----

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| UTAH                                                                            | 87-0447580                                         |
|---------------------------------------------------------------------------------|----------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) | (IRS                  Employer Identification No.) |

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**INTERNATIONAL        AUTOMATED SYSTEMS, INC.**

***(A        Development Stage Company)***

**TABLE        OF CONTENTS**

|                                                                                                                                                                                                                                                                                          |                                                                               | **Page** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| PART                    I - FINANCIAL INFORMATION                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    1.                                                                                                                                                                                                                                                                    | Financial                    Statements                                            | 3        |
|                                                                                                                                                                                                                                                                                          |                                                                               |
| Unaudited                    Condensed Balance Sheets as of March 31, 2006 and June 30,                    2005                                                                                                                                                                               | 3                                                                                  |
|                                                                                                                                                                                                                                                                                          |                                                                               |
| Unaudited                    Condensed Statements of Operations for the Three and Nine Months                    Ended                    March 31, 2006 and 2005 and for the Period from September 26,                    1986 (Date                    of Inception) through March 31, 2006 | 4                                                                                  |
|                                                                                                                                                                                                                                                                                          |                                                                               |
| Unaudited                    Condensed Statements of Cash Flows for the Three and Nine Months                    Ended                    March 31, 2006 and 2005 and for the Period from September 26,                    1986 (Date                    of Inception) through March 31, 2006 | 5                                                                                  |
|                                                                                                                                                                                                                                                                                          |                                                                               |
| Notes                    to the Unaudited Condensed Financial Statements                                                                                                                                                                                                                      | 6                                                                                  |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    2.                                                                                                                                                                                                                                                                    | Management’s                    Discussion and Analysis or Plan of Operation | 9        |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    3.                                                                                                                                                                                                                                                                    | Controls                    and Procedures                                         | 10       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| PART                    II - OTHER INFORMATION                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    1.                                                                                                                                                                                                                                                                    | Legal                    Proceedings                                               | 10       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    2.                                                                                                                                                                                                                                                                    | Changes                    in Securities                                           | 11       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item 3.                                                                                                                                                                                                                                                                                       | Commitments and Contingencies                                                      | 11       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    4.                                                                                                                                                                                                                                                                    | Defaults                    Upon Senior Securities                                 | 12       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    5.                                                                                                                                                                                                                                                                    | Submission                    of Matters to a Vote of Security Holders             | 12       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    6.                                                                                                                                                                                                                                                                    | Other                    Information                                               | 12       |
|                                                                                                                                                                                                                                                                                          |                                                                               |     |
| Item                    7.                                                                                                                                                                                                                                                                    | Exhibits                    and Reports on Form 8-K                                | 12       |

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**INTERNATIONAL      AUTOMATED SYSTEMS, INC.**

