SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

(Mark One)
/x/ Annual report under section 13 or 15(d) of the Securities Exchange Act of
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
-----------------

/ / Transition report under section 13 or 15(d) of the Securities Exchange Act
of 1934

COMMISSION FILE NUMBER 0-22196

INNODATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)

THREE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY
(Address of principal executive offices)

07601
(Zip Code)

(201) 488-1200
(Registrant's telephone number)

13-3475943
(I.R.S. Employer Identification No.)

07601
(Zip Code)

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK,
$.01 PAR VALUE

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 past twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/ No / /

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

State the aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of the Company's Common Stock on
February 29, 2000 of $11.375 per share. $42,997,000
----------

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

5,018,734 SHARES OF COMMON STOCK, $.01 PAR VALUE, AS OF FEBRUARY 29, 2000.

DOCUMENTS INCORPORATED BY REFERENCE
[SEE INDEX TO EXHIBITS]

PART I
------

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL

Innodata Corporation ("Innodata" or the "Company") is a leading provider of
Internet and on-line data conversion, content architecture, and content
management services, providing all the necessary steps to enable its customers
to create and disseminate vast amounts of information both on-line and via the
Internet. The Company's operations are classified in two business segments:
Internet and On-Line Data Conversion and Content Management Services, and
Document Imaging Services. See Note 8 of the Notes to Consolidated Financial
Statements in Item 8 of this report for further information about the Company's
business segments.

The Company was incorporated in Delaware in June 1988, maintains its
executive offices in Hackensack, New Jersey, and employs globally approximately
6,000 persons in offices in Hackensack, New Jersey; Garden Grove, California;
London, U.K.; Manila, The Philippines; Cebu, The Philippines; Delhi, India; and
Colombo, Sri Lanka.

INDUSTRY BACKGROUND

Since its founding, Innodata has provided a host of services to commercial
electronic data providers that publish CD-ROM and on-line products ("traditional
electronic publishers"). Historically, the market has been dominated by a few
large competitors in most vertical markets (e.g., Dialog, Lexis/Nexis, Westlaw,
Elsevier Science BV). These traditional electronic publishers obtain information
from a variety of different providers and resell it to targeted groups of end
users (e.g., Dialog and Elsevier Science to libraries, Lexis/Nexis and Westlaw
to attorneys).

Traditional electronic publishers discovered that outsourcing offered the
most efficient and cost-effective way to develop and deploy massive electronic
content to meet their on-line publishing goals.

With the rapid growth and popularity of the Internet and the wide
acceptance of Internet publishing standards, the market for electronic
information has grown enormously. The Internet offers traditional electronic
publishers and new market entrants unprecedented opportunities for global
information distribution.

Traditional electronic publishers have responded by becoming increasingly
ambitious in delivering large quantities of information quickly to subscribers,
and new market entrants have developed novel electronic information offerings,
such as adding image content to traditional text products and offering new media
deliverables such as PDF (Portable Document Format) and XML (eXtensible Markup
Language).

In order to stay competitive, traditional electronic publishers and new
market entrants are becoming more focused on speed of product delivery and
product quality, and increasing the value added which accrues to their
information content.

At the same time, as standards regarding Internet and Web protocols have
become universal and solutions for data security have become more reliable,
major corporations have begun to implement electronic knowledge management
initiatives as a way of mitigating the cost of lost knowledge, isolated islands
of information, and redundancies and duplication in work efforts. Corporations
are viewing the Web as a viable publishing environment for enabling
unprecedented information access to knowledge workers.

As a result, many document-intensive companies are confronted with the
challenge of making large quantities of data accessible to both current and new
users. This is causing a revolution in the way organizations create, manage, and
access information of all types. Providing timely and accurate information to
knowledge workers is a publishing process, and corporations - no matter what
their business - are becoming de facto electronic publishers of product and
technical documentation and policy and procedures manuals.

CORPORATE STRATEGY

The Internet opportunity for Innodata is five-fold: 1) enable traditional
electronic information providers and new market entrants to prepare and deliver
increasingly massive amounts of content over the Internet reliably and
efficiently; 2) support electronic publishers' race for product currency by
becoming increasingly flexible with a focus on delivering information quickly
and reliably; 3) respond to opportunities to provide increased value-add to
content; 4) configure service offerings specifically geared to corporate
organizations' knowledge management initiatives, which is a new fast-growth
market area where the Company's core competencies apply; and 5) provide industry
thought leadership and specific service offerings around XML as it becomes the
key part of the future of the Internet, intranets, and the World Wide Web.

CLOSE RELATIONSHIPS WITH CUSTOMERS

Innodata views the long-term partnerships with its customers as a critical
element in its historical and future success. Innodata's customers include many
of the largest and most highly regarded electronic publishers and Fortune 500
companies. In order to continue to meet the needs of its existing and
prospective customers in a timely fashion, the Company works directly with its
customers to identify and develop new and improved services. To promote a close
and continuing relationship with customers, the Company sells through its direct
sales organizations in North America and Europe, provides consulting expertise
through its Professional Services Group, and provides 24/7 project support
through its Customer Service Center.

The Company generally performs its work for its customers under
project-specific contracts or long-term contracts, which are subject to numerous
termination provisions.

One customer accounted for 17%, 13% and 10% of the Company's Internet and
on-line data conversion and content management services revenues in 1999, 1998
and 1997, respectively. During 1998 and 1997, one other customer that is
comprised of twelve affiliated companies, accounted for 21% and 16% of such
revenues, respectively. No other customer accounted for 10% or more of such
revenues. Further, in 1999, 1998 and 1997, export revenues, all of which were
derived from European customers, accounted for 21%, 22% and 24%, respectively,
of such revenues. A significant amount of the Company's revenues are derived
from customers in the publishing industry. Accordingly, the Company's accounts
receivable generally include significant amounts due from such customers.

During 1999, three customers accounted for 30%, 16% and 12%, respectively,
of the Company's document imaging service revenues. Another customer accounted
for 53% and 11% of such revenues in 1998 and 1997, respectively. No other
customer accounted for 10% or more of such revenues.

RECURRING BUSINESS

The Company's marketing, pricing, and support strategies are focused on the
generation of both one-time and recurring revenues. Many of the Company's
customers are involved in publishing information content that requires regular
updating, thus providing Innodata with recurring business. To support these
initiatives and preserve recurring revenue, Innodata has configured on-site
facilities management service offerings. In addition, the Company is working
with many of its long-time customers to migrate their products to new, less
proprietary formats, and to add both more and richer content.

COMPREHENSIVE SERVICE OFFERINGS

The Company's comprehensive set of services distinguishes the Company from
its competitors. Many competitors offer only a single service, such as data
capture, or do not offer the full complement of specialized services to enable
large organizations to develop on-line/Internet services. Innodata provides a
broad range of conversion and processing services and consulting services to
enable its clients to publish massive content databases quickly and
economically.

INTERNET AND ON-LINE DATA CONVERSION AND CONTENT MANAGEMENT SERVICES
- - --------------------------------------------------------------------

Innodata's customers represent an array of major Internet content providers
of business to business (B to B) Internet commerce companies and electronic
publishers of legal, scientific, educational, and medical information, as well
as document-intensive companies repurposing theirproprietary information into
electronic resources that can be referenced via web-centric applications.

The Company's specific services include:

CONSULTING AND SUPPORT

Through its Professional Services Group, the Company offers customers
vendor-neutral conversion and consulting services, including SGML (Standard
Generalized Markup Language), XML (eXtensible Markup Language), and HTML
(Hypertext Markup Language) consulting services, customized programming and
conversion application development, document analysis, DTD architecture
analysis, and design and database quality assurance.

The Company operates two Customer Support Centers, one located at its U.S.
headquarters in New Jersey and one located at its Asian headquarters in the
Philippines. Seamlessly linked over a proprietary fiber-optic wide area network,
the Customer Support Centers offer customers 24/7 hotline project support and
remote dial-in services for data transmission.

DATA CONVERSION

For customers desiring the ability to use electronic data for on-line
information retrieval, intranet, extranet, or Internet distribution, permanent
archives, electronic publishing, CD-ROM and DVD distribution or printing on
demand, the Company converts massive hardcopy and paper collections to a variety
of output formats including Adobe PDF (Portable Document Format), tagged ASCII
(American Standard Code for Information Interchange), and EBCDIC (Extended
Binary Coded Decimal Interchange Code), as well as SGML, XML and HTML conforming
electronic files.

To accomplish this, the Company utilizes high speed scanning and a variety
of commercial and proprietary OCR/ICR (optical/intelligent character
recognition) applications, in concert with structured methodologies and work
flow processes designed to accomplish rapid turnaround of data with high degrees
of accuracy (typically guaranteeing up to 99.995% character accuracy). Its
systems enable multiple production processes to be performed simultaneously at
one or more of its production sites. In addition, the Company uses a wide
variety of advanced tools for data enhancement and validation, and its
Conversion Engineers create automatic procedures - utilizing industry standards
such as Omnimark, DynaText, Adept, etc. - to ensure validated SGML or XML
structure for legacy data files. Finally, Editorial Specialists enhance the
structured files by adding hyperlinks, tagging and inserting electronic markers.

In addition, the Company converts a broad range of legacy-formatted data
and proprietary electronic formatted data to SGML and SGML-related electronic
files. The Company maintains a staff of experienced engineers and programmers
who utilize custom conversion filters and parsers for this purpose.

Two of the Company's conversion facilities have been accorded ISO 9003 and
9002 Certifications. The ISO 9000-series certification program is an
internationally recognized marque of quality assurance and process conformity.
Regularly scheduled ISO audits assure a high degree of staff acuity to the
documented processes and serve to build accountability within all levels of the
Company's delivery organizations. Increasingly, customers rely on their vendors'
conformity to documented processes and promised quality levels when making
purchasing decisions. Innodata's adoption of the ISO program has resulted in
such processes having become engrained in its operating culture, which in turn
serves as a major contributor to generating and maintaining customer confidence
in the Company's ability to make deliveries as promised.

