CITATION COMPUTER SYSTEMS INC, S-2, 1996-07-16

CITATION COMPUTER SYSTEMS INC
S-2, 1996-07-16
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1996

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
CITATION COMPUTER SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C>
MISSOURI 43-1174397
(State or Other Jurisdiction (I.R.S. Employer
of Identification
Incorporation or Number)
Organization)
</TABLE>

424 SOUTH WOODS MILL ROAD
CHESTERFIELD, MISSOURI 63017
(314) 579-7900
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

KENNETH H. SUELTHAUS, ESQ.
SUELTHAUS & WALSH, P.C.
7733 FORSYTH BOULEVARD
ST. LOUIS, MISSOURI 63105
(314) 727-7676
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)

COPIES TO:

<TABLE>
<S> <C>
JAMES J. JUNEWICZ, ESQ. JEFFREY A. SCHUMACHER, ESQ.
Mayer, Brown & Platt Sachnoff & Weaver
190 South LaSalle Street 30 South Wacker Drive, 29th Floor
Chicago, Illinois 60603 Chicago, Illinois 60606
(312) 701-7032 (312) 207-6414
</TABLE>

-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
-------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /

If the registrant elects to deliver its latest annual report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / / _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same
offering. / / _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
BE OFFERING PRICE OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.10 par value............... 3,167,159 $16.4375 $52,060,176 $17,952
</TABLE>

(1) Includes 409,847 shares covered by an over-allotment option.
(2) Estimated solely for purposes of determining the registration fee, based on
the average of the high and low sales prices on the Nasdaq National Market
on July 15, 1996.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 16, 1996

2,732,312 SHARES

[LOGO]
COMMON STOCK
--------------

Of the 2,732,312 shares of Common Stock offered hereby, 2,000,000 are being
sold by CITATION Computer Systems, Inc. ("CITATION" or the "Company") and
732,312 shares are being sold by certain shareholders of the Company (the
"Selling Shareholders"). In addition to the 2,732,312 shares offered to the
public, the Company is offering 25,000 shares pursuant to this Prospectus
directly to eligible employees on a non-underwritten basis. The Company will not
receive any proceeds from the sale of Common Stock by the Selling Shareholders.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "CITA." On July 12, 1996, the last reported sale price of the Common
Stock as reported on the Nasdaq National Market was $16.125 per share. See
"Price Range of Common Stock."
-------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 6 -- 9.
-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO THE SELLING
PUBLIC COMMISSIONS(1) THE COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)(4)............. $ $ $ $
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities under the Securities Act of
1933, as amended. See "Underwriting."

(2) Before deducting expenses, payable by the Company, estimated at $550,000.

(3) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase up to 409,847 additional shares of Common Stock,
on the same terms and conditions as set forth above, solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discounts and Commissions, Proceeds
to Company and Proceeds to the Selling Shareholders will be $ , $ ,
$ and $ , respectively. See "Underwriting."

(4) Excludes 25,000 shares being offered by the Company directly to eligible
Company employees at the Price to Public less Underwriting Discounts and
Commissions. See "Company Employee Offering" and "Underwriting."
-------------------

The shares of Common Stock (other than the shares offered pursuant to the
Company employee offering) are offered by the several Underwriters named herein,
subject to prior sale, when, as and if accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that the
certificates for the shares of Common Stock will be available for delivery at
the offices of Volpe, Welty & Company, One Maritime Plaza, San Francisco,
California on or about , 1996.

VOLPE, WELTY & COMPANY
JEFFERIES & COMPANY, INC.
PUNK, ZIEGEL & KNOELL

The date of this Prospectus is , 1996.
<PAGE>
[A GRAPHIC DEPICTION OF THE PRODUCTS AND DEMOGRAPHIC AND CLINICAL DATA
REPOSITORIES OF THE COMPANY AND THE TYPE OF CUSTOMERS USING THEM]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMPANY'S COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE
"UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, AND NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION
CONTAINED IN THIS PROSPECTUS ASSUMES THAT (I) THE UNDERWRITERS' OVER-ALLOTMENT
OPTION IS NOT EXERCISED AND (II) ALL OF THE 25,000 SHARES OF COMMON STOCK
OFFERED BY THE COMPANY TO ELIGIBLE COMPANY EMPLOYEES ARE PURCHASED BY SUCH
PERSONS. SEE "UNDERWRITING."

THE COMPANY

CITATION Computer Systems, Inc. ("CITATION" or the "Company") designs,
develops, markets and supports patient-centered clinical and financial
information systems for hospitals, clinics, physician groups and emerging
Integrated Delivery Networks ("IDNs"). The Company offers a comprehensive suite
of products using open client/server architecture to meet a broad range of the
information systems needs of the healthcare industry. The Company's products
integrate clinical, financial and decision support information within the
enterprise and provide community-wide patient registration and identification
throughout the IDN. The Company's systems are modular, scalable and
interoperable, enabling hospitals and IDNs to purchase systems that fit their
specific needs and leverage their existing information technology.

Since the Company's inception, CITATION has developed client/server-based
solutions for clients in the healthcare industry. CITATION offers a
comprehensive suite of products to manage information in the healthcare
enterprise. CITATION offers products addressing four functional areas: clinical,
financial, community registration and decision support. As part of its
continuing efforts to deliver advanced solutions to its clients, the Company is
presently migrating substantially all of its products to a Windows NT operating
system, which is an emerging client/server industry standard. In addition to its
own development efforts, the Company acquires or licenses technologies or
products developed by third parties that complement and enhance CITATION's
internally developed product offerings.

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 adaptable to
changes in the healthcare marketplace. In the future, as healthcare delivery
systems become more complex and IDNs emerge, the Company believes that access to
information and the ability to integrate patient data from disparate sources
will grow in importance. For example, a master patient index ties together
information about individuals no matter where or how the data is stored,
providing a universal electronic record of a patient's demographic, clinical and
payor history. In a 1996 survey conducted by Modern Healthcare/ Coopers &
Lybrand that appears in the March 4, 1996 issue of MODERN HEALTHCARE, 59% of
hospital chief information officers surveyed identified master patient indices
as one of their top four information priorities. In late calendar year 1996, the
Company intends to ship its master patient index product, the Common User
Registration Entry System, CURES. CURES distributes demographic and health
assessment information across multiple sites located throughout healthcare
enterprises, IDNs or the community. CURES is designed to function as a master
patient index and as a central data repository for all patient demographic and
health status information, streamlining the intake process by eliminating
repetitive registration questions about medical history and eligibility
information.

CITATION's goal is to leverage its 15 years of experience developing
client/server application solutions to become a leading provider of healthcare
information systems. In order to achieve this goal, the Company's strategy
includes increasing the number of comprehensive systems sales, expanding its
existing client base to include larger enterprises, broadening its product
portfolio to address the changing needs of healthcare enterprises and building
upon its international presence. CITATION's systems are installed in nearly 600
healthcare institutions worldwide, ranging in size from under 100 beds to over
1,000. CITATION markets its products directly in the United States, Canada, the
United Kingdom and Europe as well as through distribution partners in the Middle
East, the Far East and Latin America.

As part of its strategy to sell more comprehensive systems to larger
entities, the Company intends to expand its sales and marketing effort. In
addition, the Company sees an opportunity to expand its value-added client
support services by assisting clients in the design and configuration of their
systems, including networking, systems integration and data conversion.
Furthermore, the Company intends to provide advice on data analysis to assist
care providers in evaluating their operations.

In Janury 1995, J. Robert Copper became Chairman and Chief Executive Officer
of CITATION. From that time until September 1995, the Company recruited and
reorganized its senior management to improve its operating performance and
position the Company for future growth. Under the guidance of the new management
team, in January 1995 the Company initiated a plan to restructure its operations
in order to reduce its cost structure. In addition, in June 1995 the Company
decided to consolidate the operations of its Madison, Wisconsin facility into
its St. Louis, Missouri headquarters.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company................................... 2,000,000 shares(1)
The Selling Shareholders...................... 732,312 shares
Common Stock to be outstanding after the 5,781,936 shares(2)
offering........................................
Use of Proceeds................................. Working capital and general corporate
purposes, including sales force
expansion, product development and
acquisitions of complementary
businesses and technologies.
Nasdaq National Market Symbol................... CITA
</TABLE>

- ---------

(1) Excludes 25,000 shares of Common Stock offered hereby directly by the
Company to eligible Company employees on a non-underwritten basis. See
"Company Employee Offering."

(2) Based on the number of shares of Common Stock outstanding as of June 30,
1996. Excludes options to purchase 291,497 shares which were outstanding as
of June 30, 1996.

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

This Prospectus contains trademarks and trade names of companies other than
CITATION. These trademarks and trade names are the property of their respective
owners. The following trademarks are owned by the Company: C-CIS, C-COM, C-LAB,
C-CARE, C-RIS, C-MED, C-FIS, C-GEN, C-REC, CURES, C-MIS, AND
CITATION-REGISTERED TRADEMARK- IS A FEDERALLY REGISTERED TRADEMARK OF THE
COMPANY.

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

ANY FORWARD LOOKING STATEMENTS SET FORTH IN THIS PROSPECTUS ARE NECESSARILY
SUBJECT TO SIGNIFICANT UNCERTAINTIES AND RISKS, INCLUDING BUT NOT LIMITED TO,
THOSE SET FORTH IN "RISK FACTORS." WHEN USED IN THIS PROSPECTUS, THE WORDS
"BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD BE MATERIALLY
DIFFERENT AS A RESULT OF VARIOUS POSSIBILITIES, INCLUDING DIFFICULTIES OR DELAYS
IN THE INTRODUCTION OF NEW PRODUCTS OR THE REVISION OF EXISTING PRODUCTS,
SIGNIFICANT CHANGES IN HEALTHCARE REGULATION, ECONOMIC DOWNTURNS IN ANY OF THE
COMPANY'S KEY MARKETS, INCREASED COMPETITION CAUSED BY FACTORS SUCH AS INDUSTRY
CONSOLIDATION, NEW PRODUCT OFFERINGS BY EXISTING COMPETITORS, NEW ENTRANTS INTO
THE COMPANY'S MARKETS, INCREASED PRICE PRESSURE, THE AVAILABILITY OF SUITABLE
ACQUISITION CANDIDATES, CUSTOMER REDUCTION CAUSED BY INDUSTRY CONSOLIDATION OR
OTHER FACTORS OR MARKETPLACE ACCEPTANCE OF WINDOWS NT AS AN OPERATING PLATFORM.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS,
WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING
STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------
1992(1) 1993(1) 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net systems sales and service revenue:
System sales........................................... $ 11,186 $ 14,102 $ 14,767 $ 15,338 $ 16,216
Service revenue........................................ 3,756 5,067 6,763 8,027 8,835
--------- --------- --------- --------- ---------
Total revenue........................................ 14,942 19,169 21,530 23,365 25,051
--------- --------- --------- --------- ---------
Cost of products and services sold:
System sales........................................... 5,478 5,995 8,161 9,128 8,532
Service revenue........................................ 1,293 1,555 2,362 2,742 2,538
--------- --------- --------- --------- ---------
Total cost of products and services sold............. 6,771 7,550 10,523 11,870 11,070
--------- --------- --------- --------- ---------
Gross profit............................................. 8,171 11,619 11,007 11,495 13,981
--------- --------- --------- --------- ---------
Research and development expense......................... 538 503 1,296 1,661 1,672
Selling and administrative expenses...................... 5,308 7,450 7,718 9,212 8,711
Restructuring of operations.............................. -- -- -- 3,426(2) --
Office consolidation and relocation expense.............. -- -- -- -- 1,380(3)
--------- --------- --------- --------- ---------
Total operating expenses............................. 5,846 7,953 9,014 14,299 11,763
--------- --------- --------- --------- ---------
Operating income (loss).................................. 2,325 3,666 1,993 (2,804) 2,218
Other income, net........................................ 95 134 154 102 95
--------- --------- --------- --------- ---------
Income (loss) before income taxes........................ 2,420 3,800 2,147 (2,702) 2,313
Provision (benefit) for income taxes..................... 863 1,502 808 (877) 901
--------- --------- --------- --------- ---------
Net income (loss)........................................ $ 1,557 $ 2,298 $ 1,339 $ (1,825) $ 1,412
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Primary and fully diluted net income (loss) per share.... $ .57 $ .73 $ .36 $ (.49) $ .37
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of shares of Common Stock
outstanding -- fully diluted............................ 2,711 3,166 3,704 3,688 3,780
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(4)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 2,146 $ 32,494
Working capital......................................................................... 7,908 38,256
Total assets............................................................................ 21,257 51,605
Long-term debt, less current portion.................................................... 450 450
Shareholders' equity.................................................................... 12,614 42,962
</TABLE>

- ----------

(1) On December 11, 1992, the Company issued 596,559 shares of its Common Stock
in exchange for all of the outstanding shares of Health Micro Data Systems,
Inc. ("HMDS"). The merger was accounted for as a pooling of interests, and
accordingly, the consolidated financial statements of the Company for
periods up to the date of consummation of the merger have been restated to
include the accounts of HMDS.

(2) In January 1995, the Company initiated a plan to restructure its operations
in order to reduce its cost structure. As a result, the Company incurred a
restructuring charge of $3.4 million in the fourth quarter of fiscal 1995.
See Note 4 of Notes to Consolidated Financial Statements.

(3) In June 1995, the Company decided to consolidate the operations of its
Madison, Wisconsin facility into its St. Louis, Missouri headquarters and
recorded a charge of $1.4 million for the related costs in the first, third
and fourth quarters of fiscal 1996. The consolidation and relocation has
been substantially completed. See Note 3 of Notes to Consolidated Financial
Statements.

(4) Adjusted to reflect the sale of 2,025,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $16.125 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.

QUARTERLY FLUCTUATIONS IN OPERATING RESULTS. The Company's quarterly
results of operations have varied greatly in the past and are expected to vary
in the future because of the relatively high average sales price of the
Company's information systems and long length of the sales process. In addition,
the Company is increasingly committed to international sales. Historically, the
Company's international sales have been more volatile than the Company's
domestic sales on a quarterly basis. Any shortfall in revenues recognized in any
given period could have a material adverse effect on the Company's business,
results of operations and financial condition for such period. Because a
significant percentage of the Company's total expenses is relatively fixed,
variations in the timing of systems sales and installations can cause
significant variations in operating results from quarter to quarter and may
magnify the adverse effect of any shortfalls in revenue on the Company's results
of operations. The Company believes that period-to-period comparisons of
revenues and results of operations are not necessarily meaningful and should not
be relied upon as indicators of future performance. At some point in the future
the Company's quarterly results will likely be below those projected by market
analysts. Quarterly results fluctuations and variations from projections could
have a significant impact on the market price of the Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations."

TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCT DEVELOPMENT. The healthcare
information systems industry is characterized by rapid technological change. The
Company's future success will depend upon its ability to continually develop
software applications that incorporate new technologies and to enhance and
expand its current products. 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. The
Company anticipates that significant amounts of future revenue will be derived
from products and product enhancements which either do not exist today or have
not been sold in large enough quantities to ensure market acceptance. The
development of new systems is a complex, expensive and uncertain process
requiring technical innovation and the accurate anticipation of technological
and market trends. The Company will need to continue to attract and retain
appropriately skilled employees to successfully develop new systems. There can
be no assurance that the Company will not experience difficulties that could
delay or prevent the successful development and introduction of product
enhancements or new products, or that such enhancements or new products will
adequately meet the requirements of the marketplace or achieve market
acceptance. If the Company is unable to develop and introduce product
enhancements and new products in a timely and cost-effective manner in response
to changing market conditions or client requirements, the Company's business,
results of operations and financial condition could be materially and adversely
affected.

The software products offered by the Company may contain undetected errors
or failures when first introduced or as new versions are released. Errors or
failures that are not detected until after the commencement of commercial
shipments of a product could result in loss of or delay in market acceptance of
the product and in claims against the Company, which could have a material
adverse impact on the Company's business, results of operations and financial
condition.

PRODUCT CONVERSIONS TO WINDOWS NT. The Company intends to migrate
substantially all of its products to Windows NT. The Company expects that
Windows NT will become the operating system foundation for a large number of
healthcare enterprises, although there can be no assurance that this will be the
case. As a result of the complexities involved in the conversion of the
Company's products to Windows NT, the new versions will require significant
development and testing periods before they achieve marketability. There can be
no assurance that the Windows NT versions will be completed before demand for
the Company's software written for other operating systems slows. Some of the
Company's competitors have already been able to convert their products to
operate on Windows NT. Further, certain potential clients may delay purchasing
decisions until Windows NT versions of the Company's products are available.
There can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful and timely development, introduction and
marketing of the new Windows NT versions of its products, or that

6
<PAGE>
such versions will adequately meet the requirements of the marketplace and
achieve market acceptance. In addition, the conversions could divert resources
away from developing or enhancing other products. The occurrence of any of these
potential product conversion problems could have a material adverse impact on
the Company's business, results of operations and financial condition. See
"Business -- Products" and "Business -- Product Development."

