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

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                          COMMISSION FILE NO. 000-22061

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

        NEVADA                                             76-0157248
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                      600 CENTURY PLAZA DRIVE, BUILDING 140
                            HOUSTON, TEXAS 77073-6016
                                 (281) 821-3200

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 par value

Check whether the issuer has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months, 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 Company'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. [X].

The net sales for the Company for the fiscal year ended December 31, 1996 were
$5,536,960.

The aggregate market value of the voting stock held by non-affiliates of the
Company on March 31, 1997 was $23,371,955. The number of shares outstanding of
the Company's common stock on March 31, 1997 was 13,129,999.

                       DOCUMENTS INCORPORATED BY REFERENCE

Responses to Items 9, 10, 11 and 12 of Part III of this report are incorporated
herein by reference to certain information contained in the Company's definitive
proxy statement for its 1997 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 1997.

Transitional Small Business Disclosure Format (Check One)      Yes [ ]  No  [X]

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                                     PART I

        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. THE DISCUSSION IN THIS ANNUAL
REPORT ON FORM 10-KSB CONTAINS FORWARD LOOKING STATEMENTS WHICH INVOLVE RISKS
AND OTHER UNCERTAINTIES. REFERENCES TO THE "COMPANY" OR TO "IDS" REFER TO
INDUSTRIAL DATA SYSTEMS CORPORATION. REFERENCES TO "THERMAL" REFER TO THE RECENT
ACQUSITION OF THERMAIRE, INC., DBA THERMAL CORP.

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

        INDUSTRIAL DATA SYSTEMS CORPORATION

        Industrial Data Systems Corporation ("IDS") was incorporated in the
State of Nevada in June 1994. The Company's principal executive offices are
located at 600 Century Plaza Drive, Building 140, Houston, Texas 77073. The
Company's telephone number is (281) 821-3200.

        IDS 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 two operating segments: the
Industrial Products Division ("IPD") and the IDS Engineering Division ("IED").
The IPD is a provider of specialized microcomputer products that are targeted to
be sold to the industrial market. The IPD manufactures and sells industrial and
portable computers, microcomputers and color CRT monitors under the Company's
trade name, which include the SafeCase Series 3000, 4000, 5000 and 7000. The
microcomputer and peripheral products are designed to be used in industrial
applications, which include manufacturing, process control, discrete
manufacturing, data acquisition and man-machine interfaces. The computers and
monitors that are manufactured by the Company are different from conventional,
commercial desktop and portable computers by its architecture, packaging,
functionality, integration services and value-added software. The computer
products manufactured by the IPD are "open systems" that support "off-the-shelf"
software operated under DOS or Windows. The Company also derives revenue from
the integration and resale of industrial computer products manufactured by other
companies. Recently introduced products include the SafeCase Candere Workstation
Series which are more fully described below.

        The IPD positions itself to provide engineered industrial personal
computers. The IPD adds value to standard computer components by packaging these
components in enclosures which withstand tough environmental conditions and/or
enclosures that have a special form factor. The Company also adds value by
integrating and technically supporting advanced microcomputer systems.

        The IED offers engineering services to the pipeline division of major
integrated oil companies. These services are performed on facilities that
include cross-country pipelines, pipeline pump stations, compressor stations,
metering facilities, underground storage facilities, tank storage facilities and
product loading terminals. The management team of the IED has the capability of
developing a project from the initial planning stages through detailed design
and construction management. The services provided include project scoping, cost
estimating, engineering design, material procurement, mechanical fabrication, in
addition to project and construction management.

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        The IED has ten blanket service contracts currently in place to provide
services on a time and materials reimbursable basis. The IED also performs
services for its clients on a turnkey lump sum basis. The Company has a long
standing relationship with Exxon Pipeline Company, Arco Pipeline Company,
Marathon Pipeline Company and Texas Eastern Products Pipeline Company. New
business relationships with other major oil companies are developed through
in-house personnel.

        THERMAIRE, INC. DBA THERMAL CORP.

        Thermaire, Inc. dba Thermal Corp, a subsidiary of the Company, was
acquired on February 14, 1997. Thermal is engaged in the manufacture of
commercial and industrial air handling equipment which services all major
consumers of such equipment. Thermal began operations in 1945 and has built a
prominent reputation in the commerical and industrial air handling industry for
its quality products. As of March 31, 1997, Thermal employed approximately 40
employees. Thermal owns and occupies a 37,735 square foot facility on
approximately 4.5 acres which consists of approximately 2,500 square feet of
office space and 35,200 square feet of manufacturing area located in Houston,
Texas.

        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.

        Thermal's product lines are sold and distributed through an extensive
network of national sales representatives made up of approximately 30
representative organizations in the US. Many sales leads have been obtained
through visibility gained at industry trade shows around the country, the most
prominent of which is the annual ASHRAE show. Thermal's ability to customize
their standard product line to meet non-standard applications allows them to
command a premium pricing structure for their air handling products. Thermal
obtains a large percentage of their sales based on their ability to manufacture
and deliver the air handling products in an expedient manner. Thermal's products
are sold nationwide to Fortune 500 companies. 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.

        Major competitors of Thermal in the commercial segment are Trane,
Carrier, and York. Those competitors who have a strategy similar to Thermal are
Temptrol, Pace, and LaSalle Manufacturing. Thermal's maket share is estimated to
be less than 1% in the United States. We believe that this is a unique market
with few competitors. The Company plans to expand its share of the market
through increased marketing efforts and by replacing dormant sales
representatives with those with higher profile in existing territories. We plan
to offer units which have more value added features which include integrated
electronic control systems

        The most prominent trend in the air handling industry is the movement
toward double wall design of the air handling units as opposed to single wall
design. A single wall unit has one outer wall with interior insulation which is
in constant contact with the air flow. In a double wall unit, the insulation is
enclosed between two layers of metal, both interior and exterior, thus
preventing the air flow to come in contact with the insulation. This method of
design relieves environmental concerns about the quality of air provided to
inhabitants of commercial buildings. More than 80% of Thermal's products
incorporate this double wall design feature. See "Acquisitions - Acquisition of
Thermaire, Inc. dba Thermal Corp." for additional information relating to this
acquisition.

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ACQUISITIONS

        HISTORY

        Industrial Data Systems, Inc., a Texas corporation, was incorporated in
May 1985, to provide engineering consulting services to the pipeline divisions
of major integrated oil companies. The Company grew slowly to ten employees in
1989. At that time, a strategic decision was made by management to enter the
industrial computer marketplace. In 1989, the Company designed and built its
first industrial computer and in 1991, hired its first marketing manager. The
Company continued to support both businesses and developed its industrial
computer business through nationwide advertising. Its product sales grew through
the creation of new product lines.

        ACQUISITION OF INDUSTRIAL DATA SYSTEMS, INC.

        On August 1, 1994, the Company entered into an agreement to purchase all
of the issued and outstanding shares of Industrial Data Systems, Inc., a Texas
corporation, in a tax-free exchange of Common Stock. The Company issued
9,500,000 shares of its Common Stock to William A. Coskey and Hulda L. Coskey,
with each individual beneficially holding 4,762,800, and 4,750,000,
respectively. William A. Coskey and Hulda L. Coskey beneficially held all of the
issued and outstanding shares of the Common Stock of Industrial Data Systems,
Inc., a Texas corporation, at the time of the acquisition. William A. Coskey
held the positions of Chairman of the Board, Chief Executive Officer and
President of Industrial Data Systems, Inc., and Hulda L. Coskey held the
positions of Director, Vice President and Secretary/Treasurer of Industrial Data
Systems, Inc. The executive officers, management team and beneficial ownership
of securities held by the executive officers were the same in both companies at
the time of the transaction.

        ACQUISITION OF THERMAIRE, INC. DBA THERMAL CORP.

