Attached files
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EX-31 - CERTIFICATION - INTERNATIONAL BARRIER TECHNOLOGY INC | exhibit312.htm |
EX-32 - CERTIFICATION - INTERNATIONAL BARRIER TECHNOLOGY INC | exhibit322.htm |
EX-31 - CERTIFICATION - INTERNATIONAL BARRIER TECHNOLOGY INC | exhibit311.htm |
EX-32 - CERTIFICATION - INTERNATIONAL BARRIER TECHNOLOGY INC | exhibit321.htm |
EXCEL - IDEA: XBRL DOCUMENT - INTERNATIONAL BARRIER TECHNOLOGY INC | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the quarterly period ended September 30, 2013
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from ________ to ________
Commission file number: 000-20412
International Barrier Technology Inc.
(Exact name of registrant as specified in its charter)
British Columbia, Canada |
| N/A |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
510 4th Street North, Watkins, Minnesota, USA |
| 55389 |
(Address of principal executive offices) |
| (Zip Code) |
Issuers Telephone Number, 320-764-5797
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 preceding 12 months (or for 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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange:
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of 11/14/2013: 44,454,926 Common Shares w/o par value
Part 1 Financial Information
Item 1. Financial Statements
INTERNATIONAL BARRIER TECHNOLOGY, INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2013 and June 30, 2013 (Stated in US Dollars) (Unaudited) | |||||
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| Sept 30, | June 30, | ||
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| 2013 | 2013 | ||
ASSETS |
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Current |
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Cash and cash equivalents |
| $ 205,243 | $ 179,578 | ||
Accounts receivable |
| 170,445 | 182,041 | ||
Inventory - Note 3 |
| 536,112 | 410,900 | ||
Prepaid expenses and deposits |
| 58,190 | 89,128 | ||
Total Current Assets |
| 969,990 | 861,647 | ||
Property, plant and equipment |
| 3,008,058 | 3,060,268 | ||
Total Assets |
| $ 3,978,048 | $ 3,921,915 | ||
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LIABILITIES |
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Current |
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Accounts payable and accrued liabilities |
| $ 719,028 | $ 849,537 | ||
Deferred revenue |
| 50,000 | - | ||
Current portion of long term debt - Note 4 |
| 60,711 | 59,752 | ||
Obligation under capital leases |
| 65,516 | 64,575 | ||
Total Current Liabilities |
| 895,255 | 973,864 | ||
Long-term debt - Note 4 |
| 296,672 | 312,174 | ||
Convertible debentures - Note 5 |
| 240,000 | 240,000 | ||
Obligation under capital leases |
| 124,905 | 141,640 | ||
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Total Liabilities |
| 1,556,832 | 1,667,678 | ||
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STOCKHOLDERS' EQUITY |
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Common Stock - Note 6 |
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Authorized: |
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100,000,000 common shares without par value |
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Issued: |
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44,454,926 common shares (June 30, 2013: 44,454,926) |
| 15,463,675 | 15,463,675 | ||
Additional paid-in capital |
| 1,644,914 | 1,579,555 | ||
Accumulated deficit |
| (14,687,373) | (14,788,993) | ||
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Total Stockholders' Equity |
| 2,421,216 | 2,254,237 | ||
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Total Liabilities and Stockholders' Equity |
| $ 3,978,048 | $ 3,921,915 | ||
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APPROVED BY THE BOARD OF DIRECTORS |
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"David Corcoran" |
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| "Victor Yates" |
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David Corcoran | Director |
| Victor Yates | Director | |
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SEE ACCOMPANYING NOTES | |||||
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INTERNATIONAL BARRIER TECHNOLOGY, INC. INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS for the three months ended September 30, 2013 and 2012 (Stated in US Dollars) (Unaudited) | |||
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| Three months ended | |
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| September 30, | |
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| 2013 | 2012 |
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Sales - Note 7 |
| $ 2,282,153 | $ 896,533 |
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Cost of Sales |
| 1,860,542 | 832,799 |
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Gross Profit |
| 421,611 | 63,734 |
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Expenses |
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Accounting and audit fees |
| 47,166 | 52,432 |
Filing Fees |
| 5,391 | 5,542 |
Insurance |
| 18,416 | 18,464 |
Bank charges and interest |
| 17 | 36 |
Legal fees |
| 28,987 | 5,079 |
Office and miscellaneous |
| 22,672 | 15,595 |
Sales, marketing, and investor relations |
| 7,265 | 6,554 |
Telephone |
| 2,916 | 2,426 |
Transfer agent fees |
| 1,037 | 2,009 |
Wages and management fees - Note 6 |
| 168,052 | 98,871 |
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Total Administrative Expenses |
| 301,919 | 207,008 |
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Operating Income (loss) |
