<PAGE>
 
================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                ---------------
                                   FORM 10-Q
                                ---------------
                                        
(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
     OF THE SECURITIES EXCHANGE ACT OF 1934

     For the quarterly period ended March 31, 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 0-28436
                                        

                               OPEN MARKET, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                  <C>
         Delaware                                            04-3214536
(State or other jurisdiction of                          (I.R.S. Employer     
incorporation or organization)                        Identification Number)
                                                             
</TABLE>


                                One Wayside Road
                        Burlington, Massachusetts 01803
              (Address of principal executive offices)  (Zip Code)

                                 (781) 359-3000
              (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 [_]



As of April 30, 1999, there were 35,985,156 shares of the Registrant's Common
Stock outstanding.

================================================================================
<PAGE>
 
                               OPEN MARKET, INC.

                               TABLE OF CONTENTS
                                        
<TABLE> 
<CAPTION>
                                                                            Page
                                                                            ----
                                                                            
<S>                                                                        <C>
PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements
 
  Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.     3
                                                                              
  Consolidated Statements of Operations for the three months ended March 31, 
  1999 and 1998.                                                              4
                                                                              
  Consolidated Statements of Cash Flows for the three months                  
  ended March 31, 1999 and 1998.                                              5
                                                                              
  Notes to Consolidated Financial Statements                                  6
 
ITEM 2.  Management's Discussion and Analysis of Financial
 Condition and Results of Operations                                          9
 
 
ITEM 3.  Quantitative and Qualitative Disclosures about
 Market Risk.                                                                18


PART II - OTHER INFORMATION
 
    ITEM 1.  Legal Proceedings                                               18
                                                                       
    ITEM 2.  Changes in Securities and Use of Proceeds                       18
                                                                       
    ITEM 3.  Defaults Upon Senior Securities                                 18
                                                                       
    ITEM 4.  Submission of Matters to a Vote of Security Holders             18
                                                                       
    ITEM 5.  Other Information                                               18
                                                                       
    ITEM 6.  Exhibits and Reports on Form 8-K                                18

SIGNATURES                                                                   19
 
EXHIBIT INDEX                                                                20
</TABLE>
                                                                                
<PAGE>
 
                         PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements
                               OPEN MARKET, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                             As Restated
                                                                                      March 31,              December 31,
                                                                                        1999                     1998
                                                                               --------------------     -------------------
<S>                                                                              <C>                      <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                               $  17,876               $  19,921
  Marketable securities                                                                      14,854                  14,958
  Accounts receivable, net of allowances of $2,514 and $2,523, respectively                  22,717                  28,250 
  Prepaid expenses and other current assets                                                   2,160                   1,892
                                                                               --------------------     ------------------- 
     Total current assets                                                                    57,607                  65,021
                                                                               --------------------     -------------------
 
Property, plant and equipment, at cost:
  Computers and office equipment                                                             15,013                  14,743
  Leasehold improvements                                                                      5,379                   5,421
  Land & building                                                                             4,200                   4,200
  Furniture & fixtures                                                                        2,130                   2,157
                                                                               --------------------     -------------------
     Total property and equipment                                                            26,722                  26,521
  Less: Accumulated depreciation and amortization                                            12,152                  11,093
                                                                               --------------------     -------------------
     Net property and equipment                                                              14,570                  15,428
 
Long-term marketable securities                                                                 710                   1,510
Intangible assets, net                                                                       10,906                  11,627
Other assets                                                                                  1,372                   1,372
                                                                               --------------------     -------------------
                                                                                          $  85,165               $  94,958
                                                                               ====================     ===================
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Line of credit                                                                          $  10,350               $  11,000
  Note payable                                                                                    -                   5,000
  Accounts payable                                                                            2,329                   2,848
  Accrued expenses                                                                           11,698                  13,692
  Deferred revenues                                                                           4,719                   4,548
  Current maturities of long-term obligations                                                    96                      88
                                                                               --------------------     ------------------- 
     Total current liabilities                                                               29,192                  37,176
                                                                               --------------------     -------------------
 
Long-term obligations, net of current maturities                                              2,764                   2,789
 
Stockholders' equity:
  Preferred stock, $.10 par value -
   Authorized - 2,000,000 shares;
   Issued and outstanding  none                                                                   -                       -
  Common stock, $.001 par value -
   Authorized - 100,000,000 shares;
   Issued and outstanding  35,785,000 shares and 35,291,000 shares at 
    March 31, 1999 and December 31, 1998, respectively                                           36                      35 
  Additional paid-in capital                                                                187,530                 186,074
  Accumulated deficit                                                                      (134,357)               (131,116)
                                                                               --------------------     ------------------- 
   Total stockholders' equity                                                                53,209                  54,993
                                                                               --------------------     -------------------
                                                                                          $  85,165               $  94,958
                                                                               ====================     =================== 
</TABLE>

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

                                      -3-
<PAGE>
 
                               OPEN MARKET, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                   March 31,
                                                   --------------------------------------
                                                           1999                 1998
                                                   -----------------     ----------------
<S>                                                  <C>                   <C>
REVENUES:
   Product revenues                                          $10,075              $11,273
   Service revenues                                            5,521                3,929
                                                   -----------------     ----------------
        Total revenues                                        15,596               15,202
                                                   -----------------     ---------------- 
 
COST OF REVENUES:
   Product revenues                                              635                  600
   Service revenues                                            3,904                2,906
                                                   -----------------     ---------------- 
        Total cost of revenues                                 4,539                3,506
                                                   -----------------     ---------------- 
        Gross profit                                          11,057               11,696
                                                   -----------------     ----------------
 
