<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 1999
                                                 --------------

                           Commission File No. 0-21527
                                               -------

                            MEMBERWORKS INCORPORATED
                            ------------------------
             (Exact name of registrant as specified in its charter)


DELAWARE                                                         06-1276882
--------                                                         ----------
(State of Incorporation)                                      (I.R.S. Employer
                                                             Identification No.)

9 West Broad Street;
Stamford, Connecticut                                                 06902
----------------------------------------                            ----------
(Address of principal executive offices)                            (Zip Code)

                                 (203) 324-7635
                         -------------------------------
                         (Registrant's telephone number,
                              including area code)

Indicate by checkmark 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, and (2) has been subject to such filing
requirements for the past 90 days.  Yes |X|   No |_|

The number of shares outstanding of the Registrant's capital stock: 

15,719,489 shares of Common Stock, $0.01 par value as of April 30, 1999.
------------------------------------------------------------------------
<PAGE>   2

                            MEMBERWORKS INCORPORATED
                               INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION                                               PAGE

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 1999
and June 30, 1998                                                            3

Condensed Consolidated Statements of Operations for the three and nine
month periods ended March 31, 1999 and 1998                                  4

Condensed Consolidated Statements of Cash Flows for the nine month
periods ended March 31, 1999 and 1998                                        5

Notes to Condensed Consolidated Financial Statements                         6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations                                          7

Certain Factors That May Affect Future Results                              10

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds                           11

Item 6. Exhibits and Reports on Form 8-K                                    11


                                       2
<PAGE>   3

                            MEMBERWORKS INCORPORATED

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                     March 31,     June 30,
                                                                       1999         1998
                                                                     ---------    ---------
                  Assets                                            (Unaudited)
<S>                                                                  <C>          <C>      
Current assets:
  Cash and cash equivalents                                          $  58,452    $  35,933
  Accounts receivable                                                    9,265        7,107
  Prepaid membership materials                                           4,092        2,931
  Prepaid expenses                                                       2,644        1,060
  Membership solicitation and other deferred costs                      73,659       51,771
                                                                     ---------    ---------
        Total current assets                                           148,112       98,802
Fixed assets, net                                                       15,963        9,677
Intangible and other assets                                             25,383       25,450
                                                                     ---------    ---------
        Total assets                                                 $ 189,458    $ 133,929
                                                                     =========    =========
     Liabilities and Shareholders' Equity
Current liabilities:
  Current maturities of long-term obligations                        $      80    $     380
  Accounts payable                                                      21,690       21,967
  Accrued liabilities                                                   33,723       20,680
  Deferred membership fees                                             104,268       61,753
                                                                     ---------    ---------
        Total current liabilities                                      159,761      104,780
Long-term obligations                                                       15           69
                                                                     ---------    ---------
        Total liabilities                                              159,776      104,849
                                                                     ---------    ---------
Shareholders' equity:
  Common stock, $0.01 par value --
    40,000 shares authorized; 15,847 shares issued
    (15,653 shares at June 30, 1998)                                       158          156
  Capital in excess of par value                                        75,415       74,478
  Deferred compensation                                                   (627)        (978)
  Accumulated deficit                                                  (38,323)     (40,073)
  Treasury stock, 458 shares at cost (377 shares at June 30, 1998)      (6,941)      (4,503)
                                                                     ---------    ---------
        Total shareholders' equity                                      29,682       29,080
                                                                     ---------    ---------
                                                                     $ 189,458    $ 133,929
                                                                     =========    =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>   4

                            MEMBERWORKS INCORPORATED

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                        Three months ended         Nine months ended
                                                             March 31,                  March 31,
                                                      ----------------------    ----------------------
                                                         1999         1998         1999         1998
                                                      ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>      
Revenues from membership fees                         $  56,436    $  29,445    $ 151,017    $  81,315