CHANGE IN MARKETING FOCUS. While the Company has traditionally sold its
products to small and medium-sized hospitals, the Company believes it will be
necessary to extend its marketing efforts to larger healthcare providers with
which the Company has less sales experience. Many healthcare providers are
consolidating to create larger healthcare delivery organizations. This
consolidation reduces the number of potential customers for the Company's
products, and the increased purchasing power of these organizations could lead
to reductions in the amounts paid for the Company's products. The Company
anticipates that the laboratory information systems market and the integrated
healthcare information systems market will continue to expand despite a decrease
in the number of small and medium-sized hospitals, but there can be no assurance
that such expansion will occur in these markets. The Company intends to focus
its sales efforts on selling more comprehensive products to large hospitals and
IDNs. Because the Company has expanded its product offerings into an extensive
package of integrated products, purchases of the Company's products increasingly
require approval by a customer's executive officers as opposed to departmental
managers, lengthening the sales process and rendering the sale more competitive
and uncertain. There can be no assurance that the Company will be successful in
these sales efforts. Failure to compete successfully in these market segments
could have a material adverse impact on the Company's business, results of
operations and financial condition. See "Business -- Business Strategy" and
"Business -- Sales and Marketing."

RISKS ASSOCIATED WITH FOREIGN SALES. In 1996 the Company's international
sales increased to 12.2% of total revenues from 6.0% in 1995. The Company
expects international sales to continue to constitute a significant portion of
its revenues. The Company's sales outside the United States are subject to the
risks that: agreements may be more difficult to enforce and that receivables may
be more difficult to collect through a foreign country's legal system; foreign
customers often have longer payment cycles; foreign countries could make
unexpected changes in regulatory requirements or be the subject of significant
political and economic instability; foreign subsidiaries, distributors and sales
representatives may be difficult to manage; foreign countries could impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; and intellectual
property rights may be more difficult to enforce in foreign countries. In
addition, exchange rate fluctuations may render the Company's products less
competitive relative to local product offerings, or could result in foreign
exchange losses, depending upon the currency in which the Company sells its
products. To date, the Company has not engaged in exchange rate hedging
activities to minimize the risks of such fluctuations. The Company may seek to
implement hedging techniques in the future with respect to its foreign currency
transactions. There can be no assurance, however, that the Company will be
successful in such hedging activities. Problems arising from the Company's
international sales could have a material adverse impact on the Company's
business, results of operations and financial condition. See "Business -- Sales
and Marketing."

RISKS ASSOCIATED WITH IDENTIFYING AND INTEGRATING ACQUISITIONS. A portion
of the net proceeds of this offering and other funds available to the Company
may be used to acquire complementary products, technologies or businesses in the
healthcare information systems industry. The evaluation, negotiation and
integration of any such acquisition may divert the time, attention and resources
of the Company, particularly its management. In addition, there is significant
competition for acquisition opportunities in the healthcare information systems
industry. Consolidation in the industry may intensify such competition and
thereby increase the costs of such opportunities. There can be no assurance that
the Company will be able to identify suitable acquisition candidates, consummate
acquisitions on terms favorable to the Company, or integrate successfully any
acquired products, technologies or businesses into its current operations. The
failure to do so could have a material adverse impact on the Company's business,
results of operations and financial condition. See "Use of Proceeds," "Business
- -- Business Strategy" and "Business -- Product Development."

COMPETITION. The market for healthcare information systems, including the
market for the Company's information systems, is highly competitive. Most of the
Company's revenues are derived from lengthy, competitive procurement processes
managed by sophisticated purchasers that extensively investigate and

7
<PAGE>
compare the healthcare information systems offered by the Company and its
competitors. The Company believes that the principal competitive factors
influencing the market for its healthcare information systems include vendor and
product reputation, product architecture, functionality and features, ease of
use, rapidity of implementation, quality of client support, product performance
and price. There can be no assurance that the Company will be able to compete
successfully with respect to any of such factors. In the healthcare information
systems market, the Company competes with a large number of other healthcare
information systems vendors. Many of the Company's current and potential
competitors have significantly greater financial, managerial, development,
technical, marketing and sales resources than the Company and may be able to
devote those resources to develop and introduce products more rapidly than the
Company or systems with significantly greater functionality than, and superior
overall performance to, those offered by the Company. These competitors may also
be able to initiate and withstand significant price decreases more effectively
than the Company. Moreover, the continuing consolidation of hospitals and other
healthcare providers has resulted in fewer individual purchasing decisions, a
trend that may favor larger vendors. To be competitive, the Company must be able
to respond effectively to the introduction of new and improved healthcare
information systems by its competitors. There can be no assurance that the
Company will be able to develop new or improved healthcare industry information
services in a timely and cost effective manner or that the Company's current and
future healthcare information systems and services will achieve and maintain
market acceptance. Failure of the Company to effectively compete could have a
material adverse impact on the Company's business, results of operations and
financial condition. See "Business -- Competition."

GOVERNMENT 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 C-CIS, the Company's clinical information system. The
Company has decided not to internally develop products (E.G., blood bank
software), at this time, that would subject the Company to the pre-market
approval requirements of Section 510(k) of the Food, Drug and Cosmetic Act.
Additional legislation governing the dissemination of medical record information
has been proposed. Currently pending in Congress is the Medical Records
Confidentiality Act (the "Medical Records Act"), which would protect and
regulate the confidentiality of medical record information. The Medical Records
Act would preempt most state laws regarding access to, and the use and
disclosure of, medical record information. If the Medical Records Act is
enacted, compliance with it could be costly and could preclude or delay the
introduction of certain new products. The Company is unable to determine at this
time the effect, if any, that these requirements may have on its business. There
can be no assurance that future regulation of the healthcare industry would not
have a material adverse impact on the Company's business, results of operations
and financial condition. See "Business -- Regulation."

HEALTHCARE INDUSTRY REFORM. 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. The Company cannot predict with any certainty what impact, if any, such
legislative or market-driven, regulatory 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 impact on the Company's business,
results of operations and financial condition. See "Business -- Regulation."

PRODUCT LIABILITY. The Company's systems include applications that may
relate to confidential patient medical histories, clinical information and
treatment plans. Improper disclosure of this information or any failure by the
Company's systems to provide accurate and timely information could result in
claims against the Company by its clients or their patients. A successful claim
brought against the Company in excess of its insurance coverage could have a
material adverse effect on the Company's business, results of operations and
financial condition, and even unsuccessful claims could result in the
expenditure of substantial funds in litigation and the diversion of management
time and resources. There can be no assurance that the Company will not be
subject to such claims in the future, that such claims will not result in
liability in excess of any insurance coverage maintained by the Company with
respect to such claims, that insurance will cover such claims or that
appropriate insurance will continue to be available to the Company at
commercially reasonable rates.

INTELLECTUAL PROPERTY. The Company's success depends upon its ability to
prevent the unauthorized use of its software products, none of which is
patented. The Company relies largely on copyright protection,

8
<PAGE>
license agreements, confidentiality procedures and employee nondisclosure
agreements to protect its proprietary rights. It may nonetheless be possible for
third parties to misappropriate the Company's technology and proprietary
information or to develop independently similar or superior technology. There
can be no assurance that the legal protections afforded to the Company and the
measures taken by the Company will be adequate to protect its intellectual
property. In addition, the laws of some foreign countries in which the Company
sells, or may in the future sell, its products do not protect proprietary rights
to as great an extent as do the laws of the United States. Moreover, the Company
is subject to the risk that others will assert adverse claims and commence
litigation alleging infringement or misappropriation of their intellectual
property rights. Any such claims regardless of their merit could be time
consuming, result in costly litigation, delay or prevent product shipments or
require the Company to enter into costly royalty or licensing agreements. There
can be no assurance that the Company would be able to develop alternative
technology or that any necessary licenses would be available or that, if
available, such licenses could be obtained on commercially reasonable terms. The
occurrence of any of the foregoing could have a material adverse impact on the
Company's business, results of operations and financial condition. See "Business
- -- Intellectual Property."

DEPENDENCE ON KEY PERSONNEL. The success of the Company is dependent on the
efforts and abilities of its senior executive officers. In January 1995, J.
Robert Copper became Chairman and Chief Executive Officer of CITATION. From that
time until September 1995, the Company recruited and reorganized its senior
management. There can be no assurance that this new management team will
continue to be successful. Loss of one or more members of the management team
could have a material adverse impact on the Company's business, results of
operations and financial condition. See "Management."

POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to quarter-to-quarter
variations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, governmental
regulatory actions, general trends in the industry and other events. In
addition, the stock market in recent years has experienced price and volume
fluctuations that have particularly affected the market prices of many
technology companies and that have often been unrelated or disproportionate to
the operational performance of these companies. These fluctuations, as well as
general economic and market conditions, could materially and adversely affect
the market price of the Common Stock. See "Price Range of Common Stock."

SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL FOR ADVERSE EFFECT ON STOCK
PRICE. Sales of substantial amounts of Common Stock in the public market could
have a material adverse impact on the market price of the Common Stock. Upon
completion of this offering, substantially all shares of the Company's Common
Stock will be freely tradeable without restriction, or may be sold pursuant to
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
The Company, its Directors, executive officers and the Selling Shareholders,
beneficially holding an aggregate of 2,125,528 shares of Common Stock (excluding
shares offered hereby other than the shares subject to the Underwriters'
over-allotment option), have agreed that they will not sell any Common Stock
without the prior consent of Volpe, Welty & Company for a period of 120 days
from the date of this Prospectus (the "Lockup Period"). Upon expiration of the
Lockup Period, these shares will become eligible for immediate sale, subject in
certain cases to volume and other limitations under Rule 144. Additionally, at
June 30, 1996, options to purchase 291,497 shares of Common Stock were
outstanding, of which options to purchase 283,497 shares were exercisable. The
Company has filed a registration statement to permit the shares acquired on
exercise of options to be freely tradeable. See "Shares Eligible for Future
Sale" and "Underwriting."

ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Articles of
Incorporation and By-laws may be regarded as "anti-takeover" provisions because
they could have the effect of limiting the ability of other entities or persons
to acquire control of the Company. The existence of these provisions could
materially and adversely affect the market price of the Common Stock. See
"Description of Capital Stock -- Anti-Takeover Effects of Missouri Law and
Articles of Incorporation and By-laws."

9
<PAGE>
THE COMPANY

The Company was organized in 1979 as a Missouri corporation. The Company's
principal executive office is located at 424 South Mills Road, Suite 200,
Chesterfield, Missouri 63017 and its telephone number is (314) 579-7900. The
Company also has a branch office in London.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,025,000 shares
offered by the Company hereby (after deducting estimated underwriting discounts
and commissions and estimated offering expenses), at an assumed offering price
of $16.125 per share, are estimated to be approximately $30.3 million ($33.5
million if the Underwriters' over-allotment option is exercised in full). The
Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholders. See "Principal and Selling Shareholders."

The Company intends to use the net proceeds from the offering for working
capital and general corporate purposes, including sales force expansion, product
development and acquisitions of complementary businesses and technologies. No
material acquisitions are currently pending. The net proceeds will be invested
by the Company in short-term, interest-bearing, investment grade securities
until used for such purposes.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock.
Pursuant to the Company's line of credit agreement, the Company may not declare
or pay any dividends without the prior written consent of the lender thereunder.
The Company anticipates that it will retain all of its net earnings or available
funds, if any, 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.

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "CITA." The following table sets forth the high and low sales
prices of the Common Stock for the periods indicated, as reported on the Nasdaq
National Market:

<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
FISCAL 1995
Quarter ended June 30, 1994.................................................................... $ 53/4 $ 41/2
Quarter ended September 30, 1994............................................................... 7 47/8
Quarter ended December 31, 1994................................................................ 8 65/8
Quarter ended March 31, 1995................................................................... 75/8 43/8

FISCAL 1996
Quarter ended June 30, 1995.................................................................... $ 57/8 $ 43/8
Quarter ended September 30, 1995............................................................... 63/8 5
Quarter ended December 31, 1995................................................................ 53/4 35/8
Quarter ended March 31, 1996................................................................... 143/4 51/2
FISCAL 1997
Quarter ended June 30, 1996.................................................................... $ 201/2 $ 133/8
Quarter ended September 30, 1996 (through July 12, 1996)....................................... 201/4 161/8
</TABLE>

On July 12, 1996, the closing sales price of the Common Stock on the Nasdaq
National Market was $16 1/8 per share.

As of June 30, 1996, there were 181 holders of record of Common Stock.

10
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1996 on an actual basis and as adjusted to reflect the estimated net
proceeds to the Company from the sale of the 2,025,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $16.125 per share.
The table should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and other consolidated financial data of the
Company appearing elsewhere in this Prospectus. See "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C>
Long-term debt, less current portion...................................................... $ 450 $ 450
--------- -----------
Shareholders' equity:
Common Stock, $0.10 par value; 10,000,000 shares authorized; 3,747,882 shares issued and
outstanding; 5,772,882 shares issued and outstanding, as adjusted(1)................... 375 577
Additional paid-in capital................................................................ 6,128 36,274
Retained earnings......................................................................... 6,180 6,180
Equity adjustment from foreign currency translation....................................... (69) (69)
--------- -----------
Total shareholders' equity.............................................................. 12,614 42,962
--------- -----------
Total capitalization.................................................................... $ 13,064 $ 43,412
--------- -----------
--------- -----------
</TABLE>

- ---------
(1) Excludes 21,684 shares of Common Stock available for grant under the
Company's stock option plans and 299,497 shares which were subject to
outstanding options as of March 31, 1996. See "Principal and Selling
Shareholders" and "Shares Eligible for Future Sale."

11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data as of and for each of the five
years in the period ended March 31, 1996 has been derived from the audited
consolidated financial statements of the Company, which have been audited by
Price Waterhouse LLP. The selected consolidated financial data is qualified in
its entirety by and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and related Notes thereto appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------
1992(1) 1993(1) 1994 1995 1996
--------- ----------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net systems sales and service revenue:
System sales........................................ $ 11,186 $ 14,102 $ 14,767 $ 15,338 $ 16,216
Service revenue..................................... 3,756 5,067 6,763 8,027 8,835
--------- ----------- --------- --------- ---------
Total revenue..................................... 14,942 19,169 21,530 23,365 25,051
--------- ----------- --------- --------- ---------
Cost of products and services sold:
System sales........................................ 5,478 5,995 8,161 9,128 8,532
Service revenue..................................... 1,293 1,555 2,362 2,742 2,538
--------- ----------- --------- --------- ---------
Total cost of products and services sold.......... 6,771 7,550 10,523 11,870 11,070
--------- ----------- --------- --------- ---------
Gross profit.......................................... 8,171 11,619 11,007 11,495 13,981
--------- ----------- --------- --------- ---------
Research and development expense...................... 538 503 1,296 1,661 1,672
Selling and administrative expenses................... 5,308 7,450 7,718 9,212 8,711
Restructuring of operations........................... -- -- -- 3,426(2) --
Office consolidation and relocation expense........... -- -- -- -- 1,380(3)
--------- ----------- --------- --------- ---------
Total operating expenses.......................... 5,846 7,953 9,014 14,299 11,763
--------- ----------- --------- --------- ---------
Operating income (loss)............................... 2,325 3,666 1,993 (2,804) 2,218
Other income, net..................................... 95 134 154 102 95
--------- ----------- --------- --------- ---------
Income (loss) before income taxes..................... 2,420 3,800 2,147 (2,702) 2,313
Provision (benefit) for income taxes.................. 863 1,502 808 (877) 901
--------- ----------- --------- --------- ---------
Net income (loss)..................................... $ 1,557 $ 2,298 $ 1,339 $ (1,825) $ 1,412
--------- ----------- --------- --------- ---------
--------- ----------- --------- --------- ---------
Primary and fully diluted net income (loss) per
share................................................ $ .57 $ .73 $ .36 $ (.49) $ .37
--------- ----------- --------- --------- ---------
--------- ----------- --------- --------- ---------
Weighted average number of shares of Common Stock
outstanding -- fully diluted......................... 2,711 3,166 3,704 3,688 3,780

MARCH 31,
-------------------------------------------------------
(IN THOUSANDS)
1992 1993 1994 1995 1996
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 2,068 $ 7,807 $ 4,817 $ 2,634 $ 2,146
Working capital....................................... 2,003 9,113 7,567 6,275 7,908
Total assets.......................................... 9,151 17,337 19,119 18,890 21,257
Long-term debt, less current portion.................. 13 88 278 540 450
Shareholders' equity.................................. 3,579 11,372(4) 12,726 11,240 12,614
</TABLE>

- ----------
(1) On December 11, 1992, the Company issued 596,559 shares of its Common Stock
in exchange for all of the outstanding shares of HMDS. The merger was
accounted for as a pooling of interests, and accordingly, the consolidated
financial statements of the Company for periods up to the date of
consummation of the merger have been restated to include the accounts of
HMDS.

(4) Amount reflects the net proceeds of approximately $5.0 million from the
Company's October 1992 initial public offering of Common Stock.

12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. WHEN USED
IN THE FOLLOWING DISCUSSION, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED, INCLUDING, BUT NOT
LIMITED TO, THOSE SET FORTH IN "RISK FACTORS." READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE
TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.

