<PAGE>

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

                                  Form 10-KSB

(Mark One)

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

                  For the fiscal year ended December 31, 2000

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

For the transition period from ______________________ to _______________________

                         Commission File No. 001-14217

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                (Name of Small Business Issuer in its Charter)

           Nevada                                         88-0322261
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

  600 Century Plaza Drive, Suite 140, Houston, Texas      77073-60
      (Address of principal executive offices)           (zip code)

                    Issuer's telephone number     (281) 821-3200

     Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class                 Name of each exchange on which registered
---------------------               -----------------------------------------
     Common                                   American Stock Exchange

     Securities registered pursuant to Section 12(g) of the Exchange Act:
                                Not applicable

     Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months or for such
shortened period that the issuer was required to file such reports, and (2) has
been subject to such filing requirements for the past 90 days.    Yes   X
                                                                     ------
No____

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ______.

     The issuer's revenues for fiscal year ended December 31, 2000 were
$16,976,023.

     The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 19, 2001 was $2,026,543. The issuer has no authorized
non-voting stock.

     The number of shares outstanding of each of the registrant's classes of
stock on March 19, 2001 is as follows:

  $0.001 Par Value Common Stock_______________________________12,964,918 shares



                      DOCUMENTS INCORPORATED BY REFERENCE

                                     None


 Transitional Small Business Disclosure Format: Yes __   No    X
                                                            ------
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                      -----------------------------------
                               2000 FORM 10-KSB
                               ----------------
                               TABLE OF CONTENTS
                               -----------------

                                    PART I
                                    ------
<TABLE>
<S>                                                                               <C>
Item 1.    Description of Business.............................................    2

Item 2.    Description of Property.............................................   12

Item 3.    Legal Proceedings...................................................   12

Item 4.    Submission of Matters to a Vote of Security Holders.................   13

                                    PART II

Item 5.    Market for Common Equity and Related Stockholder Matters............   13

Item 6.    Management's Discussion and Analysis or Plan of Operation...........   14

Item 7.    Financial Statements................................................   18

Item 8.    Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure................................................   35

                                    PART III

Item 9.    Directors and Executive Officers; Promoters and Control Persons,
           Compliance with Section 16(a) of the Exchange Act...................   35

Item 10.   Executive Compensation..............................................   38

Item 11.   Security Ownership of Certain Beneficial Owners and Management......   40

Item 12.   Certain Relationships and Related Transactions......................   40

                                    PART IV

Item 13.   Exhibits and Reports on Form 8-K....................................   41

Signatures.....................................................................   47
</TABLE>

                                       i
<PAGE>

                                    PART I

            CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

     Certain of the statements made in this including matters discussed under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as oral statements made by the Company and its
officers, directors or employees, may constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements are based on
Management's beliefs, current expectations, estimates and projections about the
industries which the Company and its subsidiaries serve, the economy and about
the Company in general. The words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate" and similar expressions are intended to identify
such forward-looking statements; however, this Report also contains other
forward-looking statements in addition to historical information. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, such forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to differ
materially from historical results or from any results expressed or implied by
such forward-looking statements. The Company cautions readers that the following
important factors, among others, could cause the Company's actual results to
differ materially from the forward-looking statements contained in this Report:
(i) the effect of changes in laws and regulations, with which the Company must
comply, and the associated costs of compliance with such laws and regulations
either currently or in the future as applicable; (ii) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as by the Financial Accounting Standards Board, or of changes in the
Company's organization, compensation and benefit plans; (iii) the effect on the
Company's competitive position within its market area of the increasing
consolidation within its services industries, including the increased
competition from larger regional and out-of-state engineering services
organizations; (iv) the effect of increases and decreases in oil prices, (v) the
inability to get parts from vendors (vi) the inability to renew its line of
credit; and (vii) the effect of changes in the business cycle and downturns in
local, regional and national economies. The Company cautions that the foregoing
list of important factors is not exclusive. We are under no duty to update any
of the forward-looking statements after the date of this Report to conform such
statements to actual results.

     The following summary is qualified in its entirety by, and should be read
in connection with the more detailed information contained herein and in the
Company's Consolidated Financial Statements, and the Notes thereto, included
elsewhere in this Annual Report on Form 10-KSB. References to the "Company" or
to "IDSC" refer to Industrial Data Systems Corporation. References to "IDS"
refer to the Company's wholly owned subsidiary, Industrial Data Systems, Inc.
References to "IED" refer to the Company's wholly owned subsidiary, IDS
Engineering, Inc. References to "Thermal" refer to the Company's wholly owned
subsidiary, Thermaire, Inc. dba Thermal Corp. References to "CPM" refer to the
Company's wholly owned subsidiary, Constant Power Manufacturing, Inc. References
to "IDS FAB" refer to the Company's previously wholly owned subsidiary, IDS
Fabricated Systems, Inc. dba Marine and Industrial Fire and Safety and dba
Marine and Industrial Supply Company. The consolidated historical financial
statements related to these subsidiaries are included in this Annual Report on
Form 10-KSB.
<PAGE>

ITEM 1.  DESCRIPTION OF BUSINESS


General

     Industrial Data Systems Corporation (IDSC) was incorporated in the State
of Nevada in June 1994.  The Company's Common Stock trades on the American Stock
Exchange under the symbol "IDS."  Prior to June 16, 1998, the Company's Common
Stock was traded on the NASDAQ Electronic Bulletin Board under the symbol
"IDDS."

     The Company has never filed for protection under the bankruptcy protection
act, nor has the Company or any of its assets been in receivership or any other
similar proceedings.

     The Company's revenue is derived from its wholly owned operating
subsidiaries:  IDS Engineering, Inc., Thermaire, Inc. dba Thermal Corp., and
Constant Power Manufacturing, Inc.

IDS Engineering, Inc. (IED)
---------------------------

     On October 15, 1997 the consulting engineering segment of the Company,
formerly known as Industrial Data Systems, Inc. doing business as IDS
Engineering, was incorporated in the State of Texas and now operates as IDS
Engineering, Inc. (IED).  The Company issued all of its 1,000 shares of Common
Stock to Industrial Data Systems Corporation.

     The Company's Engineering segment generates revenues by providing
engineering consulting services to the pipeline and process divisions of major
integrated oil and gas companies.  These services include the development,
management and turnkey execution of engineering projects, and accounted for 63%
of total Company revenues in 2000.

     In February 1999, IED established a business development office in Tulsa,
Oklahoma to pursue turnkey engineering, procurement and construction (EPC)
projects.  In 2000, this office was expanded to include a full engineering and
drafting operation.  IED also continues to do business at its headquarters in
Houston.

Thermaire, Inc. dba Thermal Corp (THERMAL)
------------------------------------------

     The Company acquired Thermaire, Inc. dba Thermal Corp. (Thermal) on
February 14, 1997 for 193,719 shares of Common Stock and $212,563 in cash. In
connection with this transaction, Thermal purchased its previously leased
facilities on February 28, 1997 for a cash consideration of $500,000, subject to
the completion of the contingent purchase transaction. Bank financing in the
amount of $450,000 was obtained for the purpose of purchasing these facilities.
See Notes to Financial Statements for debt remaining under this bank financing.

     Thermal Corporation, the air handling segment, fabricates air handling
equipment for commercial heating ventilation and cooling systems and is
responsible for approximately 20% of the Company's revenues.

                                       2
<PAGE>

Constant Power Manufacturing, Inc. (CPM)
----------------------------------------

     On February 19, 1998, the Company signed a letter of intent to acquire
Constant Power Manufacturing, Inc. (CPM), a Texas corporation formed in June
1989.  The acquisition was consummated on March 25, 1998 with the exchange of
$200,000 cash and 300,000 shares of the Company's Common Stock for 100% of CPM's
shares.  CPM's previous owner, Jack Ripley, has remained with CPM as Sales
Manager.

     Constant Power Manufacturing, Inc., the manufacturing segment,
manufactures industrial grade uninterruptible electrical power systems and
battery chargers and is responsible for approximately 17% of the Company's
revenues.

Industrial Data Systems, Inc. (IDS)
-----------------------------------

     IDS was a provider of specialized microprocessor systems targeted to be
sold to the industrial market.  As reported in the Form 10-QSB for the quarter
ended September 31, 2000, Industrial Data Systems, Inc., previously referred to
as the products segment, represented approximately 2.5% of the Company's
revenues.  Due to increased competition in the computer hardware market and
diminishing profit margins, management, in the fourth quarter, elected to
combine the operations of this segment with CPM's manufacturing operation.
Through CPM, the Company will continue to receive and fill orders from existing
customers, and service its products but the Company will no longer actively
market these products.

IDS Fabricated Systems, Inc. dba Marine and Industrial Fire and Safety and dba
------------------------------------------------------------------------------
Marine and Industrial Supply Company (IDS FAB)
----------------------------------------------

     In November 1998, the Company acquired MLC Enterprises, Inc. (MLC), a
Texas corporation formed in August 1995, doing business as Marine and Industrial
Fire & Safety (MIFS) and Marine and Industrial Supply Company (MISC).  The
Company issued 50,000 shares of the Company's Common Stock for 100% of MLC's
shares.  Cash consideration of $100,000 was paid to the previous principal as
part of an employment contract.  Goodwill in the amount of  $593,000 was
generated as a result of the acquisition.  Subsequent to the acquisition, MLC's
name was changed to IDS Fabricated Systems, Inc. (IDS FAB).  This transaction
was rescinded effective October 28, 1999 as the result of a final Settlement
Agreement entered into by the Company and the former principal of MLC which is
incorporated by reference as Exhibit 10.31 on the Company's Form 10-QSB for the
quarter ended September 30, 1999.  As a result of the Settlement Agreement, all
claims of the parties, including counter-claims and third-party claims made by
the Company, have been dismissed.

     Terms of the settlement included rescission of the previously executed
Stock Acquisition Agreement of MLC Enterprises, Inc. and rescission of the
Company's Employment Agreement with the former principal.  The settlement also
called for the return of all stock issued and exchanged pursuant to the Stock
Acquisition Agreement.  As a result, MLC Enterprises, Inc. (which had been
renamed IDS Fabricated Systems, Inc.) is no longer a subsidiary of the Company.
The former principal has individually assumed all assets and liabilities of MLC
pursuant to the terms of the Settlement Agreement.

     As a result of the settlement and due to the magnitude of previous write-
offs associated with the MLC acquisition, the Company recorded a one-time gain
during the fourth quarter ended December 31, 1999, since liabilities exceeded
assets at the date the rescission occurred.

                                       3
<PAGE>

These amounts have all been netted and reflected as discontinued operations on
the Company's Statement of Operations for 1999. See additional details in the
MD&A and Financial Statements sections of this Report on Form 10-KSB.


Products and Services

     IED

     IED offers engineering consulting services primarily to the pipeline and
process industries for the development, management and turnkey execution of
engineering projects. IED also performs the execution of capital projects for
its clients on a full service, turnkey basis.  IED's staff has the capability of
developing a project from the initial planning stages through detailed design
and construction management.

     IED provides its services through blanket service contracts that typically
provide that IED will furnish engineering, procurement and project management
services for client companies on a time and materials basis.  In 2000, the
Company was successful in procuring a number of contracts which call for turnkey
execution of projects on a fixed price price basis.  The services provided
include conceptual studies, project definition, cost estimating, engineering
design, and material procurement, in addition to project and construction
management. These services are performed for major energy-related firms on
facilities that include cross-country pipelines, pipeline pump stations, gas
compressor stations, metering systems, product storage facilities, product
loading terminals, gas processing facilities, chemical plants, crude oil
refineries and electric power generation facilities.

     IED offers its clients a wide range of services from a single source
provider. Engineering projects handled by IED involve either modifications to
existing facilities or as new construction. IED develops new client business
relationships utilizing in-house personnel.

     The Advanced Controls division of IED was established in 2000 for the
purpose of providing specialized expertise to clients for the design and
implementation of their automation and control system requirements. IED
personnel offer comprehensive, turnkey services for the automation and control
of various industrial processes including but not limited to compressor
stations, material handling, data acquisition, position measuring, environmental
and safety monitoring, and factory automation. IDS personnel provide feasibility
studies, engineering, design, estimating, configuration and programming,
construction, commissioning, startup, troubleshooting, and operation of control
systems and have extensive experience in field operations and maintenance.

