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, 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)

Registrant's telephone number including area code    (801) 423-8132

       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 October 22, 2001 Registrant had 17,121,334 shares of common stock, no par
value per share, issued and outstanding after deducting shares held in the
corporate treasury.





PART I

ITEM 1         FINANCIAL STATEMENTS

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


                                        September 30,  June 30,
                                                2001       2001
                                           ---------  ---------
                                     ASSETS

Current Assets
   Net investment in direct financing
    leases - related party - current
    portion                                $  31,661  $  35,773
                                           ---------  ---------
      Total Current Assets                    31,661     35,773
                                           ---------  ---------
Property and Equipment
   Computer and electronic equipment          38,781     38,781
   Automobiles                                51,514     51,514
   Mobile office                              11,764     11,764
      Total Property and Equipment           102,059    102,059
   Accumulated depreciation                  (66,269)   (63,527)
                                           ---------  ---------
      Net Property and Equipment              35,790     38,532
                                           ---------  ---------
Other Assets
   Net investment in direct financing
    leases - related party                    25,054     32,743
   Patents, net of accumulated
    amortization of $69,576 and $66,929      256,068    258,715
   Deposits                                  209,520    209,520
                                           ---------  ---------
      Total Other Assets                     490,642    500,978
                                           ---------  ---------

Total Assets                               $ 558,093  $ 575,283
                                           =========  =========

See the accompanying notes to the condensed financial statements.

                                2


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


                                          September 30,  June 30,
                                              2001         2001
                                           -----------   ----------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Funds drawn in excess of cash in bank   $     5,033   $   14,860
   Accounts payable                            159,920      172,382
   Current portion of long term debt             5,972        5,971
   Accrued payroll expenses                    169,883      186,216
   Obligation under capital leases -
    current portion                             31,661       35,773
                                           -----------   ----------
      Total Current Liabilities                372,469      415,202
                                           -----------   ----------
Long Term Liabilities
   Notes payable - long term                    19,026       20,403
   Obligation under capital leases -
    long term                                   25,054       32,743
                                           -----------   ----------
      Total Long-Term Liabilities               44,080       53,146

Total Liabilities                              416,549      468,348
                                           -----------  -----------
Stockholders' Equity
   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, 16,971,334 and
    16,857,934 shares issued and
    outstanding, respectively                7,691,784    7,502,561
   Deficit accumulated during the
    development stage                       (7,845,026)  (7,690,412)
                                           -----------  -----------
             Total Stockholders' Equity        141,544      106,935
                                           -----------  -----------
Total Liabilities and Stockholders' Equity $   558,093  $   575,283
                                           ===========  ===========

 See the accompanying notes to the condensed financial statements.

                                3


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


                                                            For the Period
                                                            From Inception
                                                         (September 26, 1986)
                                      For the Three Months     Through
                                      Ended September 30,    September 30,
                                          2001       2000        2001
                                      ----------  ----------  -----------
Revenue
  Sales                               $     -     $       -   $   111,226
  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 Profit (Loss)                         -             -       (154,539)
                                      ----------  ----------  ------------
Operating Expenses
  General and administrative              95,180       633,650   3,735,906
  Research and development expense        56,456        58,211   3,665,163
  Amortization expense                     2,647         2,647      71,456
  Stockholder class action
   settlement expense                         -            -       170,634
                                      ----------  ------------  ----------
     Total Operating  Expenses           154,283       694,508   7,643,159
                                      ----------  ------------  ----------
Operating Loss                          (154,283)     (694,508) (7,797,698)

Other Income and (Expense)
  Loss on disposal of property
   and equipment                              -            -       (17,359)
  Forfeiture of deposits                      -            -       (27,283)
  Interest income                             16           -        22,444
  Interest expense                          (347)        (267)     (25,130)
                                      ----------  -----------  -----------
     Net Other Income (Expense)             (331)        (267)     (47,328)
                                      ----------  -----------  -----------
Net Loss                              $ (154,614) $  (694,775) $(7,845,026)
                                      ==========  ===========  ===========
Basic and Diluted Loss Per Share      $    (0.01) $     (0.04)
                                      ==========  ===========
Common and Preferred Shares Used in
 Per Share Calculation                20,625,368   18,754,141
                                      ==========  ===========

        See the accompanying notes to the condensed financial statements.

