10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2000

OR

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

For the transition period from            to           

Commission file number 000-23740               

                                              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 Number)

6655 Sugarloaf Parkway     Duluth, Georgia	30097
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code:	(678) 584-4000

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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

	Outstanding at November 7, 2000
Common Stock at $.10 par value	11,184,595 Shares

INDEX

Part I.	Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets -
		September 30, 2000 (Unaudited) and December 31, 1999
		Condensed Consolidated Statement of Operations (Unaudited)
		for the Three Months Ended September 30, 2000 and 1999
		Condensed Consolidated Statement of Operations (Unaudited)
		for the Nine Months Ended September 30, 2000 and 1999
		Condensed Consolidated Statement of Cash Flows (Unaudited)
		for the Nine Months Ended September 30, 2000 and 1999
		Notes to Condensed Consolidated Financial Statements
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosure About Market Risk
Part II.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K
Signatures

Part I -- Financial Information

Item 1 -- Financial Statements

The following consolidated financial statements of Innotrac Corporation, a Georgia corporation (the "Company"), have been prepared in accordance with the instructions to Form 10-Q and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. Certain amounts in the prior year have been reclassified to conform to the current presentation. In the opinion of management, all adjustments are of a normal and recurring nature, except those specified otherwise, and include those necessary for a fair presentation of the financial information for the interim periods reported. Results of operations for the three months ended September 30, 2000 are not necessarily indicative of the results for the entire year ending December 31, 2000. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1 0-K filing and annual report.

INNOTRAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2000 and December 31, 1999
(In thousands)

	ASSETS				September 30, 2000		December 31, 1999
					(Unaudited)
Curent assets
Cash and cash equivalents			$		18,435	$	894
Accounts receivable, net					42,898		52,431
Inventories, net					15,290		39,503
Prepaid expenses and other current assets					8,434		1,982
Total current assets					85,057		94,810
Property and equipment:
Rental equipment					3,777		4,986
Computer, machinery and transportation equipment					16,500		8,711
Furniture, fixtures and leasehold improvements					3,430		2,830
					23,707		16,527
Less accumulated depreciation and amortization					9,031		7,605
					14,676		8,922
Other assets, net					283		486
		$			100,016	$	104,218
					========		=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$			21,122	$	10,530
Accrued expenses					7,709		7,392
Total current liabilities					28,831		17,922
					1,232		7,083
Total noncurrent liabilities
Total liabilities					30,063		25,005
Minority interest in subsidiary					900		-
Shareholders' equity:
Common stock					1,121		1,121
Additional paid-in capital					59,701		59,701
Retained earnings					8,381		18,391
Treasury stock					(150)		-
Total shareholders' equity					69,053		79,213
Total liabilities and shareholders' equity				$	100,016	$	104,218
					========		=========

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

Financial Statements-Continued

INNOTRAC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended September 30, 2000 and 1999
(Unaudited)
(In thousands, except per share amounts)

		Three Months Ended September 30,
		2000		1999
Revenues, net	$	50,284	$	51,660
Cost of revenues		38,540		37,326
Gross margin		11,744		14,334
Operating expenses:
Selling, general and administrative expenses		10,295		9,421
Depreciation and amortization		1,166		838
Total operating expenses		11,461		10,259
Operating income		283		4,075
Other (income) expenses, net		(121)		270
Income before income taxes and minority interest		404		3,805
Income tax provision		(139)		(1,502)
Minority interest in subsidiary, net of tax benefit of $35 and $ 0, respectively		(54)		--
Net income	$	319	$	2,303
		==========		==========
Earnings per share:
Basic and diluted earnings per share:
Basic	$	0.03	$	0.22
		==========		==========
Diluted.	$	0.03	$	0.22
		==========		==========
Weighted average shares outstanding:
Basic		11,200		10,392
		==========		==========
Diluted		11,200		10,583
		==========		==========

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

Financial Statements-Continued

INNOTRAC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(In thousands, except per share amounts)

		Nine Months Ended September 30,
		2000		1999
Revenues, net	$	149,031	$	176,477
Cost of revenues		117,794		131,160
Special charges		7,477		-
Gross margin		23,760		45,317
Operating expenses:
Selling, general and administrative expenses		28,982		26,946
Special charges		8,473		-
Depreciation and amortization		2,893		2,644
Total operating expenses		40,348		29,590
Operating (loss) income		(16,588)		15,727
Other expenses, net		359		1,095
(Loss) income before income taxes and minority interest		(16,947)		14,632
Income tax benefit (provision)		6,836		(5,778)
Minority interest in subsidiary, net of tax benefit of $65 and $ 0, respectively		(100)		--
Net (loss) income	$	(10,011)	$	8,854
		========		========
Earnings per share:
Basic and diluted earnings per share (see Note 3):
Basic	$	(0.89)	$	0.94
		========		========
Diluted	$	(0.89)	$	0.92
		========		========
Weighted average shares outstanding:
Basic		11,209		9,419
		========		========
Diluted		11,209		9,577
		========		========

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

Financial Statements-Continued

INNOTRAC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended September 30, 2000 and 1999
(Unaudited)
(In thousands)

			2000		1999
Cash flows from operating activities:
Net (loss) income		$	(10,011)	$	8,854
Adjustments to reconcile net (loss) income to net cash provided by (used in)
operating activities:
	Depreciation and amortization		2,893		2,644
	Loss on disposal of property and equipment		454		412
	Minority interest in subsidiary		(100)		-
	Deferred income taxes		602		1,487
	Decrease (increase) in accounts receivable		9,533		(21,082)
	Decrease (increase) in inventories		24,213		(26,572)
	(Increase) decrease in prepaid expenses and other		(5,709)		534
	Increase in accounts payable and accrued expenses		10,955		2,334
	Net cash provided by (used in) operating activities		32,830		(31,389)
Cash flows from investing activities:
Purchases of property and equipment			(9,077)		(3,811)
Other			(45)		-
	Net cash used in investing activities		(9,122)		(3,811)
Cash flows from financing activities:
	Net repayments under line of credit		(7,008)		(2,655)
	Repayment of long-term debt		(9)		(63)
	Proceed from public offering, stock options and other, net		-		35,114
	Proceeds from issuance of stock in subsidiary		1,000		-
	Purchase of treasury stock		(150)		-
	Net cash (used in) provided by financing activities		(6,167)		32,396
Net increase (decrease) in cash and cash equivalents			17,541		(2,804)
Cash and cash equivalents, beginning of period			894		3,379
Cash and cash equivalents, end of period		$	18,435	$	575
			========		========
Supplemental cash flow disclosures:
	Cash paid for interest	$	132	$	1,173
			========		========
	Cash paid for income taxes, net of refunds received	$	(2,274)	$	5,132
			========		========

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

Financial Statements-Continued

INNOTRAC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)

1.	SIGNIFICANT ACCOUNTING POLICIES
	The accounting policies followed for quarterly financial reporting are the same as those disclosed in the Notes to Consolidated Financial Statements included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 30, 2000 for the fiscal year ended December 31, 1999. Certain prior year amounts have been reclassified to conform with current year financial statement presentation.
2.	EARNINGS PER SHARE
	The following table shows the amounts used in computing earnings per share ("EPS") in accordance with Statement of Financial Accounting Standards No. 128 and the effects on income and the weighted average number of shares of potential dilutive common stock (in thousands, except per share data.) Options outstanding to purchase shares of the Company's common stock were not included in the computation of diluted EPS for the three months and nine months ended September 30, 2000 because their effect would be anti-dilutive if exercised.

	Three Months Ended		Nine Months Ended
	September 30,
	2000	1999	2000	1999
Net income (loss)	$        319	$       2,303	($10,011)	$    8,854
Basic earnings per share:
Weighted average shares outstanding	11,200	10,392	11,209	9,419
Per share amount	$       0.03	$        0.22	( 0.89)	0.94
	======	=======	======	=======
Diluted earnings per share:
Weighted average shares outstanding	11,200	10,392	11,209	9,419
Effect of dilutive securities:
Employee and director stock options	-	191	-	158
Weighted average shares
assuming dilution	11,200	10,583	11,209	9,577
Per share amount	$       0.03	$          0.22	($ 0.89)	$  0.92
	======	=======	======	=======

3.	SPECIAL CHARGES
	During the quarter ended June 30, 2000, the Company incurred special charges of $15.9 million. The majority of the charge was associated with the Company's migration towards fee for service business and included charges for inventory, accounts receivable and other items. This charge equated to ($0.85) loss per share.
4.	RECENT ACCOUNTING PRONOUNCEMENTS
	In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities". The statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging Activities", an amendment of SFAS No. 133. SFAS 138 addresses a limited number of issues causing implementation difficulties for numerous entities that apply SFAS No 133 and amends the accounting and reporting standards of SFAS 133 for certain derivative instruments and certain hedging activities. SFAS 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. In management's opinion, the impact of adopting SFAS 133 and 138 will not have a material impact upon the Company's results of operations or financial position.
	In December 1999, the SEC issued Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB No.101"), which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. SAB No. 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. An amendment in June 2000 delayed the effective date until the fourth quarter of 2000. Management believes that the Company's revenue recognition practices are in conformity with the guidelines prescribed in SAB No. 101.

