinical applications. The
Description of Business section excludes these products.

INTRODUCTION

         CITATION designs, develops, markets and supports patient-centered
clinical information systems for hospitals, clinics, physicians' groups and
emerging Integrated Delivery Networks ("IDNs"). The Company offers a
comprehensive suite of clinical products using open client/server architecture
that meets a broad range of the information systems needs of the healthcare
industry. These products integrate patient care processes within the enterprise.
The Company's systems are modular, scalable and allow clients to leverage their
investments in existing systems. Individual components of the Company's systems
can function independently, giving clients the ability to build their system
over time and to integrate existing software which is meeting their current
needs. CITATION's systems are installed in approximately 370 institutions
ranging in size from under 100 beds to over 1,000 beds. CITATION markets its
products directly in the United States and Canada, as well as through
distribution partners in Europe, India and the Far East.

INDUSTRY BACKGROUND

         The United States healthcare industry is undergoing rapid change.
Historically, reimbursement for healthcare services has been based on a
fee-for-service model of payment. With increasing pressure to reduce costs,
managed care organizations and other payors are shifting the economic risk for
the delivery of care to providers through alternative reimbursement models,
including capitation and fixed fees. As a result, healthcare providers such as
hospitals, multi-specialty physician groups, laboratories, pharmacies, home
health services and nursing homes are integrating horizontally and vertically to
create IDNs. IDNs are 


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<PAGE>   3
designed to serve all of the healthcare needs of regional populations while
achieving economies of scale.                       

         In order to lower healthcare delivery costs while maintaining or
improving the quality of patient care, providers need access to detailed
clinical information to (i) manage the patient care process throughout the IDN;
(ii) automate patient care documentation; (iii) compare care provider
performance and clinical and cost outcomes both within the organization and to
established norms; (iv) monitor performance under managed care contracts; (v)
monitor practice patterns of care providers; (vi) measure the effectiveness of
new technologies and therapeutics; and (vii) support intra and inter facility
communication. A comprehensive clinical healthcare information system must be
able to assist both clinicians and administrators in managing patient
information throughout the continuum of care.

         Certain information-intensive departments of healthcare organizations,
such as laboratories, were early adopters of information systems in order to
manage workflow and clinical data. However, as multiple legacy systems have
become increasingly prominent on an enterprise-wide basis, the integration of
these systems across the enterprise has become more difficult given the
different architectures, platforms and operating systems of these information
systems.

         Integration and accessibility to patient information are increasingly
necessary for healthcare providers to operate efficiently and improve the
quality of patient care. As the need for readily accessible information
throughout the healthcare enterprise continues to grow, hospitals, providers and
payors of all sizes are faced with the challenge of implementing healthcare
information systems that are scalable, capable of working with existing
information systems and flexible to adapt to changes in the healthcare
marketplace. Also, such systems must be patient-centered, integrating all
aspects of managing the healthcare process.

THE CITATION SOLUTION

         CITATION designs, develops, markets and supports products that address
the healthcare industry's need for patient-centered, fully integrated clinical
information systems. CITATION's products are designed using a modular,
client/server approach, offering clients the ability to build their systems over
time and to allow existing legacy applications to interoperate with the
Company's products.



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<PAGE>   4


         BUSINESS STRATEGY

         CITATION's goal is to leverage its experience of over fifteen years
with client/server application solutions to become a leading provider of
clinical healthcare information systems. The Company's strategy for achieving
this goal includes the following elements:

          TARGET COMPREHENSIVE CLINICAL SYSTEM SALES. CITATION intends to focus
its sales efforts on selling larger, more comprehensive clinical systems to
hospitals with 400 beds or less and IDNs to address a broad range of needs. The
Company will aggressively promote its clinical suite of products.

         LEVERAGE EXISTING CLIENT BASE. With an installed base of nearly 350
facilities excluding the financial product suite clients, the Company believes
it has the potential to cross-sell additional products to its existing clients
because many of those clients have not purchased all of the Company's products.
CITATION's products are modular in design and can be added over time as each
client's needs expand and evolve.

