<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, D.C. 20549

                                    FORM 10-Q


[X]      Quarterly Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended June 30, 1999.

                                       or

[ ]      Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from __________________
         to ____________________.

Commission file number 0-27056


                                    HIE, Inc.
                                    ---------
             (Exact name of registrant as specified in its charter)

           Georgia                                            58-2112366
--------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


1850 Parkway Place, Suite 1100, Marietta, Georgia                30067
--------------------------------------------------------------------------------
       (Address of principal executive offices)              (Zip Code)

                                 (770) 423-8450
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                            YES [X]      NO  [ ]

The number of shares outstanding of the Company's Common Stock, $ .01 par value
per share, together with associated preferred stock purchase rights (the "Common
Stock"), as of August 2, 1999 was 25,374,359 shares.

                       Exhibit Index is on Page 17 herein.


                                       1
<PAGE>   2

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
HIE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 JUNE 30,       DECEMBER 31,
                                                                                   1999             1998
                                                                               -----------      ------------
                                                                               (UNAUDITED)
<S>                                                                            <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                       $  2,387         $  3,167
  Trade accounts receivable, less allowance of $796 and $720 at June 30,
    1999 and December 31, 1998, respectively                                        12,314           12,295
  Other current assets                                                               2,209            2,555
                                                                                  --------         --------
    Total current assets                                                            16,910           18,017

Purchased software, net of accumulated amortization of $1,578 and $1,341
  at June 30, 1999 and December 31, 1998, respectively                               1,609            1,946
Capitalized software development costs, net of accumulated amortization
  of $560 and $329 at June 30, 1999 and December 31, 1998, respectively              2,144            1,606
Property and equipment, net of accumulation depreciation of $2,675 and
  $2,194 at June 30, 1999 and December 31, 1998, respectively                        3,028            2,289
Excess of cost over net assets of businesses acquired, less accumulated
  amortization of $2,947 and $2,611 at June 30, 1999 and December 31,
  1998, respectively                                                                 7,223            7,535
Other assets                                                                           112              142
                                                                                  --------         --------
    Total assets                                                                  $ 31,026         $ 31,535
                                                                                  ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current installments of long-term debt and capital lease obligations            $  3,939         $  2,911
  Accounts payable, principally trade                                                2,106            1,276
  Accrued liabilities                                                                1,918            1,718
  Deferred service revenue                                                           4,792            4,690
                                                                                  --------         --------
    Total current liabilities                                                       12,755           10,595
Long-term debt and obligations under capital leases, excluding current
 installments                                                                          392              642
                                                                                  --------         --------
    Total liabilities                                                               13,147           11,237
                                                                                  --------         --------

Shareholders' equity:
  Preferred stock, without par value. Authorized 20,000 shares; designated
    Series A cumulative preferred stock 500 shares; issued none                         --               --
  Common stock, $.01 par value. Authorized 50,000 shares; issued and
    outstanding 25,343 and 24,972 shares at June 30, 1999 and December 31,
    1998, respectively                                                                 253              250
  Additional paid-in capital                                                        41,899           41,301
  Accumulated deficit                                                              (24,273)         (21,253)
                                                                                  --------         --------
Shareholders' equity                                                                17,879           20,298
                                                                                  --------         --------
    Total liabilities and shareholders' equity                                    $ 31,026         $ 31,535
                                                                                  ========         ========
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.


                                       2
<PAGE>   3




HIE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,            SIX MONTHS ENDED JUNE 30,
                                            ---------------------------           ---------------------------
                                              1999               1998               1999               1998
                                            --------           --------           --------           --------
<S>                                         <C>                <C>                <C>                <C>
Revenue:
 Software                                   $  1,187           $  2,954           $  2,173           $  4,933
 Services and other                            5,163              3,631              9,422              6,853
                                            --------           --------           --------           --------
    Total revenue                              6,350              6,585             11,595             11,786
                                            --------           --------           --------           --------

Cost of revenue:
 Software                                        307                257                558                479
 Services and other                            2,758              1,652              5,052              3,217
                                            --------           --------           --------           --------
    Total cost of revenue                      3,065              1,909              5,610              3,696
                                            --------           --------           --------           --------

Gross profit                                   3,285              4,676              5,985              8,090
                                            --------           --------           --------           --------

Operating expenses:
 Sales and marketing                           1,812              1,627              3,559              3,048
 Research and development                      1,147                950              2,128              1,918
 General and administrative                    1,495              1,448              3,134              2,679
 Merger costs                                     --                993                 --                993
                                            --------           --------           --------           --------
    Total operating expenses                   4,454              5,018              8,821              8,638
                                            --------           --------           --------           --------

Operating loss                                (1,169)              (342)            (2,836)              (548)
Interest income (expense), net                   (83)               (31)              (184)               (38)
                                            --------           --------           --------           --------

Loss before income taxes                      (1,252)              (373)            (3,020)              (586)

Income tax expense                                --                 --                 --               (144)
                                            --------           --------           --------           --------

Net loss                                    $ (1,252)          $   (373)          $ (3,020)          $   (730)
                                            ========           ========           ========           ========

Shares used in the calculation of
 net loss per share                           25,326             23,767             25,274             23,697
                                            ========           ========           ========           ========

Net loss per share of common stock          $  (0.05)          $  (0.02)          $  (0.12)          $  (0.03)
                                            ========           ========           ========           ========
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.




