<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 September 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 November 5, 1999 was 25,484,658 shares.

                       Exhibit Index is on Page 18 herein



                                       1
<PAGE>   2

                         PART I - FINANCIAL INFORMATION


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

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                                    1999             1998
                                                                                -------------    ------------
<S>                                                                             <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                       $  2,041         $  3,167
  Trade accounts receivable, less allowance of $556 and $720 at
    September 30, 1999 and December 31, 1998, respectively                          13,492           12,295
Other current assets                                                                 2,126            2,555
                                                                                  --------         --------
  Total current assets                                                              17,659           18,017

Purchased software, net of accumulated amortization of $1,732 and $1,341
  at September 30, 1999 and December 31, 1998, respectively                          1,465            1,946

Capitalized software development costs, net of accumulated amortization of
  $695 and $329 at September 30, 1999 and December 31, 1998, respectively            2,286            1,606

Property and equipment, net of accumulated depreciation of $2,744 and
  $2,194 at September 30, 1999 and December 31, 1998, respectively                   2,990            2,289
Excess of cost over net assets of businesses acquired, less accumulated
  amortization of $3,115 and $2,611 at September 30, 1999 and December 31,
  1998, respectively                                                                 7,055            7,535
Other assets                                                                           222              142
                                                                                  --------         --------
    Total assets                                                                  $ 31,677         $ 31,535
                                                                                  ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current installments of long-term debt and capital lease obligations            $  4,405         $  2,911
  Accounts payable, principally trade                                                2,074            1,276
  Accrued liabilities                                                                2,284            1,718
  Deferred service revenue                                                           4,461            4,690
                                                                                  --------         --------
    Total current liabilities                                                       13,224           10,595
Long-term debt and obligations under capital leases, excluding current
  installments                                                                         329              642
                                                                                  --------         --------
    Total liabilities                                                               13,553           11,237
                                                                                  --------         --------

Series B Cumulative Convertible Exchangeable Preferred Stock; designated
  550 shares; 65 shares issued and outstanding at September 30, 1999                   650               --
                                                                                  --------         --------

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 25,431 and 24,972 shares at September 30, 1999 and
    December 31, 1998, respectively                                                    254              250
  Additional paid-in capital                                                        41,965           41,301
  Accumulated deficit                                                              (24,745)         (21,253)
                                                                                  --------         --------
Shareholders' equity                                                                17,474           20,298
                                                                                  --------         --------
    Total liabilities and shareholders' equity                                    $ 31,677         $ 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                NINE MONTHS ENDED
                                                 SEPTEMBER 30,                     SEPTEMBER 30,
                                           -------------------------         -------------------------
                                             1999             1998             1999             1998
                                           --------         --------         --------         --------
<S>                                        <C>              <C>              <C>              <C>
Revenue:
   Software                                $  2,371         $  3,301         $  4,539         $  8,234
   Services and other                         4,841            3,981           14,268           10,834
                                           --------         --------         --------         --------
     Total revenue                            7,212            7,282           18,807           19,068
                                           --------         --------         --------         --------

Cost of revenue:
   Software                                     378              122              936              601
   Services and other                         2,669            1,807            7,721            5,024
                                           --------         --------         --------         --------
    Total cost of revenue                     3,047            1,929            8,657            5,625
                                           --------         --------         --------         --------

Gross profit                                  4,165            5,353           10,150           13,443
                                           --------         --------         --------         --------

Operating expenses:
   Sales and marketing                        1,693            1,734            5,252            4,782
   Research and development                   1,086              930            3,214            2,848
   General and administrative                 1,727            1,608            4,861            4,287
   Merger costs                                  --               67               --            1,060
                                           --------         --------         --------         --------
    Total operating expenses                  4,506            4,339           13,327           12,977
                                           --------         --------         --------         --------

Operating earnings (loss)                      (341)           1,014           (3,177)             466
Interest expense, net                          (131)             (29)            (315)             (67)
                                           --------         --------         --------         --------

Earnings (loss) before income taxes            (472)             985           (3,492)             399

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

Net earnings (loss)                        $   (472)        $    985         $ (3,492)        $    255
                                           ========         ========         ========         ========