CONTENT DEVELOPMENT AND DATA ENHANCEMENT

The Company's teams of Content Editors enhance customers' databases by
creating links to related material and building indexes and abstracts as the
basis of subject links and access points.

Innodata's highly educated professionals are trained to index and abstract
a wide variety of scientific, medical, and technical data in diverse fields,
including law, medicine, biology, pharmacology, and engineering.

New services include Web mining and indexing of information published on
the Internet.

DOCUMENT IMAGING SERVICES
- - -------------------------

The Company also provides high volume backfile and day-forward conversion
of business documents, technical manuals, engineering drawings, aperture cards,
roll film, and microfiche, providing high quality computer accessible images and
indexing. After conversion, these documents are stored on various optical and
magnetic media to populate document management systems such as Documentum and
FileNet. The Company is continuing a gradual phase-out of these services.

SALES AND MARKETING

Sales and marketing functions are primarily conducted by the Company's
full-time sales personnel. Sales and marketing activities have consisted
primarily of exhibiting at trade shows in the United States and Europe, and
seeking direct personal access to decision-makers. The Company has also obtained
visibility by way of articles published in the trade press. To date, the
Company has not conducted any significant advertising campaign in the general
media.

The direct sales effort is closely supported by sales engineering and
pre-sales consulting personnel from the Company's Professional Services Group.
These individuals assist the sales force in understanding the technical needs of
customers and providing responses to these needs, including demonstrations,
prototypes, pricing quotations and time estimates.

COMPETITION

The Company's ability to compete favorably is, in significant part,
dependent upon its ability to control costs, react swiftly and appropriately to
short and long-term trends, harness technology and competitively price its
services. Firms compete based on quality, speed, accuracy, and "customer
intimacy," as well as on the relative ability to accomplish massive and complex
data conversions economically. Major competitors include: for document and
information outsourcing, F.Y.I. Inc. and Lason Inc.; for data conversion
services, Saztec Philippines, Inc., Access Innovations, Inc., APEX Data
Services, Inc. and Jouve S.A.; for SGML/XML and related consulting services,
Database Publishing Systems Ltd. and KPMG Consulting. The Company may also be
considered in competition with customers' and potential customers' in-house
personnel who may attempt to duplicate the Company's services.

RESEARCH AND DEVELOPMENT

The Company has not made significant expenditures for research and
development, although expenditures were incurred in connection with OCR
technology developments and enhancing its networking and telecommunications
capabilities.

FACTORS AFFECTING BUSINESS OVERSEAS

While the major part of the Company's operations are carried on in the
Philippines, India and Sri Lanka, the Company's headquarters are in the United
States and its customers to date have all been located in North America and
Europe. As a result, the Company is not as affected by economic conditions
overseas as it would be if it depended on revenues from sources internal to
those countries. However, such adverse economic factors as inflation, external
debt, negative balance of trade, political pressure to raise salaries, and
underemployment may significantly impact the Company.

Certain aspects of overseas economies directly affect the Company.
Overseas operations remain vulnerable to political unrest which could interfere
with the Company's operations. Political instability could also change the
present satisfactory legal environment for the Company through the imposition of
restrictions on foreign ownership, repatriation of funds, adverse labor laws,
and the like.

The Philippine and Indian operations are conducted through wholly-owned
subsidiaries that have been granted income tax holidays through April 1, 2000
and December 31, 2004, respectively. Accordingly, no income taxes will be
payable on earnings from operations of the subsidiaries during such periods,
unless repatriated to the U.S. The Company is seeking an additional one-year
period with respect to the Philippine subsidiary.

The Company funds its overseas operations through transfers of U.S. dollars
only as needed and generally does not maintain any significant amount of funds
or monetary assets overseas. To the extent that the Company needs to bring
currency to the United States from its overseas operations, it will be affected
by currency control regulations.

The Philippines has historically experienced high rates of inflation and
major fluctuations in exchange rate between the Philippine peso and the U.S.
dollar. Continuing inflation without corresponding devaluation of the peso
against the dollar, or any other increase in value of the peso relative to the
dollar, may have a material adverse effect on the Company's operations and
financial condition. From time to time, the Company has purchased futures
contracts for pesos at fixed prices, in order to ensure a stable cost of
services. In the second half of 1997 and the first part of 1998 these contracts
stabilized prices for the Company's services at a time when the peso was
significantly devalued. As a result, the Company was unable to enjoy the
benefits it would have otherwise received.

The Philippines is subject to relatively frequent earthquakes, volcanic
eruptions, floods and other natural disasters, which may disrupt the Company's
operations. Further, power outages lasting for periods of as long as eight hours
per day have occurred. The Company's facilities are equipped with standby
generators which have produced electric power during these outages; however,
there can be no assurance that the Company's operations will not be adversely
affected should municipal power production capacity deteriorate further.

EMPLOYEES

As of February 29, 2000, the Company employed an aggregate of approximately
50 persons in the United States and the United Kingdom, and approximately 6,000
persons in the Philippines, Sri Lanka and India.

Certain employees at the Company's Manila facilities are members of a
union. The Company reached agreement in 1996 on a collective bargaining
agreement which provides for approximately 12% wage increases per annum plus
one-half of any government mandated increases for the five years ending March
31, 2001.

No other of the Company's employees are represented by any labor union.
The Company believes that its relations with its employees are satisfactory.

Production Staff; Recruitment and Training-Philippines
- - ------------------------------------------------------

The Philippines offers a well-educated workforce trained in an English
language school system. Economic opportunity in the Philippines is not
commensurate with the level of education in the workforce. The overall
depressed economic conditions and low wage scale permit an educated professional
to enjoy a comfortable standard of living on an income that is relatively low
when compared to that in developed nations.

The Company's staff in the Philippines has a median age of approximately
twenty-five. A significant number of employees have college degrees. A
substantial middle management infrastructure, grown both from within the ranks
of the Company and through experienced hires, is in place. These managers are
in charge of departmental responsibilities, including personnel, public
relations, facilities, quality control, programming, systems and development.

The Company maintains a vigorous recruiting, screening and training
program. All applicants are given an extensive battery of written and practical
tests, many developed specifically by the Company, over a two-day period. The
Company hires less than 10% of all applicants. Diagnostic tests and equipment
have allowed the Company to hire the brightest people available rather than
focusing solely on typing ability.

Once hired, the Company uses intensive efforts to train its employees and
to ensure that their skills are constantly upgraded. Training is performed
under close supervision by senior personnel. In addition, the Company has an
in-house training program for new employee applicants who have all the requisite
skills, excepting the speed of their performance. The course consists of
approximately three weeks of half-day sessions. Upon satisfactory completion,
full time employment is offered.

The Company seeks to maintain high levels of motivation and retention. It
offers its employees what it believes to be one of the most comprehensive
benefit packages available in the Philippines. This package includes
comprehensive medical insurance, eye care, food subsidies, a subsidized general
store and canteen, tuition credits, and free computer-programming classes. It
maintains a modern and well-appointed facility. It conducts aggressive incentive
programs tied to performance. It affords to its employees the opportunity to
advance.

Similar conditions and methods are in place at the Company's facilities in
India and Sri Lanka.

ITEM 2. DESCRIPTION OF PROPERTY

The Company's principal Manila, Philippines premises are occupied under a
five-year lease which expires on December 31, 2003 and which is cancelable at
the Company's option. The premises consist of a four-story, 45,000 square foot
building with a separate cafeteria building. The lease provides for monthly
payments of approximately $23,000.

The Company's operations in the Philippines city of Cebu are conducted in
approximately 25,000 square feet of space leased through 2004, cancelable at the
Company's option, at a monthly rental of approximately $13,000.

The Company has a lease for a 12,000 square foot office and production
facility located in Hackensack, New Jersey. The lease provides for monthly
rental payments of approximately $25,000 through December 2009. In addition,
the Company leases a 6,000 square foot office and production facility in
California for approximately $5,000 per month. The lease expires in February
2002.

The Company leases its production facility in India for an aggregate annual
amount of approximately $180,000 for a term expiring in September 2002.

The Company's operations in Colombo, Sri Lanka are conducted in
approximately 10,000 square feet of space leased through July 2001, cancelable
at the Company's option, at a monthly rental of approximately $4,000.

The Company believes that it maintains adequate fire, theft and liability
insurance for its facilities and that its facilities are adequate for its
present needs.

ITEM 3. LEGAL PROCEEDINGS.

There is no material litigation pending to which the Company is a party or
of which any of its property is the subject.

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

See Part II, Item 4 of Form 10-QSB for September 30, 1999 as to results of
voting at the Company's Annual Meeting held on October 21, 1999.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock is quoted on the Nasdaq National Market System
since February 3, 2000 under the symbol "INOD." Prior thereto it was listed on
the Nasdaq SmallCap Market. On February 29, 2000, there were 105 stockholders
of record of the Company's Common Stock based on information provided by the
Company's transfer agent. Virtually all of the Company's publicly held shares
are held in "street name" and the Company believes the actual number of
beneficial holders of its Common Stock to be approximately 3,500.

The following table sets forth the high and low sales prices on a quarterly
basis for the Company's Common Stock, as reported on Nasdaq, for the two years
ended December 31, 1999, after giving retroactive effect to a three-for-one
stock split on September 9, 1999.

COMMON STOCK
SALE PRICES

1998 HIGH LOW
---- ---- ---

First Quarter 31/32 3/8
Second Quarter 2--3/32 3/8
Third Quarter 3--5/32 1--5/32
Fourth Quarter 2--25/32 1--3/16

1999
----

First Quarter 3--31/32 1--53/64
Second Quarter 5--37/64 2--43/64
Third Quarter 13--5/64 2--13/16
Fourth Quarter 14--3/8 6--1/32

DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. The future payment of
dividends, if any, on the Common Stock is within the discretion of the Board of
Directors and will depend on the Company's earnings, its capital requirements
and financial condition and other relevant factors. The Company declared a
three-for-one stock split on August 17, 1999 which was paid on September 9,
1999.