                                       3

<PAGE>   4


HIE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED
                                                                                    JUNE 30,
                                                                           -------------------------
                                                                             1999              1998
                                                                           -------           -------

<S>                                                                        <C>               <C>
Cash flows from operating activities:
  Net loss                                                                 $(3,020)          $  (730)
  Adjustments to reconcile net loss to net cash used in operating
    activities:
     Merger costs                                                               --               406
     Provision for doubtful accounts                                           150               (56)
     Depreciation and amortization                                           1,285             1,118
     Compensation related to stock options, net                                 --                66
     Increase in trade accounts receivable                                    (169)           (3,109)
     Decrease (increase) in other current assets                               346               (59)
     Increase in trade accounts payable                                        980               442
     Increase (decrease) in accrued liabilities                                200              (491)
     Increase in deferred revenue                                              102               592
                                                                           -------           -------
       Net cash used in operating activities                                  (126)           (1,821)
                                                                           -------           -------

Cash flows from investing activities:
  Purchased software                                                           (50)             (301)
  Capitalized software development costs                                      (769)             (713)
  Capital expenditures                                                      (1,220)             (159)
  Change in other non-current assets and liabilities, net                        6               (34)
                                                                           -------           -------
       Net cash used in investing activities                                (2,033)           (1,207)
                                                                           -------           -------

Cash flows from financing activities:
  Principal payments on long-term debt, net                                   (222)               --
  Net borrowings (repayments) under line of credit                           1,000            (2,996)
  Proceeds from issuances of common stock                                      601               308
                                                                           -------           -------
       Net cash provided by (used in) financing activities                   1,379            (2,688)
                                                                           -------           -------

Net decrease in cash and cash equivalents                                     (780)           (5,716)

Cash and cash equivalents at beginning of period                             3,167             7,777
                                                                           -------           -------

Cash and cash equivalents at end of period                                 $ 2,387           $ 2,061
                                                                           =======           =======

Supplemental disclosures of cash paid for:
  Interest                                                                 $   184           $    38
                                                                           =======           =======
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.



                                       4

<PAGE>   5


HIE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)


1.       Accounting Policies

         The Condensed Consolidated Financial Statements as of June 30, 1999 and
         for the three months and six months ended June 30, 1999 are unaudited.
         In the opinion of management, all adjustments consisting of normal
         recurring accruals, necessary for the fair presentation of the
         consolidated financial position and results of operations and cash
         flows for the periods presented have been included. Results for the
         interim periods are not necessarily indicative of results that may be
         expected for the full year. The condensed consolidated financial
         statements include the accounts of HIE, Inc. and subsidiaries (the
         "Company").

         These Condensed Consolidated Financial Statements should be read in
         conjunction with the Company's consolidated financial statements and
         notes included in the Annual Report on Form 10-K for the year ended
         December 31, 1998 filed with the Securities and Exchange Commission.

         The accounting policies followed in the presentation of interim
         financial results are the same as those followed on an annual basis.
         These policies are presented in Note 1 to the consolidated financial
         statements included in the Company's Annual Report on Form 10-K for the
         year ended December 31, 1998. All significant intercompany accounts and
         transactions have been eliminated. Certain prior year amounts have been
         reclassified to conform to current year classifications.

         On January 1, 1998, the Company adopted Statement of Financial
         Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
         130"). SFAS 130 establishes standards for reporting and presentation of
         comprehensive income and its components in a full set of financial
         statements. The Company has no "other comprehensive income" to report
         for the six months ended June 30, 1999 and 1998.

2.       Debt

         In August 1998, the Company entered into a $5.0 million line of credit
         (the "Credit Facility") with Silicon Valley Bank (the "Bank") of which
         $4.0 million was available for borrowing under the borrowing under the
         borrowing base limitation at June 30, 1999. The Credit Facility was for
         a one-year term, with borrowings bearing interest at the Bank's prime
         rate plus 1% (subsequently increased to the Bank's prime rate plus
         1.5%). The balance outstanding under the Credit Facility was $3.5
         million on June 30, 1999.

         At June 30, 1999, the Company was in default of two of the line of
         credit financial covenants under the Credit Facility: (1) quarterly
         profitability; and (2) the minimum Quick Ratio, defined therein.
         Subsequent to June 30, 1999, the Company and the Bank amended the
         Credit Facility whereby the Bank waived the defaults, the interest rate
         was increased by 0.5% and extended the term of the Credit Facility to
         September 30, 1999. The Company will be required to meet certain
         covenants under the agreement, including but not limited to (1) certain
         monthly financial ratios (2) quarterly profit and loss covenants. The
         line of credit is secured by the Company's intellectual property.