| **ASSETS**                                                                                                                                                                                                                              |   |                     |                                                                                |                    |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------------------------------------------------------------------------------|-------------------------|--------|
|                                                                                                                                                                                                                                    |   | March                31, |                                                                                | June                30, |   |
|                                                                                                                                                                                                                                    |   | 2006                     |                                                                                | 2005                    |   |
| **CURRENT                ASSETS**                                                                                                                                                                                                       |   |                     |                                                                                |                    |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |
| Cash                                                                                                                                                                                                                                    |   | $                        | 382,264                                                                             |                    | $      | 40,885 |   |
| Prepaid                sales commissions                                                                                                                                                                                                |   |                     |                            - |                    |   | 4,000 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
|  **Total                Current Assets**                                                                                                                                                                                           |   |                     | 382,264                                                                             |                    |   | 44,885 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| Property                and Equipment, net of $98,858 and $86,170 accumulated depreciation,                respectively                                                                                                                 |   |                     | 78,348                                                                              |                    |   | 60,491 |   |
| Patents,                net of $10,339 and $7,834 accumulated amortization,                respectively                                                                                                                                 |   |                     | 193,649                                                                             |                    |   | 173,666 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
|  **TOTAL                ASSETS**                                                                                                                                                                                                   |   | $                        | 654,261                                                                             |                    | $      | 279,042 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIT**                                                                                                                                                                                |   |                     |                                                                                |                    |   |   |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| **CURRENT                LIABILITIES**                                                                                                                                                                                                  |   |                     |                                                                                |                    |   |   |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| Accounts                payable                                                                                                                                                                                                         |   | $                        | 72,059                                                                              |                    | $      | 132,661 |   |
| Accrued                payroll taxes                                                                                                                                                                                                    |   |                     | 63,585                                                                              |                    |   | 154,600 |   |
| Related                party payable                                                                                                                                                                                                    |   |                     | 285,763                                                                             |                    |   | 48,588 |   |
| Deposits                from customers                                                                                                                                                                                                  |   |                     | 432,000                                                                             |                    |   | 40,000 |   |
| Deposits                from related parties                                                                                                                                                                                            |   |                     | -                                                                                   |                    |   | 74,400 |   |
| Notes                payable-current portion                                                                                                                                                                                            |   |                     | -                                                                                   |                    |   | 2,069 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
|  **Total                Current Liabilities**                                                                                                                                                                                      |   |                     | 853,407                                                                             |                    |   | 452,318 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| **TOTAL                LIABILITIES**                                                                                                                                                                                                    |   |                     | 853,407                                                                             |                    |   | 452,318 |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| **STOCKHOLDERS'                DEFICIT**                                                                                                                                                                                                |   |                     |                                                                                |                    |   |   |   |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
| Preferred                stock, Class A, no par value; 4,400,000 shares authorized, 3,400,000                shares issued and outstanding                                                                                              |   |                     | 294,786                                                                             |                    |   | 294,786 |   |
| Preferred                stock, Class B, no par value, 600,000 shares authorized, 300,000                shares                issued and outstanding                                                                                   |   |                     | -                                                                                   |                    |   | - |   |
| Common                stock, no par value, 45,000,000 shares authorized, 24,564,190 and                22,995,790 shares issued and outstanding, net 1,811,350 and 3,069,750                shares held in escrow account, respectively |   |                     | 11,441,978                                                                          |                    |   | 10,446,859 |   |
| Deficit                accumulated during the development stage                                                                                                                                                                         |   |                     | (11,935,910                                                                         | )                       |   | (10,914,921 | ) |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
|  **Total                Stockholders' Deficit**                                                                                                                                                                                    |   |                     | (199,146                                                                            | )                       |   | (173,276 | ) |
|                                                                                                                                                                                                                                    |   |                     |                                                                                |                    |   |   |   |
|  **TOTAL                LIABILITIES AND STOCKHOLDERS' DEFICIT**                                                                                                                                                                    |   | $                        | 654,261                                                                             |                    | $      | 279,042 |   |

