UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549
                              FORM 10-QSB

(x)  Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

               For Quarterly Period Ended March 31, 2001

                  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.)

                          326 North Sr. 198,
                          Salem, Utah   84653
                          -------------------
               (Address of principal executive offices)

                            (801) 432-8132
          (Registrant's telephone number including area code)

                            Note Applicable
 (Former name, address, and fiscal year 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 March 31, 2001, Registrant had 16,534,911 shares of common
stock, no par value per share, issued and outstanding.

/1/


                 International Automate Systems, Inc.

                           Table of Contents


PART I    FINANCIAL INFORMATION


Item 1    Financial Statements

          Condensed Balance Sheets - March 31, 2001 (Unaudited) and
            June 30, 2000

          Condensed Statements of Operations for the Three and Nine
            Months Ended March 31, 2001 and 2000 and for the Cumulative
            Period September 26, 1986 (Date of Inception) Through March
            31, 2001, (Unaudited)

          Condensed Statements of Cash Flows for the Nine Months
            Ended March 31, 2001 and 2000 and for the Cumulative
            Period September 26, 1986 (Date of Inception) Through March
            31, 2001 (Unaudited)

          Notes To Condensed Financial Statements

Item 2    Management's Discussion and Analysis of Financial Condition
           and Results of Operations


PART II   OTHER INFORMATION


Item 1    Legal Proceedings

Item 2    Changes in Securities

Item 3    Defaults Upon Senior Securities

Item 4    Submission of Matters to a Vote of Security Holders

Item 5    Other Information

Item 6    Exhibits and Reports on Form 8-K

PART I    FINANCIAL INFORMATION

Item 1    Financial Statements

/2/

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


                                                  March 31,     June 30,
                                                    2001          2000
                                                 -----------  -----------
                                ASSETS

Current Assets
   Cash and cash equivalents                     $    26,780  $     8,915
   Net investment in direct financing leases -
      related party - current portion                 29,061       27,118
                                                 -----------  -----------
      Total Current Assets                            55,841       36,033
                                                 -----------  -----------
Property and Equipment
   Computer and electronic equipment                 154,717      148,864
   Furniture and fixtures                             22,503       20,982
   Automobiles                                        21,657       21,657
   Mobile office                                      11,764       11,764
   Leasehold improvements                             18,238       18,238
                                                 -----------  -----------
      Total Property and Equipment                   228,879      221,505
   Accumulated depreciation                         (190,012)    (174,455)
                                                 -----------  ------------
      Net Property and Equipment                      38,867       47,050
                                                 -----------  -----------
Other Assets
   Related party receivable                        1,230,470      819,050
   Net investment in direct financing leases
     - related party                                  40,098       62,845
   Patents, net of accumulated amortization
     of $61,636 and $56,342, respectively            314,055      291,230
   Escrow deposit                                     25,223            -
   Deposit on land held for future construction       85,320        6,000
                                                 -----------  -----------
      Total Other Assets                           1,695,166    1,179,125
                                                 -----------  -----------

Total Assets                                     $ 1,789,874  $ 1,262,208
                                                 ===========  ===========

See the accompanying notes to the condensed financial statements.

/3/


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


                                                  March 31,    June 30,
                                                    2001         2000
                                                 -----------  -----------

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Accounts payable                              $   167,650  $    92,833
   Current portion of long term debt                       -        4,424
   Accrued payroll expenses                          182,494       82,877
   Obligation under capital leases -
     current portion                                  29,061       27,118
                                                 -----------  -----------
      Total Current Liabilities                      379,205      207,252
                                                 -----------  -----------
Long Term Liabilities
   Notes payable - long term                             551            -
   Obligation under capital leases - long term        40,098       62,845
                                                 -----------  -----------
      Total Long Term Liabilities                     40,649       62,845
                                                 -----------  -----------
Total Liabilities                                    419,854      270,097
                                                 -----------  -----------
Stockholders' Equity
   Preferred stock, Class A, no par value,
     4,400,000 shares authorized, 3,400,000
     and 1,000,000 shares issued and
     outstanding, respectively                       294,786      292,786
   Preferred stock, Class B, no par value,
     600,000 shares authorized, 300,000 and
     0 shares issued and outstanding,
     respectively                                          -            -
   Common stock, no par value, 45,000,000
     shares authorized, 16,534,911 and
     15,646,361 shares issued and outstanding,
     respectively                                  8,466,873    6,430,872
   Deficit accumulated during the development
     stage                                        (7,391,639)  (5,731,547)
                                                 -----------  -----------
      Total Stockholders' Equity                   1,370,020      992,111
                                                 -----------  -----------
Total Liabilities and Stockholders' Equity       $ 1,789,874  $ 1,262,208
                                                 ===========  ===========

See the accompanyingnotes to the condensed financial statements.