OPERATING EXPENSES:
   Selling and marketing                                       7,411                7,876
   Research and development                                    4,482                6,776
   General and administrative                                  2,359                2,929
                                                   -----------------     ---------------- 
        Total operating expenses                              14,252               17,581
                                                   -----------------     ---------------- 
        Loss from operations                                  (3,195)              (5,885)
                                                   -----------------     ---------------- 
OTHER INCOME (EXPENSE) :
    Interest income                                              284                  318
    Interest expense                                            (139)                (240)
    Other expense                                               (147)                 (10)
                                                   -----------------     ----------------
Loss before provision for incomes taxes                       (3,197)              (5,817)
                                                   -----------------     ----------------
Provision for foreign income taxes                                43                   32
                                                   -----------------     ----------------
 
NET LOSS                                                     $(3,240)             $(5,849)
                                                   =================     ================  
 
NET LOSS PER SHARE  BASIC AND DILUTED (Note 2(e))             $(0.09)              $(0.18)
                                                   =================     ================  
 
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
 EQUIVALENT SHARES OUTSTANDING  - BASIC AND
 DILUTED (Note 2(e))                                          35,316               31,769
                                                   =================     ================
</TABLE>
                                                                                
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      -4-
<PAGE>

                               OPEN MARKET, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                             Three Months Ended
                                                                                                 March 31,
                                                                                -----------------------------------------
                                                                                        1999                   1998
                                                                                ------------------     ------------------
<S>                                                                               <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                                  $(3,240)               $(5,849)
 Adjustments to reconcile net loss to net cash provided by (used in) operating
  activities:
   Depreciation and amortization                                                             1,059                  1,194
   Amortization of intangible assets                                                           720                    405
   Deferred Compensation                                                                         -                     28
   Changes in assets and liabilities-
      Accounts receivable                                                                    5,532                   (533)
      Prepaid expenses and other current assets                                               (267)                  (157)
      Accounts payable                                                                        (519)                 1,542
      Accrued expenses                                                                      (1,993)                (2,441)
      Deferred revenues                                                                        171                 (2,517)
                                                                                ------------------     ------------------ 
        Net cash provided by (used in) operating activities                                  1,463                 (8,328)
                                                                                ------------------     ------------------ 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property, plant and equipment                                                   (201)                (2,219)
 Payment from founder on loan                                                                    -                    993
 Sales(purchase)of marketable securities, net                                                  904                 (2,252)
 Increase in other assets                                                                        -                     10
                                                                                ------------------     ------------------
        Net cash provided by (used in) investing activities                                    703                 (3,468)
                                                                                ------------------     ------------------
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 (Payments)proceeds from Line of Credit                                                       (650)                 7,136
 Payments on note payable                                                                   (5,000)                (1,818)
 Payments on long-term obligations                                                             (17)                    (2)
 Proceeds from issuance of common stock                                                      1,456                  1,248
                                                                                ------------------     ------------------
        Net cash (used in) provided by financing activities                                 (4,211)                 6,564
                                                                                ------------------     ------------------
 
 Net decrease in cash and cash equivalents                                                  (2,045)                (5,232)
 
 Cash and cash equivalents, beginning of period                                             19,921                 19,666
                                                                                ------------------     ------------------
 Cash and cash equivalents, end of period                                                  $17,876                $14,434
                                                                                ==================     ==================
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid during the period                                                           $   547                $   855
                                                                                ==================     ==================
 Taxes paid during the period                                                              $    44                $    21
                                                                                ==================     ==================
 
 
Supplemental Disclosure Of Non-Cash Investing Activities:
 Payment of note payable through issuance of common stock                                        -                $ 3,182
                                                                                =========================================
</TABLE>

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

                                      -5-
<PAGE>
 
                               OPEN MARKET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (in thousands, except share data)
                                  (Unaudited)

1.  Basis of Presentation

  The consolidated financial statements of Open Market, Inc. (the Company)
presented herein have been prepared pursuant to the rules of the Securities and
Exchange Commission for quarterly reports on Form 10-Q and do not include all of
the information and note disclosures required by generally accepted accounting
principles.  These statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1998, included in the Company's Annual Report on Form 10-K/A filed with the
Securities and Exchange Commission on April 2, 1999.

  The consolidated financial statements and notes herein are unaudited but, in
the opinion of management, include all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company and its
subsidiaries.

  The results of operations for the interim periods shown herein are not
necessarily indicative of the results to be expected for any future interim
period or for the entire year.

  In March 1999, the Company restated its June 30, 1998 and September 30, 1998
financial statements to reflect a change for the purchase price allocation
related to the 1998 acquisition of ICentral Incorporated (ICentral) and the
related amortization of intangibles. This adjustment decreased the amount
previously allocated to in-process technology by $5,100, which has been
capitalized as developed technology and goodwill and will be amortized on a
straight-line basis over five years. The restatement was the result of concerns
presented by the Securities and Exchange Commission (SEC) regarding the
valuation methodology used for the determination of charges for acquired in-
process research and development costs. The Company believes that its periodic
reports filed June 30, 1998 and September 30, 1998, which included such charges
related to the acquisition costs for ICentral, were made in accordance with
generally accepted accounting principles and established industry practices at
the time. In addition, the valuation of the acquired in-process research and
development was supported by an independent valuation by Arthur Andersen LLP.

  The Company has not been contacted by the SEC regarding its valuation
methodology. However, in response to the SEC's new guidelines, the Company has
decided to proactively move to the new valuation methodology for its 1998
acquisition of ICentral. Therefore, the Company expensed $5,700 to in-process
research and development in the second quarter of 1998, capitalized $6,300 of
developed technology and goodwill, and amortized the developed technology and
goodwill over the 5-year estimated useful life.



2.  Summary of Significant Accounting Policies
 
  The accompanying consolidated financial statements reflect the application of
certain accounting policies described in this and other notes to these
consolidated financial statements.


 (a) Principles of Consolidation

  The accompanying consolidated financial statements reflect the accounts of the
  Company and its wholly-owned subsidiaries.  All material intercompany accounts
  and transactions have been eliminated in consolidation.