         EXPAND PRODUCT PORTFOLIO. The Company plans to expand its product line
to meet the evolving needs of its clients. The Company continually evaluates its
offerings to determine what additional products or enhancements are required by
the healthcare information systems marketplace and the Company develops and
enhances products internally to meet clients' needs. If the Company can purchase
or license proven products at reasonable cost on its chosen technology base it
will do so in order to avoid the time and expense involved in developing
products.

         CAPITALIZE ON INTERNATIONAL MARKETS. CITATION believes that a
significant opportunity exists to expand the sales of its products in
international markets. Healthcare providers in a number of countries have not
yet invested in sophisticated information systems, and increasingly they are
seeking to purchase state-of-the art products, particularly clinical information
systems. The Company believes that its open, client/server architecture and
modular, scalable systems provide a cost effective solution to these markets.
CITATION has successfully entered several international markets through a
combination of direct sales and distribution arrangements.

         EXPANDED SERVICES. The Company has expanded the range of strategic
client support and data interpretation services it provides in order to
strengthen relationships with clients. The Company has also expanded its
services to design and configure the architecture of a client's systems,
including networking, systems integration and data conversion. Further, the
Company provides advice on data analysis to assist care providers in evaluating
their operations.


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<PAGE>   5



PRODUCTS

         CITATION has developed a comprehensive suite of clinical products to
manage information in the healthcare enterprise. A client can purchase a
comprehensive system or can buy modules separately to match a user's individual
needs. CITATION's systems address the information needs of care providers and
hospital administrators by enabling joint access to clinical and cost
information, thereby facilitating cost containment, effective decision making
and delivery of high-quality care.

         CITATION's clinical suite of products currently consists of six main
components, each of which can operate independently or as part of a fully
integrated system.

                  C-COM captures and tracks comprehensive patient clinical
         information and routes that information among departments or systems in
         the healthcare organization, enabling providers to evaluate quality of
         care, productivity and cost-effectiveness of services. C-COM accepts
         orders from and displays the resulting information at any networked PC
         location where patient care is being delivered, such as a nursing
         station or even the bedside. C-COM also supports hand-held, wireless
         technology. C-COM is available for DOS, Windows(TM) and Windows
         NT(TM).(1)

                  C-LAB provides comprehensive laboratory automation solutions
         for clinics, single and multiple site hospitals and clinical and
         research laboratories. C-LAB automates order entry and dissemination of
         results and interfaces with care providers' financial systems. C-LAB
         sub-modules consist of General Lab, Microbiology, Anatomical Pathology
         and Blood Bank. The Blood Bank submodule is licensed by CITATION for
         use and implementation in C-LAB. C-LAB is available in DOS and Windows
         NT(TM).

                  C-CARE is a patient care management system which is designed
         to increase the productivity of nurses and other clinicians and to
         assist in the creation and management of care plans and clinical
         pathways. C-CARE documents variances against established care plans and
         clinical pathways, enabling care providers to focus on both improving
         the quality of care and controlling costs. This system enables the
         healthcare enterprise to allocate resources and schedule procedures and
         tests automatically. C-CARE must


(1) This document contains trademarks and trade names of other persons. These
trademarks remain the property of such persons.


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         be used in conjunction with C-COM. C-CARE is currently available for
         DOS under the NuCaMS product name. C-CARE is expected to be available
         for Windows NT(TM) in late 1999 or early 2000.

                  C-RIS is a radiology management system providing patient
         tracking, transcription, radiology reporting, auto-fax capabilities,
         statistical reporting, film management and mammography management.
         C-RIS is currently available for DOS and will be available in August,
         1997 for Windows NT(TM). C-RIS is a third-party product for which
         CITATION has exclusive distribution rights.

