INNOTRAC CORP, 10-K405, 2000-03-30

INNOTRAC CORP
10-K405, 2000-03-30
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

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

For the transition period from __________ to __________

Commission File No. 000-23741

INNOTRAC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

GEORGIA 58-1592285
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

6655 SUGARLOAF PARKWAY, DULUTH, GEORGIA 30097
--------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code: (678) 584-4000

Securities registered pursuant to Section 12(b) of the Act: NONE.
----

Name of each exchange on which registered: THE NASDAQ NATIONAL MARKET.
--------------------------

Securities registered pursuant to Section 12(g) of
the Act: COMMON STOCK, PAR VALUE $.10 PER SHARE.
--------------------------------------

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 .
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10K. /X/

The aggregate market value of the voting stock held by nonaffiliates
(which for purposes hereof are all holders other than executive officers and
directors) of the Registrant as of March 17, 2000 was $46,775,691, based on the
closing sale price of the Common Stock as reported by the Nasdaq National Market
on such date. See Item 12.

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At March 17, 2000, there were 11,214,545 shares of Common Stock, par
value $0.10 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's 1999 Annual Report to Shareholders, filed
as an exhibit hereto, are incorporated by reference into Part II of this Annual
Report on Form 10-K for the year ended December 31, 1999 (the "Report").
Portions of the Registrant's definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders, to be filed with the Securities and Exchange Commission
(the "Commission" or the "SEC"), are incorporated by reference into Part III of
this Report.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I.........................................................................................1
ITEM 1. BUSINESS....................................................................1
CERTAIN FACTORS AFFECTING FORWARD-LOOKING
STATEMENTS.......................................................7
EXECUTIVE OFFICERS OF REGISTRANT...................................12
ITEM 2. PROPERTIES.................................................................14
ITEM 3. LEGAL PROCEEDINGS..........................................................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................14

PART II.......................................................................................14
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS........................................................15
ITEM 6. SELECTED FINANCIAL DATA....................................................15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES...................................15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................................16

PART III......................................................................................16
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.........................16
ITEM 11. EXECUTIVE COMPENSATION.....................................................16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................................16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................16

PART IV.......................................................................................16
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES....................................16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES............................S-1
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS.....................................S-2
</TABLE>

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PART I

ITEM 1. BUSINESS

Innotrac provides customized, technology-based marketing support and
distribution services to large corporations that outsource these functions. We
target companies that have (1) a large customer base, (2) numerous and/or
geographically diverse subsidiary or affiliate operations, (3) extensive
marketing needs or (4) complex point-of-distribution requirements. Our
integrated services provide clients a more efficient and comprehensive means of
delivering products and information to their end user customers. We enable our
clients to manage their sales channels efficiently by utilizing our core
competencies, which include:

- - consultative services

- channel management, marketing and product strategy
- customized and flexible billing options
- promotions
- sales and marketing information and forecasting

- - technology services

- electronic data interface, or EDI, integration
- interactive voice response, or IVR
- database management

- - distribution services

- product ownership, consignment and warehousing
- fulfillment
- purchasing management
- inventory management

- - end user customer support services

- inbound call center services and technical support
- returns and refunds processing

Since 1994, we have focused on the telecommunications industry because
of its high growth characteristics and increasing marketing needs. The majority
of our growth during this time period has come from sales and services related
to telecommunications products, specifically Caller ID equipment, including
corded and cordless telephones with built-in Caller ID and stand-alone devices.
Approximately 90% of our 1999 revenues came from sales to BellSouth
Telecommunications, Inc., Pacific Bell and Southwestern Bell Telephone Co. and
their customers, and an additional 7% was from sales to US West Communications
Services, Inc., Bell Atlantic Corporation and Ameritech Services Inc. Pacific
Bell, Southwestern Bell and Ameritech are all subsidiaries of SBC
Communications, Inc.

We intend to apply our existing core competencies to help our clients
sell their products through the internet. We expect our e-commerce solution to
provide our clients with an additional distribution channel for offering their
products and services to their end user customers. We believe that our "one stop
shop" approach appeals to large corporations that seek to reduce the expense and
management of outsourcing to numerous service providers.

In order to perform marketing support and distribution functions
in-house, a company may be required to develop expensive, labor intensive
infrastructures, which may divert its resources and management's focus from its

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principal business. By assuming responsibility for these tasks, we strive to
improve the quality of the non-core operations of our clients and to reduce
their operating costs.

We believe that the flexibility of our services allows us to attract
clients in many industries. We have provided technical literature and
point-of-sale distribution for a number of years to companies in other
industries, including Home Depot U.S.A., Inc., Siemens Energy and Automation
Inc. and National Automotive Parts Association, or NAPA. In 1999, we began to
sell and distribute cable modems to customers of Tele-Communications, Inc., or
TCI, and digital subscriber line modems, or DSL, for BellSouth.net and other
internet service providers, or ISPs.

MARKETING SUPPORT SERVICES

We design customized, technology-based marketing support solutions for
our clients. We act as an extension of our clients in reaching their end user
customers. Our full range of services are described below and can be offered to
clients who sell products and services through the traditional sales channels or
the e-commerce channel.

CONSULTATIVE SERVICES

We offer consultative services to our clients regarding their sales,
marketing and distribution channels, which include:

CHANNEL MANAGEMENT, MARKETING AND PRODUCT STRATEGY. We strive to create
strategic relationships with our clients. We assist our clients in managing
their sales channels by assigning a client services team to each client to
understand the client's operations, customer service processes, culture,
requirements and goals. We are often in the field to train our clients' sales
staffs and promote product sales. To the extent requested by a client, we will
assist in formulating its marketing strategy and address product forecasting,
pricing, sourcing and promotional opportunities. We also consult with clients
about the products they sell to their customers. In addition, we seek new
revenue sources for our clients and address process and product improvements.
For clients who seek e-commerce solutions, we can provide internet marketing and
product strategy. We believe our value-added channel management and strategy
services integrate us into our clients' sales channels and increase our value to
our clients.

CUSTOMIZED AND FLEXIBLE BILLING OPTIONS. We believe that one of the key
services we offer is convenient payment options for end users to pay for
products. For example, we offer our clients product billing solutions, like the
billing option program we pioneered for BellSouth in 1993 in which customers
could pay for Caller ID equipment and telephones through interest-free
installments on their phone bill. We can implement payment alternatives for
clients, like billing in installments on credit cards. As part of our e-commerce
strategy, we offer universal payment processing software in conjunction with
shopping cart software for sales through the e-commerce channel. We design the
payment method to fit the needs of our client, its customers and the
distribution channel.

PROMOTIONS. We design and manage targeted promotional activities for
our clients. We consult with clients to determine which products to promote and
how to increase sales through coupons, rebate and other programs. We work with
our clients to determine how much rebate or discount will be given to the end
user and the manner in which an end user can access a program. Once established,
we implement and manage the promotion, providing such services as creative
design, verification, database management, results tracking, check printing and
disbursement and the program's back-end customer support.

SALES AND MARKETING INFORMATION AND FORECASTING. As a supplement to our
services, we provide sales reports and inventory analysis, program results and
detailed order processing information. We have developed flexible technologies
and reporting procedures that convert raw data gathered during the course of a
marketing support program into useful, customized reports. These reports provide
a basis for our client's responses to customer needs and inquiries. For example,
information obtained during a customer telephone call is captured by our
database marketing and management systems and is then incorporated into
customized reports. We use this information to help our clients prepare and
update forecasted sales information. These reports also are used by us and our
clients to monitor performance of various marketing programs. On-line functions
allow clients to monitor their programs in

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real-time to obtain comprehensive trend analyses and modify program parameters
as necessary. We provide clients with customized reports via
computer-to-computer transmission, disk, magnetic tape and the internet. We also
provide cost-center based accounting reports for clients who utilize our
services for subsidiary and intra-company fulfillment transactions.

TECHNOLOGY SERVICES

Our technology helps us provide marketing support services to our
clients. We provide the following technology-based services:

ELECTRONIC DATA INTERFACE INTEGRATION. We use EDI to link our systems
to our clients' systems, which permits the automatic exchange of information.
Our telecommunications clients generally transmit sales orders for Caller ID
equipment and other products to us via EDI. We can also provide sales, billing
and individual customer order status updates to our clients through EDI links.
The open architecture of our systems facilitates adapting our EDI capabilities
to new clients and new marketing programs. We also develop methods to allow
clients without EDI capabilities to transmit their order files to us through
other methods.

INTERACTIVE VOICE RESPONSE. In many cases, our call center services are
offered through IVR systems. These menu driven systems allow customers to route
their calls by selecting from several offerings. Our IVR systems include text to
speech capabilities, which allow the IVR systems to "read" specific, real-time
data from the client's databases and convert it into speech based on cues from a
caller. These systems generally reduce personnel and physical plant expenses
associated with a call center while expanding the operating capabilities of the
center. Technical support is also integrated into our IVR systems, so that an
end user can obtain answers to technical questions, from an automated system
rather than a call center representative, regarding the products they purchased.

DATABASE MANAGEMENT. We can manage client databases independently or in
conjunction with other marketing support programs. Independent database
management begins with the client providing the information to establish the
database or our obtaining the data from information generated through a client's
web site. We then customize and manage this data to provide client reports. In
addition, our integrated marketing support programs generate information about
customers, demographics, recurring technical problems and other useful marketing
data. We are then able to create customized databases that evolve with our
ongoing marketing support and customer service programs. This data is a source
of valuable information as we evaluate ongoing programs and plan and design
future programs with our clients.

DISTRIBUTION SERVICES

Effective distribution of our clients' products and services is another
of our core competencies and has been a key component in our revenue growth. Our
capabilities in this area are described below.

PRODUCT OWNERSHIP, CONSIGNMENT AND WAREHOUSING. As a part of our
comprehensive approach, we often acquire products that our clients offer and
warehouse them in our distribution facility. At a client's option, we can also
hold its inventory on consignment, in which case we distribute consigned client
products to the client's end user customers for a per-unit fee. We believe that
our flexibility in product ownership models gives us a competitive advantage in
maintaining and building client relationships.

FULFILLMENT. We are committed to offering our clients' products and
services to their customers on a timely and accurate basis. Our personnel
process, pack and ship product orders and requests for promotional, technical
and educational literature, signage and point of sale materials for clients. We
use several custom-designed semi-automated packaging and labeling lines to pack
and ship products. By utilizing this technology, we are able to reduce labor
costs and provide more timely shipments to our clients' customers. We streamline
and customize the distribution procedures for each client based upon the product
request and the tracking, reporting and inventory controls necessary to
implement that client's marketing support program.

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PURCHASING MANAGEMENT. We place orders for products we distribute with
vendors selected by us or our clients. Our purchasing management services
include assisting a client in negotiating product pricing with the vendor, as
well as forecasting product quantities required for normal business programs or
promotions. By managing the timing of purchases, we are better able to control
the inventory risk that we incur when we own the products our clients offer,
while providing a value-added service to our clients.

INVENTORY MANAGEMENT. An integral part of our marketing support
services is the on-line monitoring and control of a client's inventory. We
provide automated inventory management to assure real-time stock counts of a
client's products, literature, signage and other items. These inventory systems
enable us to provide management information to maintain consistent and timely
reorder levels and supply capabilities and also enable the client to assess
quickly stock balances, pricing information, reorder levels and inventory
values. We offer this information to the client on a real-time basis through our
internet gateway or direct dial-up. Inventory management data is also utilized
in our reporting services. We utilize bar coding equipment in our inventory
management systems which improves the efficiency of stock management and
selection.

END USER CUSTOMER SUPPORT SERVICES

Our fourth core competency relates to support services we provide to
our clients' customers. We believe this is critical to a comprehensive marketing
solution. These customer support services are described below.

INBOUND CALL CENTER SERVICES AND TECHNICAL SUPPORT. Our call center
representatives resolve questions regarding shipping, billing and technical
support as well as a variety of other questions. From time to time they may sell
advanced equipment and extended warranties to customers who call us.

Inquiries generally relate to a customer's purchase of a product or a
customer's need for ongoing assistance. These end users dial a support number
printed on the product or in the documentation accompanying the product. To
handle the call properly, Innotrac's automated call distributor identifies each
inbound call by the toll-free number dialed and immediately routes the call to
the IVR system or an Innotrac representative. The IVR system attempts to resolve
support issues by guiding the customer through a series of interactive
questions. If IVR automatic resolution cannot solve the problem, the call is
routed to one of our service representatives who is specially trained in the
applicable client's business and products. Our call center representatives can
enter customer information into our call-tracking system, listen to a question
and quickly access a proprietary network database using a graphical interface to
answer a customer's question. A senior representative is available to provide
additional assistance for complex or unique customer questions. Customer
requests are generally resolved with a single call, whether answered by a
trained representative or our automated systems.

As additional product information becomes available over the course of
a marketing program, we promptly integrate this information into our database to
ensure that IVR and representatives' answers are based upon the latest product
information.

RETURNS AND REFUNDS PROCESSING. The representatives respond to customer
calls about product returns and refunds and obtain information about customer
service problems. They facilitate a customer's return of a product by providing
a bar-coded label to the customer for return of a product. When the returned
item is processed and entered into our system, it automatically triggers a
pre-set action for reshipment of a product or refund to the customer.

TECHNOLOGY

Our use of technology enables us to design and deliver services for
each client's marketing support needs. Our information technology group, or IT
Group, has developed our database marketing support and management systems,
which utilize a UNIX-based open architecture comprised of multiple networked
computers and anchored by two Hewlett-Packard HP9000 K460 multiprocessing
systems. In 1999, we deployed an Oracle-based enterprise resource planning
software system, which features a fourth generation language technology that
will allow for quick and efficient changes to programs, systems and reports.
This system will standardize our computer services and allow for even greater
flexibility and capacity.

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The open architecture of our computer system permits us to seamlessly
interact with many different types of client systems. The IT Group uses this
platform to design and implement application software for each client's program,
allowing clients to review their programs' progress on-line to obtain real-time
comprehensive trend analysis, inventory levels and order status and to instantly
alter certain program parameters. As the needs of a client evolve, our IT Group
works with our client services team to modify the program on an ongoing basis.
Information can be exchanged via EDI, internet access and direct-dial
applications. We believe that our technology platform provides us with the
resources to continue to offer leading edge services to current and new clients
and to integrate our systems with theirs. We believe that the integrity of
client information is adequately protected by our data security system and our
off-site disaster back-up storage facilities.

Our call center utilizes a sophisticated Rockwell Spectrum Automatic
Call Distributor, or ACD, switch to handle call management functions. This ACD
system has the capacity to handle 2,400 call center representatives
simultaneously, and is currently supporting over 480 representatives
simultaneously. Additionally, the ACD system is integrated with software
designed to enable management to automatically staff and supervise the call
center based on call length and call volume data compiled by the ACD system.

PERSONNEL AND TRAINING

Our success in recruiting, hiring and training large numbers of skilled
employees and obtaining large numbers of hourly employees during peak periods
for distribution and call center operations is critical to our ability to
provide high quality marketing support services. Call center representatives and
fulfillment personnel receive feedback on their performance on a regular basis
and, as appropriate, are recognized for superior performance or given additional
training. To maintain good employee relations and to minimize employee turnover,
we offer competitive pay, hire primarily full-time employees who are eligible to
receive a full range of employee benefits, and provide employees with clear,
visible career paths.

As of January 31, 2000, we had over 850 employees, of which
approximately 98% were full-time and 2% were part-time. Management believes that
the demographics surrounding our facilities and our reputation, stability,
compensation and benefit plans should allow us to continue to attract and retain
qualified employees.

Currently, we are not a party to any collective bargaining agreements.
None of our employees is unionized. Although we consider our relationship with
our employees to be good, we have experienced occasional unionization
initiatives, particularly among our call center personnel.

COMPETITION

In tailoring services to client needs, we compete on the basis of
quality, reliability of service, efficiency, technical superiority, speed,
flexibility and price. We compete with many companies, some of which have
greater resources than us, with respect to various portions of our business.
Those companies include fulfillment businesses, call center operations, database
management firms, web developers and e-commerce service providers. We believe
that our comprehensive and integrated services differentiate us from many of
those competitors. We continuously explore new outsourcing service
opportunities, typically in circumstances where clients are experiencing
inefficiencies in non-core areas of their businesses and management believes we
can develop a superior outsourced solution on a cost-effective basis. We
primarily compete with the in-house operations of our current and potential
clients and also compete with certain companies that provide similar services on
an outsourced basis, many of whom have greater resources than Innotrac.

GOVERNMENT REGULATION

The Caller ID services offered by our telecommunications clients are
subject to various federal and state regulations. The legality of Caller ID has
been challenged in cases decided under the Electronic Communications Privacy
Act, or the ECPA, and several state statutes. In March 1994, a Federal
Communications Commission, or FCC, report preempted certain state regulation of
interstate calling party number parameter, or CPN, based services,

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the technology underlying Caller ID. This report requires certain common
carriers to transmit CPN and its associated privacy indicator (which allows
telephone callers to block the display of their phone numbers on Caller ID
display units) on an interstate call to connecting carriers without charge (the
"Free Passage" rule). In connection with this report, the Department of Justice
issued a memorandum which concluded that the installation or use of interstate
Caller ID service is not prohibited by any federal wiretap statute and that, in
general, the FCC has authority to preempt state laws that the FCC finds would
hinder federal communications policy on Caller ID services. Court decisions
since the FCC issued its March 1994 report have consistently held that Caller ID
does not violate any state or federal wiretap statute.

In May 1995, the FCC narrowed its March 1994 preemption of state public
utilities blocking regulations by permitting subscribers to choose per-line
blocking or per-call blocking on interstate calls, provided that all carriers
were required to adopt a uniform method of overriding blocking on any particular
call. At the same time, the FCC specifically preempted a California Public
Utilities Commission, or CPUC, per-line blocking default policy, which required
that all emergency service organizations and subscribers with nonpublished
numbers, who failed to communicate their choice between per-call blocking and
per-line blocking, be served with a per-line blocking.

The FCC's revised rules and regulations also require carriers to
explain to their subscribers that their telephone numbers may be transmitted to
the called party and that there is a privacy mechanism (i.e., the "blocking"
feature) available on interstate calls, and explain how the mechanism can be
activated. The CPUC, seeking to protect the caller's privacy, has ruled that a
carrier can offer Caller ID or transmit CPN to interconnecting carriers only
upon CPUC approval of its customer notification and education plan. The CPUC has
approved the education plan of Pacific Bell, whose Caller ID market includes
California.

The Telecommunications Act of 1996 introduced restrictions on
telecommunications carriers' usage of customer proprietary network information,
or CPNI. CPNI includes information that is personal to customers, including
where, when and to whom a customer places a call, as well as the types of
telecommunications services to which the customer subscribes and the extent
these services are used. The FCC interprets the CPNI restrictions to permit
telecommunications carriers, including BellSouth, Pacific Bell and US West, to
use CPNI without customer approval to market services that are related to the
customer's existing service relationship with his or her carrier. Before
carriers may use CPNI to market services outside a customer's existing service
relationships, the carrier must obtain express customer permission. Because we
are dependent upon the efforts of our clients to promote and market their
equipment and services, laws and regulations inhibiting those clients' ability
to market these equipment and services to their existing customers could have a
material adverse effect on our business, results of operations and financial
condition.

Telephone sales practices are regulated at both the federal and state
level. These regulations primarily relate to outbound teleservices, which we
currently outsource to another company. Outbound teleservices are regulated by
the rules of the FCC under the Federal Telephone Consumer Protection Act of
1991, the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of
1994 and various state regulations regarding telephone solicitations. We believe
that we are in compliance with these federal statutes and the FCC rules
thereunder and the various state regulations and that we would operate in
compliance with those rules and regulations if we were to engage in outbound
teleservice operations in the future.

Our new e-commerce business may be subject to many of the same laws and
regulations. It is uncertain how some of these existing laws and regulations
will be applied to our e-commerce business, if at all. Unfavorable
interpretations or applications of these laws in the e-commerce context,
particularly with respect to privacy issues, could impede our e-commerce
business. New laws and regulations specifically addressing e-commerce could also
affect us.

We work closely with our clients, companies we outsource outbound
teleservices to and their respective advisors to ensure that we and our client
are in compliance with these regulations. We cannot predict whether the status
of the regulation of Caller ID services or e-commerce will change and what
effect, if any, this change would have on us or our industry.

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INTELLECTUAL PROPERTY

We have used the service mark "Innotrac" since 1985 and have filed
applications for federal registration of this service mark and other marks used
by us in our business. The "innotrac.com" domain name has been a registered
domain name since 1995. We also own several other internet domain names. Due to
the possible use of identical or phonetically similar service marks by other
companies in different businesses, there can be no assurance that the United
States Patent and Trademark Office will grant our registration of our service
mark "Innotrac" or the other marks we are seeking to register, or that our
service marks will not be challenged by other users. Our operations frequently
incorporate proprietary and confidential information. In accordance with
industry practice, we rely upon a combination of contract provisions and trade
secret laws to protect the proprietary technology we use and to deter
misappropriation of our proprietary rights and trade secrets.

CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS (AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995). THESE STATEMENTS CONCERN THE COMPANY'S OPERATIONS, PERFORMANCE AND
FINANCIAL CONDITION, INCLUDING, IN PARTICULAR, THE LIKELIHOOD THAT INNOTRAC WILL
SUCCEED IN DEVELOPING AND EXPANDING ITS BUSINESS, AMONG OTHER THINGS. THEY ARE
BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT ARE INHERENTLY SUBJECT TO
SIGNIFICANT UNCERTAINTIES. MANY OF THESE UNCERTAINTIES ARE BEYOND INNOTRAC'S
CONTROL. CONSEQUENTLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH
BELOW.

WE RELY ON A SMALL NUMBER OF CLIENTS. IF WE LOSE ONE OR MORE OF OUR LARGEST
CLIENTS, OR IF REVENUES FROM OUR LARGEST CLIENTS DECLINE, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.

Innotrac focuses on developing long-term relationships with large
corporations. In recent years, this focus has been on telecommunications
companies. A relatively small number of our clients account for a significant
portion of our revenues. Our three largest clients, BellSouth, Pacific Bell
and Southwestern Bell, accounted for an aggregate of approximately 93%, 95%
and 90% of net revenues for 1997, 1998 and 1999. Pacific Bell, Southwestern
Bell and Ameritech, which are all subsidiaries of SBC, accounted for an
aggregate of 52% in 1999. If we lose one or more of our largest clients, or
if revenues from our largest clients decline, then our business, results of
operations and financial condition could be materially adversely affected.
Internal issues at BellSouth and SBC did in fact slow Caller ID sales in the
fourth quarter of 1999. We believe that sales of Caller ID for BellSouth will
continue to be slower in 2000. If one of these large clients is lost, or
revenues from our largest clients decline further, we cannot assure you that
we will be able to replace or supplement that client with others that
generate comparable revenues or profits.

WE ASSUME RISKS ASSOCIATED WITH BUYING, WAREHOUSING AND RENTING PRODUCTS TO
CUSTOMERS, AND OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE MISMANAGE THESE
RISKS.

We purchase Caller ID equipment and other telecommunications products
from third party vendors in connection with some of our distribution services.
Consequently, we assume the risks of inventory obsolescence, damage to units and
theft. Our business, results of operations and financial condition could be
materially adversely affected if we cannot manage these risks. We in fact
experienced increased inventory risks in late 1999 due to unexpectedly slow
Caller ID sales to BellSouth and SBC. Our inventory risk could increase in the
future because our e-commerce strategy contemplates our owning products offered
by e-commerce clients.

OUR WRITTEN CONTRACTS GENERALLY DO NOT GUARANTEE SPECIFIC VOLUME LEVELS AND CAN
USUALLY BE TERMINATED ON LITTLE NOTICE.

Although we have written agreements with our telecommunications
clients, those agreements are generally terminable for cause. In addition, some
agreements provide for termination without cause on short notice. Our

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agreement with BellSouth, which does not expire until September 2003, may be
terminated by BellSouth for any reason after March 15, 2000 upon 120 days
notice. Our agreement with SBC may be terminated for any reason upon 60 days
notice prior to July 1, 2004 and upon 120 days notice thereafter. BellSouth
commits to a minimum monthly Caller ID sales volume in its agreement with us.
However, most of our agreements do not assure specific volume or revenue levels.
In addition, our contracts generally do not provide that we will be the client's
exclusive service provider.

IF THE MARKET FOR TELECOMMUNICATIONS PRODUCTS OR SERVICES CHANGES, OUR BUSINESS
COULD BE ADVERSELY AFFECTED.

Our success depends upon our ability to distribute advanced
telecommunications equipment. We cannot assure you that we will be able to
continue to distribute state-of-the-art telecommunications equipment. Our
business, results of operations and financial condition could be materially
adversely affected if:

- the telecommunications products we distribute, and the related services
offered by our clients, do not gain or sustain marketplace acceptance,
- our telecommunications clients fail to adequately promote these products
and services or
- our telecommunications clients lose market share.

Currently, we rely heavily upon the distribution of Caller ID equipment
to the end user customers of our telecommunications clients for our revenues. We
also depend upon these clients to promote Caller ID service. We plan our
operations partly based on estimates of "market penetration," which represents
the percentage of customers with telephone lines capable of receiving Caller ID
service that actually subscribe for the service. Our business, results of
operations and financial condition could be materially adversely affected if:

- actual Caller ID market penetration rates are lower than estimated,
- market saturation is reached or
- new technologies replace Caller ID.

THE NEW TELECOMMUNICATIONS PRODUCTS WE ARE DISTRIBUTING MAY NOT ACHIEVE MARKET
SUCCESS AND MAY COMPETE WITH PRODUCTS WE ALREADY DISTRIBUTE FOR OTHER CLIENTS.

We distribute orders for telecommunications products other than Caller
ID. These include cable modems and digital subscriber line, or DSL, modems. Both
products are relatively new technologies that facilitate high-speed data
transmission over the internet. We cannot assure you that these products or
other new products will achieve widespread acceptance or market penetration.
There is also a risk that competing technologies will replace these products.

Some of the products we distribute compete with each other. Many of
these technologies and services are offered by our current telecommunications
clients. Potential competing services and technologies include telephone
company-related wireline technologies like traditional analog modems and
integrated services digital network modems. We cannot assure you that we will be
able to obtain, or retain, distribution service business from telecommunications
companies with competing products and technologies.

IF OUR NEW E-COMMERCE INITIATIVE FAILS, OUR BUSINESS COULD BE NEGATIVELY
IMPACTED.

We are seeking to expand the range of distribution channels we offer by
developing the ability to sell services and products via the internet
(electronic, or e-commerce). The success of this new initiative depends upon,
among other things, our ability to:

- recruit, hire and retain qualified personnel to assist in this new
service,
- integrate our new e-commerce service into our existing marketing support
services and
- finance growth of our e-commerce service during its developmental stage.

8
<PAGE>

Even if we successfully address these risks, we cannot assure you that
our new e-commerce initiative will succeed. Our e-commerce services, when fully
developed, may not be attractive to existing or new clients. If demand for them
does arise, they may not be quickly profitable, if at all. Because e-commerce is
a new business for us, we cannot predict the products or clients that may use
our e-commerce business or the other services we may offer. If our e-commerce
initiative fails, our business, financial condition or results of operations
could be materially adversely affected, particularly if significant financing
costs are not recouped.