ITEM 6. SELECTED FINANCIAL DATA

Year ended
December 31, 1,999 1,998 1,997 1,996 1,995

REVENUES $27,490,138 $19,593,353 $20,116,935 $20,536,448 $20,767,405
----------- ----------- ----------- ------------ -----------

OPERATING COSTS
AND EXPENSES
Direct
operating
costs 17,853,702 13,068,660 16,007,051 16,783,595 14,044,067
Selling and
administrative 6,783,313 4,982,127 5,283,891 4,799,739 4,344,793
Restructuring
costs,
impairment
of assets
and other - 133,141 1,500,000 - -
(Gain) loss on
settlement of
currency contracts - (487,458) 1,400,000 - -
Interest expense 10,542 77,594 85,595 36,383 18,476
Interest income (111,143) (98,391) (59,384) (123,771) (151,319)
---------- ----------- ---------- ------------ ----------

Total 24,536,414 17,675,673 24,217,153 21,495,946 18,256,017
------------ ----------- ----------- ---------- -----------

INCOME (LOSS)
BEFORE INCOME
TAXES
(BENEFIT) 2,953,724 1,917,680 (4,100,218) (959,498) 2,511,388
INCOME TAXES
(BENEFIT) 841,000 (332,000) 100,000 (357,000) 1,000,000
----------- ----------- ----------- ----------- -----------

NET
INCOME (LOSS) $ 2,112,724 $ 2,249,680 $(4,200,218) $ (602,498) $1,511,388
=========== =========== =========== =========== ===========

BASIC INCOME
(LOSS) PER SHARE $0.45 $0.51 $(0.93) $(0.13) $0.34
===== ===== ====== ====== =====

DILUTED INCOME
(LOSS) PER SHARE $0.40 $0.50 $(0.93) $(0.13) $0.32
===== ===== ====== ====== =====

CASH DIVIDENDS
PER SHARE - - - - -
===== ===== ====== ====== =====

As of December 31, 1999 1998 1997 1996 1995

WORKING CAPITAL $ 5,965,818 $ 4,749,101 $ 2,091,848 $ 4,774,121 $ 6,247,708
============ =========== =========== =========== ===========

TOTAL ASSETS $15,645,877 $10,595,508 $10,029,247 $12,416,296 $12,538,694
=========== =========== ========== =========== ===========

LONG-TERM DEBT $ 5 ,188 $ 24,089 $ 79,604 $ 195,960 $ 92,180
=========== =========== ========= == ======== ==========

STOCKHOLDERS'
EQUITY $11,652,094 $ 7,485,438 $ 5,254,133 $ 9,477,471 $ 9,747,655
=========== =========== =========== =========== ===========

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

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

Revenues increased 40% to $27,490,138 for the year ended December 31, 1999
compared to $19,593,353 for the similar period in 1998. Revenues from the
Internet and on-line data conversion and content management services segment
increased 52% to $26,459,447 in 1999 from $17,401,346 in 1998. The increase was
due principally to new projects from existing and new customers. Based on a
contract signed in 1999 and additional large projects presently under
negotiation, the Company anticipates revenues in 2000 to continue to increase
significantly. During 1998, one customer that is comprised of twelve affiliated
companies, accounted for 21% of the Company's Internet and on-line data
conversion and content management services revenues. One other customer
accounted for 17% and 13% of such revenues in 1999 and 1998, respectively. No
other customer accounted for 10% or more of such revenues. Further, in 1999 and
1998, export revenues, all of which were derived from European customers,
accounted for 21% and 22%, respectively, of such revenues. Revenues from the
document imaging services segment decreased to $1,030,691 in 1999 from
$2,192,007 in 1998. These revenues are expected to decline in the future and
represent an insignificant percentage of the Company's business. During 1999,
three customers accounted for 30%, 16% and 12%, respectively, of such revenues.
During 1998, one other customer accounted for 53% of the Company's document
imaging service revenues. No other customer accounted for 10% or more of such
revenues.

Direct operating expenses were $17,853,702 for the year ended December 31,
1999 and $13,068,660 for the similar period in 1998, an increase of 37%. Direct
operating expenses for the Internet and on-line data conversion and content
management services increased to $16,712,563 in 1999 from $10,701,569 in 1998,
or 56%. Direct operating expenses as a percentage of revenues were 63% in 1999
and 61% in 1998. The increase in 1999 is due to costs incurred for the increased
revenues, as well as training costs for new production employees required to
meet the anticipated growth in revenues. Direct operating expenses in the
document imaging services segment decreased to $1,141,139 in 1999 from
$2,367,091 in 1998. The decrease in 1999 was due principally to management's
efforts to address decreasing revenues. Direct operating expenses include
primarily direct payroll, telecommunications, depreciation, freight, computer
services, supplies and occupancy.

Selling and administrative expense was $6,783,313 and $4,982,127 for the
years ended December 31, 1999 and 1998, respectively, representing an increase
of 36% in 1999 from 1998. Selling and administrative expense as a percentage of
revenues was 25% in 1999 and 1998. The increase primarily reflects the addition
of sales and technical support staff, as well as increased commissions
commensurate with increased revenues. Selling and administrative expense
includes management salaries, sales and marketing salaries, clerical and
administrative salaries, rent and utilities not included in direct costs,
marketing costs and administrative overhead.

In the fourth quarter of 1998, management determined that its plans to
significantly increase the revenues of the document imaging services segment
were not realized. It was determined that the remaining goodwill associated
with the business could not be recovered. Accordingly, the remaining unamortized
amount of $382,000 was written off at December 31, 1998. Further, certain
estimated liabilities for restructuring and other items totaling $249,000 were
deemed in excess of actual amounts payable and were recognized as a gain in the
fourth quarter of 1998.

In the second quarter of 1998, the Company reached an agreement regarding
certain disputed currency contracts. This resulted in a reduction of an
estimated liability previously provided by $487,000 that was recognized as a
gain.

In 1999, the Internet and on-line data conversion and content management
services segment realized income before income taxes of $3,523,682, while the
document imaging services segment incurred a loss of $569,958. In 1998, the
Internet and on-line data conversion and content management services segment
realized income before income taxes of $3,151,928, while the document imaging
services segment incurred a loss of $1,234,248, including a write-off of
goodwill in the amount of $382,000.

In 1999, income taxes were lower as a percentage of income before income
taxes than the federal statutory rate due to certain overseas income that will
not be taxed due to tax holidays granted to the Company. The Company
recognized a benefit from income taxes in 1998 from a reduction in the tax
valuation allowance and a utilization of net operating loss carryforwards that
were not recognized as tax benefits in 1997 for losses incurred in that year.

As a result of the aforementioned items, the Company realized net income of
$2,112,724 in 1999 and $2,249,680 in 1998.

YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues decreased 3% to $19,593,353 for the year ended December 31, 1998
compared to $20,116,935 for the similar period in 1997. Revenues from the
Internet and on-line data conversion and content management services segment
decreased to $17,401,346 in 1998 from $18,032,232 in 1997. The 1997 period
included approximately $2,612,000 from journal and book pagination and medical
transcription businesses that were discontinued. During 1998 and 1997, one
customer that is comprised of twelve affiliated companies, accounted for 21% and
16% of the Company's Internet and on-line data conversion and content management
services revenues, respectively. One other customer accounted for 13% and 10% of
such revenues in 1998 and 1997, respectively. No other customer accounted for
10% or more of such revenues. Further, in 1998 and 1997, export revenues, all
of which were derived from European customers, accounted for 22% and 24%,
respectively, of such revenues. Revenues from the document imaging services
segment increased to $2,192,007 in 1998 from $2,084,703 in 1997. During 1998 and
1997, one customer accounted for 53% and 11% of the Company's document imaging
service revenues, respectively. Another customer accounted for 10% of such
revenues in 1997. No other customer accounted for 10% or more of such revenues.

Direct operating expenses were $13,068,660 for the year ended December 31,
1998 and $16,007,051 for the similar period in 1997, a decrease of 18%. Direct
operating expenses for the Internet and on-line data conversion and content
management services decreased to $10,701,569 in 1998 from $14,265,974 in 1997,
or 25%. Direct operating expenses as a percentage of revenues were 61% in 1998
and 79% in 1997. The decrease in direct operating expenses in 1998 was due
primarily to a favorable foreign exchange rate for the Philippine peso and the
elimination of journal and book page making services. Direct operating expenses
in the document imaging services segment increased to $2,367,091 in 1998 from
$1,741,077 in 1997. The increase in 1998 was due principally to significant
inefficiencies incurred in connection with a project that required offsite
management and hiring of temporary workers as well as a staggered workflow
provided by the segment's largest customer.

Selling and administrative expense was $4,982,127 and $5,283,891 for the
years ended December 31, 1998 and 1997, respectively, representing a decrease of
6% in 1998 from 1997. Selling and administrative expense as a percentage of
revenues was 25% in 1998 and 26% in 1997. The decrease primarily reflects the
elimination of pagination services offset by the addition of sales and technical
support staff, primarily at the beginning of the third quarter, for expansion of
the Company's sales and marketing efforts.

During the second quarter of 1997 management determined to reduce its U.S.
based overhead. The principal actions were to eliminate U.S. production for the
publishing services division and merge the east and west coast document imaging
operations into one facility on the west coast. The restructuring costs
consisted of estimated losses on leases and severance pay, while the impairment
costs consisted of a write-off of goodwill in connection with the document
imaging business and equipment in connection with both the imaging and
publishing services businesses. The restructuring and impairment costs totaled
$1,500,000.

The Company recognized an unrealized loss of $1,400,000 in 1997 in
connection with foreign currency contracts that were in dispute. The loss
represented the difference between the contract rate for Philippine pesos and
the estimated fair value at December 31, 1997. In the second quarter of 1998,
the Company reached an agreement regarding the disputed currency contracts. This
resulted in a reduction of the estimated liability previously provided by
$487,000 that was recognized as a gain.