                  C-MED is a medication dispensing and inventory control system
         which can increase productivity through the use of tools such as
         bar-coding to control narcotics or floor stock items. C-MED can
         integrate with a hospital's other information systems to verify patient
         status and to provide patient billing and laboratory information. C-MED
         also enables a single data entry to produce patient charges, labels,
         profiles, inventory control and drug utilization management. The
         Company licenses C-MED from a third party, and it is currently
         available for Windows NT(TM).

                  C-MAX provides the information necessary to manage managed
         care contracts and transactions with indemnity payors. It also allows
         users to model future expectations of performance. C-MAX is Windows(TM)
         based.

SERVICES

         Client service is an important component of the Company's operations.
As of March 31, 1998, the Company employed 40 persons (approximately 30 persons
after sale of financial products) in client services. The client services team
generally provides implementation, application and support, education and
consulting services to the Company's clients and primarily employs medical
technologists and other healthcare professionals in supporting and implementing
healthcare information systems. Instrument interface, network consulting,
operating system and hardware support are provided by experts in each area.
Additional client services are provided through computer-based training or
formal instructor-led, Company-sponsored ongoing educational courses and
seminars.

         In addition, the Company provides comprehensive training for clients at
its headquarters near St. Louis. Before the Company's product becomes
operational, training is also provided at the client's location. The Company
provides additional training at the client's request for a fee. The Company
offers a maintenance program covering hardware replacement, software upgrades,
and telephone consulting service. Depending on the type of system, the Company
offers service contracts for periods of one to five years. Customer support is
available 24 hours a day.



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<PAGE>   7

         The Company has expanded the range of strategic client support and data
interpretation services it provides in order to strengthen relationships with
clients. The Company has expanded its services to design and configure the
architecture of a provider's systems, including networking, systems integration
and data conversion. Further, the Company provides advice on data analysis to
assist care providers in evaluating their operations.

PRODUCT DEVELOPMENT

         CITATION is dedicated to providing state-of-the-art integrated clinical
systems for healthcare. The cornerstone of CITATION's system is its
long-standing commitment to client/server technology. CITATION's multi-tiered
products are modular in nature, using an open architecture that is easily
integratable with third party systems as well as other CITATION systems.

         CITATION's current product development efforts use object-oriented
programming methodologies. This allows the Company to develop applications based
on reusable libraries of code that the Company believes results in more
cost-effective and rapid product development cycles. The Company is a
Microsoft(R) Solutions Provider and extensively employs Microsoft(R) toolsets
and standards in its product development efforts. The Company believes use of
these standards and tools facilitates interfacing with other systems and
products. The Company also supports other industry standards such as HL/7 and
the Novell Netware Network Operating System.

         The Company plans to expand its clinical product line to meet the
evolving needs of its clients. The Company continually evaluates its offerings
to determine what additional products or enhancements are required by the
healthcare information systems marketplace. The Company develops and enhances
products internally to meet clients' needs, but if the Company can purchase or
license proven products at reasonable costs it will do so in order to avoid the
time and expense involved in developing products. The Company actively seeks out
for acquisition and licensing other companies and products that fit into
CITATION's overall product and technology plan. There is much competition for
suitable acquisition candidates and there can be no assurance that the Company
will be able to successfully acquire or license additional products.


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<PAGE>   8
         For the years ended March 31, 1997 and 1998, CITATION invested $4.8
million and $4.3 million, respectively, on research and development. At March
31, 1998 the Company employed 39 persons (approximately 35 persons after the
sale of financial products) in research and development. The Company expects to
continue to make significant investments in research and development, however,
there can be no assurance that the Company's financial and technological
resources will permit it to develop or market new products successfully or
respond effectively to technological changes.