The decision to implement our e-commerce solutions presents a potential
e-commerce client with significant enterprise-wide implications and involves a
substantial commitment of its management's attention. Sales cycles for our
e-commerce services, therefore, are longer than for our traditional marketing
support business as a result of lengthy client evaluation and approval processes
over which we have little or no control. Unpredictable sales cycles in the
developmental phase of our e-commerce business could hamper timely evaluation of
its success or failure. Unpredictable sales cycles could also contribute to
significant fluctuations in our operating results on a quarterly basis.

OUR NEW E-COMMERCE BUSINESS WILL DEPEND ON CONTINUED GROWTH IN THE USE AND
COMMERCIAL VIABILITY OF THE INTERNET. IF THE INTERNET FAILS TO CONTINUE TO GROW,
OUR E-COMMERCE BUSINESS MAY NOT SUCCEED, AND OUR BUSINESS MAY BE HARMED.

Commercial use of the internet is relatively new. Internet and
e-commerce usage may be inhibited for a number of reasons, including:

- increased government regulation,
- insufficient availability, reliability or capacity of telecommunications
services,
- security and authentication concerns,
- difficulty of access and
- inconsistent service quality.

If the internet develops as a commercial medium more slowly than we
expect, it will adversely affect our e-commerce business. Alternatively, if
internet and e-commerce usage grows too quickly, the internet may not be able to
support this growth or its performance and reliability may decline. If internet
outages or delays occur frequently in the future, web usage--including usage of
our clients' e-commerce web sites--could grow more slowly or decline.

IF WE ARE NOT ABLE TO CONTINUE OR MANAGE OUR GROWTH, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.

Our operations have grown significantly in recent years. Our business,
results of operations and financial condition could be materially adversely
affected if we cannot effectively manage our growth. Our continued success
depends upon our ability to:

- initiate, develop and maintain existing and new client relationships,
- respond to competitive developments,
- continue to develop our sales infrastructure,
- attract, train, motivate and retain management and other personnel and
- maintain the high quality of our services.

We expect that our continued rapid growth will significantly strain our
management, operations, employees and resources. We cannot assure you that we
will be able to:

- maintain or accelerate our current growth,
- effectively manage our expanding operations or
- achieve planned growth on a timely or profitable basis.

IF THE TREND TOWARD OUTSOURCING DOES NOT CONTINUE, OUR BUSINESS WILL BE
ADVERSELY AFFECTED.

9
<PAGE>

We believe there has recently been a significant increase in businesses
outsourcing services not directly related to their principal business
activities. Our business, results of operations and financial condition could be
materially adversely affected if the outsourcing trend declines or reverses, or
if corporations bring previously outsourced functions back in-house.
Particularly during general economic downturns, businesses may bring in-house
previously outsourced functions in order to avoid or delay layoffs.

IF WE ARE NOT BE ABLE TO RETAIN OR EMPLOY QUALIFIED EMPLOYEES, INCLUDING KEY
EXECUTIVES, OUR EMPLOYMENT-RELATED COSTS MAY RISE AND OUR RESULTS OF OPERATIONS
COULD SUFFER.

WE MAY NOT BE ABLE TO RETAIN OR EMPLOY QUALIFIED MANAGERS.

We depend in large part on the abilities and continuing efforts of our
executive officers and senior management. Our business and prospects could be
materially adversely affected if (1) current officers and managers do not
continue in their key roles and we cannot attract and retain qualified
replacements or (2) we cannot attract and retain additional qualified personnel
to sustain growth. We do not have employment agreements with our executive
officers. We cannot assure you that we will be able to retain them. We only
maintain key man life insurance on Scott D. Dorfman, in the amount of $3.5
million. In order to support growth, we must effectively recruit, develop and
retain additional qualified management personnel. We cannot assure you that in
the future we will be able to recruit and retain additional qualified managers.

WE MAY NOT BE ABLE TO RETAIN OR EMPLOY OTHER QUALIFIED EMPLOYEES.

Our success depends largely on our ability to recruit, hire, train and
retain qualified employees. If we cannot do so, our business, results of
operations or financial condition could be materially adversely affected. Our
industry is very labor-intensive and has experienced high personnel turnover. If
our employee turnover rate increases significantly, our recruiting and training
costs could rise and our operating effectiveness and productivity could decline.

New clients or new large-scale marketing support programs may require
accelerated recruiting, hiring and training. We cannot assure you that we will
be able to continue to hire, train and retain sufficient qualified personnel to
adequately staff new marketing support programs.

Some of our operations, particularly our technical support and customer
service, require specially trained personnel. In addition, the unemployment rate
in the geographic area where our facilities are located is relatively low. Our
need for specially trained personnel and low unemployment rates may make it more
difficult and costly to hire and retain qualified personnel.

Currently, we are not a party to any collective bargaining agreements.
None of our employees is unionized. Although we consider our relationship with
our employees to be good, there have been occasional unionization initiatives at
Innotrac, particularly among our call center personnel. If our employees were to
join unions, we could incur increased wages, employee benefits and
employment-related administrative costs. We could also experience an increased
risk of work stoppages. A significant portion of our operating expenses relates
to labor costs. Therefore, an increase in wages or employee benefits could
materially adversely affect our business, results of operations or financial
condition.

COMPETITION MAY HURT OUR BUSINESS.

We operate in highly competitive markets and expect this environment to
persist and intensify in the future. Because our marketing support services
comprise marketing and product consultation, sales channel management,
distribution and back-end support, including our call center operations, we have
many competitors who offer one or more of these services. Our competitors
include:

- in-house marketing support operations of our current and potential
clients,

10
<PAGE>

- other firms offering specific services, like fulfillment and call center
operations, and
- large marketing support services firms.

In addition, our new e-commerce business is in a relatively new and
highly competitive industry. Our potential competitors could be located anywhere
in the world. They range in size and sophistication from the smallest niche
companies, and even individuals, to large corporations.

A number of our competitors have developed or may develop financial and
other resources greater than ours. Additional competitors with greater name
recognition and resources may enter our markets. Our existing or potential
clients' in-house operations are also significant competitors. Our performance
and growth could be negatively impacted if:

- existing clients decide to provide, in-house, services they currently
outsource,
- potential clients retain or increase their in-house capabilities or
- existing clients consolidate their outsourced services with other
companies.

In addition, competitive pressures from current or future competitors
could result in significant price erosion, which could in turn materially
adversely affect our business, financial condition and results of operations.
For more information about our competition, see "Business--Competition" in this
Item 1.

IF WE ARE NOT ABLE TO KEEP PACE WITH CHANGING TECHNOLOGY, OUR BUSINESS WILL BE
MATERIALLY ADVERSELY AFFECTED.

Our success depends significantly upon our ability to:

- enhance existing services,
- develop applications to focus on our clients' needs and
- introduce new services and products to respond to technological
developments.

If we fail to maintain our technological capabilities or respond
effectively to technological changes, our business, results of operations and
financial condition could be materially adversely affected. We cannot assure you
that we will select, invest in and develop new and enhanced technology on a
timely basis in the future in order to meet our clients' needs and maintain
competitiveness. We provide details about our technology in
"Business--Technology" in this Item 1.

OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH MAY CAUSE SIGNIFICANT SWINGS IN THE
MARKET PRICE FOR OUR COMMON STOCK.

Our operating results may fluctuate in the future based on many
factors. These factors include, among other things:

- changes in the telecommunications industry,
- changes in the marketing support services industry,
- changes in the timing and level of client-specific marketing programs,
including the timing and nature of promotions,
- unpredictable sales cycles for our e-commerce business,
- increased competition and
- changes in customer purchasing patterns for products we distribute.

Due to these and any unforeseen factors, it is possible that in some
future quarter our operating results may be below the expectations of public
market analysts and investors. If that variance occurs, our common stock price
would likely decline materially. In view of our recent significant growth, we
believe that period-to-period comparisons of our financial results are not
necessarily meaningful or indicative of future performance.

11
<PAGE>

BECAUSE PROFIT MARGINS HAVE NARROWED, OUR PROFITS MAY FLUCTUATE MORE IN THE
FUTURE THAN THEY HAVE IN THE PAST.

Our gross profit as a percentage of our gross revenues has declined
recently from historical levels, primarily because we are now billing our
largest telecommunications clients and our ISP clients directly for products
sold to their customers, or end users, rather than billing their customers
directly for the products. Because we do not currently assume the credit risk of
these clients' customers, we charge lower unit prices for the products we
distribute, resulting in lower gross profit margins on these products. We expect
these lower gross profit margins to continue under our direct client billing
model. With a narrowed gross profit margin, we must rely on increased gross
revenues to maintain or increase our net profit. We also expect that our
operating profits in the future will be more sensitive to decreases in revenues
and increases in operating costs than in the past. We will have less capacity to
absorb increased operating expenses and still maintain profitability. Our gross
profit as a percentage of gross revenues for the year ended December 31, 1999
was 14.0% compared to 22.1% for the year ended December 31, 1998.

Some of the newer products we distribute, such as DSL modems, may have
lower gross margins than products we have traditionally distributed, such as
Caller ID equipment. Moreover, declining per-unit prices for the products we
distribute also contribute to narrowing gross margins. As competition and other
factors force prices down for Caller ID and other telecommunications equipment,
there is a risk that our cost of products sold will not decline at the same
rate.

OUR BUSINESS IS SUBJECT TO GOVERNMENT REGULATION, WHICH MAY LIMIT OUR ACTIVITIES
OR INCREASE OUR COSTS.

In connection with any outbound telemarketing services that we provide,
we must comply with federal and state regulations. These include the Federal
Communications Commission's rules under the Federal Telephone Consumer
Protection Act of 1991 and the Federal Trade Commission's regulations under the
Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, both
of which govern telephone solicitation. If we conduct outbound telemarketing
services, these rules and regulations would apply to that portion of our
business.

Furthermore, there may be additional federal and state legislation or
changes in regulatory implementation. These changes could include
interpretations under the Telecommunications Act of 1996 restricting the ability
of telecommunications companies to use consumer proprietary network information,
or CPNI. New legislation or regulatory implementation in the future may
significantly increase compliance costs or limit our activities, our clients'
activities or the activities of companies to which we outsource outbound
telemarketing functions. Additionally, we could be responsible for failing to
comply with regulations applicable to our clients or companies to which we
outsource telemarketing.

Our new e-commerce business may be subject to many of the same laws and
regulations. It is uncertain how these existing laws and regulations will be
applied to our e-commerce business, if at all. There is a risk that unfavorable
interpretations or applications of these existing laws, or the implementation of
new laws and regulations specifically addressing e-commerce, particularly with
respect to privacy issues, could impede our e-commerce business.

If unfavorable federal or state legislation or regulations affecting
Caller ID service, e-commerce or other technology or products we sell or
distribute are adopted, our business, financial condition and results of
operations could be materially adversely affected. See "Business -- Government
Regulation" in this Item 1 for further information about government regulation
of our business.

EXECUTIVE OFFICERS OF REGISTRANT

The executive officers of the Company are as follows:

12
<PAGE>

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Scott D. Dorfman.................. 42 President, Chief Executive Officer and
Chairman of the Board

David L. Ellin.................... 41 Senior Vice President; Chief Operating
Officer and Secretary

Larry C. Hanger................... 45 Senior Vice President--Business Development

Donald L. Colter, Jr. ............ 39 Vice President--Operation and Interim Chief
Financial Officer

Joel Holtzman..................... 42 Vice President--Electronic Commerce

Will Hendrick..................... 43 Vice President--Telecommunications

John Bryant....................... 37 Vice President--Information Technology
</TABLE>

MR. DORFMAN founded Innotrac and has served as President, Chief
Executive Officer and Chairman of the Board since its inception in 1984. Prior
to founding Innotrac, Mr. Dorfman was employed by Paymaster Checkwriter Company,
Inc., an equipment distributor. At Paymaster, Mr. Dorfman gained experience in
distribution, tracking and inventory control by developing and managing
Paymaster's mail order catalog.

MR. ELLIN joined us in 1986 and has served as Senior Vice President and
Chief Operating Officer since November 1997 and as a director since December
1997. He also serves as Secretary of Innotrac. He served as Vice President from
1988 to November 1997. From 1984 to 1986, Mr. Ellin was employed by the Atlanta
branch of WHERE Magazine, where he managed the sales and production departments.
From 1980 to 1984, Mr. Ellin was employed by Paymaster, where he was responsible
for Paymaster's sales and collections.

MR. HANGER joined Innotrac in 1994 and has served as Vice
President-Business Development since November 1997 and as a director since
December 1997. He was promoted to Senior Vice President in April 1999. He served
as Innotrac's Department Manager of Business Development from 1994 to November
1997, and was responsible for the management of the telecommunication equipment
marketing and service business. From 1979 to 1994, Mr. Hanger served as Project
Manager--Third Party Marketing at BellSouth, where he managed the marketing
program for BellSouth's network services and was involved in implementing the
billing options program for BellSouth with Innotrac.

MR. COLTER joined Innotrac in 1995 and has served as Vice
President--Operations since November 1997, and as Interim Chief Financial
Officer since February 2000. He previously served as Innotrac's Chief Financial
Officer from 1995 to November 1997. Prior to joining Innotrac, from 1993 to
1995, Mr. Colter was the corporate controller of Gay & Taylor/Thomas Howell
Group, an international insurance adjusting company. From 1991 to 1993, Mr.
Colter was corporate controller of Outdoor West, Inc., an outdoor advertising
company. Mr. Colter is a certified public accountant and has over 15 years of
experience in the financial and accounting industry.

MR. HOLTZMAN joined Innotrac in 1999 as Vice President--Electronic
Commerce. Mr. Holtzman joined us in 1999 and has served as Vice President
Electronic-Commerce. From 1995 to 1999 he served as Vice President of Internet
Business Development in the Digital and Applied Imaging Division of Kodak and he
was Vice President and General Manager of Worldwide Channel Marketing and
Distribution for the Document Imaging division of Kodak. From 1993 to 1995 he
was Vice President of Sales and Marketing with Rexon Corporation. From 1981 to
1993 he held senior sales and marketing positions with Seagate Technologies,
Digital Communications and NCR Corporation.

13
<PAGE>

MR. HENDRICK joined Innotrac in April 1999 as Vice President-
Telecommunications. Prior to joining Innotrac, from November 1997 to February
1999 he served as Vice President and General Manager for the former
telecommunications division of InteliData Technologies Corp., which designed and
distributed consumer telephone products. He also served as Vice President--Sales
at InteliData and its predecessor from August 1995 to November 1997. He held the
position of Senior Director--Product Management with BellSouth from January 1993
to July 1995, and has also served as Director--Product Development for that
company. Mr. Hendrick has 20 years experience in the telecommunications
industry.

MR. BRYANT joined Innotrac in 1999 as Assistant Vice President-
Information Technology. He was promoted to Vice President-Information Technology
in January 2000. From 1998 to 1999 he served as Senior Director of IT Operations
and Technical Services with the Carlson Companies. From 1996 to 1998 he was
General Manager, IT Operations and Telecommunications for the Tennessee Valley
Authority. From 1993 to 1996 he was Director of Network/Systems for Holiday Inn
Worldwide. From 1985 to 1993 Mr. Bryant held management positions within General
Electric Corporation and Schlumberger Technologies.

ITEM 2. PROPERTIES

Our headquarters and distribution facilities are located in 250,000
square feet of leased space in Duluth, Georgia. Our corporate offices occupy
50,000 square feet of this facility and the remaining 200,000 square feet is
distribution space. This site also includes approximately 3.5 acres that will be
available for Innotrac's expansion requirements. The lease for our Duluth
facility commenced in October 1998 and has a term of 10 years with two five year
renewal options. The lease provides for an option to purchase the facility at
the end of the first five years of the term or at the end of the first 10 years
of the term. We have not yet determined whether to exercise this purchase
option.

We provide teleservices through our call center located in Duluth,
Georgia. We renewed the lease for the center in May 1999 for a term of three
years. The call center is currently configured with approximately 460
workstations and has room to expand to approximately 700 workstations. It
currently operates from 8:00 a.m. until midnight Monday through Friday and from
9:00 a.m. to 6:00 p.m. on Saturday.

In June 1999, we entered into a lease for a new facility in Pueblo,
Colorado with an initial term of five years with two five year renewal options.
The facility provides approximately 87,000 square feet of floor space.
Approximately 45,000 square feet is used as a second call center, including
quality assurance, administrative, training and management space. This call
center will eventually support over 350 workstations. The second call center has
been in operation since the third quarter of 1999. The remaining 42,000 square
feet is available for future development as distribution space.

In October 1999, we entered into a lease for a facility in Duluth,
Georgia with an initial term of five years with one three-year renewal option.
The facility provides approximately 52,000 square feet of floor space for our
literature distribution business.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceeding. We are, from time
to time, a party to litigation arising in the normal course of our business.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on our financial position or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year covered by this Report.

PART II

14
<PAGE>

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS

The Company's Common Stock began trading on the Nasdaq National Market
under the symbol "INOC" on May 7, 1998. Prior to that time, there was no trading
market for the Common Stock. The following table sets forth for the periods
indicated the high and low sales prices of the Common Stock on the Nasdaq
National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
1998
<S> <C> <C>
First Quarter (beginning May 7, 1998)............... $13.250 $8.875
Third Quarter....................................... $13.500 $6.750
Fourth Quarter...................................... $24.375 $5.750
Fiscal Year Ended December 31, 1998................. $24.375 $5.750
1999
First Quarter....................................... $19.000 $10.000
Second Quarter...................................... $21.000 $12.500
Third Quarter....................................... $26.750 $14.500
Fourth Quarter...................................... $17.875 $10.250
Fiscal Year Ended December 31, 1999................. $26.750 $10.000
</TABLE>

The approximate number of holders of record of Common Stock as of March
17, 2000 was 43. The approximate number of beneficial holders of our Common
Stock as of that date was 3,700.

The Company has never declared cash dividends on the Common Stock. The
Company intends to retain its earnings to finance the expansion of its business
and does not anticipate paying cash dividends in the foreseeable future. Any
future determination as to the payment of cash dividends will depend upon such
factors as earnings, capital requirements, the Company's financial condition,
restrictions in financing agreements and other factors deemed relevant by the
Board of Directors. The payment of dividends by the Company is restricted by its
revolving credit facility.

ITEM 6. SELECTED FINANCIAL DATA

The information contained under the heading "Selected Financial Data"
in the Company's 1999 Annual Report to Shareholders, filed as an exhibit hereto,
is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information contained under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the Company's
1999 Annual Report to Shareholders, filed as an exhibit hereto, is incorporated
herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

The information contained under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Quantitative and
Qualitative Disclosures About Market Risk" in the Company's 1999 Annual Report
to Shareholders, filed as an exhibit hereto, is incorporated herein by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

15
<PAGE>

The information contained under the headings "Report of Independent
Public Accountants" and "Consolidated Financial Statements and Notes to the
Consolidated Financial Statements" in the Company's 1999 Annual Report to
Shareholders, filed as an exhibit hereto, is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained under the heading "Election of Directors" in
the definitive Proxy Statement used in connection with the solicitation of
proxies for the Company's 2000 Annual Meeting of Shareholders, to be filed with
the Commission, is hereby incorporated herein by reference. Pursuant to
Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information
relating to the executive officers of the Company is included in Item 1 of this
Report.

ITEM 11. EXECUTIVE COMPENSATION

The information contained under the heading "Executive Compensation" in
the definitive Proxy Statement used in connection with the solicitation of
proxies for the Company's 2000 Annual Meeting of Shareholders, filed with the
Commission, is hereby incorporated herein by reference. The information
contained in the Proxy Statement under the headings "Compensation Committee
Report on Executive Compensation" and "Stock Performance Graph" shall not be
deemed incorporated herein by such reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the heading "Voting Securities and
Principal Shareholders" in the definitive Proxy Statement used in connection
with the solicitation of proxies for the Company's 2000 Annual Meeting of
Shareholders, filed with the Commission, is hereby incorporated herein by
reference.

For purposes of determining the aggregate market value of the Company's
voting stock held by nonaffiliates, shares held by all current directors and
executive officers of the Company have been excluded. The exclusion of such
shares is not intended to, and shall not, constitute a determination as to which
persons or entities may be "affiliates" of the Company as defined by the
Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the heading "Related Party
Transactions" in the definitive Proxy Statement used in connection with the
solicitation of proxies for the Company's 2000 Annual Meeting of Shareholders,
filed with the Commission, is hereby incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS

1. FINANCIAL STATEMENTS

16
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>

3.1 - Amended and Restated Articles of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 to the Registrant's Amendment No. 1 to
Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the
Commission on February 11, 1998)

3.2 - Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-1 (Commission File No.
333-79929), filed with the Commission on July 22, 1999)

4.1 - Form of Common Stock Certificate of the Registrant (incorporated by reference to
Exhibit 4.1 to the Registrant's Amendment No. 1 to Registration Statement on Form
S-1 (Commission File No. 333-42373), filed with the Commission on February 11, 1998)

4.2 - Rights Agreement between Company and Reliance Trust Company as Rights Agent, dated
as of December 31, 1997 (incorporated by reference to Exhibit 4.2 to the
Registrant's Amendment No. 1 to Registration Statement on Form S-1 (Commission File
No. 333-42373), filed with the Commission on February 11, 1998)

10.1 - Acquisition Agreement by and among the Registrant, SellTel #1, Inc., RenTel #1,
Inc., IELC, Inc., HomeTel Systems, Inc., HomeTel Providers Inc., RenTel #2, L.L.C.,
SellTel #2, L.L.C., HomeTel Providers Partners, L.P., ITC Service Company, Scott D.
Dorfman, Susan Mary Trotochaud, as Custodian For Bradley H. Dorfman, Brent M.
Dorfman and Jesse E. Dorfman, and Susan Mary Trotochaud, dated December 15, 1997
(incorporated by reference to Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 (Commission File No. 333-42373), filed with the Commission on
December 16, 1997)

17
<PAGE>

<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>

10.2+(a) - Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.2 to
the Registrant's Registration Statement on Form S-1 (Commission File No. 333-42373),
filed with the Commission on December 16, 1997)

(b) - Amendment No. 1 to Stock Option and Incentive Award Plan (incorporated by reference
to Exhibit 10.2(b) to the Registrant's Amendment No. 1 to Registration Statement on
Form S-1 (Commission File No. 333-42373), filed with the Commission on February 11,
1998)

10.3** - 2000 Stock Option and Incentive Award Plan

10.4 - Purchase Agreement for Services between BellSouth Telecommunications, Inc. and the
Registrant, effective November 1, 1998 (incorporated by reference to Exhibit 10.4 to
the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998
(Commission File No. 000-23741), filed with the Commission on March 26, 1999)

10.5 (a) - Form of Indemnification Agreements entered into as of December 11, 1997, by and
between the Registrant and each of Messrs. Scott D. Dorfman, David L. Ellin, Larry
C. Hanger, Donald L. Colter, Jr., John H. Nichols III, Bruce V. Benator, Martin J.
Blank, Campbell B. Lanier, III and William H. Scott, III (incorporated by reference
to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 (Commission
File No. 333-42373), filed with the Commission on December 16, 1997)

(b) - Form of Indemnification Agreements by and between the Registrant and each of Stephen
J. Walden and Will Hendrick (incorporated by reference to Exhibit 10.5(b) to the
Registrant's Form S-1 (Commission File No. 333-79929))

10.6 - Lease, dated June 16, 1999, between Lockheed Martin Corporation and the Registrant
(incorporated by reference to Exhibit 10.6 to the Registrant's Form S-1 (Commission
File No. 333-79929))

10.8 - Lease, dated December 8, 1997, by and between Weeks Development Partnership and the
Registrant (incorporated by reference to Exhibit 10.8 to the Registrant's Amendment
No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373), filed
with the Commission on February 11, 1998)

10.9+ - Split Dollar Life Insurance Agreement, dated July 10, 1997, by and between the
Registrant, Bruce V. Benator, as Trustee of The Scott David Dorfman Family Trust #2,
and Scott David Dorfman (incorporated by reference to Exhibit 10.9 to the Registrant's
Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373),
filed with the Commission on February 11, 1998)

10.10+ - Innotrac Corporation Deferred Compensation Plan, effective as of October 16, 1997
(incorporated by reference to Exhibit 10.10 to the Registrant's Amendment No. 1 to
Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the
Commission on February 11, 1998)

18
<PAGE>

<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<S> <C>

10.11+ - Grantor Trust Agreement dated October 16, 1997, by and between the Registrant and
Wachovia Bank, N.A. (incorporated by reference to Exhibit 10.11 to the Registrant's
Amendment No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373),
filed with the Commission on February 11, 1998)

10.12(a) - Amended and Restated Loan and Security Agreement between the Registrant and SouthTrust
Bank, N.A., dated January 25, 1999 (incorporated by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (Commission
File No. 000-23741), filed with the Commission on March 26, 1999)

(b) - First Amendment to Amended and Restated Loan and Security Agreement by and between the
Registrant and SouthTrust Bank, N.A., dated April 29, 1999 10.15+(a) -- 1999 Senior
Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (Commission
File No. 000-23741), filed with the Commission on March 26, 1999)

10.13** - 2000 Senior Executive Incentive Compensation Plan

10.14 - Aircraft Lease by and between SD Holdings, Inc. and the Registrant, dated February 19, 1998
(incorporated by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 (Commission File No. 000-23741), filed with the
Commission on March 26, 1999)

10.15(a) - Contract by and between Market Reps, Inc. And the Registrant, dated June 26, 1998
(incorporated by reference to Exhibit 10.18 to the Registrant's Form 10-Q for the quarter
ended June 30, 1999)

(b) - Letter Amendment to Contract by and between Market Reps, Inc. and the Registrant, dated
August 10, 1998 (incorporated by reference to Exhibit 10.17 to the Registrant's Registration
Statement on Form S-1 (Commission File No. 333-79929))

10.16* - Master Agreement for Products and Services between the Company and SBC Operations, Inc.
effective July 1, 1999 (incorporated by reference to Exhibit 10.17 to the Registrant's
Registration Statement on Form S-1 (Commission File No. 333-79929))

13.1** - Portions of the Registrant's Annual Report to Shareholders for 1999 incorporated into this
Form 10-K

21.1** - List of Subsidiaries

23.1** - Consent of Arthur Andersen LLP

24.1** - Power of Attorney (included on signature page)

27.1** - Financial Data Schedule (for Commission use only)

99.1** - Proxy Statement for the 2000 Annual Meeting of Shareholders
</TABLE>

- --------------

* Confidential treatment has been requested for certain confidential portions
of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of
1934. In accordance with Rule 24b-2, these confidential portions have been
omitted from this exhibit and filed separately with the Commission.

**Filed herewith.

+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit.

19
<PAGE>

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed by the Registrant during the fourth
quarter of the Registrant's 1999 fiscal year.

