<PAGE>

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                                 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 June 30, 1999

                                      OR

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

                 For the transition period from       to

                        Commission File Number 0-28436

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

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

                               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 July 30, 1999, there were 36,132,550 shares of the Registrant's Common
Stock outstanding.

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<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 June 30, 1999 and December 31, 1998...   3
  Consolidated Statements of Operations for the three and six months ended
   June 30, 1999 and 1998.................................................   4
  Consolidated Statements of Cash Flows for the six months ended June 30,
   1999 and 1998..........................................................   5
  Notes to Consolidated Financial Statements..............................   6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................  13
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk........  35

PART II--OTHER INFORMATION


ITEM 1. Legal Proceedings.................................................  36
ITEM 2. Changes in Securities and Use of Proceeds.........................  36
ITEM 3. Defaults Upon Senior Securities...................................  36
ITEM 4. Submission of Matters to a Vote of Security Holders...............  36
ITEM 5. Other Information.................................................  36
ITEM 6. Exhibits and Reports on Form 8-K..................................  36

SIGNATURES................................................................  37

EXHIBIT INDEX.............................................................  38
</TABLE>

                                       2
<PAGE>

                         PART I--FINANCIAL INFORMATION

ITEM 1. Financial Statements
                               OPEN MARKET, INC.

                          CONSOLIDATED BALANCE SHEETS
                     (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                        June 30,   December 31,
                                                          1999         1998
                                                       ----------- ------------
                                                       (Unaudited)
<S>                                                    <C>         <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents...........................  $  15,961   $  19,921
  Marketable securities...............................     14,694      14,958
  Accounts receivable, net of allowances of $2,744 and
   $2,523, respectively...............................     25,429      28,250
  Prepaid expenses and other current assets...........      3,384       1,892
                                                        ---------   ---------
      Total current assets............................     59,468      65,021
                                                        ---------   ---------
Property, plant and equipment, at cost:
  Computers and office equipment......................     15,356      14,743
  Leasehold improvements..............................      5,377       5,421
  Land & building.....................................      4,200       4,200
  Furniture & fixtures................................      2,136       2,157
                                                        ---------   ---------
      Total property and equipment....................     27,069      26,521
Less: Accumulated depreciation and amortization.......     13,363      11,093
                                                        ---------   ---------
      Net property and equipment......................     13,706      15,428
Long-term marketable securities.......................        353       1,510
Intangible assets, net................................     10,186      11,627
Other assets..........................................      1,372       1,372
                                                        ---------   ---------
                                                        $  85,085   $  94,958
                                                        =========   =========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long-term obligations.........  $      78   $      88
  Line of credit......................................     10,350      11,000
  Note payable........................................        --        5,000
  Accounts payable....................................      2,397       2,848
  Accrued expenses....................................     11,592      13,692
  Deferred revenues...................................      5,215       4,548
                                                        ---------   ---------
      Total current liabilities.......................     29,632      37,176
                                                        ---------   ---------
Long-term obligations, net of current maturities......      2,720       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 36,077,000 shares and 35,291,000
     shares at June 30, 1999 and December 31, 1998,
     respectively.....................................         36          35
  Additional paid-in capital..........................    188,979     186,074
  Accumulated deficit.................................   (136,282)   (131,116)
                                                        ---------   ---------
      Total stockholders' equity......................     52,733      54,993
                                                        ---------   ---------
                                                        $  85,085   $  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     Six Months Ended
                                            Ended June 30,        June 30,
                                           -----------------  -----------------
                                            1999      1998     1999      1998
                                           -------  --------  -------  --------
<S>                                        <C>      <C>       <C>      <C>
REVENUES:
  Product revenues.......................  $12,790  $ 12,157  $22,865  $ 23,430
  Service revenues.......................    5,760     4,369   11,281     8,298
                                           -------  --------  -------  --------
    Total revenues.......................   18,550    16,526   34,146    31,728
                                           -------  --------  -------  --------
COST OF REVENUES:
  Product revenues.......................      844       742    1,479     1,342
  Service revenues.......................    4,397     3,503    8,301     6,409
                                           -------  --------  -------  --------
    Total cost of revenues...............    5,241     4,245    9,780     7,751
                                           -------  --------  -------  --------
    Gross profit.........................   13,309    12,281   24,366    23,977
                                           -------  --------  -------  --------
OPERATING EXPENSES:
  Selling and marketing..................    7,895     8,007   15,306    15,883
  Research and development...............    5,026     6,568    9,508    13,344
  General and administrative.............    2,308     3,021    4,667     5,950
  Acquired in-process research and
   development...........................       --     5,700       --     5,700
                                           -------  --------  -------  --------
    Total operating expenses.............   15,229    23,296   29,481    40,877
                                           -------  --------  -------  --------
    Loss from operations.................   (1,920)  (11,015)  (5,115)  (16,900)
OTHER INCOME (EXPENSE):
Interest income..........................      273       291      557       609
Interest expense.........................     (171)     (296)    (310)     (536)
Other expense............................       (5)      (62)    (152)      (72)
                                           -------  --------  -------  --------
Loss before provision for incomes taxes..   (1,823)  (11,082)  (5,020)  (16,899)
                                           -------  --------  -------  --------
Provision for income taxes...............      102        33      145        65
                                           -------  --------  -------  --------
NET LOSS.................................  $(1,925) $(11,115) $(5,165) $(16,964)
                                           =======  ========  =======  ========
NET LOSS PER SHARE BASIC AND DILUTED
 (Note 2(e)).............................  $ (0.05) $  (0.34) $ (0.14) $  (0.53)
                                           =======  ========  =======  ========
WEIGHTED AVERAGE NUMBER OF COMMON AND
 COMMON EQUIVALENT SHARES OUTSTANDING--
 BASIC AND DILUTED (Note 2(e))...........   35,959    32,742   35,637    32,255
                                           =======  ========  =======  ========
</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>
                                                           Six Months Ended
                                                               June 30,
                                                          -------------------
                                                            1999      1998
                                                          --------  ---------
<S>                                                       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss................................................ $(5,165)  $(16,964)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization..........................    2,270      2,299
  Amortization of intangible assets......................    1,440      1,019
  Charge associated with acquired in-process research &
   development...........................................      --       5,700
  Deferred Compensation..................................      --          77
  Changes in assets and liabilities:
  Accounts receivable....................................    2,821     (5,196)
  Prepaid expenses and other current assets..............   (1,491)      (795)
  Accounts payable.......................................     (451)       255
  Accrued expenses.......................................   (2,100)    (1,631)
  Deferred revenues......................................      668        (31)
                                                          --------  ---------
    Net cash used in operating activities................   (2,008)   (15,267)
                                                          --------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property, plant and equipment..............     (548)    (3,937)
 Payment from founder on loan............................      --         993
 Sales (purchases) of marketable securities, net.........    1,421     (1,829)
 Increase in other assets................................      --        (101)
 Net cash used in the purchase of ICentral...............      --      (1,420)
                                                          --------  ---------
    Net cash provided by (used in) investing activities..      873     (6,294)
                                                          --------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds (payments) from line of credit.................     (650)     3,981
 Payments on note payable................................   (5,000)    (1,818)
 Proceeds from the factoring of accounts receivable......      --       3,128
 Payments on long-term obligations.......................      (80)       (47)
 Proceeds from issuance of common stock..................    2,905      7,074
                                                          --------  ---------
    Net cash provided by (used in) financing activities..   (2,825)    12,318
                                                          --------  ---------
Net decrease in cash and cash equivalents................   (3,960)    (9,243)
                                                          --------  ---------
Cash and cash equivalents, beginning of period...........   19,921     19,666
                                                          --------  ---------
Cash and cash equivalents, end of period................. $ 15,961  $  10,423
                                                          ========  =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid during the period......................... $    162  $   1,010
                                                          ========  =========
 Taxes paid during the period............................ $     16  $      41
                                                          ========  =========
In connection with the acquisition of ICentral, the
 following non-cash transaction occurred:
 Fair value of assets acquired........................... $    --   $  12,086
 Liabilities assumed.....................................      --        (666)
 Issuance of common stock................................      --     (10,000)
                                                          --------  ---------
 Cash paid for acquisition and acquisition costs......... $    --   $   1,420
                                                          ========  =========
In connection with the acquisition of Folio, the
 following non-cash transaction occurred:
 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 per 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.