SALES AND MARKETING

         The Company markets its products in the United States and Canada
through a direct sales force under the direction of the Company's Vice President
of Sales. As of March 31, 1998, the Company's sales force consisted of 8
employees. In addition to the Company's sales force employees, the Company has a
6-person marketing team that promotes the Company's products, participates in
trade shows and demonstrates the Company's products. In addition, members of the
Company's development and client services departments provide pre-sales support
for the Company's direct sales force in making presentations to and preparing
comprehensive proposals for potential customers.

         The Company intends to focus its sales efforts on selling larger, more
comprehensive clinical systems to hospitals with 400 beds or less, and IDNs to
address a broad range of needs. As part of this strategy, the Company is cross
training its sales force so that each salesperson will have the background
necessary to sell all of the Company's products.

         The Company markets its products internationally through distribution
alliances in Europe, India, the Far East and Latin America. For example, Summit
Health Systems Limited, who purchased the UK operations, is marketing certain
CITATION products in the UK, while Siemens Information Systems, Ltd of India is
marketing these products in India. In addition, the Company has a strategic
relationship with Microstate Separations Pte. Ltd. ("Microstate"), a healthcare
information systems integrator based in Singapore. Microstate has agreed to
purchase the Company's systems for the Indonesian, Malaysian, Hong Kong and
Singapore markets. In Latin America, CITATION has a strategic arrangement with
Laboratories Para Laboratorios.

REGULATION

         The Company is subject to the general requirements of the Food and Drug
Administration's regulations for Class I Medical Devices because it produces a
suite of clinical software products. The Company complies with these regulations
and follows Medical Device Reporting (MDR) guidelines as well.


CITATION Computer Systems, Inc.                                        Page 8
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<PAGE>   9

         Additional legislation governing the dissemination of medical record
information has been proposed. The Company is unable to determine at this time
the effect, if any, that these requirements may have on its business.

         In addition, the healthcare industry is subject to changing political,
economic and regulatory influences that may affect the procurement practices and
operations of healthcare providers. Many lawmakers have announced that they
intend to propose programs to reform the United States healthcare system. These
programs may contain proposals to increase governmental involvement in
healthcare, lower reimbursement rates and otherwise change the regulatory
environment in which the Company's clients operate. Healthcare providers may
react to these proposals and the uncertainty surrounding such proposals by
curtailing or deferring investments, including those for the Company's
healthcare information systems. Even if healthcare providers do not curtail or
defer investments, they may institute cost containment measures in anticipation
of regulatory reform or for other reasons. These measures may result in greater
selectivity in the allocation of capital funds, which could have a material
adverse effect on the Company's ability to sell its healthcare information
systems and services. The Company cannot predict with any certainty what impact,
if any, such legislative or market-driven reforms might have on its business and
results of operations. There can be no assurance that such proposed changes, if
adopted, would not have a material adverse effect on the Company's business and
results of operations.

FORWARD LOOKING STATEMENTS

         Certain of the statements made herein are "FORWARD LOOKING STATEMENTS,"
as such term is used in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. 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. The
Company cautions readers that actual results could be materially different as a
result of various possibilities and differences between anticipated and actual
developments.

         The uncertainties and risks include, but are not limited to: (i)
fluctuations in quarterly operating results, as the Company has historically
experienced greatly varied results from quarter to quarter, and such results can
be expected to continue to vary; (ii) technological changes and the Company's
dependence on new product developments -- the healthcare industry is subject to
rapid technological change, and the Company's future success may be adversely
impacted if the Company is not able to adapt to such changes in a timely and 
efficient manner; (iii) the 


CITATION Computer Systems, Inc.                                        Page 9
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<PAGE>   10