20
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES

We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of INNOTRAC, CORPORATION included in
this Form 10-K and have issued our report thereon dated January 27, 2000. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 27, 2000

S-1

<PAGE>

INNOTRAC CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Balance at Charged to Balance at
Beginning Charged to Other End of
Description of Period Expenses Accounts Deductions Period
- -------------------------------------------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Provision for uncollectible accounts
Year ended December 31,
1999............................ $4,506 $3,314 -- $6,972 $848
1998............................ 5,058 8,245 -- (8,797) 4,506
1997............................ 4,141 7,750 -- (6,833) 5,058
1996............................ 2,552 5,841 -- (4,252) 4,141

Provisions for returns and allowances
Year ended December 31,

1999............................ $1,031 $8,539 -- $(6,606) $626
1998............................ 649 11,104 -- (10,722) 1,031
1997............................ 101 6,327 -- (5,779) 649
1996............................ -- 3,536 -- (3,435) 101
</TABLE>

S-2

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 23rd day of
March, 2000.

INNOTRAC CORPORATION

By: /s/ Scott D. Dorfman
----------------------------------
Scott D. Dorfman
President, Chief Executive Officer and
Chairman of the Board

POWER OF ATTORNEY

Know all men by these presents, that each person whose signature
appears below constitutes and appoints Scott D. Dorfman and Donald L. Colter,
Jr. and either of them, as attorneys-in-fact, with power of substitution, for
him in any and all capacities, to sign any amendments to this Report on Form
10-K, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact may do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 23rd day of March, 2000.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>

/s/ Scott D. Dorfman President, Chief Executive Officer and Chairman of
- ----------------------------------- the Board (principal executive officer)
Scott Dorfman

/s/ David L. Ellin Senior Vice President, Chief Operating Officer and
- ----------------------------------- Director
David L. Ellin

/s/ Larry C. Hanger Senior Vice President--Business Development and
- ----------------------------------- Director
Larry C. Hanger

/s/ Don L. Colter, Jr. Vice President--Operations, Interim Chief Financial
- ----------------------------------- Officer and Secretary
Don L. Colter, Jr. (principal financial and accounting officer)

/s/ Bruce V. Benator Director
- -----------------------------------
Bruce V. Benator

/s/ Martin J. Blank Director
- -----------------------------------
Martin J. Blank

/s/ William H. Scott, III Director
- -----------------------------------
William H. Scott, III
</TABLE>

<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
3.1 - Amended and Restated Articles of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 to the Registrant's Amendment No. 1 to
Registration Statement on Form S-1 (Commission File No. 333-42373), filed with the
Commission on February 11, 1998)

10.3** - 2000 Stock Option and Incentive Award Plan

10.6 - Lease, dated June 16, 1999, between Lockheed Martin Corporation and the Registrant
(incorporated by reference to Exhibit 10.6 to the Registrant's Form S-1 (Commission
File No. 333-79929))

10.7 - Lease, dated April 1, 1996, by and between Weeks Realty, L.P. and the Registrant
(incorporated by reference to Exhibit 10.7 to the Registrant's Registration
Statement on Form S-1 (Commission File No. 333-42373), filed with the Commission on
December 16, 1997)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.8 - Lease, dated December 8, 1997, by and between Weeks Development Partnership and the
Registrant (incorporated by reference to Exhibit 10.8 to the Registrant's Amendment
No. 1 to Registration Statement on Form S-1 (Commission File No. 333-42373), filed
with the Commission on February 11, 1998)

10.13** - 2000 Senior Executive Incentive Compensation Plan

13.1** - Portions of the Registrant's Annual Report to Shareholders for 1999 incorporated into this
Form 10-K

21.1** - List of Subsidiaries

23.1** - Consent of Arthur Andersen LLP

24.1** - Power of Attorney (included on signature page)

27.1** - Financial Data Schedule (for Commission use only)

99.1** - Proxy Statement for the 2000 Annual Meeting of Shareholders
</TABLE>

- --------------

** Filed herewith.

+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit.

<PAGE>

EXHIBIT 10.3

INNOTRAC CORPORATION

2000 STOCK OPTION AND INCENTIVE AWARD PLAN

(Effective as of March 28, 2000)

<PAGE>

TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION..................................................................1
1.1 Establishment of the Plan..................................................................1
1.2 Purpose of the Plan........................................................................1
1.3 Duration of the Plan.......................................................................1

ARTICLE 2. DEFINITIONS...........................................................................................1

ARTICLE 3. ADMINISTRATION........................................................................................5
3.1 The Committee..............................................................................5
3.2 Authority of the Committee.................................................................5
3.3 Decisions Binding..........................................................................5

ARTICLE 4. SHARES SUBJECT TO THE PLAN............................................................................5
4.1 Number of Shares...........................................................................5
4.2 Lapsed Awards..............................................................................6
4.3 Adjustments In Authorized Shares...........................................................6

ARTICLE 5. ELIGIBILITY AND PARTICIPATION.........................................................................6

ARTICLE 6. STOCK OPTIONS.........................................................................................7
6.1 Grant of Options...........................................................................7
6.2 Agreement..................................................................................7
6.3 Option Price...............................................................................7
6.4 Duration of Options........................................................................7
6.5 Exercise of Options........................................................................7
6.6 Payment....................................................................................8
6.7 Limited Transferability....................................................................8
6.8 Shareholder Rights.........................................................................9

ARTICLE 7. STOCK APPRECIATION RIGHTS.............................................................................9
7.1 Grants of SARs.............................................................................9
7.2 Duration of SARs...........................................................................9
7.3 Exercise of SAR............................................................................9
7.4 Determination of Payment of Cash and/or Common Stock Upon Exercise of SAR..................9
7.5 Nontransferability.........................................................................9
7.6 Shareholder Rights........................................................................10

ARTICLE 8. RESTRICTED STOCK; STOCK AWARDS.......................................................................10
8.1 Grants....................................................................................10
8.2 Restricted Period; Lapse of Restrictions..................................................10
8.3 Rights of Holder; Limitations Thereon.....................................................10
8.4 Delivery of Unrestricted Shares...........................................................11
8.5 Nonassignability of Restricted Stock......................................................12

i
<PAGE>

ARTICLE 9. PERFORMANCE SHARE AWARDS.............................................................................12
9.1 Award.....................................................................................12
9.2 Earning the Award.........................................................................12
9.3 Payment...................................................................................12
9.4 Shareholder Rights........................................................................12

ARTICLE 10. BENEFICIARY DESIGNATION.............................................................................13

ARTICLE 11. DEFERRALS...........................................................................................13

ARTICLE 12. RIGHTS OF PARTICIPANTS..............................................................................13
12.1 Employment...............................................................................13
12.2 Participation............................................................................13

ARTICLE 13. CHANGE IN CONTROL...................................................................................13
13.1 Definition...............................................................................13

ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION.............................................................14
14.1 Amendment, Modification and Termination..................................................14
14.2 Awards Previously Granted................................................................15
14.3 Compliance With Code Section 162(m)......................................................15

ARTICLE 15. WITHHOLDING.........................................................................................15
15.1 Tax Withholding..........................................................................15
15.2 Share Withholding........................................................................15

ARTICLE 16. INDEMNIFICATION.....................................................................................15

ARTICLE 17. SUCCESSORS..........................................................................................16

ARTICLE 18. LEGAL CONSTRUCTION..................................................................................16
18.1 Gender and Number........................................................................16
18.2 Severability.............................................................................16
18.3 Requirements of Law......................................................................16
18.4 Regulatory Approvals and Listing.........................................................16
18.5 Securities Law Compliance................................................................16
18.6 Governing Law............................................................................16
</TABLE>

<PAGE>

INNOTRAC CORPORATION

2000 STOCK OPTION AND INCENTIVE AWARD PLAN

ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION

1.1 ESTABLISHMENT OF THE PLAN. Innotrac Corporation, a Georgia
corporation (hereinafter referred to as the "Company"), hereby establishes a
stock option and incentive award plan known as the "Innotrac Corporation 2000
Stock Option and Incentive Award Plan" (the "Plan"), as set forth in this
document. The Plan permits the grant of Incentive Stock Options, Nonqualified
Stock Options, Restricted Stock, Stock Awards, Performance Share Awards and
Stock Appreciation Rights.

The Plan shall become effective on the date it is approved by the Board
of Directors, March 28, 2000 (the "Effective Date"), subject to approval of
the Plan by the Company's shareholders within the 12-month period immediately
thereafter, and shall remain in effect as provided in Section 1.3.

1.2 PURPOSE OF THE PLAN. The purposes of the Plan are to promote
greater stock ownership in the Company by key employees, directors, consultants,
or other persons who perform services for the Company and its subsidiaries, who
are responsible for its future growth and continued success; to more closely
link the personal interests of Participants (as defined below) to those of the
Company's shareholders; and to provide flexibility to the Company in its ability
to motivate, attract and retain the services of Participants upon whose
judgment, interest and special effort the successful conduct of its operation
largely depends.

1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, and shall remain in effect, subject to the right of the Board of Directors
to amend or terminate the Plan at any time pursuant to Article 14, until the day
prior to the tenth (10th) anniversary of the Effective Date.

ARTICLE 2. DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings
set forth below:

(a) "AGREEMENT" means an agreement entered into by each
Participant and the Company, setting forth the terms and
provisions applicable to Awards granted to Participants under
this Plan.

(b) "AWARD" means, individually or collectively, a grant under
this Plan of Incentive Stock Options, Nonqualified Stock
Options, Restricted Stock, Stock Awards, Performance Share
Awards or Stock Appreciation Rights.

(c) "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the
meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act.

(d) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors
of the Company.

-1-

<PAGE>

(e) "CAUSE" means: (i) with respect to the Company or any Subsidiary
which employs the Participant or for which the Participant
primarily performs services, the commission by the Participant of
an act of fraud, embezzlement, theft or proven dishonesty, or any
other illegal act or practice (whether or not resulting in
criminal prosecution or conviction), or any act or practice which
the Committee shall, in good faith, deem to have resulted in the
Participant's becoming unbondable under the Company's or the
Subsidiary's fidelity bond; (ii) the willful engaging by the
Participant in misconduct which is deemed by the Committee, in
good faith, to be materially injurious to the Company or any
Subsidiary, monetarily or otherwise; or (iii) the willful and
continued failure or habitual neglect by the Participant to
perform his duties with the Company or the Subsidiary
substantially in accordance with the operating and personnel
policies and procedures of the Company or the Subsidiary
generally applicable to all their employees. For purposes of this
Plan, no act or failure to act by the Participant shall be deemed
to be "willful" unless done or omitted to be done by the
Participant not in good faith and without reasonable belief that
the Participant's action or omission was in the best interest of
the Company and/or the Subsidiary. Notwithstanding the foregoing,
if the Participant has entered into an employment agreement that
is binding as of the date of employment termination, and if such
employment agreement defines "Cause," then the definition of
"Cause" in such agreement shall apply to the Participant in this
Plan. "Cause" under either (i), (ii) or (iii) shall be determined
by the Committee.

(f) "CHANGE IN CONTROL" has the meaning set forth in Article 13 of
this Plan.

(g) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor act thereto.

(h) "COMMITTEE" means (i) the committee appointed by the Board to
administer the Plan with respect to grants of Awards, as
specified in Article 3; or (ii) in the absence of such
appointment, the Board itself.

(i) "COMMON STOCK" means the common stock of the Company, par value
$.10 per share.

(j) "COMPANY" means Innotrac Corporation, a Georgia corporation, or
any successor thereto as provided in Article 17.

(k) "CORRESPONDING SAR" means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the
surrender to the Company, unexercised, of that portion of the
Option to which the SAR relates.

(l) "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.

(m) "DISABILITY" shall have the meaning ascribed to such term in the
Company's long-term disability plan covering the Participant, or
in the absence of such plan, a meaning consistent with Section
22(e)(3) of the Code.

-2-
<PAGE>

(n) "EMPLOYEE" means any employee of the Company or the Company's
Subsidiaries. Directors who are not otherwise employed by the
Company or the Company's Subsidiaries are not considered
Employees under this Plan.

(o) "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1.

(p) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.

(q) "FAIR MARKET VALUE" shall be determined as follows:

(i) If, on the relevant date, the Shares are traded on a
national or regional securities exchange or on The
Nasdaq National Market System ("Nasdaq") and closing
sale prices for the Shares are customarily quoted, on
the basis of the closing sale price on the principal
securities exchange on which the Shares may then be
traded or, if there is no such sale on the relevant
date, then on the last previous day on which a sale
was reported;

(ii) If, on the relevant date, the Shares are not listed
on any securities exchange or traded on Nasdaq, but
nevertheless are publicly traded and reported on
Nasdaq without closing sale prices for the Shares
being customarily quoted, on the basis of the mean
between the closing bid and asked quotations in such
other over-the-counter market as reported by Nasdaq;
but, if there are no bid and asked quotations in the
over-the-counter market as reported by Nasdaq on that
date, then the mean between the closing bid and asked
quotations in the over-the-counter market as reported
by Nasdaq on the immediately preceding day such bid
and asked prices were quoted; and

(iii) If, on the relevant date, the Shares are not publicly
traded as described in (i) or (ii), on the basis of
the good faith determination of the Committee.

(r) "INCENTIVE STOCK OPTION" OR "ISO" means an option to purchase
Shares granted under Article 6 which is designated as an
Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.

(s) "INITIAL VALUE" means, with respect to a Corresponding SAR, the
Option Price per share of the related Option, and with respect to
an SAR granted independently of an Option, the Fair Market Value
of one share of Common Stock on the date of grant.

(t) "INSIDER" shall mean an Employee who is, on the relevant date, an
officer or a director, or a beneficial owner of ten percent (10%)
or more of any class of the Company's equity securities that is
registered pursuant to Section 12 of the Exchange Act or any
successor provision, all as defined under Section 16 of the
Exchange Act.

(u) "NAMED EXECUTIVE OFFICER" means, if applicable, a Participant
who, as of the date of vesting and/or payout of an Award is one
of the group of "covered employees," as

-3-

<PAGE>

defined in the regulations promulgated under Code Section 162(m),
or any successor statute.

(v) "NONQUALIFIED STOCK OPTION" OR "NQSO" means an option to purchase
Shares granted under Article 6, and which is not intended or
otherwise fails to meet the requirements of Code Section 422.

(w) "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.

(x) "OPTION PRICE" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the
Committee.

(y) "PARTICIPANT" means an Employee, Director, consultant or other
person who performs services for the Company or a Subsidiary, who
has been determined by the Committee to contribute significantly
to the profits or growth of the Company and who has been granted
an Award under the Plan which is outstanding.

(z) "PERFORMANCE SHARE AWARD" means an Award, which, in accordance
with the terms of Article 9 and the other provisions of the Plan
and subject to an Agreement, will entitle the Participant, or his
estate or beneficiary in the event of the Participant's death, to
receive cash, Common Stock or a combination thereof.

(aa) "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.

(bb) "RETIREMENT" shall mean retiring from employment with the Company
or any Subsidiary on or after attaining age sixty five (65).

(cc) "RESTRICTED STOCK" means an Award of Common Stock granted in
accordance with the terms of Article 8 and the other provisions
of the Plan, and which is nontransferable and subject to a
substantial risk of forfeiture. Shares of Common Stock shall
cease to be Restricted Stock when, in accordance with the terms
hereof and the applicable Agreement, they become transferable and
free of substantial risk of forfeiture.

(dd) "SAR" means a stock appreciation right that entitles the holder
to receive, with respect to each share of Common Stock
encompassed by the exercise of such SAR, the amount determined by
the Committee and specified in an Agreement. In the absence of
such specification, the holder shall be entitled to receive in
cash, with respect to each share of Common Stock encompassed by
the exercise of such SAR, the excess of the Fair Market Value on
the date of exercise over the Initial Value. References to "SARs"
include both Corresponding SARs and SARs granted independently of
Options, unless the context requires otherwise.

-4-
<PAGE>

(ee) "SHARES" means the shares of Common Stock of the Company
(including any new, additional or different stock or securities
resulting from the changes described in Section 4.3).

(ff) "STOCK AWARD" means a grant of Shares under Article 8 that is not
generally subject to restrictions and pursuant to which a
certificate for the Shares is transferred to the Employee.

(gg) "SUBSIDIARY" means any corporation, partnership, limited
liability company, joint venture or other entity in which the
Company has a majority voting interest, either direct or
indirect.

ARTICLE 3. ADMINISTRATION

3.1 THE COMMITTEE. The Plan shall be administered by the Board of
Directors or by the Compensation Committee of the Board (or a subcommittee
thereof), or by any other committee or subcommittee appointed by the Board that
is granted authority to administer the Plan. The members of the Committee shall
be appointed from time to time by, and shall serve at the discretion of, the
Board of Directors. In the absence of any such appointment, the Plan shall be
administered by the Board.

3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have full and exclusive power to select the Participants who
shall participate in the Plan (who may change from year to year); determine the
size and types of Awards; determine the terms and conditions of Awards in a
manner consistent with the Plan (including conditions on the exercisability of
all or a part of an Option or SAR, restrictions on transferability, vesting
provisions on Restricted Stock or Performance Share Awards and the duration of
the Awards); construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and regulations for
the Plan's administration; and (subject to the provisions of Article 14) amend
the terms and conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided in the Plan,
including accelerating the time any Option or SAR may be exercised and
establishing different terms and conditions relating to the effect of the
termination of employment or other services to the Company. Further, the
Committee shall make all other determinations which may be necessary or
advisable in the Committee's opinion for the administration of the Plan. All
expenses of administering this Plan shall be borne by the Company.

3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all Persons,
including the Company, the shareholders, Participants and their estates and
beneficiaries.

ARTICLE 4. SHARES SUBJECT TO THE PLAN

4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3,
the total number of Shares available for grant of Awards under the Plan shall be
one million three hundred

-5-
<PAGE>

thousand (1,300,000) Shares. The Shares may, in the discretion of the Company,
be either authorized but unissued Shares or Shares held as treasury shares,
including Shares purchased by the Company, whether on the market or otherwise.
The following rules shall apply for purposes of the determination of the number
of Shares available for grant under the Plan:

(a) The grant of an Option, SAR, Stock Award, Restricted
Stock Award or Performance Share Award shall reduce
the Shares available for grant under the Plan by the
number of Shares subject to such Award.

(b) While an Option, SAR, Stock Award, Restricted Stock
Award or Performance Share Award is outstanding, it
shall be counted against the authorized pool of
Shares, regardless of its vested status.

4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, or if Shares are withheld in
payment of the Option Price or for withholding taxes, any Shares subject to such
Award or that are withheld shall again be available for the grant of an Award
under the Plan. However, in the event that prior to the Award's cancellation,
termination, expiration or lapse, the holder of the Award at any time received
one or more "benefits of ownership" pursuant to such Award (as defined by the
Securities and Exchange Commission, pursuant to any rule or interpretation
promulgated under Section 16 of the Exchange Act), the Shares subject to such
Award shall not again be made available for regrant under the Plan.

4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in
corporate capitalization, such as a stock split or stock dividend; a
reclassification of stock; a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company; any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368); or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares which may be delivered under the Plan,
and in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number and the Committee shall make such
adjustments as are necessary to insure Awards of whole Shares.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

Any Director or Employee of the Company or of any Subsidiary, or any
independent contractor, adviser or consultant to the Company or any Subsidiary,
whose judgment, initiative and efforts contribute or may be expected to
contribute materially to the successful performance of the Company or any
Subsidiary shall be eligible to receive an Award under the Plan. In determining
the individuals to whom such an Award shall be granted and the number of Shares
which may be granted pursuant to that Award, the Committee shall take into
account the duties of the respective individual, his or her present and
potential contributions to the success of the Company or any Subsidiary, and
such other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan.

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ARTICLE 6. STOCK OPTIONS

6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee shall have sole discretion
in determining the number of Shares subject to Options granted to each
Participant. An Option may be granted with or without a Corresponding SAR. No
Participant may be granted ISOs (under the Plan and all other incentive stock
option plans of the Company and any Subsidiary) which are first exercisable in
any calendar year for Common Stock having an aggregate Fair Market Value
(determined as of the date an Option is granted) that exceeds One Hundred
Thousand Dollars ($100,000). The preceding annual limit shall not apply to
NQSOs. The Committee may grant a Participant ISOs, NQSOs or a combination
thereof, and may vary such Awards among Participants. The maximum number of
Shares subject to Options which can be granted under the Plan during any
calendar year to any individual is 500,000 Shares.

6.2 AGREEMENT. Each Option's grant shall be evidenced by an Agreement
that shall specify the Option Price, the duration of the Option, the number of
Shares to which the Option pertains and such other provisions as the Committee
shall determine. The Option Agreement shall further specify whether the Award is
intended to be an ISO or an NQSO. Any portion of an Option that is not
designated as an ISO or otherwise fails or is not qualified as an ISO (even if
designated as an ISO) shall be a NQSO. If the Option is granted in connection
with a Corresponding SAR, the Agreement shall also specify the terms that apply
to the exercise of the Option and Corresponding SAR.

6.3 OPTION PRICE. The Option Price for each grant of an ISO shall not
be less than one hundred percent (100%) of the Fair Market Value of a Share on
the date the Option is granted. In no event, however, shall any Participant who
owns (within the meaning of Section 424(d) of the Code) stock of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company be eligible to receive an ISO at an Option Price
less than one hundred ten percent (110%) of the Fair Market Value of a share on
the date the ISO is granted. The Option Price for each grant of a NQSO shall be
established by the Committee and, in its discretion, may be less or more than
the Fair Market Value of a Share on the date the Option is granted. The
Committee is authorized to issue Options, whether ISOs or NQSOs, at an Option
Price in excess of the Fair Market Value on the date the Option is granted (the
so-called "Premium Price" Option) to encourage superior performance.

6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant; provided, further, however, that any ISO granted to any Participant who
at such time owns (within the meaning of Section 424(d) of the Code) stock of
the Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, shall not be exercisable later
than the fifth (5th) anniversary date of its grant.

6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, including conditions related to
the employment of the Participant with the Company or

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any Subsidiary, which need not be the same for each grant or for each
Participant. Each Option shall be exercisable for such number of Shares and at
such time or times, including periodic installments, as may be determined by the
Committee at the time of the grant. The Committee may provide in the Agreement
for automatic accelerated vesting and other rights upon the occurrence of a
Change in Control (as defined in Section 13.1) of the Company. Except as
otherwise provided in the Agreement and Article 13, the right to purchase Shares
that are exercisable in periodic installments shall be cumulative so that when
the right to purchase any Shares has accrued, such Shares or any part thereof
may be purchased at any time thereafter until the expiration or termination of
the Option. The exercise or partial exercise of either an Option or its
Corresponding SAR shall result in the termination of the other to the extent of
the number of Shares with respect to which the Option or Corresponding SAR is
exercised.

6.6 PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares. The Option Price upon exercise of any Option shall be payable to the
Company in full, either: (a) in cash, (b) cash equivalent approved by the
Committee, (c) if approved by the Committee, by tendering previously acquired
Shares (or delivering a certification of ownership of such Shares) having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for the period required by the Committee, if any, prior to their
tender to satisfy the Option Price), or (d) by a combination of (a), (b) and
(c). The Committee also may allow cashless exercises as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law. As soon as practicable after receipt of a
written notification of exercise and full payment, the Company shall deliver to
the Participant, in the Participant's name, Share certificates in an appropriate
amount based upon the number of Shares purchased under the Option(s), and may
place appropriate legends on the certificates representing such Shares.

6.7 LIMITED TRANSFERABILITY. If permitted by the Committee in the
Agreement, a Participant may transfer an Option granted hereunder, including,
but not limited to, transfers to members of his or her Immediate Family (as
defined below), to one or more trusts for the benefit of such Immediate Family
members, or to one or more partnerships where such Immediate Family members are
the only partners, if (i) the Participant does not receive any consideration in
any form whatsoever for such transfer, (ii) such transfer is permitted under
applicable tax laws, and (iii) the Participant is an Insider, such transfer is
permitted under Rule 16b-3 of the Exchange Act as in effect from time to time.
Any Option so transferred shall continue to be subject to the same terms and
conditions in the hands of the transferee as were applicable to said Option
immediately prior to the transfer thereof. Any reference in any such Agreement
to the employment by or performance of services for the Company by the
Participant shall continue to refer to the employment of, or performance by, the
transferring Participant. For purposes hereof, "Immediate Family" shall mean the
Participant and the Participant's spouse, children and grandchildren. Any Option
that is granted pursuant to any Agreement that did not initially expressly allow
the transfer of said Option and that has not been amended to expressly permit
such transfer, shall not be transferable by the Participant other than by will
or by the laws of descent and distribution and such Option thus shall be
exercisable in the Participant's lifetime only by the Participant.

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<PAGE>

6.8 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder with respect to Shares subject to his Option until the issuance of
such Shares to the Participant pursuant to the exercise of such Option.

ARTICLE 7. STOCK APPRECIATION RIGHTS

7.1 GRANTS OF SARS. The Committee shall designate Participants to whom
SARs are granted, and will specify the number of Shares of Common Stock subject
to each grant. An SAR may be granted with or without a related Option. All SARs
granted under this Plan shall be subject to an Agreement in accordance with the
terms of this Plan. A payment to the Participant upon the exercise of a
Corresponding SAR may not be more than the difference between the Fair Market
Value of the Shares subject to the ISO on the date of grant and the Fair Market
Value of the Shares on the date of exercise of the Corresponding SAR. The
maximum number of SARs which can be granted under the Plan during any calendar
year to any individual is 500,000 SARs.

7.2 DURATION OF SARS. The duration of an SAR shall be set forth in the
Agreement as determined by the Committee. An SAR that is granted as a
Corresponding SAR shall have the same duration as the Option to which it
relates. An SAR shall terminate due to the Participant's termination of
employment at the same time as the date specified in Article 6 with respect to
Options, regardless of whether the SAR was granted in connection with the grant
of an Option.

7.3 EXERCISE OF SAR. An SAR may be exercised in whole at any time or in
part from time to time and at such times and in compliance with such
requirements as the Committee shall determine as set forth in the Agreement;
provided, however, that a Corresponding SAR that is related to an Incentive
Stock Option may be exercised only to the extent that the related Option is
exercisable and only when the Fair Market Value of the Shares exceeds the Option
Price of the related ISO. An SAR granted under this Plan may be exercised with
respect to any number of whole shares less than the full number of shares for
which the SAR could be exercised. A partial exercise of an SAR shall not affect
the right to exercise the SAR from time to time in accordance with this Plan and
the applicable Agreement with respect to the remaining shares subject to the
SAR. The exercise of either an Option or Corresponding SAR shall result in the
termination of the other to the extent of the number of Shares with respect to
which the Option or its Corresponding SAR is exercised.

7.4 DETERMINATION OF PAYMENT OF CASH AND/OR COMMON STOCK UPON EXERCISE
OF SAR. At the Committee's discretion, the amount payable as a result of the
exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. A fractional share shall not be deliverable upon the
exercise of an SAR, but a cash payment shall be made in lieu thereof.

7.5 NONTRANSFERABILITY. Each SAR granted under the Plan shall be
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom the SAR is granted, the SAR may
be exercised only by the Participant. No right or interest of a Participant in
any SAR shall be liable for, or subject to any lien, obligation or liability of
such Participant. A Corresponding SAR shall be subject to the same restrictions
on transfer as the ISO to which it relates. Notwithstanding the foregoing, if
the Agreement so provides, a Participant may

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transfer an SAR (other than a Corresponding SAR that relates to an Incentive
Stock Option) under the same rules and conditions as are set forth in Section
6.7.