OVERVIEW

CITATION designs, develops, markets and supports patient-centered clinical
and financial information systems for hospitals, clinics, physician groups and
emerging Integrated Delivery Networks ("IDNs"). The Company offers a
comprehensive suite of products using open client/server architecture to meet a
broad range of the information systems needs of the healthcare industry. These
products integrate patient care processes within the enterprise and provide
community-wide patient registration and identification throughout the IDN. 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 nearly 600 institutions ranging in
size from fewer than 100 beds to more than 1,000 beds. CITATION markets its
products directly in the United States, Canada, the United Kingdom, and Europe
as well as through distribution partners in the Middle East, the Far East, and
Latin America.

The Company generates revenues from the sale of information systems and
services. System sales consist of software licenses, related hardware,
installation and training, and the sale of third-party software. Hardware
revenues are generated from sales of third-party manufactured hardware typically
sold in conjunction with the Company's software. Service revenue includes
maintenance and support services.

The sales cycle for the Company's systems is typically six to nine months
from initial contact to contract execution. Depending upon the combination of
products purchased and the installation schedule, installation typically
requires six to 12 months. Revenue from systems sales is recognized upon
shipment to the client provided that no significant vendor obligations remain
and collection of the related receivable is deemed probable. Revenue related to
the installation is recognized as the work is performed. Service revenue is
recognized ratably over the term of the contract period. Revenue recognized from
the sale of hardware as a percentage of total revenue has declined from 18.7% in
fiscal 1995 to 14.6% in fiscal 1996 because of increased software sales and also
because the Company's clients are buying hardware directly from third parties.

Cost of products and services sold includes cost of system sales and cost of
service revenue. Cost of system sales includes cost of hardware sold,
installation and training expenses, and software amortization expenses. Cost of
service revenue includes all client service expenses plus an allocation of
certain other overhead expenses.

Research and development expenses include salaries and expenses related to
development and documentation of software systems, reduced by capitalized
software development costs. Software development costs are expensed until such
time as technological feasibility is established and then are capitalized in
compliance with Statement of Financial Accounting Standards No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed."

Sales and marketing expenses include salaries, commissions, advertising,
trade show costs, and user group costs related to the sale and marketing of the
Company's systems. General and administrative expenses include salaries and
expenses for the corporate administration, finance, legal, and human resources,
as well as profit sharing, bonuses and insurance.

13
<PAGE>
In January 1995, J. Robert Copper became Chairman and Chief Executive
Officer of the Company. From that time until September 1995, the Company
recruited and reorganized its senior management to improve its operating
performance and position the Company for future growth.

In January 1995, the Company initiated a plan to restructure its operations
in order to reduce its cost structure. As a result, the Company incurred a
restructuring charge of $3.4 million in the fourth quarter of fiscal 1995. See
Note 4 of Notes to Consolidated Financial Statements for details of the
restructuring charge.

In June 1995, the new management team decided to consolidate the operations
of its Madison, Wisconsin facility into its St. Louis, Missouri headquarters.
During the fiscal year ended March 31, 1996, the Company recorded a charge of
$1.4 million for the related costs. The consolidation and relocation has been
substantially completed. See Note 3 of the Notes to Consolidated Financial
Statements for details of the office consolidation and relocation charge.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
from the Company's Consolidated Statement of Operations expressed as a
percentage of total revenues.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1994 1995 1996
----------- ------------ -----------
<S> <C> <C> <C>
Net system sales and service revenue:
System sales................................................................... 68.6% 65.6% 64.7%
Service revenue................................................................ 31.4 34.4 35.3
----- ----- -----
Total revenues............................................................... 100.0% 100.0% 100.0%
----- ----- -----
Cost of products and services sold:
System sales................................................................... 37.9 39.1 34.1
Service revenue................................................................ 11.0 11.7 10.1
----- ----- -----
Total cost of products and services sold..................................... 48.9 50.8 44.2
----- ----- -----
Gross profit..................................................................... 51.1 49.2 55.8
----- ----- -----
Research and development expense................................................. 6.0 7.1 6.7
Selling and administrative expenses.............................................. 35.8 39.4 34.8
Restructuring of operations...................................................... -- 14.7 --
Office consolidation and relocation expense...................................... -- -- 5.5
----- ----- -----
Total operating expenses..................................................... 41.8 61.2 47.0
----- ----- -----
Operating income (loss).......................................................... 9.3 (12.0) 8.8
Other income (expense):
Interest income................................................................ 0.8 0.8 0.6
Interest expense............................................................... (0.2) (0.3) (0.3)
Other, net..................................................................... 0.1 -- 0.1
----- ----- -----
Income (loss) before income taxes................................................ 10.0 (11.6) 9.2
Provision (benefit) for income taxes............................................. 3.8 (3.8) 3.6
----- ----- -----
Net income (loss)................................................................ 6.2% (7.8)% 5.6%
----- ----- -----
----- ----- -----
</TABLE>

COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1995 TO FISCAL YEAR ENDED MARCH 31,
1996

REVENUE. Total revenues increased 7.2% from $23.4 million in fiscal 1995 to
$25.1 million in fiscal 1996 due to a 5.7% increase in system sales, and a 10.1%
increase in service revenue. Revenues from domestic operations were flat in
fiscal 1996. However, revenues increased at accelerated rates during the third
and fourth quarters of fiscal 1996. The Company believes that the results for
the first six months of the year were negatively impacted by (i) a management
reorganization within the Company, (ii) the refocusing of its sales efforts
toward larger, fully integrated hospital information systems sales and (iii) the
consolidation of its

14
<PAGE>
domestic operations. The increased revenues in the third and fourth quarters are
due to this refocusing of sales efforts in the United States and increased
efforts to sell the products internationally. International revenues increased
119% to $3.1 million in fiscal 1996. This increase is due to several key system
sales to hospitals in England, Ireland and the Netherlands. Domestic and
international sales represented 87.8% and 12.2% of total revenues, respectively,
in fiscal 1996.

System sales increased from $15.3 million in fiscal 1995 to $16.2 million in
fiscal 1996. The 5.7% increase in system sales was primarily attributable to
additional revenue generated from international operations. While the Company
sold fewer systems in fiscal 1996 as compared to fiscal 1995, the average system
contract value was higher in fiscal 1996. The higher average system contract
value reflects the growth in the sale of more comprehensive systems. The average
system contract value increased from approximately $180,000 in fiscal 1995 to
approximately $280,000 in 1996. This trend was especially evident in the fourth
quarter of fiscal year 1996 during which the average systems contract increased
166% from $154,000 during the fourth quarter of fiscal year 1995 to $410,000.
System sales represented 65.6% and 64.7% of total revenues in fiscal years 1995
and 1996, respectively.

Service revenue increased from $8.0 million in fiscal 1995 to $8.8 million
in fiscal 1996. The 10.1% increase was primarily due to additional service
revenue from the growth in the client base and renewals of maintenance contracts
from existing clients. Service revenue represented 34.4% and 35.3% of total
revenues in fiscal years 1995 and 1996, respectively.

COST OF PRODUCTS AND SERVICES SOLD AND GROSS PROFIT. Cost of products and
services sold includes cost of hardware sold, installation and client service
expenses, and software amortization costs. Cost of sales relating to service
revenue includes all client service expenses plus an allocation of certain other
expenses based upon estimates made by management. Total cost of products and
services sold decreased from $11.9 million in 1995 to $11.1 million in 1996. The
total cost of products and services sold decreased from 50.8% of total revenues
in fiscal 1995 to 44.2% in fiscal 1996. The decrease was primarily due to the
decrease in hardware costs as a percentage of total revenues and a decrease in
client service expense reflecting the closing of the Madison office. The
decreases in hardware costs and client service expenses were offset by a slight
increase in amortization of capitalized software costs for the year. Software
amortization costs of $1.7 million in fiscal 1995 and $1.8 million in fiscal
1996 represented 14.4% and 16.2%, respectively, of total costs of products and
services sold for fiscal years 1995 and 1996.

Gross profit increased $2.5 million from $11.5 million in fiscal 1995 to
$14.0 million in fiscal 1996. Gross profit as a percentage of total revenues
increased from 49.2% in fiscal 1995 to 55.8% in fiscal 1996. The increase was
primarily attributable to higher average per system contract value and a lower
hardware component as a percentage of the system contract value. Several system
sales in fiscal 1996 were software-only sales, which have a higher gross profit
percentage than similarly priced systems which include both software and
hardware.

RESEARCH AND DEVELOPMENT EXPENSES. Total outlays for software development
for fiscal years 1995 and 1996 were $5.3 million and $4.4 million, respectively,
representing 22.8% and 17.6% of total revenues for those periods. The Company
capitalized $3.6 million in fiscal 1995 and $2.6 million in fiscal 1996,
resulting in research and development expense of $1.7 million for both fiscal
years 1996 and 1995. The decrease of $1.0 million in total outlays for software
development was primarily due to the consolidation of domestic development into
one location. Software development costs for domestic operations were $3.5
million in fiscal year 1996 of which $2.0 million was capitalized.

SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses as
a percentage of total revenues decreased from 39.4%, or $9.2 million in fiscal
1995, to 34.8%, or $8.7 million in fiscal 1996. The decrease in selling and
administrative expenses as a percentage of total revenues resulted from
consolidating domestic operations in St. Louis. The $0.5 million decrease is
also due to lower costs associated with the support of both domestic and
international operations.

15
<PAGE>
OFFICE CONSOLIDATION AND RELOCATION. A charge of $1.4 million was recorded
in fiscal 1996 to provide for costs of the consolidation of facilities,
settlement of related employee claims and the relocation of certain employees
and equipment due to the consolidation of domestic operations in St. Louis.

OPERATING INCOME. Operating income for fiscal 1996 increased to $3.6
million, excluding $1.4 million in office consolidation and relocation charges,
from $0.6 million, excluding restructuring charges of $3.4 million in fiscal
1995. The increase in operating income is due to the growth in revenues and the
reduction in the cost of sales and selling and administrative expenses.
Including the above non-recurring charges, the Company incurred a loss of $2.2
million in fiscal 1995 compared with operating income of $2.8 million in fiscal
1996.

INCOME TAXES. The Company's effective income tax (benefit) rate was (32.5)%
in fiscal 1995 versus 39.0% in fiscal 1996. The fiscal 1995 rate reflects the
non-deductibility for tax purposes of a relatively minor portion of the asset
write-offs included in the restructuring costs recorded during the year.

COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1994 TO FISCAL YEAR ENDED MARCH 31,
1995

REVENUE. Total revenues increased 8.5% from $21.5 million in fiscal 1994 to
$23.4 million in fiscal 1995 due to a 3.9% increase in system sales and an 18.7%
increase in service revenue.

System sales increased from $14.8 million in fiscal 1994 to $15.3 million in
fiscal 1995. The 3.9% increase in system sales was primarily attributable to
additional revenue generated from international operations. While the Company
sold fewer systems in fiscal 1995 as compared to fiscal 1994, the average system
contract value was higher in fiscal 1995. The higher average system contract
value reflects the growth in the sale of systems consisting of clinical
information systems. In fiscal 1994 less than 10% of system sales (as measured
by the number of contracts sold) consisted of clinical information systems,
versus 20% in fiscal 1995. System sales represented 68.6% and 65.6% of total
revenues in fiscal years 1994 and 1995, respectively. Revenue from international
sales represented 3.2% and 6.0% of total revenues in fiscal years 1994 and 1995,
respectively.

Service revenue increased from $6.8 million in fiscal 1994 to $8.0 million
in fiscal 1995. The 18.7% increase was primarily due to additional service
revenue from the growth in the client base and renewals of service contracts
from existing clients. Service revenue represented 31.4% and 34.4% of total
revenues in fiscal years 1994 and 1995, respectively.

COST OF PRODUCTS AND SERVICES SOLD AND GROSS PROFIT. For fiscal 1994 and
1995, total cost of products and services sold were $10.5 million and $11.9
million, respectively, for a 12.8% increase in fiscal 1995. The total cost of
products and services sold increased from 48.9% of total revenues in fiscal 1994
to 50.8% in fiscal 1995. The increase was primarily due to the increase in
amortization of capitalized software costs for the year, related to the increase
in product development expenditures over the past two years, and to an increase
in client service expenses related to additional employees hired to support the
growth in the client base. The increases in amortization costs and client
service expenses were offset by a slight decrease in hardware costs as a
percentage of total revenues. Software amortization costs of $1.3 million in
fiscal 1994 and $1.7 million in fiscal 1995 represented 12.1% and 14.4%,
respectively, of total costs of products and services sold for fiscal years 1994
and 1995.

Gross profit increased $0.5 million from $11.0 million in fiscal 1994 to
$11.5 million in fiscal 1995. While gross profit increased, gross profit as a
percentage of total revenues decreased from 51.1% in fiscal 1994 to 49.2% in
fiscal 1995. The decrease in gross profit as a percentage of total revenues
primarily reflects the fact that the increases in software amortization costs
(34.3%), and client service expenses (15.2%) outpaced the increase in total
revenues (8.5%) in fiscal 1995.

RESEARCH AND DEVELOPMENT COSTS. Total outlays for software development for
fiscal years 1994 and 1995 were $3.7 million and $5.3 million, respectively,
representing 17.0% and 22.6% of total revenues for those periods. The Company
capitalized $2.4 million in fiscal 1994 and $3.6 million in fiscal 1995,
resulting in research and development expense of $1.3 million and $1.7 million
for fiscal years 1994 and 1995, respectively. The increase of $1.7 million in
total outlays for software development was primarily due to costs

16
<PAGE>
associated with allocating more resources to the development of new products,
such as Windows-based products and enhancements to existing products. See also
the discussion of restructuring of operations following.

SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses as
a percentage of total revenues increased from 35.8%, or $7.7 million in fiscal
1994 to 39.4% or $9.2 million in fiscal 1995. The increase in selling and
administrative expenses as a percentage of total revenues resulted from selling
and administrative expenses increasing at a greater rate (19.4%) than the
increases in total revenues (8.5%). Total selling and administrative expenses
increased $1.5 million primarily due to costs associated with higher selling and
administrative costs to support international and domestic operations. In
addition, the increase is attributable to increases in facilities and equipment
expenses resulting from moving to new offices, as well as increases to ongoing
expenses related to insurance, taxes, professional services, travel, salaries
and benefits.

RESTRUCTURING OF OPERATIONS. During the fourth quarter of fiscal 1995, the
Company incurred a restructuring charge of $3.4 million. In January 1995, the
Company initiated a plan to restructure its operations in order to reduce its
cost structure and remain competitive. The restructuring charge includes $2.8
million related primarily to the write-off of capitalized software costs,
inventory and intangible assets associated with discontinued product lines, and
$0.6 million for severance and related benefit costs associated with changes in
the Company's executive management. The restructuring required a cash outlay of
approximately $0.3 million in fiscal 1995 and required a cash outlay of
approximately $0.3 million in fiscal 1996.

OPERATING INCOME. Operating income for fiscal 1994 was $2.0 million
compared to $0.6 million in fiscal 1995 (excluding restructuring charges of $3.4
million in 1995). The decrease in operating income before restructuring costs of
$1.4 million reflected growth in revenue at a slower rate than growth in various
expenses, including increased product development expenditures and higher
selling and administrative costs to support the international and domestic
operations.

INCOME TAXES. The Company's effective income tax (benefit) rate was 37.6%
in fiscal 1994 versus (32.5)% in fiscal 1995. The fiscal 1995 rate reflects the
non-deductibility for tax purposes of a relatively minor portion of the asset
write-offs described in restructuring of operations above.