     THERMAL

     Thermal has manufactured quality air handling equipment since 1945. Because
Thermal stocks a large number of fans and manufactures coils, dampers, curbs and
most other accessories, the Company believes that it can achieve one of the
quickest deliveries available in the industry, usually six to eight weeks,
depending on order size and scope. Thermal also reserves production capacity to
accomplish premium, expedited deliveries of two to four weeks, when necessary.
Thermal is well known for its design and manufacturing expertise and
flexibility, which is often required to meet the special needs for custom
installations.

                                       4
<PAGE>

Thermal's product lines consist of a variety of cooling, heating and ventilating
equipment. The wide range of sizes and models in each product line coupled with
Thermal's manufacturing flexibility provides vast freedom in air handling
equipment choice. Thermal's quality air handling products include central plant
air conditioners, multizone air conditioners, high pressure air conditioners,
and air cooled condensers. Thermal also manufactures fan coil units, cooling and
heating coils, and roof top air handlers. Popular custom unit features include
special modular construction, custom cabinet dimensions, special insulation type
and thickness, gas and electric heaters, humidifiers, all types of fans, non-
standard arrangements, motor and unit controls, unique customer requirements,
exotic materials of construction and severe service applications, etc.

     Thermal distributes its products exclusively through its United States and
international network of non-stocking sales representatives.

     CPM

     CPM is a thirteen-year-old company established in the industrial and
commercial backup and conditioned power systems marketplace.  CPM designs,
manufactures and resells both standard and custom-designed products and systems
in a wide array of power ranges which include: battery chargers, battery
monitoring systems, DC power supplies, DC/AC inverters, uninterruptible power
systems (UPS), power conditioners, power distribution systems and solar photo-
voltaic systems.

     CPM provides field service support for installation and maintenance of
these products. Most of the products manufactured by CPM are made pursuant to
specifications required for a particular order. In mid-1999, CPM introduced a
new product line of switch-mode battery chargers. These chargers have been
readily accepted where physical size constraints and heat are design factors.
Refineries, petrochemical plants, utilities, offshore platforms and other
commercial, industrial and governmental facilities utilize the products sold by
CPM. CPM sells to industrial and commercial accounts across the United States.

     During the fourth quarter 2000, the operations of IDS were combined into
CPM. CPM will continue manufacturing and service of IDS' specialized industrial
microcomputer systems to existing IDS customers. This division of CPM also
provides systems integration and resells industrial microcomputers and
peripheral products. The microcomputer and peripheral products are designed to
be utilized in industrial applications, which include manufacturing, process
control, discrete manufacturing, data acquisition, telecommunications and man-
machine interfaces. These systems are typically designed with enclosures that
withstand tough environmental conditions or with enclosures that have a special
form factor which are based on the customer's specific parameters.


Product Development

     IED

     IED continues to provide engineering services primarily to the energy
industry as its core business.  IED currently has approximately twenty-one
blanket service contracts in place which provide that IED furnish clients with
service on a time and materials basis and eight fixed fee contracts for turnkey
services.  The Company's Tulsa, Oklahoma office, which

                                       5
<PAGE>

opened in February 1999, has facilitated the expansion of its market area.
During 2000, IED continued to grow geographically throughout the United States
and into international markets. IED continues to implement its plans to increase
its range of engineering capabilities and market its services to downstream
industries such as the refining, petrochemical and process industries.

     IED completed development of its standard meter skid package in 1999 and
began to market this package which is designed with modular, interchangeable
components that help to reduce project cost and execution times.  It is expected
that initial revenue for this product will be generated in the second half of
the year 2001.

     THERMAL

     In 2000, Thermal installed the necessary equipment for the manufacturing
of industry compliant, 5/8" plate-fin coils.  The addition of this plate-fin
coil production line has improved its competitive position in the marketplace by
reducing product costs and production time.  A majority of Thermal's coil
requirements are now produced in-house.  In 2001, the Company will make
additional capital commitments for the replacement of a variety of older
equipment used on its production line.

     CPM

     In 2000, CPM introduced its USGS Intellicharger product line of
microprocessor controlled battery chargers which bring to the marketplace state-
of-the-art flexibility and features for the end user.  The Intellicharger is now
included in the majority of battery charger units sold by CPM.  The Company has
seen substantial cost savings in the manufacturing process during the initial
six months of production by reducing wiring labor by eight to ten hours per
unit.  This reduction in cost has provided CPM the opportunity to enter new
markets that have historically been unavailable due to price competition.

     The completion of the Intellicharger had priority over the continued
development of the proprietary battery monitoring product, the BMR-280, thereby
postponing its completion.  The Company still plans to complete the BMR-280 as
R&D resources become available.  This product will continuously monitor
parameters associated with battery systems, including current, voltage and
temperature.  The BMR-280 will provide status and historical information about
the battery system to which it is connected, and will also have a feature to
optimize recharging.

     IDS is currently not developing any new proprietary product designs.


Competition

     IED

     IED operates in a highly competitive environment with many other
organizations that are substantially larger and have greater financial and other
resources.  IED competes with other consulting engineering companies on the
basis of price, performance, and its experience as a provider of quality
personnel to perform projects.  The pricing competition of IED has intensified
as a result of an increase in temporary personnel contracting agencies who can

                                       6
<PAGE>

perform services at a higher volume level and lower profit margin. Because the
engineering business may require small amounts of capital, market entry can be
rather effortless for a potential new competitor possessing acceptable
professional qualifications. Therefore, IED competes with a wide array of both
national and regional specialty firms.

     THERMAL

     Thermal operates in a highly competitive environment with many other
organizations that are substantially larger and have greater financial
resources.  Management believes that the principal competitive factors in its
market include delivery time, flexibility and product design, breadth of product
features, product quality, customer service, and price.  Thermal competes with
other air handling equipment manufacturers on the basis of quality, quick
delivery and capability to provide custom applications.  Thermal is cost
competitive with many well-established manufacturers, such as Temtrol,
Governaire, Mammoth and Pace, and others.  Thermal has distinguished itself by
being responsive to customer requests for custom products and is able to
expedite delivery of units faster than many other commercial manufacturers due
to the flexibility of its engineering and manufacturing facility capabilities.

     CPM

     CPM is engaged in a highly competitive business that is characterized by a
small number of larger companies that dominate the bulk of the market, and a
large number of similarly sized companies that compete for a limited share of
the market.  In the opinion of Management, the competitive position of CPM has
been greatly enhanced by the introduction of its microprocessor controlled
battery charger product line, trademarked Intellicharger.  This additional
product line, due to the cost savings and the absence of a similarly priced
product in the marketplace, has enabled CPM to better compete against its
competitors.  Additionally, the Intellicharger product contains battery charging
technology which, Management believes, is unique in the industry and has many
advantages over existing battery charging methods.  The new Intellicharger
product has allowed CPM to enter markets that are more standardized in nature
and volume oriented.

Business Strategy

     IED's strategy is to increase revenues per employee by developing and
marketing the capability of performing full service turnkey or EPC (Engineering,
Procurement and Construction) projects.  IED has traditionally only been
responsible for the engineering portion of its projects, which is normally
between five to fifteen percent of the project's total installed cost.  In the
past, IED has invoiced for its services largely on a time and materials basis
with billing rates that are specified in client generated blanket services
contracts.  During the year 2000, the Company saw a significant increase in the
number of projects billed on a fixed price basis.

     In order to execute its strategy with respect to EPC projects, IED
continues to add staff with expertise in project proposal and bidding.  While
executing this EPC strategy, IED has expanded its area of engineering expertise
beyond its traditional focus on the pipeline industry and continues to diversify
its client base.

     In 2001, the Company also plans to emphasize the services provided through
its newly established Advanced Controls division of IED.  The Company believes
that the Advanced Controls division will allow its IDS Engineering segment to
leverage its existing sales and

                                       7
<PAGE>

marketing effort. It is expected that the result will be additional revenues
from projects that the Company would not otherwise be involved in. In addition,
the Company will have the opportunity to realize a larger revenue percentage of
projects on which the Company is already performing the engineering and design
function. The controls function of any engineering project is very critical and
often determines project success or failure. The Advanced Controls capability
facilitates the execution of the Company's plan to handle a larger portion of
projects on a fixed price turnkey basis. Performing the controls function in-
house will make the project interface easier, and should result in overall
improved project performance by the Company.

     Thermal continues to focus on establishing and supporting a qualified
sales representative network within the U.S., and exploiting its niche for
custom products.  The addition of a plate-fin coil manufacturing line has helped
reduce product costs and production time, and has also generated additional
revenues from increased sales of replacement coils.

     Management does not believe that CPM made significant progress in the
signing of new sales representatives or in its marketing strategy in 2000.
Because of this, Management anticipates adding in-house personnel in 2001 whose
primary responsibility will be to increase quotation capabilities and work to
expand the sales and marketing effort of CPM.  CPM has strategically placed
advertising for its batteries, battery chargers, and UPS systems in a well-known
product catalogue.  The Company plans to continue these advertisements through
the year 2002.

     The Company continues to pursue potential acquisitions of complementary
businesses.  The success of this strategy depends not only upon the Company's
ability to acquire complementary businesses on a cost-effective basis, but also
upon its ability to integrate acquired operations into its organization
effectively, to retain and motivate key personnel and to retain customers of
acquired firms. There can be no assurance that the Company will be able to find
suitable acquisition candidates or be successful in acquiring or integrating
such businesses. Furthermore, there can be no assurance that financing required
for any such transactions will be available on satisfactory terms.


Sales and Marketing

     The Company's various subsidiaries derive revenues primarily from in-house
direct sales and from its network of sales representatives.  Sales
representatives are teamed with in-house sales managers and are assigned to
territories within the United States.  Management believes that this method of
selling leads to increased account penetration, proper management of its
products, and enhanced customer service which creates and maintains the
foundation for long-term relationships with its customers.  The Company's in-
house sales personnel are normally compensated utilizing incentive commissions
which are based on either a percentage of revenues or gross profitability which
can be attributed to their efforts.  Management believes that its past and
future growth depends in large measure on its ability to attract and retain
qualified sales representatives and sales management personnel.  Management is
of the opinion that its in-house marketing and selling of its products allows
for more freedom and control, thus increasing profitability.

                                       8
<PAGE>

     The Company's subsidiaries promote their products and services through
general and trade advertising, participation in trade shows, and most recently
through on-line Internet communication via IDSC's corporate home page which
provides links to each of the subsidiaries' websites.  The Company, through a
service provider, makes an effort to maintain and update each of its
subsidiaries' Internet web sites on an ongoing basis.  It is the opinion of
management that the Internet is a powerful marketing tool, and with the
increasing e-commerce activity becoming evident, each subsidiary must be
positioned to capitalize on this trend.

     The Company's sales personnel focus on building long-term relationships
with customers and, through their product and industry expertise, providing
customers with product application, engineering and after-the-sale services.
Additionally, the sales personnel of IDSC subsidiaries seek to capitalize on
customer relationships that have been developed by each subsidiary through
cross-selling of the various products and services offered by each subsidiary.
Sales leads developed by this synergy are then jointly pursued.

     Much of the Company's business is repeat business, and the source of new
customers has been largely through word-of-mouth referrals from existing
customers and industry members, such as manufacturer's representatives.


Customers

     IDSC's customer base consists primarily of Fortune 500 companies in
numerous industry segments within the United States.

     The Company's largest ten customers (which varied from period to period)
accounted in the aggregate for approximately 65% and 60% of the Company's total
revenue during 1999 and 2000, respectively.

     Currently, the Company's major customers include:

          IED:      Caspian Pipeline Consortium, EXXON Mobil Pipeline Co., Inc.,
                    Oneok, Centennial Pipeline, LLC, Universal Compression,
                    Inc., Marathon Pipeline Co.
          THERMAL:  Hollingsworth Equipment, Inc., South Texas Equipment,
                    Conditioning Components Company
          CPM:      Parsons Power Group

     Based upon historical results and existing relationships with customers,
the Company believes that, although efforts are being made to diversify its
client base, a substantial portion of its total revenue and gross profit will
continue to be derived from sales to existing customers.  There are no long-term
commitments by such customers to purchase products or services from the Company.
Sales of IDSC's subsidiaries products are typically made on a purchase order
basis.  A significant reduction in orders from any of the Company's largest
customers could have a material adverse effect on the Company's financial
condition and results of operations.  Similarly, the loss of any one of the
Company's largest customers or the failure of any one of such customers to pay
its accounts receivable on a timely basis could have a material adverse effect
on the Company's financial condition and results of operations.  There can be no
assurance that the Company's largest customers will continue to place orders

                                       9
<PAGE>

with the Company or that orders by such customers will continue at their
previous levels. There can be no assurance that the Company's customers for its
engineering services will continue to enter into contracts with the Company for
such services or that existing contracts will not be terminated.