      The Company entered into an Agreement with the owners of Thermaire, Inc.
dba Thermal Corp. on August 15, 1995 to acquire Thermaire, Inc. dba Thermal
Corp. in a contingent purchase transaction. The Company issued 600,000 shares of
Common Stock which were held in an escrow account pending completion of the
acquisition by the Company exercising its option to pay $600,000 and obtain a
release of the shares. The Company's option to acquire Thermaire, Inc. dba
Thermal Corp. was later renegotiated and exercised on February 14, 1997 with the
exchange of 193,719 shares of Common Stock and $212,563 in cash. Upon completion
of the acquisition, the 600,000 shares of Common Stock previously included in
the original Escrow Agreement were canceled. In connection with this
transaction, Thermaire, Inc. dba Thermal Corp purchased the previously leased
facilities of Thermaire, Inc. dba Thermal Corp., 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. The audited financial statements of
Thermaire, Inc. dba Thermal Corp. are included herein as Exhibit 99 and the
proforma financial statements giving the effect to the acquisition for the
combined companies is included as Exhibit 99.1. Financial statements of
Thermaire, Inc. dba Thermal Corp. will be consolidated with the Company's
financial statements prospectively from the date of acquisition. See "Subsequent
Events" included in the Accompanying Notes to the Consolidated Financial
Statements of Industrial Data Systems Corporation for additional information
relating to this acquisition.

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NEW PRODUCTS

        INTRODUCTION OF SAFECASE SERIES 400

        On August 14, 1996, the Company announced the introduction of the
SafeCase Series 400 computer as its latest entry into the industrial portable
computer market. This computer is the industrial equivalent of a contemporary
commercial grade notebook computer. The size of the computer is 9" wide by 12"
in length and 5" in height and provides the same basic footprint as commercial
grade laptop computers, and complements the performance, durability and
reliability of the Company's other industrial computers. The SafeCase Series 400
is designed to be utilized in an environment with mild and severe weather
conditions, from light rain to gusting winds and temperatures ranging from nine
to 50 degrees Celsius, and is constructed to withstand shock at 10G and
vibration loads of 0.5mm within a five to 100 Hz range. The SafeCase Series 400
is a fully featured portable computer with an introduction price of $4,695.
Initial deliveries of this computer are now scheduled to commence during the 2nd
quarter of 1997.

        INTRODUCTION OF CANDERE WORKSTATION SERIES

        The Company recently introduced two new workstation products which
utilize Sun Microsystems SPARC technology. These products, packaged as either
tower or rack mount units are designed for the industrial and/or the
communications based environments. These new products will allow the Company to
participate in the $4 billion workstation market for Sun hardware. The new
technology uses PCI Bus expansion slots to allow for lower cost, higher
performance peripherals available in the PC world to be incorporated in the Sun
hardware market at a dramatic cost savings. Advertisement of the Candere
Workstation Series will be implemented via the Company's direct sales force,
direct mail, trade publications, telemarketing, and Sunworld On Line Product
Showcase which has a hot-link directly to the Company's own Internet home page.
Delivery of these products will begin in the second quarter of 1997 with an
introductory price of approximately $9,000 per unit.

        The Company plans to increase sales through the introduction of
additional computer products in 1997, and it is in the process of researching
complementary computer products which are suitable to the industrial computer
market.

INDUSTRY OVERVIEW

        The market for computer products and services has experienced
significant growth in recent years and the use of such products and services
within organizations has been impacted by several concurrent trends. The
introduction of LANs (local area networks) and WANs (wide area networks) has
allowed organizations to supplement or replace expensive, centralized mainframe
computer systems with more flexible and affordable PC-based client/server
platforms. The emergence of widely accepted industry standards for hardware and
software has increased the acceptance of open architecture LANs and WANs which
can and frequently do contain products from numerous manufacturers and
suppliers. Industrial personal computers and workstations are displacing other
controllers in a growing number of applications. Suppliers of office grade
(white box) personal computers have a price advantage. However, the necessity of
"hardened" units for difficult industrial environments ensures growth in the
sales of industrial personal computers and workstations.

        The worldwide industrial personal computer and workstation industry is
one that predominantly services OEM (Original Equipment Manufacturer) and
systems integrator applications. Growth is 

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expected to be slightly higher for OEM and systems integrator applications than
for end-user applications. Quality, reliability, shock resistance and speed of
operation are key factors of significance for the user. The ability of the user
to use the industrial personal computer in rugged environments, such as harsh
office, light industrial and heavy industrial applications is also essential.

        Users have needs and expectations that will affect product designs in
the industrial computer market. The type of backplane that is used, is of
critical importance as it affects ruggedness, expandability and price. The
supply side of the market is moving in diverse directions depending on price and
performance. High-end industrial personal computer and workstation vendors are
shifting more to active backplanes in order to lower prices, while low-end
vendors are continuing to use predominantly passive backplanes to meet user
demands for expansion and ease of servicing.

        The industrial personal computer market is following the desktop market
in terms of bus architectures with industrial modifications. The ISA (Industry
Standard Architecture) bus will remain the industry standard for primary buses,
and will be integrated in hybrid form with PCI (Peripheral Component
Interconnect) in a large percentage of shipments. The average number of board
expansion slots is expected to increase over the next five years. The number of
PCMCIA slots is expected to remain the same, but more industrial PCI computers
and workstations will have these features. The industrial personal computer and
workstation market is moving heavily in the direction of Pentium, which will be
followed by P-6, P-7 and Power PC microprocessors.

        The most popular enclosure type for industrial personal computers and
workstations is rack mount. Panel mount is the second most popular enclosure for
light and heavy industrial conditions, and third most popular for harsh office
conditions. Bench top, desktop and tabletop is the second most popular for harsh
office, and the third most popular enclosure type for light and heavy industrial
environments. Relative use of these enclosures are expected to shift only
slightly over the next five years, as are those of lesser used pedestal mounts,
hand held, notebooks and luggable portables.

        Distribution channels for computer products changed significantly
commencing in the early 1990's. During that period, many manufacturers of
computers began to scale back their sales forces and, in order to ensure the
continued wide distribution of their products, started to offer their products
to wholesale computer distributors which previously had sold only software and
peripheral equipment. In addition, manufacturers also began allowing resellers
to purchase products from more than one distributor, a practice known as "open
sourcing". Expanding computer sales to distributors and allowing open sourcing
intensified price competition among suppliers.

        Rapid technological improvements in computer hardware and the
introduction of new software operating systems have also created the need to
expand or upgrade existing networks and systems. At the same time, price
decreases have made such networks and systems affordable to a larger number of
organizations. The Company believes that these trends have increased the general
demand for computer products and related information technology services.

        The advent of open architecture networks has also impacted the market
for information technology services. Wider use of complex networks involving a
variety of manufacturer's equipment, operating systems and application software
has made it increasingly difficult to diagnose problems and maintain the
technical knowledge and repair parts necessary to provide support services.
Increasingly, organizations seeking computer products often require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available and proficient service expertise to assist them in product
selection, system design, installation and post-installation assistance and
service. The 

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Company believes that the ability to offer customers a comprehensive solution to
their information technology needs, including the ability to work within its
customers' industrial environments as integral members of their management
information system staff, are increasingly important in the marketplace.

COMPETITION

        The Company competes against various companies across its different
product lines. The Company's line of industrial portable computers compete with
products manufactured by Fieldworks, Dolch and Kontron. The Company's industrial
computer products which are mountable in a 19" equipment rack compete with
products from Advantek, Contec and Industrial Computer Source. There is also
competition from much larger suppliers of commercial grade computers, such as
Compaq, Dell, Toshiba and IBM. This commercial competition effectively sets
pricing for the Company's product line, since the Company's customers are
willing to pay a premium for industrial grade computers which is usually limited
to approximately two times the equivalent of commercial grade products.