/4/


                 INTERNATIONAL AUTOMATED SYSTEMS, INC.
                     (A Development Stage Company)
                   CONDENSED STATEMENTS OF OPERATIONS
                               (Unaudited)
<TABLE>
<CAPTION>
                                                                                         Cumulative
                                                                                       For the Period
                                                                                          September
                                                                                          26, 1998
                                       For the Three Months      For the Nine Months     (Inception)
                                          Ended March 31,           Ended March 31,       Through
                                     ------------------------  ------------------------   March 31,
                                         2001        2000         2001         2000         2001
                                     -----------  -----------  -----------  -----------  -----------
<S>                                 <C>          <C>          <C>          <C>          <C>
Revenue
  Sales                              $         -  $         -  $         -  $         -  $   111,226
  Equipment lease income from
     related party                             -            -            -            -       32,348
                                     -----------  -----------  -----------  -----------  -----------
     Total Revenue                             -            -            -            -      143,574
                                     -----------  -----------  -----------  -----------  -----------
Cost of Sales
  Cost of sales                                -            -            -            -       81,927
  Write down of carrying value
    of inventories                             -            -            -            -      216,186
                                     -----------  -----------  -----------  -----------  -----------
     Total Cost of Sales                       -            -            -            -      298,113
                                     -----------  -----------  -----------  -----------  -----------
Gross Loss                                     -            -            -            -     (154,539)
                                     -----------  -----------  -----------  -----------  -----------
Operating Expenses
  General and administrative             179,353       98,242      906,133      219,532    3,604,505
  Research and development expense       622,339       87,928      747,119      283,911    3,396,441
  Amortization expense                         -        5,507        5,294        7,875       63,516
  Stockholder class action
    settlement expense                         -            -            -            -      170,634
                                     -----------  -----------  -----------  -----------  -----------
     Total Operating Expenses            801,692      191,677    1,658,546      511,318    7,235,096
                                     -----------  -----------  -----------  -----------  -----------
Loss From Operations                    (801,692)    (191,677)  (1,658,546)    (511,318)  (7,389,635)

Other Income (Expense)
  Interest income                              -            -            -           46       22,227
  Interest expense                          (488)        (132)      (1,546)        (599)     (24,231)
                                     -----------  -----------  -----------  -----------  -----------
     Net Other Expense                      (488)        (132)      (1,546)        (553)      (2,004)
                                     -----------  -----------  -----------  -----------  -----------
Net Loss                             $  (802,180) $  (191,809) $(1,660,092) $  (511,871) $(7,391,639)
                                     ===========  ===========  ===========  ===========  ===========
Basic and Diluted Loss Per Share     $     (0.04) $     (0.01) $     (0.09) $     (0.03)
                                     ===========  ===========  ===========  ===========
Common and Preferred Shares Used
  in Per Share Calculation            19,697,991   16,546,361   19,383,375   16,546,361
                                     ===========  ===========  ===========  ===========
</TABLE>
See the accompanying notes to the condensed financial statements.