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.

 (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
collection is 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.

                                       6
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  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, corporate
notes, and obligations of certain municipalities as of June 30, 1999. These
instruments typically have maturities of greater than three months but less
than one year. The average maturity of the Company's marketable securities is
approximately thirteen 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 period-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 subsidiaries are included in the accompanying consolidated statements
of operations since the functional currency of these subsidiaries is the U.S.
dollar. The Company had no sales denominated in foreign currencies in the
three months and six months ended June 30, 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. Diluted net loss per share for the three months and six months
ended June 30, 1999 and 1998 are the same as basic net loss per share as the
inclusion of potential common stock would be antidilutive.

  For the six months ended June 30, 1999 and 1998, 6,405,000 and 6,202,000,
respectively, of anti-dilutive securities were not included in the calculation
of basic and diluted net loss per share.

 (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 and Significant Customers

  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

                                       7
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

  As a result of the ABSB L.C. license and distribution agreement (see Note 5)
the Company now has two reportable operating segments: (1) Commerce Products,
including the licensing of Transact, Live Commerce and Shopsite products and
(2) Publishing Products which include the Folio publishing product suite. The
Company evaluates performance of the operating segments based on gross profit.

  During the three months ended June 30, 1999, one customer accounted for
approximately 16% of the Company's revenues or $3 million. The related
accounts receivable balance for this customer was $568 as of June 30, 1999.

<TABLE>
<CAPTION>
                                           Three Months Ended   Six Months Ended
                                           -------------------- -----------------
                                           June 30,   June 30,  June 30, June 30,
                                             1999       1998      1999     1998
                                           ---------  --------- -------- --------
<S>                                        <C>        <C>       <C>      <C>
Commerce Product Revenues................. $  10,542   $  8,465 $18,367  $11,659
Commerce Service Revenues.................     5,091      3,359   9,894    6,234
                                           ---------   -------- -------  -------
  Subtotal Commerce Revenues..............    15,633     11,824  28,261   17,893
                                           ---------   -------- -------  -------
Publishing Product Revenues...............     2,248      3,692   4,498   11,771
Publishing Service Revenues...............       669      1,010   1,387    2,064
                                           ---------   -------- -------  -------
  Subtotal Publishing Revenues............     2,917      4,702   5,885   13,835
                                           ---------   -------- -------  -------
    Total Revenues........................    18,550     16,526  34,146   31,728
                                           ---------   -------- -------  -------
Commerce Cost of Product..................       760        609   1,320    1,036
Commerce Cost of Service..................     3,649      2,828   6,869    5,009
                                           ---------   -------- -------  -------
  Subtotal Cost of Commerce Revenues......     4,409      3,437   8,189    6,045
                                           ---------   -------- -------  -------
Publishing Cost of Product................        84        133     159      306
Publishing Cost of Service................       748        675   1,432    1,400
                                           ---------   -------- -------  -------
  Subtotal Cost of Publishing Revenues....       832        808   1,591    1,706
                                           ---------   -------- -------  -------
    Total Cost of Revenues................     5,241      4,245   9,780    7,751
                                           ---------   -------- -------  -------
Gross Profit--Commerce....................    11,224      8,387  20,073   11,848
Gross Profit--Publishing..................     2,085      3,894   4,294   12,129
                                           ---------   -------- -------  -------
    Total Gross Profit....................    13,309     12,281  24,366   23,977
                                           =========   ======== =======  =======
</TABLE>

                                       8
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The following table presents geographical revenues from sources in total and
as a percent of total revenues for the three and six months ended June 30,
1999:

<TABLE>
<CAPTION>
                               Three Months Ended         Six Months Ended
                             ------------------------  ------------------------
                              June 30,     June 30,     June 30,     June 30,
                                1999         1998         1999         1998
                             -----------  -----------  -----------  -----------
<S>                          <C>     <C>  <C>     <C>  <C>     <C>  <C>     <C>
North America............... $15,008  81% $12,273  74% $24,285  71% $23,406  74%
Europe/Africa...............   2,882  16%   2,869  18%   7,896  23%   5,409  17%
Asia/Pacific Rim............     592   3%   1,153   7%   1,629   5%   2,514   8%
Other.......................      68   0%     231   1%     336   1%     399   1%
                             ------- ---  ------- ---  ------- ---  ------- ---
                             $18,550 100% $16,526 100% $34,146 100% $31,728 100%
                             ======= ===  ======= ===  ======= ===  ======= ===
</TABLE>

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
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 exitance 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. The restructuring charge was comprised of
the following:

<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 June 30, 1999, approximately $562 of accrued restructuring charges
remained, which is comprised of approximately $185 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 June 30, 1999 was
approximately $1,153 and the remaining amount is expected to be paid during
1999.

4. Acquisitions

 ICentral Incorporated

  On April 30, 1998, the Company acquired all of the outstanding shares of
capital stock of ICentral, Incorporated (ICentral) based in Provo, Utah.
ICentral specializes in Internet store-building products geared to small and
medium-sized businesses. As payment of the purchase price, the Company (i)
issued an aggregate of 480,140 shares of common stock of the Company and (ii)
made a cash payment of $720 to the former stockholders of ICentral. The value
of the shares of the Company's common stock issued in connection with the
acquisition was approximately $10,000 based on a weighted average market
price, as defined. In addition, in connection with this acquisition, the
Company entered into employment agreements with certain key employees of
ICentral under which the Company agreed to pay bonuses in an aggregate amount
of $1,000, depending on certain future events, as defined. The employees
earned $570 under the employment agreements as of April 30, 1999 and 42,223
shares have been issued in connection with this transaction. For financial
statement purposes, this acquisition was accounted for as a purchase, and
accordingly, the results of operations of ICentral subsequent to April 30,
1998 are included in the Company's consolidated statements of operations. All
of the

                                       9
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

shares of common stock issued to the former stockholders of ICentral have been
registered for resale pursuant to a registration statement on Form S-3,
declared effective by the Securities and Exchange Commission on November 3,
1998.