Company has expended and will continue to expend significant resources to
migrate its products to the Windows NT operating system, and will be subject to
substantial risk of adverse effect if the market does not show the anticipated
acceptance of this move; (iv) changes in the marketing focus of the Company,
shifting to becoming a clinical solutions supplier only and selling larger more
comprehensive clinical products than in the past, may adversely affect the
Company if such changes are not successful in attracting additional sales; (v)
risks associated with foreign sales, including difficulties in enforcing
agreements and collecting receivables, as well as potential adverse effects due
to fluctuating monetary exchange rates; (vi) the Company has sought to fill
certain needs within the range of products it offers through the acquisition of
licenses from third parties or the acquisition of such third parties, but there
is no assurance that such acquisition candidates will be found or that the
Company will have the resources to make such acquisitions in the future; (vii)
there are a number of larger and better financed entities in competition with
the Company, many of which offer a fuller range of products than the Company;
(viii) the Company is currently subject to regulation as a medical device
manufacturer and there is no assurance that such regulation will not become more
complex and onerous to the Company, subjecting it to adverse effects; (ix)
healthcare industry reform is an ongoing process, and is likely to continue to
pressure healthcare providers to become more efficient and engage in less
capital spending, including spending on information systems such as those
offered by the Company; (x) product liability arising out of such issues as
confidentiality of patient records or the failure of the Company's products to
provide accurate and timely disclosure of information could lead to adverse
effects upon the Company; (xi) the Company is heavily dependent upon its
intellectual property, none of which is patented; (xii) the Company has sold its
suite of financial products to another company which has agreed to assume the
Company's obligations under various warranties and service agreements, and if
the acquiror fails to adequately satisfy these obligations such failure could
have a material adverse effect on the Company; (xiii) the Company, either with
respect to its own software or with respect to other software upon which the
Company's software is dependent, may not be able to address adequately Year 2000
programming requirements; and (xiv) if the Company enters into a business
combination with another party, there is no assurance the two entities will be
able to successfully integrate operations and management.

EMPLOYEES

          As of March 31, 1998, the Company employed 123 persons. Of these
employees, 39 were involved in product development, 40 in client services, 16 in
sales and marketing and 28 in general administration, clerical and finance. The
Company's employees are not represented by a labor union and the Company's
management believes that its relationship with its employees is good. 


CITATION Computer Systems, Inc.                                        Page 10
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<PAGE>   11
BACKLOG

         The Company sells its products on a purchase order basis, with
shipments of "turnkey" systems made shortly after receipt of executed purchase
orders. As a result, the level of backlog at any particular time is not
necessarily an indication of future results.

SUBSEQUENT EVENTS

         In June 1998, the Company announced that it 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 a privately held corporation
doing business as Sterling Systems based in Downey, Idaho. This business
accounted for approximately $1.0 million of revenue and contributed a pretax
loss of $0.2 million in fiscal 1998. Net assets associated with this line of
business, which are primarily comprised of capitalized software, approximated
$1.1 million at March 31, 1998. The cash transaction will result in a slight
after-tax loss on disposal in the first quarter of fiscal 1999.

         Also in June 1998, the Company announced it is in discussions about a
possible business combination with MEDASYS Digital Systems, a French Company
with U.S. offices in Miami and Chicago. MEDASYS is a leading provider of medical
imaging systems in Europe, is listed on the Second Market of the Paris Bourse
and reported revenues of $23.3 million in calendar 1997. Any transaction is
subject to the performance of due diligence and negotiation of a definitive
agreement. The Company anticipates that these negotiations and the resulting
transaction, if any, will be completed in the fall of 1998.


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<PAGE>   12


                          EXECUTIVE OFFICERS OF COMPANY

         The following persons constitute the executive officers and other key
employees of Company. All executive officers are appointed annually at the
organizational meeting of the Company's Board of Directors.