ITEM 2 --

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion may contain certain forward-looking statements that are subject to conditions 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, the reliance on a small number of major clients; risks associated with buying, warehousing and owning products for customers; risks associated with the terms of our contracts; risks of entering new lines of businesses, particularly e-commerce; reliance on the telecommunications industry; the impact of the trend toward outsourcing; risks associated with changing technology; risks associated with competition; risks associated with fluctuations in operating and quarterly results; compliance with government regulation; and other factors discussed in more detail under "Business" in the Company's annual report on Form 10-K for the year ended December 31, 1999.

Overview

Innotrac provides customized, technology-based marketing support and fulfillment services to large corporations that outsource these functions. Since 1994, the Company has a high focus on the telecommunications industry because of its growth characteristics and increasing marketing needs. The Company provides marketing support services and fulfillment of Caller ID equipped telephones and Digital Subscriber Line Modems ("DSL modems"), and other telecommunications products to BellSouth, Pacific Bell, Southwestern Bell, Ameritech Services, Inc., Bell Atlantic and Qwest and their customers. For the nine months ended September 30, 2000 and 1999, the Company's three largest clients represented 78.5% and 89.5% of total revenues, respectively. During 2000, the Company began a major initiative to expand customer distribution channels through e-commerce to diversify its client base. The Company's e-commerce clients include the Coca-Cola Company, Kodak, Haggar, and Ocean Pacific, amongst others.

The Company has begun to convert its clients to a fee for service model. For a majority of our clients, the Company will no longer purchase and sell Caller ID equipped phones, DSL modems and other telecommunications equipment from third party manufacturers. Instead, the Company will warehouse products on a consignment basis and fulfill equipment on behalf of our customers for a fee. In certain cases, the Company may purchase and own inventory, but on a significantly reduced risk basis as a result of client guarantees and contractual indemnifications. Management believes that this new model will substantially reduce revenues as pass through cost of purchased equipment will no longer be included in revenues; however, since the Company will no longer have inventory risk or cost of equipment, gross margins, and more importantly, operating cash flows should improve.

The Company receives most of its orders either through electronic data interchange ("EDI") or the internet. On a same day basis, depending on product availability, the Company picks, packs and ships the item, tracks inventory levels through an automated, integrated perpetual inventory system, warehouses data and handles customer support and level one technical inquiries.

On May 17, 2000, the Company invested in a new venture, Return.com Online, Inc. ("Return.com") with its equity partner, Mail Boxes Etc. ("MBE"), to process product returns for online and catalog retailers. Return.com is the first full-service returns portal supported by the convenience of 3,400 physical locations. Customers returning merchandise purchased online, or by catalog or phone, can simply take the item to any participating MBE location in the U.S. for packaging and shipping. Return.com's Instacredit ™ service, available early next year, will allow many customers to receive authorization for an immediate merchandise credit on their credit card-rather than waiting weeks for the return to be processed by the merchant.

Return.com operates a Web portal that leverages MBE's locations and Innotrac's customer care centers and reverse logistics operations. Information from all of these entities is entered into Return.com's database, enabling quick, accurate and informative customer service. When buyers wish to return merchandise, they simply click on the Return.com icon on the merchant's Web site, go directly to the Return.com portal or call a toll-free number. Return.com then verifies the information about the merchandise to be returned, and direct the customer to a MBE location where an Instacredit will be authorized and the returned merchandise will be dropped off for shipping. The merchant can then have the return sent to either its warehouse, Innotrac or to the manufacturer, or sold through the Return.com disposition network.

Innotrac has invested $3.0 million in this subsidiary and has committed to fund an additional $3.0 million when needed. MBE has invested $1.0 million, through October 2000, and has the right to invest an additional $3.0 million through December 31, 2000. As of September 30, 2000, Innotrac owned 86% of this subsidiary. However, should MBE elect to further invest, the Company's ownership position could be diluted down to as low as 60%. Management anticipates that further investment by MBE will occur, but there are no guarantees or requirements. As a result of this ownership structure, the Company has consolidated the results of operations and financial position of Return.com in the attached condensed consolidated financial statements. The Company expects Return.com to generate significant operating losses for the balance of 2000 and into 2001.

In the quarter ended June 30, 2000, the Company incurred special charges of $15.9 million. The majority of the charges were associated with the Company's migration towards fee for service business and included charges for inventory, accounts receivable and other items.

Results of Operations

The following table sets forth unaudited summary operating data, expressed as a percentage of revenues, for the three and nine months ended September 30, 2000 and 1999, respectively. The data has been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, it reflects all adjustments, consisting of both a $15.9 million special charge recorded in the quarter ended June 30, 2000 and normal and recurring adjustments, necessary for a fair presentation of the information for the periods presented. 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 condensed consolidated financial statements.

	Three Months		Nine Months
	Ended September 30,		Ended September 30,
	2000	1999	2000	1999
Revenues	100.0%	100.0%	100.0%	100.0%
Cost of revenues	76.6	72.3	79.1	74.3
Special charges	0.0	0.0	5.0	0.0
Gross margin	23.4	27.7	15.9	25.7
Selling, general and administrative expenses	20.5	18.2	19.4	15.3
Special charges	0.0	0.0	5.7	0.0
Depreciation and amortization	2.3	1.6	1.9	1.5
Operating income (loss)	0.6	7.9	(11.1)	8.9
Other (income) expense, net	(0.2)	0.5	0.2	0.6
Income (loss) before income taxes
and minority interest	0.8	7.4	(11.3)	8.3
Income tax (provision) benefit	(0.3)	(2.9)	4.6	(3.3)
Minority interest in subsidiary	(0.1)	-	(0.0)	-
Net income (loss)	0.6 %	4.5%	(6.7)%	5.0%
	====	=====	=====	=====

Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999

Revenues. The Company's net revenues decreased 2.7% to $50.3 million for the three months ended September 30, 2000 from $51.7 million for the three months ended September 30, 1999. The decrease in revenue is consistent with the Company's switch to a fee for service model offset by an increase in DSL modems fulfilled.

Cost of Revenues. The Company's cost of revenues increased 3.3% to $38.5 million for the three months ended September 30, 2000 compared to $37.3 million for the three months ended September 30, 1999. Cost of revenues increased primarily due to an increase in outbound telemarketing costs to obtain sales plus a slight increase in fulfillment center labor.

Gross Margin. For the three months ended September 30, 2000, the Company's gross margin decreased 18.1% to $11.7 million compared to $14.3 million for the three months ended September 30, 1999. The decrease in gross margin was due primarily to the increase in outbound telemarketing costs and the slight increase in fulfillment center labor.

Selling, General and Administrative Expenses. S,G&A expenses for the three months ended September 30, 2000 increased 9.6% to $10.3 million or 20.5% of revenues compared to $9.4 million or 18.2% of revenues for the three months ended September 30, 1999. This increase is due to significant investments, beyond normal levels, being expended on information technology during 2000 to complete the Company's migration to a new fully integrated warehouse management, procurement, inventory, billing and general ledger system. Management expects such expenditures to return to normal levels in 2001. Additionally, S,G&A expenses in 2000 include costs associated with the Company's subsidiary, Return.com, which was formed in May 2000.

Income Taxes. The Company's effective tax rate for the three months ended September 30, 2000 and 1999 was 39.5%.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999

Revenues. The Company's net revenues decreased 15.6% to $149.0 million for the nine months ended September 30, 2000 from $176.5 million for the nine months ended September 30, 1999. The decrease in revenue is consistent with the Company's switch to a fee for service model, offset by an increase in DSL modems fulfilled.

Cost of Revenues. The Company's cost of revenues decreased 10.2% to $117.8 million for the nine months ended September 30, 2000 compared to $131.2 million for the nine months ended June 30, 1999. Cost of revenues decreased primarily due to the decrease in units sold and fulfilled by the Company.

Special charges. The Company recorded special charges of $7.5 million for inventory writedowns and write-offs during the three months ended June 30, 2000.

Gross Margin. For the nine months ended September 30, 2000, the Company's gross margin decreased 47.6% to $23.8 million compared to $45.3 million for the nine months ended September 30, 1999. The decrease in gross margin was due primarily to special charges of $7.5 million plus the decrease in units sold and fulfilled. Exclusive of the special charges, gross margins decreased to 21.0% of net revenues from 25.7% of net revenues.

Selling, General and Administrative Expenses. S,G&A expenses for the nine months ended September 30, 2000 increased 7.7% to $29.0 million or 19.4% of revenues compared to $26.9 million or 15.3% of revenues for the nine months ended September 30, 1999. This increase is due to a significant investment, beyond normal levels, being expended on information technology during 2000 to complete the Company's migration to a new fully integrated warehouse management, procurement, inventory, billing and general ledger system. Management expects such expenditures to return to normal levels in 2001. Additionally, S,G&A expenses in 2000 include costs associated with the Company's subsidiary, Return.com, which was formed in May 2000.

Special charges. The Company recorded special charges of $8.4 million for accounts receivable and other write-offs during the three months ended June 30, 2000. The majority of the special charges were related to the fee for service conversion, as previously discussed.

Income Taxes. The Company's effective tax rate for the nine months ended September 30, 2000 and 1999 was 39.5%.