----

**INTERNATIONAL      AUTOMATED SYSTEMS, INC.**

|                                                         |   | For                the Three Months Ended March 31, |       | For                the Nine Months Ended March 31, |   | For                the PeriodFrom                Inception(September                26,1986)                Through |   |
|--------------------------------------------------------------|--------|-----------------------------------------------------|------------|----------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                         |   | 2006                                                |       | 2005                                               |   | 2006                                                                                                                |   | 2005 |   | March                31, 2006 |   |
| **REVENUE**                                                  |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |
| Sales                                                        |   | $                                                   | -          |                                               | $      | -                                                                                                                   |   | $ | - |   | $ | - |   | $ | 111,226 |   |
| Income                from related party                     |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 32,348 |   |
|  **Total                Revenue**                       |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   | 143,574 |   |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **COST                OF GOODS SOLD**                        |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| Cost                of sales                                 |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 81,927 |   |
| Write                down of carrying value of inventories   |   |                                                | -          |                                               |   | 16,945                                                                                                              |   |   | - |   |   | 16,945 |   |   | 233,131 |   |
|  **Total                Costs of Sales**                |   |                                                | -          |                                               |   | 16,945                                                                                                              |   |   | - |   |   | 16,945 |   |   | 315,058 |   |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **GROSS                LOSS**                                |   |                                                | -          |                                               |   | (16,945                                                                                                             | )      |   | - |   |   | (16,945 | ) |   | (171,484 | ) |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                        |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| General                and administrative                    |   |                                                | 347,197    |                                               |   | 102,927                                                                                                             |   |   | 663,014 |   |   | 420,140 |   |   | 7,242,734 |   |
| Research                and development                      |   |                                                | 235,453    |                                               |   | 134,161                                                                                                             |   |   | 357,975 |   |   | 380,580 |   |   | 5,261,889 |   |
| Impairment                of patents                         |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 110,082 |   |
| License                fees                                  |   |                                                |  -    |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 270,634 |   |
|  **Total                Operating Expenses**            |   |                                                | 582,650    |                                               |   | 237,088                                                                                                             |   |   | 1,020,989 |   |   | 800,720 |   |   | 12,885,339 |   |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **LOSS                FROM OPERATIONS**                      |   |                                                | (582,650   | )                                                  |   | (254,033                                                                                                            | )      |   | (1,020,989 | ) |   | (817,665 | ) |   | (13,056,823 | ) |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **OTHER                INCOME (EXPENSES)**                   |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| Loss                on disposal of property and equipment    |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | (17,359 | ) |
| Forfeiture                of deposits                        |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | (236,803 | ) |
| Interest                income                               |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 22,444 |   |
| Other                                                        |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | (29,392 | ) |
|  **Total                Other Income (Expenses)**       |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | (261,110 | ) |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **LOSS                BEFORE EXTRAORDINARY GAIN**            |   |                                                | (582,650   | )                                                  |   | (254,033                                                                                                            | )      |   | (1,020,989 | ) |   | (817,665 | ) |   | (13,317,933 | ) |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **Extraordinary                Gain on Sale of Patents**     |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   | 1,382,023 |   |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| **NET                LOSS**                                  |   | $                                                   | (582,650   | )                                                  | $      | (254,033                                                                                                            | )      | $ | (1,020,989 | ) | $ | (817,665 | ) | $ | (11,935,910 | ) |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted Loss Per Share              |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
|  Loss                before extraordinary gain          |   | $                                                   | (0.02      | )                                                  | $      | (0.01                                                                                                               | )      | $ | (0.04 | ) | $ | (0.04 | ) |   |   |   |
|  Extraordinary                gain                      |   |                                                | -          |                                               |   | -                                                                                                                   |   |   | - |   |   | - |   |   |   |   |
| Net                Loss Applicable to                        |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
|  Common                Shareholders                     |   | $                                                   | (0.02      | )                                                  | $      | (0.01                                                                                                               | )      | $ | (0.04 | ) | $ | (0.04 | ) |   |   |   |
|                                                         |   |                                                |       |                                               |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| Weighted                Shares Used in Per Share Calculation |   |                                                | 24,107,500 |                                               |   | 21,241,974                                                                                                          |   |   | 23,756,012 |   |   | 21,073,092 |   |   |   |   |

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**INTERNATIONAL      AUTOMATED SYSTEMS, INC.**

