<PAGE> 1
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20284
CITATION COMPUTER SYSTEMS, INC.
(Exact name of company as specified in its charter)
MISSOURI 43-1174397
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
424 SOUTH WOODS MILL ROAD, SUITE 200 63017
CHESTERFIELD, MISSOURI (Zip Code)
(Address of principal executive offices)
Company's telephone number, including area code: (314) 579-7900
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.10 PER SHARE
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of Company's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-K. _____
Company's revenues for the fiscal year ended March 31, 1997, were $22,005,000.
On June 20, 1997, the aggregate market value of the Company's voting stock held
by non-affiliates was $22,547,393.
On June 20, 1997, there were 3,803,717 shares of Common Stock outstanding,
exclusive of treasury shares or shares held by subsidiaries of the Company.
Parts II incorporates information by reference from the Annual Report to
Shareholders dated June 9, 1996. Part III incorporates information by reference
from the definitive Proxy Statements to be used in connection with the Company's
Annual Meeting of Shareholders to be held on August 15, 1997, and to be filed no
later than 120 days after Company's fiscal year end.
Page 1
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
CITATION Computer Systems, Inc. ("CITATION" or the "Company") was
organized in 1979 as a Missouri corporation. The Company's principal executive
office is located at 424 South Woods Mill Road, Suite 200, Chesterfield,
Missouri 63017 (a suburb of St. Louis) and its telephone number is (314)
579-7900.
INTRODUCTION
CITATION designs, develops, markets and supports patient-centered
clinical and financial information systems for hospitals, clinics, physicians'
groups and emerging Integrated Delivery Networks ("IDNs"). The Company offers a
comprehensive suite of products using open client/server architecture that meets
a broad range of the information systems needs of the healthcare industry. These
products integrate patient care processes within the enterprise 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 over 400 institutions ranging in size
from under 100 beds to over 1,000 beds. CITATION markets its products directly
in the United States and Canada, as well as through distribution partners in the
United Kingdom and Europe, India, the Far East and Latin America.
INDUSTRY BACKGROUND
The United States healthcare industry is undergoing rapid change.
Historically, reimbursement for healthcare services has been based on a
fee-for-service model of payment. With increasing pressure to reduce costs,
managed care organizations and other payors are shifting the economic risk for
the delivery of care to providers through alternative reimbursement models,
including capitation and fixed fees. As a result, healthcare providers such as
hospitals, multi-specialty physician groups, laboratories, pharmacies, home
health services and nursing homes are integrating horizontally and vertically to
create IDNs. IDNs are designed to serve all of the healthcare needs of regional
populations while achieving economies of scale.
CITATION Computer Systems, Inc. Page 2
Form 10-KSB for FYE 3/31/97
<PAGE> 3
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. As the need for readily accessible information
throughout the healthcare enterprise continues to grow, hospitals, providers and
payors of all sizes are faced with the challenge of implementing healthcare
information systems that are scalable, capable of working with existing
information systems and flexible to adapt to changes in the healthcare
marketplace. Also, such systems must be patient-centered, integrating all
aspects of managing the healthcare process, 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 the fall of 1997, distributes demographic and
health assessment information across multiple disparate entities within
healthcare enterprises or IDNs. CURES serves as a central collection point for
all patient demographic and health status information, streamlining the intake
process by
CITATION Computer Systems, Inc. Page 3
Form 10-KSB for FYE 3/31/97
<PAGE> 4
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 hospitals with 250 beds
or less and IDNs to address a broad range of needs. The Company will
aggressively promote its clinical and administrative suites of products.
LEVERAGE EXISTING CLIENT BASE. With an installed base of almost 400
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 has expanded the range of strategic client
support and data interpretation services it provides in order to strengthen
relationships with clients. The Company has also expanded its services to design
and configure the architecture of a client's systems, including networking,
systems
CITATION Computer Systems, Inc. Page 4
Form 10-KSB for FYE 3/31/97
<PAGE> 5
integration and data conversion. Further, the Company provides advice on data
analysis to assist care providers in evaluating their operations.