Shares used in the calculation
 of net earnings (loss) per share:
    Basic                                    25,375           24,089           25,308           23,826
                                           ========         ========         ========         ========
    Dilutive(1)                              25,375           25,497           25,308           25,047
                                           ========         ========         ========         ========

Net earnings (loss) per share of
 common stock:
    Basic                                  $  (0.02)        $   0.04         $  (0.14)        $   0.01
                                           ========         ========         ========         ========
    Dilutive(1)                            $  (0.02)        $   0.04         $  (0.14)        $   0.01
                                           ========         ========         ========         ========
</TABLE>

(1)    Common stock equivalents are excluded from the earnings (loss) per share
       calculation for the three and nine months ended September 30, 1999
       because the effect would be anti-dilutive.

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>
                                                                       For the Nine Months Ended
                                                                             September 30,
                                                                       -------------------------
                                                                          1999            1998
                                                                       ---------       ---------
<S>                                                                    <C>             <C>

Cash flows from operating activities:
 Net (loss) earnings                                                     $(3,492)        $   255
 Adjustments to reconcile net earnings (loss) to net cash used in
  operating activities:
    Provision for (recovery of) doubtful accounts                            450             (55)
    Depreciation and amortization                                          2,006           1,656
    Compensation related to stock options, net                                --              73
    Increase in accounts trade receivable                                 (1,647)         (5,827)
    Decrease (increase) in other current assets                              429             (91)
    Increase in accounts payable, principally trade                          948             501
    Increase (decrease) in accrued liabilities                               566            (823)
    (Decrease) increase in deferred revenue                                 (229)          1,010
                                                                         -------         -------
      Net cash used in operating activities                                 (969)         (3,301)
                                                                         -------         -------

Cash flows from investing activities:
  Purchased software                                                         (60)           (534)
  Capitalized software development costs                                  (1,046)           (964)
  Capital expenditures                                                    (1,479)           (282)
  Change in other non-current assets and liabilities, net                    (71)            258
                                                                         -------         -------
      Net cash used in investing activities                               (2,656)         (1,522)
                                                                         -------         -------

Cash flows from financing activities:
  Principal payments on long-term debt, net                                 (319)             --
  Net borrowings (repayments) under line of credit                         1,500          (1,794)
  Proceeds from the sale of Series B Cumulative Convertible
    Exchangeable Preferred Stock                                             650              --
  Proceeds from issuances of common stock                                    668             691
                                                                         -------         -------
      Net cash provided by (used in) financing activities                  2,499          (1,103)
                                                                         -------         -------

Net decrease in cash and cash equivalents                                 (1,126)         (5,926)

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

Cash and cash equivalents at end of period                               $ 2,041         $ 1,851
                                                                         =======         =======

Supplemental disclosures of cash paid for:
  Interest                                                               $   344         $   166
                                                                         =======         =======
Supplemental disclosures of non-cash investing
  and financing activities:
    Equipment acquired under capital lease obligations                   $    --         $   517
                                                                         =======         =======
    Issuance of common stock in satisfaction of note
      payable to HUBlink shareholder                                     $    --         $   508
                                                                         =======         =======
    Issuance of common stock in satisfaction of
      investment banker advisory fee                                     $    --         $   406
                                                                         =======         =======
</TABLE>

See accompanying Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>   5




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




1.       Accounting Policies

         The Condensed Consolidated Financial Statements as of September 30,
         1999 and for the three months and nine months ended September 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 its subsidiaries (the
         "Company").

         These Condensed Consolidated Financial Statements should be read in
         conjunction with the Company's consolidated financial statements and
         notes included in its Annual Report on Form 10-K for the year ended
         December 31, 1998 (the "1998 Form 10-K") 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 1998 Form 10-K. 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 three and nine months ended September 30, 1999 and 1998.

2.       Debt

         In August 1998, the Company entered into a $5.0 million line of credit
         facility (the "Credit Facility") with Silicon Valley Bank (the "Bank").
         The Company was in default of two of the financial covenants under the
         Credit Facility at March 31, 1999: (1) quarterly profitability; and (2)
         the minimum Quick Ratio, as defined therein. Subsequent to March 31,
         1999, the Company and the Bank amended the Credit Facility whereby the
         Bank waived these defaults, the interest rate increased by 0.5%
         annually (to 1.5% over prime) and the line of credit became secured by
         the Company's intellectual property.