17
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly financial data
for each of the eight quarters in the two-year period ended March 31, 1996. This
quarterly unaudited information, in the opinion of the Company's management, is
a fair presentation of the information for the periods presented. The results of
operations for any quarter are not necessarily indicative of results for any
future quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1994 1994 1994 1995 1995 1995 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net systems sales and service
revenue:
System sales.................. $ 3,806 $ 4,810 $ 3,361 $ 3,361 $ 3,447 $ 2,404 $ 4,293
Service revenue............... 1,911 2,025 1,991 2,100 2,188 2,240 2,164
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues.............. 5,717 6,835 5,352 5,461 5,635 4,644 6,457
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cost of products and services
sold:
System sales.................. 2,128 2,405 2,078 2,517 1,931 1,731 2,003
Service revenue............... 621 594 639 888 685 657 602
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total cost of products and
services sold.............. 2,749 2,999 2,717 3,405 2,616 2,388 2,605
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit.................... 2,968 3,836 2,635 2,056 3,019 2,256 3,852
----------- ----------- ----------- ----------- ----------- ----------- -----------
Research and development........ 329 421 403 508 447 479 389
Selling and administrative...... 2,318 2,479 2,546 1,869 1,926 1,767 2,062
Restructuring of operations..... -- -- -- 3,426 -- -- --
Office consolidation and
relocation..................... -- -- -- -- 1,000 -- 58
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses.... 2,647 2,900 2,949 5,803 3,373 2,246 2,509
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)......... 321 936 (314) (3,747) (354) 10 1,343
Other income, net............... 31 25 14 32 30 23 3
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes.......................... 352 961 (300) (3,715) (324) 33 1,346
Provision (benefit) for income
taxes.......................... 137 375 (118) (1,271) (127) 13 525
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ 215 $ 586 $ (182) $ (2,444) $ (197) $ 20 $ 821
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Primary and fully diluted net
income (loss) per share........ $ .06 $ .16 $ (.05) $ (.66) $ (.05) $ .01 $ .22
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------

MAR. 31,
1996
-----------

<S> <C>
Net systems sales and service
revenue:
System sales.................. $ 6,072
Service revenue............... 2,243
-----------
Total revenues.............. 8,315
-----------
Cost of products and services
sold:
System sales.................. 2,867
Service revenue............... 594
-----------
Total cost of products and
services sold.............. 3,461
-----------
Gross profit.................... 4,854
-----------
Research and development........ 357
Selling and administrative...... 2,956
Restructuring of operations..... --
Office consolidation and
relocation..................... 322
-----------
Total operating expenses.... 3,635
-----------
Operating income (loss)......... 1,219
Other income, net............... 39
-----------
Income (loss) before income
taxes.......................... 1,258
Provision (benefit) for income
taxes.......................... 490
-----------
Net income (loss)............... $ 768
-----------
-----------
Primary and fully diluted net
income (loss) per share........ $ .20
-----------
-----------
</TABLE>

The Company's quarterly revenues and results of operations have varied
significantly in the past, and are likely to vary in the future as a result of a
number of factors, including: the volume and timing of systems sales and
installations; the Company's internal management changes and facilities
consolidation efforts; the timing of client acceptances; the length and
complexity of the systems sales and installation cycles; seasonal buying trends
as a result of clients' annual purchasing and budgeting practices; and the
increased size of the average contract. While the Company expects that these
variations will continue for the foreseeable future, it believes that the impact
of the Company's internal changes will be less dramatic. However, the timing of
revenue recognition is difficult to forecast because the Company's systems sales
and installation cycles are relatively long and frequently depend on factors
such as the size and scope of installations and general economic conditions.
Also, because a significant percentage of the Company's total expenses,
particularly employee compensation, is relatively fixed, variations in timing of
systems sales and installations can cause significant variations in operating
results from quarter to quarter. If total revenues are below expectations in any
period, the Company's inability to adjust spending to compensate fully for the
lower revenues may magnify the adverse effect of such a shortfall on the
Company's results of operations. Accordingly, period-to-period comparisons of
revenues and results of operations may not necessarily be meaningful and are not
necessarily indicative of future results.

18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity is cash flow from operations. At
March 31, 1995, the Company had cash and cash equivalents of $2.6 million as
compared to $2.1 million at March 31, 1996.

The Company generated cash from operations of $2.4 million, $2.4 million and
$2.7 million in fiscal years of 1994, 1995 and 1996, respectively. Total cash
decreased $2.2 million in fiscal 1995. The decrease was primarily due to $4.8
million used in investing activities, including $3.6 million for capitalized
software offset by cash provided by operations. Fiscal 1995 cash flow from
operating activities includes a non-cash restructuring charge of $2.6 million.

For the year ended March 31, 1996, the Company generated $2.7 million in
cash from operating activities, and used $3.0 million in investing activities
(including $2.6 million for capitalized software development and $0.4 million
for capital expenditures). Cash from investing activities was immaterial.

As of March 31, 1996, the Company had a line of credit agreement with a
bank. The line of credit allows the Company to borrow up to $1.0 million through
July 1996 with interest at the bank's prime rate (8.25% at March 31, 1996). The
line of credit is secured by the Company's accounts receivable, inventory and
general intangible assets. The Company anticipates that it will renew or replace
its line of credit with a similar facility. There were no borrowings outstanding
under the line of credit agreement as of March 31, 1996.

The Company's current commitments consist primarily of operating lease
obligations aggregating $3.9 million over the next ten years. The operating
leases consist primarily of the Company's office lease in St. Louis, Missouri,
which expires in May 2004.

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

INFLATION AND CHANGING PRICES

The Company believes inflation has not had a material effect on the
Company's operations or its financial condition.

NEW ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123"), which addresses accounting for stock options,
purchase and award plans. FAS 123 specifies that companies utilize either the
"fair value based method," or the "intrinsic value based method" for valuing
stock options granted. The Company will adopt FAS 123 during the year ending
March 31, 1997, and expects to utilize the "intrinsic value based method" for
valuing stock options granted. The Company anticipates that when adopted, FAS
123 will have no material effect on its consolidated financial position or
consolidated results of operations.

19
<PAGE>
BUSINESS

INTRODUCTION

CITATION designs, develops, markets and supports patient-centered clinical
and financial information systems for hospitals, clinics, physician groups and
emerging IDNs. The Company offers a comprehensive suite of products using open
client/server architecture meet a broad range of the information systems needs
of the healthcare industry. The Company's products integrate patient care
processes within the enterprise and provide community-wide patient registration
and identification throughout the IDN. 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 nearly 600 institutions ranging in size from under 100 beds to over
1,000 beds. CITATION markets its products directly in the United States, Canada,
the United Kingdom and Europe as well as through distribution partners in the
Middle East, the Far East and Latin America.

INDUSTRY BACKGROUND

The United States healthcare industry is undergoing rapid change. In 1995,
healthcare expenses in the United States approximated $1.0 trillion.
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 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 and
management 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 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. For example, creation of a master patient index
represents a current information goal of many hospitals, providers and,
increasingly, IDNs. A master patient index ties together information about
individuals no matter where or how the data is stored, integrating data from
disparate systems and providing a universal electronic record of a patient's
demographic, clinical and payor history. In a 1996 survey conducted by Modern
Healthcare/Coopers & Lybrand that appears in the March 4, 1996 issue of MODERN
HEALTHCARE, 59% of hospital chief information officers surveyed identified
master patient indices as one of their top four information priorities, and 54%
identified remote access to data as another pressing information systems need.
Further, a majority of executives surveyed indicated that they either have or
are planning for operations that extend beyond the hospital to integrate other
elements of the healthcare system such as physicians, outpatient facilities and
payors.

20
<PAGE>
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, such as clinical care, financial management and
administrative decision support.

THE CITATION SOLUTION

CITATION designs, develops, markets and supports products that address the
healthcare industry's need for patient-centered, fully integrated clinical and
financial 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.

CURES, the Common User Registration Entry System, which the Company expects
to ship to clients in late calendar 1996, distributes demographic and health
assessment information across multiple disparate entities within healthcare
enterprises or IDNs. CURES serves as a central data repository, or master
patient index, for all patient demographic and health status information,
streamlining the intake process by eliminating repetitive registration questions
about medical history and eligibility information.

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 healthcare
information systems. The Company's strategy for achieving this goal includes the
following elements:

TARGET COMPREHENSIVE SYSTEM SALES. CITATION intends to focus its sales
efforts on selling larger, more comprehensive systems to larger hospitals and
IDNs to address a broad range of needs. The Company's new management team began
to implement this strategy in April 1995. In the fourth quarter of fiscal 1996
the average systems contract value was $410,000, an increase of 166% from the
fourth quarter of the previous year.

LEVERAGE EXISTING CLIENT BASE. With an installed base of over 600
facilities, 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.

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

EXTEND BEYOND HOSPITALS TO THE IDN MARKET. Leveraging the opportunity
presented by CURES and the Company's other existing products as well as its
position in the hospital market, CITATION believes that it is well positioned to
broaden its product array to offer products which meet the complete needs of the
IDN. These opportunities include physician practice management, home health,
long-term care and specialty facilities, including psychiatric care, ambulatory
care and rehabilitation.

21
<PAGE>
PRODUCTS

CITATION has developed a comprehensive suite of products to manage
information in the healthcare enterprise. A client can purchase a comprehensive
system or can buy modules separately to match its 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 offers products addressing four functional areas:
clinical, financial, community registration and decision support.

<TABLE>
<CAPTION>
NUMBER OF
SYSTEMS
PRODUCTS SALES DESCRIPTION
<S> <C> <C>
CLINICAL
C-COM 30 Communications and Clinical Database
Support System
C-LAB 333 Laboratory Information Systems,
including the following submodules:
General Lab, Microbiology, Anatomical
Pathology and Blood Bank (1)
C-CARE 30 Care Management System, including
nursing notes, care plans and clinical
pathways
C-RIS 26 Radiology Information System, including
the following submodules: Transcription
System, Film Tracking and Mammography
Submodule
C-MED (1) 15 Pharmacy Information System, including
medication dispensing and inventory
control
FINANCIAL
C-FIS 120 Financial System for registration,
billing, accounts receivable and
collection management
C-GEN 90 General Accounting System, including
general ledger, payroll, accounts
payable, materials management and fixed
assets management
C-REC 100 Medical Records Systems, including
abstracting and case mix analysis
COMMUNITY REGISTRATION
CURES 5 (2 ) Master Patient Index linking demographic
and health assessment information
throughout the integrated delivery
network
DECISION SUPPORT
C-MIS (3) 1 Management Information System providing
analytical and decision support
information for an enterprise's
operations
</TABLE>

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

(1) The blood bank submodule and C-MED are licensed by the Company from third
parties.
(2) Expected to be shipped in late calendar 1996.
(3) Until May 1996 C-MIS was included with certain of the Company's other
systems.

22
<PAGE>
CLINICAL

C-CIS is CITATION's clinical information system. It currently consists of
five 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 currently available for
DOS and Windows and is expected to become available for Windows NT in August
1996. Depending on the modules purchased, its price range is $30,000 to
$80,000.

C-LAB (marketed as LAB 2000 in the United Kingdom) 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 consists of General Lab, Microbiology,
Anatomical Pathology and Blood Bank submodules. The Blood Bank submodule is
licensed by CITATION for use and implementation in C-LAB. C-LAB is currently
available for DOS and is in the process of being migrated to Windows NT.
Depending on the modules purchased, its price range is $85,000 to $800,000.

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 be
used in conjunction with C-COM. C-CARE is currently available for DOS.
Depending on the modules purchased, its price range is $25,000 to $75,000.

C-RIS (marketed as XR2000 in the United Kingdom) 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 in the United
States and for Windows in the United Kingdom and it is in the process of
being migrated to Windows NT. Depending on the modules purchased, its price
range is $25,000 to $250,000.

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 DOS. Depending on the modules purchased, its
price range is $20,000 to $85,000.

FINANCIAL

CITATION's financial systems consist of C-FIS (CITATION's registration and
billing system), C-GEN (CITATION's general accounting system), and C-REC
(CITATION's medical and financial records mixed tracking system). These modules
provide a flexible system for evaluating contracts, controlling costs and
managing financial information for multiple entity healthcare organizations.

C-FIS handles patient admissions, discharges and transfers as well as
accounts receivable, patient billing and collection arrangement. C-FIS is
currently available for DOS and is in the process of being migrated to
Windows NT. Depending on the modules purchased, its price range is $40,000
to $80,000.

C-GEN has a general ledger module providing budgetary comparisons as
well profit and loss statements for each department or division, or for the
entire enterprise. It has an accounts payable module to maintain cash
management through disbursement controls. C-GEN also has the capability to

23
<PAGE>
handle human resources functions, tracking authorized staff positions
against actual labor resources consumed. C-GEN has a payroll module which
assists in managing labor costs. C-GEN is currently available for DOS.
Depending on the modules purchased, its price range is $40,000 to $80,000.

C-REC is designed to help a medical records department meet quality
assurance, concurrent review, and special study requirements. C-REC is
currently available for DOS and is in the process of being migrated to
Windows NT. Depending on the modules purchased, its price range will be
$15,000 to $25,000.

REGISTRATION

CURES, the Company's community-wide user registration system, distributes
demographic and health assessment information across multiple disparate entities
within healthcare enterprises or IDNs. CURES serves as a central data
repository, or master patient index, for all patient demographic and health
status information, streamlining the intake process by eliminating repetitive
registration questions about medical history and eligibility information. CURES
is capable of linking multiple healthcare facilities in a community (E.G.
doctors' offices, hospitals, clinics, nursing homes, and home health agencies)
as well as multiple departments within a single facility, providing each user
with access to common demographic information. CURES can also serve as a link
between existing information systems in home health, physician's offices, and
other health facilities, thereby offering a significant step towards the goals
of a computerized patient record and the establishment of community-based
healthcare services. CURES is in final testing and the Company expects to ship
the product in late 1996. The Company has received orders for five CURES
systems. CURES will be available for Windows NT. Depending on the modules
purchased, its price range will be $25,000 to $250,000.

DECISION SUPPORT

C-MIS, CITATION's decision support module, provides healthcare executives
access to financial and census information, as well as medical, physician,
payor, rate, case mix and labor trends. The module offers report writing and
word processing applications, enabling the user to produce reports tying
together financial and clinical information. C-MIS includes multiple security
levels to limit access to sensitive information. C-MIS is currently available
for DOS. Depending on the modules purchased, its price range is $10,000 to
$35,000.

SERVICES

Client service is an important component of the Company's operations. As of
March 31, 1996, the Company employed 57 persons 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.

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

24
<PAGE>
PRODUCT DEVELOPMENT

CITATION is dedicated to providing state-of-the-art integrated systems for
healthcare enterprises. 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
Solutions Provider and extensively employs Microsoft 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.

Currently, a majority of CITATION's products are available solely on DOS.
C-COM is also available for Windows and is expected to be available for Windows
NT in August 1996. CURES, which is expected to be shipped in late 1996, will run
on Windows NT. The Company intends to migrate substantially all of its products
to Windows NT, which the Company expects will become the operating system
foundation for a large number of healthcare enterprises, although there can be
no assurance that this will be the case. While the Company believes it will
accomplish its migration to Windows NT in a timely fashion, there can be no
assurance that the Company will not experience difficulties that could delay or
prevent the successful and timely development, introduction and marketing of the
new Windows NT products, that such versions will adequately meet the
requirements of the marketplace or that the migration will be accomplished
before demand for existing versions of the Company's products slows. Negative
developments in these areas could have a material adverse effect on the
Company's business, results of operations and financial condition.

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. 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.

For the years ended March 31, 1995 and 1996, CITATION invested $5.3 million
and $4.4 million, respectively, on research and development. At March 31, 1996
the Company employed 49 persons 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. The Company
expects to complete the development of the majority of its Windows and Windows
NT-based products during fiscal 1997. The Company anticipates that due to the
nature of the planned development activities (E.G., product enhancements versus
the significant development effort involved in porting software to a new
operating system), the ratio of software development costs capitalized to total
software development outlays will decline in future periods as compared to
recent years.

SALES AND MARKETING

The Company markets its products in the United States, Canada and the United
Kingdom through a direct sales force under the direction of the Company's
Executive Vice President Sales and Marketing. As of March 31, 1996, the
Company's sales force consisted of 22 employees. In addition to the Company's
sales force employees, the Company has an 11-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.

25
<PAGE>
The Company intends to focus its sales efforts on selling larger, more
comprehensive systems to larger hospitals 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 is also planning to increase its sales force in
fiscal 1997.

The Company has a branch office in the United Kingdom to enhance
international marketing. The Company markets its products through distribution
alliance in the Middle East, the Far East and Latin America. For example, the
Company's UK office is providing support to El Sief Development Corporation
(Saudi Arabia) in its efforts to market CITATION products in the Middle East. In
addition, the Company has a strategic relationship with Microstate Separations
Plc. Ltd. ("Microstate"), a healthcare information systems integration based in
Singapore. Microstate has agreed to purchase the Company's systems and to
install and support them in other bases, enhancing the Company's access to the
Asian/Pacific Rim market. 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
C-CIS. The Company complies with these regulations and follows Medical Device
Reporting guidelines as well. The Company decided not to internally develop
products (e.g., blood bank software), at this time, as doing so would subject
the Company to the pre-market approval requirements of Section 510(k) of the
Food, Drug and Cosmetic Act.

Additional legislation governing the dissemination of medical record
information has been proposed. The Medical Records Act, currently pending in
Congress, would protect and regulate the confidentiality of medical record
information. The Medical Records Act would prohibit the disclosure of
individually identifiable health information, except with the patient's consent.
Without the patient's consent, medical information could be disclosed only for
other limited purposes, including disclosures to permit the creation of
nonidentifiable health information and to facilitate medical research. The
Medical Records Act would preempt most state laws regarding access to, and the
use and disclosure of, medical record information. If the Medical Records Act is
enacted, compliance with it could be costly and could preclude or delay the
introduction of certain new products. 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.

COMPETITION

The market for healthcare information systems is highly competitive. Most of
the Company's revenues are derived from lengthy, competitive procurement
processes managed by sophisticated purchasers that extensively investigate and
compare the products offered by the Company and its competitors. The Company
believes that the principal competitive factors in this market are the features,
functions, and capabilities of the information systems, the user's evaluation of
the ongoing support for the information systems, the potential for enhancements
and future compatible products, and price. There can be no assurance that the

26
<PAGE>
Company will be able to compete successfully with respect to any of such
factors. Many of the Company's current and potential competitors have
significantly greater financial, managerial, development, technical, marketing
and sales resources than the Company and may be able to devote those resources
to develop and introduce systems more rapidly than the Company or healthcare
information systems with significantly greater functionality than, and superior
overall performance to, those offered by the Company. These competitors may also
be able to initiate and withstand significant price decreases more effectively
than the Company. The continuing consolidation of hospitals and other healthcare
providers has resulted in fewer individual purchasing decisions, a trend that
may favor larger vendors with greater numbers of hospitals currently under
contract. Moreover, the healthcare information industry is entering a period of
consolidation which could have a material adverse effect on the Company by
increasing the size and strength of its competitors.