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 a user's individual needs.
CITATION's systems address the information needs of care providers and hospital
administrators by enabling joint access to clinical and cost information,
thereby facilitating cost containment, effective decision making and delivery of
high-quality care. CITATION offers products addressing three functional areas:
clinical, financial, community registration and decision support.1
CLINICAL. CITATION's clinical suite of products 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(TM) and
will become available for Windows NT(TM) in early fall 1997.
C-LAB provides comprehensive laboratory automation solutions
for clinics, single and multiple site hospitals and clinical and
research laboratories. C-LAB automates order entry and dissemination of
results and interfaces with care providers' financial systems. C-LAB
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(TM).
C-CARE is a patient care management system which is designed
to increase the productivity of nurses and other clinicians and to
assist in the creation and management of care plans and clinical
pathways. C-CARE
- --------
This document contains trademarks and trade names of other persons.
These trademarks remain the property of such persons.
CITATION Computer Systems, Inc. Page 5
Form 10-KSB for FYE 3/31/97
<PAGE> 6
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.
C-RIS is a radiology management system providing patient
tracking, transcription, radiology reporting, auto-fax capabilities,
statistical reporting, film management and mammography management.
C-RIS is currently available for DOS, and will be available in August,
1997 for Windows NT(TM).
C-MED is a medication dispensing and inventory control system
which can increase productivity through the use of tools such as
bar-coding to control narcotics or floor stock items. C-MED can
integrate with a hospital's other information systems to verify patient
status and to provide patient billing and laboratory information. C-MED
also enables a single data entry to produce patient charges, labels,
profiles, inventory control and drug utilization management. The
Company licenses C-MED from a third party, and it is currently
available for Windows NT(TM).
ADMINISTRATIVE. CITATION's administrative suite consists of
CURES, 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.
CURES, the Company's community-wide user registration system,
provides a single point of collection for demographic and health assessment
information across multiple disparate entities within healthcare enterprises or
IDNs. 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 is in final
testing and the Company expects to begin beta testing in August, 1997. CURES
will be available for Windows NT(TM).
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(TM).
CITATION Computer Systems, Inc. Page 6
Form 10-KSB for FYE 3/31/97
<PAGE> 7
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 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 and Windows NT(TM).
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(TM).
C-MAX provides the information necessary to manage managed
care contracts and transactions with indemnity payors. C-MAX is
Windows(TM) based.
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.
SERVICES
Client service is an important component of the Company's operations.
As of March 31, 1997, the Company employed 45 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
CITATION Computer Systems, Inc. Page 7
Form 10-KSB for FYE 3/31/97
<PAGE> 8
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 has expanded the range of strategic client support and data
interpretation services it provides in order to strengthen relationships with
clients. The Company has expanded its services to design and configure the
architecture of a provider's systems, including networking, systems integration
and data conversion. Further, the Company provides advice on data analysis to
assist care providers in evaluating their operations.
PRODUCT DEVELOPMENT
CITATION is dedicated to providing state-of-the-art integrated systems
for healthcare. The cornerstone of CITATION's system is its long-standing
commitment to client/server technology. CITATION's multi-tiered products are
modular in nature, using an open architecture that is easily integratable with
third party systems as well as other CITATION systems.
CITATION's current product development efforts use object-oriented
programming methodologies. This allows the Company to develop applications based
on reusable libraries of code that the Company believes results in more
cost-effective and rapid product development cycles. The Company is a
Microsoft(R) Solutions Provider and extensively employs Microsoft(R) toolsets
and standards in its product development efforts. The Company believes use of
these standards and tools facilitates interfacing with other systems and
products. The Company also supports other industry standards such as HL/7 and
the Novell Netware Network Operating System.
The Company plans to expand its 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.
CITATION Computer Systems, Inc. Page 8
Form 10-KSB for FYE 3/31/97
<PAGE> 9
For the years ended March 31, 1996 and 1997, CITATION invested $4.3
million and $4.8 million, respectively, on research and development. At March
31, 1997 the Company employed 37 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.