In 1998, the Internet and on-line data conversion and content management
services segment realized income before income taxes of $3,151,928, while the
document imaging services segment incurred a loss of $1,234,248, including a
write-off of goodwill in the amount of $382,000. In 1997, the Internet and
on-line data conversion and content management services segment incurred a loss
before income taxes of $2,894,158, including a loss on foreign currency
contracts and restructuring costs of $2,107,000, while the document imaging
services segment incurred a loss of $1,206,060, including restructuring costs of
$793,000.

The Company recognized a benefit from income taxes in 1998 from a reduction
in the tax valuation allowance and a utilization of net operating loss
carryforwards that were not recognized as tax benefits in 1997 for losses
incurred in that year.

As a result of the aforementioned items, the Company realized net income of
$2,249,680 in 1998 and incurred a net loss of $(4,200,218) in 1997. The 1997
loss was principally due to the charges set forth above, no benefit for income
taxes and higher overhead.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities increased to $2,878,086 in 1999
from $2,547,013 in 1998. Net cash of $3,890,848 and $841,710 was used in
investing activities in 1999 and 1998, respectively, for the purchase of fixed
assets. The significant increase in 1999 was due to the expansion of production
facilities and new workstations for additional production staff to meet
increased revenues and anticipated future revenue increases. Net cash provided
by financing activities was $857,471 in 1999, principally from proceeds from the
exercise of stock options compared to $139,622 used in 1998 for financing
activities to repay borrowings.

The Company expects to make capital expenditures of approximately
$6,000,000 during the next 12 months, principally for continued production
facility expansion and equipment upgrades, and for its new automated, offshore
production facility. The Company expects these costs to be financed in part
internally and in part from a combination of external sources, including its
line of credit, equipment financing from original equipment manufacturers and
others, and debt and equity financing.

The Company has a line of credit with a bank in the amount of $2 million.
The line is collateralized by accounts receivable. Interest is charged at 1/2%
above the bank's prime rate and is due on demand. The line is believed to be
sufficient for the Company's cash requirements.

INFLATION, SEASONALITY AND PREVAILING ECONOMIC CONDITIONS

To date, inflation has not had a significant impact on the Company's
operations. The Company generally performs its work for its customers on a task
by task at-will basis, or under short-term contracts or contracts which are
subject to numerous termination provisions. The Company has flexibility in its
pricing due to the absence of long-term contracts. The Company's revenues are
not significantly affected by seasonality.

Disclosures in this Form 10-K contain certain forward-looking statements,
including without limitation, statements concerning the Company's operations,
economic performance and financial condition. These forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The words "believe," "expect," "anticipate" and
other similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on the Company's current expectations and are subject to a number of
risks and uncertainties, including without limitation, changes in external
market factors, the ability of the Company's customers to continue to execute
their business plans which give rise to increased requirements for data
conversion, changes in the Company's business or growth strategy or an inability
to execute its strategy due to changes in its industry or the economy generally,
the emergence of new or growing competitors, various other competitive factors
and other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission. Actual results could differ
materially from the results referred to in the forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that the
results referred to in the forward-looking statements contained in this Form
10-K will in fact occur.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial institution which is priced based on the
prime rate of interest. At December 31, 1999, there were no outstanding
borrowings under the credit facility. Changes in the prime interest rate during
fiscal 2000 will have a positive or negative effect on the Company's interest
expense. Such exposure will increase accordingly should the Company maintain
higher levels of borrowing during 2000.

The Company has operations in foreign countries. While it is exposed to foreign
currency fluctuations, the Company presently has no financial instruments in
foreign currency and does not maintain funds in foreign currency beyond those
necessary for operations.

ITEM 8. FINANCIAL STATEMENTS.

INNODATA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

PAGE
----

Independent Auditors' Report II-9
Consolidated Balance Sheets as of December 31, 1999 and 1998 II-10
Consolidated Statements of Operations for the three
years ended December 31, 1999 II-11
Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1999 II-12
Consolidated Statements of Cash Flows for the three
years ended December 31,1999 II-13
Notes to Consolidated Financial Statements II-14-24

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Innodata Corporation
Hackensack, New Jersey

We have audited the accompanying consolidated balance sheets of Innodata
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

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

Grant Thornton LLP
New York, New York
March 2, 2000

INNODATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998

1999 1998
ASSETS

CURRENT ASSETS:
Cash and equivalents $ 3,380,242 $ 3,535,533
Accounts receivable-net of allowance
for doubtful accounts
of $580,000 in 1999 and
$425,000 in 1998 5,247,428 2,943,422
Prepaid expenses and other current assets 396,743 555,127
Deferred income taxes 540,000 376,000
---------- ----------

Total current assets 9,564,413 7,410,082

FIXED ASSETS-Net 4,891,992 2,669,892

OTHER ASSETS 1,189,472 515,534
---------- ------------

TOTAL $15,645,877 $10,595,508
=========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt $ 19,629 $ 56,718
Accounts payable and accrued expenses 1,553,585 1,295,347
Accrued salaries and wages 1,529,753 849,608
Income and other taxes 495,628 459,308
---------- ------------

Total current liabilities 3,598,595 2,660,981
----------- ------------

LONG-TERM DEBT, less current portion 5,188 24,089
------------ ------------

DEFERRED INCOME TAXES 390,000 425,000
------------ ------------

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value-authorized
20,000,000 shares; issued 5,133,943
shares in 1999 and 4,585,206 shares
in 1998 51,339 45,852
Additional paid-in capital 10,908,538 8,860,093
Retained earnings (deficit) 913,186 (1,199,538)
------------ ------------

11,873,063 7,706,407
Less: treasury stock -
at cost; 144,249 shares (220,969) (220,969)
----------- ------------

Total stockholders' equity 11,652,094 7,485,438
------------ ------------

TOTAL $15,645,877 $10,595,508
=========== ============

See notes to consolidated financial statements

INNODATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1999 1998 1997
------------ ------------ ------------

REVENUES $27,490,138 $19,593,353 $20,116,935
------------ ------------ ------------

OPERATING COSTS AND EXPENSES
Direct operating costs 17,853,702 13,068,660 16,007,051
Selling and administrative
expenses 6,783,313 4,982,127 5,283,891
Restructuring costs, impairment
of assets and other - 133,141 1,500,000
(Gain) loss on foreign currency
contracts - (487,458) 1,400,000
Interest expense 10,542 77,594 85,595
Interest income (111,143) (98,391) (59,384)
------------ ------------ ------------

Total 24,536,414 17,675,673 24,217,153
------------ ------------ ------------

INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (BENEFIT) 2,953,724 1,917,680 (4,100,218)

PROVISION FOR INCOME TAXES (BENEFIT) 841,000 (332,000) 100,000
------------ ------------ -----------

NET INCOME (LOSS) $ 2,112,724 $ 2,249,680 $(4,200,218)
============ =========== ===========

BASIC INCOME (LOSS $0.45 $0.51 $(0.93)
===== ===== ======

DILUTED INCOME (LOSS) PER SHARE $0.40 $0.50 $(0.93)
====== ===== ======

See notes to consolidated financial statements

INNODATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

ADDITIONAL RETAINED
COMMON STOCK PAID-IN EARNINGS TREASURY
SHARES AMOUNT CAPITAL (DEFICIT) STOCK TOTAL
------ ------ ------- --------- -------- -----

January
1, 1997 4,565,208 $ 45,652 $8,824,696 $751,000 $(143,877) $9,477,471

Net loss - - - (4,200,218) - (4,200,218)

Warrant
costs for
consulting
arrangement - - 15,600 - - 15,600

Purchase of
treasury
stock - - - - (38,720) (38,720)
---------- -------- ---------- ---------- --------- ---------

December
31, 1997 4,565,208 45,652 8,840,296 (3,449,218) (182,597) 5,254,133

Net income - - - 2,249,680 - 2,249,680

Issuance of
common
stock
upon
exercise
of stock
options 19,998 200 19,797 - - 19,997

Purchase of
treasury
stock - - - - (38,372) (38,372)
---------- ------ --------- ----------- -------- ---------

December
31, 1998 4,585,206 45,852 8,860,093 (1,199,538) (220,969) 7,485,438

Net income - - - 2,112,724 - 2,112,724

Issuance of
common
stock
upon
exercise
of stock
options 513,739 5,137 908,324 - - 913,461

Issuance of
common stock
for software
development 34,998 350 68,246 - - 68,596

Income tax
benefit
from exercise
of stock
options - - 1,071,875 - - 1,071,875
---------- ------ ---------- ---------- --------- ----------

December
31, 1999 $5,133,943 $51,339 $10,908,538 $913,186 $(220,969) $11,652,094
========== ======= =========== ======== ========= ===========

See notes to consolidated financial statements

INNODATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1999 1998 1997
---- ---- ----

OPERATING ACTIVITIES:
Net income (loss) $2,112,724 $2,249,680 $(4,200,218)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and amortization 1,797,031 1,322,721 1,321,555
Tax benefit from exercise
of options 1,071,875 - -
Restructuring costs, impairment
of assets and other - 133,141 1,500,000
Loss (gain) on disposal
of fixed assets 71,630 (74,399) -
(Gain) loss on foreign
currency contracts - (487,458) 1,400,000
Deferred income taxes (199,000) (482,000) 400,000
Changes in operating
assets and liabilities:
Accounts receivable (2,304,006) 419,834 529,363
Prepaid expenses and
other current assets (326,131) 120,459 304,924
Other assets (73,565) 23,660 (116,769)
Accounts payable and
accrued expenses 258,238 (76,805) (104,330)
Liability for foreign
currency contracts - (912,542) -
Accrued salaries and wages 680,145 208,422 15,707
Income and other
taxes payable (210,855) 102,300 78,439
------------ ---------- ----------

Net cash provided by
operating activities 2,878,086 2,547,013 1,128,671
------------ ---------- ----------