| 119,692 | (143,274) |
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Foreign exchange gain (loss) and other income |
| (2,228) | 2,236 |
Interest on long-term obligations |
| (15,844) | (19,727) |
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Total Other Income |
| (18,072) | (17,491) |
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Net income (loss) for the period |
| $ 101,620 | $ (160,765) |
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Basic and diluted income (loss) per share |
| $ 0.00 | $ (0.00) |
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Weighted average number of shares outstanding |
| 44,454,926 | 44,454,926 |
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SEE ACCOMPANYING NOTES | |||
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INTERNATIONAL BARRIER TECHNOLOGY, INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the three months ended September, 2013 and 2012 (Stated in US Dollars) (Unaudited) | |||
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| Three months ended | |
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| Sept 30, | |
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| 2013 | 2012 |
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Operating Activities |
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Net income (loss) for the year |
| $ 101,620 | $ (160,765) |
Items not involving cash: |
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Depreciation - plant and equipment |
| 78,544 | 74,559 |
Stock-based compensation - consulting |
| 2,220 | - |
Stock-based compensation - wages |
| 63,139 | - |
Changes in non-cash working capital balances related to operations: |
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Accounts receivable |
| 11,596 | 100,420 |
Inventory |
| (125,212) | (146) |
Prepaid expenses and deposits |
| 30,938 | 13,673 |
Accounts payable and accrued liabilities |
| (130,509) | (24,191) |
Deferred revenue |
| 50,000 | - |
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Net cash provided by operating activities |
| 82,336 | 3,550 |
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Cash Flows provided by Financing Activities |
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Repayment on long term debt |
| (14,543) | (13,420) |
Decrease in obligations under capital lease |
| (15,794) | (13,484) |
Net cash provided by (used in) financing activities |
| (30,337) | (26,904) |
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Cash Flows used in Investing Activities |
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Acquisition of equipment |
| (26,334) | - |
Net cash used in investing activities |
| (26,334) | - |
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Decrease in cash and cash equivalents during the period |
| 25,665 | (23,354) |
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Cash and cash equivalents, beginning of the period |
| 179,578 | 101,523 |
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Cash and cash equivalents, end of the period |
| $ 205,243 | $ 78,169 |
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Supplemental Cash Flow Information |
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Cash paid for interest |
| $ 15,844 | $ 19,727 |
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Cash paid for income taxes |
| $ - | $ - |
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SEE ACCOMPANYING NOTES |
INTERNATIONAL BARRIER TECHNOLOGY, INC. | ||||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||
for the period ended September 30, 2013 | ||||||
(Stated in US Dollars) | ||||||
(Unaudited) | ||||||
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| Common Stock | |||||
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| Additional |
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| Issued | Amount | Paid-in | Accumulated |
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| Shares |
| Capital | Deficit |
| Total |
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Balance, June 30, 2012 | 44,454,926 | 15,463,675 | 1,579,555 | (14,730,354) |
| 2,312,876 |
Net loss for the year | - | - | - | (58,639) |
| (58,639) |
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Balance, June 30, 2013 | 44,454,926 | 15,463,675 | 1,579,555 | (14,788,993) |
| 2,254,237 |
Stock based compensation | - | - | 65,359 | - |
| 65,359 |
Net income for the period | - | - | - | 101,620 |
| 101,620 |
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Balance, September 30, 2013 | 44,454,926 | 15,463,675 | 1,644,914 | (14,687,373) |
| 2,421,216 |
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SEE ACCOMPANYING NOTES |
INTERNATIONAL BARRIER TECHNOLOGY INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Stated in US Dollars)
(Unaudited)
Note 1
Significant Accounting Policies
The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuations, asset impairment, derivative liability, stock based compensation and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Note 2
Fair Value Measurements
The book value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term maturity of those instruments. Based on borrowing rates currently available to the Company under similar terms, the book value of long term debt, convertible debentures and capital lease obligations approximate their fair values. The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1- quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - observable inputs other than Level I, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 - assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.