<TABLE>
<CAPTION>
PERSON                                   AGE      OFFICE/POSITION HELD
------                                   ---      --------------------
<S>                                     <C>       <C>

J. Robert Copper                         58       Chairman and Chief Executive Officer 
                                                  (since January 1995)

Richard D. Neece                         52       President (since August 1997; prior to that 
                                                  Executive Vice President and Chief Financial 
                                                  Officer since July 1995)

W. Steven Carter                         43       Executive Vice President, Services 
                                                  (since August 1996)

Russell L. Fortune                       50       Executive Vice President, International Sales 
                                                  (since April 1997; prior to that various sales 
                                                  positions since June 1991)

John Selestak                            41       Vice President Marketing (since January 1996)

Patricia Q. Moore                        51       Vice President Human Resources (since October 1995)

John P. Gilmore                          56       Vice President, Controller and Treasurer 
                                                  (since August 1996; prior to that Controller 
                                                  since June 1995)

Anton F. Flieg                           44       Vice President Product Management, Admin-
                                                  istrative Suite (since May 1997; prior to that 
                                                  Director of Sales Operations since March 1992)

Candice J. Barker                        42       Vice President Clinical Products 
                                                  (since September 1997, prior to that 
                                                  Director of Systems Development 
                                                  since December 1996)

</TABLE>


CITATION Computer Systems, Inc.                                        Page 12
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<PAGE>   13


ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company's principal facilities consist of approximately 32,000
square feet are located in Chesterfield, Missouri, a suburb of St. Louis. The
lease expires in May, 2004.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not aware of any reportable litigation.


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

         No such matters were submitted during the fourth quarter of Company's
fiscal year ended March 31, 1998.


CITATION Computer Systems, Inc.                                        Page 13
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<PAGE>   14


                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock of the Company is quoted and traded on the NASDAQ
National market under the symbol CITA. The following table sets forth the high
and low sale prices of the Common Stock for the periods indicated, as quoted on
NASDAQ.


<TABLE>
<CAPTION>
                                                   High                 Low
     <S>                                           <C>                <C>
Fiscal 1998
     Quarter ended June 30, 1997                  $8 1/2               $5 1/2
     Quarter ended September 30, 1997              9 1/2                7 1/8
     Quarter ended December 31, 1997               8 5/8                5 1/2
     Quarter ended March 31, 1998                  9 1/2                5 3/4

</TABLE>

         No dividends have been declared or paid on the Company's Common Stock.
The Company anticipates that it will retain all available funds for use in the
operation and expansion of its business and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. There were
approximately 153 shareholders of record on July 7, 1998.

ITEM 6.  MANAGEMENT'S DISCUSSION AND  ANALYSIS OR PLAN OF OPERATION

         The Company hereby incorporates by reference pages 1 through 9,
inclusive, of the Company's Financial Information for the Year Ended March 31,
1998 insert to the Annual Report to Shareholders, comprising Exhibit 13(a) of
this Form 10-KSB.

ITEM 7.  FINANCIAL STATEMENTS

         The Company hereby incorporates by reference pages 10 through 27
inclusive, of the Company's Financial Information for the Year Ended March 31,
1998 insert to the Annual Report to Shareholders comprising Exhibit 13(b) of
this Form 10-KSB.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
AND FINANCIAL DISCLOSURE

         Not Applicable


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<PAGE>   15


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         The Company hereby incorporates by reference portions of the Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end. Information respecting executive officers is set forth as a part of
Item 1 of this Report.

ITEM 10. EXECUTIVE COMPENSATION

         The Company hereby incorporates by reference portions of the Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

         The Company hereby incorporates by reference portions of Company's
definitive Proxy Statement to be filed within 120 days of Company's fiscal year
end.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company hereby incorporates by reference portions of Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Those Exhibits required by Item 601 of Regulation S-B and by
         paragraph (a) of Item 13:

         -3(a)    Restated Articles of Incorporation of the Company;
                  incorporated by reference to the corresponding Exhibit to the
                  Company's Registration Statement on Form S-1 of the Company,
                  Registration No. 33-48332

         -3(b)    Restated By-laws of the Company; incorporated by reference to
                  the corresponding Exhibit to the Company's Registration
                  Statement of Form S-1 of the Company, Registration No.
                  33-48332


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<PAGE>   16

         -4(a)    Specimen Common Stock Certificate; incorporated by reference
                  to the corresponding Exhibit to the Company's Registration
                  Statement on Form S-1 of the Company, Registration No.
                  33-48332