INVESTING ACTIVITIES:
Expenditures for fixed assets (3,890,848) (1,024,622) (1,015,088)
Proceeds from disposal of
fixed assets - 182,912 -
----------- ---------- -----------

Net cash used in
investing activities (3,890,848) (841,710) (1,015,088)
--------- --------- ----------

FINANCING ACTIVITIES:
Proceeds from borrowings - - 577,000
Payments of borrowings (55,990) (121,247) (779,204)
Proceeds from exercise of
stock options 913,461 19,997 -
Purchase of treasury stock - (38,372) (38,720)
----------- --------- ----------
Net cash provided by
(used in) financing activities 857,471 (139,622) (240,924)
---------- ---------- ---------

(DECREASE) INCREASE IN CASH AND
EQUIVALENTS (155,291) 1,565,681 (127,341)
CASH AND EQUIVALENTS, BEGINNING
OF YEAR 3,535,533 1,969,852 2,097,193
---------- ---------- -----------

CASH AND EQUIVALENTS, END OF YEAR $ 3,380,242 $3,535,533 $ 1,969,852
=========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 10,542 $ 32,524 $ 85,595
Income taxes $ 310,698 $ - $ -

See notes to consolidated financial statements

INNODATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND BASIS OF PRESENTATION - Innodata Corporation and subsidiaries
(the "Company") is a leading provider of Internet and on-line data conversion,
content architecture, and content management services, providing all the
necessary steps to enable its customers to create and disseminate vast amounts
of information both online and via the Internet. The Company's services are
performed in production facilities located in the Philippines, Sri Lanka, India
and the United States. The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly owned. All
intercompany transactions and balances have been eliminated in consolidation.

USE OF ESTIMATES - In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.

REVENUE RECOGNITION - Revenue is recognized in the period in which services
are performed.

FOREIGN CURRENCY - The functional currency for the Company's production
operations located in the Philippines, India and Sri Lanka is U.S. dollars. As
such, transactions denominated in Philippine pesos, Indian and Sri Lanka rupees
were translated to U.S. dollars at rates which approximate those in effect on
transaction dates. Monetary assets and liabilities denominated in foreign
currencies at December 31, 1999 and 1998 were translated at the exchange rate in
effect as of those dates. In 1997, the Company recognized a gain of $125,000
resulting from such foreign currency translation. Exchange gains and losses in
1999 and 1998 resulting from such transactions were immaterial.

STATEMENT OF CASH FLOWS - For financial statement purposes (including cash
flows), the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

DEPRECIATION - Depreciation is provided on the straight-line method over
the estimated useful lives of the related assets which are as follows:

ESTIMATED USEFUL
CATEGORY LIVES

Equipment 3-5 years
Furniture and fixtures 5-10 years

Leasehold improvements are amortized on the straight-line basis over the
shorter of their estimated useful lives or the lives of the leases.

INCOME TAXES - Deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates, as well as any net operating loss or tax credit carryforwards
expected to reduce taxes payable in future years.

ACCOUNTING FOR STOCK-BASED COMPENSATION - The Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which became effective in 1996.
As permitted by SFAS No. 123, the Company has elected to continue to account for
employee stock options under APB No. 25, "Accounting for Stock Issued to
Employees."

FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company has estimated the fair
value of financial instruments using available market information and other
valuation methodologies in accordance with SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments." Management of the Company believes that the
fair value of financial instruments for which estimated fair value has not been
specifically presented is not materially different than the related carrying
value. Determinations of fair value are based on subjective data and
significant judgment relating to timing of payments and collections and the
amounts to be realized. Different assumptions and/or estimation methodologies
might have a material effect on the fair value estimates. Accordingly, the
estimates of fair value are not necessarily indicative of the amounts the
Company would realize in a current market exchange.

INCOME (LOSS) PER SHARE - Basic earnings (loss) per share is based on the
weighted average number of common shares outstanding without consideration of
potential common stock. Diluted earnings per share is based on the weighted
average number of common and potential common shares outstanding. The
calculation takes into account the shares that may be issued upon exercise of
stock options, reduced by the shares that may be repurchased with the funds and
tax benefits received from the exercise, based on average prices during the
year.

2. FIXED ASSETS

Fixed assets, stated at cost less accumulated depreciation and
amortization, consist of the following:

DECEMBER 31, 1999 1998

Equipment $9,522,707 $6,647,870
Furniture and fixtures 501,768 427,807
Leasehold improvements 1,045,865 678,557
--------- ----------

Total 11,070,340 7,754,234

Less accumulated depreciation
and amortization 6,178,348 5,084,342
---------- -----------

$4,891,992 $2,669,892
========== ===========

As of December 31, 1999 and 1998, the net book value of fixed assets
located at the Company's production facilities in the Philippines, India and Sri
Lanka was approximately $4,217,000 and $1,553,000, respectively. In addition,
equipment financed by capital leases has a net book value of $30,000 at December
31, 1999.

3. INCOME TAXES

The significant components of the provision for (benefit from) income taxes
are as follows:

1999 1998 1997
Current income tax expense (benefit):
Foreign $ - $ 50,000 $ -
Federal 884,000 55,000 (300,000)
State and local 156,000 45,000 -
--------- -------- -----------
1,040,000 150,000 (300,000)

Deferred income tax (benefit) expense (199,000) (482,000) 400,000
---------- ------- -------
Provision for (benefit from) income taxes $ 841,000 $(332,000) $ 100,000
========== ========= =========

During 1998 the Company utilized approximately $1,100,000 of net operating
loss carryforwards, resulting in a tax benefit of $375,000.

Reconciliation of the U.S. statutory rate with the Company's effective tax
rate is summarized as follows:

1999 1998 1997

Federal statutory rate 34.0% 34.0% (34.0)%

Effect of:
Valuation allowance - (35.0) 34.0
Utilization of net operating loss carryforwards
not previously recognized - (19.5) -
State income taxes (net of federal tax benefit) .1 1.6 -
Effect of foreign tax holiday (8.1) - -
Foreign taxes - 2.6 -
Other 2.5 (1.0) 2.4
---- ----- ---

Effective rate 28.5% (17.3)% 2.4%
==== ===== ===

As of December 31, 1999 and 1998, the composition of the Company's net
deferred taxes is as follows:

1999 1998

Deferred income tax assets:
Allowances not currently deductible $ 355,000 $ 266,000
Expenses not deductible until paid 60,000 60,000
Net operating loss carryforwards 225,000 150,000
-------- -------
640,000 476,000
Less: valuation allowance (100,000) (100,000)
-------- --------
540,000 376,000
-------- --------

Deferred income tax liabilities:
Foreign source income, not taxable
unless repatriated (415,000) (415,000)
Depreciation and amortization 25,000 (10,000)
-------- --------

(390,000) (425,000)
-------- --------

Net deferred income tax asset /(liability) $ 150,000 $ (49,000)
========= =========

The valuation allowance reduces total deferred tax assets to an amount
management believes will likely be realized. At December 31, 1999, the Company's
net operating loss carryforward for federal income tax purposes of approximately
$600,000 expires in 2019. These net operating losses may be limited to annual
use based on IRS regulations.

4. LONG-TERM DEBT

Long-term debt is as follows:

1999 1998
Equipment leases, at 9.6% to 13.5% $27,048 $88,581
Less: deferred interest 2,231 7,774
------- ------

Total 24,817 80,807
Less: current portion of long-term debt 19,629 56,718
------- -------

Long-term debt $ 5,188 $24,089
======= =======

Long term debt matures as follows: 2000 - $20,878; 2001 - $6,170.

5. COMMITMENTS AND CONTINGENT LIABILITIES

LINE OF CREDIT - The Company has a line of credit with a bank in the amount
of $2 million. The line is collateralized by accounts receivable. Interest is
charged at 1/2% above the bank's prime rate and is due on demand. The line was
unused at December 31, 1999.

LEASES - The Company is obligated under various operating lease agreements
for office and production space. The agreements contain escalation clauses and
requirements that the Company pay taxes, insurance and maintenance costs. The
lease agreements for production space in the Philippines, which expire through
2004, contain provisions pursuant to which the Company may cancel the leases at
any time. The annual rental for the leased space in the Philippines is
approximately $450,000. For the years ended December 31, 1999, 1998 and 1997,
rent expense totaled approximately $850,000, $700,000 and $940,000,
respectively.

At December 31, 1999, future minimum annual rental commitments on
non-cancellable leases are as follows:

2000 $ 538,000
2001 541,000
2002 468,000
2003 293,000
2004 293,000
Thereafter 1,466,000
---------
$3,599,000
==========

EMPLOYMENT AGREEMENTS - The Company has a three-year employment
agreement through August 2000 with its President and CEO. He is currently paid
at the rate of $270,000 per annum with any bonuses and future increases at the
discretion of the Board of Directors. In addition, each December 31 during the
term of the agreement he is to receive 31,000 options to purchase common stock
of the Company at then prevailing market prices. In consideration of the signing
of the agreement he was granted five year options as follows: 30,000 options at
$1.00 per share; 49,998 at $1.67; 69,999 at $2.00; 90,000 at $2.33; and 99,999
at $5.17. The options are presently exercisable.

The Company has an employment agreement with its former President and CEO
expiring September 30, 2000 that provides for a salary of $75,000 per annum. He
serves as Vice Chairman of the Board and in executive capacities as designated
by the CEO or the Board of Directors.

LITIGATION - The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not materially
affect the Company's financial statements.

FOREIGN CURRENCY - The Company's production facilities are located in the
Philippines, India and Sri Lanka. To the extent that the currencies of these
countries fluctuate, the Company is subject to risks of changing costs of
production after pricing is established for certain customer projects, although
most arrangements are at-will and can be terminated or renegotiated.

OTHER COMMITMENTS - The Company has a collective bargaining agreement with
certain employees at its Manila facility which provides for approximately 12%
wage increases per annum plus one-half of any government mandated increases
through March 31, 2001.