Certain of the Companys cash equivalents, consisting of short-term term deposits, are based on Level 2 inputs in the ASC 820 fair value hierarchy.
The Companys long-term debt is based on Level 2 inputs in the ASC 820 fair value hierarchy. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of the long-term debt is $357,383 (June 30, 2013: $371,926).
The Companys convertible debentures are based on Level 2 inputs in the ASC 820 fair value hierarchy. The Company calculated the fair value of these instruments by discounting future cash flows using rates representative of current borrowing rates. At September 30, 2013, the convertible debentures had a fair value of $526,159 (June 30, 2013: $431,022).
The Companys capital lease obligations are based on Level 2 inputs in the ASC 820 fair value hierarchy. The fair value of the capital lease obligations is $190,419 (June 30, 2013: $206,215).
INTERNATIONAL BARRIER TECHNOLOGY INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Stated in US Dollars)
(Unaudited)
Note 3
Inventory
| September 30, 2013 |
| June 30, 2013 |
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Raw materials | $ 336,019 |
| $ 320,338 |
Finished goods | 200,093 |
| 90,562 |
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| $ 536,112 |
| $ 410,900 |
Note 4
Long-term Debt
| September 30, 2013 |
| June 30, 2013 |
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Term bank loan facility in the amount of $450,000 bearing interest at 6.25% and collateralized by a security interest in inventory, accounts receivable, equipment and all intangibles of the Company as well as an assignment of the building lease. The facility is being amortized over 4 years with fixed monthly blended payments of principal and interest totaling $6,800 with a balloon payment due on January 1, 2016 | 357,383 |
| 371,926 |
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Less: current portion | (60,711) |
| (59,752) |
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| $ 296,672 |
| $ 312,174 |
Note 5
Convertible Debentures
During the year ended June 30, 2012, the Company approved the issuance of two convertible debentures to a director and a company controlled by a director in the amount of $300,000. The debentures are being issued in tranches from $10,000-$50,000 and as at September 30, 2013 the Company had received $240,000 (2012: $200,000) in respect of these debentures. The debentures bear interest at 12% per annum, payable quarterly, and are collateralized by a third charge over the Companys plant and equipment as well as a charge against the Companys patents. At any time, the notes are convertible into units of the Company at a price of $0.10 per unit. Each unit will consist of one common share and one common share purchase warrant entitling the holder the right to purchase one additional share for $0.10 for a period of two years from the conversion date. During the period ended September 30, 2013, the Company incurred interest charges of $7,200 (three months ended September 30, 2012: $6,000) on these convertible debentures.
INTERNATIONAL BARRIER TECHNOLOGY INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Stated in US Dollars)
(Unaudited)
Note 6
Common Stock
Escrow:
At September 30, 2013, there are 48,922 (2012 48,922) common shares held in escrow by the Companys transfer agent, the release which is subject to the approval of the regulatory authorities. As at September 30, 2013 and June 30, 2013, all of these shares held in escrow are issuable but the Company has yet to request their release.
Commitments:
Stock-based Compensation Plan
At September 30, 2013, the Company has outstanding options that were granted to directors, officers, and consultants to purchase 4,430,000 common shares of the Company.