/5/

                 INTERNATIONAL AUTOMATED SYSTEMS, INC.
                     (A Development Stage Company)
                  CONDENSED STATEMENTS OF CASH FLOWS
                              (Unaudited)
                                                                    Cumulative
                                                                     For the
                                                                     Period
                                                                    September
                                                                     26, 1986
                                          For the Nine Months      (Inception)
                                             Ended March 31,         Through
                                         ------------------------   March 31,
                                             2001         2000        2001
                                         -----------  -----------  -----------
Cash Flows From Operating Activities
 Net loss                                $(1,660,092) $  (511,871) $(7,391,639)
 Adjustments to reconcile net income
  to net cash provided by operating
  activities:
   Amortization                                5,294        7,876       63,516
   Depreciation                               15,557       29,354      190,012
   Stock based compensation                1,191,500            -    1,593,144
 Change in assets and liabilities:
   Prepaid expenses                                -         (400)           -
   Accounts payable                           74,817       55,465      167,650
   Accrued liabilities                        99,617       32,620      182,494
                                         -----------  -----------  -----------
   Net Cash Used By Operating Activities    (273,307)    (386,956)  (5,194,823)
                                         -----------  -----------  -----------
Cash Flows From Investing Activities
 Purchase of property and equipment           (7,374)      (3,508)    (203,758)
 Purchase of rights to technology            (28,119)         (14)    (375,691)
 Organization costs                                -            -       (1,880)
 Net cash loaned to related party           (411,420)    (330,091)  (1,283,724)
 Proceeds from capital lease receivable            -       17,849       44,220
 Repayment of cash loaned to related party         -            -       53,254
                                         -----------  -----------  -----------
   Net Cash Used By Investing Activities    (446,913)    (315,764)  (1,767,579)
                                         -----------  -----------  -----------
Cash Flows From Financing Activities
 Proceeds from issuance of common stock      163,445            -    1,525,791
 Cash from controlling shareholder           578,513      739,937    5,519,914
 Payments for treasury stock                       -            -       (3,325)
 Payments for stock offering costs                 -            -      (56,509)
 Decrease in bank overdraft                        -       (1,670)           -
 Proceeds from net borrowings from
   related party                                   -            -       78,101
 Payments on note payable and obligations
   under capital lease                        (3,873)     (17,850)     (74,790)
                                         -----------  -----------  -----------
   Net Cash Provided By Financing
     Activities                              738,085      720,417    6,989,182
                                         -----------  -----------  -----------
Net Increase (Decrease) In Cash and
  Cash Equivalents                            17,865       17,697       26,780

Cash and Cash Equivalents at Beginning
  of Period                                    8,915            -            -
                                         -----------  -----------  -----------
Cash and Cash Equivalents at End
  of Period                              $    26,780  $    17,697  $    26,780
                                         ===========  ===========  ===========
Supplemental Cash Flow Information
 Payments on notes payable made
   by U-check                            $    20,804  $         -
 Stock issued for deposit on land             79,320            -
 Value of common stock held in escrow         25,223            -
 Value of stock issued for deposits on
   land held for future construction          54,000            -

See the accompanying notes to the condensed financial statements.

/6/


                 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, 2000. 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, 2001.

NOTE 2--RELATED PARTY TRANSACTIONS

     For the nine months ending March 31, 2001 and 2000, the
controlling shareholder, Neldon Johnson, contributed $578,513 and
$739,937 for research as additional paid-in capital, respectively. No
additional preferred or common stock was issued.

          As of June 30, 2000, the Company loaned U-Check, Inc. (U-Check),
a corporation solely owned by Mr. Johnson, $819,050. For the nine
months ended March 31, 2001, the Company has advanced this same
corporation an additional $411,420, resulting in a balance due of
$1,230,470. These receivables consist of construction, labor costs and
operating costs paid for by the Company on behalf of U-Check.  No
terms for repayment have been established.

NOTE 3--CONTINGENCIES AND COMMITMENTS

     Legal Matters - On September 23, 1998, the Company was notified
by the U.S. Securities and Exchange Commission (SEC) of formal action
against the Company, its president, and members of his family for
possible securities violations. The action stems from alleged material
misrepresentations by the company regarding new technology developed
by the Company. The SEC is seeking disgorgement of the proceeds from
the sale of stock by the company and its principles that occurred
between June 1995 and June 1996. This figure is believed to be in
excess of $3,000,000. The SEC is also seeking the imposition of fines
and attorney's fees. The ultimate outcome of the action cannot
presently be determined. Accordingly, no provision for any liability
that may result has been made in the accompanying financial
statements, and the possible effect that action will have on future
financial statements is unknown.

     Payroll Tax Contingency - During the nine months ended March 31,
2001, the Company did not pay payroll taxes, and has unpaid federal
and state withholding tax liabilities which have been reflected in the
financial statements.  The Company has not notified the Internal
Revenue Service regarding this matter, but has increased their federal
and state withholding liabilities to reflect potential penalties and
interest.