|                                                                                                   |   | For                the Nine MonthsEnded                March 31, |       | For                the PeriodFrom                Inception(September                26,1986)                Through |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   | 2006                                                             |       | 2005                                                                                                                |   | March                31, 2006 |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                                                |   |                                                             |       |                                                                                                                |   |   |   |
| Net                loss                                                                                |   | $                                                                | (1,020,989 | )                                                                                                                   | $      | (817,665 | ) | $ | (11,935,910 | ) |
| Adjustments                to reconcile net loss to net cash from operating                activities: |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| Depreciation                and amortization                                                           |   |                                                             | 15,193     |                                                                                                                |   | 13,837 |   |   | 349,311 |   |
| Stock                based compensation                                                                |   |                                                             | -          |                                                                                                                |   | - |   |   | 2,221,407 |   |
| Stock                issued for services                                                               |   |                                                             | 35,400     |                                                                                                                |   | - |   |   | 464,400 |   |
| Settlement                of liability                                                                 |   |                                                             | 63,600     |                                                                                                                |   | - |   |   | 63,600 |   |
| Forfeiture                of deposits                                                                  |   |                                                             | -          |                                                                                                                |   | - |   |   | 236,803 |   |
| Write                down of inventory                                                                 |   |                                                             | -          |                                                                                                                |   | 16,945 |   |   | 16,945 |   |
| Write                off of equipment to research & development                                    |   |                                                             | -          |                                                                                                                |   | - |   |   | 23,900 |   |
| Loss                on disposal of equipment                                                           |   |                                                             | -          |                                                                                                                |   | - |   |   | 17,359 |   |
| Impairment                of patents and abandonment of in-process rights to                technology |   |                                                             | -          |                                                                                                                |   | - |   |   | 356,632 |   |
| Gain                on sale of patents                                                                 |   |                                                             | -          |                                                                                                                |   | - |   |   | (1,382,023 | ) |
| Gain                on settlement of debt                                                              |   |                                                             | -          |                                                                                                                |   | - |   |   | (6,123 | ) |
| Changes                in current assets and liabilities:                                              |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| Prepaid                sales commissions                                                               |   |                                                             | 4,000      |                                                                                                                |   | - |   |   | - |   |
| Deposits                from customers                                                                 |   |                                                             | 392,000    |                                                                                                                |   | - |   |   | 432,000 |   |
| Accounts                payable                                                                        |   |                                                             | (60,601    | )                                                                                                                   |   | (17,182 | ) |   | 72,059 |   |
| Related                party payable                                                                   |   |                                                             | -          |                                                                                                                |   | - |   |   | 48,588 |   |
| Accrued                liabilities                                                                     |   |                                                             | (91,015    | )                                                                                                                   |   | (31,942 | ) |   | 163,584 |   |
|  **Net                Cash From Operating Activities**                                            |   |                                                             | (662,412   | )                                                                                                                   |   | (836,007 | ) |   | (8,857,468 | ) |
|                                                                                                   |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                                                |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| Purchase                of property and equipment                                                      |   |                                                             | (41,783    | )                                                                                                                   |   | (16,296 | ) |   | (369,642 | ) |
| Proceeds                from sale of property and equipment                                            |   |                                                             | 11,237     |                                                                                                                |   | - |   |   | 11,237 |   |
| Purchase                of rights to technology                                                        |   |                                                             | (22,488    | )                                                                                                                   |   | (44,794 | ) |   | (646,075 | ) |
| Organization                costs                                                                      |   |                                                             | -          |                                                                                                                |   | - |   |   | (1,880 | ) |
| Net                cash advanced to related party                                                      |   |                                                             | -          |                                                                                                                |   | - |   |   | (1,644,988 | ) |
| Proceeds                from capital lease receivable                                                  |   |                                                             | -          |                                                                                                                |   | - |   |   | 44,220 |   |
| Repayment                of cash loaned to related party                                               |   |                                                             | -          |                                                                                                                |   | - |   |   | 53,254 |   |
| Net                proceeds from sale of patents                                                       |   |                                                             | -          |                                                                                                                |   | - |   |   | 1,382,023 |   |
|  **Net                Cash From Investing Activities**                                            |   |                                                             | (53,034    | )                                                                                                                   |   | (61,090 | ) |   | (1,171,851 | ) |
|                                                                                                   |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| Proceeds                from issuance of common stock                                                  |   |                                                             | 821,719    |                                                                                                                |   | 256,000 |   |   | 3,843,810 |   |
| Cash                from controlling shareholder                                                       |   |                                                             | -          |                                                                                                                |   | - |   |   | 6,270,559 |   |
| Payments                for treasury stock                                                             |   |                                                             | -          |                                                                                                                |   | - |   |   | (3,325 | ) |
| Payments                for stock offering costs                                                       |   |                                                             | -          |                                                                                                                |   | - |   |   | (56,509 | ) |
| Proceeds                from net borrowings from related party                                         |   |                                                             | 237,175    |                                                                                                                |   | - |   |   | 315,276 |   |
| Proceeds                from notes payable                                                             |   |                                                             | -          |                                                                                                                |   | - |   |   | 29,857 |   |
| Payments                on note payable and obligations capital lease                                  |   |                                                             | (2,069     | )                                                                                                                   |   | (4,182 | ) |   | (143,744 | ) |
| Proceeds                from related party deposits                                                    |   |                                                             | -          |                                                                                                                |   | - |   |   | 224,400 |   |
| Purchases                of equipment held for distribution                                            |   |                                                             | -          |                                                                                                                |   | - |   |   | (68,741 | ) |
|  **Net                Cash From Financing Activities**                                            |   |                                                             | 1,056,825  |                                                                                                                |   | 251,818 |   |   | 10,411,583 |   |
|                                                                                                   |   |                                                             |       |                                                                                                                |   |   |   |   |   |   |
| **NET                CHANGE IN CASH**                                                                  |   |                                                             | 341,379    |                                                                                                                |   | (645,279 | ) |   | 382,264 |   |
| **CASH                AT BEGINNING OF PERIOD**                                                         |   |                                                             | 40,885     |                                                                                                                |   | 702,366 |   |   | - |   |
| **CASH                AT END OF PERIOD**                                                               |   | $                                                                | 382,264    |                                                                                                                | $      | 57,087 |   | $ | 382,264 |   |