  The aggregate purchase price of $12,086 consisted of the following:

<TABLE>
<CAPTION>
      Description                                                        Amount
      ------------------------------------------------------------------ -------
      <S>                                                                <C>
      Common stock...................................................... $10,000
      Cash..............................................................     720
      Assumed liabilities...............................................     666
      Acquisition costs.................................................     700
                                                                         -------
        Total purchase price:........................................... $12,086
                                                                         =======
</TABLE>

  The purchase price was allocated based upon the fair value of the tangible
and intangible assets acquired. These allocations represent the fair values
determined by an appraisal. The appraisal incorporated proven valuation
procedures and techniques in determining the fair value of each intangible
asset. The purchase price has preliminarily been allocated as follows:

<TABLE>
<CAPTION>
      Description                                                       Amount
      ----------------------------------------------------------------- -------
      <S>                                                               <C>
      Current assets................................................... $    86
      Other acquired intangible assets.................................   6,300
      In-process research & development................................   5,700
                                                                        -------
        Total assets acquired:......................................... $12,086
                                                                        =======
</TABLE>

  As of the acquisition date of ICentral in April 1998, ICentral had initiated
a research and development effort related to the third major revision of its
flagship ShopSite product suite, an Internet commerce product suite that
allows small to medium-sized web merchants to transact business on the
Internet. The elements of the product suite are as follows: (1) ShopSite
Express, a tool that allows web designers to add a shopping system to any
existing web site, (2) ShopSite Manager, which offers the shopping
functionality of ShopSite Express combined with an automated commerce site
management system, and (3) ShopSite Pro, which combines the features of
ShopSite Manager with an additional set of advanced commerce tools including
real-time payment processing. The in-process technology included significant
new modifications of the features and functionality of the current suite of
products, such as the addition of Cybercash as a payment option, quantity
discount interface capability to allow customers to purchase at quantity
discounts, tax modifications to allow the merchant to decide whether to
calculate tax before or after shipping is calculated, improved shipping
configuration of United Parcel Service shipping zones, and a mailing list
generator. It is expected that these modifications will further enhance the
product's ease of use in the marketplace. As of the acquisition date, the in-
process project was approximately 60% complete and it was estimated that the
in-process technology would have a seven-year life. The first product was
introduced during Q2, 1999.

  The value of the acquired in-process technology was computed using a
discounted cash flow analysis on the anticipated income stream of the
estimated future product sales of the developed technology. This was
determined by estimating the costs of developing the purchased in-process
development project into commercially viable products, estimating the
resulting net cash flows from the project, adjusting the cash flow for the
percentage of completion and the core technology component of the required
technology and discounting the adjusted net cash flows to their present value.
The estimates used to value the future revenue benefits of the in-process
research and development were based on elements of relevant market sizes and
growth/risk factors, expected trends in technology, and the nature and
expected timing of new product introductions by the Company and its
competitors.

                                      10
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  In the valuation analysis, aggregate revenues for ICentral products were
estimated to be approximately $3,300 for fiscal 1998 and increasing to
approximately $62,500 in 2007. Revenues for the in-process technology were
estimated to be approximately $2,300 for fiscal 1998 and increasing to
approximately $28,700 in fiscal 2002, representing a compound annual growth
rate of approximately 65%. The estimated revenues for the in-process
technologies were expected to peak within four years of the acquisition date.
The estimated overall life of the acquired developed technologies of ICentral
is five years.

  Operating expenses used in the valuation of ICentral included selling,
general and administrative, and research and development expenses. Operating
expenses were estimated based on historical expense levels of similar
companies operating in similar industries. Selling, and general and
administrative expenses expressed as a percentage of revenue for the in-
process technologies were estimated to be 30% throughout the estimation
period. Research and development expenses, also expressed as a percentage of
estimated revenue, were estimated to be approximately 32% and 13% in 1998 and
1999, respectively, and stabilized at 20% for the remainder of the estimation
period. Cost of sales was estimated based on an analysis of historical
information for similar companies operating in similar industries. Cost of
sales for both the developed and in-process technologies was estimated to be
19% throughout the estimation period.

  The discount rate selected for both the developed and in-process
technologies was 22% and was estimated by calculating a Weighted Average Cost
of Capital (WACC) based on publicly traded guideline companies. The WACC
represents the blended, after-tax costs of debt and equity. The cost of equity
was estimated using the Capital Asset Pricing Model (CAPM) and by reviewing
venture capital rates of return.

  The valuation analysis was performed in accordance with the provisions of
Accounting Principles Board (APB) Opinions Nos. 16 and 17, wherein all
identifiable assets and intangible assets acquired were identified and
analyzed to determine their fair market values. In addition, to identify the
in-process research and development and determining if there were any
alternative future uses for these projects, these projects were evaluated in
the context of Interpretation 4 of Financial Accounting Standards Board
Statement No. 2 (SFAS 2) and SFAS No. 86: Accounting For Software Costs. Such
evaluation consisted of a specific review of the efforts and uniqueness of the
developments of these projects, and a determination of whether technological
feasibility had been achieved. Accordingly, the Company believed that the
foregoing assumptions used in the ICentral acquired in-process research and
development analysis were reasonable at the time of acquisition. However, no
assurance can be given that the underlying assumptions used to estimate
expected sales revenues, development costs, or profitability, or the events
associated with such projects will transpire, or have transpired, as
estimated. The Company believes that the ShopSite product suite requires
continual upgrading and refinement to remain competitive in the targeted
markets. Thus, the failure to complete the in-process projects as scheduled
may cause ShopSite revenue to fall off precipitously from forecasted levels.
The Company estimates that if the scheduled ShopSite product releases were not
achieved, the existing ShopSite product suite would remain commercially viable
for only the next 12 to 18 months. The Company recorded approximately $840 of
amortization expense relating to these intangible assets during 1998.

5. Exclusive Distribution Agreement

  On June 9, 1999, the Company announced the formation of a strategic
partnership with ABSB, L.C., now known as NextPage. Under the terms of the
agreement, in exchange for exclusive worldwide marketing and distribution
rights for Folio publishing products, Open Market will receive a minimum of
$14,000 in guaranteed royalties over a three-year period commencing July 1,
1999. At the end of the three-year period, NextPage has an option to obtain
all rights, title and interests to the Folio products for fair-market value
consideration. In addition, Open Market will receive a minimum of $4,000 in
guaranteed royalties from NextPage in exchange for the non-exclusive worldwide
rights to market and distribute Open Market's Internet commerce software
products to the commercial publishing industry. In connection with this
distribution agreement, the Company recorded $3,000 in commerce product
revenue during the three months ended June 30, 1999.

                                      11
<PAGE>

                               OPEN MARKET, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6. Subsequent Event

  On July 14, 1999, the Company announced that it had entered into a
definitive agreement to acquire FutureTense(R), Inc., a leading provider of
Internet content management software. Under the terms of the agreement, Open
Market estimates that it will issue approximately 7,226,000 shares of its
common stock to the holders of outstanding FutureTense stock. In addition,
Open Market will assume options to acquire FutureTense stock, which Open
Market estimates, will convert into options to acquire approximately 1,118,000
shares of Open Market common stock. A portion of these options will be
exercisable immediately upon the closing of the transaction. The exact number
of shares of Open Market common stock that will be issued and the exact number
of shares of common stock that will be subject to assumed options will be
determined by a formula and will not be known until immediately prior to the
closing of the Future Tense acquisition. As of the close of trading on July
13, 1999, 8,344,000 shares of Open Market common stock had an aggregate market
value of approximately $125 million. The companies expect that the transaction
will be accounted for as a pooling of interests. The transaction is subject to
stockholder approval and is expected to close in the fourth quarter of 1999.

                                      12
<PAGE>

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 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,
if included. All comparisons to the three and six month periods ended June 30,
1998 are based on restated quarterly results for those periods.

  On July 14, 1999, the Company announced that it had entered into a
definitive agreement to acquire FutureTense(R), Inc., a leading provider of
Internet content management software. Under the terms of the agreement, Open
Market estimates that it will issue approximately 7,226,000 shares of its
common stock to the holders of outstanding FutureTense stock. In addition,
Open Market will assume options to acquire FutureTense stock, which Open
Market estimates, will convert into options to acquire approximately 1,118,000
shares of Open Market common stock. A portion of these options will be
exercisable immediately upon the closing of the transaction. The exact number
of shares of Open Market common stock that will be issued and the exact number
of shares of common stock that will be subject to assumed options will be
determined by a formula and will not be known until immediately prior to the
closing of the Future Tense acquisition. As of the close of trading on July
13, 1999, 8,344,000 shares of Open Market common stock had an aggregate market
value of approximately $125 million. The companies expect that the transaction
will be accounted for as a pooling of interests. The transaction is subject to
stockholder approval and is expected to close in the fourth quarter of 1999.