3.       Shareholders' Equity

         On December 31, 1997, HIE issued warrants to purchase 50,000 shares of
         HIE common stock, at $1.59 per share, and 41,600 shares of HIE common
         stock to The Southern Venture Fund II, L.P. ("SVFII") (Massey Burch) in
         exchange for 50% equity ownership interest in Criterian Health
         Strategies, Inc. ("CHS"). In January 1999, SVFII exercised the warrants
         to purchase 41,600 shares of HIE Common Stock.

4.       Segment Information

         The Company's reportable segments are strategic business units that
         offer different products and services.


                                       5
<PAGE>   6

HIE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
(UNAUDITED)


         During 1998, the Company operated in two segments: (i) the licensing of
         integration software products and performance of related integration
         services ("Software") and (ii) the providing of consulting services
         related to information systems integration for healthcare organizations
         ("Consulting"). Prior to 1998, the Consulting business did not
         separately exist. On December 31, 1998, the Consulting business was
         sold (see note 3 of the Company's 1998 Annual Report filed on Form 10-K
         with the Securities and Exchange Commission). The Company evaluates
         performance of the segments based on revenues and operating earnings
         (loss) of the segments. Segment information for the three and six
         months ended June 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Three Months       Six Months
                                                      Ended             Ended
                                                 June 30, 1998      June 30, 1998
                                                 --------------     -------------
                                                           (Unaudited)
               <S>                               <C>               <C>
               Revenue:
                 Software                          $ 5,645           $  9,871
                 Consulting                            940              1,915
                                                   -------           --------
                   Total revenue                   $ 6,585           $ 11,786
                                                   =======           ========

               Operating earnings (loss):
                 Software                          $  (364)          $   (961)
                 Consulting                             22                413
                                                   -------           --------
                   Operating loss                  $  (342)          $   (548)
                                                   =======           ========
</TABLE>




6.       Major Customer

         One distributor accounted for 11% of the Company's total revenue for
         the three months ended June 30, 1999. Revenue from international sales
         was approximately 15% and 16% of the Company's total revenue for the
         three months and six months ended June 30, 1999, respectively.


                                       6
<PAGE>   7





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

         This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions are intended to identify such
forward-looking statements; however, this Report also contains other
forward-looking statements in addition to historical information. Actual results
may differ materially from those indicated in the forward-looking statements;
accordingly, there can be no assurance that such indicated results will be
realized. Among the important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are the
factors set forth in "Item 1. Business -- Factors That May Affect Future
Performance" in the Company's 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the "Commission"). By making these
forward-looking statements, the Company does not undertake to update them in any
manner except as may be required by its disclosure obligations in filings it
makes with the Commission under the Federal securities laws.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated (1) the Company's total
revenue and (2) unless otherwise indicated, the percentage of total revenue for
each component included in the Company's Condensed Consolidated Statements of
Operations:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED           SIX MONTHS ENDED
                                                               JUNE 30,                    JUNE 30,
                                                         -------------------        --------------------
                                                          1999         1998           1999         1998
                                                         ------       ------        -------      -------
                                                                           (UNAUDITED)

<S>                                                      <C>          <C>           <C>          <C>
Total HIE revenue (in thousands)                         $6,350       $6,585        $11,595      $11,786
                                                         ======       ======        =======      =======

Revenue:
  Software                                                   19%          45%            19%          42%
  Services and other                                         81%          55%            81%          58%
                                                         ------       ------        -------      -------
Total revenue                                               100%         100%           100%         100%

Cost of revenue:
  Software (as a percentage of software revenue)             26%           9%            26%          10%
  Services and other (as a percentage of
    services and other revenue)                              53%          45%            54%          47%
Total cost of revenue                                        48%          29%            48%          31%
                                                         ------       ------        -------      -------

Gross profit                                                 52%          71%            52%          68%
                                                         ------       ------        -------      -------

Operating expenses:
  Sales and marketing                                        29%          25%            31%          26%
  Research and development                                   18%          14%            18%          16%
  General and administrative                                 23%          22%            27%          23%
  Merger costs                                                0%          15%             0%           8%
                                                         ------       ------        -------      -------
Total operating expenses                                     70%          76%            76%          73%

Operating loss                                              (18)%         (5)%          (24)%         (5)%

Interest expense, net                                        (2)%         (1)%           (2)%         (0)%
                                                         ------       ------        -------      -------

Loss before income taxes                                    (20)%         (6)%          (26)%         (5)%

Income tax expense                                            0%           0%             0%          (1)%
                                                         ------       ------        -------      -------

Net loss                                                    (20)%         (6)%          (26)%         (6)%
                                                         ======       ======        =======      =======
</TABLE>




                                       7
<PAGE>   8




COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 AND 1998

REVENUE. Revenue decreased 4% to $6.4 million for the three months ended June
30, 1999 from $6.6 million for the three months ended June 30, 1998. The
Company experienced a decrease in software revenue, which was partially offset
by an increase in services and other revenue.