The Company competes with a large number of other healthcare information
systems vendors, some of which sell comprehensive systems and some of which sell
products which compete with only one or more modules of the Company's products.
The Company believes that it is competitive in the marketplace due to the
functional capability, sophistication, client/server architecture and price of
its software systems; the ability of each user to customize the systems to meet
its unique needs; and the high level of service the Company provides to all
clients.

PRODUCT LIABILITY

The Company's products may from time to time be involved in the conveyance,
retrieval or storage of confidential data. Improper disclosure of confidential
information as a result of an error in the Company's healthcare information
systems or any failure by the Company's systems to provide accurate and timely
information could result in claims against the Company by its clients or their
patients. There can be no assurance the Company will not be subject to such
claims in the future, that such claims will not result in liability in excess of
any insurance coverage maintained by the Company with respect to such claims,
that insurance will cover such claims or that appropriate insurance will
continue to be available to the Company at commercially reasonable rates.

INTELLECTUAL PROPERTY

The Company regards its products as proprietary and relies on a combination
of trade secrecy, contractual provisions, and technical measures to protect its
proprietary rights. Under the Company's license agreements, the Company's
clients agree not to disclose sensitive information about the system. The
Company also requires each employee to sign a nondisclosure agreement at the
commencement of employment. Notwithstanding these safeguards, it is possible for
competitors of the Company to obtain its trade secrets and to imitate its
products. Furthermore, there can be no assurance that others will not
independently develop software products similar to those developed or planned by
the Company. The Company has decided not to apply for patent or copyright
protection for its software. The Company believes that trade secret and
copyright protection are less important to the Company's success than the
Company's ability to further develop, enhance, and modify its software. However,
the Company has decided to seek trademark protection for the names of certain of
its products in order to avoid confusion in the marketplace.

EMPLOYEES

As of March 31, 1996, the Company employed 161 persons. Of these employees,
49 were involved in product development, 57 in client services, 33 in sales and
marketing and 22 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.

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.

27
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Company's Directors and executive officers and their ages as of July 15,
1996 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- -------------------------------------------- --- --------------------------------------------------------
<S> <C> <C>
Chairman, President and Chief Executive Officer;
J. Robert Copper............................ 56 Director
Richard D. Neece............................ 50 Executive Vice President and Chief Financial Officer
Executive Vice President -- Sales and Marketing;
William H. J. Seabrook...................... 62 Director
Patricia Q. Moore........................... 49 Vice President -- Human Resources
John M. Selestak............................ 39 Vice President -- Marketing
John P. Gilmore............................. 54 Controller
Fred L. Brown (1)........................... 55 Director
James F. O'Donnell (1)(2)................... 49 Director
David T. Pieroni (1)(2)..................... 51 Director
Frank L. Poggio............................. 49 Director
</TABLE>

- ---------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

J. Robert Copper has been a Director of the Company since May 1992. Mr.
Copper was appointed Chairman and Chief Executive Officer of the Company in
January 1995 and President of the Company in July 1996. Prior to that time Mr.
Copper was a partner in Hales, Copper & Company, a management consulting firm,
which he joined in 1992. From 1990 to 1992, Mr. Copper was President and Chief
Executive Officer of the PLC Group, a management consulting firm specializing in
mergers and acquisitions. From 1988 to 1990, Mr. Copper was President and Chief
Executive Officer of Pet, Incorporated, a packaged foods company. Mr. Copper was
Senior Vice President -- Planning and Development for Whitman Corporation
(formerly IC Industries), a conglomerate ("Whitman Corporation"), from 1980 to
1988.

Richard D. Neece has been the Executive Vice President -- Finance and
Administration of the Company since July 1995. From 1991 to 1995, Mr. Neece
served as Executive Vice President -- Finance and Administration for Hussmann
Corporation, a manufacturer of commercial refrigeration and supermarket display
equipment, which is a subsidiary of Whitman Corporation.

William H. J. Seabrook has been a Director of the Company since February
1993, and has served as Executive Vice President -- Sales and Marketing of the
Company since October 1995. Since September 1991, Mr. Seabrook has provided
consulting services to the Company in connection with its international
operations. In 1985 he became Chairman of Datasystems Consultants Limited and
I.T. Health Consulting Limited, each of which is a consulting company
headquartered in London, England specializing in advising health authorities and
small companies in the healthcare business.

Patricia Q. Moore has been Vice President -- Human Resources of the Company
since October 1995. From 1992 to 1995, Ms. Moore was Director of Human Resources
for Spencer & Spencer Systems, Inc., a contract programming consulting company
("Spencer & Spencer"). From 1988 to 1992, Ms. Moore was Assistant Vice President
- -- Staff Relations/Generalist Treasury Group for Citicorp.

John M. Selestak has served as Vice President -- Marketing since January
1996, and has also previously served as the Company's Director of National
Accounts from 1992 to March 1994. During 1995 he served as a Director for First
Consulting Group, Chicago, Illinois, a consulting firm that specializes in
information technology in the healthcare industry. From April 1994 to the
beginning of 1995, Mr. Selestak served as a Senior Sales Representative of
Shared Medical Systems Corporation, which sells healthcare information

28
<PAGE>
systems. From 1988 to 1992, he served in sales and marketing roles for ALLTEL
Healthcare Information Services, Inc. (formerly TDS Healthcare Systems
Corporation), a provider of clinical-based information systems.

John P. Gilmore has been Controller of the Company since June 1995. From
1991 to 1995, Mr. Gilmore was Director, Corporate Planning and Real Estate
Accounting of Whitman Corporation.

Fred L. Brown has been a Director of the Company since February 1993. He has
been President and Chief Executive Officer of BJC Health System, a hospital and
healthcare provider headquartered in St. Louis, Missouri, since its creation in
June 1993 (resulting from the merger of Christian Health Services with
Barnes-Jewish, Inc.). Mr. Brown was President and Chief Executive Officer of
Christian Health Services from January 1986 to February 1993. Mr. Brown is a
director of Commerce Bancshares, Inc., a Missouri bank holding company
("Commerce Bancshares").

James F. O'Donnell was elected as a Director of the Company in 1994. Mr.
O'Donnell has served since 1990 as Chairman of Capital For Business, Inc., an
investment manager of two federally licensed SBIC venture funds and served as
President of that company since 1987 to 1990. Capital For Business, Inc. manages
CFB Venture Fund I, Inc., which owns 632,312 shares of the Company's Common
Stock. Mr. O'Donnell is also Chairman of CFB Venture Fund I, Inc. Capital For
Business, Inc. and CFB Venture Fund I, Inc. are wholly owned subsidiaries of
Commerce Bancshares. See "Principal and Selling Shareholders."

David T. Pieroni has been a Director of the Company since August 1991. Mr.
Pieroni formed Pieroni Management Counselors, Inc., a management consulting
company, in 1990 and served as President from 1990 to 1991, and again became
active in its affairs in 1995. From 1991 to 1995 Mr. Pieroni was President of
Spencer & Spencer. In 1995, Mr. Pieroni joined The Farris Group, a medical
consulting firm, and became President of The Farris Group in 1996. From 1977 to
1990, Mr. Pieroni was a partner at a predecessor of Ernst & Young, working in
its healthcare and management consulting practice.

Frank L. Poggio has been a Director of the Company since it acquired HMDS in
December 1992 and was President of the Company from January 1995 to July 1996.
Prior to January 1995, Mr. Poggio served as Executive Vice President --
Operations of the Company. Mr. Poggio was the founder of HMDS and served as its
President from 1980 to July 1996.

The Company's Articles of Incorporation provide that the Board of Directors
is divided into three classes of Directors serving staggered three-year terms.
The members of Class 1 whose terms of office expire at the 1996 annual
shareholders meeting are Mr. Brown and Mr. Seabrook. The members of Class 2
whose terms of office expire at the 1997 annual shareholders meeting are Mr.
Poggio and Mr. O'Donnell. The members of Class 3 whose terms of office expire at
the 1998 annual shareholders meeting are Mr. Copper and Mr. Pieroni. Executive
officers are appointed annually by the Board of Directors and continue in office
until the following annual meeting of the Board of Directors or until their
earlier removal or resignation.

29
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1996, before and after
giving effect to the sale of Common Stock offered hereby by (i) each Director
and certain executive officers of the Company, (ii) all Directors and executive
officers of the Company as a group, (iii) each person known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock and (iv)
the Selling Shareholders. The Company believes that each individual or entity
named has sole investment and voting power with respect to shares of Common
Stock indicated as beneficially owned by them, except as otherwise noted.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED AFTER THE
PRIOR TO THE OFFERING(1) NUMBER OF OFFERING(1)(2)
---------------------------- SHARES ------------------------
NAME(3) NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---------------------------------------------------- ------------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
CFB Venture Fund I, Inc. (4)........................ 632,312 16.9% 532,312 100,000 1.7%
James F. O'Donnell (4).............................. 632,312 16.9% 532,312 100,000 1.7%
Frank L. Poggio..................................... 351,623 9.4% 200,000 151,623 2.6%
Kennedy Capital Management, Inc..................... 341,800 9.1% -- 341,800 5.9%
J. Robert Copper.................................... 290,211(5) 7.5% -- 290,211 5.0%
Richard D. Neece.................................... 130,000(5) 3.4% -- 130,000 2.2%
William T. Wynn..................................... 40,265 1.1% -- 40,265 *
William H. J. Seabrook.............................. 18,703(5) * -- 18,703 *
Fred L. Brown....................................... 7,853 * -- 7,853 *
David T. Pieroni.................................... 2,050 * -- 2,050 *
All Directors and Executive Officers as a Group (11
Persons) (6)....................................... 1,493,216 37.7 % 732,312 760,904 13.2 %
</TABLE>

- ------------
* Less than 1%.

(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under Rule 13d-3(d), shares not
outstanding which are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person, but
not deemed outstanding for the purpose of calculating the percentage owned
by each other person listed. None of the shares shown are known to be
shares with respect to which the listed beneficial owner has the right to
acquire beneficial ownership, as specified in Rule 13d-3(d)(1), except that
the number of shares includes shares subject to options presently
exercisable or exercisable within 60 days as follows: Mr. Copper -- 100,000
shares; Mr. Neece -- 50,000 shares; Mr. Seabrook -- 10,000 shares; and all
Directors and executive officers as a group -- 209,332 shares.

(2) Adjusted to reflect the sale of shares of Common Stock offered hereby and
assuming 25,000 shares are sold in the Company employee offering. The
Company, CFB Venture Fund I, Inc. and Mr. Poggio each granted to the
Underwriters a 30-day option to purchase up to an aggregate of 209,847,
100,000 and 100,000 additional shares, respectively, solely to cover
over-allotments, if any. If all of such shares are purchased, CFB Venture
Fund I, Inc. will no longer own any and Mr. Poggio will continue to own
less than 1% of the shares of Common Stock outstanding. See "Underwriting"
and "Company Employee Offering."

(3) The address for CFB Venture Fund I, Inc. and Mr. O'Donnell is Eleven South
Meramec, Suite 1430, St. Louis, Missouri 63105; the address for Kennedy
Capital Management, Inc. is 425 North New Ballas, St. Louis, Missouri
63141. The address for all other shareholders in the table is care of the
Company at 424 South Woods Mill Road, Chesterfield, Missouri 63017.

(4) Mr. O'Donnell, a director of the Company, is Chairman of CFB Venture Fund
I, Inc. and is deemed to beneficially own the shares held by CFB Venture
Fund I, Inc.

(5) Mr. Copper purchased 183,400 of the shares beneficially owned by him in the
open market and 5,000 shares in connection with the Company's 1992 initial
public offering. Mr. Copper received 1,811 shares of Common Stock as a
director's fee. The balance of shares of Common Stock beneficially owned by
him have been issued, or are issuable, upon the exercise of options. Mr.
Neece purchased 80,000 of the shares beneficially owned by him in the open
market and the balance of such shares have been issued, or are issuable,
upon the exercise of options. Mr. Seabrook purchased 8,703 of the shares
beneficially owned by him in the open market and the balance of such shares
have been issued, or are issuable, upon the exercise of options.

(6) Because Mr. O'Donnell is a director of the Company and is deemed to
beneficially own the shares held by CFB Venture Fund I, Inc., the number of
shares and percentages for all Directors and Officers as a group includes
the shares owned and sold by CFB Venture Fund I, Inc.

30
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

As of the date of this Prospectus, the Company's authorized capital consists
of 10,000,000 shares of Common Stock, par value $.10 per share (the "Common
Stock"), and 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). On June 30, 1996, 3,756,936 shares of Common Stock were
issued and outstanding and held of record by 181 persons and 291,497 shares were
reserved for issuance upon the exercise of options issued pursuant to the
following plans (collectively, the "Stock Option Plans"): (i) the First Amended
Incentive Stock Option Plan of CITATION Computer Systems, Inc. effective January
25, 1986, as amended January 1, 1987 and April 30, 1992 and (ii) the CITATION
Computer Systems, Inc. 1992 Employee Incentive Stock Option Plan effective April
1, 1992, as amended in April 1993. All issued and outstanding shares of Common
Stock are, and the shares of Common Stock offered hereby will be, fully paid and
non-assessable. Upon completion of this offering, 5,781,936 shares of Common
Stock will be issued and outstanding (including the 25,000 shares offered by the
Company in the Company Employee Offering). No shares of Preferred Stock are
outstanding.

Holders of shares of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to share ratably in all assets remaining after payment
in full of liabilities, including the liquidation rights of outstanding
Preferred Stock, if any. Holders of Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of the shareholders. Holders
are not entitled to cumulate votes for the election of directors. There are no
redemption, conversion or sinking fund provisions or preemptive rights with
respect to the Common Stock. The rights and privileges of the holders of the
Common Stock are subject to the preferential rights and privileges of the
holders of any Preferred Stock of the Company. The Common Stock of the Company
is quoted and traded on the Nasdaq National Market under the trading symbol
"CITA." The Transfer Agent and Registrar for the Common Stock is Boatmen's Trust
Company, St. Louis, Missouri.

PREFERRED STOCK

The Articles of Incorporation authorize the Board of Directors to create and
issue one or more series of Preferred Stock and to determine the rights and
preferences of each series, to the extent permitted by the Articles of
Incorporation and applicable law. Among other rights, the Board of Directors may
fix (i) the number of shares constituting the series and the distinctive
designation of the series; (ii) the annual dividend rate on the shares of the
series, whether dividends will be cumulative, and if so, from which date or
dates; (iii) whether the series shall be redeemable, and if so, the terms and
conditions of such redemption, including the date or dates upon and after which
the shares shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (iv) the obligation, if any of the Company to retire shares of
the series pursuant to a sinking fund; (v) whether the shares of that series
shall be convertible into, or exchangeable for, shares of stock of any other
class or classes or debt securities and if so, the terms and conditions of such
conversion or exchange, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any; (vi) whether the
shares of that series shall have voting rights, in addition to any voting rights
provided by law, and if so, the terms of such voting rights; (vii) the rights of
the shares of the series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company; and (viii) any other relative rights,
powers, preferences, privileges, qualifications, limitations, or restrictions
relating to that series. The shares of Preferred Stock within any one series
shall be identical with each other in all respects except as to the dates from
and after which dividends shall cumulate, if cumulative.

ANTI-TAKEOVER EFFECTS OF MISSOURI LAW AND ARTICLES OF INCORPORATION AND BY-LAWS

Set forth below is a description of the relevant provisions of Section
351.459 of the Missouri General and Business Corporations Law, the Articles of
Incorporation and the By-laws. The descriptions are

31
<PAGE>
intended as a summary only and are qualified in their entirety by reference to
the Articles of Incorporation and By-laws, which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and to Section
351.459 of the Missouri General and Business Corporations Law.

MISSOURI GENERAL AND BUSINESS CORPORATIONS LAW BUSINESS COMBINATION
PROVISION. Section 351.459 of the Missouri General and Business Corporation Law
(the "Business Combination Statute"), a statutory provision restricting business
combinations with shareholders who acquire 20% or more of a corporation's voting
stock, is applicable to the Company because it applies to Missouri corporations
that have a class of voting stock registered with the Securities and Exchange
Commission (the "Commission") pursuant to Section 12 of the Exchange Act and
that have not elected to opt out of the Business Combination Statute; the
Company has not opted out of the Business Combination Statute.

The Business Combination Statute prohibits mergers and certain other
business combination transactions between a publicly held Missouri corporation,
such as the Company, and any beneficial owner of 20% or more of the outstanding
voting stock of the Company (an "Interested Shareholder") for a period of five
years after the date on which the latter becomes an Interested Shareholder,
unless the proposed business combination or the proposed purchase of stock made
by such Interested Shareholder on such Interested Shareholder's stock
acquisition date is approved by the board of directors on or prior to such stock
acquisition date. After such five year restriction, a business combination with
an Interested Shareholder can only be effected if: (i) such business combination
is approved by the board of directors prior to the acquisition of stock by the
Interested Shareholder; or (ii) a majority of the holders of the outstanding
voting stock of the company (not including shares beneficially owned by the
Interested Shareholder) approve such business combination; or (iii) certain fair
price provisions are met by the proposed business combination.