Revenues

  The following table summarizes product revenues by segment:

<TABLE>
<CAPTION>
                           Three Months Ended                  Six Months Ended
                          --------------------                ------------------
                          June 30,   June 30,   % Change From June 30, June 30, % Change From
                            1999       1998      Prior Year     1999     1998    Prior Year
                          ---------  ---------  ------------- -------- -------- -------------
<S>                       <C>        <C>        <C>           <C>      <C>      <C>
Commerce product
 revenues...............      10,542      8,465       25 %     18,367   11,659        58 %
Publishing product
 revenues...............       2,248      3,692      (39)%      4,498   11,771       (62)%
                           ---------  ---------      ---       ------   ------       ---
Total product revenues..      12,790     12,157        5 %     22,865   23,430        (2)%
                           =========  =========      ===       ======   ======       ===
</TABLE>

  Product revenues increased to $12,790, or 69% of total revenues, for the
three months ended June 30, 1999, compared to $12,157, or 74% of total
revenues, for the same period of the prior year. Product revenues include: (1)
commerce product revenues, which include the licensing of Transact, the
Company's flagship product for Internet commerce, LiveCommerce, and ShopSite
products, and (2) publishing product revenues, which include the Folio
publishing product suite. The increase in product revenues was attributed
primarily to growth in the

                                      13
<PAGE>

Company's core Internet commerce products segment. In the three months ended
June 30, 1999, Internet commerce product revenues grew to $10,542, or
approximately 25% over the comparable prior year period. The Company's systems
integrator partnerships were more effectively leveraged in generating new
business opportunities for the commerce product segment during the quarter.
Additionally, the Company experienced a shortening of the sales cycle for its
Internet commerce products. Management believes that the shorter sales cycle
is indicative of improvements in the Company's sales and marketing execution
as well as an overall positive trend in the general market environment for its
Internet commerce products. However, management acknowledges that the sales
cycle could lengthen in subsequent quarters as a result of unforeseen market
circumstances.

  Product revenues decreased to $22,865, or 67% of total revenues, for the six
months ended June 30, 1999, compared to $23,430, or 74% of total revenues, for
the comparable prior year period. The Company attributes this decrease to its
Folio publishing products segment, which declined approximately 39% and 62%,
respectively, from the three and six months ended June 30, 1998, primarily due
to a decline in publisher royalties for use of the Folio publishing product
suite. The decrease in publisher royalties for the six months ended June 30,
1999, as compared to the prior year period, was attributed primarily to the
signing of three large multi-year publishing royalty contracts in the first
quarter of fiscal 1998. Product revenues declined as a percentage of total
revenues primarily due to a higher rate of growth in the Company's service
business.

  On June 9, 1999, the Company announced the formation of a strategic
partnership with ABSB, L.C., now known as NextPage. Under the terms of the
agreement, in exchange for exclusive worldwide marketing and distribution
rights for Folio publishing products, Open Market will receive a minimum of
$14,000 in guaranteed royalties over a three-year period commencing July 1,
1999. At the end of the three-year period, NextPage has an option to obtain
all rights, title and interests to the Folio products for fair-market value
consideration. In addition, Open Market will receive a minimum of $4,000 in
guaranteed royalties from NextPage in exchange for the non-exclusive worldwide
rights to market and distribute Open Market's Internet commerce software
products to the commercial publishing industry. In connection with this
distribution agreement, the Company recorded $3,000 in commerce product
revenue, or 16% of total revenues, during the three months ended June 30,
1999. The Company expects to record the remaining guaranteed minimum $15,000
in product revenues in subsequent quarters. In addition, the Company expects
that total revenues from its publisher segment will decline from historical
quarterly levels as a result of this agreement.

  The following table summarizes service revenues by segment:

<TABLE>
<CAPTION>
                           Three Months Ended                    Six Months Ended
                          ---------------------                 ------------------
                          June 30,    June 30,    % Change From June 30, June 30, % Change From
                            1999        1998       Prior Year     1999     1998    Prior Year
                          ---------   ---------   ------------- -------- -------- -------------
<S>                       <C>         <C>         <C>           <C>      <C>      <C>
Commerce service
 revenues...............       5,091       3,359        52 %      9,894   6,234         59 %
Publishing service
 revenues...............         669       1,010       (34)%      1,387   2,064        (33)%
                           ---------   ---------       ---       ------   -----        ---
Total service revenues..       5,760       4,369        32 %     11,281   8,298         36 %
                           =========   =========       ===       ======   =====        ===
</TABLE>

  Service revenues increased 32% to $5,760 for the three months ended June 30,
1999 from $4,369 for the three months ended June 30, 1998. Service revenues
increased 36% to $11,281 for the six months ended June 30, 1999, from $8,298
for the six months ended June 30, 1998. For the three and six months ended
June 30, 1999, service revenues comprised approximately 31% and 33% of total
revenues, respectively, as compared to 26% and 26% in the comparable prior
year periods. Of the total service revenues for the three and six months ended
June 30, 1999, 41% and 39%, respectively, was attributed to maintenance and
support services, which include customer service and technical support, and
59% and 61%, respectively, was attributed to professional services, which
include consulting, implementation, and education services. For the three and
six months ended June 30, 1999, commerce service revenues grew approximately
52% and 59%, respectively, as compared to the same periods of the prior year.
The Company's publishing services revenue for the three and six months ended
June 30, 1999, declined approximately 34% and 33%, respectively, as compared
to the same periods of the prior year. The decrease was attributed primarily
to the decrease in publishing product revenues for the periods

                                      14
<PAGE>

presented. Generally, customers purchase maintenance and support and
professional services from the Company upon purchase of the Company's
products. In addition, recurring quarterly revenues are derived from the
ratable recognition of maintenance and support services as well as subsequent
purchases of professional services from existing customers. Accordingly, the
Company expects service revenues to grow in relative proportion to growth in
new product business. During the periods presented, management attributed
growth in the Company's service revenues to growth in both maintenance and
support and professional services revenues in the commerce services segment,
primarily as a result of growth in the Company's commerce product revenues
during the periods presented.

Cost of Revenues

  The following table summarizes cost of revenues by segment:

<TABLE>
<CAPTION>

                        Three-Months Ended               Six-Months Ended
                        ------------------               -----------------
                         June 30, June 30, % Change From June 30, June 30, % Change From
                           1999     1998    Prior Year     1999     1998    Prior Year
                        --------- -------- ------------- -------- -------- -------------
<S>                     <C>       <C>      <C>           <C>      <C>      <C>
Commerce cost of
 product................     760      609        25 %      1,320    1,036        27 %
Commerce cost of
 service................   3,649    2,828        29 %      6,869    5,009        37 %
Publishing cost of
 product................      84      133       (37)%        159      306       (48)%
Publishing cost of
 service................     748      675        11 %      1,432    1,400         2 %
                          ------  -------       ---       ------   ------       ---
  Total cost of
   revenues.............  $5,241  $ 4,245        23 %     $9,780   $7,751        26 %
                          ======  =======       ===       ======   ======       ===
</TABLE>

  Cost of product revenues increased to $844 and $1,479 for the three and six
months ended June 30, 1999, respectively, from $742 and $1,342 for the three
and six months ended June 30, 1998, representing increases of approximately
14% and 10%, respectively. The increase in commerce cost of product was
primarily due to increased costs for third party licensing royalties related
to the Company's Internet commerce products. Publishing cost of product
declined in proportion to the decline in publishing product revenues. 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 into 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 be 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 to $4,397 and $8,301 for the three and
six months ended June 30, 1999, respectively, from $3,503 and $6,409, for the
three and six months ended June 30, 1998, representing increases of
approximately 26% and 30%, respectively. Cost of service revenues consists
primarily of personnel and related costs incurred in providing development,
consulting, and other technical services to customers. Overall, the increase
in cost of service revenues was consistent with the approximate 32% and 36%
growth in service revenues for the three and six months ended June 30, 1999,
respectively. Commerce cost of service increased to $3,649 and $6,869 for the
three and six months ended June 30, 1999, respectively from $2,828 and $5,009
for the comparable prior year periods. The increase in commerce cost of
service was attributed primarily to higher costs related to the employment of
outside consultants and higher recruiting costs related to the hiring of new
consultants. Publishing cost of service increased to $748 and $1,432 for the
three and six months ended June 30, 1999, respectively, from $675 and $1,401
for the comparable prior year periods. Publishing cost of service increased as
a result of an increase in consulting headcount of approximately 13%.
Management believes that these costs will increase in proportion to growth in
service revenues, particularly anticipated growth in the Company's commerce
consulting business.