7.6 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder with respect to Shares subject to an SAR until the issuance of
Shares (if any) to the Participant pursuant to the exercise of such SAR.

ARTICLE 8. RESTRICTED STOCK; STOCK AWARDS

8.1 GRANTS. The Committee may from time to time in its discretion grant
Restricted Stock and Stock Awards to Participants and may determine the number
of Shares of Restricted Stock or Stock Awards to be granted. The Committee shall
determine the terms and conditions of, and the amount of payment, if any, to be
made by the Participant for such Shares or Restricted Stock. A grant of
Restricted Stock may, in addition to other conditions, require the Participant
to pay for such Shares of Restricted Stock, but the Committee may establish a
price below Fair Market Value at which the Participant can purchase the Shares
of Restricted Stock. Each grant of Restricted Stock shall be evidenced by an
Agreement containing terms and conditions not inconsistent with the Plan as the
Committee shall determine to be appropriate in its sole discretion. The maximum
number of Shares of Restricted Stock or Stock Awards which can be granted under
the Plan during any calendar year to any individual is 500,000 Shares.

8.2 RESTRICTED PERIOD; LAPSE OF RESTRICTIONS. At the time a grant of
Restricted Stock is made, the Committee shall establish a period or periods of
time (the "Restricted Period") applicable to such grant which, unless the
Committee otherwise provides, shall not be less than one year. Subject to the
other provisions of this Article 8, at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the Participant.
At the time a grant is made, the Committee may, in its discretion, prescribe
conditions for the incremental lapse of restrictions during the Restricted
Period and for the lapse or termination of restrictions upon the occurrence of
other conditions in addition to or other than the expiration of the Restricted
Period with respect to all or any portion of the Restricted Stock. Such
conditions may, but need not, include the following:

(a) The death, Disability or Retirement of the Employee to
whom Restricted Stock is granted, or

(b) The occurrence of a Change in Control (as defined in
Section 13.1).

The Committee may also, in its discretion, shorten or terminate the Restricted
Period, or waive any conditions for the lapse or termination of restrictions
with respect to all or any portion of the Restricted Stock at any time after the
date the grant is made.

8.3 RIGHTS OF HOLDER; LIMITATIONS THEREON. Upon a grant of Restricted
Stock, a stock certificate (or certificates) representing the number of Shares
of Restricted Stock granted to the Participant shall be registered in the
Participant's name and shall be held in custody by the Company or a bank
selected by the Committee for the Participant's account. Following such
registration, the Participant shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to receive
dividends, if and when declared by the Board of

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<PAGE>

Directors, and to vote such Restricted Stock, except that the right to
receive cash dividends shall be the right to receive such dividends either in
cash currently or by payment in Restricted Stock, as the Committee shall
determine, and except further that, the following restrictions shall apply:

(a) The Participant shall not be entitled to delivery of
a certificate until the expiration or termination of
the Restricted Period for the Shares represented by
such certificate and the satisfaction of any and all
other conditions prescribed by the Committee;

(b) None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted
Period and until the satisfaction of any and all
other conditions prescribed by the Committee; and

(c) All of the Shares of Restricted Stock that have not
vested shall be forfeited and all rights of the
Participant to such Shares of Restricted Stock
shall terminate without further obligation on the
part of the Company, unless the Participant has
remained an employee of (or non-Employee Director
of or active consultant providing services to) the
Company or any of its Subsidiaries, until the
expiration or termination of the Restricted Period
and the satisfaction of any and all other
conditions prescribed by the Committee applicable
to such Shares of Restricted Stock. Upon the
forfeiture of any Shares of Restricted Stock, such
forfeited Shares shall be transferred to the
Company without further action by the Participant
and shall, in accordance with Section 4.2, again
be available for grant under the Plan. If the
Participant paid any amount for the Shares of
Restricted Stock that are forfeited, the Company
shall pay the Participant the lesser of the Fair
Market Value of the Shares on the date they are
forfeited or the amount paid by the Participant.

With respect to any Shares received as a result of adjustments under
Section 4.3 hereof and any Shares received with respect to cash dividends
declared on Restricted Stock, the Participant shall have the same rights and
privileges, and be subject to the same restrictions, as are set forth in this
Article 8.

8.4 DELIVERY OF UNRESTRICTED SHARES. Upon the expiration or termination
of the Restricted Period for any Shares of Restricted Stock and the satisfaction
of any and all other conditions prescribed by the Committee, the restrictions
applicable to such Shares of Restricted Stock shall lapse and a stock
certificate for the number of Shares of Restricted Stock with respect to which
the restrictions have lapsed shall be delivered, free of all such restrictions
except any that may be imposed by law, a shareholders' agreement or any other
agreement, to the holder of the Restricted Stock. The Company shall not be
required to deliver any fractional Share but will pay, in lieu thereof, the Fair
Market Value (determined as of the date the restrictions lapse) of such
fractional Share to the holder thereof. Concurrently with the delivery of a
certificate for Restricted Stock, the holder shall be required to pay an amount
necessary to satisfy any applicable federal, state and local tax requirements as
set out in Article 16 below.

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8.5 NONASSIGNABILITY OF RESTRICTED STOCK. Unless the Committee provides
otherwise in the Agreement, no grant of, nor any right or interest of a
Participant in or to, any Restricted Stock, or in any instrument evidencing any
grant of Restricted Stock under the Plan, may be assigned, encumbered or
transferred except, in the event of the death of a Participant, by will or the
laws of descent and distribution.

ARTICLE 9. PERFORMANCE SHARE AWARDS

9.1 AWARD. The Committee may designate Participants to whom Performance
Share Awards will be granted from time to time for no consideration and specify
the number of shares of Common Stock covered by the Award.

9.2 EARNING THE AWARD. A Performance Share Award, or portion thereof,
will be earned, and the Participant will be entitled to receive Common Stock, a
cash payment or a combination thereof, only upon the achievement by the
Participant, the Company, or a Subsidiary of such performance objectives as the
Committee, in its discretion, shall prescribe on the date of grant.

The Committee may in determining whether performance targets have been
met adjust the Company's financial results to exclude the effect of unusual
charges or income items or other events, including acquisitions or dispositions
of businesses or assets, restructurings, reductions in force, currency
fluctuations or changes in accounting, which are distortive of financial results
(either on a segment or consolidated basis). In addition, the Committee will
adjust its calculations to exclude the effect on financial results of changes in
the Code or other tax laws, or the regulations relating thereto.

9.3 PAYMENT. In the discretion of the Committee, the amount payable
when a Performance Share Award is earned may be settled in cash, by the grant of
Common Stock or a combination of cash and Common Stock. The aggregate Fair
Market Value of the Common Stock received by the Participant pursuant to a
Performance Share Award, together with any cash paid to the Participant, shall
be equal to the aggregate Fair Market Value, on the date the Performance Shares
are earned, of the number of Shares of Common Stock equal to each Performance
Share earned. A fractional Share will not be deliverable when a Performance
Share Award is earned, but a cash payment will be made in lieu thereof.

9.4 SHAREHOLDER RIGHTS. No Participant shall have, as a result of
receiving a Performance Share Award, any rights as a shareholder until and to
the extent that the Performance Shares are earned and Common Stock is
transferred to such Participant. If the Agreement so provides, a Participant may
receive a cash payment equal to the dividends that would have been payable with
respect to the number of Shares of Common Stock covered by the Award between (a)
the date that the Performance Shares are awarded and (b) the date that a
transfer of Common Stock to the Participant, cash settlement, or combination
thereof is made pursuant to the Performance Share Award. A Participant may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of a
Performance Share Award or the right to receive Common Stock thereunder other
than by will or the laws of descent and distribution. After a Performance Share
Award is earned and paid in Common Stock, a Participant will have all the rights
of a shareholder with

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respect to the Common Stock so awarded; provided that the restrictions of
Section 19.4 or any shareholders' agreement or other agreement shall, if
applicable, continue to apply.

ARTICLE 10. BENEFICIARY DESIGNATION

To the extent applicable, each Participant under the Plan may, from
time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company and shall be effective
only when filed by the Participant, in writing, with the Company during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate. If required, the spouse of a married Participant domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
or beneficiaries other than the spouse.

ARTICLE 11. DEFERRALS

The Committee may permit a Participant to defer to another plan or
program such Participant's receipt of Shares or cash that would otherwise be due
to such Participant by virtue of the exercise of an Option, the vesting of
Restricted Stock, or the earning of a Performance Share Award. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.

ARTICLE 12. RIGHTS OF PARTICIPANTS

12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company or a Subsidiary to terminate any Participant's
employment by, or performance of services for, the Company at any time, nor
confer upon any Participant any right to continue in the employ or service of
the Company or a Subsidiary. For purposes of the Plan, transfer of employment of
a Participant between the Company and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.

12.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.

ARTICLE 13. CHANGE IN CONTROL

13.1 DEFINITION. For purposes of the Plan, a "Change in Control" shall
be deemed to have occurred if:

(a) the Company consolidates or merges with or into
another company, or is otherwise reorganized, if the
Company is not the surviving company in such
transaction, or, if after such transaction, any other
company, association or other person, entity or group
or the shareholders thereof that did not own fifty
percent (50%) or more of the then outstanding Shares
prior to such transaction, then own, directly and/or
indirectly, more than

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fifty percent (50%) of the then outstanding Shares
of the Company or more than fifty percent (50%) of
the assets of the Company; or

(b) more than 35% of the Shares of the Company are, in a
single transaction or in a series of related
transactions, sold or otherwise transferred to or
are acquired by (except as collateral security for
a loan) any other company, association or other
person, entity or group, whether or not any such
shareholder or any shareholders included in such
group were shareholders of the Company prior to
the Change in Control, PROVIDED HOWEVER that a
"Change in Control" shall not be deemed to have
occurred as a result of any transaction wherein
any person, entity or group that owns more than
sixty-five percent (65%) of the then outstanding
Shares prior to such transaction continues to own
sixty-five percent (65%) or more after such
transaction; or

(c) a change in the composition of the Board such that
the individuals who, as of the Effective Date,
constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however, for
purposes of this Section 13.1 that any individual
who becomes a member of the Board subsequent to
the Effective Date whose election, or nomination
for election by the Company's shareholders, was
approved by a vote of at least a majority of those
individuals who are members of the Board and who
were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall
be considered as though such individual were a
member of the Incumbent Board; but, provided,
further, that any such individual whose initial
assumption of office occurs as a result of either
an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, including any
successor to such Rule), or other actual or
threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board,
shall not be so considered as a member of the
Incumbent Board.

ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION

14.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board may, at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part; provided, that, unless approved by the holders of a majority of the
total number of Shares of the Company represented and voted at a meeting at
which a quorum is present, no amendment shall be made to the Plan if such
amendment would (a) materially modify the eligibility requirements provided in
Article 5; (b) increase the manner in which the total number of Shares which may
be granted under the Plan is determined (except as provided in Section 4.3); (c)
extend the term of the Plan; or (d) amend the Plan in any other manner which the
Board, in its discretion, determines should become effective only if approved by
the shareholders even if such shareholder approval is not expressly required by
the Plan or by law.

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14.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award. The Committee shall, with the written consent of
the Participant holding such Award, have the authority to cancel Awards
outstanding and grant replacement Awards therefor.

14.3 COMPLIANCE WITH CODE SECTION 162(m). At all times when the
Committee determines that compliance with Code Section 162(m) is required or
desired, all Awards granted under this Plan to Named Executive Officers shall
comply with the requirements of Code Section 162(m). In addition, in the event
that changes are made to Code Section 162(m) to permit greater flexibility with
respect to any Award or Awards under the Plan, the Committee may, subject to
this Article 14, make any adjustments it deem appropriate.

ARTICLE 15. WITHHOLDING

15.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising in connection with an Award under this Plan.

15.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options, or upon any other taxable event arising as a result of
Awards granted hereunder which are to be paid in the form of Shares,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All elections shall be irrevocable, made in writing, signed by the Participant,
and elections by Insiders shall additionally comply with all legal requirements
applicable to Share transactions by such Participants.

ARTICLE 16. INDEMNIFICATION

Each person who is or shall have been a member of the Committee, or the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall be in addition to
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

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ARTICLE 17. SUCCESSORS

All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.

ARTICLE 18. LEGAL CONSTRUCTION

18.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein shall also include the feminine; the
plural shall include the singular and the singular shall include the plural.

18.2 SEVERABILITY. If any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

18.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

18.4 REGULATORY APPROVALS AND LISTING. The Company shall not be
required to issue any certificate or certificates for Shares under the Plan
prior to (i) obtaining any approval from any governmental agency which the
Company shall, in its discretion, determine to be necessary or advisable, (ii)
the admission of such shares to listing on any national securities exchange or
Nasdaq on which the Company's Shares may be listed, and (iii) the completion of
any registration or other qualification of such Shares under any state or
federal law or ruling or regulation of any governmental body which the Company
shall, in its sole discretion, determine to be necessary or advisable.

To the extent applicable, if required by the then-current Section 16 of
the Exchange Act, any "derivative security" or "equity security" offered
pursuant to the Plan to any Insider may not be sold or transferred for at least
six (6) months after the date of grant of such Award. The terms "equity
security" and "derivative security" shall have the meanings ascribed to them in
the then-current Rule 16(a) under the Exchange Act.

18.5 SECURITIES LAW COMPLIANCE. To the extent applicable, with respect
to Insiders, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provisions of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.

18.6 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Georgia.

-16-

<PAGE>

AS APPROVED BY THE BOARD OF DIRECTORS OF INNOTRAC CORPORATION ON
MARCH 28, 2000.

-17-

<PAGE>
EXHIBIT 10.13

INNOTRAC CORPORATION
SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN

Effective as of January 1, 2000

1. ESTABLISHMENT AND EFFECTIVE DATE OF PLAN

Innotrac Corporation (the "Corporation") hereby adopts the
Innotrac Corporation Senior Executive Incentive Compensation Plan (the
"Plan") for its executive officers and certain other key employees of
the Corporation, its Operating Units and affiliates who are in
management positions designated as eligible for participation by the
Executive Compensation Subcommittee (the "Committee") of the Board of
Directors of the Corporation or its designee. The Plan shall be
effective as of January 1, 2000 and shall remain in effect, subject to
the rights of amendment and termination in Section 13, until the
Incentive Awards are paid for the Corporation's fiscal year ending in
2004. Payments under the Plan shall only be made to Named Executive
Officers after the Plan is approved by the stockholders of the
Corporation.

2. PURPOSE OF THE PLAN

The purpose of the Plan is to further the growth and financial
success of the Corporation by offering performance incentives to
designated executives who have significant responsibility for such
success.

3. DEFINITIONS

(a) "Base Annual Salary" means the actual salary paid to a
Participant during the applicable Plan Year, increased by the
amount of any pre-tax deferrals or other pre-tax payments made
by the Participant to the Corporation's deferred compensation
or welfare plans (whether qualified or non-qualified).

(b) "Board of Directors" means the Board of Directors of the
Corporation.

(i) the Company consolidates or merges with or into
another company, or is otherwise reorganized, if the Company
is not the surviving company in such transaction, or, if after
such transaction, any other company, association or other
person, entity or group or the shareholders thereof that did
not own fifty percent (50%) or more of the then outstanding
Shares prior to such transaction, then own, directly and/or
indirectly, more than fifty percent (50%) of the then
outstanding Shares of the Company or more than fifty percent
(50%) of the assets of the Company; or

<PAGE>

(ii) more than 35% of the Shares of the Company are,
in a single transaction or in a series of related
transactions, sold or otherwise transferred to or are acquired
by (except as collateral security for a loan) any other
company, association or other person, entity or group, whether
or not any such shareholder or any shareholders included in
such group were shareholders of the Company prior to the
Change in Control, provided however that a "Change in Control"
shall not be deemed to have occurred as a result of any
transaction wherein any person, entity or group that owns more
than sixty-five percent (65%) of the then outstanding Shares
prior to such transaction continues to own sixty-five percent
(65%) or more after such transaction; or

(iii) a change in the composition of the Board such
that the individuals who, as of the Effective Date, constitute
the Board (such Board shall be hereinafter referred to as the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, for purposes of
this Section 13.1 that any individual who becomes a member of
the Board subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of those individuals
who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a
member of the Incumbent Board; but, provided, further, that
any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, including any successor to
such Rule), or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board, shall not be so considered as a member of the Incumbent
Board."Change in Control" means any of the following events:

(d) "Chief Executive Officer" means the chief executive officer of
the Corporation, unless otherwise specified.

(e) "Code" means the Internal Revenue Code of 1986, as amended.

(f) "Committee" means the Executive Compensation Subcommittee of
the Compensation Committee of the Board of Directors or any
other committee designated by the Board of Directors which is
responsible for administering the Plan.

(g) "Corporation" means Innotrac Corporation, a Georgia
corporation, and its successors.

(h) "Incentive Award" or "Award" means the bonus awarded to a
Participant under the terms of the Plan.

2
<PAGE>

(i) "Maximum Award" means the maximum percentage of Base Annual
Salary which may be paid based upon the Relative Performance
during the Plan Year.

(j) "Named Executive Officer" means a Participant who as of the
date of payment of an Incentive Award is one of the group of
"covered employees" under Code Section 162(m) and the
regulations thereunder.

(k) "Operating Unit" means a separate business operating unit of
the Corporation with respect to which separate performance
goals may be established hereunder.

(l) "Participant" means an employee of the Corporation, an
Operating Unit or an affiliate who is designated by the
Committee to participate in the Plan.

(m) "Personal Performance Goals" means the goals that may be
established for a Participant each year to improve the
effectiveness of the Participant's area of responsibility as
well as the Corporation as a whole.

(n) "Plan Rules" means the guidelines established annually by the
Committee pursuant to Section 4, subject, where applicable, to
ratification by the Board of Directors.

(o) "Plan Year" means the twelve month period which is the same as
the Corporation's fiscal year. The initial Plan Year for the
amended and restated Plan shall be January 1, 2000 through
December 31, 2000.

(p) "Relative Performance" means the extent to which the
Corporation, and/or designated Operating Unit, as applicable,
achieves the performance measurement criteria set forth in the
Plan Rules.

(q) "Target Award" means the percentage (which may vary among
Participants and from Plan Year to Plan Year) of Base Annual
Salary which will be paid to a Participant as an Incentive
Award if the performance measurement criteria applicable to
the Participant for the Plan Year is achieved, as reflected in
the Plan Rules for such Plan Year.

(r) "Threshold Award" means the percentage of Base Annual Salary
which may be paid based on the minimum acceptable Relative
Performance during the Plan Year.

4. ADMINISTRATION OF THE PLAN

The Plan will be administered by the Committee, subject to its
right to delegate responsibility for administration of the Plan as it
applies to Participants other than Named Executive Officers pursuant to
Section 7. The Committee will have authority to establish Plan Rules
with respect to the following matters for the Plan Year, subject to the
right of the Board of Directors to ratify such Plan Rules as provided
in this Section 4:

<PAGE>

(a) the employees who are Participants in the Plan;

(b) the Target Award, Maximum Award and Threshold Award that can
be granted to each Participant and the method for determining
such award, which the Committee may amend from time to time;

(c) the performance targets and the measurement criteria to be
used in determining the Corporation's or an Operating Unit's
Relative Performance, which will include one or more of the
following, as determined by the Committee each year: earnings
before interest and taxes (EBIT), earnings before interest,
taxes, depreciation and amortization (EBITDA), sales, net
income, operating income, earnings per share, return on
capital employed, return on equity, return on assets (or net
assets), after-tax or pre-tax profit, market value of the
Corporation's stock, total shareholder return, return on
investment, economic profit, capitalized economic profit,
cash flow and cash flow return; and

(d) the time or times, the form, and the conditions subject to
which any Incentive Award may become payable.

The Plan Rules will be adopted by the Committee prior to, or
as soon as practical after, the commencement of each Plan Year. Subject
to the provisions of the Plan and the Committee's right to delegate its
responsibilities, the Committee will also have the discretionary
authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, and to make all other determinations
deemed necessary or advisable in administering the Plan. The
determinations of the Committee on the matters referred to in
paragraphs (a) through (d) of this Section 4 with respect to Named
Executive Officers (and such other Participants as the Committee may
determine) shall be submitted at least annually to the Board of
Directors for its consideration and ratification. For Participants who
are not Named Executive Officers, the Committee may in its discretion
establish performance measures not listed in this Section 4 without
obtaining shareholder approval.

5. PARTICIPATION

Eligibility for participation in the Plan is limited to
executive officers of the Corporation and certain other key employees
of the Corporation and its Operating Units or affiliates who hold key
management and staff positions. From among those eligible and based
upon the recommendations of the Chief Executive Officer and other
designees, the Committee will designate by name or position the
Participants each Plan Year. Any employee who is a Participant in one
Plan Year may be excluded from participation in any other Plan Year.
If, during the Plan Year, a Participant other than a Named Executive
Officer changes employment positions to a new position which
corresponds to a different award level, the Committee may, in its
discretion, adjust the Participant's award level for such Plan Year.
The Committee may, in its discretion, designate employees who are hired
after the beginning of the Plan Year as Participants for such Plan Year
and as eligible to receive full or partial Incentive Awards for such
year.

4
<PAGE>

6. INCENTIVE AWARDS

6.1 DETERMINATION OF THE AMOUNT OF INCENTIVE AWARDS

At the end of each Plan Year, the Committee or its designee
shall certify the extent to which the performance targets and
measurement criteria established pursuant to Section 4 have been
achieved for such Plan Year based upon financial information provided
by the Corporation. Subject to the right to decrease an award as
described in the next paragraph, the Participant's Incentive Award
shall be computed by the Committee based upon the achievement of the
established performance targets, measurement criteria and the
requirements of the Plan. In addition to any adjustments provided by
the Incentive Award; the Committee may in determining whether
performance targets have been met adjust the Corporation's financial
results to exclude the effect of unusual charges or income items or
other events, including acquisitions or dispositions of businesses or
assets, recapitalizations, reorganizations, restructurings, reductions
in force, currency fluctuations or changes in accounting, which are
distortive of results for the year (either on a segment or consolidated
basis); provided, that for purposes of determining the Incentive Awards
of Named Executive Officers, the Committee shall exclude unusual items
whose exclusion has the effect of increasing Relative Performance if
such items constitute "extraordinary items" under generally accepted
accounting principles or are unusual events or items. In addition, the
Committee will adjust its calculations to exclude the unanticipated
effect on financial results of changes in the Code or other tax laws,
or the regulations relating thereto.

The Committee may, in its discretion, decrease the amount of a
Participant's Incentive Award for a Plan Year based upon such factors
as it may determine, including the failure of the Corporation or an
Operating Unit to meet certain performance goals or of a Participant to
meet his Personal Performance Goals. The factors to be used in reducing
an Incentive Award may be established at the beginning of a Plan Year
and may vary among Participants.

In the event that the Corporation's or an Operating Unit's
performance is below the anticipated performance thresholds for the
Plan Year and the Incentive Awards are below expectations or not earned
at all, the Committee may in its discretion grant Incentive Awards (or
increase the otherwise earned Incentive Awards) to deserving
Participants, except for Participants who are Named Executive Officers.

The Plan Rules and Incentive Awards under the Plan shall be
administered in a manner to qualify payments under the Plan to the
Named Executive Officers for the performance-based exception under Code
Section 162(m) and the regulations thereunder, except where the Board
of Directors determines such compliance is not necessary. The maximum
Incentive Award that may be paid to an individual Participant for a
Plan Year shall be $2,000,000.

<PAGE>

6.2 ELIGIBILITY FOR PAYMENT OF INCENTIVE AWARD

No Participant will have any vested right to receive any
Incentive Award until such date as the Board of Directors has ratified
the Committee's determination with respect to the payment of individual
Incentive Awards, except where the Committee determines such
ratification is not necessary. No Incentive Award will be paid to any
Participant who is not an active employee of the Corporation, an
Operating Unit or an affiliate at the end of the Plan Year to which the
Incentive Award relates; provided, however, at the discretion of the
Committee or its designee (subject to ratification by the Board of
Directors, where required, and the limitations of Code Section 162(m)),
partial Incentive Awards may be paid to Participants (or their
beneficiaries) who are terminated without cause (as determined by the
Committee or its designee) or who retire, die or become permanently and
totally disabled during the Plan Year. No Participant entitled to
receive an Incentive Award shall have any interest in any specific
asset of the Corporation, and such Participant's rights shall be
equivalent to that of a general unsecured creditor of the Corporation.

6.3 PAYMENT OF AWARDS

Payment of the Incentive Awards will be made as soon as
practicable after their determination pursuant to Sections 6.1 and 6.2,
subject to a Participant's right to defer payment pursuant to any
applicable deferred compensation plans of the Corporation. Payment will
generally be made in a lump sum in cash, unless the Committee otherwise
determines at the beginning of the Plan Year.

7. DELEGATION OF AUTHORITY BY THE COMMITTEE

Notwithstanding the responsibilities of the Committee set
forth herein, the Committee may delegate to the Chief Executive Officer
or others all or any portion of its responsibility for administration
of the Plan as it relates to Participants other than Named Executive
Officers. Such delegation may include, without limitation, the
authority to designate employees who can participate in the Plan, to
establish Plan Rules, to interpret the Plan, to determine the extent to
which performance criteria have been achieved, and to adjust any
Incentive Awards that are payable. In the case of each such delegation,
the administrative actions of the delegate shall be subject to the
approval of the person within the Corporation to whom the delegate
reports (or, in the case of a delegation to the Chief Executive
Officer, to the approval of the Committee).

8. CHANGE IN CONTROL

Upon the occurrence of a Change in Control, unless the
Participant otherwise elects in writing, the Participant's Incentive
Award for the Plan Year, determined at the Target Award level (without
any reductions under Section 6.1) shall be deemed to have been fully
earned for the Plan Year, provided that` the Participant shall only be
entitled to a pro rata portion of the Incentive Award based upon the
number of days within the Plan Year that had elapsed as of the
effective date of the Change in Control. The Incentive Award amount
shall be paid in cash within thirty (30) days of the effective date of
the Change in Control. The Incentive Award payable upon a Change in
Control to a

<PAGE>

Participant for the Plan Year during which a Change in Control occurs
shall be the greater of the amount provided for under this Section 8 or
the amount of the Incentive Award payable to such Participant for the
Plan Year under the terms of any employment agreement or severance
agreement with the Corporation, its Operating Units or affiliates.
Notwithstanding the above, the Committee may provide in the Plan Rules
for alternative consequences upon a Change in Control, which may apply
to some or all Participants and which may vary among Participants.

9. BENEFICIARY

To the extent provided by the Committee or its designee each
Participant will designate a person or persons to receive, in the event
of death, any Incentive Award to which the Participant would then be
entitled under Section 6.2. Such designation will be made in the manner
determined by the Committee and may be revoked by the Participant in
writing. If the Committee does not provide for a designation of
beneficiary or if a Participant fails effectively to designate a
beneficiary, then the estate of the Participant will be deemed to be
the beneficiary.