Liquidity and Capital Resources

The Company funds its operations and capital expenditures primarily through cash flow from operations and borrowings under a credit facility with a bank and, from time to time, equity offerings. The Company had cash and cash equivalents of approximately $18.4 million at September 30, 2000, including $3.0 million, that is committed to the startup and development of Return.com. The Company maintains a $40.0 million revolving line of credit with a bank, maturing in June 2002. Borrowings under the line of credit bear interest at the Company's option at the bank's prime rate, as adjusted from time to time, or LIBOR plus up to 225 basis points. At September 30, 2000, the interest rate on the line of credit was 7.88%, and the weighted average interest rate for the nine months ended September 30, 2000 was 7.49%. At September 30, 2000, there was no outstanding balance under the line of credit.

During the nine months ended September 30, 2000, the Company generated $32.8 million in cash flow from operating activities compared to the use of $31.4 million in cash flow from operating activities in the same period in 1999. The generation of cash flow from operating activities for the nine months ended September 30, 2000 compared to the use of cash flow from operating activities in the same period in 1999 was due primarily to the decrease in inventory levels attributable to the Company's migration towards a fee for service business model, decrease in accounts receivable and the timing of various payables.

During the nine months ended September 30, 2000, net cash used in investing activities was $9.1 million in 2000 as compared to $3.8 million in 1999. This increase was primarily due to an increase in technology purchases for e-commerce applications and internal systems development.

During the nine months ended September 30, 2000, the net cash used in financing activities was $6.2 million compared to $32.4 million provided by financing activities in the same period in 1999. This use of cash was primarily due to repayments of borrowings under the Company's line of credit.

The Company estimates that its cash and financing needs through 2000 will be met by cash flows from operations and its line of credit facility. The Company may need to raise additional funds in order to take advantage of unanticipated opportunities, such as acquisitions of complementary businesses. 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.

Item 3 -- Quantitative and Qualitative Disclosure About Market Risks

Reference is made to item 7A, Part II of the Company's annual report on Form 10-K for the fiscal year ended December 31, 1999, for discussion pertaining to the Company's exposure to certain market risk. There have been no material changes in the disclosure for the nine months ended September 30, 2000.

PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON 8-K

(a)	Exhibits
	Exhibit
	Number	Description
	10.1	Letter Agreement, dated August 9, 2000 relating to modification/waiver and consent under that certain Amended Loan and Security Agreement between Innotrac Corporation and SouthTrust Bank
	10.2	Employment Agreement, dated August 31, 2000, between Scott D. Dorfman and Innotrac Corporation
	10.3	Employment Agreement, dated August 31, 2000, between David L. Ellin and Innotrac Corporation
	10.4	Employment Agreement, dated August 31, 2000, between Larry C. Hanger and Innotrac Corporation
	27	Financial Data Schedule (for SEC use only)
(b)	Reports on Form 8-K -- There were no Form 8-K filings during the quarter ended September 30, 2000.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INNOTRAC CORPORATION (Registrant)
Date: November 13, 2000	By: /s/ Scott D. Dorfman
	Scott D. Dorfman
	President, Chief Executive Officer and Chairman
	of the Board
Date: November 13, 2000	By: /s/ David L. Gamsey
	David L. Gamsey
	Senior Vice President , Chief Financial Officer
	and Secretary (Principal Financial Officer)

EXHIBIT INDEX

Exhibit
Number	Description
10.1	Letter Agreement, dated August 9, 2000 relating to modification/waiver and consent under that certain Amended Loan and Security Agreement between Innotrac Corporation and SouthTrust Bank
10.2	Employment Agreement, dated August 31, 2000, between Scott D. Dorfman and Innotrac Corporation
10.3	Employment Agreement, dated August 31, 2000, between David L. Ellin and Innotrac Corporation
10.4	Employment Agreement, dated August 31, 2000, between Larry C. Hanger and Innotrac Corporation
27	Financial Data Schedule (for SEC use only)

EX-10

                                 Exhibit 10.1



SouthTrust Bank, N.A.
One Georgia Center
600 West Peachtree Street
Atlanta, Georgia  30308



August 9, 2000


Mr. David L. Gamsey
Chief Financial Officer
Innotrac Corporation
6655 Sugarloaf Parkway
Duluth, Georgia  30097

Dear David:

In response to your request, SouthTrust Bank grants a modification/waiver and
consent of the outlined covenants contained in the Amended Loan and Security
Agreement between Innotrac Corporation and SouthTrust Bank:

12.2      Tangible Net Worth
          ------------------

Currently this covenant requires that tangible net worth shall increase annually
over the amount as of the prior fiscal year end.  The waiver of this covenant is
for Fiscal Year 2000.  The modification also specifically allows the exclusion
of the affect of the special charge the company took in June, 2000, from future
calculations for this covenant.

12.3      Fixed Charge Coverage Ratio
          ---------------------------

Currently, this covenant requires that the Fixed Charge Coverage Ratio be at
least 1.2:1 at the end of each fiscal quarter, on a rolling four quarters basis.
The waiver of this covenant is for Fiscal Year 2000.  The modification also
specifically allows the exclusion of the affect of the special charge the
company took in June, 2000, from future calculations for this covenant.


13.5      Stock Redemptions
          -----------------

Currently, the purchase or redemption of stock is restricted if there is an
Event of Default.  Given the covenant violations mentioned herein, we have
obtained a waiver of this covenant to permit the $5,000,000 stock buy-back
currently approved by your Board of Directors.

13.6      Restricted Investment
          ---------------------

Currently, this covenant restricts investments except for normal business
purposes or for investment in certain securities or accounts.  The waiver of
this covenant allows for the restricted investments made previously this year.
The modification allows that a single restricted investment of up to $10 million
in any one company/venture may be made during any fiscal year, and the total of
all restricted investments made during any fiscal year will not exceed $15
million, without prior approval of SouthTrust Bank.


The Bank will not impose our normal fee for these waivers and modifications.
However, in consideration of the contemplated change in the need and usage of
the Revolving Credit Facility, the Bank will require an unused fee of one
quarter of one percent (1/4%) per annum, payable quarterly.  This will begin on
September 1, 2000.

I hope you find that this accommodation provides you with an assurance of our
commitment to you as a customer and that it allows you the flexibility you need
to continue with your business plans.  Should you need anything further, please
let me know.



Sincerely,


/s/ Noble Jones
Noble Jones
Vice President

cc:  Kenneth W. Deere



ACKNOWLEDGMENT                     Date:     8/14/00

By:  /s/ David L. Gamsey

It's:  SVP & CFO

EX-10

Exhibit 10.2

EMPLOYMENT AGREEMENT

          THIS AGREEMENT ("Agreement") is made and entered into as of this 31st day of August, 2000, by and between SCOTT D. DORFMAN, an individual resident of the State of Georgia ("Employee"), and INNOTRAC CORPORATION, a Georgia corporation (the "Employer").

W I T N E S S E T H:

          WHEREAS, the parties hereto desire to enter into an agreement for the Company's continued employment of Employee on the terms and conditions contained herein;

          NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1.     Employment.

          Subject to the terms hereof, the Employer hereby employs Employee, and Employee hereby accepts such employment. Employee will serve as President, Chief Executive Officer and Chairman of the Board of Directors of the Employer or in such other executive capacity as the Board of Directors of Employer (the "Board of Directors") may hereafter from time to time determine. Employee agrees to devote his full business time and best efforts to the performance of the duties that Employer may assign Employee from time to time; provided that the Employee may also serve as an officer or director of Return.com Online, Inc. and may perform services for Return.com Online, Inc.; and provided further that the Employee may also serve on boards of directors or trustees of other companies and organizations, as long as such service does not materially interfere with the performance of his duties hereunder.

Section 2.     Term of Employment.

          The term of Employee's employment (the "Term") shall continue from the date hereof until the earlier of (a) December 31, 2005 or (b) the occurrence of any of the following events:

          (i)          The death or total disability of Employee (total disability meaning the failure to fully perform his normal required services hereunder for a period of three (3) months during any consecutive twelve (12) month period during the term hereof, as determined by the Board of Directors, by reason of mental or physical disability);

          (ii)          The termination by Employer of Employee's employment hereunder, upon prior written notice to Employee, for "good cause", as determined by the Board of Directors. For purposes of this Agreement, "good cause" for termination of Employee's employment shall exist (A) if Employee is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement, (B) if Employee fails to comply with the terms of this Agreement, and, within thirty (30) days after written notice from Employer of such failure, Employee has not corrected such failure or, having once received such notice of failure and having so corrected such failure, Employee at any time thereafter again so fails, (C) if Employee violates any of the provisions contained in Section 4 of this Agreement, or (D) if Employee tests positive for illegal drugs; or

         (iii)          The termination of this Agreement by either party upon at least ninety (90) days prior written notice.

Section 3.     Compensation.

          3.1          Term of Employment. Employer will provide Employee with the following salary, expense reimbursement and additional employee benefits during the term of employment hereunder:

          (a)          Salary. Employee will be paid a salary (the "Salary") of no less than Four Hundred Twenty-Five Thousand Dollars ($ 425,000) per annum, less deductions and withholdings required by applicable law. The Salary shall be paid to Employee in equal monthly installments (or on such more frequent basis as other executives of Employer are compensated). The Salary shall be reviewed by the Board of Directors of Employer on at least an annual basis.