Gross Margin

  Product revenue gross margin was approximately 93% for the three and six
months ended June 30, 1999, as compared to approximately 94% for the three and
six months ended June 30, 1998. Management expects that product revenue gross
margin will fluctuate based on the amount of third party technology that the
Company

                                      15
<PAGE>

uses and resells to its customers with its Internet commerce solutions.
Additionally, management expects that product revenue gross margin will remain
in the range of 90% to 94% for the foreseeable future.

  Service revenue gross margin increased to approximately 24% and 26% in the
three and six months ended June 30, 1999, respectively, from approximately 20%
and 23% in the comparable prior year periods. Overall, the increase was
attributed primarily to improved cost controls, higher resource utilization
rates, and higher efficiency in the delivery of consulting services from new
hires. Management expects that the service gross margin may fluctuate in
subsequent 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 $7,895 and $15,306 for the three and six months ended
June 30, 1999, respectively, from $8,007 and $15,883 for the three and six
months ended June 30, 1998, respectively. The decrease in these expenses of
approximately 1% and 4% for the three and six months ended June 30, 1999,
respectively, was attributed primarily to a decrease in employee and travel-
related expenses due to a decrease in headcount of approximately 9% from the
comparable prior year periods.

  Research and development expenses consisted 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 and
six months ended June 30, 1999, these expenses decreased to $5,026 and $9,508,
respectively, from $6,568 and $13,344 for the three and six months ended June
30, 1998, respectively. The decrease in expenses of approximately 23% and 29%
for the three and six months ended June 30, 1999, respectively, was attributed
primarily to a reduction in employee related expenses as a result of a 17%
reduction in research and development headcount from the prior year periods.
This headcount reduction was primarily the result of the completion of certain
development projects related to the Company's next-generation group of
products that occurred during the six months ended June 30, 1998. In addition,
improvements in general cost control contributed to the decrease.

  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 consisted primarily of the cost of
finance, management, and administrative personnel, as well as legal and other
professional fees. These expenses decreased for the three and six months ended
June 30, 1999, to $2,308 and $4,667, respectively, from $3,021 and $5,950 for
the three and six months ended June 30, 1998, respectively. These amounts
represent decreases of approximately 24% and 22%, respectively, for the three
and six months ended June 30, 1999 from the comparable prior year periods. The
decrease was attributed primarily to a decrease in employee-related expenses
as a result of a 21% decrease in headcount from the comparable prior year
periods.

  Overall, management attributed lower operating expenses to general
improvement in the Company's cost structure that resulted from lower employee
headcount and improved cost controls across the Company's internal
organizations. The Company continued to experience cost efficiencies as a
result of the restructuring plan implemented in the fourth quarter of 1998.

Acquired In-Process Research and Development

  Acquired in-process research and development expenses consisted of $5,700
relating to the ICentral acquisition in the second quarter of fiscal 1998.
These costs were expensed as of the acquisition dates and are

                                      16
<PAGE>

included in the accompanying consolidated statements of operations for the
respective periods. The amount allocated to acquired in-process research and
development relates to projects that have not yet reached technological
feasibility and that, until completion of development, have no alternative
future use.

  As of the acquisition date of ICentral in April 1998, ICentral had initiated
a research and development effort related to the third major revision of its
flagship ShopSite product suite, an Internet commerce product suite that
allows small to medium-sized web merchants to transact business on the
Internet. The elements of the product suite are as follows: (1) ShopSite
Express, a tool that allows web designers to add a shopping system to any
existing web site, (2) ShopSite Manager, which offers the shopping
functionality of ShopSite Express combined with an automated commerce site
management system, and (3) ShopSite Pro, which combines the features of
ShopSite Manager with an additional set of advanced commerce tools including
real-time payment processing. The in-process technology included significant
new modifications of the features and functionality of the current suite of
products, such as the addition of Cybercash as a payment option, quantity
discount interface capability to allow customers to purchase at quantity
discounts, tax modifications to allow the merchant to decide whether to
calculate tax before or after shipping is calculated, improved shipping
configuration of United Parcel Service shipping zones, and a mailing list
generator. It is expected that these modifications will further enhance the
product's ease of use in the marketplace. As of the acquisition date, the in-
process project was approximately 60% complete and it was estimated that the
in-process technology would have a 7-year life and that the first product(s)
were introduced during the second quarter of fiscal 1999.

  The value of the acquired in-process technology was computed using a
discounted cash flow analysis on the anticipated income stream of the
estimated future product sales of the developed technology. This was
determined by estimating the costs of developing the purchased in-process
development project into commercially viable products, estimating the
resulting net cash flows from the project adjusting the cash flow for
percentage of completion and the core technology component of the acquired
technology and discounting adjusted the net cash flows to their present value.
The estimates used to value the future revenue benefits of the in-process
research and development were based on elements of relevant market sizes and
growth/risk factors, expected trends in technology, and the nature and
expected timing of new product introductions by the Company and its
competitors.

  In the valuation analysis, aggregate revenues for ICentral products were
estimated to be approximately $3,300 for fiscal 1998 and increasing to
approximately $62,500 in 2007. Revenues for the in-process technology were
estimated to be approximately $2,300 for fiscal 1998 and increasing to
approximately $28,700 in fiscal 2002, representing a compound annual growth
rate of approximately 65%. The estimated revenues for the in-process
technologies were expected to peak within four years of the acquisition date.
The estimated overall life of the acquired developed technologies of ICentral
is five years.

  Operating expenses used in the valuation of ICentral included selling,
general and administrative, and research and development expenses. Operating
expenses were estimated based on historical expense levels of similar
companies operating in similar industries. Selling, general and administrative
expenses expressed as a percentage of revenue for the in-process technologies
were estimated to be 30% throughout the estimation period. Research and
development expenses, also expressed as a percentage of estimated revenue,
were estimated to be approximately 32% and 13% in 1998 and 1999, respectively,
and stabilizing at 20% for the remainder of the estimation period. Cost of
sales was estimated based on an analysis of historical information for similar
companies operating in similar industries. Cost of sales for both the
developed and in-process technologies was estimated to be 19% throughout the
estimation period.

  The discount rate selected for both the developed and in-process
technologies was 22% and was estimated by calculating a Weighted Average Cost
of Capital (WACC) based on publicly traded guideline companies. The WACC
represents the blended, after-tax costs of debt and equity. The cost of equity
was estimated using the Capital Asset Pricing Model (CAPM) and by reviewing
venture capital rates of return.