         -4(b)    Registration Rights Agreement, dated May 29, 1992, between the
                  Company and Capital For Business, Inc.; incorporated by
                  reference to the corresponding Exhibit to the Company's
                  Registration Statement on Form S-1 of the Company,
                  Registration No. 33-48332

         -4(c)    Form of Amendment to Registration Rights Agreement, dated
                  October 23, 1992, between the Company and Capital For
                  Business, Inc.; incorporated by reference to Exhibit 4(n) to
                  the Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1992, dated November 13, 1992, as filed by the
                  Company with the Commission.

         -10(a)   First Amended Incentive Stock Option Plan; incorporated by
                  reference to the corresponding Exhibit to the Company's
                  Registration Statement on Form S-1 of the Company,
                  Registration No. 33-48332

         -10(b)   Resolution Amending the First Amended Incentive Stock Option
                  Plan; incorporated by reference to the corresponding Exhibit
                  to the Company's Registration Statement on Form S-1 of the
                  Company, Registration No. 33-48332

         -10(c)   Amendment to First Amended Incentive Stock Option Plan;
                  incorporated by reference to the corresponding Exhibit to the
                  Company's Registration Statement on Form S-1 of the Company,
                  Registration No. 33-48332

         -10(d)   1992 Employee Incentive Stock Option Plan; incorporated by
                  reference to the corresponding Exhibit to the Company's
                  Registration Statement on Form S-1 of the Company,
                  Registration No. 33-48332

         -10(y)   Software Systems Program Product License, dated October 14,
                  1992, between Health Micro Data Systems, Inc., and
                  Presbyterian Healthcare Services; incorporated by reference to
                  the Company's Form 10-K for the fiscal year ended March 31,
                  1993



CITATION Computer Systems, Inc.                                        Page 16
Form 10-KSB for FYE 3/31/98

<PAGE>   17

         

         -13(a)   Financial Information Insert to the 1998 Annual Report to
                  Shareholders, pages 1-9.

         -13(b)   Financial Information Insert to the 1998 Annual Report to
                  Shareholders, pages 10 to 27.

         -21(a)   List of Subsidiaries of the Registrant

         -23(a)   Consent of PricewaterhouseCoopers LLP

         -23(b)   Report of PricewaterhouseCoopers LLP on Financial Statement
                  Schedule                                                   

         -27      Financial Data Schedule



    (b)   REPORTS ON FORM 8-K.

         None.


CITATION Computer Systems, Inc.                                        Page 17
Form 10-KSB for FYE 3/31/98

<PAGE>   18



                              SIGNATURES


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

                                                 CITATION Computer Systems, Inc.


                                                 By  /s/ J. Robert Copper
                                                    ---------------------
                                                    J. Robert Copper, Chairman
                                                    and Chief Executive Officer


                                                 July 7, 1998


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


      /s/ J. Robert Copper                        /s/ Fred L. Brown
------------------------------------         -----------------------------------
J. Robert Copper, July 7, 1998               Fred L. Brown, July 7, 1998
Director and Chief Executive Officer         Director


      /s/ Larry D. Marcus                         /s/ James F. O'Donnell
------------------------------------         -----------------------------------
Larry D. Marcus, July 7, 1998                James F. O'Donnell, July 7, 1998
Director                                     Director


      /s/ David T. Pieroni                        /s/ Richard D. Neece
------------------------------------         -----------------------------------
David T. Pieroni, July 7, 1998               Richard D. Neece, July 7, 1998
Director                                     Principal Financial Officer


                                                  /s/ John P. Gilmore
                                             -----------------------------------
                                             John P. Gilmore, July 7, 1998
                                             Principal Accounting Officer


                                                                         Page 18

<PAGE>   19


               INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS


<TABLE>
<CAPTION>
SCHEDULE
NUMBER                 SCHEDULE
--------               --------
<S>                    <C>
VIII                   Valuation and Qualifying Accounts
</TABLE>