SALES AND MARKETING
The Company markets its products in the United States and Canada
through a direct sales force under the direction of the Company's Executive Vice
President Sales. As of March 31, 1997, the Company's sales force consisted of 15
employees. In addition to the Company's sales force employees, the Company has a
13-person marketing team that promotes the Company's products, participates in
trade shows and demonstrates the Company's products. In addition, members of the
Company's development and client services departments provide pre-sales support
for the Company's direct sales force in making presentations to and preparing
comprehensive proposals for potential customers.
The Company intends to focus its sales efforts on selling larger, more
comprehensive systems to hospitals with 250 beds or less, and IDNs to address a
broad range of needs. As part of this strategy, the Company is cross training
its sales force so that each salesperson will have the background necessary to
sell all of the Company's products.
In March 1997, the Company sold its UK operations to Health Systems
Limited, a new UK based company. Under the terms of the transaction, Health
Systems Limited acquired CITATION's UK operating assets, retained the majority
of the Company's employees in the UK and assumed responsibility for CITATION's
existing customers and contracted commitments in the UK.
The Company markets its products internationally through distribution
alliances in Europe, India, the Far East and Latin America. For example, Health
Systems Limited, who purchased the UK operations, is marketing CITATION products
in the UK and Europe, while Siemens Information Systems, Ltd of India is
marketing these products in India. In addition, the Company has a strategic
relationship with Microstate Separations Pte. Ltd. ("Microstate"), a healthcare
information systems integrator based in Singapore. Microstate has agreed to
purchase the Company's systems for the Indonesian, Malaysian, Hong Kong and
Singapore markets. In Latin America, CITATION has a strategic arrangement with
Laboratories Para Laboratorios.
CITATION Computer Systems, Inc. Page 9
Form 10-KSB for FYE 3/31/97
<PAGE> 10
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 (MDR) guidelines as well.
Additional legislation governing the dissemination of medical record
information has been proposed. The Company is unable to determine at this time
the effect, if any, that these requirements may have on its business.
In addition, the healthcare industry is subject to changing political,
economic and regulatory influences that may affect the procurement practices and
operations of healthcare providers. Many lawmakers have announced that they
intend to propose programs to reform the United States healthcare system. These
programs may contain proposals to increase governmental involvement in
healthcare, lower reimbursement rates and otherwise change the regulatory
environment in which the Company's clients operate. Healthcare providers may
react to these proposals and the uncertainty surrounding such proposals by
curtailing or deferring investments, including those for the Company's
healthcare information systems. Even if healthcare providers do not curtail or
defer investments, they may institute cost containment measures in anticipation
of regulatory reform or for other reasons. These measures may result in greater
selectivity in the allocation of capital funds, which could have a material
adverse effect on the Company's ability to sell its healthcare information
systems and services. The Company cannot predict with any certainty what impact,
if any, such legislative or market-driven reforms might have on its business and
results of operations. There can be no assurance that such proposed changes, if
adopted, would not have a material adverse effect on the Company's business and
results of operations.
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
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
CITATION Computer Systems, Inc. Page 10
Form 10-KSB for FYE 3/31/97
<PAGE> 11
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
CITATION Computer Systems, Inc. Page 11
Form 10-KSB for FYE 3/31/97
<PAGE> 12
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, 1997, the Company employed 134 persons. Of these
employees, 37 were involved in product development, 45 in client services, 28 in
sales and marketing and 24 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.
CITATION Computer Systems, Inc. Page 12
Form 10-KSB for FYE 3/31/97
<PAGE> 13
EXECUTIVE OFFICERS OF COMPANY
The following persons constitute the executive officers and other key
employees of Company. All executive officers are appointed annually at the
organizational meeting of the Company's Board of Directors.