                                4


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

                                                            For the Period
                                                            From Inception
                                                         (September 26, 1986)
                                      For the Three Months    Through
                                      Ended September 30,   September 30,
                                         2001       2000         2001
                                      ----------  ----------  -----------
Cash Flows From Operating Activities
 Net loss                             $ (154,614) $ (694,775) $(7,845,026)
 Adjustments to reconcile net
  income to net cash provided by
  operating activities:
   Amortization                            2,647       2,647       71,456
   Depreciation                            2,742       7,463      198,212
   Stock based compensation               28,500     605,000    1,581,004
   Forfeiture of deposits                   -           -          27,283
   Loss on disposal of fixed assets         -           -          17,359
   Patents abandoned                        -           -         130,106
 Change in assets and liabilities:
   Accounts payable                      (12,462)     (8,912)     159,920
   Accrued liabilities                   (16,333)      7,735      169,882
                                      ----------  ----------  -----------
   Net Cash From Operating Activities   (149,520)    (80,842)  (5,489,804)
                                      ----------  ----------  -----------
Cash Flows From Investing Activities
 Purchase of property and equipment         -           -        (238,523)
 Purchase of rights to technology           -        (12,647)    (455,749)
 Organization costs                         -           -          (1,880)
 Net cash loaned to related party       (119,014)   (138,191)  (1,532,248)
 Proceeds from capital lease
  receivable                                -           -          44,220
 Repayment of cash loaned to
  related party                             -           -          53,254
                                      ----------  ----------  -----------
   Net Cash From Investing Activities   (119,014)   (150,838)  (2,130,926)
                                      ----------  ----------  -----------
Cash Flows From Financing Activities
 Proceeds from issuance of
  common stock                            76,278        -       1,772,010
 Cash from controlling shareholder       203,459     227,890    5,875,763
 Payments for treasury stock                -           -          (3,325)
 Payments for stock offering costs          -           -         (56,509)
 Increase (decrease) in bank
  overdraft                              (9,827)        -           5,033
 Proceeds from net borrowings
  from related party                        -           -          78,101
 Proceeds from notes payable                -           -          29,857
 Payments on note payable and
  obligations under capital lease        (1,376)      (1,401)     (80,200)
                                      ----------  ----------  -----------
   Net Cash From Financing Activities    268,534     226,489    7,620,730
                                      ----------  ----------  -----------
Net Increase (Decrease) In Cash
 and Cash Equivalents                       -         (5,191)        -

Cash and Cash Equivalents at
 Beginning of Period                        -          8,915         -
                                      ----------  ----------  -----------
Cash and Cash Equivalents at
 End of Period                        $     -     $    3,724  $      -
                                      ==========  ==========  ===========
Supplemental Cash Flow Information

 Cash Paid for Interest               $      347  $      267  $    23,032


        See the accompanying notes to the condensed financial statements.

                                5


                      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, 2001. 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,
2002.

NOTE 2--RELATED PARTY TRANSACTIONS

     For the three months ending September 30, 2001 and 2000, the controlling
shareholder, Neldon Johnson, contributed $203,459 and $227,890 for research as
additional paid-in capital, respectively. No additional preferred or common
stock was issued.

     For the three months ended September 30, 2001, the Company loaned U-Check,
Inc. (U-Check), a corporation solely owned by Mr. Johnson, $119,014. These
receivables consist of operating capital and labor costs paid for by the Company
on behalf of U-Check.

     Due to adverse financial conditions experienced by U-Check, the Company
does not feel that the amount due from U-Check will be realized. Accordingly,
the Company has written off the entire balance. Because Mr. Johnson is the sole
shareholder of U-Check, the write-off of $119,014 was treated as a capital
distribution to Mr. Johnson.

NOTE 3-CONTINGENCIES AND COMMITMENTS

     Legal Contingencies - 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 and the Company's employees regarding new technology developed by the
Company. The SEC is seeking disgorgement of the proceeds from the sale of stock
by the Company's principles that occurred between June 1995 and June 1996.

     At the end of July 2001, the president of the Company, on behalf of the
Company, approved a settlement recommendation to be presented to the SEC as a
full compromise of the matter. Pursuant to the terms of the settlement, the
Company consents to permanently restrain from engaging in acts and practices
which constitute and will constitute violations of Federal Securities laws and
regulations.

                                6

     As part of this settlement agreement, the Company's President consents to
pay a civil penalty, disgorgement and pre-judgement interest. This judgement
will be settled by the transfer of the President's personal shares of IAS stock
into receivership for sale to satisfy the civil penalty, disgorgement and pre-
judgement interest.

     Because the judgement of penalties, interest and disgorgement are against
the president and his family, no provision for this liability has been made in
the accompanying financial statements.

     Pursuant to SEC regulations and policies, this offer has been presented to
the SEC for approval. It is anticipated that this process will take several more
months.

     Payroll Tax Contingency - During the year ended June 30, 2001, the Company
did not pay payroll taxes for several months, and has unpaid federal and state
withholding tax liabilities as of September 30, 2001. These balances, including
potential penalties and interest, have been reflected in the financial
statements.

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. The Company has had no revenue for
the three month periods ended September 30, 2001 and 2000. During the three
month periods ended September 30, 2001 and 2000, the Company incurred net losses
of $154,614 and $694,775, respectively. As of September 30, 2001, the Company's
losses accumulated from inception totaled $7,845,026. 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

     Common Stock - During the year ended June 30, 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 June 30,
2001, there was a balance 188,400 shares left in escrow. During the three months
ended September 30, 2001, 88,400 shares were sold for proceeds of $76,278 at
prices ranging from $0.67 to $1.11 per share. Of the $76,278 of proceeds,
$56,065 was used to cover legal fees, $20,000 was used for audit fees, and the
remaining $213 had not been spent as of September 30, 2001 and remained in the
escrow account.