A summary of the status of the Companys share purchase option plan for the three months ended September 30, 2013 is presented below:
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| Weighted |
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| Average |
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Outstanding, June 30, 2013 |
| 3,252,500 |
| $ 0.100 |
Granted |
| 1,177,500 |
| $ 0.097 |
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Outstanding September 30, 2013 |
| 4,430,000 |
| $ 0.099 |
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Exercisable September 30, 2013 |
| 4,430,000 |
| $ 0.099 |
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Exercisable, June 30, 2013 |
| 3,252,500 |
| $ 0.100 |
The following summarizes information about the stock options outstanding at September 30, 2013:
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| Remaining |
Number |
| Exercise |
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| Contractual |
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| Price |
| Expiry Date |
| Life |
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3,252,500 |
| $0.10 |
| May 15, 2015 |
| 1.62 years |
1,177,500 |
| $0.097 |
| August 2, 2016 |
| 2.84 years |
4,430,000 |
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During the three month period ended September 30, 2013, the Company granted 1,177, 500 fully vested share purchase options having a fair value of $65,359. The fair value of options was calculated using the Black-Scholes option pricing model using the following weighted average assumptions: stock price - $0.058; exercise price - $0.097; expected life 3.0 yrs.; volatility 246.16%; risk free discount rate 0.59%; dividend rate 0.00%.
INTERNATIONAL BARRIER TECHNOLOGY INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013
(Stated in US Dollars)
(Unaudited)
Note 6
Common Stock (contd)
Stock-based Compensation Plan (contd)
Stock-based compensation amounts for the three month period ended September 30 are classified in the Companys Statement of Operations as follows:
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| 2012 |
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Wages and management fees |
| $ 63,139 |
| $ - |
Consulting |
| 2,220 |
| - |
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| $ 65,359 |
| $ - |
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Note 7
Segmented Information and Sales Concentration
The Company operates in one industry segment being the manufacturing and marketing of fire resistant building materials. Substantially all of the Companys revenues and long-term assets are located in the United States.
During the three months ended September 30, 2013, two customers accounted for 97% of total sales revenue; each representing 73% and 24%, respectively (2012: two customers accounted for 100% of total sales revenue each representing 56% and 44% respectively). The amounts receivable from each of these customers at September 30, 2013 were $159,256 and $0, respectively.
The loss of either of these customers or the curtailment of purchases by such customers could have material adverse effects on the Companys financial condition and results of operations.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements. These statements may be identified by the use of words like plan, expect, aim, believe, project, anticipate, intend, estimate, will, should, could and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Companys strategy for growth, marketing expectations, product prices, future performance or results of current or anticipated product sales, interest rates, foreign exchange rates, and the outcome of contingencies, such as potential joint ventures and/or legal proceedings.
Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Quarterly Report and factors described in documents that we may furnish from time to time to the Securities and Exchange Commission. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.
Description of Business
International Barrier Technology Inc. (Barrier) manufactures and sells fire-rated building materials. Barriers primary business is in the United States but through developing distribution partnerships is endeavoring to enter building products markets in Australia, Europe, and South America. Barrier possesses a proprietary fire resistive material technology (Pyrotite®) and a patented manufacturing process that when applied to building materials their respective fire resistant properties are significantly enhanced. Many of the top multifamily and wood frame commercial builders in the United States utilize Barriers fire-rated structural panels in areas where the building code requires the use of a fire-rated building panel.
Barrier manufactures a private label fire rated sheathing product under contract for both LP® Building Products, Inc. (LP) and MuleHide Products, Inc. (MuleHide). LP has been marketing a fire rated OSB trademarked LP® Flameblock® Fire-Rated OSB Sheathing (LP FlameBlock) since 2010 and MuleHide has been selling MuleHide FR Deck Panel (FR Deck Panel) to commercial modular building manufacturers since 2004.
Discussion of Operations
Barriers financial statements are filed with both the SEC (USA) and SEDAR (Canada) and are disclosed in US dollars utilizing US generally accepted accounting principles. Barriers filings with the SEC consist of quarterly reviewed financial statements on Form 10-Q and annual audited financial statements on Form 10-K. Barrier continues to file the above financial statements with SEDAR in Canada on their website at www.sedar.com. Finally, we also make Canadian and USA reports available on the Companys website: www.intlbarrier.com.