<TABLE>
<CAPTION>
PERSON AGE OFFICE/POSITION HELD
- ------ --- --------------------
<S> <C> <C>
J. Robert Copper 57 Chairman and Chief Executive Officer (since January 1995)
Richard D. Neece 51 Executive Vice President and Chief Financial Officer (since July
1995)
W. Steven Carter 42 Executive Vice President, Services (since August 1996)
Duane A. Fitch 57 Executive Vice President, Domestic Sales (since October 1996)
Russell L. Fortune 49 Executive Vice President, International Sales (since April 1997;
prior to that various sales positions since June 1991)
John Selestak 40 Vice President Marketing (since January 1996)
Patricia Q. Moore 50 Vice President Human Resources (since October 1995)
John P. Gilmore 55 Vice President, Controller and Treasurer (since August 1996;
prior to that Controller since June 1995)
Anton F. Flieg 43 Vice President Product Management, Admin- istrative Suite
(since May 1997; prior to that Director of Sales Operations since
March 1992)
</TABLE>
CITATION Computer Systems, Inc. Page 13
Form 10-KSB for FYE 3/31/97
<PAGE> 14
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal facilities consist of approximately 242,000
square feet are located in Chesterfield, Missouri, a suburb of St. Louis,
occupied under a lease expiring in May, 2004.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any material litigation involving the
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No such matters were submitted during the fourth quarter of Company's
fiscal year ended March 31, 1997.
CITATION Computer Systems, Inc. Page 14
Form 10-KSB for FYE 3/31/97
<PAGE> 15
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company hereby incorporates by reference page 9 of the Company's
Annual Report to Shareholders, dated June 9, 1997.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company hereby incorporates by reference pages 2 through 10,
inclusive, of the Company's Financial Information for the Year Ended March 31,
1997 insert to the Annual Report to Shareholders, dated June 9, 1997.
ITEM 7. FINANCIAL STATEMENTS
The Company hereby incorporates by reference pages 11 through 16
inclusive, of the Company's Financial Information for the Year Ended March 31,
1997 insert to the Annual Report to Shareholders dated June 9, 1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
CITATION Computer Systems, Inc. Page 15
Form 10-KSB for FYE 3/31/97
<PAGE> 16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company hereby incorporates by reference portions of the Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end. Information respecting executive officers is set forth as a part of
Item 1 of this Report.
ITEM 10. EXECUTIVE COMPENSATION
The Company hereby incorporates by reference portions of the Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference portions of Company's
definitive Proxy Statement to be filed within 120 days of Company's fiscal year
end.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference portions of Company's
definitive Proxy Statement to be filed within 120 days of the Company's fiscal
year end.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) Those Exhibits required by Item 601 of Regulation S-B and by
paragraph (a) of Item 13:
-3(a) Restated Articles of Incorporation of the Company;
incorporated by reference to the corresponding Exhibit to the
Company's Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
-3(b) Restated By-laws of the Company; incorporated by reference to
the corresponding Exhibit to the Company's Registration
Statement of Form S-1 of the Company, Registration No.
33-48332
CITATION Computer Systems, Inc. Page 16
Form 10-KSB for FYE 3/31/97
<PAGE> 17
-4(a) Specimen Common Stock Certificate; incorporated by reference
to the corresponding Exhibit to the Company's Registration
Statement on Form S-1 of the Company, Registration No.
33-48332
-4(b) Registration Rights Agreement, dated May 29, 1992, between the
Company and Capital For Business, Inc.; incorporated by
reference to the corresponding Exhibit to the Company's
Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
-4(c) Form of Amendment to Registration Rights Agreement, dated
October 23, 1992, between the Company and Capital For
Business, Inc.; incorporated by reference to Exhibit 4(n) to
the Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992, dated November 13, 1992, as filed by the
Company with the Commission.
