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  September 30, 1996

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 September 30, 1996, registrant had 15,186,100
shares of common stock, no par value per share, issued
and outstanding. 




                                     <PAGE>
                                     
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 September 30, 1996, and the results
of its operations from June 30, 1996, through September
30, 1996, and changes in its financial position from
inception through September 30, 1996, 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 for
products based on high technology.  Such development
has significant risks.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources.  As of September 30,
1996, Registrant had cash of $186,602 compared to cash
of $545,847 as of June 30, 1996.  Cash declined because
of a net loss for the quarter of $(310,992). Registrant
has total assets of $779,459 and total liabilities of
$697,081 and a shareholders' equity of $82,378 as of
September 30, 1996, compared to total assets of
$1,099,158 and total liabilities of $705,788 and a
shareholders' deficit of $393,370 as of June 30, 1996. 
As of June 30, 1996, Registrant had cash of $545,847
and total current assets of $815,299 and had current
liabilities of $687,709 and shareholders' equity of
$393,370.  As of September 30, 1996, the ratio of
current assets to current liabilities was approximately
 .67 to 1.0.  

     
Results of Operation.  For the quarter ended September
30, 1996, Registrant had revenues of $9,885 compared to
total revenues of $7,865 for the same period a year
earlier.  For the quarter ended September 30, 1996,
Registrant had total expenses of $320,412 compared to
expenses of $78,046 for the same period a year earlier. 
All the income was derived from sales of $9,885. Cost
of sales was $5,683 yielding gross profit of $4,202.
For the quarter ended September 30, 1995, Registrant
had a net of loss of $(310,992) compared to a net loss
of $(72,979) for the same period a year earlier.  The
increase in the net loss is attributable primarily to
an increase of $145,629 in research and development
expenses.  These costs for the quarter were $205,408
compared to $59,779 for the same period a year earlier.
Also the net loss is attributable to an increase in
general and administrative expense of $96,824.  During
the quarter general and administrative expense was
$114,542 compared to $17,718 for the same period a year
earlier.  Net loss per share for the quarter ended
September 30, 1996, was $(0.02) compared to a loss
of $(0.01) for the same period in 1995. 
                INTERNATIONAL AUTOMATED SYSTEMS, INC.
                       (A Development Stage Company)
                             BALANCE SHEETS
                              (Unaudited)               
          
                             September 30,     June 30,
                                     1996      1996
                          ASSETS

Current Assets
 Cash and cash equivalents     $186,602      $ 545,847
 Receivable from sales
 representatives, net of 
 allowance for doubtful 
 accounts of $1,590              33,780         30,279
 Prepaid expenses                12,877          7,259
 Inventory                      236,344        231,914

  Total Current Assets          469,603        815,299

Property and Equipment
 Computer and electronic
 equipment                      127,204        121,263
 Furniture and fixtures          20,982         18,880
 Automobiles                     21,657         21,657
 Leasehold improvements          18,238         10,965

  Total Property and Equipment  188,081        172,765
 Accumulated depreciation       (48,986)       (41,189)

  Net Property and Equipment    139,095        131,576

Patents, net of accumulated
 amortization of $15,487 and
 $15,025, respectively          170,761        152,283

Total Assets                 $  779,459     $1,099,158


          LIABILITIES AND STOCKHOLDERS'  EQUITY
Current Liabilities
 Accounts payable               $ 34,554       $42,081
 Current portion of
 long-term debt                    3,735         3,735
 Accrued payroll expenses          1,662         1,936
 Advance from majority
 shareholder                     647,758       647,758

  Total Current Liabilities      687,709       695,510  

Notes Payable                      9,372        10,278

  Total Liabilities              697,081       705,788

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,
 15,186,100 shares issued and 
 outstanding                    1,238,559    1,238,559
 Deficit accumulated during the
 development stage             (1,448,967)  (1,137,975) 
                                