         Software. Software revenue decreased 60% to $1.2 million for the three
months ended June 30, 1999 from $3.0 million for the three months ended June 30,
1998. As a percentage of total revenue, software revenue decreased to 19% in the
three months ended June 30, 1999 from 45% for the three months ended June 30,
1998. Management believes that the dollar decrease in software revenue was
attributable to the impact of the Year 2000 issue as customers or potential
customers expend significant resources to correct or update their current system
for Year 2000 compliance and delay purchases of new software until after the
Year 2000 due to limited budgets or in order to avoid implementing a formal Year
2000 compliance program with respect to the new software. In addition, the
Company experienced a decline in direct sales to end-users in the three months
ended June 30, 1999 compared to the three months ended June 30, 1998. The
decrease in software revenue as a percentage of total revenue resulted from the
decrease in software revenue previously discussed and the increase in service
revenue discussed below.

         Services and other. Services and other revenue increased 42% to $5.2
million for the three months ended June 30, 1999 from $3.6 million for the three
months ended June 30, 1998. Services and other revenue as a percentage of total
revenue increased to 81% for the three months ended June 30, 1999 from 55% for
the three months ended June 30, 1998. The dollar increase in services and other
revenue was primarily due to an increase in the sale and completion of projects.
The increase in services and other revenue as a percentage of total revenue
resulted primarily from the decrease in software revenue.

COST OF REVENUE. Total cost of revenue increased 61% to $3.1 million for the
three months ended June 30, 1999 from $1.9 million for the three months ended
June 30, 1998.

         Software. Cost of software revenue increased 19% to $307,000 for the
three months ended June 30, 1999 from $257,000 for the three months ended June
30, 1998. As a percentage of software revenue, cost of software revenue
increased to 26% for the three months ended June 30, 1999 from 9% for the three
months ended June 30, 1998. Cost of software increased due to an increase in
amortization of capitalized software for the three months ended June 30, 1999
compared to June 30, 1998. The increase in cost of software as a percentage of
software revenue was a result of decreased software sales and the increase in
amortization of capitalized software during the three months ended June 30, 1999
compared to June 30, 1998, as previously discussed.

         Services and other. Cost of services and other revenue increased 67% to
$2.8 million for the three months ended June 30, 1999 from $1.7 million for the
three months ended June 30, 1998. As a percentage of services and other revenue,
cost of services and other revenue increased to 53% for the three months ended
June 30, 1999 from 45% for the three months ended June 30, 1998. The dollar
increase in cost of services and other revenue was attributable to an increase
in personnel needed to complete service projects. The increase in cost of
services and other revenue as a percentage of services and other revenue was
primarily attributable to an increase in service personnel and the related
startup time to train and educate new staff.

OPERATING EXPENSES:

         Sales and marketing. Sales and marketing expense increased 11% to $1.8
million for the three months ended June 30, 1999 from $1.6 million for the three
months ended June 30, 1998. Sales and marketing expense as a percentage of total
revenue increased to 29% for the three months ended June 30, 1999 from 25% for
the three months ended June 30, 1998. The dollar increase in sales and marketing
expense was primarily due to the addition of sales personnel to market solutions
developed for new vertical markets other than the healthcare market. The
increase in sales and marketing expense as a percentage of total revenue was
primarily attributable the addition of sales personnel, discussed above, and to
a decrease in software sales for the three months ended June 30, 1999.

         Research and development. Research and development expense increased
21% to $1.1 million for the three months ended June 30, 1999 from $1.0 million
for the three months ended June 30, 1998. Research and



                                       8
<PAGE>   9

development expense as a percentage of total revenue increased to 18% for the
three months ended June 30, 1999 from 14% for the three months ended June 30,
1998. Research and development expense increased due to an increase in
development costs for solutions in vertical markets other than the healthcare
market.

         General and administrative. General and administrative expense
increased 3% to $1.5 million for the three months ended June 30, 1999. General
and administrative expense as a percentage of revenue increased to 23% for the
three months ended June 30, 1999 from 22% for the three months ended June 30,
1998. The increase in general and administrative expense as a percentage of
total revenue was primarily due to the decrease in software sales for the three
months ended June 30, 1999.

INTEREST INCOME (EXPENSE), NET. Net interest expense increased $52,000 to
$83,000 for the three months ended June 30, 1999 from $31,000 for the three
months ended June 30, 1998. The increase in interest expense resulted from a
higher line of credit balance during the three months ended June 30, 1999.

INCOME TAX (EXPENSE) BENEFIT. The Company did not record any income tax benefit
for the three months ended June 30, 1999.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND 1998

REVENUE. Revenue decreased 2% to $11.6 million for the six months ended June 30,
1999 from $11.8 million for the six months ended June 30, 1998. The Company
experienced a decrease in software revenue, which was partially offset by an
increase in services and other revenue.