-10(a) First Amended Incentive Stock Option Plan; incorporated by
reference to the corresponding Exhibit to the Company's
Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
-10(b) Resolution Amending the First Amended Incentive Stock Option
Plan; incorporated by reference to the corresponding Exhibit
to the Company's Registration Statement on Form S-1 of the
Company, Registration No. 33-48332
-10(c) Amendment to First Amended Incentive Stock Option Plan;
incorporated by reference to the corresponding Exhibit to the
Company's Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
-10(d) 1992 Employee Incentive Stock Option Plan; incorporated by
reference to the corresponding Exhibit to the Company's
Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
-10(y) Software Systems Program Product License, dated October 14,
1992, between Health Micro Data Systems, Inc., and
Presbyterian Healthcare Services; incorporated by
CITATION Computer Systems, Inc. Page 17
Form 10-KSB for FYE 3/31/97
<PAGE> 18
reference to the Company's Form 10-K for the fiscal year ended
March 31, 1993
-10(bb) Line of Credit Note and General Loan and Security Agreement,
dated January 9, 1995, between the Company and Commerce Bank
of St. Louis; incorporated by reference to the Company's Form
10-K for the fiscal year ended March 31, 1996
-10 (dd) Employment Agreement, dated July 25, 1995, among
CITATION Computer Systems, Inc., the Company, and J. Robert
Copper; incorporated by reference to the Company's Form 10-K
for the fiscal year ended March 31, 1996
-10 (ee) Amendment to Line of Credit Note and General Loan and Security
Agreement, dated February 10, 1997, between the Company and
Commerce Bank of St. Louis
-13(a) Annual Report to Shareholders dated June 9, 1997
-22(a) List of Subsidiaries of the Registrant
-24(a) Consent of Price Waterhouse LLP
-27 Financial Data Schedule
-28(a) Report of Independent Accountants on Financial Statement
Schedule
(B) REPORTS ON FORM 8-K.
On March 18, 1997, the Company filed a report on Form 8-K
reporting the sale of assets related to the Company's UK operation. Pro forma
financial statements relating to the transaction were included.
CITATION Computer Systems, Inc. Page 18
Form 10-KSB for FYE 3/31/97
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CITATION Computer Systems, Inc.
By /s/ J. Robert Copper
-------------------------------
J. Robert Copper, Chairman
and Chief Executive Officer
June 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ J. Robert Copper /s/ Fred L. Brown
- ------------------------------------ ---------------------------------
J. Robert Copper, June 25, 1997 Fred L. Brown, June 25, 1997
Director and Chief Executive Officer Director
/s/ Larry D. Marcus /s/ James F. O'Donnell
- ------------------------------------ ---------------------------------
Larry D. Marcus, June 25, 1997 James F. O'Donnell, June 25, 1997
Director Director
/s/ David T. Pieroni /s/ Richard D. Neece
- ------------------------------------ ----------------------------------
David T. Pieroni, June 25, 1997 Richard D. Neece, June 25, 1997
Director Principal Financial Officer and
Principal Accounting Officer
CITATION Computer Systems, Inc. Page 19
Form 10-KSB for FYE 3/31/97
<PAGE> 20
INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
SCHEDULE
NUMBER SCHEDULE
- ------ --------
VIII Valuation and Qualifying Accounts
EXHIBIT
NUMBER EXHIBIT
- ------ -------
3(a) Restated Articles of Incorporation of the Company;
incorporated by reference to the corresponding Exhibit to the
Company's Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
3(b) Restated By-laws of the Company; incorporated by reference to
the corresponding Exhibit to the Company's Registration
Statement of Form S-1 of the Company, Registration No. 33-48332
4(a) Specimen Common Stock Certificate; incorporated by reference
to the corresponding Exhibit to the Company's Registration
Statement on Form S-1 of the Company,
Registration No. 33-48332
4(b) Registration Rights Agreement, dated May 29, 1992,
between the Company and Capital For Business, Inc.;
incorporated by reference to the corresponding Exhibit to
the Company's Registration Statement on Form S-1 of the
Company, Registration No. 33-48332
4(c) Form of Amendment to Registration Rights Agreement, dated
October 23, 1992, between Company and Capital For
Business, Inc.; incorporated by reference to Exhibit 4(n)
to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992, dated November 13, 1992, as
filed by the Company with the Commission.