Customer Service and Support

     The Company provides service and technical support to its customers in
varying degrees depending upon the product line and on customer contractual
arrangements. The Company's support staff provides initial telephone
troubleshooting services for end-user customers and distributors. These services
include isolating and verifying reported product failures, authorizing product
returns and tracking completion of repaired goods in support of customer
requirements. Technical support also provides on-site engineering support in the
event that a technical issue can not be resolved over the telephone. The Company
provides limited warranty coverage for its products for varying time periods
depending on a variety of factors.  On a routine basis, IED provides worldwide
start-up and commissioning services for projects in which it provides
engineering services.

Dependence upon Suppliers

     The Company's businesses depend upon the ability to obtain an adequate
supply of products and parts at competitive prices and on reasonable terms. The
Company's suppliers are not obligated to have products on hand for timely
delivery to the Company nor can they guarantee product availability in
sufficient quantities to meet the Company's demands. There can be no assurance
that such products will be available as required by the Company at prices or on
terms acceptable to the Company. The Company procures a majority of its
components from distributors in order to obtain competitive pricing, maximize
product availability and maintain quality control.

     Thermal currently stocks key components due to long lead times.  Specialty
items are purchased as required for each job.  Thermal has increased its
stocking levels, because of the potential delays in manufacturing which would be
caused by its inability to procure critical components.

     All of CPM's products are manufactured using components and materials that
are available from numerous domestic suppliers.  CPM has approximately 10
principal suppliers of components and each of those could be replaced with
several competitors; therefore, CPM anticipates little or no difficulty in
obtaining components in sufficient quantities and in a timely manner to support
its manufacturing and assembly operations.

     A majority of the components and peripherals used by IDS are available
from a number of different suppliers, although certain major items are procured
from single sources.  Management believes that alternate sources could be
developed for such single source items, if necessary.

     There can be no assurance that IDSC's subsidiaries will be able to
continue to obtain the necessary components from any of its single sources on
terms acceptable to the Company, if at all. There can be no assurance that such
relationships will continue or that, in the event of a termination of any
relationship, it would be able to obtain alternative sources of supply

                                       10
<PAGE>

without a material disruption in the Company's ability to provide products to
its customers. Any material disruption in the Company's supply of products would
have a material adverse effect on the Company's financial condition and results
of operations. No one manufacturer or vendor provides products that account for
10% or more of the Company's revenues.


Patents, Trademarks, Licenses

      The Company's success depends in part upon its proprietary technology, and
it relies primarily on trade secrecy and confidentiality agreements to establish
and protect its rights in its proprietary technology.  The Company does not own
the rights to any U.S. or foreign patents.  There can be no assurance that the
Company's present protective measures will be adequate to prevent unauthorized
use or disclosure of its technology or independent third party development of
the same or similar technology.  Although the Company's competitive position
could be affected by its ability to protect its proprietary and trade secret
information, the Company believes other factors, such as the technical expertise
and knowledge of the Company's management and technical personnel, and the
timeliness and quality of support services provided by the Company, to be more
significant in maintaining the Company's competitive position.

      The Company currently has no patents, registered trademarks, licenses
(other than for off-the shelf software), franchises, concessions, royalty
agreements, or labor contracts.


Government Regulations

      Certain of the Company's subsidiaries are subject to various laws and
regulations relating to its business and operations, and various health and
safety regulations as established by the Occupational Safety and Health
Administration.  The Company is not currently aware of any situation or
condition that it believes is likely to have a material adverse effect on its
results of operations or financial condition.


Research and Development

      Research and development cost for 2000 was approximately $32,000.
Expenditures for research and development in 1999 were approximately $79,000.
As of December 31, 2000, IDSC's subsidiaries were involved in the following
active research and development activities:  IED is expanding the capability of
its standard meter skid product; IED is currently designing a standardized
specification package for project related execution; CPM is evaluating the
design of an uninterruptible power supply product.  The development of CPM's
proprietary battery monitor product is currently on hold.  Substantially all of
the hardware design has been completed with additional software development
required to complete the product.  Work on this product will resume as
additional research and development funds become available.  Thermal has no
current research and development projects.

                                       11
<PAGE>

Employees

      As of December 31, 2000, the Company employed approximately 166
individuals within its three operating subsidiaries; approximately five were
employed in sales, marketing and customer services; 108 were employed in
engineering; 31 were employed in technical production positions; and 22 were
employed in administration, finance and management information systems. The
Company believes that its ability to recruit and retain highly skilled and
experienced technical, sales and management personnel has been, and will
continue to be, critical to its ability to execute its business plan. None of
the Company's employees are represented by a labor union or are subject to a
collective bargaining agreement. The Company believes that relations with its
employees are good.


ITEM 2.  DESCRIPTION OF PROPERTY


Facilities

      The Company leases its principal executive offices, which consist of
approximately 32,836 square feet, in two adjoining offices in Houston, Texas.
Approximately 12,000 square feet of this space is currently utilized for
production operations and warehouse space for the IDS and CPM operations.

      On February 10, 1999, IED signed a lease for its newly established office
in Tulsa, Oklahoma.  This office space consisted of 5,400 square feet in a one-
story office building.  Due to the recent successes of its business development
strategy, the Tulsa office was expanded twice in 2000, and has approximately
tripled its office space to approximately 15,000 square feet.  New leases
agreements were signed in September 2000.

      As a result of the acquisition of Thermal, land and property previously
leased by Thermal was purchased by Thermal for $500,000, consisting of $50,000
cash advance from the Company and a note payable in the amount of $450,000.  The
balance on this note at December 31, 2000 was $386,606.  This property consists
of 4.5995 acres of land improved with a 37,725 square foot concrete tiltwall
office/manufacturing facility located in Houston, Texas, of which approximately
2,500 square feet is used for office space and 35,200 square feet for
manufacturing.  Remodeling of 1,600 square feet of office and engineering space
was completed in February 2000 which allowed office personnel to vacate
temporary modular offices on the premises.


ITEM 3.  LEGAL PROCEEDINGS

      From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. The Company is not currently
involved in any material legal proceedings and is not aware of any material
legal proceeding threatened against it.


                                       12
<PAGE>

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

      No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the fiscal year ended December 31, 2000.


                                    PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Company's Common Stock, $.001 par value per share, has been quoted on
the American Stock Exchange since June 16, 1998, under the symbol "IDS".


                                               High             Low
                                              ------           -----

Year Ended December 31, 1999
----------------------------

First Quarter...........................       9.250            7.250
Second Quarter..........................      10.750            1.750
Third Quarter...........................       2.688            1.000
Fourth Quarter..........................       1.188            0.750

Year Ended December 31, 2000
----------------------------

First Quarter...........................       5.125            0.750
Second Quarter..........................       2.063            0.938
Third Quarter...........................       1.125            0.813
Fourth Quarter..........................       1.000            0.438

      The foregoing figures are based on information published by AMEX, do not
reflect retail markups or markdowns and may not represent actual trades.


      As of December 31, 2000, the Common Stock was held by approximately 189
stockholders of record.

                                DIVIDEND POLICY


      The Company has never declared or paid a cash dividend on the Common
Stock.  The payment of dividends in the future will depend on the Company's
earnings, capital requirements, operating and financial position and general
business conditions. The Company intends to retain any future earnings for
reinvestment in its business and does not intend to pay cash dividends in the
foreseeable future. The Company has not entered into any agreement which
restricts its ability to pay dividends on its Common Stock in the future.  See
"Management's Discussion and Analysis or Plan of Operation."

                                       13
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The following discussion is qualified in its entirety by, and should be
read in conjunction with, the Company's Consolidated Financial Statements
including the Notes thereto, included elsewhere in this Annual Report on Form
10-KSB. Footnote 13 to the Financial Statements contains segment information.

Forward-Looking Statements

     Certain information contained in this Form 10-KSB Annual Report, the
Company's Annual Report to Shareholders, as well as other written and oral
statements made or incorporated by reference from time to time by the Company
and its representatives in other reports, filings with the Securities and
Exchange Commission, press releases, conferences, or otherwise, may be deemed to
be forward-looking statements with the meaning of Section 21E of the Securities
Exchange Act of 1934.  This information includes, with limitation, statements
concerning the Company's future financial position and results of operations;
planned capital expenditures; business strategy and other plans for future
operations; the future mix of revenues and business; commitments and contingent
liabilities; and future demand and industry conditions.  Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct.  When used in this report, the words "anticipate," "believe,"
"estimate," "expect," "may," and similar expressions, as they relate to the
Company and its management, identify forward-looking statements could differ
materially from the results described in the forward-looking statements due to
the risks and uncertainties set forth with this Annual Report on Form 10-KSB
generally.

Overview

      The major source of revenues for the Company is the provision of
engineering consulting services to the pipeline divisions of major integrated
oil and gas companies. This has been the case since the Company's inception in
1985.  In 2000, the Engineering segment accounted for 63.3% of total revenues
for the year. This segment has been successful in obtaining more turnkey
projects providing expanded services in the engineering, procurement and
construction phases of major projects.  The Air Handling segment revenue was
20.2% of the total revenues for the 2000 year. The Company combined the Power
Systems and Product segments during the fourth quarter of the year in an attempt
to reduce costs, consolidate facilities and better utilize personnel. The
resulting segment is being called the Manufacturing Segment ("Manufacturing").
This segment accounted for 16.5% of the total revenues.

      The Company generated a consolidated gross margin in 1999 and 2000 of
23.3%.  In 2000, consolidated gross margin increased by $1,100,829 from 1999.
This increase was attributable to the increased revenues in 2000.

      The Company reclassified the activity pertaining to the Fabricating
segment as discontinued for the year ended December 31, 1999.  This resulted in
a loss from discontinued operations in 1999 of $1,972. The acquisition of IDS
FAB was rescinded, effective October 28, 1999 and as a result of the rescission,
the Company recorded a one-time loss on the disposal of discontinued operations
of $481,085, net of tax of approximately $146,000 for the year ended December
31, 1999.



                                       14
<PAGE>

Results of Operations

      The following table sets forth, for the periods indicated, certain
financial data derived from the Company's consolidated statements of operations
and indicates percentage of total revenue for each item.


<TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                               ---------------------------
                                                                        1999                                   2000
                                                                        -----                                  ----
                                                             Amount                 %                Amount              %
                                                            --------               ---              --------            ---
Revenue:
<S>                                                      <C>                      <C>             <C>                  <C>
   Engineering.....................................      $ 5,978,180               48.8           $10,739,874           63.3
   Air Handling....................................        3,151,295               25.7             3,421,184           20.2
   Manufacturing...................................        3,108,974               25.5             2,814,965           16.5
                                                         -----------              -----           -----------          -----
  Total Revenue....................................       12,238,449              100.0           $16,976,023          100.0

Gross Profit:
  Engineering......................................        1,599,722               26.8             2,564,902           23.9
  Air Handling.....................................          598,766               19.0               725,496           21.2
  Manufacturing....................................          649,952               20.9               658,871           23.4
                                                         -----------              -----           -----------          -----
  Total Gross Profit...............................      $ 2,848,440               23.3           $ 3,949,269           23.3
Selling, general and administrative expenses               2,615,922               21.4             3,427,778           20.2
                                                         -----------              -----           -----------          -----
  Operating  Profit................................          232,518                1.9               521,491            3.1
Other income (expense).............................           78,436                0.6               (17,845)          (0.1)
                                                         -----------                              -----------
Income from continuing operations
     before provision for income
     taxes.........................................          310,954                2.5               503,646            3.0
Provision for income taxes.........................          151,212                1.2               122,768            0.8
                                                         -----------              -----           -----------          -----
Income from continuing operations..................          159,742                1.3               380,878            2.2
                                                         -----------              -----           -----------          -----
Loss from discontinued operations...................          (1,972)               0.0                    --            0.0
                                                         -----------              -----           -----------          -----
Loss on disposal of discontinued
     operations, net of tax of
     approximately $146,000 in 1999.................        (481,085)              (3.9)                   --            0.0
                                                         -----------              -----           -----------          -----
                                                         $  (323,315)              (2.6)          $   380,878            2.2
Net Income (Loss)                                        ===========              =====           ===========          =====
</TABLE>

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     In October 1999, the acquisition of IDS FAB, which took place in November
1998 was rescinded.  As a result of this, the operating results of IDS FAB were
reclassified as discontinued operations for 1998 and 1999.  During the Fourth
Quarter of 2000, the Company combined the Power Systems and the Product segments
into one Manufacturing ("Manufacturing") segment. The following comparisons
reflect these reclassifications and combinations.