Expenses:
  Operating                                              11,525        6,002       29,784       16,848
  Marketing                                              33,154       17,617       88,874       48,525
  General and administrative                             10,168        5,448       28,687       15,571
  Other income, net principally interest                   (591)        (442)      (1,445)      (1,269)
                                                      ---------    ---------    ---------    ---------
Total expenses                                           54,256       28,625      145,900       79,675
                                                      ---------    ---------    ---------    ---------
Income before income taxes and cumulative
  effect of accounting change                             2,180          820        5,117        1,640
Cumulative effect of accounting change                       --           --       (3,367)          --
Provision for income taxes                                   --           --           --           --
                                                      ---------    ---------    ---------    ---------
Net income                                            $   2,180    $     820    $   1,750    $   1,640
                                                      =========    =========    =========    =========

Earnings per share (note 2):
    Basic                                             $    0.14    $    0.06    $    0.11    $    0.11
                                                      =========    =========    =========    =========
    Diluted                                           $    0.13    $    0.05    $    0.10    $    0.10
                                                      =========    =========    =========    =========

Pro forma amounts assuming new accounting principle
 is retroactively applied:
  Net income                                              2,180          647        1,750        1,325
    Earnings per share assuming no dilution                0.14         0.04         0.11         0.09
    Earnings per share assuming full dilution              0.13         0.04         0.10         0.08

Shares used in EPS calculations:
    Basic                                                15,369       14,764       15,343       14,737
                                                      =========    =========    =========    =========
    Diluted                                              17,299       16,394       17,007       16,246
                                                      =========    =========    =========    =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>   5

                            MEMBERWORKS INCORPORATED

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                              Nine months ended
                                                                                  March 31,
                                                                           ----------------------
                                                                             1999         1998
                                                                           ---------    ---------
<S>                                                                        <C>          <C>      
Operating activities
  Net income                                                               $   1,750    $   1,640
  Adjustments to reconcile net income to
    net cash provided by operating activities:
        Cumulative effect of accounting change                                 3,367           --
        Membership solicitation and other deferred costs                    (106,325)     (64,207)
        Amortization of membership solicitation and other deferred costs      81,070       52,921
        Deferred membership fees                                              42,515       11,379
        Depreciation and amortization                                          3,824        1,223
        Other                                                                    351          397

  Change in assets and liabilities affecting operating cash flows:
    Accounts receivable                                                       (2,158)      (7,500)
    Prepaid membership materials                                              (1,161)        (639)
    Prepaid expenses                                                          (1,584)        (650)
    Other assets                                                                (581)           8
    Accounts payable                                                            (277)       1,465
    Accrued liabilities                                                       13,043        6,163
                                                                           ---------    ---------
Net cash provided by operating activities                                     33,834        2,200
                                                                           ---------    ---------

Investing activities
  Acquisition of fixed assets and other                                       (9,462)      (2,781)
                                                                           ---------    ---------
Net cash used in investing activities                                         (9,462)      (2,781)
                                                                           ---------    ---------

Financing activities
  Payments of long-term obligations                                             (354)        (528)
  Treasury stock purchases                                                    (2,438)      (2,721)
  Proceeds from issuance of common stock                                         939          331
                                                                           ---------    ---------
Net cash used in financing activities                                         (1,853)      (2,918)
                                                                           ---------    ---------
Net increase (decrease) in cash and cash equivalents                          22,519       (3,499)
Cash and cash equivalents at beginning of period                              35,933       40,758
                                                                           ---------    ---------
Cash and cash equivalents at end of period                                 $  58,452    $  37,259
                                                                           =========    =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       5
<PAGE>   6

                            MEMBERWORKS INCORPORATED

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, such statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the fiscal year ending June 30, 1999. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K with respect to the fiscal year ended
June 30, 1998.