CITATION Computer Systems, Inc. Page 20
Form 10-KSB for FYE 3/31/97
<PAGE> 21
10(a) First Amended Incentive Stock Option Plan; incorporated by
reference to the corresponding Exhibit to the Company's
Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
10(b) Resolution Amending the First Amended Incentive Stock Option
Plan; incorporated by reference to the corresponding Exhibit
to the Company's Registration Statement on Form S-1 of the
Company, Registration No. 33-48332
10(c) Amendment to First Amended Incentive Stock Option Plan;
incorporated by reference to the corresponding Exhibit to the
Company's Registration Statement on Form S-1 of the
Company, Registration No. 33-48332
10(d) 1992 Employee Incentive Stock Option Plan; incorporated by
reference to the corresponding Exhibit to the Company's
Registration Statement on Form S-1 of the Company,
Registration No. 33-48332
10(y) Software Systems Program Product License, dated October
14, 1992, between Health Micro Data Systems, Inc., and
Presbyterian Healthcare Services; incorporated by
reference to Company's Form 10-K for the fiscal year
ended March 31, 1993
10(bb) Line of Credit Note and General Loan and Security Agreement,
dated January 9, 1995, between the Company and Commerce Bank
of St. Louis; incorporated by reference to the Company's Form
10-K for the fiscal year ended March 31, 1996
10(dd) Employment Agreement, dated July 25, 1995, among CITATION
Computer Systems, Inc., the Company, and J. Robert
Copper; incorporated by reference to the Company's Form
10-K for the fiscal year ended March 31, 1996
CITATION Computer Systems, Inc. Page 21
Form 10-KSB for FYE 3/31/97
<PAGE> 22
10(ee) Amendment to Line of Credit Note and General Loan and Security
Agreement, dated February 10, 1997, between the Company and
Commerce Bank
13(a) Annual Report to Shareholders dated June 9, 1997
22(a) List of Subsidiaries of the Registrant
24(a) Consent of Price Waterhouse LLP
27 Financial Statement Schedule
28(a) Report of Independent Accountants on Financial Statement
Schedule
CITATION Computer Systems, Inc. Page 22
Form 10-KSB for FYE 3/31/97
<PAGE> 23
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS CHARGED OFF PERIOD
----------- --------- -------- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
Year Ended March 31, 1995:
Allowance for Doubtful accounts $110 $106 - $79 $137
Year ended March 31, 1996:
Allowance for Doubtful accounts $137 $74 - $41 $170
Year ended March 31, 1997:
Allowance for Doubtful accounts $170 $40 - $48 $162
</TABLE>
CITATION Computer Systems, Inc.
Form 10-KSB for FYE 3/31/97
<PAGE> 1
EXHIBIT 10(ee)
THIRD AMENDMENT TO GENERAL LOAN AND SECURITY AGREEMENT
This Third Amendment to General Loan and Security Agreement (the
"Amendment") is entered into as of the 10th day of February, 1997, and amends
that certain General Loan and Security Agreement, as amended October 2, 1995,
and August 12, 1996, (the "Agreement"), entered into as of January 9, 1995,
between COMMERCE BANK, NATIONAL ASSOCIATION, (hereinafter called "Commerce")
with a place of business located at 8000 Forsyth Boulevard, St. Louis (Clayton)
Missouri, 63105, and CITATION COMPUTER SYSTEMS, INC., a Missouri corporation,
(hereinafter called "Borrower"), with a place of business at 424 S. Woods Mill
Road, Chesterfield, Missouri 63017.
WHEREAS, Borrower and Commerce desire to amend the Agreement, provide
for a new minimum Tangible Net Worth, increase the maximum amount available
under the Line of Credit Note, and amend the Borrowing Base formula;
The parties agree as follows:
I. AMENDMENTS
1.1 Section 6.19 Tangible Net Worth is hereby amended in its
entirety to read as follows:
Borrower shall maintain at all times a Tangible Net Worth not
less than Seven Million Seven Hundred Thousand Dollars
($7,700,000) to be adjusted annually on the first day of each
fiscal year by adding to the minimum Tangible Net Worth for the
preceding fiscal year an amount equal to 50% of Borrower's Net
Income, if positive, and disregarding any year in which Net
Income is negative.