                                      -6-
<PAGE>
 
 (b) Revenue Recognition

     The Company applies Statement of Position No. 97-2, Software Revenue
  Recognition, which superseded Statement of Position 91-1.  The Company
  generates revenue from licensing the rights to use its software products to
  end users and sublicense fees from resellers.  The Company also generates
  service revenues from the sale of postcontract customer support and the sale
  of certain consulting and development services.

  Revenues from software license agreements are recognized upon delivery of the
  software if there is evidence of an agreement, there are no significant post-
  delivery obligations, and the payment is fixed, determinable and probable.  If
  an acceptance period is required, revenues are recognized upon customer
  acceptance.  The Company enters into reseller arrangements for certain
  products that typically provide for sublicense fees payable to the Company
  based on a percentage of the Company's list price.  Royalty and sublicense
  revenues from the Company's reseller arrangements are recognized when earned,
  either on a per-unit basis as reported to the Company by its licensees, or,
  with regards to guaranteed minimums, upon shipment of the master copy of all
  software to which the guaranteed minimum sublicense fees relate, if there are
  no significant post-delivery obligations.  Revenues for post-contract customer
  support are recognized ratably over the term of the support period, which is
  typically one year.  Service revenue, which includes education, implementation
  and consulting services, is recognized in the period services are provided, if
  customer acceptance is not required, there is evidence of an agreement, the
  revenues are fixed and determinable and collectibility is probable.

  Cost of product revenues consists of costs to distribute the product,
  including the cost of the media on which it is delivered and royalty payments
  to third-party vendors.  Cost of service revenues consists primarily of
  consulting and support personnel salaries and related costs.

  Deferred revenues represent cash received from customers for products and
  services in advance of revenue recognition.



 (c) Cash, Cash Equivalents and Marketable Securities


     The Company accounts for investments under Statement of Financial
  Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in
  Debt and Equity Securities.  Under SFAS No. 115, investments for which the
  Company has the positive intent and ability to hold to maturity, consisting of
  cash equivalents and marketable securities, are reported at amortized cost,
  which approximates fair market value.  Cash equivalents are highly liquid
  investments with  maturities of less than three months at the time of
  acquisition.  Marketable securities consist of investment grade commercial
  paper and corporate notes, and obligations of certain municipalities as of
  March 31, 1999, have maturities of greater than three months but less than one
  year.  The average maturity of the Company's marketable securities is
  approximately eleven months.

  (d)  Translation of Foreign Currencies

    The accounts of the Company's foreign subsidiaries are translated in
  accordance with SFAS No. 52, Foreign Currency Translation.  In translating the
  accounts of the foreign subsidiaries into U.S. dollars, assets and liabilities
  are translated at the rate of exchange in effect at year-end, while
  stockholders' equity is translated at historical rates.  Revenue and expense
  accounts are translated using the weighted average rate in effect during the
  year.  Foreign currency translation and transaction gains or losses for the
  foreign subsidiary are included in the accompanying consolidated statements of
  operations since the functional currency of these subsidiaries is the U.S.

                                      -7-
<PAGE>

  dollar.  The Company had no sales denominated in foreign currencies in the
  three months ended March 31, 1999 and 1998.

 (e) Net Loss Per Share

     Effective December 31, 1997, the Company adopted SFAS No. 128 Earnings Per
  Share. SFAS NO. 128 establishes standards for computing and presenting
  earnings per share and applies to entities with publicly held common stock or
  potential common stock. The Company has applied the provisions of SFAS No. 128
  and Staff Accounting Bulletin (SAB) No. 98 retroactively to all periods
  presented. Weighted average shares outstanding includes the shares issued to
  Reed Elsevier in January 1998 relating to the Folio acquisition. Diluted net
  loss per share for the three months ended March 31, 1999 and 1998 are the same
  as basic net loss per share as the inclusion of potential common stock would
  be antidilutive. Calculations of basic and diluted net loss per common share
  are as follows:


<TABLE>
<CAPTION>
 
                                      
 
                                                  Three Months Ended
                                            --------------------------------
                                             March 31,         March 31,
                                               1999              1998
                                            --------------------------------
                                         (in thousands, except per share data)
<S>                                      <C>                <C>
Antidilutive securities 
that were not included
- common stock options                        6,784              6,208
 
</TABLE>


(f) Comprehensive Income

     Effective January 1, 1998, the Company adopted Statement of Financial
     Accounting Standards No. 130 SFAS 130, Reporting Comprehensive Income.
     SFAS No. 130 establishes standards for reporting and display of
     comprehensive income and its components in financial statements.
     Comprehensive income includes all changes in equity during a period except
     those resulting from investments by owners and distribution to owners. The
     comprehensive net loss is the same as net loss for all periods presented.

(g)  Disclosures about Segments of an Enterprise

     The Company has adopted SFAS No. 131, Disclosures about Segments of an
     Enterprise and Related Information in the fiscal year ended December 31,
     1998.  SFAS No. 131 establishes standards for reporting information
     regarding operating segments in annual financial statements and requires
     selected information for those segments to be presented in interim
     financial reports issued to stockholders.  SFAS No. 131 also establishes
     standards for related disclosures about products and services and
     geographic areas.  Operating segments are identified as components of an
     enterprise about which separate discrete financial information is available
     for evaluation by the chief operating decision maker, or decision making
     group, in making decisions how to allocate resources and assess
     performance.  The Company's chief decision-maker, as defined under SFAS No.
     131, is a combination of the Chief Executive Officer and the Chief
     Financial Officer.  To date, the Company has viewed its operations and
     manages its business as principally one operating segment.  As a result,
     the financial information disclosed herein, represents all of the material
     financial information related to the Company's principal operating segment.