                                      17
<PAGE>

  The fair values of the assets acquired from ICentral were allocated between
the following:

<TABLE>
<CAPTION>
                                                                         Fair
                                                                        Market
      Asset                                                              Value
      -----                                                             -------
      <S>                                                               <C>
      In-process Research and Development.............................. $ 5,700
      Developed Technology.............................................   2,110
      Developed Technology.............................................   4,190
      Acquired Assets..................................................      86
                                                                        -------
        Total:......................................................... $12,086
                                                                        =======
</TABLE>

  The valuation analysis was performed in accordance with the provisions of
Accounting Principles Board (APB) Opinions Nos. 16 and 17, wherein all
identifiable assets and intangible assets acquired were identified and
analyzed to determine their fair market values. In addition, to identify the
in-process research and development and to determine if there were any
alternative future uses for these projects, these projects were evaluated in
the context of Interpretation 4 of Financial Accounting Standards Board
Statement No. 2 (SFAS 2) and SFAS 86: Accounting For Software Costs. Such
evaluation consisted of a specific review of the efforts and uniqueness of the
developments of these projects, and a determination of whether technological
feasibility had been achieved. Accordingly, the Company believed that the
foregoing assumptions used in the ICentral acquired in-process research and
development analysis were reasonable at the time of acquisition. However, no
assurance can be given that the underlying assumptions used to estimate
expected sales revenues, development costs, or profitability, or the events
associated with such projects will transpire, or have transpired, as
estimated.

  The Company believes that the ShopSite product suite requires continual
upgrading and refinement to remain competitive in the targeted markets. Thus,
the failure to complete the in-process projects as scheduled may cause
ShopSite revenue to fall off precipitously from forecasted levels. The Company
estimates that if the scheduled ShopSite product releases were not achieved,
the existing ShopSite product suite would remain commercially viable for only
the next 12 to 18 months.

  Interest income represents interest earned on cash, cash equivalents and
marketable securities. Interest income decreased to $273 and $557,
respectively, for the three and six months ended June 30, 1999, from
approximately $291 and $609 for the three and six months ended June 30, 1998,
respectively. The decrease was attributed primarily to lower average
investments in cash, cash equivalents and marketable securities during the
periods. Interest expense decreased to $171 and $310 for the three and six
months ended June 30, 1999, respectively, from $296 and $536 for the three and
six months ended June 30, 1998, respectively. The decrease in interest expense
was attributed primarily to the final payment made on the note payable issued
to Reed Elsevier in 1997 in connection with the Folio acquisition. Interest
expense relates to the accounts receivable line-of-credit (discussed below),
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 $5 and $152 represents foreign
currency translation losses recorded during the three and six months ended
June 30, 1999, respectively, as compared to $62 and $72 of foreign currency
translation losses recorded during the three and six months ended June 30,
1998.

  The Company recorded a provision for foreign income taxes of $102 and $145
for the three and six months ended June 30, 1999, respectively, compared to
$33 and $65 for the three and six months ended June 30, 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 June 30, 1999, the Company had $30,655 in cash, cash equivalents, and
marketable securities, which represented a decrease of $4,224 from December
31, 1998.

                                      18
<PAGE>

  The Company's operating activities used cash and cash equivalents of
approximately $2,008 and $15,267 for the six months ended June 30, 1999 and
1998, respectively. The improvement in cash used in operating activities was
primarily the result of the lower net loss and lower investment in accounts
receivable. The Company's net loss decreased approximately 70% to $5,165 for
the six months ended June 30, 1999 from $16,964 for the comparable prior year
period. The level of accounts receivable improved primarily as a result of
strong collection efforts and shorter average payment terms in new contracts.

  The Company's investing activities provided cash and cash equivalents of
approximately $519 for the six months ended June 30, 1999 and used
approximately $6,294 in the comparable prior year period. The principal
addition of cash from investing activities for the six months ended June 30,
1999 was $1,421 received for the net sale of certain marketable securities and
the principal use of cash for the period was $548 for purchases related to
office equipment. The improvement in cash from investing activities was
primarily due to decreased spending on equipment. In addition, $1,420 of net
cash was used in the ICentral acquisition (see Note 4) in the six months ended
June 30, 1998.

  The Company's financing activities used cash and cash equivalents of
approximately $2,825 for the six months ended June 30, 1999 and provided
approximately $12,318 in the comparable prior year period. The principal use
of cash from financing activities was the final payment of $5,000 on the note
payable issued to Reed Elsevier in 1997 in connection with the Folio
acquisition. In addition, the Company received proceeds of $2,905 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.

  In July 1998, the Company entered into a $2,800 mortgage of its Provo, Utah,
building which bears interest at the fixed rate of 8.5%. The mortgage
principal payments are based upon a 20-year term with a balloon payment
required at the end of the fifth year.

  The Company has an unsecured bank credit facility that provides up to
$15,000 in financing in the form of a demand line of credit. 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 June 30, 1999). The Company is required to comply
with certain restrictive covenants under this agreement and the line is
collateralized by the Company's accounts receivable. The Company was in
compliance with all such convenants at June 30, 1999. During the six months
ended June 30, 1999, the Company decreased its borrowings under this facility
to $10,350 from $11,000 at December 31, 1998. At June 30, 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 stockholders 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.

                                      19
<PAGE>

 State of Readiness

  With respect to the Company's internal systems, 90% 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 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 $700 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, including such software created through custom
development either by the Company, its customers, or other third party
developers, 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.

                                      20
<PAGE>

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

 Demand for Open Market's products may decrease if Open Market is unable to
 adapt continually to rapid changes in the market for Internet-based software
 applications.

  The market for Internet-based software applications 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 introduction of product or service enhancements or new
products or services embodying new technologies, industry standards, or
customer requirements could supplant or make our existing products and
services obsolete. Open Market must continue to upgrade its technologies and
commercialize products and services incorporating such technologies, which may
lengthen Open Market's sales cycles.

 Open Market's operating results are largely dependent upon the continued
 development and acceptance of Internet commerce.

  The market for our Internet products and services has only recently begun to
develop, is rapidly evolving and has an increasing number of market entrants
that have introduced and developed products and services for Internet commerce
that compete with Open Market. Open Market's future operating results depend
upon the development and growth of the market for Internet-based packaged
software applications, including electronic commerce applications. The
widespread acceptance of electronic commerce in general and, in particular,
the Internet as a sales, marketing, order receipt and processing medium are
highly uncertain and subject to a number of risks. The following critical
issues remain unresolved and may impact the growth of Internet commerce:

  .  security;

  .  reliability;

  .  ease of use;

  .  quality;

  .  service; and

  .  government regulation.

  If the Internet commerce market fails to continue to develop or develops
more slowly than expected, Open Market's business, operating results and
financial condition could be materially adversely affected.

 Government regulation of and legal uncertainties relating to the Internet may
 adversely affect Open Market's ability to market products facilitating
 Internet commerce.

  Open Market is not currently subject to direct regulation by any U.S.
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. Moreover, the applicability to the Internet
of existing laws governing

                                      21
<PAGE>

issues such as property ownership, libel and personal privacy is uncertain.
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 both in the U.S. and internationally, 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 electronic commerce, which could in turn adversely affect
Open Market's business, operating results or financial condition. Due to the
encryption technology contained in Open Market's products, such products are
subject to U.S. export controls. U.S. export controls, either in their current
form or as may be subsequently enacted, may delay the introduction of new
products or limit Open Market's ability to distribute products outside of the
United States. 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 our
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 effect on Open Market's
business, operating results and financial condition.

 The sales cycles for Open Market's products may be lengthy due to the
 complexity of Open Market's products and could negatively impact Open
 Market's operating results.

  Open Market's products are complex and prospective customers often must make
significant investment decisions to purchase Open Market's products.
Accordingly, licensing such complex software products may require Open Market
to provide a significant level of education to prospective customers regarding
the use and benefits of its products, which may be time consuming. As a
result, Open Market's sales cycles may be lengthy and subject to a number of
significant delays. Delays due to lengthy sales cycles or delays in Open
Market's generation of customers or deployment of its Internet commerce
products could have a material adverse effect on Open Market's business,
operating results and financial condition and could be expected to cause Open
Market's operating results to vary significantly from quarter to quarter.

