FORM 10-QSB

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                  Quarterly Report Under Section 13 or 15(d)
                    Of the Securities Exchange Act of 1934

For Quarter Ended  December 31, 1998

Commission File Number  33-16531-D 

                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)


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

                             512 South 860 East 
                          American Fork, Utah 84003
                   (Address of principal executive offices)

Registrant's telephone number including area code    (801)763-9965    

                    Not Applicable                 Former Address,
                                              if changed since last report


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the proceeding 12 months (or such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes   x     No     


As of December 31, 1998, Registrant had 15,546,361 shares of common stock,
no par value per share, issued and outstanding after deducting shares held
in the corporate treasury. 


PART I

ITEM I - FINANCIAL STATEMENTS

     The condensed financial statements included herein have been prepared
by International Automated Systems, Inc. (the "Company" or the
"Registrant"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not misleading.

     In the opinion of the Company, all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the financial
position of the Company as of December 31, 1998, and the results of its
operations and changes in its financial position from June 30, 1998, through
December 31, 1998, and from inception through December 31, 1998, have been
made.  The results of its operations for such interim period is not
necessarily indicative of the results to be expected for the entire year.  

     Registrant is a development stage company.  Historically its primary
activities have been research and development of high technology which can
be applied to develop commercial products. Such development has significant 
risks.


                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
                        (A Development Stage Company)
                           CONDENSED BALANCE SHEETS



                                                 December 31,     June 30,
                                                         1998         1998
                                                    ---------     --------
                                                  (Unaudited)
                                    ASSETS


Current Assets
     Cash and cash equivalents                      $  13,693     $ 92,030
     Receivable from sales representatives, 
       net of allowance for doubtful
       accounts of $40,783                                  -            -
                                                                            
     Receivable from related party                    260,585      184,925
     Net investment in direct
     financing leases -
     related party - current portion                   21,956       24,613
     Prepaid expenses                                       -        2,241
                                                    ---------     --------

      Total Current Assets                            296,234      303,809
                                                    ---------     --------

Property and Equipment
     Computer and electronic equipment                147,684      147,684
     Furniture and fixtures                            20,982       20,982
     Automobiles                                       21,657       21,657
     Leasehold improvements                            18,238       18,238
                                                    ---------     --------
      Total Property and Equipment                    208,561      208,561
     Accumulated depreciation                        (128,317)    (109,844)
                                                    ---------     --------

      Net Property and Equipment                       80,244       98,717
                                                    ---------     --------
Other Assets
      Net investment in direct financing
        leases - related party                         99,396      109,570
      Patents, net of accumulated amortization        250,605      242,519
                                                    ---------     --------

      Total Other Assets                              350,001      352,089
                                                    ---------     --------

Total Assets                                        $ 726,479     $754,615
                                                    =========     ========




                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
                        (A Development Stage Company)
                     CONDENSED BALANCE SHEETS (CONTINUED)


                                                     December 31,     June 30,
                                                            1998          1998
                                                    ------------   -----------
                                                     (Unaudited)


                    LIABILITIES AND STOCKHOLDERS' EQUITY 

Current Liabilities
     Accounts payable                               $     37,083   $    12,965
     Note payable - current portion                        4,069         4,387
     Accrued liabilities                                  10,672         4,627
     Obligation under capital leases -
      current portion                                     15,210        17,867
                                                    ------------   -----------

     Total Current Liabilities                            67,034        39,846
                                                    ------------   -----------
Long Term Liabilities
     Notes payable                                             -         1,830
     Obligation under capital leases                      99,396       109,570
                                                    ------------   -----------

          Total Long Term Liabilities                     99,396       111,400
                                                    ------------   -----------

Total Liabilities                                        166,430       151,246

Stockholders' Equity
     Preferred stock, Class A, no par value,
     5,000,000 shares authorized, 1,000,000
     shares issued and outstanding                       292,786       292,786
     Common stock, no par value, 45,000,000 shares
       authorized,15,546,361 shares issued and
       outstanding                                     4,756,739     4,260,739
     Deficit accumulated during the development
       stage                                          (4,489,476)   (3,950,156) 
                                                    ------------   -----------

         Total Stockholders' Equity                      560,049       603,369
                                                    ------------   -----------

Total Liabilities and Stockholders' Equity          $    726,479   $   754,615
                                                    ============   ===========

                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
                        (A Development Stage Company)
                      CONDENSED STATEMENTS OF OPERATIONS
                                 (Unaudited)