 3. Restructuring

     In the fourth quarter of 1998, the Company implemented a restructuring plan
     to better align its operating costs with its anticipated future revenue

                                      -8-
<PAGE>
 
     stream. The major component of the restructuring charge relates to the
     elimination of approximately 67 employees across the following functions:
     Engineering (27), Marketing (17), General and Administrative (22) and
     Services (1). In addition, 10 employees moved from Engineering to
     Consulting. Other components related to the exiting of certain contractual
     arrangements for porting and product integration that resulted from a
     change in product strategy. Other charges included the write-off of
     unutilized software, originally intended for use by the sales force but not
     implemented due to the reduction in marketing personnel.

<TABLE>
<S>                                                               <C>
         Employee severance, benefits and related costs..........  $  1,260
         Write-off of assets.....................................       294
         Termination costs of certain contractual arrangements...       488
                                                                   --------
        Total....................................................  $  2,042
                                                                   ========
</TABLE>
                                                                                
     At March 31, 1999, approximately $671 of accrued restructuring charges
     remained, which is comprised of approximately $294 of severance-related
     costs and $377 of contractual costs. The total cash impact of the
     restructuring amounted to approximately $1,748. The total cash paid as of
     March 31, 1999 was approximately $1,044 and the remaining amount will be
     paid during 1999.
 

 

     ITEM 2.  Management's Discussion and Analysis of Financial Condition and
              ---------------------------------------------------------------
              Results of Operations
              ---------------------

     Results of Operations

     Overview

     Open Market develops, markets, licenses and supports enterprise-class,
     packaged application software products and professional services that allow
     its customers to engage in business-to-business and business-to-consumer
     Internet commerce, information commerce and commercial publishing.  Open
     Market's Internet commerce software includes a wide spectrum of
     functionality required to effectively conduct business on the Internet,
     allowing companies to attract customers to their Web site, engage customers
     in acting upon a commercial offer, complete a secure transaction and
     service customers once a transaction has been completed.

     This section of the Quarterly Report may include historical information and
     certain forward-looking statements.  Please review below the information
     contained under the heading "Certain Factors That May Affect Future
     Operating Results" that addresses certain risks and uncertainties that
     could cause the Company's future operating results to differ from those
     indicated by any forward looking statements made by the Company or others.
     The Company recommends that the business and historical discussions put
     forth in this section be read together with the discussion of such risks
     and uncertainties.  In addition, the following discussion should be read in
     conjunction with the consolidated financial statements and the notes
     thereto, and the information included elsewhere herein.  All dollar amounts
     presented in the following discussion are presented in thousands, except
     share and per share amounts and employee data.

     Revenues

     Total revenues for the three months ended March 31, 1999 were approximately
     $15,596, or a 3% increase when compared to $15,202 for the three months
     ended March 31, 1998.

                                      -9-
<PAGE>
 
     Product revenues decreased approximately 10% to $10,075, or 65% of total
     revenues, for the three months ended March 31, 1999, compared to $11,273,
     or 74% of total revenues, for the same period of the prior year.  Product
     revenues include: (1) software products, which include the licensing of
     Transact, the Company's flagship product for Internet commerce,
     LiveCommerce and the Folio and ShopSite product suites, and (2) royalty
     revenues, which include Folio publisher royalties and Transact merchant
     fees.  The decrease in product revenues was attributed primarily to a
     decrease in Folio publisher royalties.  The 36% comparative decrease in
     publisher royalties/merchant fees from the same period of the prior year
     was attributable primarily to three large multi-year Folio publisher
     royalty contracts that were consummated in the first quarter of 1998. The
     publisher royalty decrease was partially offset by a 41% increase in
     software product revenues.

     Service revenues increased to $5,521, or 35% of total revenues, for the
     three months ended March 31, 1999, from $3,929, or 26% of total revenues,
     for the three months ended March 31, 1998.  Of the total service revenues
     for the three months ended March 31, 1999 and 1998, 38% and 43% came from
     maintenance and support services, respectively, which include product
     maintenance and technical support, and 62% and 57%, respectively, was
     attributable to professional services, which include consulting,
     implementation, and education services.  Professional service revenues
     increased as a percentage of total service revenues for the three months
     ended March 31, 1999 primarily due to increased demand for consulting
     services across the Company's customer base.  Increases in demand for
     consulting and other services often result from new software product sales.
     Additionally, the increase in demand for consulting services is attributed
     to improvements in the Company's design and execution in marketing and
     delivering these services.

     Cost of Revenues

     Cost of product revenues increased to $635, or 6% of total product
     revenues, for the three months ended March 31, 1999, from $600, or 5% of
     total product revenues, for the same period in the prior year. The increase
     in cost of product revenues was primarily due to increased costs for third
     party licensing royalties. Cost of product revenues includes the costs to
     distribute products, costs of media on which products are delivered,
     royalties for third-party technology that is embedded in certain products
     of the Company, and royalties for the resale of third-party software
     products. Management believes that these costs as a percentage of product
     revenues will remain in the range of 6% to 10% for the foreseeable future
     as the Company incorporates more third-party technology into its products
     and continues to resell third-party software products with its Internet
     commerce solutions.

     Cost of service revenues increased approximately 34% to $3,904 for the
     three months ended March 31, 1999, from $2,906 for the same period of the
     prior year. Cost of service revenues consists primarily of personnel and
     related costs incurred in providing development, consulting, and other
     technical services to customers. The increase in cost was consistent with
     the approximate 40% growth in service revenues from the same period of the
     prior year. Additionally, service revenue gross margin increased
     approximately 3% in the three months ended March 31, 1999 from the same
     prior year period. The increase was attributed primarily to higher resource
     utilization rates and improved cost management in the delivery of
     professional services. Management believes that the service gross margin
     may fluctuate over the next few quarters depending upon such factors as
     resource utilization rates and growth in the consulting business.