The Business Combination Statute would not prevent the holder of a
controlling interest from exercising control over the Company or preclude a
hostile takeover or acquisition of control of the Company. It may, however,
discourage or make more difficult a hostile takeover or acquisition of control.
Thus, the Business Combination Statute could deprive shareholders of possible
opportunities to realize premiums for their shares and reduce the risk to
management that it might be displaced by a takeover.

AVAILABILITY OF SHARES OF CAPITAL STOCK FOR FUTURE ISSUANCE. The
availability for issue of shares of Preferred Stock and Common Stock by the
Company without further action by shareholders (except as may be required by
applicable Nasdaq National Market regulations) could be viewed as enabling the
Board of Directors to make more difficult a change in control of the Company,
including by issuing warrants or rights to acquire shares of Preferred Stock or
Common Stock to discourage or defeat unsolicited stock accumulation programs and
acquisition proposals and by issuing shares in a private placement or public
offering to dilute or deter stock ownership of persons seeking to obtain control
of the Company. The Company has no present plans to issue any shares of
Preferred Stock or Common Stock other than as offered hereby or as contemplated
under the Stock Option Plans.

REMOVAL OF DIRECTORS ONLY FOR CAUSE AND RELATED PROVISIONS. The Articles of
Incorporation provide that Directors may be removed only for cause and by the
affirmative vote of the holders of two-thirds of all outstanding stock entitled
to vote. This provision, in conjunction with the provisions of the Articles of
Incorporation authorizing the Board of Directors to fill vacant directorships,
may prevent shareholders from removing incumbent Directors without cause and
filling the resulting vacancies with their own nominees.

CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS. The Articles of
Incorporation provide that the Board of Directors is divided into three classes
of Directors serving staggered three-year terms. This classified board provision
will prevent a party who acquires control of a majority of the outstanding
voting stock from obtaining control of the Board of Directors until the second
annual shareholders' meeting following the date the acquirer obtains the
controlling interest. The classified board provision could have the effect of
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of the Company and could thus increase the
likelihood that incumbent Directors will retain their positions.

32
<PAGE>
The Articles of Incorporation provide that the number of Directors will be
set at seven, or such other number as may be determined in accordance with the
By-laws. The Directors will have the power to change the number of Directors on
the Board by resolution adopted by vote of a majority of the Board of Directors.
The number of directors is currently set at six.

The foregoing provisions of the Articles of Incorporation and the provisions
described under "Description of Capital Stock -- Anti-Takeover Effects of
Missouri Law and Articles of Incorporation and By-laws -- Removal of Directors
Only for Cause and Related Provisions" may be changed only by the affirmative
vote of the holders of two-thirds of the shares of capital stock of the Company
entitled to vote for directors on such matters at a meeting duly called for such
purpose.

BOARD CONSIDERATION OF ACQUISITION PROPOSALS; OTHER CONSTITUENCIES. Section
351.347 of the Missouri General and Business Corporations Law authorizes, but
does not require, the Company's Board of Directors to consider a variety of
factors and constituencies in addition to the economic interests of the
Company's shareholders when exercising its business judgment in connection with
acquisition proposals (such as tender offers, merger offers and the like) by
other entities. The Articles of Incorporation provide that, in determining
whether to take or refrain from taking any corporate action, the Board of
Directors may take into account long-term as well as short-term interests of the
Company and its shareholders, clients, employees, suppliers and other
constituencies, including the effect on communities in which the Company does
business. As a consequence, the economic interests of the shareholders may not
be the exclusive factor considered by the Board of Directors in response to any
such proposals.

SHAREHOLDER PROPOSALS. The By-laws provide that, if a shareholder desires
to submit a proposal at an annual or special shareholders' meeting, the
shareholder must submit written notice to the Company in accordance with the
provisions of Rule 14a-8 promulgated under the Exchange Act.

The By-laws also provide that, in order for shareholders to approve
precatory proposals requesting the Board of Directors to take certain actions, a
majority of the outstanding stock of the Company entitled to vote thereon (and
not of the stock present at the meeting) must be voted for the proposal. The
requirement that precatory proposals receive approval of a majority of the
outstanding shares entitled to vote rather than a majority of the shares present
at a meeting will make it more difficult for shareholders to obtain the vote
required to approve such proposals. As a result, the By-law provision may
discourage or deter a third party from conducting a solicitation of proxies to
request the Board of Directors to take certain actions.

The By-laws provide that, if a shareholder desires to nominate persons for
election as Directors, the shareholder must submit written notice to the Company
at least 120 days and no more than 180 days prior to the anniversary date of the
prior annual meeting. Director nomination notices must set forth the name,
address and occupation of the nominee, certain other information about the
nominee and the shareholder proposing him or her, and other information as would
be required under Regulation 14A of the Exchange Act.

33
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding an
aggregate of 5,781,936 shares of Common Stock based on the number of shares
outstanding at June 30, 1996, including 25,000 shares of Common Stock offered
hereby directly by the Company to eligible Company employees on a
non-underwritten basis and excluding options to purchase 291,497 shares which
were outstanding as of June 30, 1996. If the Underwriters' over-allotment option
is exercised in full the number of shares of Common Stock outstanding after the
offering will be 5,991,783. All of these shares will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities Act")
or may currently be sold pursuant to Rule 144 under the Securities Act ("Rule
144"). If CFB Venture Fund I, Inc. holds shares remaining after this offering
with a market value of at least $1,500,000, it will have the right to require
the Company to register the shares under the Securities Act. If the
over-allotment is exercised in full, CFB Venture Fund I, Inc. will not own any
shares of the Company.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
(as such term is defined in Rule 144) for at least two years, including a person
who may be deemed an affiliate of the Company, is entitled to sell within any
three month period a number of shares of Common Stock that does not exceed the
greater of 1% of the then outstanding shares of Common Stock of the Company and
the average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
are further subject to certain restrictions relating to the manner of sale,
notice and the availability of current public information about the Company. A
person who is not an affiliate of the Company as of or at any time during the 90
days preceding a sale and who has beneficially owned shares of Common Stock for
at least three years, is entitled to sell such shares without regard to the
volume limitations, manner of sale provisions, notice or other requirements of
Rule 144.

In addition, under the Company's Stock Option Plans, the Company has issued
options to purchase Common Stock at prices which are below current market and
may issue options to purchase additional shares of Common Stock in the future.
At June 30, 1996, options to purchase 291,497 shares of Common Stock were
outstanding of which options to purchase 283,497 shares were immediately
exercisable and options to purchase 4,000 shares will become exercisable on
September 26, 1996. An additional 21,684 shares of Common Stock are available
for future grants under the Stock Option Plans. The Company has filed
registration statements on Form S-8 to permit the shares acquired upon exercise
of options to be freely tradable or sold pursuant to Rule 144.

The Company, its directors, executive officers and the Selling Shareholders,
holding an aggregate of 2,125,528 shares of Common Stock (excluding shares
offered hereby other than the shares subject to the Underwriters' over-allotment
option), have entered into lockup agreements with the Underwriters pursuant to
which such stockholders have agreed not to sell or otherwise dispose of any
shares of Common Stock for a period of 120 days after the date of this
Prospectus without the prior written consent to Volpe, Welty & Company. Upon
expiration of the lockup period, these shares will be eligible for immediate
sale, subject in certain cases to volume and other limitations under Rule 144.
See "Underwriting."

No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Sales of substantial number of shares of Common
Stock could adversely affect prevailing market prices.

COMPANY EMPLOYEE OFFERING

Of the shares of Common Stock offered hereby, the Company is offering 25,000
shares of Common Stock (the "Employee Shares") to its full-time Company
employees who are presently and for at least six months have been employed by
the Company (the "Employee Offerees"). The Employee Shares will be offered and
sold to eligible Employee Offerees on a non-discriminatory basis at the Price to
Public less the amount of Underwriting Discounts and Commissions. The minimum
number of Employee Shares that may be purchased by an Employee Offeree is 25
shares. Employee Offerees must advise the Company whether they desire to
purchase any of the Employee Shares not later than twenty-four hours after the
date of this

34
<PAGE>
Prospectus. Any Employee Shares not purchased by Employee Offerees will not be
offered or sold to the public. In the event that the offering by the Company of
Employee Shares is over-subscribed, each subscribing Employee Offeree will be
sold a number of Employee Shares equal to his or her pro rata portion of the
25,000 Employee Shares available for sale based on the relationship which the
number of Employee Shares subscribed for by such Employee Offeree bears to the
total number of Employee Shares subscribed for by all Employee Offerees. The
offering to the public pursuant to this Prospectus is not contingent upon any
minimum number of Employee Shares being sold. The Underwriters are not
responsible for and are not involved in any manner with the offering and sale of
the Employee Shares and the Underwriters will not receive any compensation or
reimbursement in respect of the sale of the Employee Shares.

Each Employee Offeree who purchases Employee Shares is required to include
in his or her gross income in the year of purchase, with respect to each
Employee Share purchased by such Employee Offeree, the excess, if any, of the
fair market value of an Employee Share (determined at the time of transfer) over
the amount paid by such Employee Offeree. This amount will be subject to
applicable income, employment and other withholding taxes. Any subsequent
appreciation or depreciation in the value of such Employee Share generally will
be taxable as capital gain or loss on an exchange or other taxable disposition.
This summary of Federal income tax consequences to Employee Offerees is not
intended to be a complete summary of such tax consequences. Further, this
summary does not cover other tax consequences, including state income tax
consequences. Accordingly, Employee Offerees are urged to consult with their own
tax advisors concerning the purchase of Employee Shares.

35
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") the Company and the Selling Shareholders have agreed
to sell to each of the underwriters named below (the "Underwriters"), and each
of such Underwriters, for whom Volpe, Welty & Company, Jefferies & Company, Inc.
and Punk, Ziegel & Knoell, L.P. are acting as representatives (together, the
"Representatives"), has severally agreed to purchase from the Company and the
Selling Shareholders the respective number of shares of Common Stock set forth
opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Volpe, Welty & Company.....................................................................
Jefferies & Company, Inc...................................................................
Punk, Ziegel & Knoell, L.P.................................................................

----------
Total.................................................................................. 2,732,312
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession of not in excess of $ per share, of which $ may
be reallocated to other dealers. After the offering, the public offering price,
concession and reallowance to dealers may be reduced by the Representatives. No
such reduction shall change the amount of proceeds to be received by the Company
as set forth on the cover page of this Prospectus.

The Company and the Selling Shareholders have granted to the Underwriters an
option, exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 209,847 and 200,000 shares of Common Stock,
respectively, at the same price per share as the Company and the Selling
Shareholders receive for the 2,732,312 shares of Common Stock offered hereby,
solely to cover over-allotments, if any. If the Underwriters exercise their
over-allotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares of Common Stock to be purchased by each of them, as shown
in the foregoing table, bears to the 2,732,312 shares of Common Stock offered
hereby. The Underwriters may exercise such option only to cover the over-
allotments in connection with the sale of the 2,732,312 shares of Common Stock
offered hereby.

Each of the Company's directors, certain officers of the Company and the
Selling Shareholders have agreed not to offer, sell, contract to sell or
otherwise dispose of Common Stock or securities convertible into or exchangeable
for, or any rights to purchase or acquire, Common Stock for a period of 120 days
following the date of this Prospectus, without the prior written consent of
Volpe, Welty & Company. The Company also has agreed not to offer, sell, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable for, or any rights to purchase or acquire,
Common Stock for a period of 120 days following the date of this Prospectus
without the prior written consent of Volpe, Welty & Company, except for the
offering of 25,000 shares of Common Stock to certain Company employees as
described on the cover page of this Prospectus and under "Company Employee
Offering" and the granting

36
<PAGE>
of options pursuant to the Company's existing Stock Option Plans. Volpe, Welty &
Company, in its discretion, may waive the foregoing restrictions in whole or in
part, with or without a public announcement of such action.

The Company is offering 25,000 shares of Common Stock hereby to certain
Company employees as described on the cover page of this Prospectus and under
"Company Employee Offering." The offering of Employee Shares by the Company is
not being underwritten by the Underwriters and will not be subject to the terms
and conditions of the Underwriting Agreement. The Underwriters will not receive
any compensation or reimbursement in connection with the offer or sale of such
shares. Any of such shares of Common Stock not purchased by such employees will
not be offered or sold to the public.

The offering of the underwritten shares is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The Underwriters
reserve the right to reject an order for the purchase of shares in whole or in
part.

In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the Common
Stock during the "cooling off" period immediately preceding the commencement of
sales in the offering. The Commission has, however, adopted exemptions from
these rules that permit passive market making under certain conditions. These
rules permit an underwriter to continue to make a market subject to the
conditions, among others, that its bid not exceed the highest bid by a market
maker not connected with the offering and that its net purchases on any one
trading day not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any) or their respective affiliates may
have engaged in passive market making in the Company's Common Stock during the
cooling off period.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect
thereof.

LEGAL MATTERS

The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Mayer, Brown & Platt, Chicago, Illinois, special
counsel to the Company, which may rely, as to matters of Missouri law, on the
opinion of Suelthaus & Walsh, P.C., St. Louis, Missouri. Certain legal matters
will be passed upon for the Underwriters by Sachnoff & Weaver, Ltd., Chicago,
Illinois.

EXPERTS

The consolidated financial statements of the Company included in this
Propectus as of March 31, 1995 and 1996 and for each of the three years in the
period ended March 31, 1996 have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60601-2511; and New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.

The Company has filed with the Commission a registration statement on Form
S-2 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. For the

37
<PAGE>
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is hereby made to such Registration
Statement, exhibits and schedules, which may be inspected and copied at the
public reference facilities maintained by the Commission at its principal office
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549
and at certain regional offices of the Commission located at Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661 and at 75 Park Place,
14th Floor, New York, New York 10007. Copies of the Registration Statement can
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 or at the Commission's Web site at
http:/www.sec.gov.

Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus by reference and made a
part hereof: (i) Annual Report on Form 10-KSB for the fiscal year ended March
31, 1996 (the "1996 Annual Report"), filed on July 1, 1996; and (ii) the
registration statement on Form 8-A, filed on June 3, 1992, which discusses the
terms of the Common Stock.

The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above that have been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents. Such written or oral request should be directed to the attention of
Debbie Edgar, Executive Assistant, CITATION Computer Systems, Inc., 424 South
Woods Mill Road, Chesterfield, Missouri 63017 (telephone (314) 579-7900).

38
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheet................................................................................. F-3
Consolidated Statement of Operations....................................................................... F-4
Consolidated Statement of Cash Flows....................................................................... F-5
Consolidated Statement of Shareholders' Equity............................................................. F-7
Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of CITATION Computer Systems, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholders' equity
present fairly, in all material respects, the consolidated financial position of
CITATION Computer Systems, Inc. and its subsidiaries at March 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
St. Louis, Missouri
April 30, 1996

F-2
<PAGE>
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS,
EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................. $ 2,634 $ 2,146
Accounts receivable:
Trade, net of allowance for doubtful accounts of $137 and $170, respectively...... 6,885 10,919
Other............................................................................. 52 36
Inventories (Note 6).................................................................. 534 537
Prepaid expenses and other current assets............................................. 689 704
Income taxes receivable (Note 8)...................................................... 1,178 --
Deferred tax asset (Note 8)........................................................... 159 83
--------- ---------
Total current assets............................................................ 12,131 14,425
--------- ---------
SOFTWARE DEVELOPMENT COSTS, NET OF ACCUMULATED AMORTIZATION OF $6,203 AND $7,992,
RESPECTIVELY (NOTE 2)................................................................. 3,942 4,762
--------- ---------
PROPERTY AND EQUIPMENT, NET (NOTE 2).................................................... 2,255 1,756
--------- ---------
OTHER ASSETS............................................................................ 562 314
--------- ---------
Total assets.................................................................... $ 18,890 $ 21,257
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7)............................................ $ 120 $ 143
Accounts payable...................................................................... 1,880 1,421
Customer deposit...................................................................... 520 542
Accrued bonuses payable............................................................... -- 475
Accrued commissions................................................................... 47 334
Other accrued liabilities............................................................. 688 1,254
Deferred service revenue.............................................................. 2,601 2,317
Income taxes payable (Note 8)......................................................... -- 31
--------- ---------
Total current liabilities....................................................... 5,856 6,517
LONG-TERM DEBT (NOTE 7)................................................................. 540 450
DEFERRED TAX LIABILITY (NOTE 8)......................................................... 1,254 1,676
--------- ---------
7,650 8,643
--------- ---------
COMMITMENTS (NOTES 5, 11 AND 12)