 Failure to provide secure transmission of information over the Internet could
 adversely impact the acceptance of Open Market's Internet commerce products.

  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. Open Market 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 Open Market in Open Market's products to protect customer transaction data.
If any such compromise or breach were to occur, it could have a material
adverse effect on Open Market's business, financial condition, and operating
results.

 Demand for Open Market's products may decrease if Open Market cannot compete
 successfully in the Internet commerce software market.

  The market for Internet commerce software is new 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. Open Market'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 a greater market share than Open Market. Many of Open
Market's competitors have greater financial, technical and marketing resources
and greater name recognition than Open Market does. Due to competition, Open
Market may have to reduce the prices of its products substantially or
introduce lower-priced lines of products to gain greater market share. Open
Market's operating results will be affected by the number of competitors it
has and their pricing strategies and market acceptance of their products. Open
Market cannot assure you that it will be able to compete successfully against
these companies.

                                      22
<PAGE>

 Open Market will depend on the continued service of its key technical and
 senior management personnel after the merger to secure, maintain and enhance
 its industry position.

  Open Market'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 in a highly competitive market. Open Market's ability to
establish and maintain a position of technology leadership in the Internet
commerce industry depends in large part upon the skills of its development
personnel.

 Fluctuations in Open Market's quarterly revenue and operating results may
 result in reduced profitability and lead to reduced prices for its stock.

  Open Market's expense levels are fixed in advance and are 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. Open Market may be unable to adjust spending in a timely manner to
compensate for unexpected revenue shortfalls. Open Market expects in the
future to experience significant fluctuations in quarterly operating results
that may be caused by many factors, including, among other things, the
following:

  .  the number, timing and significance of product enhancements and new
     product announcements by Open Market or its competitors;

  .  the length of Open Market's sales cycle;

  .  market acceptance of, and demand for, Open Market'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 Open Market or Open Market's competitors;

  .  non-renewal of service agreements;

  .  software defects and other product quality problems;

  .  Open Market'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, Open Market's operating results in future quarters may be below
the expectations of market analysts and investors. In that event, the price of
Open Market's common stock would likely decrease.

 Difficulties presented by international markets could negatively impact Open
 Market's business.

  For the fiscal year ended December 31, 1998, Open Market's international
gross sales comprised approximately 32% of its total gross sales. A downturn
in foreign economies may result in decreased sales of Open Market's products.
Generally, sales and manufacturing operations are subject to the risks
normally associated with international operations, including the following:

  .  currency conversion risks and currency fluctuations limitations,
     including taxes, on the repatriation of earnings;

  .  political instability, civil unrest and economic instability;

  .  greater difficulty enforcing intellectual property rights and weaker
     laws protecting such rights;

  .  greater difficulty and expense in conducting business abroad;

                                      23
<PAGE>

  .  complications in complying with foreign laws and changes in governmental
     policies;

  .  transportation delays and interruptions; and

  .  the imposition of tariffs.

  These risks could negatively impact international sales and manufacturing
operations, which could have a material adverse effect on Open Market's
business, financial condition and operating results.

 Open Market will continue to depend on intellectual property rights to
 protect its products although it may not always be able to protect such
 rights.

  Open Market's success is dependent to a significant degree on its
proprietary software technology. Open Market provides its products to end
users generally under non-exclusive, non-transferable licenses for the term of
the agreement, which is usually in perpetuity. Open Market'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 Open Market's software or other proprietary
information without authorization or to develop similar software
independently. Although Open Market holds five U.S. patents covering certain
aspects or uses of electronic commerce software, it cannot be sure of the
degree of intellectual property protection such patents will provide. Policing
unauthorized use of Open Market'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 Open Market little or no effective protection of
its intellectual property. There can be no assurance that the steps taken by
Open Market will prevent misappropriation of its technology or that agreements
entered into for that purpose would be enforceable.

 Other parties may claim that Open Market has infringed their intellectual
 property rights and such claims may interrupt Open Market's regular business
 operations.

  In the future, other parties may assert claims for infringement or
invalidity (or claims for indemnification from Open Market customers resulting
from infringement claims) against Open Market for violation of patent,
trademark, copyright or other proprietary rights as a result of the use by
Open Market, Open Market's customers or other third parties of Open Market's
products to transmit, disseminate, or display information over or on the
Internet. Such claims are likely to become increasingly prevalent as the
Internet gains more widespread use and new parties enter already competitive
markets where intellectual property rights are essential to conducting
business. 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 us to enter into royalty
or licensing agreements. There can be no assurance that any 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 Open Market's
business, financial condition and operating results.

 Open Market's products may contain undetected defects which may prove costly
 and time-consuming for Open Market to correct.

  Sophisticated software products, such as those Open Market produces and
markets, may contain undetected errors or failures that become apparent when
Open Market introduces the products or when it provides an increased volume of
services. Open Market cannot assure you that its testing and its potential
customers will detect all errors in Open Market's products prior to licensing
or sale. Correcting such errors may result in loss of revenues, delay in
market acceptance, diversion of development resources, damage to Open Market's
reputation, or increased service and warranty costs, which would have a
material adverse effect on Open Market's business, financial condition and
operating results.

                                      24
<PAGE>

 Open Market may need to engage in litigation to protect its intellectual
 property rights in the competitive market for Internet software products and
 services.

  Litigation may be necessary in the future to enforce Open Market's
intellectual property rights, to protect its patents, copyrights, trademarks
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 Open Market's business, financial condition and operating
results. Litigation regarding intellectual property rights, copyrights,
trademarks and patents is increasingly common in the software industry.
Intellectual property litigation is complex and expensive and the outcome of
such litigation is difficult to predict.

 Delays in Open Market's planned release schedule may result in a loss of
 market share.

  Delays in the planned release of Open Market's new products may adversely
affect forecasted revenues and create operational inefficiencies resulting
from staffing levels designed to support the forecasted revenues. Open
Market'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 Open Market.

 Open Market has a limited operating history.

  Open Market began operations in 1994. Open Market'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 like the Internet.

 The failure of Open Market's software products and internal computer systems
 and software programs to be year 2000 compliant could negatively impact its
 business.

  Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear
as "00," which a system might consider to be the year 1900 rather than the
year 2000. This could result in software product failures, system failures,
delays or miscalculations causing disruptions to Open Market's operations.
Open Market has begun and will continue to assess the impact of year 2000 date
recognition problems on its commercial products and internal systems. Open
Market cannot be certain that it will identify all of the potential risks to
its business that could result from year 2000-related issues. However, Open
Market has identified the following risks of which you should be aware:

  .  Year 2000 problems that affect Open Market's internal systems. Open
     Market has relied on the representations and certifications by its
     software vendors regarding the year 2000 readiness of its information
     technology systems and has not conducted extensive independent testing
     of these systems. It is possible that these systems could contain
     undetected problems that could cause serious disruptions which would
     have a material adverse effect on Open Market's business, financial
     condition and operating results.

  .  Year 2000 problems that affect Open Market's software products. Open
     Market is implementing a detailed year 2000 test procedure for the phase
     review and software release process to ensure that its software products
     will be year 2000 compliant. This testing began in October 1998, and
     Open Market expects that such testing will continue through 1999 and
     into 2000. As part of this process, Open Market must also determine,
     through a combination of internal and external testing, whether the
     components of its software products supplied to Open Market by vendors
     are year 2000 compliant. Open Market cannot be certain that such testing
     will detect all potential year 2000 problems. The failure of Open
     Market's products to be year 2000 compliant could result in claims by or
     liability to Open Market's customers, which could have a material
     adverse effect on Open Market's business, financial condition and
     operating results.