Sales revenue reported for the quarterly period ending September 30, 2013 increased 155% to $2,282,153 in comparison to $896,533 generated in the same quarterly period in 2012. Total sales volume, as measured by surface volume of product shipped, was 5,560,500 sq. ft. This is a 185% increase from the 1,951,000 sq. ft. shipped during the previous period.
Shipments into the Residential Roof Deck, Wall Assembly, and Structural Insulated Panel Market Sectors (LP FlameBlock) during Q1 2014 increased 231% over shipments in Q1 2013. LP Flameblock sales were split between the Mid-Atlantic region at 52%, the West at 21%, the Midwest at 18%, and the South at 7%. There were 2% of shipments of LP Flameblock into the Structural Insulated Panel market during this period.
Sales into the Commercial Modular Market (FR Deck Panel) increased 97% in comparison to the previous year quarterly period). FR Deck Panel sales were split between the South at 74%, the West at 14%, the Midwest at 9%, and the East at 3%.
LP and Barrier extended their existing Supply Agreement through December 31, 2013, with an option to extend through December 31, 2014 with mutual agreement. The agreement provides LP the exclusive opportunity to market Pyrotite® technology based structural wood products in North America as long as minimum sales volumes are met on an annual basis. Sales to the Commercial Modular Market are restricted from the LP Agreement since that market is serviced by MuleHide. LP is the largest producer of Oriented Strand Board (OSB) in the world and believes that Barriers Pyrotite Technology helps them achieve their strategy of providing value added OSB products to the building community.
The relationship with LP has increased sales volume to historical levels and Barrier anticipates that sales will continue to grow substantially through the efforts of LPs sales and marketing team. Reported sales revenue for LP products, include only the charges for treatment services, not the underlying OSB substrate or outbound freight as LP supplies its own OSB substrate and contracts for its own outgoing freight. The pass through of the OSB substrate and freight serves to lower reported top line sales revenue, but not gross profits since margins on substrate and freight have historically been restricted to handling costs only to help keep prices competitive. For the Commercial Modular market, Barrier purchases OSB from local distributors and invoices the cost of the substrate and outgoing freight to the customer, therefore the cost of the substrate and freight is included in revenue for Commercial Modular shipments.
Cost of sales increased to $1,860,542 from $832,799 in the prior year quarterly period. The increase is in direct relation to the increase in volume produced. Barrier continues to capture gains in manufacturing efficiency as reflected in the quarterly average cost per sq.ft. of production which decreased by $0.10 from $0.43 to $0.33 over the comparable period in the previous year.
Substrate cost and materials/labor were the major expenses in this category. Substrate, purchased for the MuleHide FR panel only, accounted for $436,064 for the quarter versus $220,303 in the same period last year. Materials and labor accounted for an additional $1,027,630 in the three month period in 2013 versus $403,317 in 2012.
During the current period, R&D activity has generally been focused on creating new and improved fire rated wall assemblies. New and improved wall assemblies, tested and listed by Underwriters Laboratory and sanctioned by the International Code Council, are a significant factor in improved sales volume.
Depreciation on plant and equipment is included in cost of sales category. Depreciation, which has non-cash impact on Barriers actual cash flow, increased slightly from $74,559 in Q1 2013 to $78,544 in Q1 2014. The expense reflects scheduled depreciation of new manufacturing line equipment and building improvements.
Gross profit for the quarterly period ended September 30, 2013 was $421,611 vs. $63,734 in the prior year quarter. The gross margin, as a percentage of sales revenue, increased to 18% from 7%. Improvements in gross margin were captured with gains in manufacturing efficiencies provided by improved production technology and efficiencies created by steady and increased sales volumes. Overhead costs are spread across a larger manufacturing/sales volume base. Barrier is intently focused on continued strong gross margins.