         At June 30, 1999, the Company was in default of two of the financial
         covenants under the Credit Facility: (1) quarterly profitability; and
         (2) the minimum Quick Ratio, as 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%
         annually (to 2% over prime) and the term of the Credit Facility was
         extended to September 30, 1999.

         Under the Credit Facility borrowing base limitation, $4.5 million was
         available for borrowing under the Credit Facility at September 30,
         1999. The balance outstanding under the Credit Facility was $4.0
         million on September 30, 1999. The Credit Facility currently bears
         interest at the Bank's prime rate (8.25% at September 30, 1999) plus
         2%. On September 30, 1999, the Company and the Bank again amended the
         Credit Facility, whereby the Bank extended the term of the Credit
         Facility to November 30, 1999.




                                       5
<PAGE>   6


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




3.       8.5% Series B Cumulative Convertible Exchangeable Preferred Stock

         On September 29, 1999, the Company sold 65,000 shares of a newly
         designated 8.5% Series B Cumulative Convertible Exchangeable Preferred
         Stock ("Series B Preferred Stock") to individuals in a private
         placement for gross proceeds of $650,000. The Series B Preferred Stock
         has a $10.00 per share liquidation value and provides for 8.5%
         cumulative annual dividends, payable quarterly in arrears beginning on
         December 31, 1999. The Series B Preferred Stock is convertible at any
         time into the Company's common stock determined by dividing (1) $10.00
         by (2) $2.1491 (115% of the average of the closing bid prices of the
         common stock for the five business days prior to the closing date). The
         conversion price will be reset on June 20, 2000 if the average closing
         price for the Company's common stock on the preceding five business
         days is less than $2.1491. The Series B Preferred Stock is also
         exchangeable at the Company's option into subordinated notes with
         substantially equal terms. The Series B Preferred Stock is redeemable
         at 25% of the originally issued shares of Series B Preferred Stock on
         annual redemption dates beginning on September 30, 2002.

4.       Shareholders' Equity

         On December 31, 1997, HIE issued warrants to purchase 50,000 shares of
         HIE common stock, at $1.59 per share, and 416,000 shares of HIE common
         stock to The Southern Venture Fund II, L.P. ("SVFII") (Massey Burch) in
         exchange for 50% equity ownership interest in Criterion Health
         Strategies, Inc. ("CHS"). In January 1999, SVFII exercised the warrants
         to purchase HIE Common Stock.

5.       Segment Information

         The Company's reportable segments are strategic business units that
         offer different products and services. 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 Notes to
         Consolidated Financial Statements included in the 1998 Form 10-K). The
         Company evaluates performance of the segments based on revenue and
         operating earnings (loss) of the segments. Segment information for the
         three and nine months ended September 30, 1998 is as follows (in
         thousands):




                                       6
<PAGE>   7

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





<TABLE>
<CAPTION>
                                                     Three Months        Nine Months
                                                         Ended             Ended
                                                     September 30,      September 30,
                                                         1998               1998
                                                     -------------      -----------
                                                               (Unaudited)
                    <S>                              <C>               <C>
                    Revenue:
                     Software                           $ 6,518           $16,389
                     Consulting                             764             2,679
                                                        -------           -------
                       Total revenue                    $ 7,282           $19,068
                                                        =======           =======

                    Operating earnings (loss):
                     Software                           $ 1,241           $   280
                     Consulting                            (227)              186
                                                        -------           -------
                        Operating earnings              $ 1,014           $   466
                                                        =======           =======
</TABLE>



6.       Major Customers

         One customer accounted for 23% of the Company's total revenue for the
         three months ended September 30, 1999. That one customer accounted for
         69% and 36% of the Company's software revenue for the three and nine
         months ended September 30, 1999, respectively. One distributor
         accounted for 21% of the Company's software revenue for the nine months
         ended September 30, 1999. One distributor's accounts receivable balance
         represents 29% of total trade accounts receivable at September 30,
         1999.