                                7

     In July 2001, the Company issued 25,000 shares of common restricted stock
to an individual in exchange for services performed during February through July
2001. The shares were valued at $28,500 or $1.14 per share.

NOTE 6 - SUBSEQUENT STOCK ISSUANCES

     During October 2001, the Company placed 5,000,000 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.

     During October 2001, the Company filed an S-8 Registration Statement for
the issuance of 150,000 common shares. Of the 150,000 shares, 100,000 were
pursuant to a consulting agreement and the remaining 50,000 were for legal
services to two different firms.


                                8





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 September 30, 2001, total current assets were $31,661 and total
assets were $558,093 compared to total current assets $35,773 and
total assets $575,283 as of June 30, 2001.

As of September 30, 2001, Registrant had total liabilities of $416,549 and
shareholders' equity of $141,544 as compared to total liabilities of
$468,348 and shareholders'  equity of $106,935 as of June 30, 2001.
The deficit accumulated during the development stage was $7,845,026 as
of September 30, 2001, compared to $7,690,412 as of June 30, 2001.  At
this time the Company is not generating sufficient funds to sustain
its operations.  The Company's operations involve significant risks
regarding the development of technology and products that may not be
commercially acceptable and profitable.  As of September 30, 2001, the ratio
of current assets to current liabilities was approximately 0.08 to one.

For the three months ended September 30, 2001, Registrant had total
revenues of $0 compared to total revenues of $0 for the same period a
year earlier. For the three months ended September 30, 2001, registrant
had total operating expenses of $154,283 compared to expenses of
$694,508 during the same three month period for a year earlier. Cost of
sales was $0 compared to cost sales of $0 during the three months ended
September 30, 2001 and 2000 respectively. For the three months ended
September 30, 2001, general and administrative expenses were $95,180
compared to $633,650 and research and development expenses were $56,456
compared to $58,211 a year earlier. For the three months, the Registrant
had a net loss of $154,614 compared to a net loss of $694,775 for the same
three month period a year earlier. The decrease in net loss is primarily due to
a decrease in general and administrative expenses secondary to the absence of
an employee stock compensation given during the same period a year earlier.


Results of Operations

For the quarter ended September 30, 2001, Registrant had total revenues of
$0 compared to total revenues of $0 for the same period a year
earlier.  For the quarter ended September 30, 2001, registrant had total
operating expenses of $154,283 compared to expenses of $694,508 during
the same quarter of a year earlier.  As of  September 30, 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
$154,614 compared to a net loss of $694,775 for the same quarter a
year earlier.    For the quarter, the net loss per share was $0.01
compared to $0.04 for the same quarter a year earlier.  For the
quarter ended September 30, 2001, general and administrative expenses were
$95,180 compared to $633,650 and research development expenses were
$56,456 compared to $58,211 a year earlier. The decrease in net loss is
primarily due to a decrease in general and administrative expenses secondary
to the absence of an employee stock compensation given during the same
quarter a year earlier.

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. Acting in what they
believe to be the best interest of the Company, Neldon Johnson, IAS, and
the Relief Defendants have, without admitting or denying the allegations
of the Complaint, consented to a settlement. The basics of the  settlement
are that Neldon Johnson and IAS agree they will not engage in acts and
practices which constitute and will constitute violations of specific
Security Acts and Rules and that a total amount of disgorgement, pre-
judgment interest and civil penalties due and owing by Neldon Johnson,
and the Relief Defendants of $2,099,596 shall be collectively satisfied
by the transfer of 1,749,664 shares of IAS stock held in the name of
Neldon Johnson to a Special Agent appointed by the courts. The
appointed Special Agent will sell the IAS shares in a manner designed
to maximize the proceeds from such sales without unduly disrupting or
depressing the market for IAS shares in order to pay the amount due.
The Settlement Agreement is still awaiting final approval.
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. Discovery is presently
in progress.

The Company has filed a civil action complaint in the United States District
Court for the district of Utah Central division against The Kroger
Company alleging patent infringement arising under the patent infringement
arising under the patent laws of the United States, and more specifically,
under Title 35, U.S.C., section 271, 281, 283, 284, and 285.

Item 2.  Changes in Securities

During October 2001, the Company placed 5,000,000 shares of common stock in
escrow with an attorney. Proceeds of the stock sales from the escrow account
are placed in a separate account to be used at the Company's and the attorney's
discretion.

During October 2001, the Company filed an S-8 Registration Statement for the
issuance of 150,000 common shares. Of the 150,000 shares, 100,000 were pursuant
to a consulting agreement and the remaining 50,000 were for legal services to
two different firms.

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.




    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: November 9, 2001

                               International Automated Systems, Inc.

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