          (b)          Bonus. Employee will be entitled to an annual bonus (the "Bonus") of 100% of Salary at Plan (to be defined) with a 3-up-3-down formula. The Bonus shall be paid promptly upon the availability of annual financial results (which is expected to occur in early February of each year).

          (c)          Car Allowance. Employee shall be reimbursed for reasonable automobile expenses, including gas, repairs, maintenance and insurance.

          (d)          Club Dues. Employee will be provided a corporate membership at Employer's expense under its existing corporate membership at Sugar Loaf and at the 1818 Club, and will reimburse Employee for his annual dues and membership fees for his personal membership at the Standard Club, so that these facilities may be used for client entertainment.

          (e)          Vacation. Employee shall receive eight (8) weeks vacation time per calendar year during the term of this Agreement. Any unused vacation days in any calendar year may not be carried over to subsequent years.

          (f)          Expenses. Employer shall reimburse Employee for all reasonable and necessary expenses incurred by Employee at the request of and on behalf of Employer.

          (g)          Benefit Plans. Employee may participate in such medical, dental, disability, hospitalization, life insurance and other benefit plans (such as pension and profit sharing plans) as Employer maintains from time to time for the benefit of other senior executives of Employer, on the terms and subject to the conditions set forth in such plans.

3.2          Effect of Termination.

          (a)          Except as hereinafter provided, upon the termination of the employment of Employee hereunder for any reason, Employee shall be entitled to all compensation and benefits earned or accrued under Section 3.1 as of the effective date of termination (the "Termination Date"), but from and after the Termination Date no additional compensation or benefits shall be earned by Employee hereunder. Employee shall be deemed to have earned any Bonus payable with respect to the calendar year in which the Termination Date occurs on a prorated basis (based on the number of days in such calendar year through and including the Termination Date divided by 365) based upon the year to date financials and performance of the Employer and assuming performance at the target level for any individual performance criteria. Any such Bonus shall be payable upon termination.

          (b)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount payable hereunder, Employer shall continue to pay Employee his normal Salary pursuant to Section 3.1(a) for a six-month period (on the same basis as if Employee continued to serve as an employee hereunder for such applicable period). If Employee's employment is terminated pursuant to Section 2(b)(i) hereof or if Employee's employment is terminated by Employer pursuant to Section 2(b)(iii), all options to purchase stock of the Company or an affiliate of the Company granted to Employee shall immediately become exercisable upon such termination. In the case of a termination pursuant to Section 2(b)(i) hereof, the options will expire in accordance with their respective scheduled expiration dates. Except as provided in Section 3.3, in the case of a termination by Employer pursuant to Section 2(b)(iii) hereof, the options will expire on the first anniversary after the effective date of the termination of Employee's employment hereunder. Upon the death of Employee, any options that Employee would otherwise be entitled to exercise hereunder may be exercised by his personal representatives or heirs, as applicable. Except as provided in Section 3.3, if Employee's employment is terminated by Employer pursuant to Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those options which are exercisable as of the date of such termination shall be exercisable for a period of 90 days after such termination (and all other options not then exercisable shall be forfeited as of such date), and after such 90-day period, all unexercised options will expire. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer .

          3.3          Effect of Change in Control. Notwithstanding Section 3.2(b) above, if there is a Change in Control (as defined below) of the Employer and the Employee's employment is terminated within 18 months following the date of the Change in Control, the following provisions shall apply.

          (a)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to received the compensation and benefits set forth in subsections (i) through (iv) below:

          (i)          Base Salary. Employee will continue to receive his Salary as then in effect (subject to withholding of all applicable taxes) for a period of eighteen (18) months from his date of termination in the same manner as it was being paid as of the date of termination.

          (ii)          Health, Dental and Life Insurance Coverage. The health, dental and group term life insurance benefits coverage provided to Employee at his date of termination shall be continued at the same level and in the same manner as if his employment under this Agreement had not terminated (subject to the customary changes in such coverages if Employee retires, reaches age 65 or similar events), beginning on the date of such termination and ending on the date eighteen (18) months from the date of such termination. Any additional coverages Employee had at termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. Any costs Employee was paying for such coverages at the time of termination shall be paid by Employee by separate check payable to the Company each month in advance or by reduction of amounts owed to Employee by the Employer. If the terms of any benefit plan referred to in this Section, or the laws applicable to such plan, do not permit continued participation by Employee, then the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this paragraph shall be applied against and reduce the period for which COBRA will be provided.

          (iii)          Stock Options. Notwithstanding any provision in any option agreement, all outstanding stock options granted to Employee by Employer or an affiliate of Employer shall become fully vested on the date of Employee's termination of employment and shall remain exercisable as provided in the applicable option agreement or, if longer, for a period of three (3) years following the date of termination of employment. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer.

          (iv)          Other Benefits. For a period of 18 months following the date of Employee's termination of Employment, the Employee shall continue to receive a car allowance as provided in Section 3.1(c) of this Agreement and reimbursement of club membership dues as provided in Section 3.1(d) of this Agreement.

          (b)          If Employee's employment hereunder is terminated by Employee pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to receive the compensation and benefits set forth in subsections (i) through (iv) of Subsection 3.3(a) above, provided, however, that a period of 12 months shall be substituted for 18 months in subsections 3.3(a)(i), (ii) and (iv).

          3.4          Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

(a)          "Change in Control" means any of the following events:

          (i)          The acquisition (other than from the Employer) by any person of beneficial ownership of fifty percent (50%) or more of the combined voting power of the Employer's then outstanding voting securities; provided, however, that for purposes of this Section, person shall not include any person who on the date hereof owns 25% or more of the Employer's outstanding securities, and a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Employer's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Employer or any of its subsidiaries, or (ii) any corporation, which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Employer in the same proportion as their ownership of stock in the Employer immediately prior to such acquisition.

          (ii)          Approval by shareholders of the Employer of (1) a merger or consolidation involving the Employer if the shareholders of the Employer, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Employer outstanding immediately before such merger or consolidation, or (2) a complete liquidation or dissolution of the Employer, or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Employer.

          (iii)          A change in the composition of the Board such that the individuals who, as of the date of this Agreement, 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 that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Employer'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 t hreatened 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.

          (iv)          The occurrence of any other event or circumstance which is not covered by (i) through (iii) above which the Board determines affects control of the Company and adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement.

          (b)          A "Good Reason" for termination by Employee of Employee's employment shall mean the occurrence (without the Employee's express written consent), within the eighteen (18) month period following the date of a Change in Control, of any one of the following acts by the Employer, or failures by the Employer to act, unless, in the case of any act or failure to act described in paragraph (i) or (iv) below, such act or failure to act is corrected within 30 days after notice by the Employee to the Employer of the act or failure to act:

          (i) the assignment to Employee of any duties inconsistent with Employee's title and status set forth herein, or a substantial adverse alteration in the nature or status of Employee's responsibilities at the Employer from those in effect immediately prior to the Change in Control;

                                (ii) a substantial reduction by the Employer in Employee's Base Salary;

          (iii) the relocation of Employee's principal office to a place more than 50 miles from Atlanta, Georgia;

          (iv) the failure by the Employer to continue in effect any compensation or benefit plan or program in which Employee participates immediately prior to the Change in Control, which is material to Employee's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Employer to continue the Employee's participation in such plan (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Employee's participation relative to other participants, as existed at the time of the Change in Control.

          The Employee's right to terminate the Employee's employment for Good Reason shall not be affected by the Employee's incapacity due to physical or mental illness, except for a total disability as defined in Section 2 above. The Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

Section 4.     Partial Restraint on Post-termination Competition.

          4.1          Definitions. For the purposes of this Section 4, the following definitions shall apply:

          (a)          "Company Activities" means the business of selling caller ID technology and hardware, fulfillment services, e-commerce fulfillment and e-commerce return services as well as other similar services that Innotrac or its subsidiaries is involved in at the date of this agreement.

          (b)          "Competitor" means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Employer or its affiliates or subsidiaries, engaged, wholly or partly, in Company Activities.

          (c)          "Competitive Position" means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Employee will serve such Competitor in any managerial capacity.

          (d)          "Confidential Information" means any confidential, proprietary business information or data belonging to or pertaining to Employer that does not constitute a "Trade Secret" (as hereinafter defined) and that is not generally known by or available through legal means to the public, including, but not limited to, information regarding Employer's customers or actively sought prospective customers, suppliers, manufacturers and distributors gained by Employee as a result of his employment with Employer.

          (e)          "Customer" means actual customers or actively sought prospective customers of Employer during the Term.

          (f)          "Noncompete Period" or "Nonsolicitation Period" means the period beginning the date hereof and ending on the first anniversary of the termination of Employee's employment with Employer.

          (g)          "Territory" means the area within a thirty-five (35) mile radius of any corporate office of Employer or any of its subsidiaries, affiliates or divisions.

          (h)          "Trade Secrets" means information or data of or about Employer, including but not limited to technical or non-technical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, products plans, or lists of actual or potential customers, clients, distributees or licensees, information concerning Employer's finances, services, staff, contemplated acquisitions, marketing investigations and surveys, that (i) derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from their disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.