        The Company believes that its products compete effectively based on its
engineering responsiveness to specific industrial market requirements, the
resulting functional specialization of its products, and its strategy of
focusing on relatively "sheltered" market niches where major competitors have
difficulty in tailoring their offerings to specific application requirements.
These strategies help offset the greater name recognition and broader service
and support resources of the Company's major competitors.

         The Company is engaged in business activities that are targeted to
 industrial markets which are less competitive and typically generate greater
 profit margins. The Company believes that the principal competitive factors in
 the business in which it operates are price and performance, product
 availability, technical expertise, adherence to industry standards, financial
 stability, service support and reputation. The pricing competition for the
 Company's IPD segment is from large manufacturers of commercial grade computer
 products. The IPD's pricing of its computer product line is governed by pricing
 in the commercial market. The pricing competition of the IED segment has
 intensified as a result of an increase in temporary personnel contracting
 agencies who can perform services at a higher volume level and lower profit
 margin. Some of the Company's current and potential competitors have longer
 operating histories and financial, sales, marketing, manufacturing,
 distribution, technical and other competitive resources which are substantially
 greater than those of the Company. As a result, the Company's competitors may
 be able to adapt more quickly to changes in customer demands or to commit
 resources to sales and service of its products than the Company has available.
 Such competitors could also seek to increase their presence in the markets
 where the Company is providing sales and services by creating strategic
 alliances with other competitors of the Company, by offering new or improved
 products and services to the Company's customers or increasing their efforts to
 gain and retain market share through competitive pricing.

        The Company's largest supplier, Microbus, Inc., a vendor of CPU boards
accounted for approximately 18% of total purchases for the year ended December
31, 1996. The CPU boards are purchased on individual purchase orders. The
Company does not have a long term contract with Microbus, Inc. to purchase the
CPU boards. In the event that this supplier could not provide CPU boards to the
Company, the Company believes that it would not have an adverse affect on the
Company's results of operations due to an abundance of suppliers of CPU boards
in the marketplace.

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BUSINESS STRATEGY

        The Company intends to increase market share and market penetration
through its existing product line, and also increase its sales through strategic
relationships with other computer manufacturers. On September 20, 1996, the
Company announced that it had entered into a Volume Purchasing Agreement with
Texas Microsystems, a division of Sequoia Systems, Inc. Under the terms of the
Purchasing Agreement, the Company will purchase OEM subsystems from Texas
Microsystems and act as an authorized systems integrator for their industrial
computer products. Texas Microsystems is a leading manufacturer of industrial
computer CPU boards and chassis products. The Company continues to actively
pursue similar OEM contracts with several major suppliers in the industrial
computer and desktop workstation marketplace.

        The Company also intends to continue 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. No specific acquisitions are being negotiated or planned as of
the date of this Annual Report on Form 10-KSB and 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.

        In order to achieve its growth objective, the Company intends to
commence with the expansion of its national marketing network to increase sales
of its current line of proprietary industrial computer products. This expansion
into new locations within the United States will require additional in-house
sales personnel and sales representatives.

PRODUCTS

        INDUSTRIAL PRODUCTS DIVISION

        The Company's Industrial Products Division ("IPD") provides Intel
microprocessor-based microcomputer systems and system components that are
extremely dependable and can withstand harsh weather conditions and demanding
work environments. These computer systems are designed to withstand a wide
fluctuation in temperatures, shock waves, vibration, electromagnetic and radio
frequency interference, in addition to airborne dust particles and excessive
moisture.

               SAFECASE SERIES 3000

        The SafeCase Series 3000 is a microcomputer designed to be operated at
sites where temperature, vibration and airborne dust particles are of primary
concern. This microcomputer is designed to accommodate either active motherboard
CPUs or passive backplanes with plug-in CPUs. Being extremely adaptable, it can
be configured to accommodate various types of CPU boards, in addition to the
installation of various floppy and hard drives. The microcomputer enclosure is
constructed of 16 gauge steel and is pressurized by a filtered push-pull fan
cooling system to prevent dust particles and other matter from entering into the
computer. All of the computer components are modularly installed and shock
mounted. The SafeCase Series 3000 is suitable for installation in a standard 19"
equipment rack.

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               SAFECASE SERIES 4000

        The SafeCase Series 4000 is a durable, rugged portable computer designed
to be operated under extremely harsh environmental conditions normally
encountered at industrial and commercial locations. The computer is constructed
with a four slot passive backplane and three full-size open bus slots to allow
the user to customize it with industry standard add-in boards. These computers
are designed with dual cooling fans to control heat build-up, are fully gasketed
to prevent the penetration of moisture and dust particles, and has a shock
mounted disk drive which together enhance its service life. The locations and
sites under which these computers are generally operated are unlike the
environmental conditions under which the plastic notebook and laptop computers
are operated. To complement the durability of the SafeCase Series 4000, its
sturdy aluminum carrying case has been designed to withstand excessive
mechanical loads.

               SAFECASE SERIES 5000

        The SafeCase Series 5000 is a color CRT computer monitor designed with a
resolution of 1024 x 768 pixels, positive pressure fan and filter which protects
against internal damage from airborne dust particles, and is mountable in a 19"
equipment rack. This monitor can be interfaced with a touch screen adapter. The
color CRT computer monitor is available in 14" and 20" diagonal models.

               SAFECASE SERIES 7000

        The SafeCase Series 7000 is a microcomputer designed for applications
which require an industrial computer to be mounted on a wall or attached to
machinery or other equipment. The features of this microcomputer include a six
slot passive backplane and plug-in CPU board, a positive pressure, filtered
cooling system, two drives which will accommodate either floppy or hard disks in
addition to a 150 watt power supply.

IPD PRODUCT DEVELOPMENT

        The Company's engineering strategy is to continue to develop
differentiated microprocessor based capabilities that can be delivered in
"open-systems" using industry standard technology. Through this product
development strategy, the Company is able to provide highly reliable and readily
available microcomputers that are compatible with "off-the-shelf" application
software and hardware. These microcomputers can also provide a much greater
degree of system availability to users by focusing on reliability as its main
feature.

        Product development during calendar 1997 will be concentrated on the
completion of and revisions to the previously announced SafeCase 400 product.
Revisions will also be made to the current SafeCase 4000 product line to
increase functionality and reduce cost. In addition, the Company will continue
to extend its products offerings to include high-end computer platforms. These
enhancements will include the latest Pentium, Pentium Pro and/or Sun Sparc
processors. SALES AND MARKETING

        IPD

        Revenues derived from the IPD are approximately 53% in-house direct
sales, approximately 42% from sales representatives and approximately 5% from
catalog distributors sales.

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        IED

        Revenues derived from the Company's IED are 100% direct in-house sales.

        DIRECT SALES

        The Company's SafeCase Series of computer products are primarily
marketed through commissioned third-party sales representatives. These sales
representatives are teamed with in-house sales managers and are assigned to
territories within the United States. The Company believes that this method of
selling leads to increased account penetration, proper management of its
products, and enhanced customer service which create and maintain the foundation
for long-term relationships with its customers. The Company's in-house sales
personnel receive a salary in addition to commission, which is based upon a
percentage of their sales. The Company 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. The Company promotes its
products and services through general and trade advertising, participation in
trade shows and through telemarketing and most recently through on-line Internet
communication via the Company's home page. The Company believes that a
significant percentage of new customers of its SafeCase Series of computer
products originates through word-of-mouth referrals from existing customers and
industry members, such as manufacturers representatives. Additionally, the sales
personnel of its IPD seek to capitalize on customer relationships that have been
developed by its IED personnel. Sales leads developed by this synergy are then
jointly pursued. The IPD's customer base of over 200 accounts consists primarily
of Fortune 500 companies in all industry segments within the United States.

        OTHER METHODS OF SALES

        Sales of the IPD are primarily generated through commissioned sales
representatives and its in-house direct sales force. The Company also has an
arrangement with two catalog distributors that offer industrial computer
products and related peripherals. The SafeCase 4000 product is sold through
catalog distribution. This method of sales currently accounts for approximately
5% of IPD's total revenue.