         Revenue from international sales was approximately 5% and 11% of the
         Company's total revenue for the three months and nine months ended
         September 30, 1999, respectively.




                                       7
<PAGE>   8





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 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                  NINE MONTHS ENDED
                                                             SEPTEMBER 30,                       SEPTEMBER 30,
                                                       ------------------------          --------------------------
                                                         1999            1998             1999               1998
                                                       -------          -------          -------           --------
                                                                               (UNAUDITED)

<S>                                                    <C>              <C>              <C>               <C>
Total HIE revenue (in thousands)                       $ 7,212          $ 7,282          $ 18,807          $ 19,068
                                                       =======          =======          ========          ========

Revenue:
 Software                                                   33%              45%               24%               43%
 Services and other                                         67%              55%               76%               57%
                                                       -------          -------          --------          --------
Total revenue                                              100%             100%              100%              100%
                                                       -------          -------          --------          --------

Cost of revenue:
 Software (as a percentage of software revenue)             16%               4%               21%                7%
 Services and other (as a percentage of
  services and other revenue)                               55%              45%               54%               46%
Total cost of revenue                                       42%              26%               46%               29%
                                                       -------          -------          --------          --------
Gross profit                                                58%              74%               54%               71%
                                                       -------          -------          --------          --------

Operating expenses:
 Sales and marketing                                        23%              24%               28%               25%
 Research and development                                   15%              13%               17%               15%
 General and administrative                                 24%              22%               26%               22%
 Merger costs                                                0%               1%                0%                6%
                                                       -------          -------          --------          --------
Total operating expenses                                    62%              60%               71%               68%
                                                       -------          -------          --------          --------

Operating earnings (loss)                                   (5)%             14%              (17)%               2%

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

Earnings (loss) before income taxes                         (7)%             14%              (19)%               2%

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

Net earnings (loss)                                         (7)%             14%              (19)%               1%
                                                       =======          =======          ========          ========
</TABLE>




                                       8
<PAGE>   9


COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

REVENUE. Revenue decreased 1% to $7.2 million for the three months ended
September 30, 1999 from $7.3 million for the three months ended September 30,
1998. The Company experienced a decrease in software revenue, which was almost
completely offset by an increase in services and other revenue.

         Software. Software revenue decreased 28% to $2.4 million for the three
months ended September 30, 1999 from $3.3 million for the three months ended
September 30, 1998. As a percentage of total revenue, software revenue decreased
to 33% in the three months ended September 30, 1999 from 45% for the three
months ended September 30, 1998. Management believes that the dollar decrease in
software revenue was primarily attributable to the impact of the Year 2000 issue
as customers or potential customers continue to expend significant resources to
correct or update their existing systems for Year 2000 compliance and continue
to delay purchases of new software until after the end of 1999 due to limited
budgets or in order to avoid implementing a formal Year 2000 compliance program
with respect to the new software. 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 22% to $4.8
million for the three months ended September 30, 1999 from $4.0 million for the
three months ended September 30, 1998. Services and other revenue as a
percentage of total revenue increased to 67% for the three months ended
September 30, 1999 from 55% for the three months ended September 30, 1998. The
dollar increase in services and other revenue was due to an increase in the sale
and completion of projects and an increase in maintenance revenue. The increase
in services and other revenue as a percentage of total revenue resulted
primarily from the decrease in software revenue discussed above.

COST OF REVENUE. Total cost of revenue increased 58% to $3.0 million for the
three months ended September 30, 1999 from $1.9 million for the three months
ended September 30, 1998.

         Software. Cost of software revenue increased $256,000 to $378,000 for
the three months ended September 30, 1999 from $122,000 for the three months
ended September 30, 1998. As a percentage of software revenue, cost of software
revenue increased to 16% for the three months ended September 30, 1999 from 4%
for the three months ended September 30, 1998. Cost of software revenue
increased due to an increase in amortization of capitalized software for the
three months ended September 30, 1999 compared to September 30, 1998. The
increase in cost of software revenue 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 September 30, 1999 compared
to September 30, 1998, as previously discussed.