          (i)          "Work Product" means any and all work product, property, data documentation or information of any kind, prepared, conceived, discovered, developed or created by Employee for Employer or its affiliates, or any of Employer's or its affiliates' clients or customers.

          4.2          Trade Name and Confidential Information.

          (a)          Employee hereby agrees that (i) with regard to each item constituting all or any portion of the Trade Secrets, at all times during the Term and all times during which such item continues to constitute a Trade Secret under applicable law; and (ii) with regard to any Confidential Information, during the Term and the Noncompete Period:

          (i)          Employee shall not, directly or by assisting others, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected in any manner with, any business conducted under any corporate or trade name of Employer or name similar thereto, without the prior written consent of Employer;

          (ii)          Employee shall hold in confidence all Trade Secrets and all Confidential Information and will not, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, appropriate or otherwise communicate any Trade Secrets or Confidential Information, without the prior written consent of Employer; and

          (iii)          Employee shall immediately notify Employer of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist Employer, to the extent necessary, in the procurement or any protection of Employer's rights to or in any of the Trade Secrets or Confidential Information.

          4.3          Noncompetition.

          (a)          The parties hereto acknowledge that Employee is conducting Company Activities throughout the Territory. Employee acknowledges that to protect adequately the interest of Employer in the business of Employer it is essential that any noncompete covenant with respect thereto cover all Company Activities and the entire Territory.

          (b)          Employee hereby agrees that, during the Term and the Noncompete Period, Employee will not, in the Territory, either directly or indirectly, alone or in conjunction with any other party, accept, enter into or take any action in conjunction with or in furtherance of a Competitive Position. Employee shall notify Employer promptly in writing if Employee receives an offer of a Competitive Position during the Noncompete Term, and such notice shall describe all material terms of such offer.

          Nothing contained in this Section 4 shall prohibit Employee from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

          4.4          Nonsolicitation During Employment Term. Employee hereby agrees that Employee will not, during the Term, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term.

          4.5          Nonsolicitation During Nonsolicitation Period. Employee hereby agrees that Employee will not, during the Nonsolicitation Period, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term; provided, however, that the covenant in this clause shall limit Employee's conduct only with respect to those Customers with whom Employee had substantial contact (through direct or supervisory interaction with the Customer or the Customer's account) during a period of time up to but no greater than two (2) years prior to the last day of the Term.

Section 5.     Miscellaneous.

          5.1          Severability. The covenants in this Agreement shall be construed as covenants independent of one another and as obligations distinct from any other contract between Employee and Employer. Any claim that Employee may have against Employer shall not constitute a defense to enforcement by Employer of this Agreement.

          5.2          Survival of Obligations. The covenants in Section 4 of this Agreement shall survive termination of Employee's employment, regardless of who causes the termination and under what circumstances.

          5.3          Notices. Any notice or other document to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered in person or by courier, by telecopy transmission or sent by any express mail service, postage or fees prepaid at the following addresses:

                    Employer

                    Innotrac Corporation
                    6655 Sugarloaf Parkway
                    Duluth, GA 30097
                    Attention: David Gamsey, CFO
                    Telephone No.: (678) 584-4000

                    Employee

                    Mr. Scott D. Dorfman
                    8241 Nesbit Ferry Road
                    Atlanta, GA 30350

or at such other address or number for a party as shall be specified by like notice. Any notice which is delivered in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party or its agent.

          5.4          Binding Effect. This Agreement inures to the benefit of, and is binding upon, Employer and their respective successors and assigns, and Employee, together with Employee's executor, administrator, personal representative, heirs, and legatees.

          5.5          Entire Agreement. This Agreement is intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and is the complete and exclusive statement of the terms thereof, notwithstanding any representations, statements or agreements to the contrary heretofore made. This Agreement may be modified only by a written instrument signed by all of the parties hereto.

          5.6          Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed, and governed by and in accordance with, the laws of the State of Georgia. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority or by any board of arbitrators by reason of such party or its counsel having or being deemed to have structured or drafted such provision.

          5.7          Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

          5.8          Specific Performance. Each party hereto hereby agrees that any remedy at law for any breach of the provisions contained in this Agreement shall be inadequate and that the other parties hereto shall be entitled to specific performance and any other appropriate injunctive relief in addition to any other remedy such party might have under this Agreement or at law or in equity.

          5.9          Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

          5.10          Public Announcement. Neither party shall disclose that this Agreement has been executed until such time as both parties mutually agree to such disclosure.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

INNOTRAC CORPORATION

By:            /s/ David L. Gamsey                     

Name: David L. Gamsey

Title: Chief Financial Officer

EMPLOYEE

            /s/ Scott Dorfman                               

  Scott D. Dorfman

EX-10

Exhibit 10.3

EMPLOYMENT AGREEMENT

        THIS AGREEMENT ("Agreement") is made and entered into as of this 30th day of August, 2000, by and between DAVID L. ELLIN, an individual resident of the State of Georgia ("Employee"), and INNOTRAC CORPORATION, a Georgia corporation (the "Employer").

W I T N E S S E T H:

        WHEREAS, the parties hereto desire to enter into an agreement for the Company's continued employment of Employee on the terms and conditions contained herein;

        NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1.     Employment.

        Subject to the terms hereof, the Employer hereby employs Employee, and Employee hereby accepts such employment. Employee will serve as Senior Vice President and Chief Operating Officer of the Employer or in such other executive capacity as the Board of Directors of Employer (the "Board of Directors") may hereafter from time to time determine. Employee agrees to devote his full business time and best efforts to the performance of the duties that Employer may assign Employee from time to time; provided that the Employee may also serve as an officer or director of Return.com Online, Inc. and may perform services for Return.com Online, Inc.; and provided further that the Employee may also serve on boards of directors or trustees of other companies and organizations, as long as such service does not materially interfere with the performance of his duties hereunder.

Section 2.     Term of Employment.

        The term of Employee's employment (the "Term") shall continue from the date hereof until the earlier of (a) December 31, 2005 or (b) the occurrence of any of the following events:

        (i)      The death or total disability of Employee (total disability meaning the failure to fully perform his normal required services hereunder for a period of three (3) months during any consecutive twelve (12) month period during the term hereof, as determined by the Board of Directors, by reason of mental or physical disability);

        (ii)         The termination by Employer of Employee's employment hereunder, upon prior written notice to Employee, for "good cause", as determined by the Board of Directors. For purposes of this Agreement, "good cause" for termination of Employee's employment shall exist (A) if Employee is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement, (B) if Employee fails to comply with the terms of this Agreement, and, within thirty (30) days after written notice from Employer of such failure, Employee has not corrected such failure or, having once received such notice of failure and having so corrected such failure, Employee at any time thereafter again so fails, (C) if Employee violates any of the provisions contained in Section 4 of this Agreement, or (D) if Employee tests positive for illegal drugs; or

        (iii)         The termination of this Agreement by either party upon at least ninety (90) days prior written notice.

Section 3.     Compensation.

        3.1      Term of Employment. Employer will provide Employee with the following salary, expense reimbursement and additional employee benefits during the term of employment hereunder:

        (a)      Salary. Employee will be paid a salary (the "Salary") of no less than One Hundred Seventy-Five Thousand Dollars ($175,000) per annum, less deductions and withholdings required by applicable law. The Salary shall be paid to Employee in equal monthly installments (or on such more frequent basis as other executives of Employer are compensated). The Salary shall be reviewed by the Board of Directors of Employer on at least an annual basis.

        (b)      Bonus. Employee will be entitled to an annual bonus (the "Bonus") of 60% of Salary at Plan (to be defined) with a 3-up-3-down formula. The Bonus shall be paid promptly upon the availability of annual financial results (which is expected to occur in early February of each year).

         (c)     Car Allowance. Employee shall receive a car allowance of One Thousand Five Hundred Dollars ($1,500) per month.

        (d)      Vacation. Employee shall receive four (4) weeks vacation time per calendar year during the term of this Agreement. Any unused vacation days in any calendar year may not be carried over to subsequent years.

        (e)      Expenses. Employer shall reimburse Employee for all reasonable and necessary expenses incurred by Employee at the request of and on behalf of Employer.

        (f)     Benefit Plans. Employee may participate in such medical, dental, disability, hospitalization, life insurance and other benefit plans (such as pension and profit sharing plans) as Employer maintains from time to time for the benefit of other senior executives of Employer, on the terms and subject to the conditions set forth in such plans.

        3.2     Effect of Termination.

        (a)      Except as hereinafter provided, upon the termination of the employment of Employee hereunder for any reason, Employee shall be entitled to all compensation and benefits earned or accrued under Section 3.1 as of the effective date of termination (the "Termination Date"), but from and after the Termination Date no additional compensation or benefits shall be earned by Employee hereunder. Employee shall be deemed to have earned any Bonus payable with respect to the calendar year in which the Termination Date occurs on a prorated basis (based on the number of days in such calendar year through and including the Termination Date divided by 365) based upon the year to date financials and performance of the Employer and assuming performance at the target level for any individual performance criteria. Any such Bonus shall be payable upon termination.