Administrative expenses for the quarter ended September 30, 2013 increased to $301,919 from $207,008 in the prior year quarterly period. The administrative costs per sq. ft. were $0.05 for the quarter in comparison to $0.11 reported through September 30, 2012. . The positive impact of increased sales volume reducing administrative cost per square foot shipped was captured during this reporting period. As volumes continue to increase, the trend for overall reduction in the average cost of administrative expense per sq.ft. is expected to continue.
Accounting and Audit Fees were $47,166 vs. $52,432. A significant portion of the cost for accounting services is involved with the year-end audited review and publishing of Barriers annual financials.
Insurance costs have remained stable at $18,416 vs. $18,464.
Legal fees for the quarterly period increased to $28,987 from $5,079 in the prior year comparable period. Legal fees were expended on activities in support of developing strategic partners and technology licensees.
Barrier has two US patents, a patent in Australia, and a recently acquired patent in Canada. These patents protect the manufacturing and process technology utilized in the production of fire-rated sheathing products utilizing Pyrotite®.
Sales, marketing, and investor relations expenses increased from $6,554 to $7,265 for the quarter. During the period, there were sales trips directly related to the expansion of product markets.
Barriers cost for sales and marketing will continue to decline relative to sales volume as our partners, LP and MuleHide Products, continue to perform more and more of those functions themselves. Barrier remains active in a support role by providing necessary technical sales support but more and more of the day to day market and sales development activities are performed by the capable sales and marketing staff of LP and MuleHide Products resulting in improved sales but also lower costs for Barrier.
Operating income (loss) of $119,692 is being reported for the quarter ending September 30, 2013, whereas in the same period in 2012, a net loss of ($143,274) was reported.
The significant improvement in loss before other items is a result of increased sales volumes and focus on manufacturing efficiency. It is Barriers fundamental belief that sustained increased sales volume, in concert with the existing supply agreements with both MuleHide and LP Products is the best pathway to long-term profitability. Increases in Barriers sales volume are expected to follow the improving trend in home building starts in North America.
Other items include income and costs not directly related to business operations. Other income items reported during the period herein includes a foreign exchange loss of $2,326 and interest/other income of $98. To compare, for the same reporting period last year there was a foreign exchange gain of $2,168 and interest/other income of $68.
Interest on Long Term Debt has decreased from $19,727 to $15,884 for the three-month reporting period as a result of declining debt balances.
Net Income (loss). Net income of $101,620 is being reported for the quarter ending September 30, 2013, whereas in the same period in the prior year, a net loss of $160,765 was reported.
Barrier remains focused on cutting costs and improving efficiencies wherever it can. This includes operating the manufacturing line with maximum efficiency. Keeping a vigilant handle on costs will help keep operational costs as low as possible and enable financial improvements to continue and at lower volumes than previously possible.
Summary of Quarterly Results. The following is a summary of the Companys financial results for the nine most recently completed quarters:
| Sept 30 2013 | Jun 30 2013 | Mar 31 2013 | Dec 31 2012 | Sept 30 2012 | June 30 2012 | Mar 31 2012 | Dec 31 2011 | Sept 30 2011 |
Volume shipped (MSF) | 5,561 | 5,162 | 3,625 | 2,506 | 1,951 | 2,531 | 2,619 | 2,327 | 2,210 |
Total Revenues (000) | $2,282 | $2,426 | $1,695 | $977 | $897 | $1,029 | $1,023 | $1,008 | $1,085 |
Operating Income(loss) (000) | $120 | $218 | $50 | ($125) | ($143) | ($270) | ($103) | ($157) | ($104) |
Net income (loss) (000) | $102 | $201 | $36 | ($135) | ($161) | ($291) | ($65) | ($34) | $250 |
EPS (Loss) Per Share | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | ($0.01) | $0.01 |
Selected Annual Information
The following financial data is for the three most recent years ended June 30:
| 2013 | 2012 | 2011 |
Total Revenue | $5,995.0 | $4,144.8 | $3,256.0 |
Net income (loss) | (58.6) | $(139.7) | $895.8 |
Per share | 0.00 | $0.00 | $0.02 |
Per share, fully diluted | 0.00 | $0.00 | $0.02 |
Total assets | 3,921.9 | $3,708.0 | $4,002.2 |
Total long-term financial liabilities | 818.1 | $900.0 | $705.9 |
Cash dividends declared per share | Nil | $Nil | $Nil |
New product and market development
Barrier continues to provide support to LP for new product and market development in activity directed specifically toward applications in areas where wildfires are prevalent. Wildland/Urban Interface (WUI) zones, which are primarily located in the western US, are areas where special building codes have been developed to help save homes if a brush fire should occur. Becoming certified for use in these applications requires additional product development, including fire testing specific and unique to these fire hazard zones. In addition to these WUI applications, which are primarily associated with limiting the ignition of the exterior of the building, Barrier and LP are cooperating on the development of new, more cost effective, designs of 1 and 2 hour exterior wall systems designed to be used when houses are built in close proximity all over the USA.