  Total Stockholders  Equity       82,378      393,370

Total Liabilities and
Stockholders  Equity             $779,459   $1,099,158




The accompanying notes are an integral part of these
financial statements.<PAGE>
                INTERNATIONAL AUTOMATED SYSTEMS, INC.
                    (A Development Stage Company)
                         STATEMENTS OF OPERATIONS
                                (Unaudited)

                                                        
                                             Cumulative
                                                For the 
                                                 Period
                                          September 26,
            For the Three Months Ended  1986(Inception) 
              September 30,                     Through
                     1996      1995      Sept. 30, 1996

Revenue   
 Sales            $   9,885  $  6,365       $   98,807
 Equipment lease
 income from 
 related party         -        1,500           20,000

  Total Revenue       9,885     7,865          118,807

Cost of Sales         5,683     2,454           56,980

Gross Profit          4,202     5,411           61,827

Operating Expenses
 General and
 administrative
 expense             114,542    17,718         706,553
 Research and
 development expense 205,408    59,779         786,178
 Amortization expense    462       549          17,367

  Total Operating
  Expenses           320,412    78,046       1,510,098

Other Income and
 (Expense)
 Interest income       5,492      -             16,591
 Interest expense       (274)     (344)        (17,287)

  Net Other Income
  and (Expense)        5,218      (344)           (696)

Net Loss             310,992) $(72,979)   $ (1,448,967)

Net Loss Per Share  $  (0.02) $  (0.01)       $  (0.09)

Common shares used
in Per   Share
Calculation        16,186,100 9,006,600     16,186,100







The accompanying notes are an integral part of these
financial statements.<PAGE>
                INTERNATIONAL AUTOMATED SYSTEMS, INC.
                    (A Development Stage Company)
                         STATEMENT OF CASH FLOWS
                              (Unaudited)
                                                    
                                             Cumulative
                                         For the Period
                                           September 26 
        For the Three Months Ended     1986 (Inception)
           September 30,                        Through
                 1996        1995         Sept 30, 1996
Cash Flows
From Operating 
Activities
 Net loss    $ (310,992)    $ (72,979)    $ (1,448,967)
 Adjustments 
 to reconcile
 net income to
 net cash
 provided by
 operating
 activities:      
  Allowance 
  for doubtful
  accounts          -           -                1,590
  Amortization      462           550           17,367
  Depreciation    7,797         3,513           48,986
  Stock based
  compensation        -           -            132,274
 Change in assets
 and liabilities:      
  Inventory       (4,430)     (16,476)        (236,344)
  Sales 
  representatives
  receivable      (3,501)          -           (35,370)
  Prepaid 
  expenses        (5,618)          -           (12,877)
  Accounts payable(7,527)        (482)          34,554
  Deferred revenue   -         (1,500)            -   
  Accrued 
  liabilities       (274)          -             1,662
   
   Net Cash Used By             
   Operating
   Activities   (324,083)     (87,374)      (1,497,125)
   
Cash Flows From
Investing Activities      
 Purchase of
 property and
 equipment       (15,316)     (24,334)        (168,724)
 Purchase of 
 rights to 
 technology      (18,940)      (9,728)        (186,248)
 Organization
 costs               -           -              (1,880)
   
  Net Cash Used
  By Investing
  Activities     (34,256)     (34,062)        (356,852)
   
Cash Flows From 
Financing Activities      
 Proceeds from
 issuance of
 common stock         -           -            912,346
 Proceeds from 
 advance from
 controlling
 shareholder          -           -          1,116,216
 Payments for
 treasury stock       -           -             (3,325)
 Payments for
 stock offering
 costs                -           -            (56,509)
 Proceeds (payments)
 from net borrowings
 from related
 party                -          110,969        78,101
 Payments on
 note payable       (906)           (838)       (6,250)
   
  Net Cash Provided
  By (Used In)
  Financing
  Activities         (906)        110,131    2,040,579
   