SHAREHOLDERS' EQUITY (NOTES 2 AND 9):
Preferred stock; par value $.01 per share; 5,000,000 shares authorized; no shares
issued and outstanding............................................................... -- --
Common stock; par value $.10 per share; 10,000,000 shares authorized; 3,711,791 and
3,747,882 shares issued and outstanding, respectively................................ 371 375
Paid-in capital....................................................................... 5,965 6,128
Retained earnings..................................................................... 4,768 6,180
Equity adjustment from foreign currency translation................................... 136 (69)
--------- ---------
11,240 12,614
--------- ---------
Total liabilities and shareholders' equity...................................... $ 18,890 $ 21,257
--------- ---------
--------- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE:
System sales.......................................................... $ 14,767 $ 15,338 $ 16,216
Service revenue....................................................... 6,763 8,027 8,835
--------- --------- ---------
21,530 23,365 25,051
--------- --------- ---------
COST OF PRODUCTS AND SERVICES SOLD:
System sales.......................................................... 8,161 9,128 8,532
Service revenue....................................................... 2,362 2,742 2,538
--------- --------- ---------
10,523 11,870 11,070
--------- --------- ---------
Gross profit...................................................... 11,007 11,495 13,981

RESEARCH AND DEVELOPMENT EXPENSE........................................ 1,296 1,661 1,672
SELLING AND ADMINISTRATIVE EXPENSES..................................... 7,718 9,212 8,711
RESTRUCTURING OF OPERATIONS (NOTE 4).................................... -- 3,426 --
OFFICE CONSOLIDATION AND RELOCATION EXPENSE (NOTE 3).................... -- -- 1,380
--------- --------- ---------
OPERATING INCOME (LOSS)................................................. 1,993 (2,804) 2,218
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income....................................................... 178 186 144
Interest expense...................................................... (35) (74) (68)
Other, net............................................................ 11 (10) 19
--------- --------- ---------
154 102 95
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES....................................... 2,147 (2,702) 2,313
PROVISION (BENEFIT) FOR INCOME TAXES (NOTE 8)........................... 808 (877) 901
--------- --------- ---------
NET INCOME (LOSS)....................................................... $ 1,339 $ (1,825) $ 1,412
--------- --------- ---------
--------- --------- ---------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (NOTE 2):
Primary and fully diluted:
Net income (loss) per share....................................... $ .36 $ (.49) $ .37
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers........................................ $ 20,721 $ 22,972 $ 20,771
Cash paid to suppliers and employees................................ (18,225) (20,145) (18,896)
Income taxes paid................................................... (242) (592) 806
Interest paid....................................................... (25) (71) (87)
Interest received and other......................................... 178 186 144
--------- --------- ---------
Net cash provided by operating activities..................... 2,407 2,350 2,738
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................ (883) (1,167) (430)
Software development costs.......................................... (2,369) (3,622) (2,609)
Proceeds from sale of property and equipment........................ -- 8 55
Purchase of CPS, net of cash acquired (Note 1)...................... (2,124) -- --
--------- --------- ---------
Net cash used in investing activities......................... (5,376) (4,781) (2,984)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt................................ (36) (91) (362)
Proceeds from long-term debt........................................ -- -- 202
Proceeds from sale of common stock pursuant to exercise of stock
options and warrants............................................... 40 119 136
Issuance of common stock to directors............................... -- 37 31
--------- --------- ---------
Net cash provided by financing activities..................... 4 65 7
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................. (25) 183 (249)
--------- --------- ---------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS............................. (2,990) (2,183) (488)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
(NOTE 2).............................................................. 7,807 4,817 2,634
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................. $ 4,817 $ 2,634 $ 2,146
--------- --------- ---------
--------- --------- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income (loss)........................................................ $ 1,339 $ (1,825) $ 1,412
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment.............. 511 852 921
Amortization of software development costs........................... 1,274 1,711 1,789
Amortization of maintenance contracts................................ 104 104 --
Amortization of other assets......................................... 191 264 83
Non-cash restructuring charges....................................... -- 2,593 90
Loss on disposal of property and equipment........................... -- 35 --
Increase in accounts receivable, net................................. (1,034) (715) (4,018)
Decrease (increase) in inventories................................... 202 201 (3)
Decrease (increase) in prepaid expenses and other assets............. (345) (492) 150
Decrease (increase) in deferred tax asset............................ 148 (130) 76
Increase (decrease) in accounts payable.............................. (201) 757 (459)
Increase (decrease) in customer deposits............................. (238) (12) 22
Increase (decrease) in other accrued liabilities..................... (341) 12 1,328
Increase (decrease) in deferred service revenues..................... 379 334 (284)
Increase (decrease) in current income taxes receivable/ payable...... (25) (1,371) 1,209
Increase in deferred income tax liability............................ 443 32 422
--------- --------- ---------
Net cash provided by operating activities...................... $ 2,407 $ 2,350 $ 2,738
--------- --------- ---------
--------- --------- ---------
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (IN
THOUSANDS)

During the years ended March 31, 1994, 1995 and 1996, the Company issued $249,
$418 and $93, respectively, in notes payable in conjunction with the purchase of
property and equipment.

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
EQUITY
COMMON STOCK ADJUSTMENT
-------------------- FROM FOREIGN
PAID-IN RETAINED CURRENCY
PAR VALUE CAPITAL EARNINGS TRANSLATION TOTAL
--------- --------- ----------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993..................................... $ 360 $ 5,780 $ 5,254 $ (22) $ 11,372
Sale of common stock pursuant to exercise of stock options
and warrants.............................................. 4 36 -- -- 40
Foreign currency translation adjustment..................... -- -- -- (25) (25)
Net income.................................................. -- -- 1,339 -- 1,339
--------- --------- ----------- ----- ---------
BALANCE, MARCH 31, 1994..................................... 364 5,816 6,593 (47) 12,726
Sale of common stock pursuant to exercise of stock options
and warrants.............................................. 6 113 -- -- 119
Issuance of common stock to directors....................... 1 36 -- -- 37
Foreign currency translation adjustment..................... -- -- -- 183 183
Net loss.................................................... -- -- (1,825) -- (1,825)
--------- --------- ----------- ----- ---------
BALANCE, MARCH 31, 1995..................................... 371 5,965 4,768 136 11,240
Sale of common stock pursuant to exercise of stock options
and warrants.............................................. 3 133 -- -- 136
Issuance of common stock to directors....................... 1 30 -- -- 31
Foreign currency translation adjustment..................... -- -- -- (205) (205)
Net income.................................................. -- -- 1,412 -- 1,412
--------- --------- ----------- ----- ---------
BALANCE, MARCH 31, 1996..................................... $ 375 $ 6,128 $ 6,180 $ (69) $ 12,614
--------- --------- ----------- ----- ---------
--------- --------- ----------- ----- ---------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. BASIS OF PRESENTATION
In July 1993, CITATION Computer Systems, Inc. ("CITATION" or the "Company")
acquired all of the issued and outstanding shares of capital stock of Rubicon
Corporation, subsequently renamed CITATION Professional Services, Inc. ("CPS")
for approximately $2,245 in cash, effective July 1, 1993. The business
combination has been accounted for as a purchase transaction; accordingly, the
accompanying financial statements include the results of operations of CPS since
the date of acquisition.

Net assets acquired consist of the following:

<TABLE>
<S> <C>
Cash................................................................ $ 121
Accounts receivable................................................. 419
Property and equipment.............................................. 247
Maintenance contracts............................................... 970
Other assets........................................................ 686
Current liabilities assumed......................................... (198)
---------
$ 2,245
---------
---------
</TABLE>

The following unaudited pro forma summary presents the combined historical
results of operations as adjusted to reflect purchase transactions assuming that
the acquisition had occurred at April 1, 1993. These pro forma results are not
necessarily indicative of the combined results that would have occurred had the
acquisition actually taken place on April 1, 1993, nor are they necessarily
indicative of the results that may occur in the future.

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1994
--------------
<S> <C>
Net sales and service revenue................................................. $ 22,228
Net income.................................................................... $ 1,364
Net income per share.......................................................... $ .36
</TABLE>

See Note 4 for discussion of the fiscal 1995 restructuring charge related to
CPS.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The policies utilized by the Company in the preparation of the financial
statements conform to generally accepted accounting principles, and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from these estimates.

The significant accounting policies followed by the Company are described
below:

OPERATIONS

CITATION designs, develops, markets and services client/server information
systems for the healthcare industry. The Company's products focus on three main
areas: clinical, administrative/ financial, and community registration.

INVENTORIES

Inventories are valued at the lower of cost, determined on the first in,
first out basis, or market.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Major renewals and betterments
are capitalized while maintenance and repairs are expensed currently. When
property is sold or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss on
disposition is credited or charged to income.

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment consists of the following:

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Furniture and fixtures.............................................. $ 1,448 $ 1,315
Hardware and shop equipment......................................... 3,229 3,687
Leasehold improvements.............................................. 158 170
Vehicles............................................................ 104 91
--------- ---------
4,939 5,263
Less -- accumulated depreciation and amortization................... (2,684) (3,507)
--------- ---------
Net property and equipment...................................... $ 2,255 $ 1,756
--------- ---------
--------- ---------
</TABLE>

The Company provides for depreciation of property and equipment by charging
against earnings amounts sufficient to amortize the cost of the properties over
the estimated useful lives generally using straight-line methods. The estimated
useful life of the assets is as follows:

<TABLE>
<S> <C>
Vehicles, furniture, fixtures and equipment....... 3 to 10 years
Remaining life of the
Leasehold improvements............................ lease
</TABLE>

REVENUE RECOGNITION

Revenue from the sale of computer systems is recognized upon shipment to the
customer providing that no significant vendor obligations remain and collection
of the related receivable is deemed probable. Costs and expenses related to
installation of the computer equipment and software system, training customer
personnel, and provision for warranties offered are estimated and recorded as
cost of sales when the related revenue is recognized.

Revenue from the sale of additional hardware and additional software is
recognized upon shipment. Costs and expenses associated with the sale of
additional hardware and software are recorded when the related revenue is
recognized. Revenue related to product warranties and maintenance service
contracts is recognized ratably over the term of the contract period. Sales
returns are treated as reductions to net system sales and service revenues.

COST OF SALES

For purposes of estimating the cost of sales related to service revenue, the
Company includes all of its customer service expenses plus an allocation of
certain other expenses based upon estimates made by management.

SOFTWARE DEVELOPMENT COSTS

Certain costs incurred in developing software products are capitalized and
amortized on a product-by-product basis using the greater of the ratio that
current gross revenues for a product bear to the current and anticipated future
gross revenues for that product or the straight-line method over the estimated
three to five year economic life of the products. The costs consist of salaries,
computer expenses and other overhead costs directly related to the development
and/or major enhancement of software products. Such costs are capitalized, to
the extent they are recoverable through future sales, from the time the
products' technological feasibility is established up to its general release to
customers. Costs incurred before or after this period are expensed as incurred.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred.

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Such temporary differences result primarily
from using different methods to accrue certain expenses and to calculate
capitalization of software development costs for financial and tax reporting
purposes. Deferred tax expense represents the change in the deferred tax asset
or liability.

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Earnings per common and common equivalent share is determined by dividing
net income by the aggregate weighted average number of common shares and common
share equivalents outstanding during each period presented. Common share
equivalents consist of common stock which may be issuable upon exercise of
outstanding stock options (using the treasury stock method), except when
antidilutive.

The weighted average number of shares used in computing earnings per common
and common equivalent share are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Primary....................................... 3,703,876 3,687,669 3,767,533
---------- ---------- ----------
Fully diluted................................. 3,703,876 3,688,152 3,779,759
---------- ---------- ----------
</TABLE>

FOREIGN CURRENCY TRANSLATION

The asset and liability accounts of the Company's foreign division are
translated at the year-end exchange rate. Revenue and expense amounts are
translated at monthly average exchange rates. The resulting translation
adjustment is recorded as a separate component of shareholders' equity. Foreign
currency transaction gains and losses are included in earnings when incurred.
Such foreign currency transaction gains and losses were not material for each of
the three years in the period ended March 31, 1996.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes all highly liquid investments, such as
money-market accounts and short-term discount notes, with an original maturity
of three months or less.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.

DIRECTORS' FEES

During the year ended March 31, 1995, the Company adopted the Directors
Common Share Plan ("Directors' Plan") whereby certain non-employee members of
the Board of Directors ("Directors") may receive all or a portion of the
Directors' fees in the form of Company common stock in lieu of cash. During the
years ended March 31, 1995 and 1996, 5,433 and 4,959 shares of common stock
valued at $37 and $31, respectively, were issued to such Directors under the
Directors' Plan.

3. OFFICE CONSOLIDATION AND RELOCATION
In June 1995, the Company decided to consolidate the operations of its
Madison, Wisconsin, facility into its St. Louis, Missouri, headquarters. Charges
of $1,000, $58 and $322 were recorded in the first, third

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

3. OFFICE CONSOLIDATION AND RELOCATION (CONTINUED)
and fourth quarters, respectively, of the fiscal year ended March 31, 1996 to
provide for the costs of the consolidation of facilities, settlement of related
employee claims and the relocation of certain employees and equipment. The major
components of the combined charges are as follows:

<TABLE>
<S> <C>
Lease buyout and asset write-off, net............................... $ 680
Employee severance and related costs................................ 171
Employee arbitration settlement and related costs................... 208
Employee relocation................................................. 112
Office move and other related expenses.............................. 209
---------
$ 1,380
---------
---------
</TABLE>

All expenses associated with the office consolidation and relocation were
recorded during the fiscal year ended March 31, 1996, and no material future
costs are expected. With the exception of the asset write-offs totaling
approximately $90, all costs resulted in cash payments.

4. RESTRUCTURING OF OPERATIONS
During the fourth quarter of the fiscal year ended March 31, 1995, the
Company initiated various activities to restructure its operations in order to
reduce its cost structure and remain competitive.

Restructuring activities resulted in net charges of $3,426 which included
$2,801 related to the write-off of capitalized software costs, inventory and
intangible assets associated with discontinued product lines, certain
maintenance contracts and intangible assets associated with the CPS acquisition
and $625 for severance and related benefit costs associated with changes in the
Company's executive management. With the exception of the asset write-offs,
these restructuring charges resulted in cash outlays.

Accrued restructuring costs totaling $292 were paid during the fiscal year
ended March 31, 1996, and no additional costs were incurred or are expected.

5. CONCENTRATION OF CREDIT RISK
The Company generates revenue primarily through sales to the healthcare
industry located throughout the United States. Due to this concentration,
substantially all receivables at March 31, 1995 and 1996 are from healthcare
institutions which may be similarly affected by changes in economic, regulatory
or other conditions.

The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves for
potential credit losses and such losses have been within management's
expectations.

The Company invests its excess cash in deposits with major financial
institutions, in U.S. government agency securities and in commercial paper of
companies with strong credit ratings. Generally, the investments mature within
90 days and, therefore, are subject to little risk. The Company has not
experienced losses related to these investments.

6. INVENTORIES
Inventories consist of the following:

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Hardware and third party software......................................... $ 286 $ 322
Field service equipment................................................... 248 215
--------- ---------
$ 534 $ 537
--------- ---------
--------- ---------
</TABLE>

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

7. DEBT
Long-term debt consists of bank notes payable with interest rates ranging
from 8.09% to 8.75% due through March 2000. Long-term debt at March 31, 1995 and
1996, was $660 and $593, respectively.

As of March 31, 1996, the Company had a line of credit agreement with a
bank. The line of credit allows the Company to borrow up to $1,000 through July
31, 1996, with interest at the bank's prime rate (8.25% at March 31, 1996).
There were no borrowings outstanding under the line of credit agreement in
effect at March 31, 1996.

The line of credit and the notes payable are secured by the Company's
accounts receivable, inventory, equipment and general intangible assets. The
respective agreements require that certain minimum net worth and leverage ratio
requirements be maintained by the Company. The Company was in compliance with
these requirements at March 31, 1996.

The aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------
<S> <C>
1997................................................................... $ 143
1998................................................................... 359
1999................................................................... 54
2000................................................................... 37
-----
$ 593
-----
-----
</TABLE>

8. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal...................................................... $ 164 $ (620) $ 341
State........................................................ 53 (159) 62
--------- --------- ---------
217 (779) 403
--------- --------- ---------
Deferred:
Federal...................................................... 497 (106) 418
State........................................................ 94 8 80
--------- --------- ---------
591 (98) 498
--------- --------- ---------
$ 808 $ (877) $ 901
--------- --------- ---------
--------- --------- ---------
</TABLE>

The provision (benefit) for income taxes differs from the amount computed
using the statutory federal income tax rate (34%) as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income tax provision (benefit) at the statutory rate......... $ 730 $ (919) $ 787
Increases (decreases):
State income taxes, net...................................... 97 (108) 94
Write-off of CPS acquisition costs........................... -- 70 --
Other, net................................................... (19) 80 20
--------- --------- ---------
$ 808 $ (877) $ 901
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

8. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities at March 31, 1995 and 1996, are as
follows:

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Current deferred tax asset:
Accrued liabilities....................................................... $ 58 $ 29
Allowance for doubtful accounts........................................... 56 68
Other, net................................................................ 45 (14)
--------- ---
Total current deferred tax asset.......................................... $ 159 $ 83
--------- ---
--------- ---
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Long-term deferred tax liability:
Capitalized software development costs.............................. $ 1,523 $ 1,952
Depreciation........................................................ (33) (29)
State taxes......................................................... (69) (97)
Tax credit carry forward............................................ (90) (90)
Other, net.......................................................... (77) (60)
--------- ---------
Total deferred tax liability.......................................... $ 1,254 $ 1,676
--------- ---------
--------- ---------
</TABLE>

9. STOCK OPTIONS AND WARRANTS
On April 20, 1992, the board of directors and shareholders approved the
adoption of the 1992 Employee Incentive Stock Option Plan which provides for the
issuance of up to 148,347 stock options to executive officers or other key
employees of the Company.