      Total Revenue. Total revenue increased by $4,737,574 or 38.7% from
$12,238,449 in 1999 to $16,976,023 in 2000. Revenue from the Engineering
segment, which comprised 48.8% and 63.3% of total revenue in 1999 and 2000,
respectively, increased by $4,761,694 or 79.7%. This increase was due to the
segment being awarded several substantial fixed fee projects to its existing
base of business and to revenues generated by additional projects secured by its
Tulsa operation. Revenue from the Air Handling segment comprised 25.7% and 20.2%
of total

                                       15
<PAGE>

revenue in 1999 and 2000, respectively, increased by $269,889 or 8.6%.
The Manufacturing segment contributed revenue, which comprised 25.5% of total
revenues for the year ended December 31,1999 and it generated 16.5% of total
revenues in 2000.

      Gross Profit. Gross profit increased by $1,100,829 or 38.6% from
$2,848,440 in 1999 to $3,949,269 in 2000. The gross margin for the Engineering
segment increased by $965,180 or 60.3% from 1999 to 2000. This increase was
attributable to the substantial increase in revenues in 2000. The Engineering
segment's 2000 gross profit as a percentage of revenue decreased from 26.8% in
1999 to 23.9%. This was attributable to higher material costs related to
sizeable fixed fee projects completed during the 2000 period.  The gross margin
for the Air Handling segment increased by $126,730 or 21.2% from 1999 to 2000.
This increase was due to the increase in 2000 revenues and to higher margins
during the last two quarters of the year brought about by improvements in
quoting jobs. The Manufacturing segment gross margin as a percentage of sales
increased from 20.9% in 1999 to 23.4% in 2000. The Company believes this was a
result of the combination of the Power Systems and Product segments and the
benefits derived from this combination, such as reduced labor costs and improved
efficiencies.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $811,856 or 31.0% from $2,615,922 in 1999
to $3,427,778 in 2000. However, as a percentage of total revenue, selling,
general and administrative expenses decreased from 21.4% in 1999 to 20.2% in
2000.

      Operating Profit. Operating profit increased by $288,973 or 124.3% from
$232,518 in 1999 to $521,491 in 2000. Operating profit increased as a percentage
of total revenue from 1.9% in 1999 to 3.1% in 2000. This increase was brought
about by the overall higher revenues and to a lower selling, general and
administrative expenses as a percentage of total revenues.

      Income from Continuing Operations. Income from continuing operations
increased by $221,136 or 138.4% from $159,742 in 1999 to $380,878 in 2000.  This
was attributable to the overall increase in revenues accompanied by a decrease
in selling, general and administrative costs as a percentage of revenue and to a
lower provision for income taxes.

      Discontinued  Operations. Discontinued operations contributed a loss of
$1,972 in 1999.  In 2000, there was no loss from discontinued operations
generated.  The loss on disposal of discontinued operations, as a result of the
rescission of the IDS FAB acquisition generated a one-time loss of $481,085 in
1999.


Liquidity and Capital Resources

      Historically, the Company has satisfied its cash requirements principally
through operations and, as needed, by borrowings under its line of credit. As of
December 31, 2000, the Company's cash position, was in management's judgment,
sufficient to meet its working capital requirements, for at least the next 12
months.  The Company had, as of December 31, 2000, approximately $888,000 in
additional advances available under its line of credit with a bank. This line of
credit provides for maximum borrowings of $1,250,000, bears interest at prime
plus 0.5%, is for a term of one year and matures on April 24, 2001. The Company
expects the line of credit will be renewed at that time. The line of credit is
secured by accounts

                                       16
<PAGE>

receivable, inventory and the personal guarantees of certain stockholders and
officers of the Company.  As of December 31, 2000, the Company had approximately
$362,000 outstanding against the line of credit note.  Interest on the
outstanding balance of this note is paid on a monthly basis.

      The Company's working capital was $3,187,454 at December 31, 2000.

      Cash Flow

      Operating activities provided net cash totaling $93,703 and $27,218 during
1999 and 2000, respectively. The Company has not generated significant cash flow
from operating activities due to the working capital requirements resulting from
its rapid growth in the engineering segment.

      Investing activities used cash totaling $208,923 and $467,753
respectively, during the years ended December 31, 1999 and 2000. In 2000, the
Company's investing activities consisted primarily of capital expenditures.

      Financing activities used cash totaling $196,514 and provided cash
totaling $19,155 during 1999 and 2000, respectively. The Company has additional
financing amounts available on its line of credit ($888,000 at December 31,
2000). The line of credit has been used principally to finance accounts
receivable and inventory purchases.

      Asset Management

The Company's cash flow from operations has been affected primarily by the
timing of its collection of trade accounts receivable. The Company typically
sells its products and services on short-term credit terms and seeks to minimize
its credit risk by performing credit checks and conducting its own collection
efforts. The Company had trade accounts receivable of $2,540,835 and $3,555,933
at December 31, 1999 and 2000, respectively. The number of days' sales
outstanding in trade accounts receivable was 76 days at December 31, 1999 and
December 31, 2000. Bad debt expenses have been insignificant (approximately
 .01%) for each of these periods.

                                       17
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

     The audited consolidated financial statements for Industrial Data Systems
Corporation, as of December 31, 2000 and 1999 are attached hereto and made part
hereof.



                                     INDEX

<TABLE>
<CAPTION>
                                                   Page
                                                   ----
<S>                                                <C>

INDEPENDENT AUDITOR'S REPORT.....................    21

CONSOLIDATED BALANCE SHEET - December 31, 2000...    22

CONSOLIDATED STATEMENTS OF OPERATIONS
     Years Ended December 31, 1999 and 2000......    23

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     Years Ended December 31, 1999 and 2000......    24

CONSOLIDATED STATEMENTS OF CASH FLOWS
     Years Ended December 31, 1999 and 2000......    25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......    26
</TABLE>

                                       18
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders
Industrial Data Systems Corporation


We have audited the accompanying consolidated balance sheet of Industrial Data
Systems Corporation and Subsidiaries as of December 31, 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1999 and 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Industrial Data Systems Corporation and Subsidiaries as of December  31, 2000,
and the results of their operations and their cash flows for the years ended
December 31, 1999 and 2000, in conformity with generally accepted accounting
principles.



/s/Hein + Associates llp

Houston, Texas
March 7, 2001

                                       19
<PAGE>

                           Consolidated Balance Sheet
                               December 31, 2000


<TABLE>
<S>                                                                                             <C>
                                                   ASSETS
Current Assets:
   Cash and cash equivalents                                                                     $  242,592
   Municipal bond, at cost                                                                          400,000
   Accounts receivable - trade, less allowance for doubtful                                       3,555,933
    accounts of approximately $17,000
   Inventory                                                                                        865,341
   Cost and estimated earnings in excess of billings on                                             330,000
    uncompleted contracts
   Prepaid and other                                                                                190,369
                                                                                                 ----------
           Total current assets                                                                   5,584,235
Property and Equipment, net                                                                       1,404,017
Goodwill                                                                                             18,450
Deposits                                                                                             45,563
                                                                                                 ----------
           Total assets                                                                          $7,052,265
                                                                                                 ==========
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------

Current Liabilities:
   Notes payable                                                                                 $  433,729
   Current maturities - long-term debt                                                               21,238
   Current maturities - capital lease payable                                                        24,118
   Accounts payable                                                                               1,333,003
   Deferred income taxes                                                                             37,000
   Income taxes payable                                                                             160,013
   Accrued expenses and other current liabilities                                                   387,680
                                                                                                 ----------
           Total current liabilities                                                              2,396,781
Long-Term Debt, net of current portion                                                              365,368
Capital lease payable, net of current portion                                                       120,212
Deferred Income Taxes                                                                                11,000
Commitments and Contingencies (notes 5, 7,8  and 15)
Stockholders' Equity:
   Common stock, $.001 par value; 75,000,000 shares authorized;
    12,964,918 shares issued and outstanding                                                         12,965
   Additional paid-in capital                                                                     2,640,154
   Retained earnings                                                                              1,702,285
   Note receivable from stockholder                                                                (196,500)
                                                                                                 ----------
           Total stockholders' equity                                                             4,158,904
                                                                                                 ----------
           Total liabilities and stockholders' equity                                            $7,052,265
                                                                                                 ==========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       20
<PAGE>

                     Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                   ---------------------------------------
                                                                        1999                     2000
                                                                   ---------------          --------------
<S>                                                                 <C>                       <C>
Operating Revenues:
   Engineering services                                             $ 5,978,180               $10,739,874
   Product sales                                                      6,260,269                 6,236,149
                                                                    -----------               -----------
                                                                     12,238,449                16,976,023

Operating Expenses:
   Cost of engineering services                                       4,378,459                 8,174,972
   Cost of product sales                                              5,011,550                 4,851,782
   Selling, general and administrative                                2,615,922                 3,427,778
                                                                    -----------               -----------
                                                                     12,005,931                16,454,532
                                                                    -----------               -----------
           Operating profit                                             232,518                   521,491
Other Income (Expense):
   Realized gains on marketable securities, net                          50,909                         -
   Interest income                                                       46,963                    52,368
   Interest expense                                                     (68,067)                  (92,296)
   Other income                                                          48,631                    22,083
                                                                    -----------               -----------
                                                                         78,436                   (17,845)
                                                                    -----------               -----------
Income from Continuing Operations Before Provision for
 Income Tax (Benefit) Expense                                           310,954                   503,646
Provision for Income Tax (Benefit) Expense:
   Federal                                                              141,632                   139,228
   State                                                                 14,580                    32,540
   Deferred                                                              (5,000)                  (49,000)
                                                                    -----------               -----------
                                                                        151,212                   122,768
                                                                    -----------               -----------
           Income from Continuing Operations                            159,742                   380,878
Loss from Discontinued Operations, net of tax of $.0                     (1,972)                        -
Loss on Disposal of Discontinued Operations, net of tax                (481,085)                        -
                 of approximately $146,000.
                                                                    -----------               -----------
Net Income (Loss)                                                   $  (323,315)              $   380,878
                                                                    ===========               ===========
Basic and Diluted Earnings per Common Share:
   Continuing operations                                            $      0.01               $      0.03
   Discontinued operations                                          $     (0.03)                        -
                                                                    -----------               -----------
   Net income (loss)                                                $     (0.02)              $      0.03
                                                                    ===========               ===========
           Weighted Average Common Shares Outstanding                13,055,535                12,964,918
                                                                    ===========               ===========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       21
<PAGE>

                Consolidated Statements of Stockholders' Equity
                     Years Ended December 31, 1999 and 2000


<TABLE>
<CAPTION>
                                                                                    Additional
                                                            Common Stock              Paid-in
                                                ----------------------------------
                                                       Shares          Amount         Capital
                                                ----------------------------------  ------------
<S>                                                 <C>              <C>            <C>
Balances, January 1, 1999                             13,073,718         13,074       2,766,163
  Treasury stock
     Acquisition:                                              -              -               -
        Received 50,000 shares in
          rescission agreement                                 -              -               -
          Purchased 40,000 shares
       Retirement                                       (108,800)          (109)       (126,009)
          Net loss                                             -              -               -
                                                      ----------        -------      ----------
Balances, December 31, 1999                           12,964,918         12,965       2,640,154
  Reclassification of note receivable from
    stockholder                                                -              -               -
  Net income                                                   -              -               -
                                                      ----------        -------      ----------
Balances, December 31, 2000                           12,964,918        $12,965      $2,640,154
                                                      ==========        =======      ==========
<CAPTION>
                                                                      Note             Total
                                                   Retained        Receivable      Stockholders'