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                 EXHIBIT
-------                -------
<S>      <C>
3(a)     Restated Articles of Incorporation of the Company; incorporated by
         reference to the corresponding Exhibit to the Company's Registration
         Statement on Form S-1 of the Company, Registration No. 33-48332

3(b)     Restated By-laws of the Company; incorporated by reference to the
         corresponding Exhibit to the Company's Registration Statement of Form
         S-1 of the Company, Registration No. 33-48332

4(a)     Specimen Common Stock Certificate; incorporated by reference to the
         corresponding Exhibit to the Company's Registration Statement on Form
         S-1 of the Company, Registration No. 33-48332

4(b)     Registration Rights Agreement, dated May 29, 1992, between the Company
         and Capital For Business, Inc.; incorporated by reference to the
         corresponding Exhibit to the Company's Registration Statement on Form
         S-1 of the Company, Registration No. 33-48332
</TABLE>


                                                                         Page 19

<PAGE>   20

<TABLE>
<S>      <C>

4(c)     Form of Amendment to Registration Rights Agreement, dated October 23,
         1992, between Company and Capital For Business, Inc.; incorporated by
         reference to Exhibit 4(n) to the Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1992, dated November 13, 1992, as filed by
         the Company with the Commission.

10(a)    First Amended Incentive Stock Option Plan; incorporated by reference to
         the corresponding Exhibit to the Company's Registration Statement on
         Form S-1 of the Company, Registration No. 33-48332

10(b)    Resolution Amending the First Amended Incentive Stock Option Plan;
         incorporated by reference to the corresponding Exhibit to the Company's
         Registration Statement on Form S-1 of the Company, Registration No.
         33-48332

10(c)    Amendment to First Amended Incentive Stock Option Plan; incorporated by
         reference to the corresponding Exhibit to the Company's Registration
         Statement on Form S-1 of the Company, Registration No. 33-48332

10(d)    1992 Employee Incentive Stock Option Plan; incorporated by reference to
         the corresponding Exhibit to the Company's Registration Statement on
         Form S-1 of the Company, Registration No. 33-48332

10(y)    Software Systems Program Product License, dated October 14, 1992,
         between Health Micro Data Systems, Inc., and Presbyterian Healthcare
         Services; incorporated by reference to Company's Form 10-K for the
         fiscal year ended March 31, 1993

</TABLE>


                                                                         Page 20

<PAGE>   21

<TABLE>
<S>      <C>

13(a)    Financial Information Insert to the 1998 Annual Report to Shareholders,
         pages 1 to 9

13(b)    Financial Information Insert to the 1998 Annual Report to Shareholders,
         pages 10 to 27

21(a)    List of Subsidiaries of the Registrant

23(a)    Consent of PricewaterhouseCoopers LLP

23(b)    Report of PricewaterhouseCoopers LLP on Financial Statement Schedule

27       Financial Data Schedule


</TABLE>


                                                                         Page 21



<PAGE>   22



                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                          ADDITIONS      ADDITIONS
                                          BALANCE AT     CHARGED TO      CHARGED TO      DEDUCTIONS      BALANCE AT
                                          BEGINNING       COSTS AND        OTHER          ACCOUNTS         END OF
              DESCRIPTION                 OF PERIOD       EXPENSES        ACCOUNTS       CHARGED OFF       PERIOD
              -----------                 ----------     ----------      ----------      -----------     ----------
<S>                                          <C>             <C>             <C>              <C>            <C>
Year ended March 31, 1996:
   Allowance for Doubtful accounts           $137            $74              -               $41            $170

Year ended March 31, 1997:
   Allowance for Doubtful accounts           $170            $40              -               $48            $162

Year ended March 31, 1998:
   Allowance for Doubtful accounts           $162            $74              -               $31            $205

</TABLE>



                                                                         Page 22