                                      25
<PAGE>

  .  The costs associated with remedying year 2000 problems. Open Market has
     assessed the cost of achieving year 2000 compliance to be in the range
     of $700,000 to $1 million. To date, Open Market has incurred costs of
     approximately $700,000 for its year 2000 projects. Such costs may
     include those for research and development, capital equipment, outside
     software tools, outside contractors or internal resources which may be
     allocated to year 2000 projects. There can be no assurance that these
     costs will not increase or be subject to reassessment as testing of Open
     Market's products and essential technology information systems
     continues. Open Market may incur significant costs to avoid disruptions
     in customer service, technical support, access to on-line services and
     products and product functionality. Failure to contain costs could have
     a material adverse effect on Open Market's business, financial condition
     and results of operations.

 Open Market may face challenges in integrating Open Market and FutureTense
 and, as a result, may not realize the expected benefits of the anticipated
 merger.

  Integrating the operations and personnel of Open Market and FutureTense will
be a complex process, and Open Market is uncertain that the integration will
be completed rapidly or will achieve the anticipated benefits of the merger.
The successful integration of Open Market and FutureTense will require, among
other things, integration of each company's sales and marketing groups and
coordination of each company's development efforts. The diversion of the
attention of each company's management and any difficulties encountered in the
process of combining both companies could cause the disruption of, or a loss
of momentum in, the activities of the combined company's business. Further,
the process of combining both companies could negatively affect employee
morale and the ability of Open Market to retain some of its key employees
after the merger. In addition, the announcement and completion of the merger
could cause customers to delay or change orders for products as a result of
uncertainty over the integration of both companies' software products. The
inability to successfully integrate the operations and personnel of Open
Market and FutureTense, or any significant delay in achieving integration,
could have a material adverse effect on the business, financial condition and
operating results of Open Market after the merger.

 Open Market may not be able to retain key employees of FutureTense.

  Because of the high valuation Open Market placed on FutureTense, its key
founders and employees have received or will receive a substantial number of
Open Market shares and can sell these shares at substantial gains. In many
cases, these individuals could become financially independent through these
sales, before the products of either company have fully matured into
commercially deliverable products commanding reasonable market share.
Additionally, startup and other companies will seek out these individuals due
to the financial result they have achieved for their investors. Under the
circumstances, Open Market faces a difficult and significant task of retaining
and motivating the key personnel of FutureTense to stay committed to Open
Market. Open Market has entered into employment agreements with only six
employees of FutureTense. Open Market may nonetheless be unsuccessful in
retaining these employees or any other FutureTense employees.

 Open Market's stock price is volatile and the value of the Open Market common
 stock issued in the merger will depend on its market price at the time of the
 merger, and no adjustment will be made as a result of changes in the market
 price of Open Market's common stock.

  Under the merger agreement, the conversion ratio used to determine the
number of shares of Open Market's common stock that FutureTense stockholders
will receive is unaffected by the share price of Open Market's common stock.
Increases in the value of Open Market's common stock will result in a higher
price being paid by Open Market for FutureTense and more value received by
FutureTense stockholders in the merger. Decreases in the value of Open
Market's common stock will result in a lower price being paid by Open Market
for FutureTense and less value received by FutureTense stockholders in the
merger. Under the merger agreement, neither Open Market nor FutureTense will
have the right to terminate or renegotiate the merger agreement or to
resolicit proxies as a result of any increase or decrease in the value of Open
Market's common stock. The market price of Open Market's common stock, like
that for the shares of many other high technology and Internet

                                      26
<PAGE>

companies, has been and may continue to be volatile. For example, from January
1, 1997 to June 30, 1999, the Open Market common stock traded as high as
$27.00 per share and as low as $4.25 per share. Recently, the stock market in
general and the shares of software and Internet companies in particular have
experienced significant price fluctuations. The market price may continue to
fluctuate significantly in response to various factors, including:

  .  quarterly variations in operating results or growth rates;

  .  the announcement of technological innovations;

  .  the introduction of new products by Open Market and its competitors;

  .  changes in estimates by securities analysts;

  .  market conditions in the industry;

  .  announcements and actions by competitors;

  .  regulatory and judicial actions; and

  .  general economic conditions.

 Significant merger-related charges against earnings will increase Open
 Market's losses in the quarter in which the merger is consummated and during
 the post-merger integration period.

  We expect to incur charges of approximately $4.0 million in connection with
the merger which relates to fees, legal and accounting services and other
integration costs. These costs may be higher than we anticipate. In addition,
we may incur other additional unanticipated merger costs. These costs may
delay the anticipated benefits of the merger. Some of these nonrecurring costs
will be charged to operations in the fiscal quarter in which the merger is
consummated while others will be expensed as incurred during the post-merger
integration period.


 Customers of Open Market and FutureTense may delay or cancel orders as a
 result of concerns over the merger.

  The announcement and closing of the merger could cause customers and
potential customers of Open Market and FutureTense to delay or cancel orders
for products as a result of customer concerns and uncertainty over product
evolution, integration and support over the combined company's products. Such
a delay or cancellation of orders could have a material adverse effect on the
business, operating results and financial condition of Open Market or
FutureTense.



                                      27
<PAGE>

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
quarter 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 quarter. 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 and other instruments that do not meet the high credit quality
standards, as specified in the Company's investment policy guidelines. The
Company's policy guidelines also limit 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.

                                      28
<PAGE>

                           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

  At the Company's Annual Meeting of Stockholders held on May 12, 1999, the
following proposals were adopted by the vote specified below:

<TABLE>
<CAPTION>
                                                                       Broker
                  Proposal                  For      Against  Abstain Non-Votes
     ---------------------------------   ---------- --------- ------- ---------
 <C> <S>                                 <C>        <C>       <C>     <C>
 (1) To elect two Class III Directors
     for the ensuing three years:
     Shikhar Ghosh....................   25,897,425           648,113
     Eugene Quinn.....................   26,042,839           502,699

 (2) To approve amendments to the 1996
     Director Option Plan to (a)
     increase the number of shares of
     Common Stock authorized for
     issuance under such plan from
     100,000 to 200,000 and (b)
     provide that all options granted
     on or after May 12, 1999 under
     such plan shall be fully
     exercisable on the date of
     grant............................   24,918,973 1,228,979 397,586    -0-

 (3) To ratify the selection by the
     Board of Directors of Arthur
     Andersen LLP as the Corporation's
     independent public accountants
     for the fiscal year ending
     December 31, 1999................   26,279,614   185,559  80,365
</TABLE>

ITEM 5. Other Information

  None

ITEM 6. Exhibits and Reports on Form 8-K

 (a) Exhibits

  The exhibits listed on the Exhibit Index are included in this report.

 (b) Reports on Form 8-K

  None.

                                       29
<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: August 4, 1999
                                                  /s/ Gary B. Eichhorn
                                          By:__________________________________
                                                    Gary B. Eichhorn
                                              President and Chief Executive
                                                         Officer

Date: August 4, 1999
                                                   /s/ Betty J. Savage
                                          By:__________________________________
                                                     Betty J. Savage
                                           Vice President and Chief Financial
                                                         Officer
                                              (Principal Financial Officer)

Date: August 4, 1999
                                                  /s/ Annmarie Russell
                                          By:__________________________________
                                                    Annmarie Russell
                                                   Director of Finance
                                             (Principal Accounting Officer)

                                       30
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
   No.                              Description
 -------                            -----------
 <C>     <S>
  +10.1  Master Software License and Distribution Agreement, dated June 9,
         1999, between ABSB, L.C. and the Company.

   27.1  Financial Data Schedule for the quarter ended June 30, 1999.
</TABLE>
--------
+ Confidential materials omitted and filed separately with the Securities and
  Exchange Commission.