                                                   Earnings       Stockholder         Equity
                                               -----------------------------------------------
<S>                                               <C>                <C>            <C>
Balances, January 1, 1999                          1,644,722           (15,323)      4,408,636
  Treasury stock
     Acquisition:
        Received 50,000 shares in
          rescission agreement                             -           (43,750)        (43,750)
        Purchased 40,000 shares                            -           (67,045)        (67,045)
     Retirement                                            -           126,118               -
  Net loss                                          (323,315)                -        (323,315)
                                                  ----------         ---------      ----------
Balances, December 31, 1999                        1,321,407                 -       3,974,526
  Reclassification of note receivable from
    stockholder                                            -          (196,500)       (196,500)
  Net income                                         380,878                 -         380,878
                                                  ----------         ---------      ----------
Balances, December 31, 2000                       $1,702,285         $(196,500)     $4,158,904
                                                  ==========         =========      ==========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       22
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                    -----------------------------------
                                                                                       1999                     2000
                                                                                    ------------           ------------
<S>                                                                                 <C>                     <C>
Cash Flows from Operating Activities:
   Net income (loss)                                                                $ (323,315)             $   380,878
   Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
      Depreciation and amortization                                                    144,304                  216,237
      Deferred income tax benefit from continuing operations                            (5,000)                 (49,000)
      Gain on sale of trading securities                                               (50,909)                       -
      Loss from discontinued operations                                                483,057                        -
      Changes in operating assets and liabilities, net of assets acquired
      in business combinations:
        Accounts receivable - trade                                                   (583,747)              (1,345,098)
        Inventory                                                                       91,289                  (93,533)
        Trading securities                                                             427,556                        -
        Prepaids and other current assets                                                    -                  139,072
        Accounts payable                                                               436,699                  553,986
        Income taxes payable                                                          (210,000)                 213,013
        Accrued expenses and other current liabilities                                (214,905)                  90,226
        Other, net                                                                    (101,326)                 (78,563)
                                                                                    ------------           ------------
              Net cash provided by operating activities                                 93,703                   27,218
Cash Flows from Investing Activities:
   Capital expenditures                                                               (208,923)                (367,753)
   Purchase of bonds                                                                         -                 (100,000)
                                                                                    ------------           ------------
              Net cash used in  investing activities                                  (208,923)                (467,753)
Cash Flows from Financing Activities:
   Short-term borrowings (repayments)                                                 (146,014)                  91,719
   Long-term borrowings (repayments) of debt and capital leases                         16,545                  (59,064)
   Notes receivable stockholder                                                              -                  (13,500)
   Purchases of treasury stock                                                         (67,045)                       -
                                                                                    ------------           ------------
              Net cash provided by (used in) financing activities                     (196,514)                  19,155
                                                                                    ------------           ------------
        Net cash used in discontinued operations                                    $ (250,115)             $         -
                                                                                    ------------           ------------
Net Change in Cash and Cash Equivalents                                               (561,849)                (421,380)
Cash and Cash Equivalents, at beginning of year                                      1,225,821                  663,972
                                                                                    ------------           ------------
Cash and Cash Equivalents, at end of year                                           $  663,972              $   242,592
                                                                                    ============           ============
Supplemental Disclosures:
   Interest paid                                                                    $   68,709              $    92,296
   Income taxes paid                                                                $  415,580              $   220,000
                                                                                    ============           ============
Non-Cash Transactions:
   Purchase price adjustment - adjustment to liabilities and goodwill               $  121,649              $         -
   Treasury stock received in rescission transaction (see note 14)                  $   43,750              $         -
   Property and equipment acquired under capital leases                             $        -              $   166,083
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       23
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

1.        Summary of Significant Accounting Policies
          ------------------------------------------

     Organization - The accompanying consolidated financial statements include
     ------------
     the accounts of Industrial Data Systems Corporation ("IDSC" or the
     "Company"), a Nevada corporation, and its wholly owned subsidiaries IDS
     Engineering, Inc. ("IED"), a Texas corporation, Thermaire, Inc., a Texas
     corporation, dba Thermal Corporation ("Thermal"); Constant Power
     Manufacturing, Inc. ("CPM"), a Texas corporation, and Industrial Data
     Systems, Inc. ("IDS"), a Texas corporation. The 1999 amounts include the
     results of IDS Fabricated Systems, Inc. ("IDS FAB"), a Texas corporation,
     which was reclassified as discontinued operations and was disposed of in
     1999 (see note 14). All significant intercompany balances and transactions
     have been eliminated in consolidation.

     Cash and Cash Equivalents - Cash and cash equivalents include cash in bank
     -------------------------
     and investments in highly liquid money market mutual funds.

     Inventory - Inventory is composed primarily of raw materials and component
     ---------
     parts (computer components, sheet metal, copper tubing, blower fans and fan
     motors) and is carried at the lower of cost or market value, with cost
     determined on the first-in, first-out ("FIFO") method of accounting.

     Revenue and Cost on Fixed-Fee Contracts Recognition - The Company's
     ---------------------------------------------------
     revenues are composed of product sales and engineering service revenue. The
     Company recognizes service revenue when such services are performed and
     product sales upon shipment to the customer.

     Profits and losses on fixed-fee contracts are recorded on the percentage-
     of-completion method of accounting, measured by the percentage-of-contract
     costs incurred to date to estimated total contract costs for each contract.
     Contract costs include amounts paid to subcontractors. Anticipated losses
     on uncompleted construction contracts are charged to operations as soon as
     such losses can be estimated. Changes in job performance, job conditions,
     estimated profitability and final contract settlements may result in
     revisions to costs and income and are recognized in the period in which the
     revisions are determined.

     The asset, "costs and estimated earnings in excess of billings on
     uncompleted contracts," represents revenues recognized in excess of amounts
     billed.

      See accompanying notes to these consolidated financial statements.

                                       24
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

1.   Summary of Significant Accounting Policies  (continued)
     ------------------------------------------

     Marketable Securities - Marketable securities to be held to maturity are
     ---------------------
     stated at amortized cost. Marketable securities classified as available-
     for-sale are stated at market value, with unrealized gains and losses
     reported as a separate component of stockholders' equity, net of deferred
     income taxes. If a decline in market value is determined to be other than
     temporary, any such loss is charged to earnings. Trading securities are
     stated at fair value, with unrealized gains and losses recognized in
     earnings. The Company records the purchases and sales of marketable
     securities and records realized gains and losses on the trade date.
     Realized gains or losses on the sale of securities are recognized on the
     specific identification method.

     Property and Equipment - All property and equipment is stated at cost,
     ----------------------
     adjusted for accumulated depreciation. Depreciation on all property and
     equipment, other than land, building and improvements, is calculated using
     an accelerated method over the estimated useful lives of the related
     assets, which is five years. Depreciation on the building is calculated
     using a straight-line method over the useful life, which is 40 years.
     Leasehold improvements are amortized over the term of the related lease.

     Goodwill - The Company capitalizes the excess purchase price over the fair
     --------
     value of net assets acquired ("goodwill") and amortizes this intangible
     asset on a straight-line basis over 5-10 years.

     Long-lived Assets - The Company reviews for the impairment of long-lived
     -----------------
     assets and certain identifiable intangibles whenever events or changes in
     circumstances indicate that the carrying amount of an asset may not be
     recoverable. An impairment loss would be recognized when estimated future
     cash flows expected to result from the use of the asset and its eventual
     disposition is less than its carrying amount. The Company has not
     identified any such impairment losses.

     Income Taxes - The Company accounts for deferred income taxes in accordance
     ------------
     with the asset and liability method, whereby deferred income taxes are
     recognized for the tax consequences of temporary differences by applying
     enacted statutory tax rates applicable to future years to differences
     between the financial statement and tax bases of its existing assets and
     liabilities. The provision for income taxes represents the current tax
     payable or refundable for the period plus or minus the tax effect of the
     net change in the deferred tax assets and liabilities during the period.

     Stock Based Compensation - The Company applies SFAS No.123, Accounting for
     ------------------------
     stock-Based Compensation. SFAS No.123 encourages, but does not require,
     companies to recognize compensation expense for grants of stock, stock
     options, and other equity instruments to employees based on fair value.
     Companies that do not adopt the fair value accounting rules must disclose
     the impact of adopting the new method in the notes to the financial
     statements. Transactions in equity instruments with non-employee for goods
     or services must be accounted for on the fair value method. The Company has
     elected not

      See accompanying notes to these consolidated financial statements.

                                       25
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

1.   Summary of Significant Accounting Policies  (continued)
     ------------------------------------------

     to adopt the fair value accounting prescribed by SFAS No.123 for employees,
     and is subject only to the disclosure requirements prescribed by SFAS
     No.123.

     Earnings Per Share - Basic earnings per share was computed by dividing net
     ------------------
     income by the weighted average common shares outstanding as of December 31,
     1999 and 2000. The options outstanding at December 31, 1999 and 2000 (see
     note 9) were not considered in the computation of diluted EPS for the year
     ended December 31, 1999 and 2000 since their effect would have been
     antidilutive.

     Use of Estimates - The preparation of the Company's consolidated financial
     ----------------
     statements in conformity with generally accepted accounting principles
     requires the Company's management to make estimates and assumptions that
     affect the amounts reported in these financial statements and accompanying
     results. Actual results could differ from these estimates.

     Fair Value of Financial Instruments - The fair value of financial
     -----------------------------------
     instruments, primarily accounts receivable, notes receivable, bonds,
     accounts payable and notes payable, closely approximate the carrying values
     of the instruments due to the short-term maturities of such instruments.

     Comprehensive Income - Comprehensive income is defined as all changes in
     --------------------
     stockholders' equity, exclusive of transactions with owners, such as
     capital investments. Comprehensive income includes net income or loss,
     changes in certain assets and liabilities that are reported directly in
     equity, such as translation adjustments on investments in foreign
     subsidiaries and certain changes in minimum pension liabilities. The
     Company's comprehensive income (loss) is equal to net income (loss) for all
     periods presented in these financial statements.

     Reclassifications - Amounts in prior years' financial statements are
     -----------------
     reclassified as necessary to conform with the current year's presentation.
     Such reclassifications had no effect on net income.


2.   Notes Receivable - Stockholder
     ------------------------------

     The Company has notes receivable due from the majority stockholder of the
     Company totaling $150,000 at December 31, 2000. The notes receivable are
     unsecured, due on demand and bear interest at a rate of 9% per annum.
     Interest on the notes is due annually. During the years ended December 31,
     1999 and 2000, the Company recognized interest income of approximately
     $13,500 on these notes. The balance at December 31, 2000 included accrued
     interest receivable of $46,500. The note receivable and accrued interest at
     December 31, 2000 has been classified as a reduction of stockholders'
     equity in the accompanying financial statements.

      See accompanying notes to these consolidated financial statements.

                                       26
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

3.   Property and Equipment
     ----------------------

     Property and equipment consisted of the following at December 31, 2000:

<TABLE>
<S>                                                                          <C>
          Land                                                               $   90,000
          Furniture and fixtures                                                214,707
          Computer equipment                                                    492,636
          Building                                                              605,000
          Shop equipment                                                        332,045
          Building and leasehold improvements                                   167,228
                                                                             ----------
                                                                              1,901,616
          Accumulated depreciation and amortization                            (497,599)
                                                                             ----------
                                                                             $1,404,017
                                                                             ==========
</TABLE>

4.   Fixed-Fee Contracts
     -------------------
     Costs, estimated earnings and billings on uncompleted contracts consisted
     of the following at December 31, 2000:

<TABLE>
<S>                                                                         <C>
          Costs incurred on uncompleted contracts                           $ 1,745,000
          Estimated earnings on uncompleted contracts                         1,004,000
                                                                            -----------
                                                                              2,749,000
          Less billings to date                                              (2,419,000)
                                                                            -----------
                                                                            $   330,000
                                                                            ===========
</TABLE>

These amounts are included in the accompanying balance sheet under the following
captions:

<TABLE>
<S>                                                                            <C>
          Costs and estimated earnings in excess of billings                   $330,000
           on uncompleted contracts
          Billings in excess of costs and estimated earnings                          -
           on uncompleted contracts                                            --------
                                                                               $330,000
                                                                               ========
</TABLE>

The following summarizes the results of fixed fee contracts:

<TABLE>
<CAPTION>
                                           Revenue           Cost           Gross Profit
          Year Ended December 31, 2000     Earned          Incurred          Recognized
          ----------------------------   ----------        ----------        ----------
          <S>                            <C>               <C>               <C>
          Completed contracts            $1,590,000        $1,296,000        $  294,000
          Uncompleted contracts           2,749,000         1,745,000         1,004,000
                                         ----------        ----------        ----------
                                         $4,339,000        $3,041,000        $1,298,000
                                         ==========        ==========        ==========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       27
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

4.   Fixed-Fee Contracts  (continued)
     -------------------

     The Company did not have any significant fixed fee contracts as of and for
     the year ended December 31, 1999.