        (b)      If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount payable hereunder, Employer shall continue to pay Employee his normal Salary pursuant to Section 3.1(a) for a six-month period (on the same basis as if Employee continued to serve as an employee hereunder for such applicable period). If Employee's employment is terminated pursuant to Section 2(b)(i) hereof or if Employee's employment is terminated by Employer pursuant to Section 2(b)(iii), all options to purchase stock of the Company or an affiliate of the Company granted to Employee shall immediately become exercisable upon such termination. In the case of a termination pursuant to Section 2(b)(i) hereof, the options will expire in accordance with their respective scheduled expiration dates. Except as provided in Section 3.3, in the case of a termination by Employer pursuant to Section 2(b)(iii) hereof, the options will expire on the first anniversary after the effective date of the termination of Employee's employment hereunder. Upon the death of Employee, any options that Employee would otherwise be entitled to exercise hereunder may be exercised by his personal representatives or heirs, as applicable. Except as provided in Section 3.3, if Employee's employment is terminated by Employer pursuant to Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those options which are exercisable as of the date of such termination shall be exercisable for a period of 90 days after such termination (and all other options not then exercisable shall be forfeited as of such date), and after such 90-day period, all unexercised options will expire. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer.

        3.3      Effect of Change in Control. Notwithstanding Section 3.2(b) above, if there is a Change in Control (as defined below) of the Employer and the Employee's employment is terminated within 18 months following the date of the Change in Control, the following provisions shall apply.

        (a)      If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to received the compensation and benefits set forth in subsections (i) through (iv) below:

        (i)      Base Salary. Employee will continue to receive his Salary as then in effect (subject to withholding of all applicable taxes) for a period of eighteen (18) months from his date of termination in the same manner as it was being paid as of the date of termination.

        (ii)      Health, Dental and Life Insurance Coverage. The health, dental and group term life insurance benefits coverage provided to Employee at his date of termination shall be continued at the same level and in the same manner as if his employment under this Agreement had not terminated (subject to the customary changes in such coverages if Employee retires, reaches age 65 or similar events), beginning on the date of such termination and ending on the date eighteen (18) months from the date of such termination. Any additional coverages Employee had at termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. Any costs Employee was paying for such coverages at the time of termination shall be paid by Employee by separate check payable to the Company each month in advance or by reduction of amounts owed to Employee by the Employer. If the terms of any benefit plan referred to in this Section, or the laws applicable to such plan, do not permit continued participation by Employee, then the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this paragraph shall be applied against and reduce the period for which COBRA will be provided.

        (iii)      Stock Options. Notwithstanding any provision in any option agreement, all outstanding stock options granted to Employee by Employer or an affiliate of Employer shall become fully vested on the date of Employee's termination of employment and shall remain exercisable as provided in the applicable option agreement or, if longer, for a period of three (3) years following the date of termination of employment. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer.

         (iv)     Other Benefits. For a period of 18 months following the date of Employee's termination of Employment, the Employee shall continue to receive a car allowance as provided in Section 3.1(c) of this Agreement.

        (b)      If Employee's employment hereunder is terminated by Employee pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to receive the compensation and benefits set forth in subsections (i) through (iv) of Subsection 3.3(a) above, provided, however, that a period of 12 months shall be substituted for 18 months in subsections 3.3(a)(i), (ii) and (iv).

        3.4     Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

         (a)     "Change in Control" means any of the following events:

        (i)      The acquisition (other than from the Employer) by any person of beneficial ownership of fifty percent (50%) or more of the combined voting power of the Employer's then outstanding voting securities; provided, however, that for purposes of this Section, person shall not include any person who on the date hereof owns 25% or more of the Employer's outstanding securities, and a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Employer's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Employer or any of its subsidiaries, or (ii) any corporation, which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Employer in the same proportion as their ownership of stock in the Employer immediately prior to such acquisition.

        (ii)      Approval by shareholders of the Employer of (1) a merger or consolidation involving the Employer if the shareholders of the Employer, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Employer outstanding immediately before such merger or consolidation, or (2) a complete liquidation or dissolution of the Employer, or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Employer.

        (iii)      A change in the composition of the Board such that the individuals who, as of the date of this Agreement, 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 that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Employer'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.

        (iv)      The occurrence of any other event or circumstance which is not covered by (i) through (iii) above which the Board determines affects control of the Company and adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement.

        (b)      A "Good Reason" for termination by Employee of Employee's employment shall mean the occurrence (without the Employee's express written consent), within the eighteen (18) month period following the date of a Change in Control, of any one of the following acts by the Employer, or failures by the Employer to act, unless, in the case of any act or failure to act described in paragraph (i) or (iv) below, such act or failure to act is corrected within 30 days after notice by the Employee to the Employer of the act or failure to act:

        (i)    the assignment to Employee of any duties inconsistent with Employee's title and status set forth herein, or a substantial adverse alteration in the nature or status of Employee's responsibilities at the Employer from those in effect immediately prior to the Change in Control;

         (ii)    a substantial reduction by the Employer in Employee's Base Salary;

         (iii)   the relocation of Employee's principal office to a place more than 50 miles from Atlanta, Georgia;

        (iv)    the failure by the Employer to continue in effect any compensation or benefit plan or program in which Employee participates immediately prior to the Change in Control, which is material to Employee's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Employer to continue the Employee's participation in such plan (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Employee's participation relative to other participants, as existed at the time of the Change in Control.

        The Employee's right to terminate the Employee's employment for Good Reason shall not be affected by the Employee's incapacity due to physical or mental illness, except for a total disability as defined in Section 2 above. The Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

Section 4.     Partial Restraint on Post-termination Competition.

        4.1     Definitions.  For the purposes of this Section 4, the following definitions shall apply:

         (a)      "Company Activities" means the business of selling caller ID technology and hardware, fulfillment services, e-commerce fulfillment and e-commerce return services as well as other similar services that Innotrac or its subsidiaries is involved in at the date of this agreement.

        (b)       "Competitor" means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Employer or its affiliates or subsidiaries, engaged, wholly or partly, in Company Activities.

        (c)      "Competitive Position" means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Employee will serve such Competitor in any managerial capacity.

        (d)      "Confidential Information" means any confidential, proprietary business information or data belonging to or pertaining to Employer that does not constitute a "Trade Secret" (as hereinafter defined) and that is not generally known by or available through legal means to the public, including, but not limited to, information regarding Employer's customers or actively sought prospective customers, suppliers, manufacturers and distributors gained by Employee as a result of his employment with Employer.

        (e)      "Customer" means actual customers or actively sought prospective customers of Employer during the Term.

        (f)      "Noncompete Period" or "Nonsolicitation Period" means the period beginning the date hereof and ending on the first anniversary of the termination of Employee's employment with Employer.

        (g)      "Territory" means the area within a thirty-five (35) mile radius of any corporate office of Employer or any of its subsidiaries, affiliates or divisions.

        (h)      "Trade Secrets" means information or data of or about Employer, including but not limited to technical or non-technical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, products plans, or lists of actual or potential customers, clients, distributees or licensees, information concerning Employer's finances, services, staff, contemplated acquisitions, marketing investigations and surveys, that (i) derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from their disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.

        (i)      "Work Product" means any and all work product, property, data documentation or information of any kind, prepared, conceived, discovered, developed or created by Employee for Employer or its affiliates, or any of Employer's or its affiliates' clients or customers.

        4.2     Trade Name and Confidential Information.

        (a)      Employee hereby agrees that (i) with regard to each item constituting all or any portion of the Trade Secrets, at all times during the Term and all times during which such item continues to constitute a Trade Secret under applicable law; and (ii) with regard to any Confidential Information, during the Term and the Noncompete Period:

        (i)      Employee shall not, directly or by assisting others, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected in any manner with, any business conducted under any corporate or trade name of Employer or name similar thereto, without the prior written consent of Employer;

        (ii)      Employee shall hold in confidence all Trade Secrets and all Confidential Information and will not, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, appropriate or otherwise communicate any Trade Secrets or Confidential Information, without the prior written consent of Employer; and

        (iii)      Employee shall immediately notify Employer of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist Employer, to the extent necessary, in the procurement or any protection of Employer's rights to or in any of the Trade Secrets or Confidential Information.

        4.3     Noncompetition.

        (a)      The parties hereto acknowledge that Employee is conducting Company Activities throughout the Territory. Employee acknowledges that to protect adequately the interest of Employer in the business of Employer it is essential that any noncompete covenant with respect thereto cover all Company Activities and the entire Territory.

        (b)      Employee hereby agrees that, during the Term and the Noncompete Period, Employee will not, in the Territory, either directly or indirectly, alone or in conjunction with any other party, accept, enter into or take any action in conjunction with or in furtherance of a Competitive Position. Employee shall notify Employer promptly in writing if Employee receives an offer of a Competitive Position during the Noncompete Term, and such notice shall describe all material terms of such offer.

        Nothing contained in this Section 4 shall prohibit Employee from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

        4.4      Nonsolicitation During Employment Term. Employee hereby agrees that Employee will not, during the Term, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term.

        4.5      Nonsolicitation During Nonsolicitation Period. Employee hereby agrees that Employee will not, during the Nonsolicitation Period, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term; provided, however, that the covenant in this clause shall limit Employee's conduct only with respect to those Customers with whom Employee had substantial contact (through direct or supervisory interaction with the Customer or the Customer's account) during a period of time up to but no greater than two (2) years prior to the last day of the Term.