        All in-house sales personnel are located at the Company's principal
executive offices in Houston, Texas. The IPD does not anticipate hiring direct
regional sales managers who would be located in other states.

        GOVERNMENT CONTRACTS

        Sales to branches of the United States government have accounted for
less than 1% of total revenue.

CUSTOMERS

        The Company's top ten customers (which varied from period to period)
accounted in the aggregate for approximately 90% and 82% of the Company's total
revenue during 1995 and 1996, respectively. The Company had one customer that
accounted for 65% and 39% of the Company's total revenue for the same periods.
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. 

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<PAGE>
There are no long-term commitments by such customers to purchase products or
services from the Company. Sales of the Company's computer 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 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 Houston based technical support staff provides
initial telephone trouble shooting 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 generally provides end-user purchasers of its systems
with a one year warranty.

DEPENDENCE UPON SUPPLIERS

        The Company's business depends upon its 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
computers, computer systems and computer components from distributors in order
to obtain competitive pricing, maximize product availability and maintain
quality control. In some cases, the Company's computer components are purchased
through a single source. The Company does not always have a long term purchasing
contract in place to purchase computer components from single sources. In the
normal course of business, the Company executes blanket purchase orders with its
major suppliers for a period of one year in order to maintain competitive
pricing and service. The purchase orders include provisions for the delivery, on
a monthly basis, of an adequate supply of computer parts to fulfill the
Company's orders for a one year period.

        The Company relies on a few key contract manufacturers for the
manufacture of some components used in the assembly of its microcomputers.
Although such subcontracting arrangements offer cost and capacity advantages,
and would eliminate the need to incur certain capital expenditures associated
with manufacturing, reliance on third party manufacturers gives the Company less
control over the manufacturing process for these components than if it undertook
such activities itself. Any failure of such subcontractors to manufacture and
deliver components as planned, or any problems with the quality of such
components, could have a material adverse effect on the Company's operations.

        The Company purchases from other manufacturers substantially all
peripheral devices and components used in its products. A majority of the
components and peripherals are available from a 

                                       11
<PAGE>
number of different suppliers, although certain major items are procured from
single sources. The Company believes that alternate sources could be developed
for such single source items, if necessary, however, in the event that certain
peripheral or component shortages were to occur, it could have an adverse effect
on the Company's operations.

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

RAPID TECHNOLOGICAL CHANGE

        The business in which the Company competes is characterized by rapid
technological change and frequent introduction of new products and product
enhancements. The Company's success depends in large part on its ability to
identify and obtain products that meet the changing requirements of the
marketplace. There can be no assurance that the Company will be able to identify
and offer products necessary to remain competitive or avoid losses related to
obsolete inventory and drastic price reductions. The Company attempts to
maintain a level of inventory required to meet its near term delivery
requirements by relying on the ready availability of products from its principal
suppliers. Accordingly, the failure of the Company's suppliers to maintain
adequate inventory levels of computer products demanded by the Company's
existing and potential customers and to react effectively to new product
introductions could have a material adverse affect on the Company's financial
condition and results of operations. In addition, certain of its computer
products are subject to manufacturer or distributor allocations, which limit the
number of units available to the Company, therefore, there can be no assurance
that the Company will be able to offer new products or product enhancements in
sufficient quantities to satisfy customer demand. Failure of the Company to gain
sufficient access to new products or product enhancements could also have a
material adverse affect on the Company's financial condition and results of
operations.

PATENTS, TRADEMARKS, LICENSES

        The Company's success depends in part upon its proprietary technology,
and 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.

EMPLOYEES

        As of March 31, 1997, the Company employed approximately 90 individuals,
of which 40 were employed by the Company's subsidiary, Thermaire, Inc. dba
Thermal Corp. Of these, approximately 

                                       12
<PAGE>
four were employed in sales, marketing and customer services, forty were
employed in engineering and technical production positions and six were employed
in administration, finance and MIS. 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 does not own any real property and currently leases all of
its existing facilities. The Company leases its principal executive offices in
Houston, Texas, which consists of approximately 18,155 square feet that has been
divided into administrative offices, computer production operations and
warehouse facilities. The lease which will expire on August 31, 2000 is for a
five year term. Management believes that it has the ability to sustain a 100%
sales growth without having to expand its facilities or relocate its offices.
The Company also leases office space which consists of approximately 180 square
feet in Clarksburg, West Virginia, for the purpose of providing an office
facility for engineering and technical employees who reside in that State. This
lease will expire on May 31, 1997. The Company intends to continue operations at
its West Virginia location and believes that suitable facilities will be
available as needed.

      As a result of the acquisiton of Thermaire, Inc. dba Thermal Corp., the
land and property previously leased by Thermaire, Inc. dba Thermal Corp. was
purchased by Thermaire, Inc. dba Thermal Corp for $500,000., consisting of
$50,000 cash advance from Company and a note payable in the amount of $450,000.
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.

ITEM 3.  LEGAL PROCEEDINGS

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

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 year ended December 31, 1996.

                                       13
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

        The Company's Common Stock, $.001 par value per share, is traded on the
NASDAQ Electronic Bulletin Board System under the symbol "IDDS".

                                                            HIGH   LOW
                                                           -----  -----
        YEAR ENDED DECEMBER 31, 1995

        First Quarter ...................................  0.750  0.750
        Second Quarter ..................................  1.000  0.375
        Third Quarter ...................................  1.000  0.875
        Fourth Quarter ..................................  1.000  0.750

        YEAR ENDED DECEMBER 31, 1996

        First Quarter ...................................  1.125  0.750
        Second Quarter ..................................  0.875  0.375
        Third Quarter ...................................  4.250  0.875
        Fourth Quarter ..................................  7.250  3.125

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

        As of the date of this Annual Report on Form 10-KSB, the Common Stock
was held by approximately 393 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 Operations."

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

        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.

OVERVIEW

        The Company was formed in 1985 to engage in the business of providing
engineering consulting services to the pipeline divisions of major integrated
oil and gas companies. For the period 1985 through 1989, most of its revenues
were derived from the IED segment. In 1989, the Company 

                                       14
<PAGE>
introduced its IPD segment and has continued to introduce new products to the
marketplace. The IPD segment has generated sales as a percent of total revenue
of 29.9% and 37.4%, for 1995 and 1996, respectively, while the IED segment has
generated sales as a percent of total revenue of 70% and 62.6% for the same
period.

        The gross margin varies between each of its operating segments. Computer
product sales have produced a gross margin ranging from 26.5% in 1995 to 28.6%
in 1996 due to the intense price competition characteristic of the computer
products market. The gross margin for pipeline engineering services, which
reflects direct labor costs, has ranged from 27.9% in 1995 to 28.3% in 1996. The
variation is primarily attributable to the pricing and the mix of services
provided, and to the level of direct labor as a component of cost during any
given period. The overall gross margin for Industrial Data Systems Corporation,
which includes both product sales and pipeline consulting services, has varied
between 27.5% in 1995 to 28.4% in 1996. This variation reflects the different
mix of product sales and the amount of revenue derived from pipeline engineering
consulting services from period to period. Revenue from computer product sales
accounted for 37.4% of the Company's total revenue for the year ended December
31, 1996. Revenue from pipeline engineering consulting services accounted for
62.6% of the Company's total revenue for the year ended December 31, 1996.