     Operating Expenses

     Selling and marketing expenses consisted primarily of the cost of sales and
     marketing personnel and consultants, as well as the costs associated with
     marketing programs, advertising costs, and literature. Selling and
     marketing expenses decreased to $7,411 for the three-month period ended
     March 31, 1999 

                                      -10-
<PAGE>
 
     as compared to $7,876 in the comparable period of the prior year. The
     decrease in these expenses was attributable primarily to decreases in
     salaries and other employee-related expenses related, in part, to the
     Company's restructuring that took place in the fourth quarter of fiscal
     1998. As a result, selling and marketing headcount for the three-months
     ended March 31, 1999 declined approximately 12% from the same period of the
     prior year.

     Research and development expenses consist primarily of the cost of research
     and development personnel and independent contractors, as well as equipment
     and facilities costs related to such activities.  For the three months
     ended March 31, 1999, these expenses decreased to $4,482 from $6,776 for
     the three months ended March 31, 1998. The decrease in expenses of
     approximately 34% was attributable primarily to both a reduction in
     employee-related expenses and the cost of outside contractors as certain
     development projects came to fruition. In the first quarter of fiscal 1998,
     the Company was actively engaged in dual research and development projects
     related to the next generation Transact 4 and Folio 4 products. Research
     and development headcount for the three-months ended March 31, 1999
     declined approximately 37% from the prior year as a result of the
     completion of those projects.

     Qualifying capitalized software development costs were immaterial in both
     periods.  Accordingly, the Company has charged all such expenses to
     research and development in the period incurred.  The Company believes that
     significant investments in research and development are required to remain
     competitive in the software industry.  Certain research and development
     expenditures are incurred substantially in advance of the related revenues
     and in some cases do not generate revenues.

     General and administrative expenses consist primarily of the cost of
     finance, management, and administrative personnel, as well as legal and
     other professional fees. These expenses decreased for the three months
     ended March 31, 1999, to $2,359 from $2,929 for the three months ended
     March 31, 1998. The decrease of approximately 20% was due mainly to
     decreases in employee-related expenses and outside consulting expenses.
     General and administrative headcount for the three-months ended March 31,
     1999 declined approximately 15% as compared to the same period of the prior
     year primarily as a result of the Company's restructuring in the fourth
     quarter of fiscal 1998.

     Interest income represents interest earned on cash, cash equivalents and
     marketable securities.  Interest income decreased to $284 in the three
     months ended March 31, 1999 from approximately $318 in the same period of
     the prior year. The decrease was primarily attributable to lower
     average investments in cash, cash equivalents and marketable securities
     during the period. Interest expense decreased to $139 from $240 for the
     three-month periods ended March 31, 1999 and 1998, respectively. Interest
     expense relates to the Company's accounts receivable line of credit, the
     Company's note payable issued in conjunction with the Folio acquisition,
     the mortgage on the Company's Provo, Utah facility, as well as an
     obligation under a license agreement. Other expense of $147 for the three-
     month period ended March 31, 1999 represents foreign currency translation
     losses.

     The Company recorded a provision for foreign income taxes of $42 compared
     to $32 for the three-months ended March 31, 1999 and 1998, respectively.
     This provision was recorded for estimated taxes due in foreign
     jurisdictions.  The Company has had losses for U.S. tax purposes for all
     periods to date and, accordingly, there has been no provision for U.S.
     income taxes.

     Liquidity and Capital Resources

     At March 31, 1999, the Company had $33,440 in cash, cash equivalents and
     marketable securities, which represents a decrease of $2,949 from December
     31, 1998.

     The Company's operating activities provided cash of approximately $1,463
     for the three months ended March 31, 1999. The decrease in accounts
     receivable of approximately $5,532 from December 31, 1998 to March 31, 1999
     was attributable primarily to the collection of

                                      -11-
<PAGE>
 
     several extended-term contracts and improvement in the Company's overall
     cash management and collection practices.

     The Company's investing activities provided cash of approximately $703 for
     the three months ended March 31, 1999, which was related primarily to sales
     of marketable securities of $904.  The principle uses of cash for investing
     activities during the period were for purchases related to property, plant,
     and equipment.

     The Company's financing activities utilized cash of approximately $4,211
     for the three months ended March 31, 1999.  The principal use of cash for
     financing activities during the period was a $5,000 payment for the note
     payable issued to Reed Elsevier in 1997 in connection with the acquisition
     of the Folio Corporation. This use of cash was partially offset by proceeds
     of $1,456 from the exercise of stock options under the Company's 1994 Stock
     Incentive Plan and stock purchases under the Company's Employee Stock
     Purchase Plan.

     The Company has an unsecured bank credit facility that provides up to
     $15,000 in financing.  Borrowings under this line are limited to 80% of
     eligible domestic accounts receivable and 90% of eligible foreign accounts
     receivable, as defined, and bears interest at the prime lending rate (7.75%
     at March 31, 1999).  The Company is required to comply with certain
     restrictive covenants under this agreement.  During the three months ended
     March 31, 1999, the Company decreased its borrowings under this facility to
     $10,350 from $11,000 at December 31, 1998.  At March 31, 1999, $4,650
     remained available to the Company under this facility.
 
     At December 31, 1998, the Company had net operating loss carryforwards for
     income tax purposes of approximately $96,000. These losses are available to
     reduce federal and state taxable income, if any, in future years. These
     losses are subject to review and possible adjustment by the Internal
     Revenue Service and may be limited in the event of certain cumulative
     changes in ownership interests of significant shareholders over a three-
     year period that are in excess of 50%.  While the Company believes that it
     has experienced a change in ownership in excess of 50%, it does not believe
     that this change in ownership will significantly impact the Company's
     ability to utilize its net operating loss carryforwards.

     The Company believes that its existing capital resources are adequate to
     meet its cash requirements for at least the next 12 months. There can be no
     assurance, however, that changes in the Company's plans or other events
     affecting the Company's operations will not result in accelerated or
     unexpected expenditures.

     Year 2000 Compliance

     Background

     The Company recognizes that it must ensure that its products and operations
     will not be adversely impacted by Year 2000 software failures, which can
     arise in date-sensitive software applications that utilize a field of two
     digits to define the applicable year.  In such applications, a date using
     "00" as the year may be recognized as the year 1900 rather than the year
     2000.