         Services and other. Cost of services and other revenue increased 48% to
$2.7 million for the three months ended September 30, 1999 from $1.8 million for
the three months ended September 30, 1998. As a percentage of services and other
revenue, cost of services and other revenue increased to 55% for the three
months ended September 30, 1999 from 45% for the three months ended September
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 remained relatively
constant at $1.7 million for the three months ended September 30, 1999 and for
the three months ended September 30, 1998. Sales and marketing expense as a
percentage of total revenue decreased to 23% for the three months ended
September 30, 1999 from 24% for the three months ended September 30, 1998.

         Research and development. Research and development expense increased
17% to $1.1 million for the three months ended September 30, 1999 from $930,000
for the three months ended September 30, 1998. Research and development expense
as a percentage of total revenue increased to 15% for the three months ended
September 30, 1999 from 13% for the three months ended September 30, 1998.




                                       9
<PAGE>   10

Research and development expense increased due to an increase in development
costs for solutions that complement existing products. Capitalized research and
development costs were $277,000 and $251,000 for the three months ending
September 30, 1999 and 1998, respectively.

         General and administrative. General and administrative expense
increased 7% to $1.7 million for the three months ended September 30, 1999 from
$1.6 million for the three months ended September 30, 1998. General and
administrative expense as a percentage of total revenue increased to 24% for the
three months ended September 30, 1999 from 22% for the three months ended
September 30, 1998. The dollar increase is a result of an increased provision
for doubtful accounts made during the three months ended September 30, 1999
compared to the three months ending September 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 September 30, 1999.

INTEREST EXPENSE, NET. Net interest expense increased $102,000 to $131,000 for
the three months ended September 30, 1999 from $29,000 for the three months
ended September 30, 1998. The increase in interest expense resulted from a
higher level of borrowing under the Company's line of credit during the three
months ended September 30, 1999.

INCOME TAX EXPENSE. The Company did not record any income tax benefit for the
three months ended September 30, 1999 or 1998.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

REVENUE. Revenue decreased 1% to $18.8 million for the nine months ended
September 30, 1999 from $19.1 million for the nine months ended September 30,
1998. The Company experienced a decrease in software revenue, which was almost
completely offset by an increase in services and other revenue.

         Software. Software revenue decreased 45% to $4.5 million for the nine
months ended September 30, 1999 from $8.2 million for the nine months ended
September 30, 1998. As a percentage of total revenue, software revenue decreased
to 24% in the nine months ended September 30, 1999 from 43% for the nine months
ended September 30, 1998. Management believes that the dollar decrease in
software revenue was primarily attributable to the impact of the Year 2000 issue
as customers or potential customers continue to expend significant resources to
correct or update their existing systems for Year 2000 compliance and continue
to delay purchases of new software until after the end of 1999 due to limited
budgets or in order to avoid implementing a formal Year 2000 compliance program
with respect to the new software. 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 32% to $14.3
million for the nine months ended September 30, 1999 from $10.8 million for the
nine months ended September 30, 1998. Services and other revenue as a percentage
of total revenue increased to 76% for the nine months ended September 30, 1999
from 57% for the nine months ended September 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 54% to $8.7 million for the
nine months ended September 30, 1999 from $5.6 million for the nine months ended
September 30, 1998.

         Software. Cost of software revenue increased 56% to $936,000 for the
nine months ended September 30, 1999 from $601,000 for the nine months ended
September 30, 1998. As a percentage of software revenue, cost of software
revenue increased to 21% for the nine months ended September 30, 1999 from 7%
for the nine months ended September 30, 1998. Cost of software revenue increased
due to an increase in amortization of capitalized software for the nine months
ended September 30, 1999 compared to the nine months ended September 30, 1998.
The increase in cost of software revenue as a percentage of software revenue was
a result of decreased software sales and the increase in amortization of



                                       10
<PAGE>   11

capitalized software during the nine months ended September 30, 1999 compared to
the nine months ended September 30, 1998, as previously discussed.