----

**International      Automated Systems, Inc.**

**(A      Development Stage Company)**

**Notes      to Unaudited Condensed Financial Statements**

**March      31, 2006**

**NOTE      1 - INTERIM FINANCIAL STATEMENTS**

**NOTE      2 - BUSINESS CONDITION**

**NOTE      3 - STOCK BASED COMPENSATION**

----

**International      Automated Systems, Inc.**

**(A      Development Stage Company)**

**Notes      to Unaudited Condensed Financial Statements**

**March      31, 2006**

|                                                                                                                                          |   | Three                Months Ended |       | Nine                Months Ended |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|----------------------------------|--------|
|                                                                                                                                          |   | March                31,          |       | March                31,         |   |
|                                                                                                                                          |   | 2006                              |       | 2005                             |   | 2006 |   | 2005 |   |
|                                                                                                                                          |   |                              |       |                             |   |   |   |   |   |
| Net                loss, as reported                                                                                                          |   | $                                 | (582,650   | )                                | $      | (254,033 | ) | $ | (1,020,989 | ) | $ | (817,665 | ) |
| Deduct:                Total stock-based employee compensation expense determined under                fair-value based method for all awards |   |                              | (1,711,204 | )                                |   | (2,006,815 | ) |   | (5,782,192 | ) |   | (7,574,190 | ) |
| **Pro                forma net loss**                                                                                                         |   | $                                 | (2,293,854 | )                                | $      | (2,260,848 | ) | $ | (6,803,181 | ) | $ | (8,391,855 | ) |
|                                                                                                                                          |   |                              |       |                             |   |   |   |   |   |   |   |   |   |
| **Basic                and diluted loss per common share as reported**                                                                        |   | $                                 | (0.02      | )                                | $      | (0.01 | ) | $ | (0.04 | ) | $ | (0.04 | ) |
|                                                                                                                                          |   |                              |       |                             |   |   |   |   |   |   |   |   |   |
| **Basic                and diluted loss per common share pro forma**                                                                          |   | $                                 | (0.10      | )                                | $      | (0.01 | ) | $ | (0.02 | ) | $ | (0.04 | ) |

**NOTE      4 - COMMITMENTS AND CONTINGENCIES**

*Sales      Commitments*

*Payroll      Tax Contingency*

**NOTE      5 - STOCKHOLDERS DEFICIT**

***Common      Stock Issued for Cash***

***Common      Stock Issued for Services***

***Common        Stock Issued for Settlement of Debt***

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**International      Automated Systems, Inc.**

**(A      Development Stage Company)**

**Notes      to Unaudited Condensed Financial Statements**

**March      31, 2006**

**NOTE      6 - LOAN FROM SHAREHOLDER**

**NOTE      7 - CUSTOMER DEPOSITS**

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**ITEM      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**FORWARD      LOOKING STATEMENTS**

**LIQUIDITY      AND CAPITAL RESOURCES**

**RESULTS      OF OPERATIONS**

**Three      Months Ended March 31, 2006 compared to Three Months Ended March 31,      2005.**

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**Nine      Months Ended March 31, 2006 compared to Nine Months Ended March 31,      2006**

**FUTURE      BUSINESS**

**ITEM      3: CONTROLS AND PROCEDURES**

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**PART      II - OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**ITEM      2. CHANGES IN SECURITIES**

**ITEM      3. COMMITMENTS AND CONTINGENCIES**

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**ITEM      4. DEFAULTS UPON SENIOR SECURITIES.**

**ITEM      5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      6. OTHER INFORMATION.**

**ITEM      7. EXHIBITS AND REPORTS ON FORM 8-K**

|   | 31.1 | Certification                by the Chief Executive Officer Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification                by the Chief Financial Officer Pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification                by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification                by the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**International      Automated Systems, Inc.**

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