     State of Readiness

     With respect to the Company's internal systems, 80% of the Company's
     mission critical information technology systems are considered to be Year
     2000 compliant, as defined by the criteria established by the British
     Standards Institute.  With respect to the Company's software products, the
     Company has developed and implemented a detailed Year 2000 test procedure
     for the phase review and software release process to ensure that its
     software products are Year 2000 compliant.  The execution of this test
     procedure began in October 1998 and management expects that such testing
     will continue throughout 1999.  Additionally, approximately 90% of the
     Company's embedded product vendors 

                                      -12-
<PAGE>
 
     are already considered to be Year 2000 compliant, based wholly on external
     and internal testing of such embedded products. As a result, management
     expects that the Company and its key vendors will be positioned to
     successfully meet all Year 2000 compliance issues for the Company's
     products.

     Related Costs

     Management has assessed the related costs for Year 2000 compliance to be in
     the range of $700-$1,000.  To date, the Company has incurred costs of
     approximately $600 for its Year 2000 projects.  Such costs may include
     those for research and development, capital equipment, outside software
     tools, outside contractors, and other internal resources that may be
     assigned to the project.  Management acknowledges that these costs may be
     subject to reassessment as testing of the Company's products and mission
     critical systems is completed and compliance is fully achieved.

     Perceived Risks

     At the present time, management does not expect Year 2000 issues to have a
     material adverse impact on the Company's business or future results of
     operations.  However, there can be no assurance that there will not be
     interruptions of operations or other limitations of system or product
     functionality, or that the Company will not incur significant costs to
     avoid such interruptions or limitations.  For example, such interruptions
     or limitations may include disruptions in customer service and technical
     support facilities, interruptions to customer access to on-line products
     and services, information or other communications, delays in manufacturing
     and shipping of products, and other interruptions or delays in the day-to-
     day operations of the Company.  In addition, even if the Company's products
     are Year 2000 compliant, other systems or software used by the Company's
     domestic and international customers may not be Year 2000 compliant.  The
     failure of any such non-compliant third-party software or systems contained
     in such operating environments may negatively affect the performance of the
     Company's products, which may lead to increased costs associated with
     correcting technical problems, lost sales, or other negative consequences
     resulting from customer dissatisfaction, including litigation.  Such
     failure may have a material adverse effect on the Company's business,
     financial condition and operating results.
 
     Contingency Plans

     In order to avoid such material adverse effects, the Company will continue
     to seek business relationships only with those entities that are actively
     and successfully addressing Year 2000 issues.  If the inability of certain
     existing vendors or customers to successfully address Year 2000 issues
     begins to present adverse business effects for the Company, management may
     elect to suspend such business relationships until such time that such
     vendors or customers become fully compliant.

     Certain Factors That May Affect Future Results

     Introduction

     This Quarterly Report contains certain forward-looking statements. For this
     purpose, any statements contained herein that are not statements of
     historical fact may be deemed to be forward-looking statements. Without
     limiting the generality of the foregoing, the words "believes",
     "anticipates", "plans", "expects", and similar expressions are intended to
     identify forward-looking statements. There are a number of important
     factors that could cause the Company's actual results to differ materially
     from those indicated by forward-looking statements made in this Quarterly
     Report and presented elsewhere by management from time to time. Some of the
     important risks and uncertainties which may cause the Company's operating
     results to differ materially or adversely are discussed below and in the

                                      -13-
<PAGE>
 
     Company's Annual Report on Form 10-K/A for the fiscal year ended December 
     31, 1998 filed with the SEC.

     Rapid Technological Change

     The computer software industry is characterized by rapid technological
     change.  As a result, there is uncertainty about the widespread acceptance
     of new products that can cause significant delays in the sales cycle.  The
     Company must continue to upgrade its own technologies and commercialize
     products and services incorporating such technologies that may also
     lengthen the sales cycle.  The introduction of product or service
     enhancements or new products or services embodying new technologies,
     industry standards, or customer requirements could supplant or make
     obsolete the Company's existing products and services.

     Developing Internet Market

     The market for the Company's Internet products and services has only
     recently begun to develop, is rapidly evolving and is characterized by an
     increasing number of market entrants that have introduced and developed
     products and services for Internet commerce.  The Company's future
     operating results depend upon the development and growth of the market for
     Internet-based packaged software applications, including electronic
     commerce applications.  The acceptance of electronic commerce in general
     and, in particular, the Internet as a sales marketing and order receipt and
     processing medium are highly uncertain and subject to a number of risks.
     Critical issues concerning the commercial use of the Internet (including
     security, reliability, cost, ease of use, quality and service and the
     effect of government regulation) remain unresolved and may impact the
     growth of the Internet.  If the market fails to develop or develops more
     slowly than expected, the Company's operating results could be materially
     adversely affected.

     Recent Acquisition

     In April 1998, the Company completed the strategic acquisition of ICentral.
     The Company faces challenges relating to integration of operations such as
     coordinating geographically separate organizations, integrating personnel
     with disparate business backgrounds and combining different corporate
     cultures.  There can be no assurance that the acquired business or its
     products will be successful, that the Company will successfully integrate
     the acquired business into the Company, or that the Company will achieve
     the desired synergies from the transaction.

     Product Release Schedules

     Delays in the planned release of the Company's new products may adversely
     affect forecasted revenues, and create operational inefficiencies resulting
     from staffing levels designed to support the forecasted revenues.  The
     Company's failure to introduce new products, services, or product
     enhancements on a timely basis may delay or hinder market acceptance and
     allow competitors to gain greater market share than the Company.