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,
                                                                              ------------------------------------------------------
                                                                                       1995                           1996
                                                                              -----------------------        -----------------------
                                                                                AMOUNT           %            AMOUNT            %
                                                                              ----------        -----        ----------        -----
<S>                                                                           <C>                <C>         <C>                <C> 
Revenue:
  Computer Products ..................................................        $1,354,888         29.9        $2,068,517         37.4
  Consulting Services ................................................         3,170,298         70.1         3,468,443         62.6
                                                                              ----------        -----        ----------        -----
     Total revenue ...................................................         4,525,186        100.0         5,536,960        100.0
Gross Profit:
  Computer Products ..................................................           359,681         26.5           591,303         28.6
  Consulting Services ................................................           885,113         27.9           980,899         28.3
                                                                              ----------        -----        ----------        -----
     Total gross profit ..............................................         1,244,794         27.5         1,572,202         28.4
Selling, general and administrative
expenses..............................................................           758,784         16.8         1,049,879         19.0
Depreciation .........................................................            17,631          0.4            33,689          0.6
                                                                              ----------        -----        ----------        -----
    Operating income .................................................           468,379         10.4           488,616          8.8
Other income (expense) ...............................................           143,153          3.2           120,169          2.2
                                                                              ----------        -----        ----------        -----
     Income before provision
     for income taxes ................................................           611,532         13.5           608,785         11.0
Provision for income taxes ...........................................           244,109          5.4           206,367          3.7
                                                                              ----------        -----        ----------        -----
Net income after income taxes ........................................        $  367,423          8.1        $  402,418          7.3
                                                                              ==========        =====        ==========        =====
</TABLE>
                                       15
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

        TOTAL REVENUE. Total revenue increased by $1,011,774 or 22.4% from
$4,525,186 in 1995 to $5,536,960 in 1996. Revenue from the IPD, which comprised
37.4% of total revenue in 1996 increased by $713,629 or 52.7%. The increase in
IPD revenue was generally attributable to increased sales to new and existing
customers which resulted from the hiring of additional sales personnel, in
addition to the introduction of new product lines. Revenue from the IED which
comprised 62.6% of total revenue in 1996 increased by $298,145 or 9.4%. The
increase in IED revenue was primarily attributable to increased project activity
and expansion of its client base.

        GROSS PROFIT. Gross profit increased by $327,408 or 26.3% from
$1,244,794 in 1995 to $1,572,202 in 1996. The gross margin for the IED increased
from 27.9% in 1995 to 28.3% in 1996. The increase was attributable to increased
rates for consulting services which were not totally offset by increased payroll
expenses. The gross margin for the IPD increased from 26.5% in 1995 to 28.6% in
1996. This increase was primarily attributable to a sales blend of products that
have higher gross margins.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $291,095 or 38.4% from $758,784 in 1995 to
$1,049,879 in 1996. As a percentage of total revenue, selling, general and
administrative expenses increased from 16.8% in 1995 to 19.0% in 1996. The
dollar increase was primarily attributable to an increase in general and
administrative expenses and sales compensation to accommodate the Company's
growth. Personnel costs, the largest other component of general and
administrative expenses, increased at a slower rate than total revenue. Certain
general and administrative expenses are relatively fixed, and the Company was
able to leverage these expenses as revenue increased during 1996.

        OPERATING INCOME. Operating income increased by $20,237 or 4.3% from
$468,379 in 1995 to $488,616 in 1996. Operating income decreased as a percentage
of total revenue from 10.4% in 1995 to 8.8% in 1996. The increase in operating
income was a result of a increased revenues, slightly higher gross margins
coupled with increased selling, general and administrative expenses.

        OTHER INCOME (EXPENSE). Other income decreased by $22,984 or 16.1% from
$143,153 in 1995 to $120,169 in 1996. This decrease was primarily due to smaller
gains in marketable securities, and by additional interest expense due to higher
utilization of the Company's line of credit.

        NET INCOME. Net income after taxes increased by $34,995 or 9.5% from
$367,423 in 1995 to $402,418 in 1996. Net income after taxes decreased as a
percentage of total revenue from 8.1% in 1995 to 7.3% in 1996.

LIQUIDITY AND CAPITAL RESOURCES

        Historically, the Company has satisfied its cash requirements
principally through borrowings under its line of credit and through operations.
As of December 31, 1996, the Company's cash position, including marketable
securities, was sufficient to meet its working capital requirements. In
addition, the Company had, as of December 31, 1996, $25,000 in additional
advances available under its line of credit agreement with a bank. The Company's
working capital was $1,158,758 and $2,579,571 at December 31, 1995 and December
31, 1996, respectively.

                                       16
<PAGE>
        CASH FLOW

        Operating activities provided net cash totaling $317,205 and $128,863
during 1995 and 1996, respectively. The Company has not generated significant
cash flow from operating activities due to the working capital requirements
resulting from the rapid growth of the Company. Trade accounts receivable
increased $281,908 and decreased $28,773 for the years ended December 31, 1995
and 1996, respectively. Inventory increased by $42,000 and 81,582 for the same
periods.

        Investing activities used cash totaling, $28,805 and $234,920,
respectively, during the years ended December 31, 1995 and 1996. The Company's
investing activities that used cash during these periods was primarily related
to cash advances to an affiliate (Thermaire, Inc. dba Thermal Corp.) and capital
expenditures.

        Financing activities provided cash totaling $16,375 and $507,325 during
1995 and 1996. During 1996, $190,000 was provided from the issuance of Common
Stock. Additionally, financing activities provided net cash of $42,325 as a
result of the net sale of treasury stock, and an increase in borrowings of
$275,000 under its line of credit. The Company has additional financing amounts
available on its line of credit ($25,000 at December 31, 1996), and the proceeds
of $1,000,000 from a private placement of common stock. The line of credit has
been used principally to finance accounts receivable and inventory purchases. Of
the $1,000,000 proceeds received from the sale of securities, $200,000 was
received in 1996 with the remaining balance being paid in full in January, 1997;
$787,437 is expected to be used for working capital, and the balance of $212,563
was used to purchase Thermaire, Inc. dba Thermal Corp. Additional bank financing
in the amount of $450,000 has been obtained for the purchase of the facilities
that Thermaire, Inc. dba Thermal Corp. had been leasing.

        During the next twelve months, the Company expects to incur an estimated
$100,000 for capital expenditures, a majority of which is expected to be
incurred for specialized computer production equipment. The actual amount and
timing of such capital expenditures may vary substantially depending upon, among
other things, the Company's level of growth.

        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 $622,512 and $593,739 at
December 31, 1995 and 1996, respectively. The number of days' sales outstanding
in trade accounts receivable was 50 days and 39 days, respectively. Bad debt
expenses have been insignificant (approximately .01%) for each of these periods.

ITEM 7.  FINANCIAL STATEMENTS

        The audited financial statements for Thermaire, Inc. dba Thermal Corp.,
as of December 31, 1996 are attached hereto and made a part hereof as Exhibit 99
in connection with the Company's acquisition of Thermaire, Inc. dba Thermal
Corp. on February 14, 1997. The unaudited proforma condensed consolidated
financial information of the combined companies as of December 31, 1996 and for
the year then ended are attached hereto and made a part hereof as Exhibit 99.1.

                                       17
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

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

                                       18
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                                 <C>
Independent Auditor's Report.........................................................................20

Consolidated Balance Sheets, December 31, 1995 and 1996..............................................21

Consolidated Statements of Income for the Years Ended December 31, 1995 and 1996.....................22

Consolidated Statement of Stockholders' Equity for the Years ended December 31, 1995
          and 1996...................................................................................23

Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
 .....................................................................................................24

Notes to Consolidated Financial Statements...........................................................25
</TABLE>
      (a) All schedules have been omitted, as the required information is
inapplicable or the information is presented in the financial statements or the
notes thereto.

                                       19
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
Industrial Data Systems Corporation and Subsidiary
dba IDS Technical Services

We have audited the accompanying consolidated balance sheets of Industrial Data
Systems Corporation and Subsidiary as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. 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 financial statements referred to above, present fairly, in
all material respects, the financial position of Industrial Data Systems
Corporation and Subsidiary as of December 31, 1995 and 1996, and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.