1.2 Section 6.22 Borrowing Base Certificate is hereby amended by
deleting "For Qualified Receivables: seventy-five percent (75%)" and
substituting in lieu thereof "For Qualified Receivables: Forty percent
(40%)."
1.3 Section 2.1 of the Agreement is hereby amended by striking "One
Million Dollars ($1,000,000)" wherever it appears and substituting in
lieu thereof "Three Million Dollars ($3,000,000), or such other greater
or lesser amount as may agreed upon from time to time by Commerce and
Borrower as evidenced by Line of Credit Notes making reference hereto."
Exhibit "A" is hereby deleted in its entirety and in lieu thereof is
substituted the attached Exhibit "A."
Except as amended hereby, the terms and provisions of the Agreement
shall remain in full force and effect.
<PAGE> 2
II. STATUTORY NOTICE.
Oral agreements or commitments to loan money, extend credit or to
forbear from enforcing repayment of a debt, including promises to extend or
renew such debt, are not enforceable. To protect you (borrower(s)) and us
(creditor) from misunderstanding or disappointment, any agreements we reach
covering such matters are contained in this writing, which is the complete and
exclusive statement of the agreement between us except as we may later agree in
writing to modify it.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first hereinabove written.
CITATION COMPUTER SYSTEMS, INC.
By: /s/ Richard D. Neece
-----------------------------------
Richard D. Neece
Title: Exec. VP & CFO
--------------------------------
COMMERCE BANK, NATIONAL ASSOCIATION
By: /s/ John Thiebold
-----------------------------------
John Thiebold
Title: Exec. V.P.
--------------------------------
<PAGE> 1
EXHIBIT 22(a)
Subsidiaries of Registrant
Health Micro Data Systems, Inc.
CITATION Professional Services, Inc.
Both subsidiaries are wholly-owned by Registrant.
CITATION Computer Systems, Inc.
Form 10-KSB for FYE 3/31/97
<PAGE> 1
Exhibit 24(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 (No.33-85558) of CITATION Computer Systems, Inc. of our
report dated May 7, 1997 which appears on page 28 of the Financial Information
for the Year Ended March 31, 1997 insert of the 1997 Annual Report to
Shareholders of CITATION Computer Systems, Inc., which is incorporated by
reference in this Annual Report on Form 10-KSB for the year ended March 31,
1997. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 30 of this Form 10-KSB.
[SIG]
PRICE WATERHOUSE LLP
St. Louis, Missouri
June 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 511
<SECURITIES> 0
<RECEIVABLES> 7,496
<ALLOWANCES> 162
<INVENTORY> 417
<CURRENT-ASSETS> 10,437
<PP&E> 4,219
<DEPRECIATION> 2,989
<TOTAL-ASSETS> 17,636
<CURRENT-LIABILITIES> 4,987
<BONDS> 0
0
0
<COMMON> 380
<OTHER-SE> 9,429
<TOTAL-LIABILITY-AND-EQUITY> 17,636
<SALES> 12,972
<TOTAL-REVENUES> 22,005
<CGS> 8,337
<TOTAL-COSTS> 10,650
<OTHER-EXPENSES> 16,042
<LOSS-PROVISION> 40
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> (5,280)
<INCOME-TAX> (2,006)
<INCOME-CONTINUING> (3,274)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,274)
<EPS-PRIMARY> (0.87)
<EPS-DILUTED> (0.87)
</TABLE>
<PAGE> 1
Exhibit 28(a)
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
CITATION Computer Systems, Inc.
Our audits of the consolidated financial statements referred to in our report
dated May 7, 1997, appearing on page 28 of the Financial Information for the
Year the Ended March 31, 1997 insert of the 1997 Annual Report to Shareholders
of CITATION Computer Systems, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-KSB)
also included an audit of the Financial Statement Schedule included on page 24
of this Form 10-KSB. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
St. Louis, Missouri
May 7, 1997