Barrier and LP have now successfully designed, tested, and UL certified a 2-hr exterior load bearing wall being currently being used in wood-frame commercial/residential buildings of Type III construction. As more architects and specifying engineers become aware of this new design Barrier and LP are confident that considerable sales will result for these projects.
Global licensing opportunities
Barrier continues to explore manufacturing and distribution opportunities for Pyrotite® technology in geographies outside of the US. During the reporting period, Barrier announced a licensing agreement for the manufacture and distribution of Pyrotite® products in the European Union and Russia. Barrier will provide technical assistance in the design of the first manufacturing line, the transfer of production process technology, and material acquisition criteria. The license agreement provides for the payment to Barrier by the Licensee of a minimum annual royalty during the term of the agreement with an advance royalty payment on execution. The agreement contemplates the Licensee developing additional production facilities over the term of the license and making additional royalty payments to Barrier based on these plants production. The license agreement follows standard licensing protocol, which allows for the audit of manufacturing process and financial revenue information.
The selection of Pyrotite® technology by the licensor after extensive research and testing of several other fire-resistant technologies adds additional credibility to our Pyrotite® technology and could lead to potential interest in other geographies.
Financial position & financings
Barrier ended the period with a working capital surplus (current assets less current liabilities) of $74,735. Positive operating cash flow was $82,336 in comparison to $3,550 for the quarterly period ended September 30, 2012.
Barrier has a short term revolving line of credit ($100,000) at the local Farmers State Bank of Watkins, in Watkins, Minnesota. As of September 30, 2013 the balance owing on the revolving line of credit was $0 leaving an additional $100,000 available for use. In addition, two convertible debentures in the amount of $150,000 each were established in December 2011. To date, $240,000 has been used on these debentures with an additional $60,000 available for cash flow if needed.
Investing activities resulted in net cash outflow of $26,334 in the current period in comparison to a net cash outflow of $0 in the prior year. The cash outflow was the result of the acquisition of plant and equipment capital improvements.
Financing activities resulted in net cash outflow of $30,337 in the current period compared to a net cash outflow of $26,904 for the same period last year. The cash outflow resulted from the repayments on long-term debt and obligations under capital lease.
There is no assurance that Barrier will operate profitably or will generate positive cash flow in the future. In addition, Barriers operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will order products, the size of customers' orders, the demand for our products, the level of competition or general economic conditions.
During the twelve months ended June 30, 2012, the Company issued two convertible promissory debentures to a director and a company controlled by a director. As of June 30, 2013, the company had received $240,000 in respect to these debentures. As needed, the Company will draw the remaining $60,000 available. The debentures bear interest at 12% per annum and are secured by a third charge over the Companys plant and equipment as well as charge against the Companys patents. At any time, the notes are convertible into units of the Company at a price of $0.10 per unit. Each unit will consist of one common share and one common share purchase warrant entitling the hold thereof to purchase an additional share for $0.10 for a period of two years from the conversion date.
Current and Future Financing Needs
At September 30, 2013, the current cash and cash equivalents totaled $205,243; there was $100,000 in available funds to draw on the revolving credit facility, and an additional $60,000 available from the convertible debentures.