Hein & Associates, L.L.P.
Certified Public Accountants
Houston, Texas
February 19, 1997

                                       20
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                            -------------------------
                                                               1995          1996
                                                            -----------   -----------
<S>                                                         <C>           <C>        
                                     ASSETS
CURRENT ASSETS:
 Cash and cash equivalents:
    Cash in bank .........................................  $   342,304   $   637,217
    Mutual funds .........................................      231,528       337,883
                                                            -----------   -----------
                                                                573,832       975,100
 Marketable securities, at market value:
    Trading ..............................................      238,423       400,348
    Available-for-sale ...................................       32,655        56,781
                                                            -----------   -----------
                                                                271,078       457,129
 Account receivable - trade, less
  allowance for doubtful accounts of
  approximately $11,000 and $16,000
  in 1996 and 1995, respectively .........................      622,512       593,739
 Note receivable from an affiliate .......................         --          84,936
 Inventory ...............................................      139,514       221,096
 Note receivable from sale of common stock ...............         --         799,999
 Note receivable from stockholder ........................         --          50,000
 Advances to affiliate ...................................         --          30,000
 Prepaid assets and deferred costs .......................       48,858
                                                            -----------   -----------
       Total current assets ..............................    1,606,936     3,260,857
                                                            -----------   -----------
PROPERTY AND EQUIPMENT, net ..............................      106,283       122,578

OTHER ASSETS .............................................        2,000         2,000
                                                            -----------   -----------
       Total assets ......................................  $ 1,715,219   $ 3,385,435
                                                            ===========   ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Note payable to bank ....................................  $    50,000   $   325,000
 Accounts payable ........................................      113,478        57,698
 Income taxes payable ....................................      166,986       128,065
 Accrued expenses and other current liabilities ..........      117,714       170,523
                                                            -----------   -----------
       Total current liabilities .........................      448,178       681,286

DEFERRED INCOME TAX ......................................       31,423        34,010

COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 13)

STOCKHOLDERS' EQUITY:
 Common stock, $.001 par value; 75,000,000 shares
    authorized; 13,129,999 shares issued in 1996;
    10,630,000 shares issued in 1995 .....................       10,630        13,130
 Additional paid-in capital ..............................      817,397     1,829,684
 Retained earnings .......................................      439,977       842,395
 Net unrealized gain on marketable securities ............        1,289         1,068
                                                            -----------   -----------
                                                              2,686,277     1,269,293
 Treasury stock, 38,700 and 19,800 shares in 1995
   and 1996, respectively, at cost .......................      (33,675)      (16,138)
                                                            -----------   -----------
 Total stockholders' equity ..............................    1,235,618     2,670,139
                                                            -----------   -----------
       Total liabilities and stockholders' equity ........  $ 1,715,219   $ 3,385,435
                                                            ===========   ===========
</TABLE>
                                       21
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                         -------------------------
                                                            1995          1996
                                                         -----------  ------------
<S>                                                      <C>          <C>         
OPERATING REVENUES:
 Product sales ........................................  $ 1,354,888  $  2,068,517
 Consulting fees ......................................    3,170,298     3,468,443
                                                         -----------  ------------
                                                           4,525,186     5,536,960
EXPENSES:
 Cost of revenues:
    Product ...........................................      995,207     1,477,214
    Consulting ........................................    2,285,185     2,487,544
 Selling, general and administrative ..................      758,784     1,049,897
 Depreciation .........................................       17,631        33,689
                                                         -----------  ------------
                                                           4,056,807     5,048,344
OTHER INCOME (EXPENSE):
 Realized gains on marketable securities, net .........       97,727        86,824
 Net unrealized gains (losses) on marketable securities       29,932        20,389
 Interest income (expense), net .......................        8,653          (456)
 Other income .........................................        6,841        13,412
                                                         -----------  ------------
                                                             143,153       120,169
                                                         -----------  ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ..............      611,532       608,785

PROVISION FOR INCOME TAXES:
 Federal ..............................................      217,572       185,468
 State ................................................       26,537        20,899
                                                         -----------  ------------
                                                             244,109       206,367
                                                         -----------  ------------
NET INCOME ............................................  $   367,423  $    402,418
                                                         ===========  ============
NET INCOME PER COMMON SHARE ...........................  $       .04  $        .04
                                                         ===========  ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ............  $10,002,630  $ 10,056,735
                                                         ===========  ============
</TABLE>
                                       22
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
                                                                                                  NET
                                                                                               UNREALIZED
                                                                                               GAIN (LOSS)
                                                     COMMON STOCK      ADDITIONAL                  ON      
                                                  -------------------    PAID-IN     RETAINED   MARKETABLE   TREASURY
                                                    SHARES     AMOUNT    CAPITAL     EARNINGS    SECURIES     STOCK        TOTAL
                                                  ----------  -------  -----------   ---------   --------   ---------   -----------
<S>                                               <C>         <C>      <C>           <C>         <C>        <C>         <C>        
BALANCES, January 1, 1995 ......................  10,000,000  $10,000  $   808,977   $  72,554   $  3,057   $    --     $   894,588
     Stock issuance ($.30 share) ...............      30,000     --          8,970        --         --          --           9,000
     Purchases of treasury stock
       (64,500 shares) .........................        --       --           --          --         --       (58,750)      (58,750)
     Sales of stock from treasury
       (25,800 shares) .........................        --       --             50        --         --        25,075        25,125
     Stock issued in connection
       with contingent purchase ................     600,000      600         (600)       --         --          --            --
     Change in unrealized gain
       on marketable securities ................        --       --           --          --       (1,768)       --          (1,768)
     Net income ................................        --       --           --       367,423       --          --         367,423
                                                  ----------  -------  -----------   ---------   --------   ---------   -----------
BALANCES, December 31, 1995 ....................  10,630,000   10,630      817,397     439,977      1,289     (33,675)    1,235,618
     Stock issuance ($.40 share),
       net of $10,000 of offering
       costs ...................................   2,499,999    2,500      987,499        --         --          --         989,999
     Purchases of treasury stock
       (10,500 shares) .........................        --       --           --          --         --        (8,188)       (8,188)
     Sale of stock from treasury
       (29,400 shares) .........................        --     24,788         --          --         --        25,725        50,513
     Change in unrealized gain on
       marketable securities ...................        --       --           --          --         (221)       --            (221)
     Net income ................................        --       --           --       402,418       --          --         402,418
                                                  ----------  -------  -----------   ---------   --------   ---------   -----------
BALANCES, December 1, 1996 .....................  13,129,999  $13,130  $ 1,829,684   $ 842,395   $  1,068   $ (16,138)  $ 2,670,139
                                                  ==========  =======  ===========   =========   ========   =========   ===========
</TABLE>
                                       23
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                          YEARS ENDED DECEMBER 31,
                                                                                                      ------------------------------
                                                                                                        1995                1996
                                                                                                      ---------           ---------
<S>                                                                                                   <C>                 <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income ................................................................................          $ 367,423           $ 402,418
 Adjustments to reconcile net income to net cash provided by
    operating activities:
    Depreciation ...........................................................................             17,631              33,689
    Increase in trading securities, net ....................................................            (81,435)           (161,925)
    Changes in:
       Accounts receivable - trade .........................................................           (281,908)             28,773
       Inventory ...........................................................................            (42,200)            (81,582)
       Accounts payable ....................................................................             42,965             (55,780)
       Income tax payable ..................................................................            101,426             (38,921)
       Accrued expenses and other current liabilities ......................................             48,891              52,809
    Deferred income tax expense ............................................................             41,098              14,617
    Non-cash compensation provided to officers .............................................            103,305                --
    Other, net .............................................................................                  9             (65,235)
                                                                                                      ---------           ---------
       Net cash provided by operating activities ...........................................            317,205             128,863