NOTE 2 - EARNINGS PER SHARE

Basic and diluted earnings per share amounts are determined in accordance with
the provisions of FASB Statement No. 128 "Earnings per Share". The following
table sets forth the reconciliation of the numerators and denominators in the
computation of basic and diluted earnings per share (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                      Three months ended    Nine months ended
                                                            March 31,          March 31,
                                                      ------------------    ------------------
                                                        1999       1998       1999       1998
                                                      -------    -------    -------    -------
<S>                                                   <C>        <C>        <C>        <C>    
Numerator for basic and diluted earnings per share:                                  
Net income available to common shareholders           $ 2,180    $   820    $ 1,750    $ 1,640
                                                      =======    =======    =======    =======
                                                                                     
Denominator for basic earnings per share:                                            
Weighted average number of common shares                                             
outstanding-basic                                      15,369     14,764     15,343     14,737
Effect of dilutive securities:                                                       
  Options and warrants                                  1,930      1,630      1,664      1,509
                                                      -------    -------    -------    -------
Weighted average number of common shares                                             
outstanding-diluted                                    17,299     16,394     17,007     16,246
                                                      =======    =======    =======    =======
                                                                                     
Basic earnings per share                              $  0.14    $  0.06    $  0.11    $  0.11
                                                      =======    =======    =======    =======
Diluted earnings per share                            $  0.13    $  0.05    $  0.10    $  0.10
                                                      =======    =======    =======    =======
</TABLE>

NOTE 3 - ALLOWANCE FOR MEMBERSHIP CANCELLATIONS

Accrued liabilities set forth in the accompanying condensed consolidated balance
sheets as of March 31, 1999 and June 30, 1998 include an allowance for
membership cancellations of $23,034,000 and $16,362,000, respectively.

NOTE 4 - CUMULATIVE EFFECT OF ACCOUNTING CHANGE

Effective July 1, 1998, the Company changed its method of accounting for
printing and mailing membership materials. Historically, the Company had
accounted for the costs of printing and mailing of membership materials by
amortizing these costs ratably over the membership period as revenue was
recognized. Effective July 1, 1998, the Company started expensing these costs
upon the mailing of membership materials. The cumulative effect of this change
in accounting principle as of July 1, 1998 of $3.4 million was recorded in the
first fiscal quarter ended September 30, 1998 as a reduction of membership
solicitation and other deferred costs and net income.

NOTE 5 - SUBSEQUENT EVENTS

On April 9, 1999, the Company acquired all the outstanding equity of
Quota-Phone, Inc. ("Quota-Phone") for $7.75 million in cash and 41,666 shares of
MemberWorks Common Stock with an approximate fair market value of $1.5 million
as of the closing date). Quota-Phone is a privately-held wholesale provider of
discount shopping services and "no-expiration" coupons. The acquisition will be
accounted for as a purchase.


                                       6
<PAGE>   7

                            MEMBERWORKS INCORPORATED

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

MemberWorks addresses the needs of organizations seeking to leverage the
expertise of an outside provider in offering membership service programs.
Membership service programs offer selected products and services from a variety
of vendors intended to enhance existing relationships between businesses and
consumers. The Company derives its revenues principally from annually renewable
membership fees. The Company receives full payment of annual fees at or near the
beginning of the membership period, but recognizes revenue ratably over the
membership period. Similarly, the costs associated with soliciting each new
member, as well as the cost of royalties, are amortized ratably over the same
period. Profitability and cash flow generated from renewal memberships exceed
that of new memberships due to the absence of solicitation costs associated with
new member procurement.

On September 1, 1998, the Company issued a press release that stated it had
contacted the Securities and Exchange Commission ("SEC") to determine whether
the SEC staff's view regarding the timing of revenue recognition for companies
such as MemberWorks Incorporated that sell services has changed in the wake of
Cendant Corporation's agreement (announced on August 27, 1998) with the SEC to
modify its revenue recognition practices. The Company had requested the SEC
staff to comment on and has provided the SEC staff with information
demonstrating the continued appropriateness of its revenue recognition
practices. The Company has consistently followed these practices in accordance
with generally accepted accounting practices and with the concurrence of
PricewaterhouseCoopers LLP, its independent accountants. As a result of this
review and several discussions with the SEC staff, the staff has not objected to
the Company's decision to presently continue to follow its revenue recognition
practices, as described above. The SEC staff did request the Company to change
its method of accounting for printing and mailing of membership materials,
beginning as of July 1, 1998. The Company has recorded the cumulative effect of
this change in accounting principle in the first quarter of fiscal 1999. See
footnote 4 for a description of the change and its financial impact.