<TABLE>                                                                          For the Period
                                                                                 From Inception
<CAPTION>                                                                        (September 26,
                           For the Three Months             For the Six                   1986)     
                             Ended December 31,          Ended December 31,             Through
                         -------------------------   -------------------------     December 31,
                                1998          1997          1998          1997             1998                       
                         -----------    ----------   -----------    ----------    -------------
<S>
                        <C>            <C>          <C>            <C>           <C>
  Revenue
  Sales                  $         -    $    1,481   $         -    $     1,881   $     108,144
  Equipment lease
    income from related
    party                        694             -        12,432              -          44,780
                         -----------    ----------   -----------    -----------   -------------

   Total Revenue                 694         1,481        12,432          1,881         152,924
                         -----------    ----------   -----------    -----------   -------------

Cost of Sales                      
  Cost of sales                    -           703             -          1,053          80,260
  Write down of carrying
  value of inventories of
  $108,093 during 1998
  and 1997                         -             -             -              -         216,186
                         -----------    ----------   -----------    -----------   -------------

     Total Cost of Sales           -           703             -          1,053         296,446
                         -----------    ----------   -----------    -----------   -------------

Gross Profit/(Loss)              694           778        12,432            828        (143,522)
                         -----------    ----------   -----------    -----------   -------------
Operating Expenses
  General and
    administrative            73,310       191,063       224,543        326,540       2,047,726
  Research and development
    expense                  202,556        94,588       319,272        212,694       2,254,077
  Amortization expense         3,551         2,593         7,101          5,186          44,150
                         -----------    ----------   -----------    -----------   -------------
                                                                        
     Total Operating 
       Expenses              279,417       288,244       550,916         544,420      4,345,953
                         -----------    ----------   -----------    ------------  -------------
Loss From Operations        (278,723)     (287,466)     (538,484)       (543,592)    (4,489,475)
Other Income and
 (Expense)
  Interest income                211           208           705            388          20,860
  Interest expense            (1,424)         (178)       (1,541)          (446)        (20,861)
                         -----------    ----------   -----------    -----------   -------------

     Net Other Income
       (Expense)              (1,213)           30          (836)           (58)             (1)
                         -----------    ----------   -----------    -----------   -------------

Net Loss                 $  (279,936)   $ (287,436)  $  (539,320)   $  (543,650)  $  (4,489,476)
                         ===========    ==========   ===========    ===========   =============

 Per Share               $     (0.02)   $    (0.02)  $     (0.03)   $     (0.03)  $       (0.31)
                         ===========    ==========   ===========    ===========   =============

Common and Preferred
 Shares Used in Per
 Share Calculation        16,546,361    16,273,904    16,546,361     16,264,633      14,684,520
                         ===========   ===========   ===========    ===========   =============
</TABLE>

                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
                        (A Development Stage Company)
                      CONDENSED STATEMENTS OF CASH FLOWS
                                 (Unaudited)

<TABLE>
<CAPTION>                            

                                                                       For the Period
                                                                       From Inception
                                                                       (September 26,
                                               For the Six Months               1986)
                                                Ended December 31,           Through
                                            -------------------------    December 31,
                                                   1998          1997           1998
                                            -----------   -----------    -----------

<S>
                                           <C>           <C>            <C>                
Cash Flows From Operating Activities
  Net loss                                  $  (539,320)  $  (543,650)   $(4,489,476)
  Adjustments to reconcile net income to    
     net cash provided by operating activities:        
   Allowance for doubtful accounts                    -             -         40,783
   Amortization                                   7,101         5,186         44,150
   Depreciation                                  18,473        17,235        128,317
   Stock based compensation                           -             -        338,497
  Change in assets and liabilities:         
   Sales representatives receivable                   -             -        (40,783)
   Prepaid expenses                               2,241        14,813              -
   Accounts payable                              24,118        25,770         37,083
    Accrued liabilities                           6,045          (946)        10,672
                                            -----------   -----------    -----------
  
   Net Cash Used In Operating Activities       (481,342)     (481,592)    (3,930,757)
                                            -----------   -----------    -----------
Cash Flows From Investing Activities        

  Purchase of property and equipment                  -          (811)      (189,204)
  Purchase of rights to technology              (15,187)       (9,280)      (292,875)
  Organization costs                                  -             -         (1,880) 
  Net cash loaned to related party              (75,660)        2,473       (260,585)
                                            -----------   -----------    -----------