         Software. Software revenue decreased 56% to $2.2 million for the six
months ended June 30, 1999 from $4.9 million for the six months ended June 30,
1998. As a percentage of total revenue, software revenue decreased to 19% in the
six months ended June 30, 1999 from 42% for the six months ended June 30, 1998.
Management believes that the dollar decrease in software revenue was
attributable to the impact of the Year 2000 issue as customers or potential
customers expend significant resources to correct or update their current system
for Year 2000 compliance and delay purchases of new software until after the
Year 2000 due to limited budgets or in order to avoid implementing a formal Year
2000 compliance program with respect to the new software. In addition, the
Company experienced a decline in direct sales to end-users in the six months
ended June 30, 1999 compared to the six months ended June 30, 1998. The decrease
in software revenue as a percentage of total revenue resulted from the decrease
in software revenue previously discussed and the increase in service revenue
discussed below.

         Services and other. Services and other revenue increased 37% to $9.4
million for the six months ended June 30, 1999 from $6.9 million for the six
months ended June 30, 1998. Services and other revenue as a percentage of total
revenue increased to 81% for the six months ended June 30, 1999 from 58% for the
six months ended June 30, 1998. The dollar increase in services and other
revenue was primarily due to an increase in the sale and completion of projects.
The increase in services and other revenue as a percentage of total revenue
resulted primarily from the decrease in software revenue.

COST OF REVENUE. Total cost of revenue increased 52% to $5.6 million for the six
months ended June 30, 1999 from $3.7 million for the six months ended June 30,
1998.

         Software. Cost of software revenue increased 16% to $558,000 for the
six months ended June 30, 1999 from $479,000 for the six months ended June 30,
1998. As a percentage of software revenue, cost of software revenue increased to
26% for the six months ended June 30, 1999 from 10% for the six months ended
June 30, 1998. Cost of software increased due to an increase in amortization of
capitalized software for the six months ended June 30, 1999 compared to the six
months ended June 30, 1998. The increase in cost of software as a percentage of
software revenue was a result of decreased software sales and the increase in
amortization of capitalized software during the six months ended June 30, 1999
compared to the six months ended June 30, 1998 previously discussed.

         Services and other. Cost of services and other revenue increased 57% to
$5.1 million for the six months ended June 30, 1999 from $3.2 million for the
six months ended June 30, 1998. As a percentage of services and other revenue,
cost of services and other revenue increased to 54% for the six months ended
June 30, 1999 from



                                       9
<PAGE>   10

47% for the six months ended June 30, 1998. The dollar increase in cost of
services and other revenue was attributable to an increase in personnel needed
to complete service projects. The increase in cost of services and other revenue
as a percentage of services and other revenue was primarily attributable to an
increase in service personnel and the related startup time to train and educate
new staff.

OPERATING EXPENSES:

         Sales and marketing. Sales and marketing expense increased 17% to $3.6
million for the six months ended June 30, 1999 from $3.0 million for the six
months ended June 30, 1998. Sales and marketing expense as a percentage of total
revenue increased to 31% for the six months ended June 30, 1999 from 26% for the
six months ended June 30, 1998. The dollar increase in sales and marketing
expense was primarily due to the addition of sales personnel to market solutions
developed for new vertical markets other than the healthcare market. The
increase in sales and marketing expense as a percentage of total revenue was
primarily attributable the addition of sales personnel, discussed above, and to
a decrease in software sales for the six months ended June 30, 1999.

         Research and development. Research and development expense increased
11% to $2.1 million for the six months ended June 30, 1999 from $1.9 million for
the six months ended June 30, 1998. Research and development expense as a
percentage of total revenue increased to 18% for the six months ended June 30,
1999 from 16% for the six months ended June 30, 1998. Research and development
expense increased due to an increase in development costs for solutions in
vertical markets other than the healthcare market.

         General and administrative. General and administrative expense
increased 17% to $3.1 million for the six months ended June 30, 1999 from $2.7
million for the six months ended June 30, 1998. General and administrative
expense as a percentage of total revenue increased to 27% for the six months
ended June 30, 1999 from 23% for the six months ended June 30, 1998. The
increase in general and administrative expense as a percentage of total revenue
was primarily due to the decrease in software sales for the six months ended
June 30, 1999.

INTEREST INCOME (EXPENSE), NET. Net interest expense increased $146,000 to
$184,000 for the six months ended June 30, 1999 from $38,000 for the six months
ended June 30, 1998. The increase in interest expense resulted from a higher
line of credit balance during the six months ended June 30, 1999.

INCOME TAX (EXPENSE) BENEFIT. The Company did not record any income tax benefit
for the six months ended June 30, 1999. Income tax expense of $144,000 was
recognized for the six months ended June 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had working capital of $4.2 million at June 30, 1999
compared to $7.4 million at December 31, 1998. The working capital decrease was
primarily attributable to operating losses, purchases of computer equipment and
furniture and investment in internally developed software during the six months
ended June 30, 1999.

         Net cash used in operating activities totaled $126,000 for the six
months ended June 30, 1999 compared to net cash used of $1.8 million for the
six months ended June 30, 1998. The cash used in operating activities was
primarily a result of operating losses offset by a decrease in other current
assets and an increase in accounts payable.

         Net cash used in investing activities was $2.0 million for the six
months ended June 30, 1999 compared to net cash used in investing activities of
$1.2 million for the six months ended June 30, 1998. This increase of $826,000
was due to expenditures for computer equipment and furniture due to the addition
of client services personnel.