On October 13, 1993, the board of directors adopted an amendment to the 1992
Employee Incentive Stock Option Plan which increased the number of stock options
available for issuance to executive officers or other key employees of the
Company by 200,000.

The Company's incentive stock option plan allows participation, with certain
restrictions, by all full-time employees with one year of service. Options
granted allow employees to purchase shares of the Company's common stock at
prices not less than the fair market value of the stock at the date of the
grant. Options which have been granted under the plan are exercisable during the
employment of the grantee or at specified time intervals. Outstanding options
expire between 1995 and 2005.

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

9. STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock option transactions (number of shares) are summarized below:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Shares under option, beginning of period............................... 225,023 291,626 255,292
Stock options granted at an option price of $4.50...................... -- -- 56,500
Stock options granted at an option price of $6.00...................... 113,600 -- --
Stock options granted at an option price of $6.88...................... -- 48,000 --
Stock options forfeited................................................ (24,333) (47,335) (131,164)
Non-qualified stock options granted at an option price of $5.00........ -- -- 150,000
Non-qualified stock options granted at an option price of $6.00........ 16,400 -- --
Non-qualified stock options granted at an option price of $7.19........ -- 30,333 --
Stock options exercised at $1.04....................................... (39,064) (57,332) (13,965)
Stock options exercised at $6.00....................................... -- (10,000) (10,000)
Stock options exercised at $8.51....................................... -- -- (7,166)
--------- --------- ----------
Shares under option, end of period..................................... 291,626 255,292 299,497
--------- --------- ----------
--------- --------- ----------
</TABLE>

Paid-in capital is credited with proceeds received in excess of the par
value of shares issued under the stock option plan. No charges are made to
income in accounting for this plan due to the options being granted with an
exercise price at or above the fair value of the common stock on the date of
grant.

At March 31, 1996, 234,997 options outstanding were exercisable. During the
years ended March 31, 1997 and 1998, an additional 60,500 and 4,000,
respectively, options outstanding will become exercisable. Options on 21,684
shares were available for grant under the 1992 Employee Incentive Stock Option
Plan at March 31, 1996.

NEW ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123") which addresses accounting for stock option, purchase
and award plans. FAS 123 specifies that companies utilize either the "fair value
based method" or the "intrinsic value based method" for valuing stock options
granted. The Company will adopt FAS 123 during the year ending March 31, 1997,
and expects to utilize the "intrinsic value based method" for valuing stock
options granted. The Company anticipates that when adopted, FAS 123 will have no
material effect on its consolidated financial position or consolidated results
of operation.

10. PROFIT AND SAVINGS INCENTIVE PLANS
CITATION maintains a Retirement Savings Plan for the benefit of
substantially all CITATION employees. Employee contributions may range from 1%
to 15% of compensation, and CITATION matches a discretionary percentage of an
employee's contribution. The match will be based on the employee's contribution
up to 6% of the employee's compensation.

For the plan year ended December 31, 1995, the matching contribution was 25%
of such contributions, and was paid in the form of cash the first three quarters
of the year and in the form of Company stock for the fourth quarter. It is the
Company's current intention to continue to make the matching contribution in the
form of Company stock. Employees are 100% vested as to employee contributions
and are vested as to employer contributions at the rate of 20% per year,
beginning in the second year of service.

For the years ended March 31, 1994, 1995 and 1996, the Company recorded
expense of approximately $66, $82 and $66, respectively, relating to this plan.

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

11. LEASES
The Company leases its office and warehouse facilities and certain office
equipment. The lease terms are generally for five to ten years. Rental expense
under operating leases for the years ended March 31, 1994, 1995 and 1996, was
approximately $578, $916 and $685, respectively.

Future minimum lease payments under noncancelable operating leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-----------

<S> <C>
1997................................................................... $ 495
1998................................................................... 471
1999................................................................... 447
2000................................................................... 468
2001................................................................... 476
Thereafter............................................................. 1,546
-----------
$ 3,903
-----------
-----------
</TABLE>

12. COMMITMENTS
The Company has entered into employment agreements with two of its executive
officers. The agreements provide for terms of employment through December 1997
and March 1998, respectively, and include annual compensation, bonuses, and
various other benefits. The agreements may be terminated by the Company for
cause, as defined in the employment agreements. The agreements require severance
benefits for termination without cause.

The Company from time to time is a party to certain lawsuits. Management and
legal counsel do not expect the outcome of any litigation to have a material
adverse effect on the Company's financial position or results of operations. As
of the date hereof, the Company does not know of any pending lawsuits.

13. RELATED PARTY TRANSACTIONS
During the years ended March 31, 1994, 1995 and 1996, the Company paid
approximately $90, $180 and $113, respectively, in fees to consulting firms,
certain executives of which are directors of the Company.

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) -- (CONTINUED)

14. SEGMENT INFORMATION
Worldwide operations data, as required by Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business Enterprise,"
are listed below. Profitability of the Company's operations by location was
determined based on ultimate sales to unaffiliated customers. Total Company
profit was included in the location of the entity transacting the final sale.

<TABLE>
<CAPTION>
NET
REVENUES, EARNINGS
UNAFFILIATED (LOSS) FROM IDENTIFIABLE
CUSTOMERS OPERATIONS ASSETS
------------ ----------- ------------
<S> <C> <C> <C>
For years ended March 31,
1994
United States....................................... $ 20,831 $ 2,324 $ 17,777
United Kingdom...................................... 699 (331) 1,342
------------ ----------- ------------
$ 21,530 $ 1,993 $ 19,119
------------ ----------- ------------
------------ ----------- ------------
1995
United States....................................... $ 21,963 $ (1,383) $ 15,790
United Kingdom...................................... 1,402 (1,421) 3,100
------------ ----------- ------------
$ 23,365 $ (2,804) $ 18,890
------------ ----------- ------------
------------ ----------- ------------
1996
United States....................................... $ 21,983 $ 2,849 $ 16,749
United Kingdom...................................... 3,068 (631) 4,508
------------ ----------- ------------
$ 25,051 $ 2,218 $ 21,257
------------ ----------- ------------
------------ ----------- ------------
</TABLE>

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
EARNINGS (LOSS)
NET SALES GROSS PROFIT NET INCOME (LOSS) PER SHARE
-------------------- -------------------- -------------------------- --------------------------
1995 1996 1995 1996 1995 1996 1995 1996
--------- --------- --------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st quarter.......... $ 5,717 $ 5,635 $ 2,968 $ 3,019 $ 215 $ (197)(2) $ .06 $ (.05)(2)
2nd quarter.......... 6,835 4,644 3,836 2,256 586 20 .16 .01
3rd quarter.......... 5,352 6,457 2,635 3,852 (182) 821(2) (.05) .22(2)
4th quarter.......... 5,461 8,315 2,056 4,854 (2,444)(1) 768(2) (.66)(1) .20(2)
--------- --------- --------- --------- ------------ ------ ----- -----
Total.............. $ 23,365 $ 25,051 $ 11,495 $ 13,981 $ (1,825) $ 1,412 $ (.49) $ .38(3)
--------- --------- --------- --------- ------------ ------ ----- -----
--------- --------- --------- --------- ------------ ------ ----- -----
</TABLE>

- ------------
(1) See Note 4 regarding restructuring of operations in the fourth quarter of
the fiscal year ended March 31, 1995.

(2) See Note 3 regarding office consolidation and relocation during the fiscal
year ended March 31, 1996.

(3) The annual earnings per share amount does not agree to the sum of the
quarters as a result of changes in the market prices of the Company's common
stock and the application of the treasury stock method.

F-16
<PAGE>
[A GRAPHIC DEPICTION OF AN ANNOTATED SAMPLE SCREEN, DESCRIBING CERTAIN FEATURES
OF THE COMPANY'S COMMON USER REGISTRATION ENTRY SYSTEM SOFTWARE PRODUCT]
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY UNDERWRITER OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES, OR AN
OFFER TO, OR A SOLICITATION OF ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DAY
SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
The Company.................................... 10
Use of Proceeds................................ 10
Dividend Policy................................ 10
Price Range of Common Stock.................... 10
Capitalization................................. 11
Selected Consolidated Financial Data........... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business....................................... 20
Management..................................... 28
Principal and Selling Shareholders............. 30
Description of Capital Stock................... 31
Shares Eligible for Future Sale................ 34
Company Employee Offering...................... 34
Underwriting................................... 36
Legal Matters.................................. 37
Experts........................................ 37
Additional Information......................... 37
Incorporation of Certain Documents by
Reference..................................... 38
</TABLE>

2,732,312 SHARES

[LOGO]

COMMON STOCK

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

PROSPECTUS
, 1996

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

VOLPE, WELTY & COMPANY

JEFFERIES & COMPANY, INC.

PUNK, ZIEGEL & KNOELL

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.

<TABLE>
<CAPTION>
Registration Fee.......................................................... $ 18,000
<S> <C>
"Blue Sky" Registration Fees.............................................. 10,000
NASD Supplemental Application Filing Fee.................................. 18,000
Printing and Engraving Expenses........................................... 150,000
Legal Fees and Expenses................................................... 200,000
Accountants' Fees and Expenses............................................ 35,000
Miscellaneous............................................................. 119,000
---------
Total................................................................... $ 550,000
---------
---------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

(a) The Missouri General and Business Corporations Law (Section 351.355)
gives Missouri corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers, subject to specified
conditions and exclusions, gives a director or officer who successfully defends
an action the right to be so indemnified, and authorizes the registrant to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any articles of incorporation, by-laws, agreement, vote of shareholders or
disinterested directors or otherwise.

(b) Article XI of the Articles of Incorporation of the registrant permits,
and Article VII of the By-laws of the registrant provides for indemnification of
directors and officers, and permits the Board of Directors to grant employees
and agents indemnification, to the fullest extent permitted by law.

(c) Reference is made to Section 11 of the Underwriting Agreement (the form
of which is included as Exhibit 1 to this Registration Statement) for provisions
regarding the indemnification under certain circumstances of the registrant, its
directors and certain of its officers by the Underwriters.

II-1
<PAGE>
ITEM 16. EXHIBITS

(a) All financial statements, schedules and historical financial information
have been omitted as they are not applicable.

<TABLE>
<C> <C> <S>
(b) *1.1 Form of Underwriting Agreement
4.1 Specimen Common Stock Certificate; incorporated by reference to the
corresponding Exhibit to the registrant's Registration Statement on
Form S-1, Registration No. 33-48332
*5.1 Opinion of Mayer, Brown & Platt with respect to legality
10.1 Registration Rights Agreement, dated May 29, 1992, between the
registrant and Capital for Business, Inc.; incorporated by reference
to the corresponding Exhibit to the registrant's Registration
Statement on Form S-1, Registration No. 33-48332
10.2 Form of Amendment to Registration Rights Agreement, dated October 23
1992, between the registrant and Capital for Business, Inc.;
incorporated by reference to the corresponding Exhibit to the
registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992
10.3 First Amended Incentive Stock Option Plan; incorporated by reference
to the corresponding Exhibit to the registrant's Registration
Statement on Form S-1, registration No. 33-48332
10.4 Resolution Amending the First Amended Incentive Stock Option Plan;
incorporated by reference to the corresponding Exhibit to the
registrant's Registration Statement on Form S-1, Registration No.
33-48332
10.5 Amendment to First Amended Incentive Stock Option Plan; incorporated
by reference to the corresponding Exhibit to the registrant's
Registration Statement on Form S-1, Registration No. 33-48332
10.6 1992 Employee Incentive Stock Option Plan; incorporated by reference
to the corresponding Exhibit to the registrant's Registration
Statement on Form S-1, Registration No. 33-48332
10.7 Non-competition/Non-solicitation Agreement, dated as of December 11,
1992, among the registrant, Health Micro Data Systems, Inc., and Frank
L. Poggio; incorporated by reference to the corresponding Exhibit to
the registrant's Form 10-K for the fiscal year ended March 31, 1993
10.8 Employment Agreement, dated December 11, 1992, among Health Micro Data
Systems, Inc., the registrant, and Frank L. Poggio; incorporated by
reference to the corresponding Exhibit to the registrant's Form 10-K
for the fiscal year ended March 31, 1993
10.9 Agreement, dated March 16, 1992, between the registrant and William H.
J. Seabrook; incorporated by reference to the corresponding Exhibit to
the registrant's Form 10-K for the fiscal year ended March 31, 1993
10.10 Agreement, dated to be effective April 1, 1993, between the registrant
and William H. J. Seabrook; incorporated by reference to the
corresponding Exhibit to the registrant's Form 10-K for the fiscal
year ended March 31, 1993
</TABLE>

II-2
<PAGE>
<TABLE>
<C> <C> <S>
10.11 Software Systems Program Product License, dated October 14, 1992,
between Health Micro Data Systems, Inc., and Presbyterian Healthcare
Services; incorporated by reference to the corresponding Exhibit to
the registrant's Form 10-K for the fiscal year ended March 31, 1993
10.12 Line of Credit Note and General Loan and Security Agreement, dated
January 9, 1995, between the registrant and Commerce Bank of St.
Louis; incorporated by reference to the corresponding Exhibit to the
registrant's 10-KSB for the fiscal year ended March 31, 1996
10.13 Amendment to Line of Credit and General Loan and Security Agreement,
dated October 2, 1995, between the registrant and Commerce Bank of St.
Louis; incorporated by reference to the registrant's 10-KSB for the
fiscal year ended March 31, 1996
10.14 Employment Agreement, dated July 25, 1995, among the registrant and J.
Robert Copper; incorporated by reference to the corresponding Exhibit
to the registrant's Form 10-KSB for the fiscal year ended March 31,
1996
10.15 Agreement, dated January 15, 1996, between the registrant and William
H.J. Seabrook; incorporated by reference to the corresponding Exhibit
to the registrant's Form 10-KSB for the fiscal year ended March 31,
1996
*23.1 Consent of Mayer, Brown & Platt (included in its opinion filed as
Exhibit 5.1)
**23.2 Consent of Price Waterhouse LLP
**24.1 Powers of Attorney (included in the signature page hereto)
</TABLE>

- ---------
* To be filed by pre-effective amendment.
** Filed herewith.

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Securities Act, and will be governed by the final
adjudication of such issue.

(b) For determining any liability under the Securities Act, the registrant
shall treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A under the Securities Act
and contained in a form of prospectus filed by the registrant under Rule
424(b)(1), or (4), or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it effective.

(c) For determining any liability under the Securities Act, the registrant
shall treat each post-effective amendment that contains a form of prospectus as
a new registration statement for the Common Stock offered in this Registration
Statement, and that offering of the Common Stock at that time as the initial
BONA FIDE offering.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chesterfield, State of Missouri, on the 16th day of
July, 1996.

CITATION COMPUTER SYSTEMS, INC.

By: /S/ RICHARD D. NEECE

-----------------------------------
Name: Richard D. Neece
Title:Executive Vice President and
Chief Financial Officer

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Richard D. Neece and J. Robert Copper and either
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments to this Registration Statement) and to file
the same with all exhibits thereto, and the other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite and necessary to be done, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<C> <S> <C>
NAME TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------

/S/ J. ROBERT COPPER
------------------------------------------- Chief Executive Officer; July 15, 1996
J. Robert Copper Director

/S/ RICHARD D. NEECE Executive Vice President and Chief
------------------------------------------- Financial Officer (Principal Financial July 15, 1996
Richard D. Neece and Accounting Officer)

/S/ FRED L. BROWN
------------------------------------------- Director July 15, 1996
Fred L. Brown

/S/ JAMES F. O'DONNELL
------------------------------------------- Director July 12, 1996
James F. O'Donnell

/S/ DAVID T. PIERONI
------------------------------------------- Director July 15, 1996
David T. Pieroni

/S/ FRANK L. POGGIO
------------------------------------------- Director July 15, 1996
Frank L. Poggio

/S/ WILLIAM H.J. SEABROOK
------------------------------------------- Director July 15, 1996
William H.J. Seabrook
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NUMBER
- --------- ------------------------------------------------------------------------------------------ ---------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement............................................................
*5.1 Opinion of Mayer, Brown & Platt with respect to legality..................................
*23.1 Consent of Mayer, Brown & Platt (included in its opinion filed as Exhibit 5.1)............
**23.2 Consent of Price Waterhouse LLP...........................................................
**24.1 Powers of Attorney (included in the signature page hereto)................................
</TABLE>

- ---------
* To be filed by pre-effective amendment.

** Filed herewith.

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the inclusion and incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form S-2 of
our report dated April 30, 1996, which appears on page 34 of the 1996 Annual
Report to Shareholders of CITATION Computer Systems, Inc., which is
incorporated by reference in CITATION Computer Systems, Inc.'s Annual Report
on Form 10-KSB for the year ended March 31, 1996. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 107 of such Annual Report on Form 10-KSB. We also
consent to the references to us under the headings "Experts" and "Selected
Consolidated Financial Data" in such Prospectus. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected
Consolidated Financial Data".

Price Waterhouse LLP

St. Louis, Missouri
July 15, 1996