     Accounts receivable related to contracts consisted of the following at
     December 31, 2000:

<TABLE>
<S>                                                                              <C>
          Completed contracts                                                  $426,536
          Uncompleted contracts                                                 501,148
          Retainage                                                                   -
                                                                               --------
                                                                               $927,684
                                                                               ========
</TABLE>


5.   Notes Payable
     -------------

     The Company entered into a Revolving Credit Note with a bank on April 24,
     2000 in the amount of $1,250,000, bearing interest at prime + .5% (10% at
     December 31, 2000) and maturing on April 24, 2001. The outstanding balance
     due at December 31, 2000 was approximately $362,000. This note is
     collateralized by the accounts receivable and inventory of the Company. The
     agreement contains certain covenants, the most restrictive of which
     requires the Company to maintain consolidated tangible net worth, as
     defined, of at least $3,250,000.

     The Company is financing a portion of its insurance each year on a short-
     term basis, with a balance of approximately $72,000 at December 31, 2000.

6.   Long-Term Debt
     --------------

     The Company has a term note payable with a bank of $450,000 at 8.88%. The
     loan, which expires on February 28, 2002, is collateralized by land and
     building. There was $386,606 outstanding under this note at December 31,
     2000. Interest on the outstanding amount is due and payable monthly.

     Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
               Years Ending December 31,
               ------------------------
               <S>                                                    <C>
                          2001                                        $ 21,238
                          2002                                         365,368
                                                                      --------
         Total                                                         386,606
         Less current portion                                          (21,238)
                                                                      --------
         Long-term debt                                               $365,368
                                                                      ========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       28
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

7.   Capital Leases and Operating Leases
     -----------------------------------

     The Company leases equipment and office space under long-term lease
     agreements. The leases covering certain pieces of equipment, which expire
     over the next five years, are classified as capital leases. Property and
     equipment includes equipment under capital leases of approximately
     $166,000, less accumulated amortization of approximately $18,000 at
     December 31, 2000.

     The future minimum lease payments for capital leases and for operating
     leases (with initial or remaining noncancellable terms in excess of one
     year) as of December 31, 2000 follow:

<TABLE>
<CAPTION>
          Years Ending December 31,                                 Capital      Operating
          ------------------------                               ----------      ---------
<S>                                                              <C>             <C>
                    2001                                           $ 37,978        $320,690
                    2002                                             41,431         264,863
                    2003                                             41,431          39,415
                    2004                                             41,431               -
                    2005                                             21,905               -
                                                                 ----------      ----------
     Total minimum lease payments                                   184,176        $624,968
                                                                 ==========      ==========
     Less amount representing interest                              (39,846)
                                                                 ----------      ----------
     Present value of net minimum lease payments                    144,330
     Less current maturities                                        (24,118)
                                                                 ----------
                                                                   $120,212
                                                                 ==========
</TABLE>

     Rental expense for all operating leases, including those with terms less
     than one year, amounted to approximately $109,000 and $275,000 for the
     years ended December 31, 1999 and 2000, respectively.


8.   Profit Sharing Plan
     -------------------

     The Company has a 401(k) profit sharing plan (the "Plan") covering
     substantially all employees. Under the terms of the Plan, the Company will
     make matching contributions equal to 50% of employee contributions up to 6%
     of employee compensation, as defined. Employees may make contributions up
     to 15% of their compensation, subject to certain maximum contribution
     limitations. The employer's contributions vest on a schedule of 25% per
     year for four years. The Company made contributions to the Plan of
     approximately $120,000 and $127,000, respectively, for the years ended
     December 31, 1999 and 2000, respectively.

      See accompanying notes to these consolidated financial statements.

                                       29
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

9.   Stock Option Plan
     -----------------

     In June 1998, the Company created the Industrial Data Systems Corporation
     1998 Incentive Plan (the "Option Plan"). The Option Plan provides for
     grants of nonstatutory options, incentive stock options, restricted stock
     awards and stock appreciation rights. No compensation cost has been
     recognized for grants under the Option Plan because the exercise price of
     the options granted to employees equals the market price of the stock on
     the date of the grants. Had compensation cost of the Option Plan been
     determined based on the fair value at the grant date for awards in 1999 and
     2000 consistent with the provisions of SFAS No. 123, the Company's pre-tax
     income in 1999 and 2000 would have been reduced by approximately $20,000.

     The fair value of each option granted is estimated on the date of grant
     using the Black-Scholes option-pricing model with the following weighted
     average assumptions used for grants in 1999 and 2000 dividend yield of 0%,
     expected volatility of 94% and 123%, risk-free interest rates of 6%, and
     expected lives of two years.

     Under the Option Plan, the total number of shares of common stock that may
     be granted is 1,200,000. Each option granted in 1999 and 2000 has an
     exercise price of $1.25 and $1.00 per share, respectively, and vest over 48
     months. The maximum term of the options is ten years.

     The following table summarizes stock option activity:

<TABLE>
<CAPTION>
<S>                                                                                     <C>
     Outstanding, January 1, 1999                                                               -
     Granted                                                                              200,000
     Canceled or expired                                                                        -
     Exercised                                                                                  -
                                                                                         --------
     Outstanding, December 31, 1999                                                       200,000
                                                                                         ========
     Exercisable at December 31, 1999                                                       5,000
                                                                                         ========
     Weighted-average fair value of options, granted during the year                     $    .42
                                                                                         ========
     Weighted-average fair value of options at December 31, 2000                         $    .42
                                                                                         ========

     Outstanding, January 1, 2000                                                         200,000
     Granted                                                                               66,000
     Canceled or expired                                                                  (40,000)
     Exercised                                                                                  -
                                                                                         --------
     Outstanding, December 31, 2000                                                       226,000
                                                                                         ========
     Exercisable at December 31, 2000                                                      45,000
                                                                                         ========
     Available for grant at December 31, 2000                                             974,000
                                                                                         ========
     Weighted-average fair value of options, granted during the year                     $    .43
                                                                                         ========
     Weighted-average fair value of options at December 31, 2000                         $    .43
                                                                                         ========
</TABLE>

      See accompanying notes to these consolidated financial statements.

                                       30
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

10.  Concentration of Credit Risk and Major Customers
     ------------------------------------------------

     The Company manufactures and distributes industrial and portable computers
     and computer monitors, power systems and battery chargers, and air handling
     equipment for air conditioning and heating systems to commercial companies
     primarily in the southern states and provides pipeline engineering and
     fabricated systems and services primarily to major integrated oil and gas
     companies, throughout the world. The Company performs ongoing credit
     evaluations of its customers and generally does not require collateral. The
     Company assesses its credit risk and provides an allowance for doubtful
     accounts for any accounts, which it deems doubtful for collection.

     For the years ended December 31, 1999 and 2000, the Company had sales to
     one and two major customers in the Engineering segment totaling
     approximately $3,460,000 and $4,200,000, respectively, which represent 24%
     and 25% of total revenues, respectively. At December 31, 2000, amounts due
     from three customers who individually had amounts due in excess of 10% of
     trade receivables totaled $1,580,627.

11.  Stockholders' Equity
     --------------------

     In 1999, the Company purchased 40,000 shares of its own stock for $67,045
     under a program approved by the Board of Directors to repurchase up to
     400,000 shares of Company common stock at no more than $5 per share. Also
     in 1999, as part of a rescission agreement, the Company received back
     50,000 shares of the Company common stock that had been issued during 1998
     in the acquisition of IDS FAB (see note 14). All treasury shares were
     retired in 1999

12.  Federal Income Taxes
     --------------------

     The following is a reconciliation of expected to actual income tax expense
     from continuing operations:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                              -------------------------------
                                                                 1999                2000
                                                              ------------       ------------
           <S>                                                <C>                <C>
           Federal income tax expense at 34%                    $105,724            $129,499
           State and foreign taxes                                 9,622              21,476
           Nondeductible expenses                                  3,400               9,200
           Other                                                  32,466             (37,407)
                                                                --------            --------
                                                                $151,212            $122,768
                                                                ========            ========
</TABLE>

      See accompanying notes to these consolidated financial statements

                                       31
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

12.  Federal Income Taxes  (continued)
     --------------------

     The components of the Company's deferred tax liability consisted of the
     following at December 31, 1999:

<TABLE>
<CAPTION>
<S>                                                                        <C>
           Deferred tax asset:
              Allowance for doubtful accounts                                    $  6,000
           Deferred tax liabilities:
              Tax accounting change from cash basis to accrual basis -            (43,000)
                  CPM Acquisition
              Depreciation                                                        (11,000)
                                                                                 --------
                      Deferred tax liability, net                                $(48,000)
                                                                                 ========
</TABLE>

13.  Segment Information
     -------------------

     The Company operates in three business segments: (1) engineering consulting
     services primarily to major integrated oil and gas companies; (2) the
     manufacture and distribution of air handling equipment for HVAC systems to
     commercial companies; and (3) the manufacture and distribution of
     uninterruptible power systems, battery chargers and industrial grade
     computer systems for specialty applications. Sales, operating income,
     interest income and expense, identifiable assets, capital expenditures and
     depreciation set forth in the following table are the results of the three
     segments. The amount in corporate and eliminations includes amounts to
     eliminate intercompany items, including notes receivable and notes payable.

       See accompanying notes to these consolidated financial statements

                                       32
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

13.  Segment Information  (continued)
     -------------------

     Segment information for the years 1999 and 2000 was as follows:

<TABLE>
<CAPTION>
                                                            (Thousands)
-----------------------------------------------------------------------------------------------------------------------------------
                                                               1999
-----------------------------------------------------------------------------------------------------------------------------------
                                                                      Power Systems
                                                                       and Computer
                                     Engineering       Air Handling      Equipment         Corporate          Total
                                    -------------     --------------    ------------      -----------      -------------
<S>                                <C>               <C>               <C>                <C>              <C>
Net sales from external             $     5,978       $     3,151       $     3,109        $         -      $    12,238
  customers
Operating profit (loss)                     428               (38)             (157)                 -              233
Interest income                               -                 -                 -                 47               47
Interest expense                              -                 -                 -                 68               68
Depreciation and  amortization               50                58                36                  -              144
Total assets                              1,735             1,719             2,409                 51            5,914
Capital expenditures                $       121       $        88       $         -        $         -      $       209

-----------------------------------------------------------------------------------------------------------------------------------
                                                               2000
-----------------------------------------------------------------------------------------------------------------------------------
Net sales from external             $    10,740       $     3,421       $     2,815        $         -      $    16,976
 customers
Operating profit (loss)                     762               (24)             (217)                                521
Interest income                               -                 -                 -                 52               52
Interest expense                              -                92                 -                  -               92
Depreciation and amortization                96                84                36                  -              216
Total assets                              3,788             1,600             1,664                  -            7,052
Capital expenditures                $       316       $        24       $        28        $         -      $       368
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

14.  Discontinued Operations
     -----------------------

     On October 28, 1999, the Company entered into a settlement agreement with
     the former owner of IDS FAB to rescind the original acquisition agreement
     dated November 1, 1998. As a result of the settlement agreement, the
     Company received the originally issued 50,000 shares of its common stock,
     valued at $43,750 at the date of the rescission, back from the former owner
     of IDS FAB and transferred the stock of IDS FAB to the former owner. All
     assets and liabilities of IDS FAB were transferred back to and assumed by
     the former owner of IDS FAB.

     In the first two fiscal quarters of the year ended December 31, 1999, prior
     to determination to dispose of the segment, the Company had recognized a
     loss of approximately $765,000 related to impairment of assets of IDS FAB.
     In the fourth quarter of 1999, this impairment charge was reclassified to
     be included in the loss on disposal of discontinued operations.

       See accompanying notes to these consolidated financial statements.

                                       33
<PAGE>

                      INDUSTRIAL DATA SYSTEMS CORPORATION
                               AND SUBSIDIARIES

14.  Discontinued Operations  (continued)
     -----------------------

     The discontinued segment recognized no sales revenue in 1999. Additionally,
     included in the loss on disposal of discontinued operations is
     approximately $85,000 of legal fees related to the disposition.