   Net Cash Used In Investing Activities        (90,847)       (7,618)      (744,544)
                                            -----------   -----------    -----------
Cash Flows From Financing Activities        
  Proceeds from issuance of common stock              -        50,000      1,262,346
  Cash from controlling shareholder             496,000       447,121      3,430,415
  Payments for treasury stock                         -             -         (3,325)
  Payments for stock offering costs                   -             -        (56,509)
  Proceeds from net borrowings from
   related party                                      -             -         78,101
  Payments on note payable and
   capital lease obligations,
    net                                          (2,148)       (1,985)        (22,034)
                                            -----------   -----------    ------------
   Net Cash Provided By Financing
    Activities                                  493,852       495,136       4,688,994
                                            -----------   -----------    ------------
  
Net Increase (Decrease) In Cash and
  Cash Equivalents                              (78,337)        5,926          13,693
Cash and Cash Equivalents
 at Beginning of Period                          92,030         7,758               -
                                            -----------   -----------    ------------

Cash and Cash Equivalents at
  End of Period                             $    13,693   $    13,684    $     13,693
                                            ===========   ===========    ============

</TABLE>



                    INTERNATIONAL AUTOMATED SYSTEMS, INC.
                   NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 1--INTERIM FINANCIAL STATEMENTS 

     The accompanying financial statements have been prepared by the
     Company, and are unaudited. In the opinion of management, the
     accompanying unaudited financial statements contain all necessary
     adjustments for fair presentation, consisting of normal recurring
     adjustments except as disclosed herein.

     The accompanying unaudited interim financial statements have been
     condensed pursuant to the rules and regulations of the Securities and
     Exchange Commission; therefore, certain information and disclosures
     generally included in financial statements have been condensed or
     omitted. These financial statements should be read in connection with
     the Company's annual financial statements included in the Company's
     annual report on Form 10-KSB as of June 30, 1998. The financial
     position and results of operations of the interim periods presented are
     not necessarily indicative of the results to be expected for the year
     ended June 30, 1999.

NOTE 2--RELATED PARTY TRANSACTIONS

     During the year ended June 30, 1998, the Company advanced a corporation
     controlled by the Company's majority shareholder $184,925.
     Subsequently, the Company has advanced this same corporation an
     additional $75,660 for the period ended December 31, 1998. Total
     advances are $260,585. No terms for repayment have been established.

     For the six months ending December 31, 1998, the controlling
     shareholder, Neldon Johnson, contributed $496,000 for research as
     additional paid-in capital. No additional preferred or common stock was 
     issued.

     In June 1998, the Company entered into capital lease obligations with a
     leasing company for various equipment. Immediately after entering into
     the obligations, the Company subleased the equipment to a company
     related through common ownership under the same terms as the original
     leases signed by the Company. The Company has ultimate responsibility
     to make all payments regarding the leases. A total of $134,183 of
     equipment was acquired and subsequently subleased under these capital
     leases. These leases expire in May 2003. As of December 31, 1998, the
     Company's total receivable and payable relating to these lease
     obligations were $121,352 and $114,606, respectively.

NOTE 3--CONTINGENCIES

     On July 2, 1996, the Company had a class action law suit filed against
     it by shareholders for securities violations. The class action has been
     brought on behalf of all persons and entities who purchased shares of
     common stock from May 13, 1996 to June 27, 1996. The suit is seeking
     damages incurred based on the decrease in the Company's stock price
     because of alleged material misrepresentations by the Company regarding
     new technology developed by the Company. The ultimate outcome of the
     litigation cannot presently be determined. Accordingly, no provision
     for any liability that may result upon adjudication has been made in
     the accompanying financial statements and the possible effect it will
     have on future financial statements is unknown. Except for proceedings
     resulting in the denial of class certification, the parties have not
     engaged in extensive discovery.  No settlement discussions have
     occurred to date.  The company intends to continue vigorously defending
     the lawsuit.

     On August 13, 1996 the Company was served a formal order of private
     investigation by the U.S. Securities and Exchange Commission (SEC).
     This investigation has resulted in a complaint against IAS and Neldon
     Johnson being filed by the SEC in the United States District Court,
     Central Division, on September 23, 1998.  Donnel Johnson and Randale
     Johnson were also named as relief defendants.  IAS continue to stand by
     its Digital Wave Modulation (DWM) technology and its inventor and
     president Neldon Johnson.  IAS and Neldon Johnson denies the allegation
     of participation in fraudulent microcap schemes and the other
     substantive allegations filed in the complaint by the SEC and intend to
     vigorously defend the lawsuit. 



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS


 Liquidity and Capital Resources.  As of December 31, 1998, Registrant had
cash of $13,693 compared to cash of $92,030 as of June 30, 1998.  Cash
decreased because of the continuing losses from research and development and
other activities.  As of December 31, 1998, total current assets were
$296,234 and total assets were $726,479 compared to total current assets
$303,809 and total assets of $754,615 as of June 30, 1998.