/7/


NOTE 4--BUSINESS CONDITION

     The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business.
During the nine month periods ended March 31, 2001 and 2000, the
Company incurred net losses of $1,660,092 and $511,871, respectively.
As of March 31, 2001, the Company's losses accumulated from inception
totaled $7,391,639. These factors, among others, indicate that the
Company may be unable to continue as a going concern for a reasonable
period of time. The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities
that might be necessary should the Company be unable to continue as a
going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to obtain additional financing as
may be required, and ultimately to attain successful operations.
Management is in the process of negotiating various sales agreements
and is hopeful these sales will generate sufficient cash flow for the
Company to continue as a going concern.

NOTE 5 -EQUITY

     Series A   Preferred Stock- In July 2000, the Company issued to
certain Employees /Directors 2,000,000 shares of preferred stock in
leu of a $2,000 bonus.  The preferred shares have equal dividend
rights to the common shares, are not convertible into common shares,
have no dividend requirements, and have no liquidation preferences to
the common shares. Each preferred share is entitled to the voting
rights of ten common shares.

          In August 2000, the Company entered into employment agreements
with certain employees. In connection with these agreements, the
Company issued 400,000 shares of preferred stock. The preferred shares
have equal dividend rights to the common shares, are not convertible
into common shares, have no dividend requirements, and have no
liquidation preferences to the common shares. Each preferred share is
entitled to the voting rights of ten common shares.  Due to the shares
having only voting rights, the shares are deemed to have been issued
with no value.

     Series B Preferred Stock-  In connection with the employment
agreements, the Company issued 300,000 shares of convertible preferred
stock.  Each preferred share has equal dividend rights to the common
shares,  has no dividend requirements, has no liquidation preferences
to the common shares, and is entitled to the voting rights of ten
common shares. Each share of the convertible preferred stock is
exchangeable into two options to purchase common stock at $3.00 per
share, exercisable immediately and the options expire ten years from
the date the preferred stock is exchanged.  The Company is accounting
for these shares as though they were an issuance of a stock option.
See below for the Company's accounting policy for the issuance of
stock options.

     Common Stock -In August 2000, the Company entered into employment
agreements with certain employees.  In connection with these
agreements, the Company issued; 250,000 shares of common stock valued
at $562,500 or $2.25 per share.

     In August 2000, the Company issued 18,000 shares of common stock
for services rendered valued at $40,500 or $2.25 per share.


/8/


     During the nine months ended March 31, 2001, the Company placed
500,000 shares of common stock in escrow with an attorney to be sold.
Proceeds of the stock sales from the escrow account are placed in a
separate escrow account to be used at the Company's, and the
attorney's, discretion.  At March 31, 2001, 180,550 shares had been
sold for proceeds of $232,668 at prices ranging from $1.00 to$2.00 per
share.  Of the $232,668 of proceeds, $75,445 was used to cover legal
fees, $132,000 was returned to the Company and the remaining $25,223
is being held in escrow.

     In November 2000, the Company agreed to issue 200,000 shares of
common stock to an individual who has agreed to guarantee a $3,000,000
loan in connection with a building project.  The shares are to be
issued in quarterly installments over an 18 month period.  The amount
of shares will be increased proportionately to the extent that the
amount of the loan guaranteed exceeds $3,000,000.  At the time of the
agreement, the Company issued 50,000 shares to the guarantor. Also, in
November 2000, the Company issued 10,000 shares of common stock to an
individual for a Sellers Financing Agreement in connection with the
building project.  On the date of issuance, the 50,000 shares issued
to the guarantor and the 10,000 shares issued to the individual for
the Sellers Financing Agreement had a fair value of $54,000 or $0.90
per share.  In January 2001, the Company issued an additional 30,000
shares at $0.84 per share under the terms of the agreement.  The total
fair value was $25,320.  The value of the shares has been capitalized
as part of the costs of the building project.

     In February 2001, the Company issued 150,000 shares of common
restricted stock to an individual in exchange for services performed.
The shares had a value of $1.55 per share or $232,500.

     In March 2001, the Company issued 200,000 shares of common
restricted shares to Neldon Johnson in exchange for wages from August
1, 2000 to March 31, 2001.  The shares had a value of $1.55 per share
$310,000.