10. WITHHOLDING OF TAXES

The Corporation shall deduct from each Incentive Award the
amount of any taxes required to be withheld by any governmental
authority.

11. EMPLOYMENT

Nothing in the Plan or in any Incentive Award shall confer (or
be deemed to confer) upon any Participant the right to continue in the
employ of the Corporation, an Operating Unit or an affiliate, or
interfere with or restrict in any way the rights of the Corporation, an
Operating Unit or an affiliate to discharge any Participant at any time
for any reason whatsoever, with or without cause.

12. SUCCESSORS

All obligations of the Corporation under the Plan with respect
to Incentive Awards granted hereunder shall be binding upon any
successor to the Corporation, whether such successor is the result of
an acquisition of stock or assets of the Corporation, a merger, a
consolidation or otherwise.

13. TERMINATION AND AMENDMENT OF THE PLAN; GOVERNING LAW

The Committee, subject to the ratification rights of the Board
of Directors, has the right to suspend or terminate the Plan at any
time, or to amend the Plan in any respect, provided that no such action
will, without the consent of a Participant, adversely affect the
Participant's rights under an Incentive Award approved under Section
6.2. The Plan shall be interpreted and construed under the laws of the
State of Georgia.

AS APPROVED BY THE BOARD OF DIRECTORS OF THE CORPORATION ON
THE 28TH DAY OF MARCH, 2000.

<PAGE>

EXHIBIT 13.1

SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the Company. The
selected historical statements of operations data for each of the years ended
December 31, 1999, 1998, 1997 and 1996 and the selected historical balance sheet
data for the periods then ended have been derived from the Consolidated
Financial Statements that have been audited by Arthur Andersen LLP, independent
public accountants.

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(IN 000'S, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR:

Revenues, net........................ $ 227,011 $ 139,673 $87,978 $ 71,297 $ 44,886
Cost of revenues (1)................. 195,230 108,785 67,986 55,519 30,658
--------- --------- -------- -------- --------
Gross profit......................... 31,781 30,888 19,992 15,778 14,228
--------- --------- -------- -------- --------
Operating expenses:
Selling, general and administrative
Expenses......................... 12,495 15,642 12,572 10,391 6,510
--------- --------- -------- -------- --------
Depreciation and
Amortization (1)................. 1,711 943 631 429 293
--------- --------- -------- -------- --------
Total operating expenses........... 14,206 16,585 13,203 10,820 6,803
--------- --------- -------- -------- --------
Operating income..................... 17,575 14,303 6,789 4,958 7,425
--------- --------- -------- -------- --------
Other (income) expense:
Interest expense, net.............. 1,370 956 1,788 1,457 1,090
Other.............................. (19) 35 118 94 (73)
--------- --------- -------- -------- --------
Total other expense................ 1,351 991 1,906 1,551 1,017
--------- --------- -------- -------- --------
Income before income
Taxes.............................. 16,224 13,312 4,883 3,407 6,408
Income tax (provision) benefit....... (6,389) (3,743) 77 (212) (793)
--------- --------- -------- -------- --------
Net income........................... 9,835 9,569 4,960 3,195 5,615
========= ========= ======== ======== ========
Pro forma net ncome.................. 9,835 8,186 3,003 2,095 3,941
========= ========= ======== ======== ========
Pro forma net income per share-basic. 0.99 1.01 0.46 0.32 0.61
Pro forma net income per
share-diluted........................ 0.98 1.00 0.46 0.32 0.61

YEAR-END FINANCIAL POSITION:

Current assets....................... $ 94,810 $ 66,416 $ 24,330 $ 37,845 $ 21,156
Current liabilities.................. 24,930 39,563 22,809 38,887 21,772
Property and equipment, net.......... 8,922 7,463 7,609 10,939 9,099
Total assets......................... 104,218 73,992 32,497 49,037 30,414
Long-term obligations................ 75 135 3,944 4,779 4,729
Total liabilities.................... 25,005 39,698 26,753 43,666 26,501
Shareholders' equity................. 79,213 34,294 4,827 4,540 3,195
COMMON STOCK INFORMATION:
Average number of common shares
Outstanding.......................... 9,911 8,096 6,500 6,500 6,500
Common stock price per share:
High 26 3/4 24 3/8 N/A N/A N/A
Low 10 5 3/4 N/A N/A N/A
Year-end 13 3/4 18 1/8 N/A N/A N/A
Book value per common share 7.99 4.24 0.74 0.70 0.49
OTHER DATA:
Capital expenditures................. $ 5,328 $ 5,739 $ 6,937 $ 7,972 $ 6,568
</TABLE>

<PAGE>

(1) Cost of revenue includes $1,703, $2,900, $3,711, $3,005 and $1,750 for the
years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively, related
to depreciation on rental equipment.

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

The following discussion may contain certain forward-looking statements
that are beyond the control of the Company. Actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ include, but are not limited to, those
factors discussed in more detail under "Business" in the Company's Annual Report
on Form 10-K.

OVERVIEW

Innotrac provides customized, technology-based marketing support and
distribution services to large corporations that outsource these functions.
Since 1994, we have focused on the telecommunications industry because of its
high growth characteristics and increasing marketing needs. We provide marketing
support services and distribution of Caller ID units, Caller ID telephones and
other telecommunications products to BellSouth, Pacific Bell, Southwestern Bell,
Ameritech Services, Inc., Bell Atlantic and US West and their customers. Pacific
Bell, Southwestern Bell and Ameritech Services, Inc. are all subsidiaries of SBC
Communications. Recently, we began distributing Digital Subscriber Line Modems
(DSL) for BellSouth.Net and other internet service providers (ISPs).

In 1991, we initiated a fulfillment program to sell or rent Caller ID
stand-alone devices to BellSouth customers. Customers paid us for these products
by check or credit card. In 1993, we began billing the charges on BellSouth
customers' telephone bills in interest-free installments. As part of that
program, we acquired Caller ID and other telecommunications equipment from third
party manufacturers, while assuming collections risk on customer payments. In
November 1998, we entered into a new contract with BellSouth pursuant to which
we continue to provide Caller ID hardware and other equipment, including corded
and cordless telephones with built-in Caller ID, to BellSouth customers. We now
bill BellSouth, rather than BellSouth customers, for these products.

Upon receipt of an order, we ship the product, track inventory levels
and sales and marketing data and maintain call center operations to handle
customer service and technical support. From time to time, rather than acquiring
units and selling or leasing them to BellSouth customers, we distribute, for a
fee, Caller ID hardware that BellSouth or other clients have purchased from
various third-party manufacturers.

Under our programs with US West, Southwestern Bell and Pacific Bell
and the ISPs, like our current contract with BellSouth, we bill the
respective telecommunications clients directly for the telecommunications
units that are sold to their end users. The clients are then responsible for
billing and collecting from their customers. As a result of this change in
our payment model, unit prices and our gross margin are lower than historical
levels (See "Results of Operations" "Revenue" and "Gross Profit" below). We
generally experience lower bad debt expenses, which are included in selling,
general and administrative expenses, because telecommunications clients,
rather than their end user customers, pay us for the equipment. These lower
expenses substantially offset the decline in gross margin. The change in our
payment model has had little effect on our operating margin to date.

We have experienced significant growth in revenue in recent years.
This growth stems primarily from growth in Caller ID market penetration and
Innotrac's consultative selling with respect to product-based marketing
support services. According to industry sources, market penetration of Caller
ID services in the United States as of December 31, 1999 was approximately
36.4% and is expected to reach approximately 75% by 2007. BellSouth indicates
that as of December 31, 1999 its Caller ID penetration was 43.1%. If
BellSouth's Caller ID penetration fails to increase, our net revenues could
be adversely affected. We believe that opportunities exist in the market
areas served by Pacific Bell, where market penetration for Caller ID lags
behind the national average because regulatory issues delayed the release of
Caller ID.

<PAGE>

However, these opportunities may be delayed, as was a marketing program in
the fourth quarter of 1999, which resulted in an increase in our inventory.
Caller ID equipment sales may eventually level off as the Caller ID market
matures. We believe that by distributing other telecommunications products
such as DSL modems for existing customers, growing our telecommunications
company client base and expanding customer distribution channels through
e-commerce, we will be able to offset any eventual maturity and lower
penetration levels in our Caller ID business. However there is no guarantee
that the gross margins associated with the expansion into these markets will
be at historical levels.

The following table sets forth the percentage of total net revenues
derived from services provided to each of the following clients for the years
ended December 31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
---------------------------------
<S> <C> <C> <C>
BellSouth..................... 39% 59% 85%
Pacific Bell.................. 31 25 8
Southwestern Bell............. 20 11 --
US West....................... 3 2 2
Bell Atlantic................. 3 -- --
Ameritech..................... 1 -- --
---------- ----------- ----------
Total................ 97% 97% 95%
========== =========== ==========
</TABLE>

The decline in revenues from BellSouth customers as a percentage of
total revenues for the years ended December 31, 1999 and 1998 results from
the diversification of our client base, increased revenue from Pacific Bell
and Southwestern Bell and the impact of the new pricing model with BellSouth.
BellSouth revenue dollars increased 8% and 10% for the years ended December
31, 1999 and 1998, respectively. In connection with previously disclosed
issues at BellSouth, our sales of Caller ID equipment for BellSouth slowed in
the fourth quarter to 22% below fourth quarter 1998 equipment sales. This
decrease was partially offset by sales of DSL modems. The Company believes
that continued issues at BellSouth will result in a decrease in sales of
Caller ID equipment that the Company undertakes for BellSouth during 2000.
The Company cannot estimate the impact of any such decrease in promotional
programs on its net revenues.

Revenues are recognized on the accrual basis as services are provided
to customers or as units are shipped (including installment sales). Revenues are
reduced for estimated product returns and allowances, which are based on our
historical experience.

The largest component of our expenses is our cost of revenues, which includes:

- the product costs of telecommunications equipment,
- depreciation on Caller ID rental equipment,
- the costs of labor associated with marketing support services for a
particular client,
- telecommunications services costs (including call center support),
- information technology support,
- materials and freight charges and
- directly allocable facilities costs.

Most of these costs are variable in nature.

A second component of our expenses includes selling, general and
administrative, or SG&A, expenses. This expense item is comprised of (1)
financial, human resources, administrative and marketing functions that are not
allocable to specific client services and (2) bad debt expense. Bad debt expense
represents a provision for installments and rentals that will be deemed
uncollectible based on Innotrac's

<PAGE>

historical experience, as well as billing adjustments from telecommunications
providers. SG&A expenses tend to be fixed in nature, with the exception of bad
debt expense, which is related to revenues.

<PAGE>

RESULTS OF OPERATIONS

The following table sets forth summary operating data, expressed as a
percentage of revenues, for the years ended December 31, 1999, 1998 and 1997.
Operating results for any period are not necessarily indicative of results for
any future period.

The financial information provided below has been rounded in order to
simplify its presentation. However, the percentages below are calculated using
the detailed information contained in the financial statements and notes
thereto.

YEARS ENDED
DECEMBER 31,
------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues, net................................... 100.0% 100.0% 100.0%
Cost of revenues................................ 86.0 77.9 77.3
Gross profit.................................... 14.0 22.1 22.7
Selling, general and administrative expenses.... 5.5 11.2 14.3
Operating income................................ 7.7 10.2 7.7
Interest expense................................ 0.6 0.7 2.0
Income before income taxes...................... 7.1% 9.5% 5.6%
</TABLE>

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

REVENUES. Net revenues increased 62.5% to $227.0 million for the
year ended December 31, 1999 from $139.7 million for the year ended December
31,1998. The increase in revenue was due primarily to increased Caller ID
volume. Total Caller ID units sold and fulfilled during the year ended
December 31, 1999 increased 95.7% to 5.6 million units from 2.9 million units
for the year ended December 31, 1998. The percentage of units sold was 61.3%
versus 62.4% for the year ended December 31, 1999 and 1998, respectively. The
percentage of units fulfilled for promotional giveaway programs for which we
are paid a fee was 38.7% versus 37.6% for the same period in 1998. This
increase in units fulfilled was due to an increase in promotional sales
programs by certain clients. The increase in unit volume was partially offset
by a decrease in the average per unit price of Caller ID units due to the
impact of the new pricing model where we have reduced our unit prices to
reflect the lower credit risk as described above in the "Overview." In
connection with previously disclosed issues at BellSouth, our sales of Caller
ID equipment for BellSouth slowed in the fourth quarter to 22% below fourth
quarter 1998 equipment sales. This decrease was partially offset by sales of
DSL modems. The Company believes that continued issues at BellSouth will
result in a decrease in sales of Caller ID equipment that the Company
undertakes for BellSouth during 2000. The Company cannot estimate the impact
of any such decrease in promotional programs on its net revenues. The
Company's reserve for returns and allowances decreased from $11.1 million
(7.9% of net revenues) for the year ended December 31, 1998 to $8.5 million
(3.7% of net revenues) for the year ended December 31, 1999.

COST OF REVENUES. Cost of revenues increased 79.5% to $195.2 million
for the year ended December 31, 1999 compared to $108.8 million for the year
ended December 31, 1998. Cost of revenues increased primarily due to an increase
in cost of equipment associated with the increase in units we sold and the
impact of the new call center in Pueblo, Colorado that became operational during
the third quarter of 1999.

GROSS PROFIT. Gross profit for the year ended December 31, 1999
increased 2.9% to $31.8 million or 14.0% of revenues as compared to $30.9
million or 22.1% of revenues for the year ended December 31,

<PAGE>

1998. The increase in gross profit was due primarily to the increase in revenue.
Gross margins declined for several reasons. First, for strategic reasons, in the
first quarter the Company conducted a promotional program that resulted in $11.0
million in revenues and $11.0 million in cost of sales. The Company chose to
conduct the program in order to strengthen its relationship with the client. In
addition, gross margins were impacted by the increased percentage of business
derived from Southwestern Bell, Pacific Bell and BellSouth where the Company
does not assume the bad debt risk, as described under "-Overview." Therefore it
is able to charge lower unit prices and as a result, experiences lower gross
margins. This decline is offset by lower bad debt expense, which is included in
selling, general and administrative expenses. During the three months ended
September 30, 1999, the Company opened a new call center in Pueblo, Colorado.
The impact of the new call center was an increase in revenues and cost of
revenues of $1.0 million dollars. The $1.0 million dollars in cost of revenues
included start up costs of the new facility.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses for the
year ended December 31, 1999 were $12.5 million or 5.5% of revenues compared to
$15.6 million or 11.2% of revenues for the year ended December 31, 1998. The
Company's bad debt expense was $3.3 million (1.5% of net revenues) for the year
ended December 31, 1999 as compared to $8.2 million (5.9% of net revenues) for
the year ended December 31, 1998. The decrease in bad debt expense as a
percentage of revenue is due primarily to the increased percentage of business
derived from Southwestern Bell, Pacific Bell and BellSouth, which generally pay
the Company directly for telecommunications equipment sold to end-users. The
increase in other selling, general and administrative expenses is due to
increased sales and marketing efforts and increased administrative costs to
support the Company's growth.

INCOME TAXES. Our effective tax rates for the years ended December 31,
1999 and 1998 were 39.4% and 28.1%, respectively. The effective tax rates are
lower than statutory rates for the year ended December 31, 1998 due to the
amount of income attributable to the pass-through entities involved in the
combination of Innotrac and related pass-through entites at the same time as
consummation of our initial public offering in May 1998. We expect our effective
tax rate in future periods to approximate the level for the year ended December
31, 1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUES. Our net revenues increased 58.8% to $139.7 million for the year
ended December 31, 1998 from $88.8 million for the year ended December 31, 1997.
The increase in revenues during 1998 was primarily due to a 61.3% increase in
Caller ID units sold in 1998. During 1988, we distributed 2.9 million units as
it increased its percentage of units sold (as opposed to distributed for a fee)
to 62.3% of total unit volume. During 1997, we distributed 1.8 million units or
56.9% of total unit volume. The 1998 increase was offset by a decrease in
average per unit prices of Caller ID units. Our reserve for returns and
allowances increased from $6.3 million (7.2% of net revenues) for the year ended
December 31, 1997 to $11.1 million (7.9% of net revenues) for the year ended
December 31, 1998.

COST OF REVENUES. Our cost of revenues increased 60.0% to $108.8
million for the year ended December 31, 1998 compared to $68.0 million for the
year ended December 31, 1997. This was primarily due to an increase in cost of
equipment associated with the increase in units we sold as described above
offset by a $1.3 million decrease from 1997 in rental equipment losses to $3.2
million and a $1.6 million write-down on Caller ID equipment in the year ended
December 31, 1997. The writedown resulted from obsolesence issues related to the
regulatory-delayed start-up of the Pacific Bell program because of California
regulatory issues.

GROSS PROFIT. For the year ended December 31, 1998, our gross profit
increased 54.5% to $30.9 million or 22.1% of revenues as compared to $20.0
million or 22.7% of revenues for the year ended December 31, 1997. The increase
in gross profit was primarily due to the increase in revenues. The decrease in
gross margin was due primarily to the increasing percentage of business derived
from Southwestern Bell and Pacific Bell clients for which Innotrac does not
assume the bad debt risk, as described above. We are therefore able to charge
lower unit prices to Southwestern Bell and Pacific Bell.

<PAGE>

As a result, the Company experiences lower gross margins. This is offset by
lower bad debt expenses. This was subsaantially offset by lower bad debt
expenses. During the fourth quarter of 1998, BellSouth sales were switched over
to a similar program.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses for the year
ended December 31, 1998 were $15.6 million or 11.2% of revenues compared to
$12.6 million or 14.3% of revenues for the year ended December 31, 1997. Our bad
debt expense, most of which was associated with sales of Caller ID and other
telecommunications equipment to BellSouth and Pacific Bell customers, was $8.2
million (5.9% of net revenue) for the year ended December 31, 1998 as compared
to $7.8 million (8.8% of net revenue) for the year ended December 31, 1997. The
decrease in bad debt expense as a percentage of revenue was primarily due to the
new direct client billing model ion which the client assumes the bad debt risk
in exchange for a lower sales price. Other SG&A expenses increased over prior
year due to increased sales and marketing efforts, increased insurance and
benefits expenses and administrative costs to support the Company's growth.

INTEREST EXPENSE. Interest expense decreased from $1.8 million for the year
ended December 31, 1997 to $1.0 million for the year ended December 31, 1998.
The decrease is primarily due to repayment of a note payable from a bank and
subordinated note payable to a shareholder from the proceeds received from the
May 1998 initial public offering and lower bank borrowings under the Company's
line of credit from the previous year ended.

INCOME TAXES. Our effective tax rates for the years ended December 31, 1998
and 1997 were 28.1% and (1.6)%, respectively. The change from 1997 to 1998 was
primarily the result of a lower level of income attributable to the pass-through
entities involved in the Consolidation prior to the consolidation.

LIQUIDITY AND CAPITAL RESOURCES

We fund our operations and capital expenditures primarily through cash
flow from operations, borrowings from banks, and, from time to time,
offerings of equity and debt. We had cash and cash equivalents of
approximately $0.9 million and $3.4 million at December 31, 1999 and 1998,
respectively. We maintain a $40.0 million revolving line of credit with a
bank, maturing in June 2002, which was increased from $35.0 million in April
1999. Borrowings under the line of credit bear interest at our option at the
bank's base rate, as adjusted from time to time, or LIBOR, subject to
adjustment in certain circumstances at the lender's option, plus up to 200
basis points. At December 31, 1999, the interest rate on the line of credit
was 7.10%, and the weighted average interest rate for the year ended December
31, 1999 was 6.26%. In May 1998, the Company repaid a term loan with a bank
that would have matured in July 1999 and bore interest at 8.95% per annum,
along with a subordinated note payable to a shareholder, which would have
matured in April 1999 and bore interest as a particular bank's prime rate at
adjusted from time to time, plus 8.0% per annum. At December 31, 1999, $7.0
million was outstanding under the line of credit. During 1999 we entered into
various leases for a new call center and distribution facility. As a result
of these leases, rental expense increased approximately $0.2 million in 1999
and will increase $1.0 million a year through 2004.

During the years ended December 31, 1999 and 1998, the Company used $23.4
million and $9.1 million, respectively, in cash flow from operating activities,
compared to the generation of $18.9 million in cash flow from operating
activities in the year ended December 31, 1997. The decrease in cash flow from
operating activities in 1999 was due to higher working capital requirements
resulting from increases in accounts receivable (principally receivables from
Pacific Bell, Southwestern Bell and BellSouth) due to the increased sales volume
and similar increases in inventory, offset by increased payables during the year
ended December 31, 1999 compared with the same period in 1998. The decrease in
cash flow from operating activities in 1998 was due to higher working capital
requirements resulting from increases in accounts receivable (principally
installment receivables and receivables from Pacific Bell and Southwestern Bell)
and inventory due to increased sales volume during the year ended December 31,
1998 compared with the same period in 1997.

<PAGE>

During the years ended December 31, 1999, 1998 and 1997, net cash used in
investing activities was $5.3 million, $5.7 million and $6.9 million,
respectively. This decrease in 1999 was primarily due to a decrease in the
number of purchases of Caller ID units for rent offset by purchases of new
furniture and equipment for the our call center and distribution facility. The
decrease in 1998 was primarily due to a decrease in the number of purchases of
Caller ID units for rent, partially offest by expenditures associated with the
Company's software upgrade and new furniture and equipment for the new corporate
facility and expansion of its call center to service new clients.

During years ended December 31, 1999 and 1998, the net cash provided by
financing activities was $26.2 million and $17.7 million, respectively, compared
to $13.4 million used in financing activities for the year ended December
31,1997. We received net proceeds of $34.9 million in a public offering of 2.2
million shares of common stock completed July 30, 1999. We used the proceeds to
reduce our borrowings under our line of credit with a bank. Subsequent to the
July 1999 offering, we made periodic borrowings under our line of credit to fund
short-term working capital needs, resulting in a net decrease in borrowings on
the line of credit of $8.7 million for the year ended December 31, 1999. During
the year ended December 31, 1998, we received $26.7 million in the initial
public offering completed on May 11, 1998, net of fees associated with the
initial public offering. We used a portion of the proceeds to repay $4.6 million
of long-term debt, $7.5 million in distributions of undistributed earnings to
shareholders of affiliated flow through entitities that were merged into the
Company in conjunction with the initial public offering, and reduced our
borrowings under our line of credit by $13.8 million. Subsequent to the intital
public offering, we made periodic borrowings against the line of credit to fund
short-term working capital needs, resulting in a net increase in borrowings on
the line of credit of $7.2 millions for the year ended December 31, 1998.

We estimate that our cash and financing needs through 2000 will be met by
cash flows from operations and our line of credit facility. However, any
increase in the Company's growth rate, shortfalls in anticipated revenues,
increases in anticipated expenses, or significant acquisitions could have a
material adverse effect on the Company's liquidity and capital resources. Any of
these might require the Company to raise additional capital from public or
private equity or debt sources in order to finance operating losses, anticipated
growth and contemplated capital expenditures. If such sources of financing are
insufficient or unavailable, the Company will be required to modify its growth
and operating plans in accordance with the extent of available funding. The
Company may need to raise additional funds in order to take advantage of
unanticipated opportunities. These opportunities could include acquisitions of
complementary businesses or the development of new products, or otherwise
respond to unanticipated competitive pressures. There can be no assurance that
the Company will be able to raise any such capital on terms acceptable to the
Company or at all.

YEAR 2000 COMPLIANCE

The efficient operation of our business is dependent in part on our
computer software programs and operating systems. These programs and systems are
used in inventory management, pricing, sales, shipping and financial reporting,
as well as in various administrative functions. Management believes that our
information technology, or IT, systems, and other non-IT systems are either Year
2000 compliant or substantially compliant. The cost of the upgrades was
approximately $120,000 through January 2000. We do not anticipate additional
material expenditures for Year 2000 compliance issues.

Our Year 2000 compliance efforts for both IT and non-IT systems included
three major phases: (1) inventory all systems, assess whether there are any Year
2000 issues and develop a compliance plan for all systems; (2) remediate any
Year 2000 problems and (3) test systems subsequent to remediation. The chart
below shows the estimated completion status of each of these phases expressed as
a percentage of completion as of December 31, 1999:

<TABLE>
<CAPTION>
PHASE: I II III
------ - -- ---
<S> <C> <C> <C>

<PAGE>

IT Systems............................. 100% 100% 100%
Non-IT Systems......................... 100% 100% 100%
</TABLE>

While we did not experience any Year 2000 issues during the month of
January 2000, we intend to continue to test for any potential unidentified Year
2000 issues of which we may not be currently aware.

We obtained documentation from our suppliers, clients, financial
institutions and others as to the status of their Year 2000 compliance programs
and the possibility of any interface difficulties relating to Year 2000
compliance that may affect us. We have obtained documentation from most of the
entities we have contacted and , to date, no significant concerns have been
identified. However, there is a risk that Year 2000-related operating problems
or expenses will arise with our computer systems and software or in connection
with our interface with the computer systems and software of our suppliers,
clients, financial institutions and others. Because these third-party systems or
software may not be Year 2000 compliant, we developed contingency plans to
address Year 2000 failures of these entities with which we interface. Our
contingency plans included the ability to address the following issues: (1) the
inability to receive customer order information electronically from our major
clients and (2) the inability of one or more of the manufacturers of the Caller
ID products we sell to produce products due to that company's Year 2000 failure.
As of March 7, 2000, no material issues were identified.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

We believe our exposure to market risks is immaterial. We hold no
market risk sensitive instruments for trading purposes. At present, we do not
employ any derivative financial instruments, other financial instruments or
derivative commodity instruments to hedge any market risks and we do not
currently plan to employ them in the future. To the extent that we have
borrowings outstanding under our credit facility, we have market risk relating
to the amounts of our borrowings because interest rates under the credit
facility are variable. Our exposure is immaterial due to the short-term nature
of these borrowings.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") has issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which must be
adopted by the year 2000. In June 1999, the FASB issued Statement No. 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133, which amends Statement 133 to be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000 (that is, January 1, 2001 for companies with calendar-year fiscal year).
This statement establishes accounting and reporting standards for derivative
instruments--including certain derivative instruments embedded in other
contracts--and for hedging activities. Adoption of this statement is not
expected to have a material impact on our financial statements.

<PAGE>

INDEX TO THE FINANCIAL STATEMENTS
OF INNOTRAC CORPORATION

<TABLE>
<S> <C>
Consolidated Financial Statements

Report of Independent Public Accountants...................................................................
Consolidated Balance Sheets as of December 31, 1999 and 1998...............................................
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997.................

Consolidated Statements of Partners', Members' and Shareholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997........................................................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997.................

Notes to Consolidated Financial Statements.................................................................
</TABLE>

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Innotrac Corporation:

We have audited the accompanying consolidated balance sheets of INNOTRAC
CORPORATION (a Georgia corporation) as of December 31, 1999 and 1998 and the
related combined statements of operations, partners', members' and shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Innotrac
Corporation as of December 31, 1999 and 1998 and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999 in conformity with auditing standards generally accepted in the United
States.