CASH FLOWS FROM INVESTING ACTIVITIES:
 Note receivable from affiliate ............................................................               --               (84,936)
 Advances on note receivable from stockholder ..............................................               --               (50,000)
 Capital expenditures ......................................................................            (85,388)            (49,984)
 Purchases of available-for-sale securities ................................................            (76,367)            (24,000)
 Proceeds from sale of available-for-sale securities .......................................            132,950               4,000
 Advances to affiliate .....................................................................               --               (30,000)
                                                                                                      ---------           ---------
       Net cash used in investing activities ...............................................            (28,805)           (234,920)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Increase in notes payable, net ............................................................             50,000             275,000
 Proceeds from issuance of common stock, net ...............................................               --               190,000
 Purchase of treasury stock ................................................................            (58,750)             (8,188)
 Sales of stock from treasury ..............................................................             25,125              50,513
                                                                                                      ---------           ---------
       Net cash provided by financing activities ...........................................             16,375             507,325
                                                                                                      ---------           ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................................................            304,775             401,268

CASH AND CASH EQUIVALENTS, at beginning of year ............................................            269,057             573,832
                                                                                                      ---------           ---------
CASH AND CASH EQUIVALENTS, at end of year ..................................................          $ 573,832           $ 975,100
                                                                                                      =========           =========
SUPPLEMENTAL DISCLOSURES:
 Interest paid .............................................................................          $   4,103           $  12,350
 Income taxes paid .........................................................................          $  40,000           $ 241,483
                                                                                                      =========           =========
NON-CASH TRANSACTIONS:
 Issuance of common stock for services provided ............................................          $   9,000           $    --
 Issuance of common stock (600,000 shares) during 1995 in connection
    with a contingent business acquisition (see Note 13) ...................................          $    --             $    --
 Common stock issued in exchange for notes receivable (see Note 9) .........................          $    --             $ 799,999
                                                                                                      =========           =========
</TABLE>
                                       24
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

       ORGANIZATION - The accompanying consolidated financial statements include
       the accounts of Industrial Data Systems Corporation (IDS or the Company),
       a Nevada corporation, and its wholly-owned subsidiary Industrial Data
       Systems, Inc., a Texas corporation, dba IDS Technical Services. All
       significant intercompany balances and transactions have been eliminated
       in consolidation.

       INVENTORY - Inventory is composed of computer components and finished
       goods and is carried at the lower of cost or market value, with cost
       determined on the first-in, first out (FIFO) method of accounting. The
       majority of inventory at December 31, 1996 and 1995 consisted of computer
       components.

       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 - Property and equipment is stated at cost,
       adjusted for accumulated depreciation. Depreciation is calculated using
       an accelerated method over the estimated useful lives of the related
       assets, which is five years.

       INVESTMENTS IN REAL ESTATE LIMITED PARTNERSHIPS - Investments in real
       estate limited partnerships were carried at the lower of cost or
       estimated fair market value of the underlying real estate. These
       investments were assigned to two officers, who are also major
       stockholders of the Company, during 1995 in lieu of cash compensation.

       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.

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

       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.

       RECLASSIFICATIONS - Amounts in the prior year financial statements have
       been reclassified as necessary to conform to the current year
       presentation.

                                       25
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     MARKETABLE SECURITIES:

       Marketable securities at December 31, 1996 are summarized as follows:

                                             GROSS        GROSS
                                            UNREALIZED   UNREALIZED       FAIR
                                   COST       GAINS        LOSSES         VALUE
                                 --------    --------     ---------     --------
Trading:
    Common stocks ...........    $225,027    $ 40,981     $ (10,258)    $255,750
    Bond ....................     100,000        --            --        100,000
    Other ...................      25,000      19,598          --         44,598
                                 --------    --------     ---------     --------
                                  350,027      60,579       (10,258)     400,348
Available-for-sale:
    Mutual fund .............      55,713       1,068          --         56,781
                                 --------    --------     ---------     --------
                                 $405,740    $ 61,647     $ (10,258)    $457,129
                                 ========    ========     =========     ========

      Marketable securities at December 31, 1995 are summarized as follows:

                                             GROSS        GROSS
                                            UNREALIZED   UNREALIZED       FAIR
                                   COST       GAINS        LOSSES         VALUE
                                 --------    --------     ---------     --------
Trading:
    Common stocks ...........    $183,491    $ 26,896     $  (6,973)    $203,414
    Other ...................      25,000      10,009          --         35,009
                                 --------    --------     ---------     --------
                                  208,491      36,905        (6,973)     238,423
Available-for-sale:
    Mutual fund .............      31,366       1,289          --         32,655
                                 --------    --------     ---------     --------
                                 $239,857    $ 38,194     $  (6,973)    $271,078
                                 ========    ========     =========     ========

3.    NOTE RECEIVABLE FROM STOCKHOLDER:

       The Company has a note receivable due from a stockholder. The note
       receivable is unsecured, due on demand and bears interest at a rate of 9%
       per annum. Interest on the note is due annually.

                                       26
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.    PROPERTY AND EQUIPMENT:

       Property and equipment consists of the following: 

                                                             DECEMBER 31,
                                                    ---------------------------
                                                       1995              1996
                                                    ---------         ---------
             Furniture and fixtures ........        $  42,859         $  43,610
             Computer equipment ............          104,226           153,459
                                                    ---------         ---------
                                                      147,085           197,069
             Accumulated depreciation ......          (40,802)          (74,491)
                                                    ---------         ---------
                                                    $ 106,283         $ 122,578
                                                    =========         =========

5.    NOTE PAYABLE TO BANK:

      The Company has a line of credit with a bank of $350,000 at prime plus 1%
      (9.25% at December 31, 1996). The line of credit, which expires on June
      11, 1997, is collateralized by accounts receivable, inventory and is
      guaranteed by the stockholders of the Company. There was $325,000
      outstanding under the line at December 31, 1996. Interest on the
      outstanding borrowings is due and payable monthly.

6.    LEASE:

      The Company leases office space under a non-cancelable operating lease.
      Total rent expense for the years ended December 31, 1995 and 1996 was
      $79,269 and $99,187, respectively. Future minimum rentals due under
      non-cancelable operating leases with an original term of at least one year
      are as follows:

YEARS ENDING DECEMBER 31,
-------------------------
1997 .................................................                  $108,573
1998 .................................................                   108,936
1999 .................................................                   108,936
2000 .................................................                    72,624
                                                                        --------
                                                                        $399,069
                                                                        ========

                                       27
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    PROFIT SHARING PLAN:

      The Company has a 401(k) profit sharing 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 3% 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 $33,214 and $44,496
      for the years ended December 31, 1995 and 1996, respectively.

8.    CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:

      The Company manufactures and distributes industrial and portable computers
      and computer monitors to commercial companies primarily in the southern
      states and provides pipeline engineering services primarily to major
      integrated oil and gas companies. 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.

      The Company maintains deposits in banks which may exceed the amount of
      federal deposit insurance available. Management periodically assesses the
      financial condition of the institutions and believes that any possible
      deposit loss is minimal.

      The Company had sales to two major customers totaling approximately
      $2,967,000 for 1996, representing 54% of total revenues for the year. For
      1995, the Company had sales to one major customer totaling approximately
      $2,927,000 which represents 65% of total revenues for that year. At
      December 31, 1996, amounts due from four customers who individually had
      amounts due in excess of 10% of trade receivables, totaled $298,829. At
      December 31, 1995, amounts due from customers in excess of 10% of trade
      accounts receivable amounted to $220,680, all of which was due from a
      single customer.

9.    STOCKHOLDERS' EQUITY:

      The Company issued 2,499,999 shares of common stock in exchange for five
      non-interest bearing notes totaling $999,999. During fiscal 1996, the
      Company received the payment on one of the notes totaling $200,000. On
      January 27, 1997, the four remaining notes were paid in full and the
      Company received the remaining $799,999.