     Options - In August 2000, as part of employment agreements, the
Company issued options to purchase 1,000,000 shares of common stock.
These options are exercisable at $3.00 per share, vest 100,000 shares
per year over a ten year period and expire ten years from the date of
issuance.  The exercise price of $3.00 per share was greater than the
market value of the shares on the date of issuance.  Accordingly, no
compensation expense will be recognized for the options.

     The Company accounts for its stock issued to directors, officers
and employees under Accounting Principles Board Opinion No. 25 and
related interpretations ("APB 25"). Under APB 25, compensation expense
is recognized if an option's exercise price on the measurement date is
below the fair value of the Company's common stock. The Company
accounts for options and warrants issued to non-employees in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation"
(SFAS 123) which requires these options and warrants to be accounted
for at their fair value.  There will be no compensation expense
recognized for the options under APB 25.


/9/


Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations

Forward Looking Statements

This report contains forward looking statements regarding the
Company's plans, objectives, expectations and intentions.  All forward
looking statements are subject to risks and uncertainties that could
cause the Company's actual results and experience to differ materially
from such projections.  Such risks include delays in product
development, the development of marketing and distribution channels,
and market acceptance of its products.  Other risks may be beyond the
control of the Company.

Liquidity and Capital Resources

As of March 31, 2001, Registrant had cash of $26,780 compared to cash
of $8,915 as of June 30, 2000.  As of March 31, 2001, total current
assets were $55,841 and total assets were $1,789,874 compared to total
current assets $36,033 and total assets $1,262,208 as of June 30,
2000.

As of March 31, 2001, Registrant had total liabilities of $419,854 and
shareholders' equity of $1,370,020 as compared to total liabilities of
$270,097 and shareholders' equity of $992,111 as of June 30, 2000.
The deficit accumulated during the development stage was $7,391,639 as
of March 31, 2001, compared to $5,731,547 as of June 30, 2000.  At
this time the Company is not generating sufficient funds to sustain
its operations.  The change in stockholders' equity is attributable
primarily to the Company issuing 888,550 shares of common stock and
2,700,000 shares of preferred stock.  The Company's operations involve
significant risks regarding the development of technology and products
that may not be commercially acceptable and profitable.  As of March
31, 2001, the ratio of current assets to current liabilities was
approximately 0.15 to one.

For the nine months ended March 31, 2001, Registrant had total
revenues of $0 compared to total revenues of $0 for the same period a
year earlier. For the nine months ended March 31, 2001, registrant had
total operating expenses of $1,658,546 compared to expenses of
$511,318 during the same nine month period for a year earlier. Cost of
sales was $0 compared to cost sales of $0 during the nine months ended
March 31, 2001 and 2000 respectively. For the nine months ended March
31, 2001, general and administrative expenses were $906,133 compared
to $219,532 and research and development expenses were $747,119
compared to $283,911 a year earlier. For the nine months, the
Registrant had a net loss of $1,660,092 compared to a net loss of
$511,871 for the same nine month period a year earlier. The increase
in general and administrative expenses is a result of increased
compensation expense for the issuance of 268,000 shares of common
stock to employees. For the nine months, the net loss per share was
$0.09 compared to $0.03 for the same nine month period a year earlier.

Results of Operations

For the quarter ended March 31, 2001, Registrant had total revenues of
$0 compared to total revenues of $0 for the same period a year
earlier.  For the quarter ended March 31, 2001, registrant had total
operating expenses of $801,692 compared to expenses of $191,677 during
the same quarter of a year earlier.  As of  March 31, 2001, cost of
sales was $0 as compared to cost of sales of $0 during the same
quarter a year earlier.  For the quarter Registrant had a net loss of
$802,180 compared to a net loss of $191,809 for the same quarter a
year earlier.    For the quarter, the net loss per share was $0.04
compared to $0.01 for the same quarter a year earlier.  For the
quarter ended March 31, 2001, general and administrative expenses were
$179,353 compared to $98,242 and research development expenses were
$622,339 compared to $87,928 a year earlier.