         Services and other. Cost of services and other revenue increased 54% to
$7.7 million for the nine months ended September 30, 1999 from $5.0 million for
the nine months ended September 30, 1998. As a percentage of services and other
revenue, cost of services and other revenue increased to 54% for the nine months
ended September 30, 1999 from 46% for the nine months ended September 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 10% to $5.3
million for the nine months ended September 30, 1999 from $4.8 million for the
nine months ended September 30, 1998. Sales and marketing expense as a
percentage of total revenue increased to 28% for the nine months ended September
30, 1999 from 25% for the nine months ended September 30, 1998. The dollar
increase in sales and marketing expense was primarily due to the addition of
sales personnel to market solutions developed for financial/banking markets. The
increase in sales and marketing expense as a percentage of total revenue was
primarily attributable to the addition of sales personnel, discussed above, and
to a decrease in software sales for the nine months ended September 30, 1999.

         Research and development. Research and development expense increased
13% to $3.2 million for the nine months ended September 30, 1999 from $2.8
million for the nine months ended September 30, 1998. Research and development
expense as a percentage of total revenue increased to 17% for the nine months
ended September 30, 1999 from 15% for the nine months ended September 30, 1998.
Research and development expense increased due to an increase in development
costs for solutions in the financial/banking market. Additionally, research and
development increased due to development costs for solutions that complement the
Company's existing products. Capitalized research and development costs were
$1,046,000 and $964,000 for the nine months ending September 30, 1999 and 1998,
respectively.

         General and administrative. General and administrative expense
increased 13% to $4.9 million for the nine months ended September 30, 1999 from
$4.3 million for the nine months ended September 30, 1998. General and
administrative expense as a percentage of total revenue increased to 26% for the
nine months ended September 30, 1999 from 22% for the nine months ended
September 30, 1998. The dollar increase is primarily the result of an increased
provision for doubtful accounts made during the nine months ended September 30,
1999 compared to the nine months ended September 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 nine months ended
September 30, 1999.

INTEREST EXPENSE, NET. Net interest expense increased $248,000 to $315,000 for
the nine months ended September 30, 1999 from $67,000 for the nine months ended
September 30, 1998. The increase in interest expense resulted from a higher
level of borrowing under the Company's line of credit during the nine months
ended September 30, 1999.

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

LIQUIDITY AND CAPITAL RESOURCES

         The Company had working capital of $4.4 million at September 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
office furniture and investment in internally developed software during the nine
months ended September 30, 1999.



                                       11
<PAGE>   12

         Net cash used in operating activities totaled $969,000 for the nine
months ended September 30, 1999 compared to net cash used in operating
activities of $3.3 million for the nine months ended September 30, 1998. This
decreased use of cash of $2.3 million was due primarily to a larger increase in
accounts receivable during the nine months ending September 30, 1998 compared
to the nine months ending September 30, 1999.

         Net cash used in investing activities was $2.7 million for the nine
months ended September 30, 1999 compared to net cash used in investing
activities of $1.5 million for the nine months ended September 30, 1998. This
increase of $1.1 million was due primarily to expenditures for computer
equipment and furniture due to the addition of client services personnel.

         Net cash provided by financing activities was $2.5 million for the nine
months ended September 30, 1999 compared to net cash used in financing
activities of $1.1 million for the nine months ended September 30, 1998. Net
cash provided by financing activities resulted from additional borrowings under
the Company's line of credit, exercises of stock options and warrants during the
nine months ended September 30, 1999, and the sale of 65,000 shares of 8.5%
Series B Cumulative Convertible Exchangeable Preferred Stock during the three
months ended September 30, 1999. Net cash used in financing activities for the
nine months ended September 30, 1998 was primarily due to repayments of
borrowings under the line of credit.

         In August 1998, the Company entered into a $5.0 million line of credit
facility (the "Credit Facility") with Silicon Valley Bank (the "Bank"). The
Company was in default of two of the financial covenants under the Credit
Facility at March 31, 1999: (1) quarterly profitability; and (2) the minimum
Quick Ratio, as defined therein. Subsequent to March 31, 1999, the Company and
the Bank amended the Credit Facility whereby the Bank waived these defaults, the
interest rate increased by 0.5% annually (to 1.5% over prime) and the line of
credit became secured by the Company's intellectual property.

         At June 30, 1999, the Company was in default of two of the financial
covenants under the Credit Facility: (1) quarterly profitability; and (2) the
minimum Quick Ratio, as 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% annually (to 2% over prime)
and the term of the Credit Facility was extended to September 30, 1999.