                                       28
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   FEDERAL INCOME TAXES:

      The Company has deferred tax assets and liabilities at December 31, 1995
and 1996 as follows:

                                                       1995              1996
                                                     --------          --------
Deferred tax assets ........................         $  6,000          $  4,235
Deferred tax liabilities ...................          (37,423)          (38,245)
                                                     --------          --------
Net deferred tax ...........................         $(31,423)         $(34,010)
                                                     ========          ========

      The Company's net deferred tax liability at December 31, 1995 and 1996
      represents the accumulated federal income taxes computed on the excess of
      tax depreciation over financial statement depreciation, and the unrealized
      gain on trading marketable securities recognized as income, for financial
      statement purposes versus upon their ultimate sale for tax purposes.

      The Company files a consolidated federal income tax return with the
      company it acquired in 1997 (see Note 13). The amounts reflected herein
      represent the Company's tax activity as if it filed a separate return,
      which would not vary significantly from allocating its portion of the
      consolidated amounts.

11.   SEGMENT INFORMATION:

      As discussed in Note 8, the Company's principal businesses are the
      manufacture and distribution of portable computers and computer monitors
      to commercial companies and to provide engineering services primarily to
      major integrated oil and gas companies. The products and the services have
      been classified into two segments. The income statement reflects the
      operating revenues and operating expenses of the segments, with the
      remaining activity representing corporate activity. At December 31, 1996,
      approximately 63% of the trade accounts receivable relate to the
      engineering service segment and the remaining 37% relate to the product
      segment. Additionally, at December 31, 1996, approximately 69% of the net
      property and equipment relate to the product segment and 12% of the net
      property and equipment relate to the engineering service segment. The
      inventory at December 31, 1996 relates to the product segment. The
      remaining assets at December 31, 1996 are considered general corporate
      assets.

12.   TRANSACTIONS WITH AFFILIATE:

      The Company is providing working capital financing to the company it
      acquired in 1997 (see Note 13). Under the terms of this agreement, the
      Company pays 98% of the face value of selected sales invoices. The Company
      funds 85% of the face value of the invoice upon acceptance and the
      remaining 13% upon ultimate collection of the invoice. The advances are
      collateralized by the accounts receivable, inventory and machinery and
      equipment of the borrower.

      The Company has an advance to the company it acquired in 1997 (see Note
      13). The advances, totaling $30,000 at December 31, 1996, are unsecured,
      bear no interest rate and contain no terms of repayment.

                                       29
<PAGE>
               INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.   TRANSACTIONS WITH AFFILIATE:  (continued)

      During 1996, the Company employed an individual to perform the general
      manager function at the company it acquired in 1997 (see Note 13). The
      Company incurred salary and related payroll costs for this individual
      totaling approximately $93,000.

13.   SUBSEQUENT EVENT:

      In February 1997, the Company acquired Thermaire, Inc. dba Thermal
      Corporation (Thermal) in a stock purchase. The Company paid $600,000,
      consisting of $212,563 in cash and 193,719 shares of the Company's common
      stock, which may be put back to the Company for $2 per share at the option
      of the holder. Additionally, the Company purchased the facilities that
      Thermal had been leasing from an affiliate for $500,000. The Company
      obtained bank financing totaling $450,000 related to the acquisition of
      these facilities. The acquisition has been accounted for on the purchase
      method of accounting. Goodwill arising as a result of this transaction
      totaled approximately $125,000. Previously, in 1995, the Company had
      issued 600,000 shares of its common stock to Thermal on a contingent
      basis. These shares were held in an escrow account pending completion of
      the acquisition, at which time these shares were released from escrow and
      cancelled. The aforementioned 193,719 shares were issued under revised
      terms of the purchase agreement.

      The financial statements do not reflect the accounts of Thermal because
      the acquisition did not close until February 1997. The shares of common
      stock issued by the Company and held in escrow have not been reflected as
      issued and outstanding in the accompanying financial statements.

                                       30
<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: April 11, 1997                       By:/s/ WILLIAM A. COSKEY, P.E.
                                                   William A. Coskey, P.E., 
                                                   Chairman of the Board,
                                                   President and Chief Executive
                                                   Officer

                                             By:/s/HULDA L. COSKEY
                                                   Hulda L. Coskey,
                                                   Chief Financial Officer, 
                                                   Director

                                             By:/s/REX S. ZERGER
                                                   Rex S. Zerger, 
                                                   Vice President - Sales &
                                                   Marketing, Director


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


                                             By:/s/ALAN W. HARVEY
                                                   Alan W. Harvey,
                                                   Director

                                       31
<PAGE>
                        DESCRIPTION AND INDEX OF EXHIBITS

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

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

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

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

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

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

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

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

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

2.9    Stock Purchase Subscription Agreement from World Glory Company Limited,
       dated July 10, 1996

2.10   Stock Purchase Subscription Agreement from Asian Harvest Corporation
       Limited., dated July 10, 1996

2.11   Stock Purchase Subscription Agreement from Silver Course Corporation,
       dated July 10, 1996

2.13   Stock Purchase Subscription Agreement from Pines Intervest Corporation,
       dated July 10, 1996

2.14   Stock Purchase Subscription Agreement from Wilton Assets Corp., dated
       July 10, 1996

                                       32
<PAGE>
3      Articles of Incorporation, dated June 20, 1994

3.1    Corporate Charter, dated June 22, 1994

3.2    Bylaws dated June 22, 1994

4.1    Revolving Credit Line with Texas Commerce Bank, N.A., dated June 11, 1996

4.2    Promissory Note plus Restricted Common Stock to John H. Cameron, dated
       July 23, 1994

4.3    Promissory Note plus Restricted Common Stock to Charles B. Pollock, et
       ux, dated July 23, 1994

4.4    Promissory Note payable to Industrial Data Systems Corporation from World
       Glory Company Limited., dated July 15, 1996

4.5    Promissory Note payable to Industrial Data Systems Corporation from Asian
       Harvest Corporation, Ltd., dated July 15, 1996

4.6    Promissory Note payable to Industrial Data Systems Corporation from
       Silver Course Corporation, dated July 15, 1996

4.7    Promissory Note payable to Industrial Data Systems Corporation from Pines
       Intervest Corporation, dated July 15, 1996

4.8    Promissory Note payable to Industrial Data Systems Corporation from
       Wilton Assets Corp. dated July 15, 1996

10     Lease Agreement between Industrial Data Systems, Incorporated, a Texas
       corporation, and American General Life Insurance Company, dated January
       16, 1991

10.1   First Amendment to Lease Agreement between Industrial Data Systems,
       Incorporated, a Texas corporation, and American General Life Insurance
       Company, dated December 7, 1993

10.2   Second Amendment to Lease Agreement between Industrial Data Systems
       Corporation, a Nevada corporation, and American General Life Insurance
       Company, dated December 29, 1994

10.3   Third Amendment to Lease Agreement between Industrial Data Systems
       Corporation, a Nevada corporation, and American General Life Insurance
       Company, dated December 8, 1995

10.4   Lease Agreement between Industrial Data Systems Corporation, a Nevada
       corporation, and Clarksburg, West Virginia Masonic Building, dated June
       1, 1995

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

                                       33
<PAGE>
21     Subsidiary of the Registrant (*)

23     Consent of Lindsey, Keys & Shannon (*)

24     Power of Attorney (*)

27     Financial Data Schedule (*)

99     Audited Financial Statements of Thermaire, Inc. dba Thermal Corp.as of
       and for the year ended December 31, 1996 (*)

99.1   Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statement of
       Income as of and for the year ended December 31, 1996 for Industrial Data
       Systems Corporation and Thermaire, Inc. dba Thermal Corp. (*)
------------
*      Exhibits included with this Annual Report on Form 10-KSB. All other
       Exhibits were incorporated by reference on the Company's Registration
       Statement on Form 10-SB filed with the Securities and Exchange Commission
       on January 27, 1997.

                                   34