On September 28, 1998, the SEC issued a press release and stated the "SEC will
formulate and augment new and existing accounting rules and interpretations
covering revenue recognition, restructuring reserves, materiality, and
disclosure" for all publicly-traded companies. Until such time as the SEC staff
issues such interpretative guidelines, it is unclear what, if any, impact such
interpretative guidance will have on the Company's current accounting practices.
However, the potential changes in accounting practice being considered by the
SEC staff could have a material impact on the manner in which the Company
recognizes revenue. Any such changes would have no effect on reported cash flow
or the economic value of the Company's memberships.

THREE MONTHS ENDED MARCH 31, 1999 VS. THREE MONTHS ENDED MARCH 31, 1998

            REVENUES. Revenues increased 92% to $56.4 million for the quarter
ended March 31, 1999 from $29.4 million for the quarter ended March 31, 1998 due
to an increase in the Company's membership base and an increase in the weighted
average program fee. The Company's membership base increased to approximately
5.0 million members at March 31, 1999 from 2.6 million members at March 31,
1998. If revenues from Coverdell and Company, acquired on April 2, 1998, were
included in both periods on a pro-forma basis, third quarter revenues would have
increased 71%. The increase in the Company's membership base was due to
increased demand for the Company's existing programs, new programs introduced in
fiscal 1998 and members acquired through the Coverdell acquisition. The increase
in the weighted average program fee was due to an increase in program pricing
and introduction of new programs with higher fees. Revenues from renewals
increased to $23.5 million in 1999 from $12.7 million in 1998. As a percentage
of individual membership revenues, these amounts represented 43% in 1999 and 44%
in 1998.


                                       7
<PAGE>   8

                            MEMBERWORKS INCORPORATED

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

            OPERATING EXPENSES. Operating expenses consist of costs incurred in
servicing the Company's membership base, including personnel, telephone and
computer processing costs, as well as expenses associated with the production
and distribution of membership information kits. Operating expenses increased
92% to $11.5 million in 1999 from $6.0 million in 1998 due to the servicing
requirements of the larger membership base of the Company. As a percentage of
revenues, operating expenses remained flat at 20.4% in 1999 and 1998.

            MARKETING EXPENSES. Marketing expenses consist of fees to
telemarketers to solicit potential members, royalties to clients, direct mail
costs and other solicitation expenses. Marketing expenses increased 88% to $33.2
million in 1999 from $17.6 million in 1998 due to increased telemarketing and
royalty expenses associated with the larger membership base. As a percentage of
revenues, marketing expenses decreased to 58.7% in 1999 from 59.8% in 1998. The
decrease was due to the favorable effect of an increase in more efficient
marketing methods and improved retention rates.

            In addition to marketing expenses, the Company also monitors the
spending for membership solicitation and other deferred costs. These costs
increased 82% to $43.9 million in 1999 from $24.2 million in 1998 primarily due
to increased marketing efforts incurred to grow the membership base.

            GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist of personnel and facilities expenses associated with the
Company's executive, sales, marketing, finance, product and account management
functions. General and administrative expenses increased 87% to $10.2 million in
1999 from $5.4 million in 1998. This increase was attributable to the costs
incurred for additional personnel in all areas and related facilities costs as
well as amortization expense of intangibles related to the Coverdell
acquisition. As a percentage of revenues, general and administrative expenses
decreased to 18.0% in 1999 from 18.5% in 1998.

            OTHER INCOME, NET. Other income, net is primarily composed of
interest income from cash and cash equivalents. Other income of $0.6 million was
reported in 1999 compared to $0.4 million reported in 1998.

            PROVISION FOR INCOME TAXES. The Company was not required to record a
provision for income taxes for the three months ended March 31, 1999 and 1998
due to tax losses realized.

