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, 2014

¨ 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)

Issuer’s 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 11/14/2014: 44,554,926 Common Shares w/o par value

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Part 1 – Financial Information

Item 1.  Financial Statements

INTERNATIONAL BARRIER TECHNOLOGY, INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2014 and June 30, 2014 (Stated in US Dollars) (Unaudited)
		September 30,	June 30,
		2014	2014
ASSETS			(audited)
Current
Cash and cash equivalents		$                984,368	$               708,926
Accounts receivable		177,855	235,714
Inventory - Note 3		448,470	448,490
Prepaid expenses and deposits		84,055	46,655
Total Current Assets		1,694,748	1,439,785
Property, plant and equipment		2,933,290	2,877,530
Total Assets		$             4,628,038	$            4,317,315
LIABILITIES
Current
Accounts payable and accrued liabilities		$                708,812	$               714,994
Current portion of long term debt - Note 4		64,673	63,650
Obligation under capital leases		82,279	75,494
Total Current Liabilities		855,764	854,138
Long-term debt - Note 4		231,938	248,460
Convertible debentures - Note 5		240,000	240,000
Obligation under capital leases		69,679	59,473
Total Liabilities		1,397,381	1,402,071
STOCKHOLDERS' EQUITY
Common Stock - Note 6
Authorized:
100,000,000 common shares without par value
Issued:
44,554,926 common shares (June 30, 2014:  44,554,926)		15,478,926	15,478,926
Additional paid-in capital		1,639,363	1,639,363
Accumulated deficit		(13,887,632)	(14,203,045)
Total Stockholders' Equity		3,230,657	2,915,244
Total Liabilities and Stockholders' Equity		$             4,628,038	$            4,317,315

APPROVED BY THE BOARD OF DIRECTORS
"David Corcoran"		"Victor Yates"
David Corcoran, Director		Victor Yates, Director

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY, INC. INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS for the three months ended September 30, 2014 and 2013 (Stated in US Dollars) (Unaudited)
				Three months ended
				September 30,
				2014	2013
Sales - Note 8				$              2,472,378	$          2,282,153
Cost of Sales				1,907,846	1,860,542
Gross Profit				564,532	421,611
Expenses
Accounting and audit fees				46,859	47,166
Filing Fees				3,631	5,391
Insurance				21,907	18,416
Bank charges and interest				40	17
Legal fees				19,243	28,987
Office and miscellaneous				20,693	22,672
Sales, marketing, and investor relations				12,054	7,265
Telephone				3,370	2,916
Transfer agent fees				1,403	1,037
Wages and management fees				106,254	168,052
Total Administrative Expenses				235,454	301,919
Operating Income				329,078	119,692
Foreign exchange gain (loss) and other income				307	(2,228)
Interest on long-term obligations				(13,972)	(15,844)
Total Other Expense				(13,665)	(18,072)
Net income for the period				$                 315,413	$             101,620
Basic and diluted income per share				$                       0.01	$                   0.00
Weighted average number of shares outstanding:
Basic				44,554,926	44,454,926
Diluted				47,616,713	44,454,926

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended September, 2014 and 2013
(Stated in US Dollars)
(Unaudited)
		Three months ended
		September 30,
		2014	2013
Operating Activities
Net income for the period		$             315,413	$              101,620
Items not involving cash:
Depreciation - plant and equipment		81,630	78,544
Stock-based compensation - consulting		-	2,220
Stock-based compensation - wages		-	63,139
Changes in non-cash working capital balances related to operations:
Accounts receivable		57,859	11,596
Inventory		20	(125,212)
Prepaid expenses and deposits		(37,400)	30,938
Accounts payable and accrued liabilities		(6,182)	(130,509)
Deferred Revenue		-	50,000
Net cash provided by operating activities		411,340	82,336
Cash Flows used in Financing Activities
Repayment of long term debt		(15,499)	(14,543)
Decrease in obligations under capital lease		(16,532)	(15,794)
Net cash used in financing activities		(32,031)	(30,337)
Cash Flows used in Investing Activities
Acquisition of equipment		(103,867)	(26,334)
Net cash used in investing activities		(103,867)	(26,334)
Increase in cash and cash equivalents during the period		275,442	25,665
Cash and cash equivalents, beginning of the period		708,926	179,578
Cash and cash equivalents, end of the period		$             984,368	$               205,243
Supplemental Cash Flow Information
Cash paid for interest		$               13,972	$                 15,844
Cash paid for income taxes			$                           -