Arthur Andersen LLP

Atlanta, Georgia
January 27, 2000

<PAGE>

INNOTRAC CORPORATION,
CONSOLIDATED BALANCE SHEETS
(IN 000'S)

<TABLE>
<CAPTION>
DECEMBER 31,
------------
ASSETS 1999 1998
------ ---- ----
<S> <C> <C>
Current assets:

Cash and cash equivalents................... $ 894 $ 3,379
Accounts receivable, net (Note 3)........... 52,431 44,354
Inventories................................. 39,503 14,381
Deferred tax assets (Note 6)................ 583 2,866
Prepaid expenses and other current assets... 1,399 1,436
-------- --------
Total current assets...................... 94,810 66,416
-------- --------
Property and equipment:
Rental equipment............................ 4,986 6,891
Computer, machinery and transportation
equipment................................. 8,711 4,949
Furniture, fixtures and leasehold
improvements.............................. 2,830 1,390
-------- --------
16,527 13,230
Less accumulated depreciation and
amortization.............................. (7,605) (5,767)
-------- --------
8,922 7,463
-------- --------
Other assets, net (Note 6).................... 486 113
-------- --------
Total assets.............................. $104,218 $ 73,992
======== ========
</TABLE>

DECEMBER 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
LIABILITIES AND AND SHAREHOLDERS' EQUITY
----------------------------------------
Current liabilities:
Current portion of long-term debt (Note 4)............. $ 8 $ 68
Line of credit (Note 4)................................ 7,008 15,736
Accounts payable....................................... 10,530 9,387
Distributions payable (Note 2)......................... 0 70
Accrued expenses....................................... 7,384 14,302
-------- --------
Total current liabilities............................ 24,930 39,563
-------- --------
Total noncurrent liabilities (Note 4 and 6).............. 75 135
-------- --------
Total liabilities.................................... 25,005 39,698
-------- --------
Commitments and contingencies (Note 5)...................

Shareholders' equity (Note 8):
Common stock........................................... 1,121 900
Additional paid-in capital............................. 59,701 24,838
Retained earnings...................................... 18,391 8,556
-------- --------
Total shareholders' equity........................... 79,213 34,294
-------- --------
Total liabilities and shareholders' equity........... $104,218 $ 73,992
======== ========
</TABLE>

The accompanying notes are an integral part of these
consolidated balance sheets.

<PAGE>

INNOTRAC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN 000'S EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
-------- ------- ------
<S> <C> <C> <C>
Revenues, net.............................. $227,011 $139,673 $87,978
Cost of revenues........................... 195,230 108,785 67,986
-------- -------- -------
Gross profit..................... 31,781 30,888 19,992
-------- -------- -------
Operating expenses:
Selling, general and administrative
expenses........................... 12,495 15,642 12,572
Depreciation and amortization......... 1,711 943 631
-------- -------- -------
Total operating
Expenses...................... 14,206 16,585 13,203
-------- -------- -------
Operating income........................... 17,575 14,303 6,789
-------- -------- -------
Other (income) expense:
Interest expense, net................. 1,370 956 1,788
Other ................................ (19) 35 118
-------- -------- -------
Total other
Expense....................... 1,351 991 1,906
-------- -------- -------
Income before income
taxes................................... 16,224 13,312 4,883
Income tax (provision) benefit............. (6,389) (3,743) 77
-------- -------- -------
Net income....................... $ 9,835 $ 9,569 $ 4,960
======== ======== =======

Unaudited Pro Forma Data:
Income tax provision.................... $ (6,389) $ (5,126) $(1,880)
======== ======== =======
Pro forma net income.................... $ 9,835 $ 8,186 $ 3,003
======== ======== =======
Pro forma net income per share-basic... $ 0.99 $ 1.01 $ 0.46
======== ======== =======
Pro forma net income per share-diluted.. $ 0.98 $ 1.00 $ 0.46
======== ======== =======
</TABLE>

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

<PAGE>

INNOTRAC CORPORATION
CONSOLIDATED STATEMENTS OF PARTNERS', MEMBERS' AND SHAREHOLDERS' EQUITY
(IN 000'S)

PARTNERS' MEMBERS' COMMON PAID-IN RETAINED
CAPITAL DEFICIT STOCK CAPITAL EARNINGS TOTAL
------- ------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996............. 1,902 (272) 5 14 2,891 4,540

Net income (loss)...................... 3,541 (233) 0 0 1,652 4,960
Distributions to shareholders,
Members and partners................ (3,684) 15 0 0 (917) (4,586)
Accreted dividends on redeemable
Capital stock....................... 0 0 0 0 (87) (87)
------- ------- ------ ------- ------- -------
BALANCE, DECEMBER 31, 1997............. 1,759 (490) 5 14 3,539 4,827
Distributions to shareholders,
Members and partners.............. (4,836) (209) 0 0 (4,747) (9,792)
Merger of companies.................... (461) 288 645 (1,667) 1,195 0
Record deferred taxes associated with
merger............................ 0 0 0 0 3,016 3,016
Proceeds from sale of common stock,
net.............................. 0 0 250 26,491 0 26,741
Net income (loss)...................... 3,538 411 0 0 5,620 9,569
Accreted dividends on redeemable
Capital stock....................... 0 0 0 0 (67) (67)
------- ------- ------ ------- ------- -------
BALANCE, DECEMBER 31, 1998............. $ 0 $ 0 $ 900 $24,838 $ 8,556 $34,294
Proceeds from sale of common stock,
net............................... 0 0 220 34,694 0 34,914
Proceeds from stockholder's options
and grants........................ 0 0 1 169 0 170
Net income (loss)...................... 0 0 0 0 9,835 9,835
------- ------- ------ ------- ------- -------
BALANCE, DECEMBER 31, 1999............. $ 0 $ 0 $1,121 $59,701 $18,391 $79,213
======= ======= ====== ======= ======= =======
</TABLE>

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

<PAGE>

INNOTRAC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 9,835 $ 9,569 $ 4,960
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 1,711 943 631
Depreciation--rental equipment............. 1,703 2,900 3,711
Loss on disposal of rental equipment....... 502 2,158 4,479
Deferred income taxes...................... 1,824 602 (537)
(Increase) decrease in accounts receivable. (8,077) (24,273) 5,379
(Increase) decrease in inventories......... (25,122) (11,445) 7,085
Increase in prepaid expenses and other
assets................................... (30) (734) (485)
Increase (decrease) in accounts payable.... 1,143 4,621 (8,960)
(Decrease) increase in accrued expenses.... (6,867) 6,571 1,881
-------- ------- -------
Net cash (used in) provided by operating
Activities............................. (23,378) (9,088) 18,882
-------- ------- -------
Cash flows from investing activities:
Accrued equipment purchases.................. 0 0 (1,595)
Purchases of property and equipment.......... (5,328) (5,739) (5,342)
-------- ------- -------
Net cash used in investing activities.... (5,328) (5,739) (6,937)
-------- ------- -------
Cash flows from financing activities:
Net (repayments) borrowings under lines of
credit..................................... (8,728) 7,191 (8,685)
Repayment of long-term debt.................. (65) (1,067) (702)
Repayment of subordinated debt............... 0 (3,500) 0
Loan commitment fees......................... 0 0 (125)
Proceeds from public offerings, net........ 34,914 26,741 0
Proceeds from stock options and grants
exercised................................ 170 0 0
Redemption of redeemable capital stock....... 0 (984) 0
Distributions to shareholders, members and
Partners................................... (70) (10,729) (3,884)
-------- ------- -------
Net cash provided by (used in) financing
Activities............................. 26,221 17,652 (13,396)
-------- ------- -------
Net (decrease) increase in cash and cash (2,485) 2,825 (1,451)
equivalents....................................
Cash and cash equivalents, beginning of period. 3,379 554 2,005
-------- ------- -------
Cash and cash equivalents, end of period....... $ 894 $ 3,379 $ 554
======== ======= =======
Supplemental cash flow disclosures:
Cash paid for interest....................... $ 1,386 $ 1,006 $ 1,788
======== ======= =======
Cash paid for income taxes, net of refunds
Received................................... $ 7,364 $ 1,493 $ 86
======== ======= =======
Non cash transactions:
Accreted dividends on Redeemable Capital
Stock...................................... $ 0 $ 67 $ 87
======== ======= =======
</TABLE>

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

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Innotrac Corporation ("Innotrac" or the "Company") is a full service
provider of customized technology based marketing support services. The majority
of the Company's operation is directly related to the sale and distribution of
caller identification display devices (Caller ID units). Prior to May 6, 1998,
Innotrac operated as eight separate affiliates: Innotrac, IELC, Inc., RenTel #1,
Inc. ("RenTel"), SellTel #1, Inc. ("SellTel"), HomeTel Systems, Inc., HomeTel
Providers, Inc., RenTel #2, LLC, SellTel #2, LLC and HomeTel Providers Partners,
L.P. ("Providers L.P.") (collectively referred to herein as the "Companies").
The Companies were all owned 100% by one shareholder or his immediate family
except for RenTel, SellTel, and Providers L.P. (which each had a 10% minority
interest owned by one party). The minority interests of RenTel and SellTel were
owned by a related party of the shareholder.

On May 6, 1998, Innotrac consolidated these eight entities (the
"Consolidation"), effective simultaneously with, and as a condition to, the
Company's initial public offering (the "Offering") of 2.5 million shares, at an
initial public offering price of $12.00 per share (See Footnote 8).

For accounting purposes, Providers, L.P. was deemed to be the acquiring
entity and its balance sheet carried over at historical cost. Since the other
entities that were parties to the Consolidation were wholly-owned by either the
majority shareholder of Providers L.P. or his direct relatives, those entities
were considered to be under common control, and the balance sheets of such
entities also carried over at historical cost.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION AND CONSOLIDATION

Prior to the Consolidation, the accompanying combined financial statements
include the accounts of the Companies and were prepared on the accrual basis of
accounting. Significant intercompany accounts and transactions have been
eliminated in the combination. Combined financial statements were presented
since the Companies have similar ownership and interrelated activities. The
financial information included herein may not necessarily reflect the financial
position, results of operations, or cash flows of the Companies in the future or
what the financial position, results of operations, or cash flows of the
Companies would have been if they were combined as a separate, stand-alone
company during the periods presented.

Subsequent to the Consolidation, the accompanying financial statements
include the consolidated accounts of Innotrac. Significant intercompany accounts
and transactions have been eliminated in the consolidation.

Certain prior year amounts have been reclassified to conform with the
current financial statement presentation.

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

PRO FORMA NET INCOME AND NET INCOME PER SHARE

In conjunction with the Consolidation, HomeTel Providers, Inc., Providers
LP, RenTel #1, RenTel #2, and SellTel #2 lost their non C corporation status for
tax purposes. Accordingly, the pro forma income taxes reflect income taxes at
statutory rates applied to pro forma earnings. In addition the pro forma
earnings per share reflect the Consolidation as if it had occurred at the
beginning of each period presented.

FASB Statement No. 128, Earnings per Share, simplifies the methodology for
computing both basic and diluted earnings per share. The only difference in the
two methods for computing per share amounts is attributable to outstanding
options under the Stock Option Plan. The effect of the stock options was
determined using the treasury stock method. Net income as reported was not
affected. Shares used to compute diluted earnings per share are as follows:

Average Common Stock Share
(In 000's) 1999 1998 1997
---------- ---- ---- ----
<S> <C> <C> <C>
As Reported 9,911 8,096 6,500
Effect of Options 122 59 0
------ ----- ------
Diluted Shares 10,033 8,155 6,500
====== ===== =====
</TABLE>

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

SOURCES OF SUPPLIES

In accordance with its agreements with certain telecommunications
companies, the Company primarily uses three providers for the supply of
telecommunications equipment. However, if these vendors were unable to meet the
Company's needs, management believes that other sources for this equipment exist
on commensurate terms and that operating results would not be adversely
affected.

CONCENTRATION OF REVENUES

Revenues earned under the Company's agreements with major telecommunication
companies/clients to sell and rent certain telecommunications equipment to the
customers of this company accounted for approximately 93%, 97% and 95% of total
revenues for the years ended December 31, 1999, 1998 and 1997, respectively. If
any of these agreements were terminated, it could have a material adverse affect
on the future operating results and liquidity of the Company.

CASH AND CASH EQUIVALENTS

The Company considers all short-term, highly liquid investments with an
original maturity of three months or less to be cash equivalents.

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

INVENTORIES

Inventories, consisting primarily of telecommunications equipment, are
stated at the lower of cost or market, with cost determined by the first-in,
first-out method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is determined using
straight-line methods over the following estimated useful lives:

<TABLE>
<S> <C>
Rental equipment............................ 3 years
Computers................................... 3 years
Machinery and transportation equipment...... 5-7 years
Furniture and fixtures...................... 7 years
</TABLE>

Leasehold improvements are amortized using the straight-line method over
the shorter of the service lives of the improvements or the remaining term of
the lease.

During the 3rd Quarter of 1999, the Company opened a call center in Pueblo,
Colorado. As part of the establishment of the facility in Pueblo, Colorado, the
Company received various tax incentives from the city of Pueblo. These tax
incentives have been recorded as a reduction in the basis of property and
equipment.

Rental equipment is written off at its net book value when it is no longer
generating revenues or is not returned by the customer. Provisions are made for
estimated equipment losses that have not yet been reported. Equipment rental
losses were approximately $502,000, $2,158,000 and $4,479,000 for the years
ended December 31, 1999, 1998 and 1997 respectively, and are included in "Cost
of revenues" in the accompanying statements of operations.

LONG-LIVED ASSETS

The Company periodically reviews the values assigned to long-lived assets
such as property and equipment to determine if any impairments are other than
temporary. Management believes that the long-lived assets in the accompanying
balance sheets are appropriately valued.

STOCK-BASED COMPENSATION PLANS

The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Company has adopted the disclosure option of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" ("SFAS 123"). SFAS 123 requires that companies which do not choose
to account for stock-based compensation as prescribed by this statement, shall
disclose the pro forma effects on earnings and earnings per share as if SFAS 123
had been adopted. Additionally, certain other disclosures are required with
respect to stock compensation and the assumptions used to determine the pro
forma effects of SFAS 123.

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

INCOME TAXES

Innotrac, as a C corporation, utilizes the liability method of accounting
for income taxes. Under the liability method, deferred taxes are determined
based on the difference between the financial and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.

Prior to the Consolidation, the shareholders of certain affiliated
companies had elected to have the Companies treated as S corporations. The
Internal Revenue Code of 1986, as amended (the "Code") and certain applicable
state statutes provide that the income and expenses of an S corporation are not
taxable separately to the corporation but rather accrue directly to the
shareholders. In addition, other entities were limited liability companies which
are not subject to federal and state income taxes. Accordingly, no provisions
for federal and certain state income taxes related to these entities have been
made in the accompanying financial statements.

Prior to the Consolidation, it was the policy of management to pay and
accrue distributions primarily for income taxes that were required to be paid by
the shareholders, members and partners due to the flow through of income of
these entities. During the years ended December 31, 1998 and 1997, distributions
of approximately $2,292,000 and $4,586,000, respectively, were recorded, of
which approximately $70,000 was accrued and unpaid as of December 31, 1998.
Additionally, in conjunction with the consolidation (Note 1), the Company
distributed $7,500,000 of the undistributed earnings of approximately $9,000,000
to the owners of certain pass-thru entities.

REVENUE RECOGNITION

Revenues are recognized on the accrual basis as services are provided to
customers or as units are shipped or rentals are provided. Revenues are reduced
for an estimate of product returns and allowances.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of the Company's financial instruments approximate
their fair values.

ADVERTISING COSTS

The Company expenses all advertising costs as incurred.

RECENT ACCOUNTING PRONOUNCEMENTS

In 1998, the Company was subject to the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No.
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information". These statements had no impact on the Company's financial
statements as it has no comprehensive income elements other than distributions
to owners and returns on equity and its financial statements reflect how the
"key operating decisions maker" views the business. The Company will continue to
review these statements over time to determine if any additional disclosures are
necessary based on evolving circumstances.

The FASB has issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which must be adopted by the year 2000. This
statement establishes accounting and reporting standards for derivative
instruments - including certain derivative instruments embedded in other
contracts - and for hedging activities. Adoption of this statement is not
expected to have a material impact on the financial statements.

In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement

<PAGE>

requires capitalization of certain costs of internal-use software. We adopted
this statement in April 1998, and it did not have a material impact on the
financial statements.

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

3. ACCOUNTS RECEIVABLE

The Company's accounts receivable includes amounts that are unbilled as of
December 31, 1999. Accounts receivable were composed of the following at
December 31, 1999 and 1998 (in 000s):

1999 1998
------- -------
<S> <C> <C>
Billed receivables.................. $32,778 $32,081
Unbilled receivables................ 20,831 17,208
------- -------
Total receivables................... 53,609 49,289
Less allowances..................... (1,178) (4,935)
------- -------
$52,431 $44,354
======= =======
</TABLE>

Management believes that the allowances for doubtful accounts and returns
reduce the gross accounts receivable to net amounts that will be collected.

4. FINANCING OBLIGATIONS

Financing obligations as of December 31, 1999 and 1998 consisted of the
following (in 000s):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Borrowings under revolving credit agreement (up to $40,000,000); the revolving
Advances owing by any one borrower cannot exceed an amount equal to the sum
of 80% of the eligible accounts receivable plus 70% of the eligible
installment receivables; interest payable monthly at rates equal to the
prime rate (8.5% and 7.75% at December 31, 1999 and 1998, respectively), or
at the Company's option, LIBOR plus a margin (7.10% at December 31, 1999),
expires on June 1, 2002, secured by all assets of the Company................... $ 7,008 $ 15,736
Other............................................................................... 10 75
-------- --------
7,018 15,811
Current portion..................................................................... 7,016 15,804
-------- --------
$ 2 $ 7
======== ========
</TABLE>

Scheduled maturities of financing obligations are as follows (in 000s):

<TABLE>
<S> <C>
2000............................................................................................. 7,016
2001............................................................................................. 2
------
Total................................................................................... $7,018
======
</TABLE>

The weighted average interest rate on the revolving line of credit
agreement was 6.26% and 7.61% for the years ending December 31, 1999 and 1998,
respectively.

The revolving line of credit agreement and the term note contain various
restrictive financial and change of ownership control covenants. The Company was
in compliance with all covenants as of December 31, 1999.
<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

Innotrac leases office and warehouse space and equipment under various
operating leases. The primary office and warehouse operating leases provide for
escalating payments over the lease term. Innotrac recognizes rent expense on a
straight-line basis over the lease term and accrues the differences each month
between the amount expensed and the amount actually paid.

Aggregate future minimum lease payments under noncancellable operating
leases with original periods in excess of one year as of December 31, 1999 are
as follows (in 000s):

<TABLE>
<S> <C>
2000........................................................................................ $ 2,494
2001........................................................................................ 2,416
2002........................................................................................ 2,160
2003........................................................................................ 2,058
2004........................................................................................ 1,863
Thereafter.................................................................................. 4,208
-------
Total minimum lease payments................................................................ $15,199
=======
</TABLE>

Rent expense under all operating leases totaled approximately $2,005,000,
$1,231,000 and $1,121,000 during the years ended December 31, 1999, 1998 and
1997, respectively.

LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims that arise in the
ordinary course of business. There are no material pending legal proceedings to
which the Company is a party.

6. INCOME TAXES

Details of the income tax (provision) benefit for the years ended December
31, 1999, 1998 and 1997 are as follows (in 000s):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Current...... $(4,565) $(3,141) $(460)
Deferred..... (1,824) (602) 537
------- ------- -----
$(6,389) $(3,743) $ 77
======= ======= =====
</TABLE>

Deferred income taxes reflect the net effect of the temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Companies' deferred tax assets and liabilities as of December
31, 1999 and 1998 are as follows (in 000s):

<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Noncurrent deferred tax assets (liabilities):
Property, plant, equipment basis differences................... $ 324 $ (114)
Other.......................................................... 29 8
----- ------
353 (106)
----- ------
Current deferred tax assets (liabilities):
Reserves for uncollectable accounts............................ 466 2,372
Reserve for returns and equipment losses................. 117 526
Other.......................................................... 0 (32)
----- ------
583 2,866
----- ------

<PAGE>

Net deferred tax asset.............................................. $ 936 $ 2,760
===== =======
</TABLE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

6. INCOME TAXES-CONTINUED

Innotrac converted from the cash basis to the accrual basis for income tax
purposes effective August 1995, with the accumulated difference to be added back
to taxable income over a four-year period.

Effective with the Consolidation in 1998, the Company coverted all of its
entities that were non-C-corporations status for income tax reporting purposes
to C-corporation status and recorded a one-time benefit of approximately $3
million related to certain temporary differences at these entities.

A reconciliation of the income tax provision (benefit) computed at
statutory rates to the income tax provision (benefit) for the years ended
December 31, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Federal statutory rate................................................. 35.0% 35.0% 34.0%
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit........................ 4.0 6.0 1.4
Income taxable directly to shareholders, partners and members
(Note 2)....................................................... 0.0 (13.3) (37.9)
Other.................................................................. 0.5 0.5 0.9
----- ----- -----
39.5% 28.2% (1.6)%
===== ===== =====
</TABLE>

7. REDEEMABLE CAPITAL STOCK

In September 1993, the Company obtained $1,000,000 of financing from a
related party in the form of subordinated debt, in two entities that were
involved in the Consolidation. The subordinated debt required monthly payments
of interest, with principal maturing at 36 months. The subordinated debt was
repaid in full in September 1996. Additionally, the related party received
callable common stock representing 10% of the common stock of these entities.
The terms of the callable common stock provided each of these entities the
option to call the common stock at predetermined amounts on or before September
30, 1998 beginning in September 1996. If the Company did not call the common
stock interests, the Company was obligated to issue the related party an
additional 10% common stock interest to redeem the common stock. Due to the
related party nature of the transaction, the Company accounted for the callable
common stock as redeemable equity.

The Company allocated the capital raised between "Subordinated Debt" and
"Redeemable Capital Stock" at the respective fair market values based on
discounted cash flow analyses (approximately $500,000 each to "Subordinated
Debt" and "Redeemable Capital Stock") and then accreted to their redemption
values over 36 months using the effective interest rate method (an approximate
30% return on both the subordinated debt and the callable common stock). The
portion of the accretion attributable to Subordinated Debt is reflected as
interest expense in the accompanying statements of operations. For the equity
portion, the Company accreted through the recording of dividends to the
estimated redemption amounts at each balance sheet date. These dividends
represent a 16% effective rate through September 1996 (the first trigger date as
defined) and 10% thereafter. In conjunction with the Offering (see Note 1), the
Company redeemed the shares of one entity in February 1998 for $390,000 and the
shares of the other entity for $594,000 in December 1998.

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED STATEMENTS-(CONTINUED)

8. SHAREHOLDERS' EQUITY

Innotrac has authorized 50,000,000 shares of Common Stock, $0.10 par value,
and 10,000,000 shares of Preferred Stock, $0.10 par value. On December 12, 1997,
Innotrac effected a 70.58823 -for- 1 stock split resulting in 1,080,000 shares
outstanding. Additionally, in exchange for their previous ownership interests,
5,420,000 shares of $0.10 par value common stock were issued to the remaining
entity owners pari-passu based on their relative value to the consolidated group
except for the minority stockholder of one of the affiliated entities, whose
ownership interest was repurchased as scheduled in the fourth quarter of 1998.
After the Consolidation, there were an aggregate of 6,500,000 shares
outstanding. As discussed in Note 1, on May 6, 1998 the Company completed an
initial public offering of 2.5 million shares at a price of $12.00 per share for
net proceeds of approximately $26,741,000. On July 30,1999, the Company
completed a secondary public offering of 2.2 million shares at a price of $17.00
per share for net proceeds of approximately $34,914,000. As of December 31,
1999, there were 11,215,000 shares of common stock outstanding.

9. EMPLOYEE RETIREMENT PLAN

Employees of Innotrac may participate in an employee retirement defined
contribution plan. The plan covers all employees of the participating entities
who have at least one year of service (six months if hired before January 1,
1997) and are 18 years of age or older. Participants may elect to defer up to
15% of compensation up to a maximum amount determined annually pursuant to IRS
regulations. Innotrac has elected to provide matching employer contributions
equal to 15% of contributions for less than five years of service, 25% of
contributions for five to nine years of service, and 35% of contributions for
over nine years of service. Total matching contributions made to the plan and
charged to expense by Innotrac for the years ended December 31, 1999, 1998 and
1997 were not material.

10. STOCK BASED COMPENSATION

In November 1997, the Company adopted a stock option plan (the "Stock
Option Plan") to provide key employees, officers, directors, contractors, and
consultants an opportunity to own Common Stock of the Company and to provide
incentives for such persons to promote the financial success of the Company.
Awards under the Stock Option Plan may be structured in a variety of ways,
including as "incentive stock options" as defined in Section 422 of the Internal
Revenue Code, as amended, non-qualified stock options, restricted stock awards,
and stock appreciation rights ("SARs"). Incentive stock options may be granted
only to full-time employees (including officers) of the Company and its
subsidiaries. Non-qualified options, restricted stock awards, SARs, and other
permitted forms of awards may be granted to any person employed by or performing
services for the Company, including directors, contractors, and consultants. The
Stock Option Plan provides for the issuance of options to purchase up to an
aggregate of 800,000 shares of Common Stock.

Incentive stock options are also subject to certain limitations prescribed
by the Code, including the requirement that such options may not be granted to
employees who own more than 10% of the combined voting power of all classes of
voting stock of the Company, unless the option price is at least 110% of the
fair market value of the Common Stock subject to the option. The Board of
Directors of the Company (or a committee designated by the Board) otherwise
generally has discretion to set the terms and conditions of options and other
awards, including the term, exercise price, and vesting conditions, if any; to
select the persons who receive such grants and awards, and to interpret and
administer the Stock Option Plan.