NINE MONTHS ENDED MARCH 31, 1999 VS. NINE MONTHS ENDED MARCH 31, 1998

            REVENUES. Revenues increased 86% to $151.0 million for the nine
months ended March 31, 1999 from $81.3 million for the nine months ended March
31, 1998 due to an increase in the Company's membership base and an increase in
the weighted average program fee. The Company's membership base increased to
approximately 5.0 million members at March 31, 1999 from 2.6 million members at
March 31, 1998. If revenues from Coverdell and Company, acquired on April 2,
1998, were included in both periods on a pro-forma basis, nine month revenues
would have increased 65%. The increase in the Company's membership base was due
to increased demand for the Company's existing programs, new programs introduced
in fiscal 1998 and members acquired through the Coverdell acquisition. The
increase in the weighted average program fee was due to an increase in program
pricing and introduction of new programs with higher fees. Revenues from
renewals increased to $64.6 million in 1999 from $33.3 million in 1998. As a
percentage of individual membership revenues, these amounts represented 45% in
1999 and 43% in 1998.


                                       8
<PAGE>   9

                            MEMBERWORKS INCORPORATED

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

            OPERATING EXPENSES. Operating expenses increased 77% to $29.8
million in 1999 from $16.8 million in 1998 due to the servicing requirements of
the larger membership base of the Company. As a percentage of revenues,
operating expenses decreased to 19.7% in 1999 from 20.7% in 1998. The decrease
in this percentage is primarily due to the increased leverage of certain costs
which do not increase proportionately with revenues.

            MARKETING EXPENSES. Marketing expenses increased 83% to $88.9
million in 1999 from $48.5 million in 1998 due to increased telemarketing and
royalty expense associated with the larger membership base. As a percentage of
revenues, marketing expenses decreased to 58.9% in 1999 from 59.7% in 1998. The
decrease was due to the favorable effect of an increase in more efficient
marketing methods and improved retention rates.

            In addition to marketing expenses, the Company also monitors the
spending for membership solicitation and other deferred costs. These costs
increased 66% to $106.3 million in 1999 from $64.2 million in 1998 primarily due
to increased marketing efforts incurred to grow the membership base.

            GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased 84% to $28.7 million in 1999 from $15.6 million in 1998. The
increase was attributable to the cost incurred for additional personnel in all
areas and related facilities costs as well as amortization expense of
intangibles related to the Coverdell acquisition. As a percentage of revenues,
general and administrative expenses decreased to 19.0% in 1999 from 19.1% in
1998.

            OTHER INCOME, NET. Other income, net of $1.4 million was reported
in 1999 compared to $1.3 million reported in 1998 and is primarily composed of 
interest income from cash and cash equivalents.

            PROVISION FOR INCOME TAXES. The Company was not required to record a
provision for income taxes for the nine months ended March 31, 1999 and 1998 due
to tax losses realized.

LIQUIDITY AND CAPITAL RESOURCES

            Net cash provided by operating activities increased to $33.8 million
for the nine months ended March 31, 1999 compared to $2.2 million for the same
period in 1998 due to improved operating results, utilization of more efficient
marketing methods, increased retention and timing of working capital which is
expected to reverse by year end.

            Net cash used in investing activities was $9.5 million in 1999 and
$2.8 million in 1998. The Company's capital expenditures increased to $8.6
million in 1999 from $2.8 million in 1998 due to a computer system upgrade and
expansion of the Company's fulfillment center and office facilities.

            Net cash used in financing activities was $1.9 million in 1999 and
$2.9 million in 1998. This decrease is primarily related to a reduction in
treasury share repurchased under the Company's stock repurchase program. The
Company purchased 81,000 shares during the nine month period ended March 31,
1999 versus 128,000 shares during the nine month period ended March 31, 1998.

            On April 9, 1999, subsequent to quarter end, the Company purchased
Quota-Phone, Inc. for $9.25 million, of which $7.75 million was paid in cash.