         On September 30, 1999, the Company and the Bank again amended the
Credit Facility, whereby the Bank extended the term of the Credit Facility to
November 30, 1999.

         Under the borrowing base limitation, $4.5 million was available for
borrowing under the Credit Facility at September 30, 1999. The balance
outstanding under the Credit Facility was $4.0 million on September 30, 1999.
The Credit Facility currently bears interest at the Bank's prime rate (8.25% at
September 30, 1999) plus 2%.

         The Company is engaged in discussions with the Bank regarding an
extension or replacement of the Credit Facility as well as with other potential
financing sources to provide additional capital for the Company's ongoing and
future operations. There can be no assurance that the Company will be successful
in its negotiations with the Bank or in attracting additional capital on terms
acceptable to the Company, if at all.

         As noted above, during the nine months ending September 30, 1999, the
Company 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 focused 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
capital expenditures. However, there can be no assurance that the Company will
be successful in its attempt to strengthen its liquidity position.



                                       12
<PAGE>   13

         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.

State of Readiness

         HIE 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 has also completed 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
HIE's operations. Representations made by software vendors for these new
systems, including Year 2000 readiness, have already been validated. Non-IT
systems, such as telecommunications systems, as well as existing IT



                                       13
<PAGE>   14

systems have been assessed and are Year 2000 compliant.

         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. This was done in order to determine the extent to which HIE is
vulnerable to any failure by such material third parties, to resolve their
respective Year 2000 problems in a manner that is practicable. HIE has completed
the assessment and is taking 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.

Year 2000 Costs and Contingency Plans

         To date, HIE has not incurred any material costs directly associated
with its Year 2000 readiness efforts. HIE has completed the replacement of all
systems effected by the 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 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, perform manual accounting and restore
working systems with backup files. HIE has finalized the development of
these contingency plans and remains in a "ready" state should such actions need
to be taken.

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.



                                       14
<PAGE>   15

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, 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 September 30,
1999, the Company had $4.0 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.










                                       15
<PAGE>   16


         PART II - OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         On September 29, 1999, the Company issued 65,000 shares of its Series B
Preferred Stock for gross proceeds of $650,000 in a private placement to
accredited investors pursuant to an exemption from registration provided by
Regulation D. The proceeds of the offering were used to reduce the outstanding
balance under our line of credit. The Series B Preferred Stock is convertible at
any time, at the option of the holder, into the Company's common stock by
dividing (1) $10.00 by (2) $2.1491 (115% of the average closing bid prices of
the common stock for the five business days prior to the closing date). The
Company is required to file a registration statement to register the underlying
shares of common stock issuable upon conversion of the Series B Preferred Stock.
Accordingly, these shares will be eligible for resale in the market without
restriction. Any future sales of these shares could depress the market price of
our common stock and make it more difficult for us to sell stock in the future.

         Furthermore, the conversion price of the Series B Preferred Stock will
be reset on June 20, 2000 if the average of the closing bid prices of the
Company's common stock on the preceding five business days is less than $2.1491.
This may obligate the Company to issue additional shares of common stock upon
conversion of the Series B Preferred Stock. To the extent that additional shares
are issuable, holders of the Company's common stock will experience dilution of
their ownership percentages.



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

         (a)  Exhibits

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

         <S>            <C>
         3(i)           Amended and Restated Articles of Incorporation.

         10             Fourth Loan Modification Agreement dated September
                        30, 1999 between HIE, Inc. and Silicon Valley
                        Bank.

         11             Statements of Computation of Per Share Loss.

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

(b)      Reports on Form 8-K

         The Company filed a current report on Form 8-K dated August 26, 1999,
         reporting under Item 5 thereof certain modifications to its credit
         facility.



                                       16
<PAGE>   17


                                   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.

November 12, 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)




                                       17
<PAGE>   18


EXHIBIT INDEX

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

               <S>            <C>
               3(i)           Amended and Restated Articles of Incorporation.


               10             Fourth Loan Modification Agreement dated September
                              30, 1999 between HIE, Inc. and Silicon Valley
                              Bank.

               11             Statements of Computation of Per Share Loss.

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






                                       18