     Government Regulation and Legal Uncertainties

     The Company is not currently subject to direct regulation by any government
     agency, other than regulations applicable to businesses generally, and
     there are currently few laws or regulations directly applicable to access
     to, or commerce on, the Internet.  However, due to the increasing
     popularity and use of the Internet, it is possible that a number of laws
     and regulations may be adopted with respect to the Internet, covering
     issues such as user privacy, taxation, the content of products, and the
     nature of services.  The adoption of any such laws or regulations may
     decrease the growth of the Internet or inhibit companies' ability to
     conduct electronic commerce, which could in turn adversely affect the
     Company's business, operating results or financial condition.  Moreover,
     the applicability of the Internet of 

                                      -14-
<PAGE>
 
     existing laws governing issues such as property ownership, libel and
     personal privacy is uncertain. Further, due to the encryption technology
     contained in the Company's products, such products are subject to U.S.
     export controls. There can be no assurance that such export controls,
     either in their current form or as may be subsequently enacted, will not
     delay the introduction of new products or limit the Company's ability to
     distribute products outside of the United States. While the Company intends
     to take precautions against unlawful exportation, the global nature of the
     Internet makes it difficult to effectively control the distribution of the
     Company's products. In addition, federal or state legislation or regulation
     may further limit levels of encryption or authentication technology.
     Further, various countries regulate the import of certain encryption
     technology and have adopted laws relating to personal privacy issues that
     could limit the Company's ability to distribute products in those
     countries. Any such export or import restrictions, new legislation or
     regulation or government enforcement of existing regulations could have a
     material adverse impact on the Company's business, operating results and
     financial condition.

     Complex Products; Lengthy Sales Cycles

     The Company's products are complex and often involve significant investment
     decisions by prospective customers.  Accordingly, the license of the
     Company's software products can be expected to require the Company to
     engage in a lengthy sales cycle and to provide a significant level of
     education to prospective customers regarding the use and benefits of the
     Company's products.  As a result, the Company's sales cycles may be subject
     to a number of significant delays over which it has little or no control.
     Delays in such transactions due to lengthy sales cycles or delays in
     customer production or deployment of a system could have a material adverse
     effect on the Company's business, operating results and financial condition
     and could be expected to cause the Company's operating results to vary
     significantly from quarter to quarter.

     Security

     A significant barrier to market acceptance of online commerce and
     communication is the concern regarding the secure exchange of valuable and
     confidential information over public networks.  The Company relies on
     encryption and authentication technology to provide the security and
     authentication necessary to effect the secure exchange of valuable and
     confidential information.  There can be no assurance that advances in
     computer capabilities, new discoveries in the field of cryptography or
     other events or developments (such as break-ins and similar disruptive
     problems caused by Internet users) will not result in a compromise or
     breach of algorithms used by the Company in its products to protect
     customer transaction data.  If any such compromise or breach was to occur,
     it could have a material adverse effect on the Company's business,
     financial condition, and operating results.

     Competition

     The market for Internet commerce software is new, rapidly evolving and
     intensely competitive.  The Internet is characterized by an increasing
     number of market entrants that have introduced or developed products and
     services for commerce on the Internet.  Many of the Company's competitors
     have greater financial, technical, and marketing resources and greater name
     recognition than does the Company.  The Company's operating results will be
     affected by the number of competitors and their pricing strategies and
     market acceptance of their products.

     Dependence on Personnel

     The Company's future success depends in significant part upon the continued
     service of its key technical and senior management personnel, and its
     continuing ability to attract and retain highly qualified technical and
     managerial personnel.  The Company's ability to establish and maintain a

                                      -15-
<PAGE>
 
     position of technology leadership in the industry depends in large part
     upon the skills of its development personnel.

     Pricing

     Future prices that the Company is able to charge for its products may
     decline from historical levels due to competitive reasons and other
     factors. In the future, the Company may have to reduce the prices of its
     products substantially or introduce lower-priced lines of products to gain
     greater market share.

     Limited Operating History

     The Company has a limited operating history.  The Company's ability to
     successfully market its existing products and to develop and market new
     products must be considered in light of the risks, expenses and
     difficulties frequently encountered by companies in their early stage of
     development, particularly companies in new and rapidly evolving markets.

     Fluctuations in Quarterly Operating Results

     The Company's expense levels are fixed in advance and based in part on its
     expectations as to future revenues. Quarterly sales and operating results
     will generally depend on the volume and timing of orders received within
     the quarter.  The Company may be unable to adjust spending in a timely
     manner to compensate for unexpected revenue shortfalls.  The Company
     expects in the future to experience significant fluctuations in quarterly
     operating results that may be caused by many factors, including, among
     other things, the number, timing, and significance of product enhancements
     and new product announcements by the Company or its competitors; the length
     of the Company's sales cycle; market acceptance of, and demand for, the
     Company's products; the pace of development of electronic commerce
     conducted on the Internet; customer order deferrals in anticipation of
     enhancements or new products offered by the Company or its competitors;
     non-renewal of service agreements; software defects and other product
     quality problems; the Company's ability to attract and retain key
     personnel; the extent of international sales; changes in the level of
     operating expenses, and general economic conditions.  As a result, the
     Company's operating results in future quarters may be below the
     expectations of market analysts and investors.

     Foreign Exchange

     To the extent that foreign currency exchange rates fluctuate in the future,
     the Company may be exposed to continued financial risk. Although the
     Company attempts to limit this risk by denominating most sales in United
     States dollars and limiting the amount of assets in its foreign operations,
     there can be no assurance that the Company will be successful in limiting
     its exposure.

     Volatility of Stock Price

     Open Market's Common Stock is quoted on the NASDAQ National Market.  The
     market price of Open Market's Common Stock, like that for the shares of
     many other high technology companies, has been and may continue to be
     volatile.  Recently, the stock market in general and the shares of software
     companies in particular have experienced significant price fluctuations.
     These broad market fluctuations combined with general economic and
     political conditions in the United States and abroad, and factors such as
     quarterly fluctuations in results of operations, the announcement of
     technological innovations, the introduction of new products by the Company
     or its competitors, and general conditions in the computer hardware and
     software industries, may have a significant impact on the market price of
     Open Market's Common Stock.