            Because of ongoing costs in connection with soliciting new members,
the Company expects to continue to utilize net cash generated from operating
activities, if any, to increase the Company's membership base. The Company
believes that existing cash balances together with its available bank credit
facility, will be sufficient to meet its funding requirements for at least the
next twelve months.


                                       9
<PAGE>   10

                            MEMBERWORKS INCORPORATED

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

YEAR 2000 ISSUES

            The Company has completed an analysis of its software and hardware
and has determined that its systems are Year 2000 ("Y2K") compliant. As part of
the Company's evaluation, the Company tested Y2K communications compliance with
all of the Company's clients and vendors, including the processing and
transmission of test files between the Company, its customers and its vendors.

            The cost of the Y2K project has not been material to the Company and
has been funded through operating cash flows. The Company has expensed all costs
associated with this project as incurred.

            Although management believes the Company's systems will be Year 2000
compliant, the Company has begun developing contingency plans to address any
possible system failures. Because the Company uses multiple vendors to process
its billing transactions, its external risk is mitigated as vendors may be used
interchangeably. However, there can be no assurance that these, or other
companies on which the Company relies will be timely converted or that any such
failure to convert would not have an adverse effect on the Company's systems and
operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

            This Quarterly Report contains forward-looking statements that
involve risks and uncertainties, including the statements in Liquidity and
Capital Resources regarding the adequacy of funds to meet funding requirements.
The Company's actual results may differ significantly from the results discussed
in the forward-looking statements. A number of uncertainties exist that could
affect the Company's future operating results, including, without limitation,
the Company's history of losses, the Company's ability to retain existing
clients and attract new clients, the Company's dependence on membership
renewals, intense competition, the Company's continuing ability to develop new
programs which generate consumer interest, and general economic factors. The
Company has incurred significant operating losses since its inception. Although
the Company has experienced revenue growth and has reported net income in recent
quarterly periods, such growth rates and favorable results may not be
sustainable and may not be indicative of future operating results. There can be
no assurance that the Company will be able to maintain profitability in the
future.


                                       10
<PAGE>   11

                            MEMBERWORKS INCORPORATED

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

The effective date of the registration statement pursuant to which the Company
conducted the public offering of its Common Stock was October 18, 1996 and the
file number was 333-10541. The Company filed its initial report on Form SR on
January 27, 1997 for the period ended January 18, 1997.

From the effective date of the registration statement filed in connection with
the offering to March 31, 1999, the net proceeds of the offering were used as
follows (in thousands):

<TABLE>
<CAPTION>
      <S>                                                    <C>    
      Acquisitions of other businesses                       $ 8,341
      Loan to affiliate                                          930
      Purchase and installation of machinery and equipment    12,946
      Repayment of indebtedness                                2,818
      Working capital                                          4,264
                                                             -------
                                                             $29,299
                                                             =======
</TABLE>

The remaining $7,101,000 of the proceeds has been invested in short-term, highly
rated money market funds, government securities and commercial paper. Of the
$2,818,000 used to repay indebtedness, $1,855,000 represented direct or indirect
payments to directors, officers, general partners of the issuer or their
associates; to persons owning ten percent or more of any class of equity
securities of the issuer; and to affiliates of the issuer.

Item 6. Exhibits and Reports on Form 8-K

            (a)   Exhibits 

                        27 - Financial Data Schedule (included in EDGAR copy
                        only)

            (b)   Reports on Form 8-K

                        No reports on Form 8-K were filed by the Company during
                        the quarter ended March 31, 1999.


                                       11
<PAGE>   12

                            MEMBERWORKS INCORPORATED

                                   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.


                                        MEMBERWORKS INCORPORATED
                                        (Registrant)


Date: May 14, 1999                  By: /s/ Gary A. Johnson
                                        ----------------------------------------
                                        Gary A. Johnson, President, Chief
                                        Executive Officer and Director


Date: May 14, 1999                  By: /s/ James B. Duffy
                                        ----------------------------------------
                                        James B. Duffy, Senior Vice President 
                                        and Chief Financial Officer (Principal 
                                        Financial and Accounting Officer)