PHILIPPINE PENSION REQUIREMENT - The Philippine government enacted
legislation requiring businesses to provide a lump-sum pension payment to
employees working at least five years and who are employed by the Company at age
60. Those eligible employees are to receive approximately 59% of one month's
pay for each year of employment with the Company. The terms of the collective
bargaining agreement provide benefits similar to the government. Based on
actuarial assumptions and calculations in accordance with SFAS No. 87,
"Employers' Accounting for Pensions," the liability for the future payment is
insignificant at December 31, 1999. Under the legislation, the Company is not
required to fund future costs, if any.

6. CAPITAL STOCK

COMMON STOCK - The Company's stockholders approved a one-for-three reverse
stock split effective on March 25, 1998. On August 17, 1999, the Board of
Directors declared a three-for-one stock split that was paid on September 9,
1999. All share and per share amounts have been restated to reflect such
splits.

PREFERRED STOCK - The Board of Directors is authorized to fix the terms,
rights, preferences and limitations of the preferred stock and to issue the
preferred stock in series which differ as to their relative terms, rights,
preferences and limitations.

COMMON STOCK RESERVED - At December 31, 1999, the Company reserved for
issuance 2,541,329 shares of its common stock as follows: (a) 2,461,331 shares
pursuant to the Company's Stock Option Plans (including 360,996 options issued
to the Company's Chairman and its President which were not granted under the
plans); and (b) 79,998 shares issuable upon exercise of warrants issued to
consultants.

7. STOCK OPTIONS AND WARRANTS

STOCK OPTIONS

The Company adopted, with stockholder approval, 1993, 1994, 1995, 1996 and
1998 Stock Option Plans (the "1993 Plan," "1994 Plan," "1994 DD Plan," "1995
Plan," "1996 Plan" and the "1998 Plan") which provide for the granting of
options to purchase not more than an aggregate of 262,500, 315,000, 52,500,
600,000, 499,998 and 900,000 shares of common stock, respectively, subject to
adjustment under certain circumstances. Such options may be incentive stock
options ("ISOs") within the meaning of the Internal Revenue Code of 1986, as
amended, or options that do not qualify as ISOs ("Non-Qualified Options").

The option exercise price per share may not be less than the fair market
value per share of common stock on the date of grant (110% of such fair market
value for an ISO, if the grantee owns stock possessing more than 10% of the
combined voting power of all classes of the Company's stock). Options may be
granted under the Stock Option Plan to all officers, directors and employees of
the Company and, in addition, Non-Qualified Options may be granted to other
parties who perform services for the Company. No options may be granted under
the 1993 Plan after April 30, 2003, under the 1994 Plan and 1994 DD Plan, after
May 19, 2004, under the 1995 Plan, after May 16, 2005, under the 1996 Plan,
after July 8, 2006 and under the 1998 Plan, after July 8, 2008.

The Plans may be amended from time to time by the Board of Directors of the
Company. However, the Board of Directors may not, without stockholder approval,
amend the Plans to increase the number of shares of common stock which may be
issued under the Plans (except upon changes in capitalization as specified in
the Plans), decrease the minimum exercise price provided in the Plans or change
the class of persons eligible to participate in the Plans.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, no compensation expense
has been recognized for stock options granted to employees. Had compensation
cost for the Company's stock option grants been determined based on the fair
value at the grant date for awards in 1999, 1998 and 1997 consistent with the
provisions of SFAS No. 123, the Company's net income would have been $1,503,634
or $.32 per share, basic, and $.28 per share, diluted in 1999, $1,463,259, or
$.33 per share, basic, and $.32 per share, diluted, in 1998, and net loss would
have been $(4,359,807), or $(.97) per share, in 1997. The fair value of options
at date of grant was estimated using the Black-Scholes pricing model with the
following weighted average assumptions: expected life of four years; risk free
interest rate of 5% in 1999 and 1998, and 6.4% in 1997; expected volatility of
107% in 1999 and 1998, and 40% in 1997; and a zero dividend yield. The effects
of applying SFAS No. 123 in this disclosure are not indicative of future
disclosures.

Weighted
Average
Per Weighted Fair
Share Average Weighted Weighted Value,
Range of Number Remaining Average Number Average Date
Exercise Out- Contractual Exercise Exercis- Exercise of
Prices standing Life Price able Price Grant
------- -------- ------- ------ ---------- ------- -------

Balance
1/1/97 $2.31-3.25 416,151 3 $2.71 334,539 $2.96
$3.38-5.95 452,649 3 $4.23 267,471 $4.39
------- -------
868,800 602,010
=======

Canceled $2.63-4.63 (146,649)
Granted $1.00-2.00 300,000 5 $1.21 $0.42
Granted $3.00-7.00 259,998 5 $4.48 $0.06
--------
Balance
12/31/97 $1.00-3.25 738,576 4 $2.14 347,907 $2.72
$3.38-7.00 543,573 3 $4.70 281,988 $4.32
-------- -------
1,282,149 629,895
=======

Canceled $1.25-3.50 (484,098)
Canceled $3.81-7.00 (487,629)
Granted $1.00-2.13 528,897 5 $1.83 $1.33
Granted
and
Repriced $1.67-2.88 801,780 2 $2.11 $0.89
Granted
and
Repriced $5.50 99,999 3 $5.17 $0.66
Exercised $1.00 (19,998)
--------

Balance
12/31/98 $1.00-3.01 1,611,651 3 $1.89 292,488 $1.38
$4.76-5.95 109,449 2 $5.23 9,450 $5.88
--------- ---------
1,721,100 301,938
========

Cancelled $1.00-2.27 (106,347) 3 $1.51
Granted $2.67-8.00 312,300 5 $4.21 $3.27
Exercised $1.00-3.01 (486,739) $1.92
---------

Balance
12/31/99 $1.00-1.88 330,330 2 $1.36 330,330 $1.36
$2.00-3.01 911,435 3 $2.33 514,235 $2.28
$4.76-8.00 198,549 2 $6.47 109,449 $5.23
-------- --------
1,440,314 954,014
========= ========

WARRANTS
In connection with consulting agreements, the Company issued warrants to
purchase 79,998 shares at prices of $3.50 - 3.81 per share.

8. SEGMENT REPORTING

The Company's operations are classified in two business segments; Internet
and on-line data conversion and content management services, and document
imaging services.

Internet and on-line data conversion and content management services
provide all the necessary steps for product development and data conversion to
enable its customers to create and disseminate vast amounts of information both
on-line and via the Internet. Its customers represent an array of Internet
content providers and major electronic publishers of legal, scientific,
educational, and medical information, as well as document-intensive companies
repurposing their proprietary information into electronic resources that can be
referenced via web-centric applications.

During 1998 and 1997, one customer that is comprised of twelve affiliated
companies, accounted for 21% and 16% of the Company's Internet and on-line data
conversion and content management service revenues, respectively. One other
customer accounted for 17%, 13% and 10% of such revenues in 1999, 1998 and 1997,
respectively. No other customer accounted for 10% or more of such revenues.
Further, in 1999, 1998 and 1997, export revenues, all of which were derived from
European customers, accounted for 21%, 22% and 24%, respectively, of such
revenues. A significant amount of the Company's revenues are derived from
customers in the publishing industry. Accordingly, the Company's accounts
receivable generally include significant amounts due from such customers.

The document imaging services segment provides high volume backfile and
day-forward conversion of business documents, technical manuals, engineering
drawings, aperture cards, roll film, and microfiche, providing high quality
computer accessible images and indexing.

During 1999, three customers accounted for 30%, 16% and 12%, respectively,
of the Company's document imaging service revenues, respectively. During 1998
and 1997 one other customer accounted for 53% and 11% of such revenues,
respectively. Another customer accounted for 10% of such revenues in 1997. No
other customer accounted for 10% or more of such revenues.

1999 1998 1997
Revenues
- - --------
Internet and on-line services $26,459,447 $17,401,346 $18,032,232*
Document imaging services 1,030,691 2,192,007 2,084,703
---------- ---------- ----------

Total consolidated $27,490,138 $19,593,353 $20,116,935
=========== =========== ===========

*Includes $2,612,000 from journal and book pagination and medical transcription
businesses that were discontinued in 1997.

Income (loss) before income taxes
- - ---------------------------------
Internet and on-line services $ 3,523,682 $ 3,151,928(a) $(2,894,158)(c)
Document imaging services (569,958) (1,234,248)(b) (1,206,060)(d)
---------- ----------- -----------

Total consolidated $ 2,953,724 $ 1,917,680 $(4,100,218)
=========== =========== ==========

(a) Includes gain on foreign currency contracts and reversal of previously
estimated liabilities of $736,000.
(b) Includes write off of goodwill of $382,000.
(c) Includes loss on foreign currency contracts and restructuring costs of
$2,107,000.
(d) Includes restructuring costs of $793,000.

1999 1998 1997
Total assets
- - -----------------------------
Internet and on-line services $15,437,090 $ 9,520,116 $ 8,703,927
Document imaging services 208,787 1,075,392 1,325,320
----------- ----------- -----------

Total consolidated $15,645,877 $10,595,508 $10,029,247
============ =========== ===========
Capital expenditures
- - ---------------------
Internet and on-line services $ 3,881,870 $ 980,218 $ 907,535
Document imaging services 8,978 44,404 107,553
----------- ----------- -----------

Total consolidated $ 3,890,848 $ 1,024,622 $ 1,015,088
=========== =========== ===========

Depreciation and amortization
- - -----------------------------
Internet and on-line services $ 1,660,801 $ 1,116,445 $ 1,048,875
Document imaging services 136,230 206,276 272,680
----------- ----------- ----------

Total consolidated $ 1,797,031 $ 1,322,721 $ 1,321,555
=========== =========== ===========

9. INCOME (LOSS) PER SHARE

1999 1998 1997

Net income (loss) $2,112,724 $2,249,680 $(4,200,218)
========== ========== ===========
Weighted average common shares
outstanding 4,675,372 4,435,224 4,503,129
Dilutive effect of outstanding
warrants and options 648,066 94,173 -
--------- --------- ---------
Adjusted for dilutive computation 5,323,438 4,529,397 4,503,129
========= ========= =========
Basic income (loss) per share $.45 $.51 $(.93)
==== ==== =====
Diluted income (loss) per share $.40 $.50 $(.93)
==== ==== =====

Reference is made to Note 7 with respect to options and warrants that would
have been dilutive in 1997 had there not been a loss in that year.