<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

A summary of the options outstanding and exercisable by price range as of
December 31, 1999 is as follows:

Options Outstanding Options Exercisable
-------------------------------------------------------------------------- -------------------------------------
Outstanding Weighted-Average Exercisable
Range of As of Remaining Weighted-Average As of Weighted-Average
Exercise Prices December 31, 1999 Contractual Life Exercise Price December 31, 1999 Exercise Price
------------------ ------------------ ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$9.0000 - $11.0000 309,575 7.9 $ 9.1000 180,786 $ 9.1000

11.0000 - 14.0000 80,000 9.3 12.3906 30,000 12.0000

14.0000 - 17.0000 93,500 9.2 14.9271 0 N/A

17.0000 - 20.0000 15,000 9.4 17.6880 5,001 17.6880
------- --- -------- ------- --------
498,075 8.4 $10.9811 215,787 $9.7022
</TABLE>

A summary of the status of the Company's Stock Option Plan and other
options at December 31, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
Shares Weighted Average Price
------ ----------------------
<S> <C> <C>
Outstanding at December 31, 1996 0 $ 0.00
Granted 343 9.10
Outstanding at December 31, 1997 343 9.10
Granted 40 12.00
Forfeited (20) 9.10
Outstanding at December 31, 1998 363 9.42
Granted 179 14.64
Exercised (13) 11.33
Forfeited (31) 14.11
----
Outstanding at December 31, 1999 498 10.98
</TABLE>

The total value of options granted during 1999 and 1998 was computed as
approximately $1,379,000 and $3,013,000 which would be amortized to expense on a
pro forma basis over the vesting period of the options. Had compensation cost
for stock options been determined under SFAS No. 123, the Company's net income
and net income per share would have been the following pro forma amounts (in
thousands except per share data):

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net income
Pro forma $ 9,835 $8,186 $ 3,003
Pro forma adjusted for the
Impact of SFAS 123 $ 9,048 $7,402 $ 2,686

Diluted net income per share
Pro forma $0.98 $1.00 $ 0.46
Pro forma adjusted for the $0.90 $0.91 $ 0.41
Impact of SFAS 123

</TABLE>
<PAGE>

INNOTRAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

The Company has elected to account for its option plans under APB 25;
however, the Company has computed for pro forma disclosure purposes the value of
all options granted using the Black-Scholes option-pricing model as prescribed
by SFAS 123 using the following weighted average assumptions:

<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Risk-free interest rate..... 6.34% 5.17% 5.17%
Expected dividend yield..... 0% 0% 0%
Expected lives.............. 2.7 Years 2.7 Years 2.7 Years
Expected volatility......... 80.5% 86.0% 106.0%
</TABLE>

11. QUATERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data) First Second Third Fourth
----------------------------------------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
1999 Quarters:
Revenues, net $67,320 $57,496 $51,661 $50,534
Operating income 5,784 5,869 4,075 1,847
Net income 3,286 3,266 2,303 980
Net income per share-basic 0.37 0.36 0.22 0.09
Net income per share-diluted $ 0.36 $ 0.36 $ 0.22 $ 0.09

1998 Quarters:
Revenues, net $22,565 $36,346 $35,233 $45,529
Operating income 2,587 4,494 3,669 3,553
Net income 1,371 2,596 2,169 2,050
Net income per share-basic 0.21 0.33 0.24 0.23
Net income per share-diluted $ 0.21 $ 0.33 $ 0.24 $ 0.22

1997 Quarters:
Revenues, net $22,388 $24,699 $20,226 $20,665
Operating income 1,371 2,722 1,896 800
Net income 718 1,205 873 207
Net income per share-basic 0.11 0.19 0.13 0.03
Net income per share-diluted $ 0.11 $ 0.19 $ 0.13 $ 0.03

</TABLE>

<PAGE>
EXHIBIT 21.1

LIST OF SUBSIDIARIES

Return.com Online, Inc.

<PAGE>

EXHIBIT 23.1

CONSENT OF ARTHUR ANDERSEN LLP

As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on October 23, 1998 (no.
333-66045) of Innotrac Corporation of our reports, dated January 27, 2000,
included in the December 31, 1999 Annual Report on Form 10-K of Innotrac
Corporation.

/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
March 24, 2000

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> $894,000
<SECURITIES> 0
<RECEIVABLES> 53,609,000
<ALLOWANCES> 1,178,000
<INVENTORY> 39,503,000
<CURRENT-ASSETS> 94,810,000
<PP&E> 16,527,000
<DEPRECIATION> 7,605,000
<TOTAL-ASSETS> 104,218,000
<CURRENT-LIABILITIES> 24,930,000
<BONDS> 0
0
0
<COMMON> 60,822,000
<OTHER-SE> 18,391,000
<TOTAL-LIABILITY-AND-EQUITY> 104,218,000
<SALES> 227,011,000
<TOTAL-REVENUES> 227,011,000
<CGS> 0
<TOTAL-COSTS> 195,230,000
<OTHER-EXPENSES> 14,206,000
<LOSS-PROVISION> 11,853,000
<INTEREST-EXPENSE> 1,370,000
<INCOME-PRETAX> 16,224,000
<INCOME-TAX> 6,389,000
<INCOME-CONTINUING> 9,835,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,835,000
<EPS-BASIC> 0.99
<EPS-DILUTED> 0.98

</TABLE>

<PAGE>
[LOGO]

April 7, 2000

To Our Shareholders:

On behalf of the Board of Directors and management of Innotrac Corporation,
I cordially invite you to the Annual Meeting of Shareholders to be held on
May 17, 2000, at 9:00 AM, Eastern Time, at the Gwinnett Civic and Cultural
Center located at 6400 Sugarloaf Parkway, Duluth, Georgia 30155.

At the Annual Meeting, shareholders will be asked to (1) consider and vote
upon the election of two directors of the Company, each of whom is currently a
director of the Company; (2) approve the Company's 2000 Stock Option and
Incentive Award Plan (the "Stock Incentive Plan"); and (3) approve the Company's
Senior Executive Compensation Plan (the "Executive Plan"). As explained in the
Proxy Statement, the Board of Directors believes that the Stock Incentive Plan
and the Executive Plan are both essential elements of the Company's
comprehensive compensation program. The Stock Incentive Plan plays an integral
role in the ability of the Company to attract and retain key employees and
directors and to provide incentives for such persons to promote the financial
success of the Company. The Executive Plan is designed to reward key management
personnel on an ongoing basis for helping the Company achieve operating
performance goals.

Information about the nominees for directors, the Stock Incentive Plan, the
Executive Plan and certain other matters is contained in the accompanying Proxy
Statement. A copy of the Company's 1999 Annual Report to Shareholders, which
contains financial statements and other important information about the
Company's business, is also enclosed.

It is important that your shares of stock be represented at the meeting,
regardless of the number of shares you hold. You are encouraged to specify your
voting preferences by marking and dating the enclosed proxy card. However, if
you wish to vote for re-electing the nominees for director specified herein,
approving the Stock Incentive Plan and approving the Executive Plan, all you
need to do is sign and date the proxy card.

Please complete and return the proxy card in the enclosed envelope, whether
or not you plan to attend the meeting. If you do attend and wish to vote in
person, you may revoke your proxy at that time.

I hope you are able to attend, and look forward to seeing you.

Sincerely,
/s/ Scott D. Dorfman

SCOTT D. DORFMAN
PRESIDENT, CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
INNOTRAC CORPORATION
6655 SUGARLOAF PARKWAY
DULUTH, GEORGIA 30097

------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2000

------------------------

To the Shareholders of
Innotrac Corporation:

Notice is hereby given that the Annual Meeting of Shareholders of Innotrac
Corporation will be held at 9:00 AM, Eastern Time, on Wednesday, May 17, 2000,
at the Gwinnett Civic and Cultural Center, 6400 Sugarloaf Parkway, Duluth,
Georgia 30155, for the following purposes:

1. To elect two directors whose terms will expire in 2003;

2. To approve the Company's 2000 Stock Option and Incentive Award Plan (the
"Stock Incentive Plan");

3. To approve the Company's Senior Executive Compensation Plan (the
"Executive Plan"); and

4. To consider such other matters as may properly come before the meeting
and any adjournment or postponement thereof.

Only shareholders of record on March 17, 2000, are entitled to notice of and
to vote at the Annual Meeting and any adjournment or postponement thereof.

A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the Proxy promptly in the
enclosed business reply envelope. If you attend the meeting you may, if you
wish, withdraw your Proxy and vote in person.

BY ORDER OF THE BOARD OF DIRECTORS,
DAVID L. ELLIN
SECRETARY

APRIL 7, 2000

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN,
DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED BUSINESS
REPLY ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT
THE ANNUAL MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
[LOGO]

PROXY STATEMENT
DATED APRIL 7, 2000
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2000

This Proxy Statement is furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors of Innotrac Corporation
("Innotrac" or the "Company") for use at Innotrac's 2000 Annual Meeting of
Shareholders ("Annual Meeting") to be held on Wednesday, May 17, 2000, including
any postponement, adjournment or adjournments thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting. Management intends to mail
this Proxy Statement and the accompanying form of proxy to shareholders on or
about April 7, 2000.

Only shareholders of record at the close of business on March 17, 2000 (the
"Record Date"), are entitled to notice of and to vote in person or by proxy at
the Annual Meeting. As of the Record Date, there were 11,214,595 shares of
common stock, $.10 par value per share ("Common Stock"), of Innotrac outstanding
and entitled to vote at the Annual Meeting. The presence of a majority of such
shares is required, in person or by proxy, to constitute a quorum for the
conduct of business at the Annual Meeting. Each share is entitled to one vote on
any matter submitted for vote by the shareholders. The vote required for
approval of each matter submitted to the shareholders is described with the
discussion of that matter in this Proxy Statement.

Proxies in the accompanying form, duly executed and returned to the
management of the Company, and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the shareholder
at any time prior to the voting of the proxy by delivery of a subsequently dated
proxy, by written notification to the Secretary of the Company or by personally
withdrawing the proxy at the Annual Meeting and voting in person.

Proxies that are executed, but that do not contain any specific
instructions, will be voted for the election of all the nominees for directors
specified herein, and for approval of the Stock Incentive Plan and the Executive
Plan. The persons appointed as proxies will vote in their discretion on any
other matter that may properly come before the Annual Meeting or any
postponement, adjournment or adjournments thereof, including any vote to
postpone or adjourn the Annual Meeting.

A copy of the Company's 1999 Annual Report to Shareholders is being
furnished herewith to each shareholder of record as of the close of business on
the Record Date. Copies of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 will be provided free of charge upon written request to:

INNOTRAC CORPORATION
6655 SUGARLOAF PARKWAY
DULUTH, GEORGIA 30097
ATTN.: VICE PRESIDENT--OPERATIONS

If the person requesting the Annual Report on Form 10-K for the year ended
December 31, 1999 was not a shareholder of record on the Record Date, the
request must include a representation that the person was a beneficial owner of
Common Stock on that date. Copies of any exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 will also be furnished on
request and upon payment of the Company's expenses in furnishing the exhibits.

1
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS

The following table sets forth the information concerning the beneficial
ownership of the common stock, par value $.10 per share, of Innotrac (the
"Common Stock"), which is the Company's only class of voting stock, at
March 17, 2000, by:

- each person known to Innotrac to beneficially own more than 5% of the
Common Stock,

- each director, the Chief Executive Officer and the four other most highly
compensated executive officers, and

- all of Innotrac's directors and executive officers as a group.

Unless otherwise indicated below, the persons named below had sole voting
and investment power with respect to all shares of the Common Stock shown as
beneficially owned by them.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
- ---------------- --------------------- ------------------
<S> <C> <C>
Scott D. Dorfman...................... 5,572,962(2)(3) 49.7%
SAFECO Corporation.................... 768,400(4) 6.9
SAFECO Asset Management Company....... 719,400(5) 6.4
SAFECO Common Stock Trust............. 611,000(6) 5.4
David L. Ellin........................ 137,500(7) 1.2
Larry C. Hanger....................... 12,500(8) *
Don L. Colter......................... 13,500(8) *
Will Hendrick......................... 12,500(9) *
Bruce V. Benator...................... 22,667(10) *
Martin J. Blank....................... 21,667(11) *
William H. Scott, III................. 223,000(11)(12) 2.0
All directors and executive officers
as a group (10 persons)............. 6,017,296 52.8
</TABLE>

- ------------------------

* Denotes less than 1%

(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares that the person or group has the right
to acquire within 60 days or with respect to which the person has or shares
voting or investment power. For purposes of computing the percentages of
outstanding shares held by each person or group of persons, shares which
the person or group has the right to acquire within 60 days after such date
are deemed to be outstanding for purposes of computing the percentage for
the person or group but are not deemed to be outstanding for the purpose of
computing the percentage of any other person or group. As of March 17,
2000, there were 11,214,595 shares of Common Stock outstanding.

(2) Mr. Dorfman's address is 6655 Sugarloaf Parkway, Duluth, Georgia 30097.

(3) Includes an aggregate of 214,033 shares owned by: (i) Mr. Dorfman's wife
individually and as custodian for the benefit of his children;
(ii) Mr. Dorfman's brother as trustee for the benefit of Mr. Dorfman's
children; and (iii) by a foundation for which Mr. Dorfman and his wife
serve as trustees.

(4) The address of SAFECO Corporation ("SAFECO") is SAFECO Plaza, Seattle,
Washington 98185. According to a joint Schedule 13G filed March 10, 2000,
SAFECO is the parent holding company of SAFECO Asset Management Company
("SAFECO AMC") and disclaims beneficial ownership of the reported shares,
which include the shares reported by SAFECO AMC and SAFECO Common Stock
Trust ("SAFECO CST"). The reported shares are beneficially owned by
(i) registered

2
<PAGE>
investment companies for which SAFECO AMC serves as investment adviser and
(ii) employee benefit plans for which SAFECO serves as plan sponsor.

(5) The address of SAFECO AMC is 601 Union Street, Suite 2500, Seattle,
Washington 98101. SAFECO AMC is an investment adviser and disclaims
beneficial ownership of the reported shares, which are beneficially owned
by registered investment companies for which SAFECO AMC serves as
investment adviser, and include the shares reported by SAFECO CST.

(6) The address of SAFECO CST is 10865 Willows Road NE, Redmond, Washington
98052. SAFECO CST is an investment company for which SAFECO AMC serves as
investment adviser.

(7) Includes 105,000 shares subject to presently exercisable stock options.

(8) Includes 12,500 shares subject to presently exercisable stock options.

(9) Includes 12,500 shares subject to options vesting in the next 60 days.

(10) Includes 21,667 shares subject to presently exercisable stock options.

(11) Includes 11,667 shares subject to presently exercisable stock options.

(12) Includes 208,333 shares owned of record by ITC Service Company, with
respect to which Mr. Scott is an officer and director. Mr. Scott disclaims
beneficial ownership of these shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires Innotrac's
directors and executive officers, and persons who own more than 10% of
Innotrac's Common Stock, to file with the Securities and Exchange Commission
certain reports of beneficial ownership of the Company's Common Stock. Based
solely on copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
all applicable Section 16(a) reports were filed by its directors, officers and
10% shareholders during the fiscal year ended December 31, 1999.

ELECTION OF DIRECTORS
(ITEM NUMBER 1 ON THE PROXY CARD)

The Bylaws of the Company provide that the Board of Directors shall consist
of not less than five nor more than eleven directors, with the exact number
being set from time to time by the Board or the shareholders. The Board
presently consists of six directors, three of whom are independent directors.

The Board of Directors is divided into three classes of directors serving
staggered three-year terms. Two directors are to be elected at the meeting for a
three-year term expiring in 2003. The Board has nominated Martin J. Blank and
William H. Scott, III for those positions.

Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock entitled to vote for the election of directors at a
meeting at which a quorum is present. A quorum will be present for the Annual
Meeting when the holders of a majority of the shares outstanding on the Record
Date are present in person or by proxy. An abstention and a broker non-vote are
included in determining whether a quorum is present, but will not affect the
outcome of the vote for the election of directors. Unless otherwise indicated on
a proxy, all duly executed proxies granted by the holders of Common Stock will
be voted individually at the Annual Meeting for the election of each nominee.
Each nominee has indicated that he will serve if elected, but if the situation
should arise that any nominee is no longer able or willing to serve, the proxy
may be voted for the election of such other person as may be designated by the
Board of Directors.

The following information as of February 11, 2000 has been furnished by the
nominees for director and the continuing directors. Except as otherwise
indicated, the nominees and the continuing directors

3
<PAGE>
have been or were engaged in their present or last principal employment, in the
same or a similar position, for more than five years.

<TABLE>
<CAPTION>
NAME (AGE) INFORMATION ABOUT THE NOMINEES AND THE CONTINUING DIRECTORS
---------- ------------------------------------------------------------
<S> <C>
NOMINEES FOR DIRECTOR AT THE MEETING AND WHOSE TERM WILL EXPIRE IN 2003

MARTIN J. BLANK (53) MR. BLANK has been a director of Innotrac since 1997 and is
a co-founder of Automobile Protection Corporation, or APCO,
a subsidiary of the Ford Motor Company engaged in the
marketing of extended vehicle service contracts and warranty
programs. Mr. Blank has served as Secretary and Director of
APCO since its inception in 1984 and as Chairman of the
Board and Chief Operating Officer since 1988. Mr. Blank's
experiences prior to co-founding APCO include the practice
of law and the representation of and financial management
for professional athletes. Mr. Blank is admitted to the bar
in the States of Georgia and California.

WILLIAM H. SCOTT, III (52) MR. SCOTT has been a director of Innotrac since 1997 and has
served as President and Chief Operating Officer of ITC
Holding Company, Inc., the parent company of ITC Service
Company, since 1991. He has been a director of
Headhunter.Net, Inc., a job information and recruiting
internet site, since October 1997 and has served as Chairman
of the Board of that company since July 1998. He has also
been a director of ITC Holding Company, Inc. since 1989, and
served as its Executive Vice President from 1989 to 1991.
Mr. Scott is a director of Powertel, Inc., a wireless
telecommunications services company operating in the
southeastern United States; KNOLOGY Holdings, Inc., a
broadband telecommunications services company currently
operating in Alabama, Florida, Georgia and South Carolina;
ITC DeltaCom, Inc., a full service telecommunications
provider to business customers in the southeastern United
States; Earthlink Network, Inc., a national internet service
provider; and nFront, Inc., a provider of Internet banking
services.

DIRECTORS WHOSE TERMS EXPIRE IN 2001

SCOTT D. DORFMAN (42) MR. DORFMAN founded Innotrac and has served as President,
Chief Executive Officer and Chairman of the Board since its
inception in 1984. Prior to founding Innotrac, Mr. Dorfman
was employed by Paymaster Checkwriter Company, Inc., an
equipment distributor. At Paymaster, Mr. Dorfman gained
experience in distribution, tracking and inventory control
by developing and managing Paymaster's mail order catalog.

DAVID L. ELLIN (41) MR. ELLIN joined Innotrac in 1986 and has served as Senior
Vice President and Chief Operating Officer since November
1997 and as a director since December 1997. He also serves
as Secretary of Innotrac. He served as Vice President from
1988 to November 1997. From 1984 to 1986, Mr. Ellin was
employed by the Atlanta branch of WHERE Magazine, where he
managed the sales and production departments. From 1980 to
1984, Mr. Ellin was employed by Paymaster, where he was
responsible for Paymaster's sales and collections.
</TABLE>

4
<PAGE>

LARRY C. HANGER (45) MR. HANGER joined Innotrac in 1994, and has served as Vice
President-Business Development since November 1997 and as a
director since December 1997. He was promoted to Senior Vice
President in April 1999. He served as Innotrac's Department
Manager of Business Development from 1994 to November 1997,
and was responsible for the management of the
telecommunication equipment marketing and service business.
From 1979 to 1994, Mr. Hanger served as Project
Manager-Third Party Marketing at BellSouth Corporation,
where he managed the marketing program for BellSouth's
network services and was involved in implementing the
billing options program for BellSouth with Innotrac.

BRUCE V. BENATOR (42) MR. BENATOR is the Managing Partner of Williams Benator and
Libby, LLP, certified public accountants, and has been a
director since 1997. He has been affiliated with the firm
since 1984 and is the firm's Director of Accounting and
Auditing Services. From 1979 to 1984, Mr. Benator was
employed by Ernst & Young, LLP.
</TABLE>

MEETINGS AND COMMITTEES OF THE BOARD

The Board of Directors meets on a regular basis to supervise, review, and
direct Innotrac's business and affairs. During the 1999 fiscal year, the Board
held four meetings. The Board of Directors has established an Executive
Committee, an Audit Committee, a Compensation Committee and an Executive
Compensation Subcommittee to which it has assigned certain responsibilities in
connection with the governance and management of our affairs. Innotrac has no
standing nominating committee or other committee performing similar functions.

Each of the directors attended 75% of the Board meetings and meetings of
committees on which he served during the 1999 fiscal year.

EXECUTIVE COMMITTEE. The Executive Committee, pursuant to authority
delegated by the Board, from time to time considers certain matters in lieu of
convening a meeting of the full Board, subject to any restrictions in applicable
law related to the delegation of certain powers to a committee of the Board.
Messrs. Dorfman, Ellin and Benator comprise the members of the Executive
Committee. The Executive Committee held no meetings during fiscal 1999.

AUDIT COMMITTEE. The Audit Committee recommends the appointment of
independent public accountants, reviews the scope of audits proposed by the
independent public accountants, reviews internal audit reports on various
aspects of corporate operations and periodically consults with the independent
public accountants on matters relating to internal financial controls and
procedures. Messrs. Benator, Blank and Scott comprise the members of the Audit
Committee. The Audit Committee held three meetings during fiscal 1999.

COMPENSATION COMMITTEE AND EXECUTIVE COMPENSATION SUBCOMMITTEE. The
Compensation Committee is responsible for the review and approval of
compensation of employees above a certain salary level, the review of management
recommendations relating to incentive compensation plans, the administration of
Innotrac's stock option and senior executive compensation plans, the review of
compensation of directors and consultation with management and the Board on
senior executive continuity and organizational matters. Messrs. Dorfman, Blank
and Scott comprise the members of the Compensation Committee. The Compensation
Committee held one meeting during fiscal 1999.

5
<PAGE>
Effective October 1999, the Board established the Executive Compensation
Subcommittee, comprised of Messrs. Blank and Scott. This subcommittee was
constituted to (1) achieve certain securities law advantages with respect to
stock-based compensation to Innotrac's officers and directors and (2) maintain
the tax deductibility of certain annual compensation in excess of $1 million to
Innotrac's Chief Executive Officer and four other most highly compensated
officers, as explained more fully under "Compliance with Section 162(m) of the
Internal Revenue Code" below.

DIRECTORS' COMPENSATION

We pay our outside directors an annual fee of $10,000, and additional fees
of $250 and $100, respectively, for each Board meeting and committee meeting
attended. We also reimburse all directors for their travel and other expenses
incurred in connection with attending Board or committee meetings.

We grant options for 5,000 shares annually to each of our outside directors
on the dates we hold our annual meetings of shareholders. The exercise price is
the closing price of our common stock reported on the Nasdaq National Market on
the date of grant. One-third of the options are immediately exercisable, the
next third vest on the first anniversary of the date of grant, and the last
third, on the second anniversary. On May 11, 1999, we granted options for 5,000
shares--1,667 of which were presently exerciseable--to each of Messrs. Benator,
Blank and Scott under this plan. These options are exercisable at $17.688 per
share.

6
<PAGE>
APPROVAL OF 2000 STOCK INCENTIVE PLAN
(ITEM NUMBER 2 ON THE PROXY CARD)

PURPOSE OF THE 2000 STOCK INCENTIVE PLAN

The Board of Directors adopted the Innotrac Corporation 2000 Stock Option
and Incentive Award Plan (the "Stock Incentive Plan") on March 28, 2000, subject
to shareholder approval. The Board of Directors is proposing that the Company's
shareholders approve the Stock Incentive Plan for a number of reasons, including
compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). See "Compliance with Section 162(m) of the Internal Revenue Code"
below. The Stock Incentive Plan, if approved by shareholders, will be effective
March 28, 2000 and will remain in effect until March 27, 2010, unless it is
terminated by the Board at an earlier date.

The Board of Directors previously adopted the Innotrac Corporation Stock
Option and Incentive Award Plan, as amended, on November 24, 1997 (the "1997
Option Plan"). As of December 31, 1999, options for 498,075 shares of Common
Stock had been granted under the 1997 Option Plan. A total of 800,000 shares
were reserved for issuance under the 1997 Option Plan. Upon the approval of the
2000 Stock Incentive Plan, no additional options or other awards will be granted
under the 1997 Option Plan.

The Board of Directors believes that the Stock Incentive Plan will play an
integral role in the ability of the Company to attract and retain key employees
and directors and to provide incentives for such persons to promote the
financial success of the Company. The following description of the material
features of the Stock Incentive Plan is a summary and is qualified in its
entirety by reference to the Stock Incentive Plan, a copy of which will be
provided to any shareholder upon written request to the Company. The Stock
Incentive Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).

DESCRIPTION OF AWARDS

OPTIONS. Awards granted under the Stock Incentive Plan may be "incentive
stock options" ("ISOs"), as defined in Section 422 of the Code, "nonqualified
stock options" ("NQSOs"), shares of Common Stock subject to terms and conditions
set by the Board of Directors ("restricted stock" or "stock awards"), stock
appreciation rights ("SARs"), or performance shares. ISOs may be granted only to
employees of the Company, including officers. NQSOs may be granted to any person
employed by or performing services for the Company, including non-employee
directors.

The Compensation Committee of the Board of Directors or its designee, or the
Executive Compensation Subcommittee or its designee, generally has discretion to
set the terms and conditions of grants and awards, including the term, exercise
price, and vesting conditions (including vesting based on the Company's
performance); to select the persons who receive such grants and awards; and to
interpret and administer the Stock Incentive Plan. The maximum number of shares
of Common Stock with respect to which awards may be granted under the Stock
Incentive Plan is 1,300,000 shares. The maximum number of shares for which
options (ISOs and NQSOs) may be granted to any individual during any calendar
year is 500,000 shares, subject to anti-dilution and similar provisions. The
Board of Directors may at any time amend or terminate the Stock Incentive Plan,
subject to applicable laws. The Company will pay the administrative costs of the
Stock Incentive Plan.

The option price for each ISO may be not less than 100% of the fair market
value of the Common Stock subject to the option. The option price for a NQSO can
be less than, equal to, or greater than the fair market value on the date of
grant. ISOs are also subject to certain limitations prescribed by the Code,
including the requirement that such options may not be granted to employees who
own more than 10% of the combined voting power of all classes of voting stock (a
"principal shareholder") of the Company, unless the option price is at least
110% of the fair market value of the Common Stock subject to the option. In
addition, an ISO granted to a principal shareholder may not be exercisable more
than five years from its date of grant.

7
<PAGE>
Full payment of the option price must be made when an Option is exercised.
The purchase price may be paid in cash or in such other form of consideration as
the Committee may approve, which may include shares of Common Stock valued at
their fair market value on the date of exercise, or by any other means which the
Committee determines to be consistent with the Stock Incentive Plan's purpose
and applicable law. A Participant will have no rights as a shareholder with
respect to the shares subject to his Option until the Option is exercised.

SARS. The Committee may grant stock appreciation rights separately or in
connection with another stock incentive, and the Committee may provide that the
holder may exercise them at any time or that they will be paid at a certain time
or times or upon the occurrence or non-occurrence of certain events. Stock
appreciation rights may be settled in shares of common stock or in cash,
according to terms established by the Committee with respect to any particular
award. The maximum number of stock appreciation rights which can be granted
under the Stock Incentive Plan during any calendar year to any individual is
500,000.

RESTRICTED STOCK; STOCK AWARDS. Participants may also be awarded shares of
Common Stock pursuant to a stock award. The Committee, in its discretion, may
prescribe that a Participant's rights in a stock award shall be nontransferable
or forfeitable or both unless certain conditions are satisfied. These conditions
may include, for example, a requirement that the Participant continue employment
with the Company for a specified period or that the Company or the Participant
achieve stated objectives. In addition, the restrictions may lapse
incrementally.