         Net cash provided by financing activities was $1.4 million for the six
months ended June 30, 1999 compared to net cash used in financing activities of
$2.7 million for the six months ended June 30, 1998. Net cash provided by
financing activities resulted from additional borrowings under the Company's
line of credit and



                                       10
<PAGE>   11

exercises of stock options and warrants during the six months ended June 30,
1999. Net cash used in financing activities for the six months ended June 30,
1998 was primarily due to repayments on the line of credit.

         In August 1998, the Company entered into a $5.0 million line of credit
(the "Credit Facility") with Silicon Valley Bank (the "Bank") of which $4.0
million was available for borrowing under the borrowing base limitation at June
30, 1999. The Credit Facility was for a one-year term, with borrowings bearing
interest at the Bank's prime rate plus 1% (subsequently increased to the Bank's
prime rate plus 1.5%), and secured by the Company's intellectual property. The
balance outstanding under the Credit Facility was $3.5 million on June 30, 1999.

         At June 30, 1999, the Company was in default of two of the line of
credit financial covenants under the Credit Facility: (1) quarterly
profitability; and (2) the minimum Quick Ratio, defined therein. Subsequent to
June 30, 1999, the Company and the Bank amended the Credit Facility whereby the
Bank waived the defaults, the interest rate was increased by 0.5%, and the term
of the Credit Facility was extended to September 30, 1999. The Company will be
required to meet certain covenants under the agreement, including but not
limited to (1) certain monthly and quarterly financial ratios and (2) quarterly
profit and loss covenants. The Company is currently working with the Bank to
secure a longer-term financing agreement. There are no assurances that the
Company will be able to successfully negotiate a longer-term agreement with the
Bank or that the Company will otherwise be able to replace the Credit Facility
with a similar credit facility from another lender. If the Company is required
to repay all amounts due under the Credit Facility, it would severely impact the
Company's cash and working capital requirements.

         As noted above, during the first half of 1999, the Company has
experienced a reduction in anticipated software revenue that has adversely
affected the Company's current results of operations and liquidity. The Company
has implemented cost control measures and cost and personnel reductions in its
efforts to increase liquidity and strengthen its financial position. In
addition, the Company plans to focus its commercial efforts on banking and
finance which it expects will result in more effective use of the Company's
resources and position the Company to achieve better results in that part of its
business. Management is exploring strategic opportunities to maximize
shareholder value and strengthen the Company's capital position. This effort
could result in the raising of additional capital through the issuance of debt
or equity securities, strategic alliances, business combinations, refinancings
or some combination thereof. In this respect, the Company is currently pursuing
additional financing to fund working capital needs, potential future losses and
for capital expenditures. However, there can be no assurance that the Company
will be successful in its attempt to strengthen its liquidity position.

         Based on the Company's business plan and business model projections,
the Company believes that currently available cash, anticipated cash flow from
operating activities, especially the collection of accounts receivable, and cash
available from the line of credit mentioned above (assuming longer-term
financing is secured), will be sufficient to meet the Company's capital
requirements for at least the next twelve months and the foreseeable future.

YEAR 2000

         The Year 2000 issue refers generally to the data structure and
processing problem that may prevent systems from properly processing
date-sensitive information when the year changes to 2000. The Year 2000 issue
affects IT systems, such as computer programs and various types of electronic
equipment that process date information by using only two digits rather than
four digits to define the applicable year, and thus may recognize a date using
"00" as the year 1900 rather than the year 2000. The issue also affects some
non-IT systems, such as devices which rely on a microcontroller to process date
information. The Year 2000 issue could disrupt a company's operations by
generating erroneous data or causing system failures or miscalculations.



                                       11
<PAGE>   12

State of Readiness

         HIE has formed a Year 2000 task force which has systematically
evaluated all existing systems, products and key external relationships to
ascertain material Year 2000 issues and solutions. HIE's Year 2000 readiness
program has two phases: (1) assessment and (2) remediation (including
modification, upgrading, replacement and validation by third parties). HIE's
Year 2000 readiness program is an ongoing process involving continual evaluation
and may be subject to change in response to new developments.

         HIE's products and services. HIE has completed the process of assessing
the Year 2000 readiness of all products available currently or previously sold
to customers and distributors. HIE is on schedule to begin the remediation phase
of the project.

         Although HIE does not generally warrant the Year 2000 readiness of its
products, it has disclosed to its customers and distributors that its products
are "Year 2000 ready." HIE has defined "Year 2000 ready" as the ability for a
product component to initialize and operate normally on and after January 1,
2000; and, where applicable, the ability to correctly manipulate, display, store
and exchange with other components of its system all dates, either prior,
during, or after January 1, 2000. However, HIE's products are configurable and
programmable by end users, and Year 2000 problems relating to re-configurations
and programming extensions to HIE's base product generated by an end user cannot
be anticipated by HIE.