The Company bases its estimate of future cash requirements on assumptions that may prove to be wrong and the requirements for cash are subject to factors, some of which are not within the control of the Company, including:
·
Increased costs of general and administrative expenses
·
Increased costs of raw materials and freight
·
Costs associated with the research and development activities
·
Costs associated with maintaining property, plant and equipment and intellectual property
Related Party Transactions
During the year ended June 30, 2012, the Company approved the issuance of two convertible debentures to a director and a company controlled by a director in the amount of $300,000. The debentures are being issued in tranches from $10,000 - $50,000 and as at June 30, 2013 the Company had received $240,000 (2012: $200,000) in respect of these debentures. The debentures bear interest at 12% per annum, payable quarterly, and are collateralized by a third charge over the Companys plant and equipment as well as a charge against the Companys patents. At any time, the notes are convertible into units of the Company at a price of $0.10 per unit. Each unit will consist of one common share and one common share purchase warrant entitling the holder the right to purchase one additional share for $0.10 for a period of two years from the conversion date. During the period ended September 30, 2013, the Company incurred interest charges of $7,200 (2012: $6,000) on these convertible debentures.
Capitalization
Authorized: 100,000,000 common shares without par value.
Issued as of June 30, 2013: 44,454,926 common shares at $15,463,675
Issued as of November 14, 2013: 44,454,926 common shares at $15,463,675
Options outstanding:
The following summarizes information about the stock options outstanding at September 30, 2013:
| Exercise |
|
Number | Price | Expiry Date |
|
|
|
3,252,500 | $0.10 | May 15, 2015 |
1,177,500 | $0.097 | August 2, 2016 |
|
|
|
4,430,000 |
|
|
Other Matters
As at September 30, 2013 the Company did not have any off-balance sheet arrangements to report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
No Disclosure Necessary
ITEM 4. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures
As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10-K, under the direction of the Chief Executive Officer, the Company has evaluated its disclosure controls and procedures as of September 30, 2013 and has concluded the disclosure controls and procedures were ineffective. As of the date of this filing, the Company is still in the process of remediating such material weaknesses in its internal controls and procedures.
b. Changes in Internal Control Over Financial Reporting
There were no changes in the Companys internal control over financial reporting during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Directors and the management of the Company know of no material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors identified in the Annual Report on Form 10-K for the year ended June 30, 2013, in response to Item 1A, Risk Factors, to Part I of the Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
a. No Disclosure Necessary
b. No Disclosure Necessary
c. No Disclosure Necessary
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No Disclosure Necessary
ITEM 4. MINE SAFETY DISCLOSURES
No Disclosure Necessary
ITEM 5. OTHER INFORMATION
a. Reports on Form 8-K:
1. Form 8-K dated 7/25/2913 regarding press release disclosing
sales results for the month, the quarter, and fiscal year ended 6/30/2013.
2. Form 8-K dated 8/8/2013 regarding press release disclosing the granting of stock options.
b. Information required by Item 407(C)(3) of Regulation S-K:
No Disclosure Necessary
ITEM 6. EXHIBITS
Exhibit 31.1: Certification required by Rule 13a-14(a) or Rule 15d-14(a) Certification executed by Michael Huddy, President/CEO/Director
Exhibit 31.2: Certification required by Rule 13a-14(a) or Rule 15d-14(a) Certification executed by Melissa McElwee, CFO
101.INS(1): XBRL Instance Document
101.SCH(1): XBRL Taxonomy Extension Schema Document
101.CAL(1): XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(1): XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(1): XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1): XBRL Taxonomy Extension Presentation Linkbase Document
(1) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.
SIGNATURE PAGE
Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 10-Q and has duly caused this Interim Report to be signed on its behalf by the undersigned, thereunto duly authorized.
International Barrier Technology Inc. -- SEC File #000-20412
Registrant
Dated: November 14, 2013 | By: /s/ Michael Huddy |
| Michael Huddy, President/CEO/Director |
|
|
Dated: November 14, 2013 | By: /s/ Melissa McElwee |
| Melissa McElwee, CFO |