Section 5.     Miscellaneous.

        5.1      Severability. The covenants in this Agreement shall be construed as covenants independent of one another and as obligations distinct from any other contract between Employee and Employer. Any claim that Employee may have against Employer shall not constitute a defense to enforcement by Employer of this Agreement.

        5.2      Survival of Obligations. The covenants in Section 4 of this Agreement shall survive termination of Employee's employment, regardless of who causes the termination and under what circumstances.

        5.3      Notices. Any notice or other document to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered in person or by courier, by telecopy transmission or sent by any express mail service, postage or fees prepaid at the following addresses:

                    Employer

                     Innotrac Corporation
                     6655 Sugarloaf Parkway
                     Duluth, GA 30097
                     Attention: Mr. Scott Dorfman
                                        Chief Executive Officer
                    Telephone No.: (770) 717-2000



                    Employee

                     Mr. David L. Ellin
                     135 Fox Grape Lane
                     Alpharetta, GA 30022

or at such other address or number for a party as shall be specified by like notice. Any notice which is delivered in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party or its agent.

        5.4      Binding Effect. This Agreement inures to the benefit of, and is binding upon, Employer and their respective successors and assigns, and Employee, together with Employee's executor, administrator, personal representative, heirs, and legatees.

        5.5      Entire Agreement. This Agreement is intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and is the complete and exclusive statement of the terms thereof, notwithstanding any representations, statements or agreements to the contrary heretofore made. This Agreement may be modified only by a written instrument signed by all of the parties hereto.

        5.6      Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed, and governed by and in accordance with, the laws of the State of Georgia. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority or by any board of arbitrators by reason of such party or its counsel having or being deemed to have structured or drafted such provision.

        5.7      Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

        5.8      Specific Performance. Each party hereto hereby agrees that any remedy at law for any breach of the provisions contained in this Agreement shall be inadequate and that the other parties hereto shall be entitled to specific performance and any other appropriate injunctive relief in addition to any other remedy such party might have under this Agreement or at law or in equity.

        5.9      Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

        5.10      Public Announcement. Neither party shall disclose that this Agreement has been executed until such time as both parties mutually agree to such disclosure.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

INNOTRAC CORPORATION

By:  /s/ Scott Dorfman                         

        Scott D. Dorfman

        Chief Executive Officer

EMPLOYEE

/s/ David L. Ellin                                    

David L. Ellin

EX-10

Exhibit 10.4

EMPLOYMENT AGREEMENT

          THIS AGREEMENT ("Agreement") is made and entered into as of this 31st day of August, 2000, by and between LARRY C. HANGER, an individual resident of the State of Georgia ("Employee"), and INNOTRAC CORPORATION, a Georgia corporation (the "Employer").

W I T N E S S E T H:

          WHEREAS, the parties hereto desire to enter into an agreement for the Company's continued employment of Employee on the terms and conditions contained herein;

          NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1.          Employment.

          Subject to the terms hereof, the Employer hereby employs Employee, and Employee hereby accepts such employment. Employee will serve as Senior Vice President - Business Development of the Employer or in such other executive capacity as the Board of Directors of Employer (the "Board of Directors") may hereafter from time to time determine. Employee agrees to devote his full business time and best efforts to the performance of the duties that Employer may assign Employee from time to time; provided that the Employee may also serve as an officer or director of Return.com Online, Inc. and may perform services for Return.com Online, Inc.; and provided further that the Employee may also serve on boards of directors or trustees of other companies and organizations, as long as such service does not materially interfere with the performance of his duties hereunder.

Section 2.          Term of Employment.

          The term of Employee's employment (the "Term") shall continue from the date hereof until the earlier of (a) December 31, 2005 or (b) the occurrence of any of the following events:

          (i)          The death or total disability of Employee (total disability meaning the failure to fully perform his normal required services hereunder for a period of three (3) months during any consecutive twelve (12) month period during the term hereof, as determined by the Board of Directors, by reason of mental or physical disability);

          (ii)          The termination by Employer of Employee's employment hereunder, upon prior written notice to Employee, for "good cause", as determined by the Board of Directors. For purposes of this Agreement, "good cause" for termination of Employee's employment shall exist (A) if Employee is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement, (B) if Employee fails to comply with the terms of this Agreement, and, within thirty (30) days after written notice from Employer of such failure, Employee has not corrected such failure or, having once received such notice of failure and having so corrected such failure, Employee at any time thereafter again so fails, (C) if Employee violates any of the provisions contained in Section 4 of this Agreement, or (D) if Employee tests positive for illegal drugs; or

          (iii)          The termination of this Agreement by either party upon at least ninety (90) days prior written notice.

Section 3.          Compensation.

          3.1          Term of Employment. Employer will provide Employee with the following salary, expense reimbursement and additional employee benefits during the term of employment hereunder:

          (a)          Salary. Employee will be paid a salary (the "Salary") of no less than One Hundred Fifty Thousand Dollars ($150,000) per annum, less deductions and withholdings required by applicable law. The Salary shall be paid to Employee in equal monthly installments (or on such more frequent basis as other executives of Employer are compensated). The Salary shall be reviewed by the Board of Directors of Employer on at least an annual basis.

          (b)          Bonus. Employee will be entitled to an annual bonus (the "Bonus") of 60% of Salary at Plan (to be defined) with a 3-up-3-down formula. The Bonus shall be paid promptly upon the availability of annual financial results (which is expected to occur in early February of each year).

          (c)          Vacation. Employee shall receive four (4) weeks vacation time per calendar year during the term of this Agreement. Any unused vacation days in any calendar year may not be carried over to subsequent years.

          (d)          Expenses. Employer shall reimburse Employee for all reasonable and necessary expenses incurred by Employee at the request of and on behalf of Employer.

          (e)          Benefit Plans. Employee may participate in such medical, dental, disability, hospitalization, life insurance and other benefit plans (such as pension and profit sharing plans) as Employer maintains from time to time for the benefit of other senior executives of Employer, on the terms and subject to the conditions set forth in such plans.

3.2          Effect of Termination.

          (a)          Except as hereinafter provided, upon the termination of the employment of Employee hereunder for any reason, Employee shall be entitled to all compensation and benefits earned or accrued under Section 3.1 as of the effective date of termination (the "Termination Date"), but from and after the Termination Date no additional compensation or benefits shall be earned by Employee hereunder. Employee shall be deemed to have earned any Bonus payable with respect to the calendar year in which the Termination Date occurs on a prorated basis (based on the number of days in such calendar year through and including the Termination Date divided by 365) based upon the year to date financials and performance of the Employer and assuming performance at the target level for any individual performance criteria. Any such Bonus shall be payable upon termination.

          (b)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount payable hereunder, Employer shall continue to pay Employee his normal Salary pursuant to Section 3.1(a) for a six-month period (on the same basis as if Employee continued to serve as an employee hereunder for such applicable period). If Employee's employment is terminated pursuant to Section 2(b)(i) hereof or if Employee's employment is terminated by Employer pursuant to Section 2(b)(iii), all options to purchase stock of the Company or an affiliate of the Company granted to Employee shall immediately become exercisable upon such termination. In the case of a termination pursuant to Section 2(b)(i) hereof, the options will expire in accordance with their respective scheduled expiration dates. Except as provided in Section 3.3 , in the case of a termination by Employer pursuant to Section 2(b)(iii) hereof, the options will expire on the first anniversary after the effective date of the termination of Employee's employment hereunder. Upon the death of Employee, any options that Employee would otherwise be entitled to exercise hereunder may be exercised by his personal representatives or heirs, as applicable. Except as provided in Section 3.3, if Employee's employment is terminated by Employer pursuant to Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those options which are exercisable as of the date of such termination shall be exercisable for a period of 90 days after such termination (and all other options not then exercisable shall be forfeited as of such date), and after such 90-day period, all unexercised options will expire. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer .

          3.3          Effect of Change in Control. Notwithstanding Section 3.2(b) above, if there is a Change in Control (as defined below) of the Employer and the Employee's employment is terminated within 18 months following the date of the Change in Control, the following provisions shall apply.

          (a)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to received the compensation and benefits set forth in subsections (i) through (iv) below:

          (i)          Base Salary. Employee will continue to receive his Salary as then in effect (subject to withholding of all applicable taxes) for a period of eighteen (18) months from his date of termination in the same manner as it was being paid as of the date of termination.

          (ii)          Health, Dental and Life Insurance Coverage. The health, dental and group term life insurance benefits coverage provided to Employee at his date of termination shall be continued at the same level and in the same manner as if his employment under this Agreement had not terminated (subject to the customary changes in such coverages if Employee retires, reaches age 65 or similar events), beginning on the date of such termination and ending on the date eighteen (18) months from the date of such termination. Any additional coverages Employee had at termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. Any costs Employee was paying for such coverages at the time of termination shall be paid by Employee by separate check payable to the Company each month in advance or by re duction of amounts owed to Employee by the Employer. If the terms of any benefit plan referred to in this Section, or the laws applicable to such plan, do not permit continued participation by Employee, then the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this paragraph shall be applied against and reduce the period for which COBRA will be provided.