15.  Contingencies
     -------------

     The Company is subject to legal proceedings and claims which have arisen in
     the ordinary course of its business. These actions when ultimately
     concluded and determined will not, in the opinion of management, have a
     material effect on results of operations or the financial condition of the
     Company.

       See accompanying notes to these consolidated financial statements.

                                       34
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     There are no changes in or disagreements with the Company's accountants on
accounting and financial disclosure.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE

     The Board of Directors of the Company presently consists of five members.

     The following table and the notes thereto state the names of all the
persons proposed to be nominated for election as Directors. Also disclosed are
their ages, all positions and offices with the Company now held by them, their
principal occupations or employment within at least the five preceding years and
the dates upon which they became directors of the Company.

<TABLE>
<CAPTION>
                                                       Director
                                                       --------
Name                               Age                  Since              Position Held
----                               ---                  -----              -------------

<S>                                <C>                 <C>                 <C>

William A. Coskey, P.E. (1)         48                  1985               Chairman of the Board, Chief
                                                                           Executive Officer and President
Hulda L. Coskey (1)                 46                  1985               Chief Financial Officer,
                                                                           Secretary, Treasurer, Director
David W. Gent, P.E. (2)             48                  1994               Director
Gordon R. Wingate (2)               45                  1998               Director
Ken J. Hedrick                      54                  1998               Controller, Director
</TABLE>

(1)  William A. Coskey and Hulda L. Coskey are husband and wife.

(2)  Member of Audit and Compensation Committees.

     William A. Coskey is the founder of the Company and has served as Chairman
of the Board, Chief Executive Officer and President since the Company's
formation in September 1985. Mr. Coskey also serves as President and Director of
the Company's subsidiaries: Industrial Data Systems, Inc.; IDS Engineering,
Inc.; Thermaire, Inc., and Constant Power Manufacturing Corporation. Prior to
founding the Company, Mr. Coskey served as Manager of Corporate Development for
Keystone International, Inc., a public company listed on the New York Stock
Exchange, and was responsible for all acquisition and merger activities of
Keystone International, Inc. during the period 1984 to 1985. Mr. Coskey had
formerly held the position of President of Syntech Associates, Inc., an
engineering services company located in Houston, Texas for the period 1979 to
1984. Mr. Coskey, an Honors Graduate, received a B.S. in Electrical Engineering
from Texas A&M University in 1975. He is a Registered Professional Engineer, and
is also a member of the Instrument Society of America. William A. Coskey is the
spouse of Hulda L. Coskey.

                                       35
<PAGE>

     Hulda L. Coskey has served as Chief Financial Officer and
Secretary/Treasurer of the Company since June 1994. During her seventeen years
with the Company and its predecessors, Mrs. Coskey has served in the following
capacities within the Company's subsidiaries: Vice President,
Secretary/Treasurer, and Director of Industrial Data Systems, Inc.; Vice
President, Secretary, and Director of IDS Engineering, Inc.; Secretary/Treasurer
and Director of Thermaire, Inc., and as Secretary and Director of Constant Power
Manufacturing Corporation. Her primary responsibilities include SEC reporting,
investor relations, and other corporate secretary functions. In prior years,
Mrs. Coskey has been responsible for management and supervision of the Company's
operations, including but not limited to all accounting, finance and personnel
functions. Prior to joining the Company, she served the banking industry in the
Houston area both as a Loan Review Officer, and as a Credit Officer. Mrs. Coskey
majored in Accounting at the University of Houston. Mrs. Coskey has served as a
committee member for various civic organizations. Hulda L. Coskey is the spouse
of William A. Coskey.

     David W. Gent, P.E. has served as a director of the Company since June 1994
and is a member of the Audit and Compensation Committees. Since September 1991,
Mr. Gent has held the position of Director of International Engineering and
Chief Information Officer of Bray International, Inc., located in Houston,
Texas, with the responsibility of overseeing several departments that include
Engineering, Information Services, and Quality Control. Mr. Gent founded SofTest
Designs Corporation, a privately held electronic test equipment company, in 1980
and has served as a director since its inception and as its President for the
period 1986 to 1991. Prior to 1986, Mr. Gent was General Manager of the USA
Controls Division of Keystone International, Inc. Mr. Gent, an Honors Graduate,
received a B.S. in Electrical Engineering from Texas A&M University in 1975 and
an MBA from Houston Baptist University. He is a Registered Professional
Engineer, and a Senior member of the Instrument Society of America. Mr. Gent
serves on the Texas A&M University Electrical Engineering Department Advisory
Council, the Bray International, Inc. 401(k) committee, and as a Bray
representative on various councils including Fieldbus Foundation and the Open
DeviceNet Vendors Association. He also holds several patents in the field of
industrial flow controls.

     Gordon R. Wingate has served on the Board of Directors since June 1998 and
is a member of the Audit and Compensation Committees. Mr. Wingate has served as
President and Chief Executive Officer of SynchroNet since 1989. SynchroNet is a
computer internetworking service provider based out of Houston that designs and
implements secure corporate networks for data, voice, and video, some of which
are global in scope. Prior to this time Mr. Wingate owned and operated Wingate
Services, a computer cabling and installation provider, which in 1989 changed
its name to SynchroNet and became involved with system design and computer
integration. Mr. Wingate earned his Bachelors of Arts degree from the University
of Texas at Austin in 1979. He is professionally certified as a Cisco Certified
Networking Associate, a Novel Certified NetWare Engineer 5, a Microsoft
Certified Product Specialist for Windows NT and a Citrix Certified Administrator
for Citrix Winframe and Metaframe.

     Ken Hedrick has served as Corporate Controller of Industrial Data Systems
Corporation since December 1997. Mr. Hedrick was initially appointed as an
interim Director upon the resignation of Rex S. Zerger in August 1998 and was
later elected to the Board of Directors by the shareholders in June 1999.
Beginning his career in public accounting over 20 years ago, Mr. Hedrick worked
on auditing assignments and on management consulting projects while in the
public sector. Moving into the private

                                       36
<PAGE>

business sector, Mr. Hedrick has held Chief Financial Officer, General Manager
and Controller positions with public and privately held companies primarily in
the construction and the manufacturing industries. In these various positions,
Mr. Hedrick has been responsible for start-up operations, information systems
conversion and implementation, as well as typical financial, accounting and
general administrative functions. Mr. Hedrick received a B.B.A. degree in
Accounting and Management from Southwest Texas State University in 1970 and
received a C.P.A. certification in 1973.

Directors Compensation

     Employee directors and independent directors of the Company do not receive
any compensation for attendance at board meetings or committee meetings. The
Company does not pay out-of-pocket expenses incurred by directors to attend
board and committee meetings. Under the Industrial Data Systems Corporation 1998
Incentive Plan (the "Incentive Plan"), non-employee directors are eligible to
receive non-statutory stock options and employees of the Company and its
majority owned subsidiaries are eligible to receive incentive or non-qualified
options. In recognition of the services provided by its Board of Directors and
in compliance with the Incentive Plan, the Company awarded options to acquire
15,000 shares to directors on November 21, 2000. The Company awarded options to
acquire 5,000 shares each for service provided to the Company in 2000 to Mr.
Gent, Mr. Wingate, and Mr. Hedrick. All of these stock options were issued at an
exercise price of $1.00 per share and vest over a five-year period with an
expiration date of November 21, 2010. The Company had previously awarded 5,000
shares each for each year or partial year of service provided to the Company
through 1999 to Mr. Gent (30,000 shares), Mr. Wingate (10,000 shares) and Mr.
Hedrick (10,000 shares). In addition to the options awarded for director
service, the Company awarded Mr. Hedrick options to acquire 20,000 shares of
stock for his services as a key employee to the Company, which is discussed
further under "Incentive Plan". All of the stock options issued in 1999 were at
an exercise price of $1.25 per share and vest over a five-year period with an
expiration date of December 12, 2009. The stock options awarded to directors
represent 37.6% of all stock options issued to directors and key employees. As
of March 19, 2001 no options have been exercised nor shares issued under the
Incentive Plan.

Board of Directors Meetings and Committees

     During 2000, there were four meetings of the Board of Directors and one
action taken by unanimous consent. Mr. Wingate was able to attend fewer than 75%
of the board and committee meetings on which he served. The Board of Directors
has established a standing Audit Committee and Compensation Committee. The Board
does not have an Executive Committee or a Nominating Committee. Compensation for
the past several years for the Company's executive officers and employees has
been determined by the President and Chief Executive Officer.

     Audit Committee. The Audit Committee serves as an independent and objective
party to monitor the Company's financial reporting process and internal control
system, reviews and appraises the audit efforts of the Company's independent
accountants, and provides an open avenue of communication among the independent
accountants, financial and senior management and the Board of Directors. The
members of this

                                       37
<PAGE>

Committee are Messrs. David W. Gent and Gordon R. Wingate, both of whom are
independent directors. The committee met one time during 2000. Both directors
were present.

     Compensation Committee. The Compensation Committee is responsible for
administering the Company's Incentive Plan and granting stock options and other
awards under the Plan. The members of this Committee are Messrs. David W. Gent
and Gordon R. Wingate, both of whom are independent directors. The committee met
one time during 2000. Both directors were present.

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers and 10% beneficial owners ("insiders") to file
with the United States Securities and Exchange Commission reports of ownership
and change in ownership of equity securities of the Company. Based solely on its
review of Forms 3 and 4 and amendments thereto furnished to the Company under
Rule 16a-3(e) during its most recent fiscal year and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
the Company believes that during the year ended December 31, 2000, no reporting
person failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act since such reporting persons became subject to reporting
requirements except that Mike M. Patton, Vice President of Business Development
of a subsidiary of IDSC failed to file a timely Form 5 during the year 2000.

ITEM 10.  EXECUTIVE COMPENSATION

Compensation Summary

     The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by, or paid to, the Company's
Chief Executive Officer (the "Named Executive Officer"). No other executive
officers of the Company received aggregate cash compensation in excess of
$100,000 during the years ended December 31, 1998, 1999 and 2000.

<TABLE>
<CAPTION>
                                      Annual Compensation
                             ----------------------------------
                                                                    Other Annual          All other
Name and Principal Position      Year       Salary      Bonus       Compensation        Compensation
---------------------------      ----       ------      -----       ------------        ------------
<S>                              <C>        <C>         <C>         <C>                 <C>
                                             ($)          ($)            ($)                 ($)
 William A. Coskey, P.E.,        2000      111,040         -              -                   -
  Chief Executive Officer        1999      109,224         -              -                   -
  and President                  1998      109,200         -              -                   -
</TABLE>

Key Man Insurance

     William A. Coskey is a key employee of the Company and the loss of Mr.
Coskey's services could adversely affect the Company's business. The Company
maintains, and is the beneficiary of, a life insurance policy on the life of Mr.
Coskey. The face amount of such policy is $600,000. The continuance of such
policy is at the discretion of the Board of Directors and the policy may or may
not be maintained in the future.

                                       38
<PAGE>

Incentive Plan

     Since the approval and adoption of the Industrial Data Systems Corporation
1998 Incentive Plan in June 1998, the Company has granted options to acquire
266,000 shares of its Common Stock with Option Agreements for 226,000 shares
remaining in effect.  In 2000, options for 40,000 shares were cancelled due to
employment termination with two employees.  No options have been exercised nor
have any shares been issued under the Incentive Plan.  As of March 19, 2001, a
total of 45,000 options were vested but not exercised.

     Issuance and cancellation of stock options are detailed in the table
below.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
DATE          OPTIONS TO KEY              OPTIONS TO                   EXERCISE      EXPIRATION
                EMPLOYEES                  DIRECTORS                    PRICE           DATE
         ----------------------------------------------------
          OPTIONS       OPTIONS       OPTIONS       OPTIONS
           ISSUED      CANCELLED       ISSUED      CANCELLED
-----------------------------------------------------------------------------------------------
<S>      <C>           <C>            <C>          <C>                 <C>           <C>
1999      150,000             0        50,000             0              $1.25        12/12/09
-----------------------------------------------------------------------------------------------
2000       51,000        40,000        15,000             0              $1.00        11/21/10
-----------------------------------------------------------------------------------------------
</TABLE>

     Stock options awarded to directors are specifically disclosed elsewhere in
this Proxy Statement, under "Director Compensation".