         HIE also markets its products and services as a solution for addressing
the Year 2000 problem. As part of its Year 2000 risk assessment services, HIE
executes an application that browses all Cloverleaf site configuration files and
provides a listing of the date fields that are at risk and where the fields are
integrated within the Cloverleaf system. After executing its Year 2000 risk
assessment application, HIE provides the customer with a written report
describing the location of these at risk fields and the application interface
that is affected.

         HIE attempts to limit by contract, both with its customers and with the
parties that license technology to HIE, its liability for damages arising in
rendering its products and services. Despite this precaution, there can be no
assurance that the limitations of liabilities set forth in its contracts would
be enforceable or would otherwise protect HIE from liability for damages. In
addition, HIE's products are generally integrated into enterprise systems
involving sophisticated hardware and complex software products that HIE cannot
adequately evaluate for Year 2000 problems. HIE may face claims based on Year
2000 problems in other companies' products, or issues arising from the
integration of multiple products within an overall system.

         Internal IT and non-IT systems. HIE continues to implement new software
for its accounting, internal network and timekeeping functions in order to
consolidate various systems under its new strategic direction and integrate
HUBLink's operations. Representations made by software vendors for these new
systems, including Year 2000 readiness, will be validated at the completion of
that implementation, which is expected by October 1, 1999. Non-IT systems, such
as telecommunications systems, as well as existing IT systems have been assessed
and are currently in remediation.

         Other third parties. HIE has surveyed with a questionnaire material
vendors and suppliers of systems used by HIE for internal IT and research and
development in order to determine the extent to which HIE is vulnerable to any
failure by such material third parties to remediate their respective Year 2000
problems and resolve such problems to the extent practicable. HIE has completed
the assessment and is starting to take the necessary remediation actions,
including changing to vendors who are Year 2000 compliant or installing internal
IT systems, to minimize the Year 2000 non-compliance risk with respect to third
parties. HIE has not conducted a Year 2000 survey of the distributors and
financial institutions with whom it has material relationships.

Year 2000 Costs and Contingency Plans

         To date, HIE has not incurred any material costs directly associated
with its Year 2000 readiness efforts nor accelerated the replacement of any
system due to Year 2000 issues. HIE does not anticipate that it will incur
either significant operating expenses or significant capital expenditures to
address Year 2000 issues with respect to its



                                       12
<PAGE>   13

internal systems and the software products and services that it markets.

         In view of HIE's Year 2000 assessment and remediation efforts to date,
and the limited activities that remain to be completed, HIE's contingency plans
consist of plans to re-route phone calls, manual accounting and restoring
working systems with backup files. HIE is in the final stages of development of
these contingency plans, which are expected to be completed by October 1, 1999.

Risks of Year 2000 Issues

         In light of its compliance efforts, HIE does not believe that the Year
2000 issue will materially adversely affect its operations or results of
operations, and does not expect implementation to have a material impact on
HIE's consolidated financial statements. However, there can be no assurance that
HIE's systems will be Year 2000 compliant prior to December 31, 1999, or that
the failure of any such system will not have a material adverse effect on HIE's
business, results of operations and financial condition. In addition, to the
extent the Year 2000 problem has a material adverse effect on the business,
operations or financial condition of third parties with whom HIE has material
relationships, such as customers, distributors, vendors, suppliers and financial
institutions, the Year 2000 problem could have a material adverse effect on
HIE's business, results of operations and financial condition.

         Although HIE has not been a party to any litigation or arbitration
proceeding involving its products or services related to Year 2000 issues, HIE
may in the future be required to defend its products or services in such
proceedings or to negotiate resolutions of claims based on Year 2000 issues. The
costs of defending and resolving Year 2000-related disputes, regardless of the
merits of such disputes, and any liability HIE may have for Year 2000-related
damages, including consequential damages, could materially adversely affect its
business, results of operations and financial condition. There also can be no
assurance that HIE will be able to obtain or maintain insurance coverage for
such liabilities, that such coverage will continue to be available on acceptable
terms, or that such coverage will be available in amounts to cover one or more
large claims. The assertion of claims against HIE that exceed available
insurance coverage or changes in HIE's insurance policies, including premium
increases or the imposition of large deductible or co-insurance requirements,
could have a material adverse effect on HIE's business, financial condition and
results of operations.

         The above Year 2000 discussion contains forward-looking statements
reflecting management's current assessment and estimates with respect to HIE's
Year 2000 readiness efforts and the impact of Year 2000 issues on HIE's
business, financial condition and results of operations. Various factors, many
of which are beyond the control of HIE, could cause actual plans and results to
differ materially from those contemplated by such assessments, estimates and
forward-looking statements. Some of these factors include, but are not limited
to, the accuracy of the Year 2000 assurances, disclosures or representations by
HIE's customers, distributors, vendors, suppliers, financial institutions and
other third parties with whom it has material relationships, availability of
qualified personnel and other IT resources and any actions of third parties with
respect to Year 2000 problems.