Net Increase
(Decrease)
In Cash            (359,245)       (11,305)    186,602
   
Cash and Cash
Equivalents at
Beginning of 
Period              545,847         10,049        -   
   
Cash (Overdraft) 
and Cash 
Equivalents at 
End of Period    $   186,602     $  (1,256)   $186,602

The accompanying notes are an integral part of these
financial statements.<PAGE>
            INTERNATIONAL AUTOMATED SYSTEMS, INC.
           NOTES TO CONDENSED FINANCIAL STATEMENTS 

NOTE 1--INTERIM FINANCIAL STATEMENTS 

The accompanying financial statements have been
prepared by the Company, without audit. 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 results of
operations of the interim periods presented are not
necessarily indicative of the results to be expected
for the entire year.

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-K as of June 30, 1996.

NOTE 2--LOSS PER SHARE

The Company has computed loss per share based on the
number of common and preferred shares outstanding as of
September 30, 1996 and 1995 under the treasury stock
method.

NOTE 3--RELATED PARTY TRANSACTIONS

The $647,758 advanced by Neldon Johnson, the
controlling shareholder in June 1996 was prepayment to
be used by the company for future research and 
development to be performed for Mr. Johnson. When the
parties agree that the research has been performed, the
Company will invoice Mr. Johnson. However, the
invoicing of Mr. Johnson and the settlement of the
advance will be accounted for as the conversion of the
advance to stockholders  equity as additional paid-in
capital for financial reporting purposes. As of
September 30, 1996 no amounts had been invoiced.

NOTE  4--CONTINGENCY

On July 2, 1996, the Company had a class action law
suit filed against them 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. 

On August 13, 1996 the Company was served a formal
order of private investigation by the U.S. Securities
and Exchange Commission (SEC). The SEC staff has
advised that its inquiry should not be construed as an
indication by the SEC or its staff that any violations
of law have occurred.

<PAGE>
Part II.
Item 1. Legal Proceedings.
     On July 2, 1996, the Company and its president
were named as defendants in a proposed class action
lawsuit filed on behalf of certain shareholders seeking
damages for violations of the federal securities laws. 
The Complaint was claims to be brought on behalf of all
persons and entities who purchased shares of common
stock of the Company during the period of May 13, 1996,
to June 27, 1996.  The suit seeks damages based on the
decrease in the Company's stock price in the trading
market because the Company made allegedly material
misrepresentations concerning new technology being
developed. On August 8, 1996, an amended complaint was
filed which increased the number of plaintiffs,
added and modified certain allegations, and changed the
proposed period from April 3, 1996, to June 27, 1996.
This lawsuit is in its preliminary stages.  The final
outcome of the litigation cannot be determined.  The
Company intends to defend vigorously the litigation. 
No provision for any liability that may result from any
adverse adjudication has been made in the accompanying
financial statements and any effect on future financial
statements is unknown.  The lawsuit is now captioned
Edouard Serfaty, David D. Baker, Michael Berry,
Margaret Moskes, Craig Swapp, Linda M. Baker, Robert H.
Baker, Kourosh Khalili and Ariel Tzadik, v.
International Automated Systems, Inc., and Neldon P.
Johnson, Civil No. 2:96 CV 0583 C, filed in the United
States District Court for the District of Utah, Central
Division.

The Company in August 1996 became aware that the U.S.
Securities and Exchange Commission ("SEC") issued a
private formal order of investigation in regard to the
Company to determine if there have been violation of
the federal securities laws.  In particular, the formal
order addresses possible violations of the registration
provisions of the Securities Act of 1933 and the
anti-fraud provisions of the Securities Exchange Act of
1934.  

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.
        July 12, 1996, and August 23, 1996. 

<PAGE>
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: 12-3-96

International Automated Systems, Inc.



By Neldon Johnson
President, Chief Executive Officer, and Chief 
Financial Officer