At the time a grant of restricted stock is made, the Committee shall
establish a period or periods of time (the "Restricted Period") applicable to
such grant. Subject to certain provisions, at the end of the Restricted Period,
all restrictions shall lapse and the restricted stock shall vest in the
Participant. The Committee may, in its discretion, shorten or terminate the
Restricted Period, or waive any conditions for the lapse or termination of
restrictions with respect to all or any portion of the restricted stock at any
time after the date the grant is made.

Upon a grant of restricted stock, a stock certificate representing the
number of shares of restricted stock granted to the Participant shall be
registered in the Participant's name and shall be held in custody by the Company
or a bank selected by the Committee for the Participant's account. Following
such registration, the Participant shall, subject to certain restrictions, have
the rights and privileges of a shareholder as to such restricted stock,
including the right to receive dividends and to vote such restricted stock,
except that the right to receive cash dividends shall be the right to receive
such dividends either in cash currently or by payment in restricted stock, as
the Committee shall determine. The maximum number of Shares of Restricted Stock
or Stock Awards which can be granted under the Stock Incentive Plan during any
calendar year to any individual is 500,000.

PERFORMANCE SHARE AWARDS. The Stock Incentive Plan also provides for the
award of performance shares. A performance share award entitles the Participant
to receive a payment equal to the fair market value of a specified number of
shares of Common Stock if certain performance standards are met. The Committee
will prescribe the requirements that must be satisfied before a performance
share award is earned. The performance share requirements may include, for
example, a requirement that the Participant continue employment with the Company
for a specified period or that the Company or the Participant achieve stated
objectives. To the extent that performance shares are earned, the obligation may
be settled in cash, in Common Stock or by a combination of the two.

No Participant shall have, as a result of receiving a performance share
award, any rights as a shareholder until and to the extent that the performance
shares are earned and Common Stock is transferred to such Participant. If the
Award Agreement so provides, a Participant may receive a cash payment equal to
the dividends that would have been payable with respect to the number of shares
of Common Stock covered by an award between (a) the date that the performance
shares are awarded and (b) the date that a transfer of Common Stock to the
Participant, cash settlement, or combination thereof is made pursuant to the
performance share award.

8
<PAGE>
TERMINATION OF AWARDS.

The terms of an award may provide that it will terminate, among other
reasons, upon the holder's termination of employment or other status with the
Company or its subsidiaries, upon a specified date, upon the holder's death or
disability, or upon the occurrence of a change in control. Also, the Committee
may, within the terms of the Stock Incentive Plan, provide in the Award
Agreement for the acceleration of vesting for any of the above reasons.

COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE

Section 162(m) of the Code denies a deduction by an employer for certain
compensation in excess of $1.0 million per year paid by a publicly traded
corporation to the Chief Executive Officer or any of the four most highly
compensated executive officers other than the Chief Executive Officer (the
"Named Executive Officers"). Compensation realized with respect to stock
options, including upon exercise of an NQSO or upon a disqualifying disposition
of an ISO, as described below under "Certain Federal Income Tax Consequences",
will be excluded from this deduction limit if it satisfies certain requirements,
including a requirement that the Stock Incentive Plan be approved by the
Company's shareholders.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

OPTIONS. Under current tax law, a holder of an ISO under the Stock
Incentive Plan does not, as a general matter, realize taxable income upon the
grant or exercise of the ISO. (Depending upon the holder's income tax situation,
however, the exercise of the ISO may have alternative minimum tax implications.)
In general, a holder of an ISO will only recognize income at the time that
Common Stock acquired through exercise of the ISO is sold or otherwise disposed
of. In that situation, the amount of income that the optionee must recognize is
equal to the amount by which the value of the Common Stock on the date of the
sale or other disposition exceeds the option exercise price. If the optionee
disposes of the stock after the required holding period--that is, no earlier
than a date that is two years after the date of grant of the option and one year
after the date of exercise--the income is taxed as capital gains. If disposition
occurs prior to expiration of the holding period, the optionee will recognize
ordinary income equal to the difference between the fair market value of the
shares at the exercise date and the option exercise price; any additional
increase in the value of option shares after the exercise date will be taxed as
capital gain. The Company is entitled to a tax deduction equal to the amount of
ordinary income recognized by the optionee.

An optionee will not realize income when an NQSO option is granted to him or
her. Upon exercise of such option, however, the optionee must recognize ordinary
income to the extent that the fair market value of the Common Stock on the date
the option is exercised exceeds the option exercise price. Any such gain is
taxed in the same manner as ordinary income in the year the option is exercised.
Thereafter, any additional gain recognized upon the disposition of the shares of
stock obtained by the exercise of an NQSO will be taxed as short or long-term
capital gain, depending on the optionee's holding period. The Company will not
experience any tax consequences upon the grant of an NQSO, but will be entitled
to take an income tax deduction equal to the amount that the option holder
includes in income (if any) when the NQSO is exercised.

STOCK AWARDS; RESTRICTED STOCK. With respect to outright grants of Common
Stock under the Stock Incentive Plan, the Company is of the opinion that the
Participant will realize compensation income at the time of grant in an amount
equal to the fair market value of the Common Stock less any amount paid for such
Common Stock. The Company is also of the opinion that it will be entitled to a
deduction under the Code in the amount and at the time that compensation income
is realized by the Participant.

With respect to the grant of restricted stock under the Stock Incentive
Plan, the Company is of the opinion that the Participant will realize
compensation income in an amount equal to the fair market value of the
restricted stock (whether received as a grant or as a dividend), less any amount
paid for such

9
<PAGE>
restricted stock, at the time when the Participant's rights with respect to such
restricted stock are no longer subject to a substantial risk of forfeiture,
unless the Participant elected, pursuant to a special election provided in the
Code, to be taxed on the restricted stock at the time it was granted or received
as a dividend, as the case may be. Dividends paid to the Participant during the
Restricted Period will be taxable as compensation income, rather than as
dividend income, unless the election referred to above was made. The Company is
also of the opinion that it will be entitled to a deduction under the Code in
the amount and at the time that compensation income is realized by the
Participant.

PERFORMANCE SHARE AWARDS. Unless an election is made under Section 83(b) of
the Code, a Participant will recognize income on account of the settlement of a
performance share award. The amount of such income will be equal to any cash
that is paid and the fair market value of Common Stock (on the date that the
shares are first transferable or not subject to a substantial risk of
forfeiture) that is received in settlement of the award, and the Company will
generally be entitled to claim a deduction of such amount for tax purposes.

NEW STOCK INCENTIVE PLAN BENEFITS

As of December 31, 1999, options for 498,075 shares of Common Stock had been
granted under the Company's 1997 Option Plan. The following table sets forth
information on option and restricted share grants made or anticipated to be made
under the Stock Incentive Plan during fiscal 2000 to the specified persons and
groups. Unless otherwise noted, all awards are stock options. Other awards may
be made in the discretion of the Compensation Committee and Executive
Compensation Subcommittee.

NEW PLAN BENEFITS IN FISCAL 2000

<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES (1)
- ----------------- --------------------
<S> <C>
Scott D. Dorfman,
President, Chairman of the Board and Chief Executive
Officer................................................... 50,000
David L. Ellin
Senior Vice President, Chief Operating Officer and
Secretary................................................. 100,000(2)
Larry C. Hanger
Senior Vice President--Business Development............... 50,000
Don L. Colter
Vice President--Operations, and Interim Chief Financial
Officer................................................... 50,000
Will Hendrick
Vice President--Telecommunications........................ 50,000
All executive officers as a group (7 persons)............... 400,000
Nonemployee directors as a group (3 persons)................ 15,000
Non-executive officer employees as a group.................. 85,000
</TABLE>

- ------------------------

(1) Options are granted with an exercise price equal to the closing price on the
Nasdaq National Market on the date of grant. The value of restricted share
awards is not determinable until the restrictions lapse.

(2) Includes 50,000 shares of restricted stock.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD

The affirmative vote of holders of a majority of the shares of the Common
Stock of the Company represented and voted at the Annual Meeting, assuming the
presence of a quorum, is required to approve the Stock Incentive Plan.

The Board of Directors, which unanimously approved the Stock Incentive Plan,
recommends a vote "FOR" approval of the Stock Incentive Plan.

10
<PAGE>
APPROVAL OF THE SENIOR EXECUTIVE
INCENTIVE COMPENSATION PLAN
(ITEM NUMBER 3 ON THE PROXY CARD)

Subject to approval by the Company's shareholders, the Board of Directors on
March 28, 2000 adopted the Innotrac Company Senior Executive Incentive
Compensation Plan (the "Executive Plan") effective as of January 1, 2000.
Stockholder approval of the Executive Plan is sought in order to qualify the
Executive Plan under Section 162(m) of the Internal Revenue Code and to thereby
allow the Company to deduct for federal income tax purposes all compensation
paid under the Executive Plan to the Named Executive Officers.

This summary of certain features of the Executive Plan is qualified in its
entirety by reference to the full text of the Executive Plan, a copy of which
will be provided to any shareholder upon written request to the Company.

GENERAL

The purpose of the Executive Plan is to further the growth and financial
success of the Company by offering performance incentives to designated
executives who have significant responsibility for such success. The Executive
Plan will be administered by the Executive Compensation Subcommittee of the
Compensation Committee or other committee designated by the Board (the
"Committee"), subject to the Committee's right to delegate to the Chief
Executive Officer and others responsibility for administration of the Executive
Plan as it relates to participants other than the Named Executive Officers.
Persons eligible to participate in the Executive Plan are the executive officers
and other key employees of the Company, its operating units, or its affiliates
who are in management positions designated as eligible for participation by the
Committee or its designee. The Executive Plan is not subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).

The Executive Plan may be amended, suspended or terminated by the Committee
at any time, subject to ratification by the Board and to the consent of each
participant whose rights with respect to an approved award would be adversely
affected. Unless terminated, the Executive Plan will remain in effect until
awards thereunder are paid for the Company's fiscal year ending in 2004.

AWARDS UNDER THE EXECUTIVE PLAN

Prior to, or as soon as practical after, the commencement of each fiscal
year, the Committee will establish plan rules for that year with respect to the
following matters: (a) employees who are eligible to participate;
(b) performance targets and the measurement criteria for determining the level
of achievement of the performance targets; (c) the percentage of a participant's
base salary which may be paid as an incentive award at specified levels of
achievement of the performance targets; (d) the form of payment of an incentive
award; and (e) the times and conditions subject to which any incentive award may
become payable. Performance criteria for the Named Executive Officers will
include one or more of the following: earnings before interest and taxes (EBIT),
earnings before interest, taxes, depreciation and amortization (EBITDA), return
on capital employed, cash flow, cash flow return, operating income, gross
margin, net income, earnings per share, return on equity, return on assets (or
net assets), pre-tax profit, market value of the Company's stock, and total
shareholder return. The Committee may establish other performance criteria for
participants other than the Named Executive Officers. The maximum incentive
award payable to a participant in any year will be $2 million.

After the end of each fiscal year, the Committee will certify the extent to
which the performance criteria have been achieved for that year. In measuring
performance, the Committee may adjust the Company's financial results to exclude
the effect of unusual charges or income items which distort year-to-year
comparisons of results. With respect to the Named Executive Officers the
Committee shall exclude such items whose exclusion has the effect of increasing
achievement of performance criteria if such

11
<PAGE>
items constitute "extraordinary items" under generally accepted accounting
principles. The Committee will also make adjustments to eliminate the effect of
unanticipated changes in the tax laws and regulations.

Incentive awards shall be approved by the Committee, subject to ratification
by the Board when required under the Executive Plan or elected by the Committee,
based on the Executive Plan rules then in effect and the achievement of
performance criteria as certified by the Committee. The Committee may in its
discretion grant awards to deserving participants, except the Named Executive
Officers, notwithstanding levels of achievement of performance criteria.

Awards will generally be made in lump sum cash payments or in such other
form as the Committee may specify at the beginning of the year. Payment will be
made as soon as practicable after determination of awards.

A partial incentive award may be authorized by the Committee for a
participant who is terminated without cause or who retires, dies, or becomes
permanently and totally disabled. Otherwise, no award will be paid to a
participant who is not an active employee of the Company, an operating unit, or
an affiliate at the end of the fiscal year to which the award relates. In
general and unless with respect to some or all participants, the Committee has
established a different rule, upon the occurrence of a Change in Control, the
participant's incentive award for that year will be deemed to have been fully
earned for the year, with deemed performance at the target level; will be
prorated for the portion of the year that has elapsed; and will be paid within
thirty days after the effective date of the Change in Control.

FEDERAL TAX CONSEQUENCES

An award under the Executive Plan will constitute taxable ordinary income to
the participant to the extent it is paid in cash. The grant of stock options
will not be currently taxable. Generally, the Company will be entitled to a
corresponding deduction.

Section 162(m) of the Internal Revenue Code limits to $1 million the amount
of compensation that may be deducted in any tax year with respect to a Named
Executive Officer (generally, the executive officers who would be listed for a
fiscal year in the Summary Compensation Table appearing below), with an
exception for certain performance-based compensation. The Executive Plan is
designed, and is to be administered, to qualify payments to the Named Executive
Officers for that performance-based exception.

NEW EXECUTIVE PLAN AWARDS

For fiscal year 2000, each of the Named Executive Officers currently serving
as an employee and certain other executives have been granted an opportunity to
receive a cash incentive award under the Executive Plan.

The future benefits to be received by participants in the Executive Plan are
not currently determinable because they are dependent upon performance criteria
and results which are not now known.

VOTE REQUIRED AND RECOMMENDATION OF THE BOARD

Approval requires the affirmative vote of a majority of the shares
represented at the meeting which are entitled to vote. In the event the
Executive Plan is not approved by the Company's shareholders, the Board will
take such action with respect to incentive awards as it considers to be in the
best interests of the Company, consistent with the compensation policies set
forth in the Report of the Compensation Committee appearing below.

The Board of Directors, which unanimously approved the Executive Plan,
recommends a vote "FOR" approval of the Executive Plan.

12
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid or accrued by
Innotrac for services rendered during the fiscal years ended December 31, 1999,
1998 and 1997, to or for Innotrac's Named Executive Officers. The total amount
of perquisites, personal benefits and other annual compensation paid to the
Named Executive Officers do not in any case exceed the lesser of $50,000 or ten
per cent of such officer's total salary and bonus. None of the executive
officers has an employment agreement with Innotrac.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME YEAR SALARY BONUS OPTIONS(#) COMPENSATION
- ----------------------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Scott D. Dorfman......................... 1999 $383,675 $325,000 -- $58,625(1)
1998 356,855 250,000 -- 26,218
1997 226,179 25,000 -- 9,526

David L. Ellin........................... 1999 163,825 119,755 6,000 11,357(2)
1998 145,000 87,000 -- 10,241
1997 137,692 70,000 155,000 --

Larry C. Hanger.......................... 1999 120,440 100,000 3,500 766(2)
1998 100,000 100,000 -- 500
1997 89,343 35,000 25,000 --

Don L. Colter............................ 1999 101,540 55,775 3,500 2,988(2)
1998 92,606 46,300 -- 3,457
1997 78,832 40,000 25,000 --

Will Hendrick(3)......................... 1999 86,308 65,925 25,000 5,394(2)
</TABLE>

- ------------------------

(1) Includes (i) Innotrac's matching contribution to deferred compensation plan
in the approximate amount of $55,799; (ii) the full dollar amount of
premiums, $1,986, paid by Innotrac with respect to split-dollar life
insurance on the life of Mr. Dorfman; and (iii) $840 in commissions.

(2) Represents Innotrac's matching contribution to deferred compensation plan.

(3) Mr. Hendrick's employment commenced April 1999.

13
<PAGE>
The following table sets forth option grants to Named Executive Officers
during fiscal 1999.

OPTION GRANTS IN FISCAL 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ------------------------------------------------------------------------------------------- -----------------------
PERCENT OF TOTAL
SHARES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION
NAME OPTIONS FISCAL YEAR* PRICE DATE 5% 10%
- ---- ---------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David L. Ellin...................... 6,000 3.7% $ 16.00 2/04/09 $ 60,374 $152,999

Larry C. Hanger..................... 3,500 2.1 16.00 2/04/09 35,218 89,250

Don L. Colter....................... 3,500 2.1 16.00 2/04/09 35,218 89,250

Will Hendrick....................... 25,000 15.2 14.13 4/13/09 222,078 562,790
</TABLE>

- ------------------------

* Based on options for 164,000 shares granted to employees in fiscal 1999.

No company-granted options were exercised by any Named Executive Officers
during fiscal 1999. The following table sets forth the year-end value of
unexercised options held by the Named Executive Officers at the fiscal year
ended December 31, 1999.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NAME FISCAL YEAR END AT FISCAL YEAR END(1)
- ----------------------------------------------- ----------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Scott D. Dorfman............................... -- -- -- --

David L. Ellin................................. 105,000 56,000(2) $488,250 $232,500

Larry C. Hanger................................ 12,500 16,000(2) 58,125 58,125

Don L. Colter.................................. 12,500 16,000(2) 58,125 58,125

Will Hendrick.................................. -- 25,000(3) -- --
</TABLE>

- ------------------------

(1) As required by the rules of the Securities and Exchange Commission, the
value of unexercised in-the-money options is calculated based on the closing
sale price of the Company's Common Stock on the Nasdaq National Market as of
the last business day of its fiscal year, December 31, 1999, which was
$13.75 per share.

(2) The in-the-money portion of the options becomes exercisable with respect to
50% of the underlying shares on November 24, 2000 and with respect to the
remaining 50%, on November 24, 2001. The out-of-the-money portion becomes
exercisable with respect to 50% of the underlying shares on February 4,
2001; 25% on February 4, 2002; and the remaining 25% on February 4, 2003.

(3) The options become exercisable with respect to 50% of the underlying shares
on April 13, 2000; with respect to an additional 25% of the underlying
shares on April 13, 2002; and with respect to the remaining 25%, on
April 13, 2003.

14
<PAGE>
RELATED PARTY TRANSACTIONS

We lease a single engine aircraft from a company wholly-owned by Scott D.
Dorfman pursuant to a three-year lease that provides for annual rent of $72,000.
We are responsible for maintenance, insurance, taxes, fuel and other expenses
associated with the aircraft.

In 1999, the Company paid $79,000 in fees to Williams Benator & Libby, LLP,
certified public accountants, for accounting and consulting services. Bruce V.
Benator, one of our directors, is Managing Partner of Williams Benator & Libby,
LLP.

POLICY RESPECTING RELATED PARTY TRANSACTIONS

The Board of Directors has adopted a policy that any transactions between
the Company and any of its officers, directors, or principal shareholders or
affiliates must be on terms no less favorable than those that could be obtained
from unaffiliated parties in comparable situations and must be approved by the
Audit Committee of the Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Dorfman, Blank and Scott comprised the members of the Compensation
Committee during fiscal 1999. Messrs. Blank and Scott comprised the members of
the Executive Compensation Subcommittee. While Mr. Dorfman is our President and
Chief Executive Officer, neither Mr. Blank nor Mr. Scott is a current officer or
former officer of Innotrac. We have entered into a transaction with Mr. Dorfman
as described in "Related Party Transactions."

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

This report sets forth the current components of Innotrac's compensation
programs for its executive officers and describes the basis on which fiscal 1999
compensation determinations were made with respect to our executive officers,
including Mr. Dorfman, the Chief Executive Officer and the other Named Executive
Officers. Mr. Dorfman does not participate as a member of the Committee in any
deliberations or discussions regarding his compensation as an employee of
Innotrac and is not a member of the Executive Compensation Subcommittee.

GENERAL COMPENSATION PHILOSOPHY

The programs and policies for the compensation of Innotrac's executive
officers are designed to link the compensation of executive officers to
Innotrac's performance. These programs are intended to align the financial
interests of our executive officers with those of our shareholders.

We use a combination of base salary, short-term performance bonuses and
long-term incentive plans to tie executive compensation to increases in our
earnings and return on shareholders' equity. Our compensation programs consist
of the following basic components:

- Competitive base salaries,

- Annual incentive cash bonuses,

- Long-term incentive stock options, appreciation rights or bonuses and

- Customary benefits.

The Committee will review and determine the appropriateness of the
compensation paid to each of Innotrac's executive officers from time to time
(and at least annually), with the philosophy described above as its basis. While
promoting initiative and providing incentives for superior performance by
executives on behalf of Innotrac for the benefit of its shareholders, the
Committee also will seek to assure that Innotrac

15
<PAGE>
is able to compete for and retain talented personnel who will lead Innotrac in
achieving levels of financial performance that will enhance shareholder value
over the long-term as well as the short-term.

BASE SALARIES

Innotrac has established the current base salaries of its executive officers
without reference to specific company performance criteria. The Committee
reviews salaries of executive officers on an annual basis.

STOCK INCENTIVE PLAN

The Stock Incentive Plan is described under Item No. 2 in this Proxy
Statement, "Approval of Stock Incentive Plan." Options granted to the Named
Executive Officers in fiscal 1999 are set forth under the table captioned
"Option Grants in Fiscal 1999."

SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN

The Executive Plan is described under Item No. 3 in this Proxy Statement,
"Approval of Executive Plan."

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

As with the other executive officers, Mr. Dorfman's base salary was not
determined with reference to specific performance-based criteria. Mr. Dorfman's
bonus was determined with reference to the criteria of the Executive Plan,
described under Item No. 3 in this Proxy Statement, "Approval of Executive
Plan."

BENEFITS

Executives also participate, on a voluntary basis, in Innotrac's regular
employee benefit programs, including group medical and dental coverage, group
life insurance and group long-term disability insurance. In addition, executive
officers can participate in a deferred compensation plan with respect to which
the Company provides matching contributions. The rate of match depends upon the
officer's number of years in service, and ranges from 25% of a participant's
contribution for less than 5 years of service to 100% for 10 years or more.

EXECUTIVE COMPENSATION SUBCOMMITTEE AND SECTION 162(m)

Effective October 1999, the Board established the Executive Compensation
Subcommittee, comprised of Messrs. Blank and Scott. This subcommittee was
constituted to (1) achieve certain securities law advantages with respect to
stock-based compensation to Innotrac's officers and directors and (2) maintain
the tax deductibility of certain annual compensation in excess of $1 million to
Innotrac's Named Executive Officers under Section 162(m) of the IRC. See
"Compliance With Section 162(m) of the Internal Revenue Code" above. In fiscal
1999, the Company did not pay "compensation" within the meaning of
Section 162(m) to such executive officers in excess of $1 million. However, the
Company's policy is to maintain the tax deductibility of compensation to such
officers under Section 162(m). In furtherance of this goal, the Board is
recommending that the shareholders vote to approve Item Nos. 2 and 3 on the
Proxy Card relating to the Stock Inventive Plan and the Executive Plan.

Scott D. Dorfman--Martin J. Blank--William H. Scott, III
(Members of Committee during fiscal 1999)

16
<PAGE>
STOCK PERFORMANCE GRAPH

Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return of the Company's Common Stock against the
cumulative total return of The Nasdaq Stock Market (U.S.) Index and the Nasdaq
Non-Financial Index for the period commencing on May 7, 1998 and ending on
December 31, 1999.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
05/07/1998 12/98 12/99
INNOTRAC CORPORATION 100 138 105
NASDAQ STOCK MARKET (U.S.) 100 118 214
NASDAQ NON-FINANCIAL 100 121 232
</TABLE>

<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------
05/07/1998 12/1998 12/1999
---------- -------- --------
<S> <C> <C> <C>
Innotrac Corporation........................................ 100 138 105
Nasdaq Stock Market (U.S.) Index............................ 100 118 214
Nasdaq Non-Financial Index.................................. 100 121 232
</TABLE>

17
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors, upon recommendation of the Audit Committee, appoints
each year the firm that will serve as the Company's independent public
accountants. The Board has appointed Arthur Andersen LLP, which firm served as
independent public accountants for the Company during the past fiscal year, to
serve as such accountants for the current fiscal year. Such appointment is not
subject to ratification or other vote by the shareholders.

A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement if he or she desires to
do so, and is expected to be available to respond to appropriate questions.

SHAREHOLDERS' PROPOSALS FOR 2001 ANNUAL MEETING

Any shareholder who wishes to present a proposal appropriate for
consideration at the Company's 2000 Annual Meeting of Shareholders must submit
the proposal in proper form to the Company at its address set forth on the first
page of this Proxy Statement no later than December 11, 2000 for the proposal to
be considered for inclusion in the Company's proxy statement and form of proxy
relating to such Annual Meeting. The Company must be notified of any other
shareholder proposal intended to be presented for consideration at the 2001
Annual Meeting not later than February 23, 2001 or else proxies may be voted on
such proposal at the discretion of the persons named in the proxy.

OTHER MATTERS

All of the expenses involved in preparing, assembling, and mailing this
Proxy Statement and the materials enclosed herewith and soliciting proxies will
be paid by the Company. It is estimated that such costs will be nominal. The
Company may reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for expenses reasonably incurred by them in sending proxy materials
to beneficial owners of stock. The solicitation of proxies will be conducted
primarily by mail but may include telephone, telegraph or oral communications by
directors, officers, or regular employees of the Company, acting without special
compensation.

The Board of Directors is aware of no other matters, except for those
incidental to the conduct of the Annual Meeting, that are to be presented to
shareholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any postponement,
adjournment, or adjournments thereof, it is the intention of the persons named
in the proxy to vote the proxy in accordance with their judgment.

Shareholders are urged to fill in, date and sign the accompanying form of
proxy and return it to the Company as soon as possible.

BY ORDER OF THE BOARD OF DIRECTORS,
DAVID L. ELLIN
SECRETARY

18
<PAGE>

COMMON STOCK
OF INNOTRAC CORPORATION

THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS FOR THE MAY 17, 2000
ANNUAL MEETING OF SHAREHOLDERS.

The undersigned hereby appoints Scott D. Dorfman and Don L. Colter, and
each of them, the proxy of the undersigned to vote the Common Stock of the
undersigned at the Annual Meeting of Shareholders of INNOTRAC CORPORATION (the
"Company") to be held on May 17, 2000, and any adjournment or postponement
thereof.

1. Election of directors

Martin J. Blank
William H. Scott, III

/ / FOR all nominees for director listed above (except as marked
to the contrary).

/ / WITHHOLD AUTHORITY to vote for all nominees listed above.

/ / WITHHOLD AUTHORITY to vote for an individual nominee. Write
name(s) below.

<PAGE>

2. Approval of Stock Incentive Plan.
/ / FOR approval of the Stock Incentive Plan.
/ / AGAINST approval of the Stock Incentive Plan.
/ / ABSTAIN

3. Approval of the Executive Plan.
/ / FOR approval of the Executive Plan.
/ / AGAINST approval of the Executive Plan.
/ / ABSTAIN

4. In accordance with their best judgment with respect to any other matters
that may properly come before the meeting.

THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION AS DIRECTORS OF THE
PERSONS NAMED IN THE PROXY AND ACCOMPANYING PROXY STATEMENT, "FOR" APPROVAL OF
THE STOCK INCENTIVE PLAN AND "FOR" APPROVAL OF THE EXECUTIVE PLAN, AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.

Date: , 2000
---------------------------

--------------------------------------
Please sign this Proxy exactly as name
appears on the Proxy.

Note: When signing as attorney,
trustee, administrator, or guardian,
please give your title as such. In
the case of joint tenants, each joint
owner must sign.