401(k) Plan

     On January 1, 1993, the Company adopted a Section 401(k) Profit Sharing
Plan and Trust (the "Plan"). The Plan is intended to qualify for tax exemption
under Section 401(k) of the Code and is subject to the Employee Retirement
Income Security Act of 1974. The Plan is administered by management of the
Company and all of the Company's employees who elect to do so are allowed to
participate, subject to certain eligibility requirements. Eligible employees may
contribute up to 15% of their annual compensation up to the maximum dollar
amount allowed by law, which is matched by the Company under a defined formula.
In addition, the Company may make discretionary contributions to the Plan, for
the benefit of all participants, at the election of the Board of Directors.
Employee contributions are fully vested at all times and contributions by the
Company vest on a schedule of 25% per year over a four-year period, commencing
with the second year of employment.

                                       39
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The directors and officers of the Company are not aware of any person or
company that beneficially owns, directly or indirectly, or exercises control or
direction over, shares carrying more than five percent (5%) of the voting rights
attached to the Common Stock of the Company as at the close of business on March
19, 2001 other than:

<TABLE>
<CAPTION>
                                                  Amount and Nature
              Name and Address of                   of Beneficial              Percent of
               Beneficial Owner                       Ownership                  Class
              -------------------                 -----------------            -----------
<S>                                              <C>                           <C>
Alliance 2000, Ltd. (1)                               9,530,100                    73.5%
William A. Coskey, P.E. (1) (2) (3)
Hulda L. Coskey (1)
600 Century Plaza Drive, Building 140
Houston, Texas 77073-6013

David W. Gent, P.E. (4)                                   9,374                      *

Gordon R. Wingate (4)                                     3,125                      *

Ken J. Hedrick (4)                                        9,375                      *

All executive officers and directors as a group       9,551,974                    73.5%
-----------------------------------------------
</TABLE>
(1)  Alliance 2000, Ltd. is the record holder of 9,500,000 shares, shown above.
     William A. Coskey and Hulda L. Coskey serve as General Partners of Alliance
     2000, Ltd.

(2)  Includes 100 shares owned by William A. Coskey purchased on June 16, 1998
     at the time the Company became listed on the American Stock Exchange.

(3)  Includes 30,000 shares of the Company's Common Stock held in the name of
     William A. Coskey, as Custodian for his children.

(4)  Includes shares the direct ownership of which may be acquired within 60
     days of March 19, 2001 through the exercise of stock options and represents
     less than 1% of the outstanding shares of Common Stock.


ITEM 12.  CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

     As of March 19, 2001, William A. Coskey, Chairman of the Board, Chief
Executive Officer, and President of the Company was indebted to the Company for
two unsecured promissory notes in an amount totaling  $150,000.  The notes are
due on demand and bear interest at a rate of 9% per annum.  The outstanding
balance at December 31, 2000 was $150,000 in principal and $46,500 in accrued
but unpaid interest.  The largest aggregate amount of indebtedness outstanding
at any time during the last twelve months owed by William and Hulda Coskey was
$196,500.

                                       40
<PAGE>

                                    PART IV


ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

A. FINANCIAL STATEMENTS

     The consolidated financial statements are contained herein as listed on the
"Index" on page 22 hereof.

B. REPORTS ON FORM 8-K

     There were no Current Reports on Form 8-K filed by the Company during the
quarter ended December 31, 2000.

C. DESCRIPTION AND INDEX OF EXHIBITS

Number    Description
------    -----------


2         Agreement and Plan of Reorganization for the Purchase of Industrial
          Data Systems, Incorporated, dated August 1, 1994 (1)

2.1       Action by Written Consent of the Board of Directors for the Purchase
          of Industrial Data Systems, Incorporated, a Texas corporation, dated
          August 1, 1994 (1)

2.2       Action by Written Consent of the Stockholders for the Purchase of
          Industrial Data Systems, Incorporated, a Texas corporation, dated
          August 1, 1994 (1)

2.3       Stock Acquisition Agreement for the Purchase of Thermaire
          Incorporated, dba Thermal Corp., dated August 15, 1995 (1)

2.4       Escrow Agreement for the Purchase of Thermaire Incorporated, dba
          Thermal Corp., dated August 15, 1995 (1)

2.5       Earnest Money Contract for the Purchase of Thermaire Incorporated, dba
          Thermal Corp.'s Manufacturing Facility, dated August 15, 1995 (1)

2.6       Offering Memorandum, 504D Offering of 500,000 Shares of Common Stock
          in the State of Nevada, dated July 26, 1994 (1)

2.7       Action by the Board of Directors regarding the 504D Stock Offering of
          2,499,999 Shares of Common Stock, dated July 10,1996 (1)

2.8       Agreement for Amendment and Substitution of Subscription Agreement and
          Notes, dated July 10, 1996 (1)

2.9       Deleted

                                       41
<PAGE>

2.10      Deleted

2.11      Deleted

2.13      Deleted

2.14      Deleted

2.15      Stock Acquisition Agreement, dated March 25, 1998, by and among
          Industrial Data Systems Corporation, John L. "Jack" Ripley, and
          Constant Power Manufacturing Incorporated. Previously filed as Exhibit
          2.1 on (8).

2.16      Deleted

2.17      Deleted

2.18      Deleted

2.19      Deleted

2.20      Deleted

2.21      Deleted

2.21.a    Deleted

2.22      Deleted

3         Articles of Incorporation, Industrial Data Systems Corporation, dated
          June 20, 1994 (1)

3.1       Corporate Charter, Industrial Data Systems Corporation, dated June 22,
          1994 (1)

3.2       Corporate Bylaws, Industrial Data Systems Corporation, dated June 22,
          1994 (1)

3.3       Articles of Incorporation, IDS Engineering, Inc., dated October 15,
          1997.  Previously filed as Exhibit 3 on (7)

3.4       Corporate Charter, IDS Engineering, Inc., dated October 15, 1997.
          Previously filed as Exhibit 3.1 on (7)

3.5       Corporate Bylaws, IDS Engineering, Inc., dated October 15, 1997.
          Previously filed as Exhibit 3.2 on (7)

3.6       Deleted

3.7       Deleted

                                       42
<PAGE>

3.8       Deleted

3.9       Deleted

4.1       Deleted

4.2       Deleted

4.3       Deleted

4.4       Deleted

4.5       Deleted

4.6       Deleted

4.7       Deleted

4.8       Deleted

10        Deleted

10.1      Deleted

10.2      Deleted

10.3      Deleted

10.4      Deleted

10.5      Adoption Agreement for Nonstandardized Code 401(k) Profit Sharing
          Plan, dated January 1, 1993 (1)

10.6      Blanket Service Contract - Exxon Pipeline Company (3)

10.7      Blanket Service Contract - Marathon Oil Company (3)

10.8      Deleted

10.9      Deleted

10.10     Deleted

10.11     Deleted

10.12     Deleted

10.13     Deleted

10.14     Deleted

                                       43
<PAGE>

10.15     Deleted

10.16     Deleted

10.17     Lease between Industrial Data Systems, Incorporated, a Texas
          corporation, and 319 Century Plaza Associates, Ltd., dated August 18,
          1997. Previously filed as Exhibit 10 on (7)

10.18     First Amendment to Lease Agreement between Industrial Data Systems,
          Incorporated, a Texas corporation, and 319 Century Plaza Associates,
          dated September 19, 1997. Previously filed as Exhibit 10.1 on (7)

10.19     Second Amendment to Lease Agreement between Industrial Data Systems,
          Incorporated, a Texas corporation, and 319 Century Plaza Associates,
          dated November 19, 1997. Previously filed as Exhibit 10.2 on (7)

10.20     Deleted

10.21     Deleted

10.22     Deleted

10.23     Pledge Agreement, dated March 25, 1998, by and between Industrial Data
          Systems Corporation and John L. "Jack" Ripley. Previously filed as
          Exhibit 10.22 on (8)

10.24     Fourth Amendment to Lease between Industrial Data Systems, Inc., a
          Texas corporation and 600 C.C. Business Park Ltd., dated September 1,
          1998 (10)

10.25     Deleted

10.26     Deleted

10.27     Deleted

10.28     Deleted

10.29     Deleted

10.30     Deleted

10.31     Settlement Agreement between the Company and Michael L. Moore (14)

10.32     Blanket Service Contract with Caspian Consortium-R (15)

10.33     Blanket Service Contract with Caspian Consortium-K (15)

10.34     Deleted (16)

                                       44
<PAGE>

10.35     Master Equipment Lease between Unicapital BSB Leasing and Thermaire,
          Inc. dba Thermal Corporation (16)

10.36     Promissory Note payable to The Frost National Bank, dated April 24,
          2000 (17)

10.37     Loan Agreement with The Frost National Bank, dated April 24, 2000 (17)

10.38     Commercial Security Agreement with The Frost National Bank, dated
          April 24, 2000 (17)

10.39     Commercial Guaranty for the benefit of The Frost National Bank, dated
          April 24, 2000 (17)

10.40     Business Park Lease for Tulsa Office Space (18)

10.41     Exhibit 10.41  Business Park Lease for Tulsa Office Space (18)

11        Statement Regarding Computation of Per Share Earnings (4) (5)

21        Subsidiary of the Registrant (11)

23        Deleted

24        Power of Attorney (2)

27        Financial Data Schedule (11) (12)

99        Deleted

99.1      Deleted

(1)   Exhibits incorporated by reference on the Company's Registration Statement
          on Form 10-SB filed with the Securities and Exchange Commission on
          January 27, 1997.
(2)   Exhibits incorporated by reference on the Company's Annual Report on Form
          10-KSB for the year ended December 31, 1996 filed with the Securities
          and Exchange Commission on April 14, 1997.

(3)   Exhibits incorporated by reference on the Company's Annual Report on Form
          10-KSB/A for the year ended December 31, 1996 filed with the
          Securities and Exchange Commission on May 14, 1997

(4)   Exhibits incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended June 30, 1997 filed with the
          Securities and Exchange Commission on August 14, 1997

(5)   Exhibits incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended September 30, 1997 filed with the
          Securities and Exchange Commission on November 14, 1997
(6)   Deleted
(7)   Exhibits incorporated by reference on the Company's Annual Report on Form
          10-KSB/A for the year ended December 31, 1997 filed with the
          Securities and Exchange Commission on April 10, 1998

                                       45
<PAGE>

(8)   Exhibits incorporated by reference on the Company's Form 8-K filed April
          10, 1998 and Form 8-K/A filed April 29, 1998
(9)   Deleted
(10)  Exhibits incorporated by reference on the Company's Annual Report on Form
          10-KSB/A for the year ended December 31, 1998
(11)  Exhibit incorporated by reference on the Company's Annual Reports on Form
          10-KSB.
(12)  Exhibit incorporated by reference on the Company's Annual Reports on Form
          10-QSB.
(13)  Exhibit incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended March 31, 1999 filed with the
          Securities and Exchange commission on May 17, 1999
(14)  Exhibit incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended September 30, 1999 filed with the
          Securities and Exchange commission on November 15, 1999
(15)  Exhibits incorporated by reference on this Annual Report on Form 10-KSB
          for the year ended December 31, 1999
(16)  Exhibit incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended January 31, 2000 filed with the
          Securities and Exchange commission on May 15, 2000
(17)  Exhibit incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended June 30, 2000 filed with the
          Securities and Exchange commission on August 14, 2000
(18)  Exhibit incorporated by reference on the Company's Quarterly Report on
          Form 10-QSB for the quarter ended September 30, 2000 filed with the
          Securities and Exchange commission on November 13, 2000

                                       46
<PAGE>

                                  SIGNATURES


     In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Annual Report on Form 10-KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.


                      INDUSTRIAL DATA SYSTEMS CORPORATION

Dated:  March 28, 2001

                              By:   /s/ William A. Coskey
                                   -----------------------
                                   William A. Coskey, P.E., Chairman of the
                                   Board, President and Chief Executive Officer


                              By:   /s/  Hulda L. Coksey
                                   ----------------------
                                   Hulda L. Coskey, Chief Financial Officer,
                                   Secretary, Treasurer, Director


                              By:   /s/  David W. Gent
                                   --------------------
                                   David W. Gent, P.E., Director


                              By:   /s/  Gordon R. Wingate
                                   ------------------------
                                   Gordon R. Wingate, Director


                              By:   /s/  Ken J. Hedrick
                                   ---------------------
                                   Ken J. Hedrick, Controller, Director