          (iii)          Stock Options. Notwithstanding any provision in any option agreement, all outstanding stock options granted to Employee by Employer or an affiliate of Employer shall become fully vested on the date of Employee's termination of employment and shall remain exercisable as provided in the applicable option agreement or, if longer, for a period of three (3) years following the date of termination of employment. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer.

          (b)          If Employee's employment hereunder is terminated by Employee pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to receive the compensation and benefits set forth in subsections (i) through (iii) of Subsection 3.3(a) above, provided, however, that a period of 12 months shall be substituted for 18 months in subsections 3.3(a)(i) and (ii).

          3.4          Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

                      (a)          "Change in Control" means any of the following events:

          (i)          The acquisition (other than from the Employer) by any person of beneficial ownership of fifty percent (50%) or more of the combined voting power of the Employer's then outstanding voting securities; provided, however, that for purposes of this Section, person shall not include any person who on the date hereof owns 25% or more of the Employer's outstanding securities, and a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Employer's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Employer or any of its subsidiaries, or (ii) any corporation, which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Employer in the same proportion as their ownership of stock in the Employer immediately prior to such acquisition.

          (ii)          Approval by shareholders of the Employer of (1) a merger or consolidation involving the Employer if the shareholders of the Employer, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Employer outstanding immediately before such merger or consolidation, or (2) a complete liquidation or dissolution of the Employer, or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Employer.

          (iii)          A change in the composition of the Board such that the individuals who, as of the date of this Agreement, 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 that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Employer'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 t hreatened 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.

          (iv)          The occurrence of any other event or circumstance which is not covered by (i) through (iii) above which the Board determines affects control of the Company and adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement.

          (b)          A "Good Reason" for termination by Employee of Employee's employment shall mean the occurrence (without the Employee's express written consent), within the eighteen (18) month period following the date of a Change in Control, of any one of the following acts by the Employer, or failures by the Employer to act, unless, in the case of any act or failure to act described in paragraph (i) or (iv) below, such act or failure to act is corrected within 30 days after notice by the Employee to the Employer of the act or failure to act:

          (i)          the assignment to Employee of any duties inconsistent with Employee's title and status set forth herein, or a substantial adverse alteration in the nature or status of Employee's responsibilities at the Employer from those in effect immediately prior to the Change in Control;

          (ii)          a substantial reduction by the Employer in Employee's Base Salary;

          (iii)          the relocation of Employee's principal office to a place more than 50 miles from Atlanta, Georgia;

          (iv)          the failure by the Employer to continue in effect any compensation or benefit plan or program in which Employee participates immediately prior to the Change in Control, which is material to Employee's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Employer to continue the Employee's participation in such plan (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Employee's participation relative to other participants, as existed at the time of the Change in Control.

          The Employee's right to terminate the Employee's employment for Good Reason shall not be affected by the Employee's incapacity due to physical or mental illness, except for a total disability as defined in Section 2 above. The Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

Section 4.          Partial Restraint on Post-termination Competition.

          4.1          Definitions.          For the purposes of this Section 4, the following definitions shall apply:

          (a)          "Company Activities" means the business of selling caller ID technology and hardware, fulfillment services, e-commerce fulfillment and e-commerce return services as well as other similar services that Innotrac or its subsidiaries is involved in at the date of this agreement.

          (b)          "Competitor" means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Employer or its affiliates or subsidiaries, engaged, wholly or partly, in Company Activities.

          (c)          "Competitive Position" means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Employee will serve such Competitor in any managerial capacity.

          (d)          "Confidential Information" means any confidential, proprietary business information or data belonging to or pertaining to Employer that does not constitute a "Trade Secret" (as hereinafter defined) and that is not generally known by or available through legal means to the public, including, but not limited to, information regarding Employer's customers or actively sought prospective customers, suppliers, manufacturers and distributors gained by Employee as a result of his employment with Employer.

          (e)          "Customer" means actual customers or actively sought prospective customers of Employer during the Term.

          (f)          "Noncompete Period" or "Nonsolicitation Period" means the period beginning the date hereof and ending on the first anniversary of the termination of Employee's employment with Employer.

          (g)          "Territory" means the area within a thirty-five (35) mile radius of any corporate office of Employer or any of its subsidiaries, affiliates or divisions.

          (h)          "Trade Secrets" means information or data of or about Employer, including but not limited to technical or non-technical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, products plans, or lists of actual or potential customers, clients, distributees or licensees, information concerning Employer's finances, services, staff, contemplated acquisitions, marketing investigations and surveys, that (i) derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from their disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.

          (i)          "Work Product" means any and all work product, property, data documentation or information of any kind, prepared, conceived, discovered, developed or created by Employee for Employer or its affiliates, or any of Employer's or its affiliates' clients or customers.

          4.2          Trade Name and Confidential Information.

          (a)          Employee hereby agrees that (i) with regard to each item constituting all or any portion of the Trade Secrets, at all times during the Term and all times during which such item continues to constitute a Trade Secret under applicable law; and (ii) with regard to any Confidential Information, during the Term and the Noncompete Period:

          (i)          Employee shall not, directly or by assisting others, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected in any manner with, any business conducted under any corporate or trade name of Employer or name similar thereto, without the prior written consent of Employer;

          (ii)          Employee shall hold in confidence all Trade Secrets and all Confidential Information and will not, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, appropriate or otherwise communicate any Trade Secrets or Confidential Information, without the prior written consent of Employer; and

          (iii)          Employee shall immediately notify Employer of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist Employer, to the extent necessary, in the procurement or any protection of Employer's rights to or in any of the Trade Secrets or Confidential Information.

          4.3          Noncompetition.

          (a)          The parties hereto acknowledge that Employee is conducting Company Activities throughout the Territory. Employee acknowledges that to protect adequately the interest of Employer in the business of Employer it is essential that any noncompete covenant with respect thereto cover all Company Activities and the entire Territory.

          (b)          Employee hereby agrees that, during the Term and the Noncompete Period, Employee will not, in the Territory, either directly or indirectly, alone or in conjunction with any other party, accept, enter into or take any action in conjunction with or in furtherance of a Competitive Position. Employee shall notify Employer promptly in writing if Employee receives an offer of a Competitive Position during the Noncompete Term, and such notice shall describe all material terms of such offer.

          Nothing contained in this Section 4 shall prohibit Employee from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

          4.4          Nonsolicitation During Employment Term. Employee hereby agrees that Employee will not, during the Term, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term.

          4.5          Nonsolicitation During Nonsolicitation Period. Employee hereby agrees that Employee will not, during the Nonsolicitation Period, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term; provided, however, that the covenant in this clause shall limit Employee's conduct only with respect to those Customers with whom Employee had substantial contact (through direct or supervisory interaction with the Customer or the Customer's account) during a period of time up to but no greater than two (2) years prior to the last day of the Term.

Section 5.          Miscellaneous.

          5.1          Severability. The covenants in this Agreement shall be construed as covenants independent of one another and as obligations distinct from any other contract between Employee and Employer. Any claim that Employee may have against Employer shall not constitute a defense to enforcement by Employer of this Agreement.

          5.2          Survival of Obligations. The covenants in Section 4 of this Agreement shall survive termination of Employee's employment, regardless of who causes the termination and under what circumstances.

          5.3          Notices. Any notice or other document to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered in person or by courier, by telecopy transmission or sent by any express mail service, postage or fees prepaid at the following addresses:

                    Employer

                    Innotrac Corporation
                    6655 Sugarloaf Parkway
                    Duluth, GA 30097
                    Attention: Mr. Scott Dorfman
                                       Chief Executive Office r
                    Telephone No.: (678) 584-4000

                    Employee

                    Mr. Larry C. Hanger
                    3440 Greenside Ct.
                    Dacula, GA 30019

or at such other address or number for a party as shall be specified by like notice. Any notice which is delivered in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party or its agent.

          5.4          Binding Effect. This Agreement inures to the benefit of, and is binding upon, Employer and their respective successors and assigns, and Employee, together with Employee's executor, administrator, personal representative, heirs, and legatees.

          5.5          Entire Agreement. This Agreement is intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and is the complete and exclusive statement of the terms thereof, notwithstanding any representations, statements or agreements to the contrary heretofore made. This Agreement may be modified only by a written instrument signed by all of the parties hereto.

          5.6          Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed, and governed by and in accordance with, the laws of the State of Georgia. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority or by any board of arbitrators by reason of such party or its counsel having or being deemed to have structured or drafted such provision.

          5.7          Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

          5.8          Specific Performance. Each party hereto hereby agrees that any remedy at law for any breach of the provisions contained in this Agreement shall be inadequate and that the other parties hereto shall be entitled to specific performance and any other appropriate injunctive relief in addition to any other remedy such party might have under this Agreement or at law or in equity.

          5.9          Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

          5.10          Public Announcement. Neither party shall disclose that this Agreement has been executed until such time as both parties mutually agree to such disclosure.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

INNOTRAC CORPORATION

By:           /s/ Scott Dorfman                     

       Scott D. Dorfman

      Chief Executive Officer

EMPLOYEE

         /s/ Larry C. Hanger                               

Larry C. Hanger