                                      -16-
<PAGE>
 
     Dependence on Intellectual Property Rights

     The Company's success is dependent to a significant degree on its
     proprietary software technology.  The Company provides its products to end
     users generally under non-exclusive, non-transferable licenses for the term
     of the agreement, which is usually in perpetuity.  The Company's policy is
     to enter into confidentiality and assignment agreements with its employees,
     consultants, and vendors and generally to control access to, and
     distribution of, its software, documentation, and other proprietary
     information.  Notwithstanding these precautions, it may be possible for a
     third party to copy or otherwise obtain and use the Company's software or
     other proprietary information without authorization or to develop similar
     software independently.  Although the Company holds several U.S. patents,
     including the three U.S. patents issued in March 1998 covering certain
     aspects or uses of electronic commerce software, there can be no assurance
     as to the degree of intellectual property protection such patents will
     provide.  Policing unauthorized use of the Company's products is difficult,
     particularly because the global nature of the Internet makes it difficult
     to control the ultimate destination or security of software or other data
     transmitted.  The laws of other countries may afford the Company little or
     no effective protection of its intellectual property.  There can be no
     assurance that the steps taken by the Company will prevent misappropriation
     of its technology or that agreements entered into for that purpose would be
     enforceable.

     Risk of Infringement

     The Company may, in the future, receive notices of claims of infringement
     of other parties' patent, trademark, copyright, and other proprietary
     rights.  There can be no assurance that claims for infringement or
     invalidity (or claims for indemnification from our customers resulting from
     infringement claims) will not be asserted or prosecuted against the
     Company.  In particular, claims could be asserted against the Company for
     violation of patent, trademark, copyright, or other laws as a result of the
     use by the Company, its customers, or other third parties of the Company's
     products to transmit, disseminate, or display information over or on the
     Internet.  Any such claims, with or without merit, could be time consuming
     to defend, result in costly litigation, divert management's attention and
     resources, cause product shipment delays, or require the Company to enter
     into royalty or licensing agreements.  There can be no assurance that such
     licenses would be available on reasonable terms, if at all, and the
     assertion or prosecution of any such claims could have a material adverse
     effect on the Company's business, financial condition, and operating
     results.

     Risk of Product Defects

     Sophisticated software products, such as those of the Company, may contain
     undetected errors or failures that become apparent when the products are
     introduced or when the volume of services provided increases.  There can be
     no assurance that, despite testing by the Company and potential customers,
     errors will not be found in the Company's products, resulting in loss of
     revenues, delay in market acceptance, diversion of development resources,
     damage to the Company's reputation, or increased service and warranty
     costs, which would have a material adverse effect on the Company's
     business, financial condition, and operating results.

     Litigation

     Litigation may be necessary in the future to enforce the Company's
     intellectual property rights, to protect the Company's patents, copyright
     or trade secrets, to determine the validity and scope of the proprietary
     rights of others, or to defend against claims of infringement or
     invalidity.  Such litigation, whether successful or unsuccessful, could
     result in substantial costs and diversions of resources, which may have a
     material adverse effect on the Company's business, financial condition, and
     operating results.  Litigation regarding intellectual property rights,
     copyrights, and patents is increasingly common in the software industry.
     Intellectual property litigation is complex and expensive, and the outcome
     of such litigation is

                                      -17-
<PAGE>
 
     difficult to predict. In addition, the Company faces risks on other general
     corporate legal matters.


     ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

     Foreign Exchange Hedging. The accounts of the Company's foreign
     subsidiaries are translated in accordance with SFAS No. 52, Foreign
     Currency Translation. In translating the accounts of the foreign
     subsidiaries into U.S. dollars, assets and liabilities are translated at
     the rate of exchange in effect at year-end, while stockholders' equity is
     translated at historical rates. Revenue and expense accounts are translated
     using the weighted average exchange rate in effect during the year. Foreign
     currency translation and transaction gains or losses for the Company's
     subsidiaries are included in the accompanying consolidated statements of
     operations since the functional currency for the Company's subsidiaries is
     the U.S. dollar.

      Investment Portfolio. The Company does not invest in derivative financial
     instruments that meet the high credit quality standards, as specified in
     the Company's investment policy guidelines; the policy also limits the
     amount of credit exposure of any one issue, issuer, and type of investment.
     See "Note 2--Summary of Significant Accounting Policies" in the Notes to
     Consolidated Financial Statements.



                          PART II - OTHER INFORMATION

     ITEM 1. Legal Proceedings

     None

     ITEM 2. Changes in Securities and Use of Proceeds

     None

     ITEM 3. Defaults Upon Senior Securities

     None

     ITEM 4. Submission of Matters to a Vote of Security Holders
 
     None

     ITEM 5. Other Information

     None

     ITEM 6. Exhibits and Reports on Form 8-K
 
             (a)  Exhibits

             No. 27  -  Financial Data Schedule

             (b)  On March 4/th/, 1999 the Company filed a report on Form 8-K
                  dated February 17/th/, 1999 to disclose that on February
                  17/th/, 1999, the Company approved an amendment to the Rights
                  Agreement dated January 26/th/, 1988. (The "Rights Agreement")
                  between the Company and Bank Boston N.A., as Rights Agent, the
                  eliminating provisions relating to the ability of newly
                  elected directors to redeem rights under the Rights Agreement.


                                      -18-
<PAGE>
 
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 hereunto duly authorized.

                                         OPEN MARKET, INC.
                                          (Registrant)
                                       
                                       
                                       
     Date: May 14, 1999                  By: /s/ Gary Eichhorn
                                             -------------------------------
                                             Gary Eichhorn
                                             President, Chief Executive Officer

                                      -19-
<PAGE>
 
     EXHIBIT INDEX

     Exhibit No.  Description                          Page
     ----------   -----------                          ----

        27        Financial Data Schedule (EDGAR)       21