RECENT ACCOUNTING PRONOUNCEMENT

         In December 1998, the AICPA issued Statement of Position No. 98-9 ("SOP
98-9"), Modification of SOP No. 97-2, Software Revenue Recognition, with Respect
to Certain Transactions. This SOP amends SOP 97-2 to, among other matters,
require recognition of revenue using the "residual method" in circumstances
outlined in the SOP. Under the residual method, revenue is recognized as
follows: (1) the total fair value of undelivered elements, as indicated by
vendor-specific objective evidence, is deferred and subsequently recognized in
accordance with the relevant sections of SOP 97-2 and (2) the difference between
the total arrangement fee and the amount deferred for the undelivered elements
is recognized as revenue related to the delivered elements. SOP 98-9 is
effective for fiscal years beginning after March 15, 1999. The Company does not
believe that the adoption of SOP 98-9 will have a material effect on its revenue
recognition.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

         The Company currently maintains all cash in United States dollars in
highly liquid, interest-bearing,



                                       13
<PAGE>   14

investment-grade instruments with maturities of less than three months, which
the Company considers cash equivalents; therefore the Company has no "market
risk sensitive investments."

         The Company's line of credit agreement provides for borrowings that
bear interest at variable rates based on the Bank's prime rate. At June 30,
1999, the Company had $3.5 million outstanding pursuant to the line of credit.
The Company believes that the effect, if any, of reasonably possible near-term
changes in interest rates on the Company's financial position, results of
operations, and cash flows should not be material.




















                                       14
<PAGE>   15


         PART II - OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders.

         The Company's annual meeting of shareholders was held on May 17, 1999.
         At the annual meeting, the Company's shareholders voted on (1) the
         election of five Directors, (2) the amendment and restatement of the
         HIE Stock Option Plan I, (3) the amendment and restatement of the HIE
         Non-Employee Director Stock Option Plan and (4) the amendment and
         restatement of the HIE Employee Stock Purchase Plan. The results of the
         voting were as follows:

         (1) Election of Five Directors

<TABLE>
<CAPTION>
                                                          FOR           VOTE WITHHELD
                                                      ----------        -------------
               <S>                                    <C>               <C>
               Class I Directors
               William J. Gresham, Jr.                19,934,148          579,300
               Charles R. Hatcher, Jr., M.D.          19,932,448          581,000
               Donald W. Weber                        19,930,548          582,900

               Class II Director
               Scott A. Jones                         19,926,348          587,100

               Class III Director
               Mark D. Shary                          19,895,283          618,165
</TABLE>


(2) Amendment and Restatement of the HIE Stock Option Plan I
<TABLE>
<CAPTION>
                 VOTE FOR                        VOTE AGAINST                      VOTE ABSTAIN
      ------------------------------    ------------------------------    -------------------------------
      <S>                               <C>                               <C>
                         18,398,608                         1,930,476                            184,364
</TABLE>

(3) Amendment and Restatement of the HIE Director Stock Option Plan
<TABLE>
<CAPTION>
                 VOTE FOR                        VOTE AGAINST                      VOTE ABSTAIN
      ------------------------------    ------------------------------    -------------------------------
      <S>                               <C>                               <C>
                         18,287,405                         2,043,624                            182,419
</TABLE>

(4) Amendment and Restatement of the HIE Employee Stock Purchase Plan
<TABLE>
<CAPTION>
                 VOTE FOR                        VOTE AGAINST                      VOTE ABSTAIN
      ------------------------------    ------------------------------    -------------------------------
      <S>                               <C>                               <C>
                         19,283,202                         1,054,882                            175,364
</TABLE>

         The directors who were not elected at the 1999 annual meeting and whose
         term of office as a director continued after the meeting are Joseph G.
         Bleser, J. Terry Dewberry, Carl E. Sanders, John W. Lawless, Robert I.
         Murrie and Parker H. Petit.

Item 6.  Exhibits and Reports on Form 8-K.

         (a)   Exhibits

<TABLE>
<CAPTION>
               Exhibit No.    Description
               -----------    -----------
               <S>            <C>
               10             HIE, Inc. Non-Employee Director Stock Option Plan.
               11             Statements of Computation of Per Share Loss.
               27             Financial Data Schedule (for SEC use only).
</TABLE>

         (b)   Reports on Form 8-K

               During the quarter ended June 30, 1999, the Company did not file
any reports on Form 8-K.




                                       15
<PAGE>   16


                                   SIGNATURES

      Pursuant to the requirements 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.


                                          HIE, Inc.

August 13, 1999                           By: /s/ Joseph A. Blankenship
                                              ----------------------------------
                                              Joseph A. Blankenship
                                              Senior Vice President - Chief
                                              Financial Officer, Treasurer and
                                              Secretary (duly authorized officer
                                              and principal accounting officer)






























                                       16
<PAGE>   17


EXHIBIT INDEX

<TABLE>
<CAPTION>
        Exhibit No.       Description
        -----------       -----------

        <S>               <C>
        10                HIE, Inc. Non-Employee Director Stock Option Plan.

        11                Statements of Computation of Per Share Loss.

        27                Financial Data Schedule (for SEC use only).
</TABLE>

                                       17