/10/


Future Business

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 - OTHER INFORMATION

Item 1.  Legal Proceedings

On September 23, 1998, the Company was notified by the U.S. Securities
and Exchange Commission (SEC) of formal action against the Company,
its president, and members of his family for possible securities
violations.  The action stems from alleged material misrepresentations
by the Company regarding new technology developed by the Company.  The
SEC is seeking disgorgement of the proceeds from the sale of stock by
the Company and its principles that occurred between June 1995 and
June 1996.  This figure is believed to be in excess of $3,000,000.
The SEC is also seeking the imposition of fines and attorney's fees.
Though the Company and the principles named in the complaint deny any
wrong doing and intend on vigorously defending the lawsuit, the
ultimate outcome of the action cannot presently be determined.
Accordingly, no provision for any liability that may result has been
made in the accompanying financial statements, and the possible effect
the action will have on future financial statements is unknown.

The Company has filed a civil action complaint in the United States
District Court for the District of Utah Central Division against
Optimal Robotics Corp. and PSC, Inc. alleging patent infringement
arising under the patent laws of the United States, and more
specifically, under Title 35, U.S.C. Sections 271, 281, 283, 284, and
285.

Item 2.  Changes in Securities

In August 2000, the Company entered into employment agreements with
certain key employees.  In connection with these agreements, the
Company issued 250,000 shares valued at $562,500 or $2.25 per share.

In August 2000, the Company issued 18,000 shares of common stock for
services rendered, valued at $40,500 or $2.25 per share.

Preferred Stock - In July 2000, the Company issued to key
Employees/Directors 2,000,000 shares of preferred stock in leu of a
$2,000 bonus.  The preferred shares have equal dividend rights to the
common shares, are not convertible into common shares, have no
dividend requirements, and have no liquidation preferences to the
common shares.  Each preferred share is entitled to the voting rights
of ten common shares.

In August 2000, the Company issued 400,000 shares of convertible
preferred shares to certain key employees as part of an employee
agreement.  Each preferred share has equal dividend rights to the
common shares, have no dividend requirements, and have no liquidation
preferences to the common shares, and is entitled to the voting rights
of ten common shares.  Each share can be converted to two options to
purchase common stock at $3.00 per share.

Options - In August 2000, the Company issued options to purchase
1,000,000 shares of restricted common stock as part of employment
agreements.  These options are exercisable at $3.00 per share, vest
100,000 shares per year over a ten year period, and expire ten years
from the date of issuance.


/11/


During the nine months ended March 31, 2001, the Company placed
500,000 shares of common stock in escrow with an attorney to be sold.
Proceeds of the stock sales from the escrow account are placed in a
separate escrow account to be used at the Company's, and the
attorney's, discretion.  At March 31, 2001, 180,550 shares had been
sold for proceeds of $232,668 at prices ranging from $1.00 to$2.00 per
share.  Of the $232,668 of proceeds, $75,445 was used to cover legal
fees, $132,000 was returned to the Company and the remaining $25,223
is being held in escrow.

In November 2000, the Company agreed to issue 200,000 shares of common
stock to an individual who has agreed to guarantee a $3,000,000 loan
in connection with a building project.  The shares are to be issued in
quarterly installments over an 18 month period.  The amount of shares
will be increased proportionately to the extent that the amount of the
loan guaranteed exceeds $3,000,000.  At the time of the agreement, the
Company issued 50,000 shares to the guarantor. Also, in November 2000,
the Company issued 10,000 shares of common stock to an individual for
a Sellers Financing Agreement in connection with the building project.
On the date of issuance, the 50,000 shares issued to the guarantor and
the 10,000 shares issued to the individual for the Sellers Financing
Agreement had a fair value of $54,000 or $0.90 per share.  In January
2001, the Company issued an additional 30,000 shares at $0.84 per
share under the terms of the agreement.  The total fair value was
$25,320.  The value of the shares has been capitalized as part of the
costs of the building project.

In February 2001, the Company issued 150,000 shares of common
restricted stock to an individual in exchange for services performed.

In March 2001, the Company issued 200,000 shares of common restricted
shares to Neldon Johnson in exchange for wages from August 1, 2000 to
March 31, 2001.

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 and Reports on Form 8-K.

     None.


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    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: May 21, 2001

                               International Automated Systems, Inc.

                               By: \s\ Neldon Johnson
                               ----------------------
                               Neldon Johnson
                               President and Chief Executive Officer

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