10. RESTRUCTURING COSTS AND IMPAIRMENT OF ASSETS

During the second quarter of 1997 management implemented a plan to reduce
the Company's U.S. based overhead. The principal actions were to eliminate U.S.
production for the publishing services division and merge the east and west
coast document imaging operations into one facility on the west coast. The
restructuring costs consisted of estimated losses on leases and severance pay
totaling approximately $325,000, while the impairment costs consisted of a
write-off of goodwill in connection with the document imaging business totaling
approximately $700,000 and fixed assets related to both the imaging and
publishing services businesses totaling approximately $475,000.

In the fourth quarter of 1998, management determined that its plans to
significantly increase the revenues of the document imaging services segment
were not realized. It was determined that the goodwill associated with the
business could not be recovered. Accordingly, the remaining unamortized amount
of $382,000 was written off at December 31, 1998. Further, certain estimated
liabilities for restructuring and other items totaling $249,000 were deemed in
excess of actual amounts payable and were recognized as income in the fourth
quarter of 1998.

11. FOREIGN CURRENCY CONTRACTS

12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
(in thousands, except per share)
1997
Revenues $4,663 $5,357 $5,269 $4,828
Net loss (449) (2,415) (1,278) (58)
Net loss per share $(.10) $ (.54) $(.28) $(.01)

1998
Revenues $4,600 $4,200 $5,309 $5,484
Net income 414 636 469 731
Net income per share $.09 $.14 $.11 $.17
Diluted net income
per share $.09 $.14 $.10 $.16

1999
Revenues $5,611 $7,026 $7,073 $7,780
Net income 291 968 585 269
Net income per share $.07 $.21 $.12 $.05
Diluted net income
per share $.06 $.18 $.11 $.05

PART III
--------

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

OFFICERS AND DIRECTORS

The officers and directors of the Company are as follows:

NAME AGE POSITION
- - ---- --- --------

Barry Hertz 50 Chairman of the Board of Directors

Jack Abuhoff 38 President, Chief Executive Officer and Director

Todd Solomon 38 Vice Chairman of the Board of Directors and
Consultant

Martin Kaye 52 Executive Vice President, Chief Financial Officer,
Secretary and Director

Stephen Agress 38 Vice President - Finance

Jurgen Tanpho 35 Vice President - Operations

Jan Palmen 45 Vice President - Sales

Dr. Albert Drillick 54 Director

Dr. E. Bruce Fredrikson 62 Director

Morton Mackof 52 Director

Stanley Stern 49 Director

BARRY HERTZ has been Chairman since 1988 and Chief Executive Officer of the
Company until August 1995. He founded Track Data Corporation ("Track") in 1981.
He was Track's sole stockholder and Chief Executive Officer until its merger
(the "Merger") on March 31, 1996 with Global Market Information, Inc.
("Global"), a public company co-founded by Mr. Hertz, who was its Chairman and
Chief Executive Officer. Upon consummation of the Merger, Global changed its
name to Track Data Corporation ("TDC"). Mr. Hertz holds a B.S. degree in
mathematics from Brooklyn College (1971) and an M.S. degree in computer science
from New York University (1973).

JACK ABUHOFF has served as President and CEO since September 15, 1997. He
has been a Director of the Company since its founding. From 1995 to 1997 he was
Chief Operating Officer of Charles River Corporation, an international systems
integration and outsourcing firm. From 1992 to 1994, he was employed by
Chadbourne & Parke, and engaged in Sino-American technology joint ventures with
Goldman Sachs. He practiced international corporate law with White & Case from
1986 to 1992. He holds an A.B. degree from Columbia College (1983) and a J.D.
degree from Harvard Law School (1986).

TODD SOLOMON has been Vice Chairman and consultant to the Company since his
resignation as President and CEO on September 15, 1997. He served as President
and a Director of the Company since its founding by him in 1988. He had been
Chief Executive Officer since August 1995. Mr. Solomon was President of Ruck
Associates, an executive recruiting firm from 1986 until 1987. Mr. Solomon
holds an A.B. in history and physics from Columbia University (1986).

MARTIN KAYE has been Chief Financial Officer of the Company since October
1993, was elected Vice President - Finance in August 1995 and was elected
Executive Vice President in March 1998. He has been a Director since March
1995. He is a certified public accountant and serves as Vice President of
Finance and a Director of TDC. Mr. Kaye had been an audit partner with Deloitte
& Touche for more than five years until his resignation in 1993. Mr. Kaye holds
a B.B.A. in accounting from Baruch College (1970).

STEPHEN AGRESS was elected Vice President - Finance in March 1998. He
served as Corporate Controller since joining the Company in August 1995. Mr.
Agress is a certified public accountant and had been a senior audit manager with
Deloitte & Touche for more than five years prior to his resignation in 1995. Mr.
Agress holds a B.S. in accounting from Yeshiva University (1982).

JURGEN TANPHO was elected Vice President - Operations in March 1998. He
served in various management capacities since joining the Company in 1991, most
recently in the position of Assistant to the President of Manila Operations. He
holds a B.S. degree in industrial engineering from the University of the
Philippines (1986).

JAN PALMEN was elected Vice President - Sales in February 1999. Mr. Palmen
was chief operating officer at SPI Technologies, Inc., a leading competitor of
the Company, from 1995 through 1998. Prior to SPI, he was general manager,
production for Reed/Elsevier from 1991 through 1995. He was also a member of the
steering committee for global SGML implementation. Before that, he spent three
years with United Dutch Publishers as head of sales and production and two years
with a global management consultancy company as a strategic consultant. He holds
a M.B.A. degree (1979) in marketing, economics and logistics management and a
B.B.A. degree (1976) in economics and marketing, both from Erasmus University in
Amsterdam.

DR. ALBERT DRILLICK has been a Director of the Company since 1990. He has
served as a director of applications and senior systems analyst for TDC for more
than the past five years. He holds a Ph.D. degree in mathematics from New York
University Courant Institute (1971).

DR. E. BRUCE FREDRIKSON has been a Director of the Company since August
1993. He is currently a professor of finance at Syracuse University School of
Management where he has taught since 1966 and has previously served as chairman
of the finance department. Dr. Fredrikson has a B.A. in economics from
Princeton University and a M.B.A. and a Ph.D. in finance from Columbia
University. He is a director of Eagle Finance Corp., a company that acquires
and services non-prime automobile installment sales contracts. He is also an
independent general partner of Fiduciary Capital Partners, L.P. and Fiduciary
Capital Pension Partners, L.P. He is also a director of TDC.

MORTON MACKOF has been a Director of the Company since April 1993. He has
been a senior negotiations executive for IBM Global Services, a division of IBM,
since December 1998. He is also President and CEO of Third Millennium
Technology Inc., a company involved in information technology consulting and
software development. He was Executive Vice President of Track since February
1991 and was elected its President in December 1994. He served as President
until his resignation in November 1996. From 1986 to 1991, he was President of
Medical Leasing of America, Inc. He holds a B.S. degree in electrical
engineering from Rensselaer Polytechnic Institute (1970) and did graduate work
in computer science. He is also a director of TDC.

STANLEY STERN has been a Director of the Company since August 1988. Since
January 1998, Mr. Stern has been Chief Operating Officer of Integrated Medical
Technologies, Inc., an Internet-based provider of medical services information.
He was chief operating officer of Track, and in predecessor positions, for more
than five years and was Executive Vice President of TDC until his resignation in
December 1996. Mr. Stern holds a B.B.A. from Baruch College (1973). He is
also a director of TDC.

There are no family relationships between or among any directors or
officers of the Company. Directors are elected to serve until the next annual
meeting of stockholders and until their successors are elected and qualified.
Officers serve at the discretion of the Board.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The Company believes that during the period from January 1, 1999 through
December 31, 1999 all officers, directors and greater than ten-percent
beneficial owners complied with Section 16(a) filing requirements.

ITEM 11. EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation
paid by the Company for services to the Company during the three fiscal years
ended December 31, 1999 to those executive officers whose aggregate cash and
cash equivalent compensation exceeded $100,000.

SUMMARY COMPENSATION TABLE

NUMBER OF
NAME AND PRINCIPAL CALENDAR ANNUAL COMPENSATION STOCK OPTIONS
POSITION YEAR SALARY BONUS AWARDED

Jack Abuhoff 1999 $250,000 $50,000 45,000
President, CEO since 1998 200,000 20,000 62,499
September 1997 (A)328,542
1997 37,500 - 343,500

Barry Hertz 1999 $75,000 $ - 45,000
Chairman 1998 75,000 - 42,000
(A)111,000
1997 50,000 - 39,999

Todd Solomon 1999 $75,000 $ - 31,500
President, CEO through 1998 93,750 - 31,500
September 1997, Vice (A)215,097
Chairman of the Board 1997 209,166 - 60,999
and Consultant thereafter

Stephen Agress 1999 $160,000 $ - 18,000
Vice President - Finance

Jan Palmen 1999 $110,000 $38,000 18,000
Vice President - Sales

<FN>

(A) Options granted in prior years and repriced in 1998

The above compensation does not include certain insurance and other personal
benefits, the total value of which does not exceed as to any named officer, the
lesser of $50,000 or 10% of such person's cash compensation. The Company has
not granted any stock appreciation rights nor does it have any "long-term
incentive plans," other than its stock option plans.

OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS

POTENTIAL
REALIZED
PERCENT OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED TO EXERCISE EXPIR- STOCK APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE ATION OPTION TERM
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%

Jack Abuhoff 45,000 14% $2.67 6/2004 $33,300 $73,350
Barry Hertz 45,000 14% 2.67 6/2004 33,300 73,350
Todd Solomon 31,500 10% 2.67 6/2004 23,310 51,345
Stephen Agress 18,000 6% 2.67 6/2004 13,320 29,340
Jan Palmen 18,000 6% 2.67 6/2004 13,320 29,340

The options become exercisable one half on the first anniversary and one half on
the second anniversary.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR;
FISCAL YEAR END OPTION VALUES

NUMBER OF VALUE OF UN
UNEXERCISED EXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE

Jack Abuhoff 63,378 $660,670 345,411/60,750 $1,749,229/$330,705
Barry Hertz 60,000 $569,814 111,999/66,000 $678,763/$361,890
Todd Solomon 74,349 $694,687 217,497/47,250 $1,352,930/$259,560
Stephen Agress 31,500 $237,280 9,999/57,000 $57,052/$326,520
Jan Palmen 9,000 $74,071 -0-/27,000 $-0-/$148,320

DIRECTORS COMPENSATION

Dr. E. Bruce Fredrikson and Stanley Stern were compensated at the rate of
$1,250 and $833 per month, respectively, plus out-of-pocket expenses for each
meeting attended. No other director is compensated for his services as
director. Further, Messrs. Fredrikson and Stern received options to purchase
7,500 and 3,600 shares, respectively, in 1999.

EMPLOYMENT AGREEMENTS

The Company has a three-year employment agreement through August 2000 with
Jack Abuhoff, its President and CEO. He is currently paid at the rate of
$270,000 per annum with any bonuses and future increases at the discretion of
the Board of Directors. In addition, each December 31 during the term of the
agreement he will receive 31,000 options to purchase common stock of the Company
at then prevailing market prices. In consideration of the signing of the
agreement he was granted five year options as follows: 30,000 options at $1.00
per share; 49,998 at $1.67; 69,999 at $2.00; 90,000 at $2.33; and 99,999 at
$5.17. The options are presently exercisable.

The Company has an employment agreement with Todd Solomon, its former
President and CEO, expiring September 30, 2000 that provides for a salary of
$75,000 per annum. He will serve as Vice Chairman of the Board and in executive
capacities as designated by the CEO or the Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For the Company's fiscal year ended December 31, 1999, Messrs. Hertz,
Abuhoff and Kaye were officers of the Company and were members of the Board of
Directors (there is no compensation committee). Mr. Hertz is Chairman and CEO of
Track Data and Mr. Kaye is chief financial officer and a director of Track Data.
Messrs. Fredrikson, Mackof and Stern are also directors of Track Data.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of February 29, 2000, information
regarding the beneficial ownership of the Company's Common Stock based upon the
most recent information available to the Company for (i) each person known by
the Company to own beneficially more than five (5%) percent of the Company's
outstanding Common Stock, (ii) each of the Company's officers and directors, and
(iii) all officers and directors of the Company as a group. Unless otherwise
indicated, each stockholder's address is c/o Company, 95 Rockwell Place,
Brooklyn, NY 11217.

SHARES OWNED BENEFICIALLY (1)
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS

Track Data Corporation (2) 633,744 12.6%

Barry Hertz (3) 754,143 14.7%

Todd Solomon (4) 706,440 13.5%

Jack Abuhoff (5) 372,411 6.9%

Martin Kaye (6) 96,249 1.9%

Stephen Agress (7) 47,010 *

Jurgen Tanpho (8) 8,835 *

Jan Palmen (8) -0- *

Albert Drillick (9) 12,460 *

Dr. E. Bruce Fredrikson (10)
Syracuse University
School of Management
Syracuse, NY 13244 35,745 *

Morton Mackof (11) 19,084 *

Stanley Stern (12) 5,575 *

All Officers and Directors
as a Group (11 persons)
(3)(4)(5)(6)(7)(8)(9)(10)(11)(12) 2,057,952 35.2%

<FN>

______________________________
* Less than 1%.
1. Except as noted otherwise, all shares are owned beneficially and of record.
Includes shares pursuant to options presently exercisable or which are
exercisable within 60 days. Based on 5,018,734 shares outstanding.
2. Consists of 633,744 shares owned by Track Data Corporation ("TDC"), which is
majority owned by Mr. Hertz.
3. Includes 633,744 shares owned by TDC, which is majority owned by Mr. Hertz,
8,400 shares held in a pension plan for the benefit of Mr. Hertz and currently
exercisable options to purchase 111,999 shares of Common Stock.
4. Includes currently exercisable options to purchase 217,497 shares of Common Stock.
5. Includes currently exercisable options to purchase 345,411 shares of Common Stock.
6. Includes currently exercisable options to purchase 86,250 shares of Common Stock.
7. Includes 35,511 shares owned of record and currently exercisable options to
purchase 9,999 shares of Common Stock. Also includes exercisable options to purchase
1,500 shares of Common Stock by his wife. Mr. Agress disclaims beneficial ownership in shares attributable to his wife.
8. Consists of shares issuable upon exercise of currently exercisable options granted
under the Company's Stock Option Plans.
9. Includes 12,460 shares held in the Track Data Phantom Unit Trust ("TD Trust")
to be released upon termination of association with the Company and TDC, or earlier
with approval of the Board of Directors of TDC.
10. Includes currently exercisable options to purchase 31,746 shares of Common Stock.
11. Includes currently exercisable options to purchase 6,624 shares of Common Stock
and 12,460 shares held in the TD Trust to be released upon termination of
association with the Company and TDC, or earlier with approval of the Board of
Directors of TDC.
12. Includes currently exercisable options to purchase 840 shares of Common Stock
and 4,735 shares held in the TD Trust to be released upon termination of
association with the Company and TDC, or earlier with approval of the Board of
Directors of TDC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

There were no material related party transactions.

PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits which are indicated as being included in previous filings are
incorporated herein by reference.

EXHIBIT DESCRIPTION FILED AS EXHIBIT
- - ------- ----------- ----------------
3.1 Restated Certificate of Incorporation Exhibit 3.1 to Form SB-2
Registration Statement
No. 33-62012

3.2 By-Laws Exhibit 3.2 to Form SB-2
Registration Statement
No. 33-62012

4.2 Specimen of Common Stock certificate Exhibit 4.2 to Form SB-2
Registration Statement
No. 33-62012

10.1 1994 Stock Option Plan Exhibit A to Definitive
Proxy dated August 9, 1994

10.2 Contract of Lease with
JM and Company, Inc. Filed herewith

10.3 Contract of Lease with Elcado
Realty Corporation Filed herewith

10.4 1993 Stock Option Plan Exhibit 10.4 to Form SB-2
Registration Statement
No. 33-62012

10.5 Form of Indemnity Agreement
with Directors Exhibit 10.5 to Form SB-2
Registration Statement
No. 33-62012

10.6 1994 Disinterested Directors
Stock Option Plan Exhibit B to Definitive
Proxy dated August 9, 1994

10.7 Contract of Sublease with
Computer Leasing, Inc. Exhibit 10.11 to Form 10-KSB
for year ended
December 31, 1995

10.8 1995 Stock Option Plan Exhibit A to Definitive
Proxy dated August 10, 1995

10.9 1996 Stock Option Plan Exhibit A to Definitive
Proxy dated November 7, 1996

10.10 Employment Agreement dated Exhibit 10.11 to Form 10-KSB
August 19, 1997 with Jack Abuhoff for the year ended
December 31, 1997

10.11 1998 Stock Option Plan Exhibit A to Definitive
Proxy dated
November 5, 1998

21 Subsidiaries of Small Business Issuer Filed herewith

23 Consent of Grant Thornton LLP Filed herewith

27 Financial Data Schedule Filed herewith
<FN>

(b) There were no reports on Form 8-K filed during the quarter ended December
31, 1999.

SIGNATURES
- - ----------

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

INNODATA CORPORATION

By /s/
------------------------------
Barry Hertz
Chairman of the Board

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature Title Date
- - --------- ------ -----

/s/ Chairman of the Board March 27, 2000
- - -----------------------
Barry Hertz

/s/ President, Chief Executive Officer March 27, 2000
- - ----------------------- and Director
Jack Abuhoff

/s/ Vice Chairman of the Board March 27, 2000
- - -----------------------
Todd Solomon

/s/ Executive Vice President (Principal March 27, 2000
- - ----------------------- Financial Officer), Director
Martin Kaye

/s/ Vice President - Finance (Principal March 27, 2000
- - ----------------------- Accounting Officer)
Stephen Agress

/s/ Director March 27, 2000
- - -----------------------
Dr. Albert Drillick

/s/ Director March 27, 2000
- - -----------------------
Dr. E. Bruce Fredrikson

/s/ Director March 27, 2000
- - -----------------------
Morton Mackof

/s/ Director March 27, 2000
- - -----------------------
Stanley Stern

EXHIBIT 21
----------

SUBSIDIARIES
------------

NAME OF SUBSIDIARY STATE OR OTHER NAME UNDER WHICH
JURISDICTION OF SUBSIDIARY
INCORPORATION CONDUCTS BUSINESS

Innodata Philippines, Inc.* Philippines Same
Innodata India (Private) Limited* India Same

* Wholly-owned by Innodata Asia Holdings, Limited which is 100% owned by
Innodata Corporation.

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We have issued our report dated March 2, 2000 accompanying the consolidated
financial statements included in the Annual Report of Innodata Corporation on
Form 10-K for the year ended December 31, 1999. We hereby consent to the
incorporation by reference of said reports in the Registration Statements of
Innodata Corporation on Form S-8 (Registration No. 33-85530, dated October 21,
1994, Registration No. 333-3464, dated April 18, 1996, Registration No.
33-63085, dated September 9, 1998 and Registration No. 333-82185, dated July 2,
1999) and on Form S-3 (Registration No. 33-62012, dated April 11, 1996 and
Registration No. 333-91649, dated January 6, 2000).

Grant Thornton LLP
New York, New York
March 2, 2000