     As of December 31, 1998, Registrant had total liabilities of $166,430
and shareholders' equity of $560,049 compared to total current liabilities
of $39,846 and shareholders' equity of $603,369 as of June 30, 1998. The
deficit accumulated during the development stage was $4,489,476 as of
December 31, 1998, compared to $3,950,156 as of June 30, 1998.  For the near
term the Company's ability to continue its operations and activities is
dependent upon the Company's major shareholder providing funds to the
Company.  At this time the Company is not generating sufficient funds to
sustain its operations. The decrease in shareholders' equity is attributable
primarily to the continued research and development activities.  These
activities have significant risks involving the development of technology
and the development of products that may be commercially acceptable and
profitable.  As of December 31, 1998, the ratio of current assets to current
liabilities was approximately 4.42 to one. 

 Results of Operations.  For the quarter ended December 31, 1998, Registrant
had total revenues of $694 compared to total revenues of $1,481 for the same
period a year earlier. For the quarter ended December 31, 1998, Registrant
had total operating expenses of $279,417 compared to expenses of $288,244
during the same quarter a year earlier.   As of December 31, 1998, cost of
sales was  $0 compared to $703 a year earlier and gross profit was $694
compared to $778 a year earlier.  For the quarter Registrant had a net loss
of $ 279,936  compared to a net loss of $ 287,436  for the same quarter a
year earlier. The decrease in net loss is attributable to the fact that
general and administrative expenses decreased by a higher amount than the
increase in research and development expenses. For the quarter ended
December 31, 1998, the net loss per share was $(0.02) compared to $(0.02)
for the quarter ended December 31, 1997. For the quarter ended December 31,
1998, general and administrative expenses were $73,310 compared to $191,063
and research and development expenses were $202,556 compared to $94,588 a
year earlier.  

     The Company has only minimal revenues, but its level of operations
requires additional funds. The Company's ability to continue its activities
is dependent on it receiving funds either as loans, advances or sales of
equity.  Previously the major shareholder has provided funds, but there is
no formal agreement between the Company and the majority shareholder to
continue providing funds in the future.  If the Company had to seek funds
from another source there is no assurance that funds would be available at
all or on terms acceptable to the Company.

PART II.

Item 1. Legal Proceedings.
     
     On July 2, 1996, the Company had a class action law suit filed against
it by shareholders for securities violations. The class action has been
brought on behalf of all persons and entities who purchased shares of common
stock from May 13, 1996 to June 27, 1996. The suit is seeking damages
incurred based on the decrease in the Company's stock price because of
alleged material misrepresentations by the Company regarding new technology
developed by the Company. The ultimate outcome of the litigation cannot
presently be determined. Accordingly, no provision for any liability that
may result upon adjudication has been made in the accompanying financial
statements and the possible effect it will have on future financial
statements is unknown. Except for proceedings resulting in the denial of
class certification, the parties have not engaged in extensive discovery. 
No settlement discussions have occurred to date.  The company intends to
continue vigorously defending the lawsuit.

     On August 13, 1996 the Company was served a formal order of private
investigation by the U.S. Securities and Exchange Commission (SEC).  This
investigation has resulted in a complaint against IAS and Neldon Johnson
being filed by the SEC in the United States District Court, Central
Division, on September 23, 1998.  Donnel Johnson and Randale Johnson were
also named as relief defendants.  IAS continue to stand by its Digital Wave
Modulation (DWM) technology and its inventor and president Neldon Johnson. 
IAS and Neldon Johnson denies the allegation of participation in fraudulent
microcap schemes and the other substantive allegations filed in the
complaint by the SEC and intend to vigorously defend the lawsuit. 


     In April 1997 the Company was named in a defendant in an action caption
Alarm Control Company V. International Automated Systems, Incorporated.  The
complaint claims breach of contract and seeks $60,000 plus interest from the
Company.  The action was in the third District Court of Salt Lake County,
State of Utah.  The Company has filed for a Summary Judgement. The court
ruled in favor of IAS and consequently the case was dismissed. 


Item 2. Changes in Securities.
     None. 

Item 3. Defaults upon Senior Securities.
     None.

Item 4. Matters Submitted to a Vote of the Company's Shareholders.
     None.

Item 5. Other Information.
            None.

Item 6. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

     A. Exhibits.
          Ex.27  Financial Data Summary. 
            
     B. Reports on Form 8-K.
                None.


SIGNATURES

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


Date February 12, 1999

International Automated Systems, Inc.


By               
     Neldon Johnson
     President and Chief Executive Officer



By                
      Neldon Johnson
      Chief Financial Officer