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the period ended September 30, 2014
(Stated in US Dollars)
(Unaudited)
	Common Stock
					Additional
	Issued		Amount		Paid-in		Accumulated
	Shares				Capital		Deficit		Total
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
Exercise of options	100,000		9,700		-		-		9,700
Fair value of stock options exercised			5,551		(5,551)		-		-
Net income for the period	-		-		-		585,948		585,948
Balance, June 30, 2014	44,554,926		15,478,926		1,639,363		(14,203,045)		2,915,244
Net Income for the period	-		-		-		315,413		315,413
Balance, September 30, 2014	44,554,926		$  15,478,926		$     1,639,363		$(13,887,632)		$  3,230,657

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2014

(Stated in US Dollars)

(Unaudited)

Note 1

Basis of Presentation

The accompanying unaudited condensed financial statements of International Barrier Technology Inc. (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of the Securities and Exchange Commission (“SEC”) Regulation S-X.  Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2014 included in the Annual Report on Form 10-K filed with the SEC on September 29, 2014.  The unaudited condensed consolidated interim financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at September 30, 2014, and the consolidated results of operations and cash flows for the three months ended September 30, 2014.  All intercompany accounts and transactions have been eliminated.  It should be understood that accounting measures at interim dates inherently involve greater reliance on estimates than at year end.  The results of operations for the three months ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

Earnings per Share

Basic and diluted earnings per share (“EPS”) is computed using the weighted-average number of common shares outstanding during the period.  Basic EPS is calculated by dividing the net income or loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents.  Diluted EPS is computed by dividing the net income or loss by the weighted-average number of common shares, plus the dilutive effect of common stock equivalents outstanding for the period.

The treasury stock method is used in calculating diluted EPS for potentially dilutive stock options which assumes that any proceeds received from the exercise of in-the-money stock options would be used to purchase common shares at the average market price for the period.

EPS for convertible debt is calculated under the “if-converted” method.  Under the “if converted” method, EPS is calculated as the more dilutive of EPS (i) including all interest (both cash interest and non-cash discount amortization) and excluding all shares underlying the convertible debt or; (ii) excluding all interest (both cash interest and non-cash discount amortization) and including all shares underlying the convertible debt.  

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2014

(Stated in US Dollars)

(Unaudited)

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 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 Company’s cash equivalents, consisting of short-term term deposits, are based on Level 2 inputs in the ASC 820 fair value hierarchy.

The Company’s 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 $296,611 (June 30, 2014:  $312,110).

The Company’s 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, 2014, the convertible debentures had a fair value of $704,159 (June 30, 2014:  $779,196).

The Company’s 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 $151,958 (June 30, 2014:  $134,967).  

As at September 30, 2014, the Company has no assets or liabilities that have fair values measured using Level 3 inputs.

Note 3

Inventory

	September 30, 2014		June 30, 2014
Raw materials	$             326,832		$          365,414
Finished goods	121,638		83,076
	$             448,470		$          448,490

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2014

(Stated in US Dollars)

(Unaudited)

Note 4

Long-term Debt

	September 30, 2014		June 30, 2014
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	296,611		312,110
	296,611		312,110
Less: current portion	(64,673)		(63,650)
	$                       231,938		$                      248,460

The Company has a $200,000 revolving credit facility with terms that include an interest rate of 6.25% per annum and a maturity date of June 13, 2015. The Company has not drawn any funds on this facility.    

Note 5  

Convertible Debt

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, 2014 the Company had received $240,000 (2013:  $240,000) in respect of these debentures.  The debentures bear interest at 12% per annum, payable quarterly, and are collateralized by a third charge over the Company’s plant and equipment as well as a charge against the Company’s 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 three month period ended September 30, 2014, the Company incurred interest charges of $7,200 (2013:  $7,200) on these convertible debentures.

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2014

(Stated in US Dollars)

(Unaudited)

Note 6  

Common Stock

Escrow:

At September 30, 2014, there are 48,922 (2013 – 48,922) common shares held in escrow by the Company’s transfer agent, the release which is subject to the approval of the regulatory authorities. As at September 30, 2014 and June 30, 2014, 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, 2014, the Company has outstanding options that were granted to directors, officers, and consultants to purchase 4,330,000 common shares of the Company.

A summary of the status of the Company’s share purchase option plan for the three months ended September 30, 2014 is presented below:

					Weighted
					Average
			Number of		Exercise
			Shares		Price
Outstanding, June 30, 2014			4,330,000		$          0.099
Outstanding, September 30, 2014			4,330,000		$          0.099
Exercisable, September 30, 2014			4,330,000		$          0.099
Exercisable, June 30, 2014			4,330,000		$          0.099

The following summarizes information about the stock options outstanding at September 30, 2014:

Number		Exercise				Remaining
		Price		Expiry Date		Contractual Life
3,252,500		$0.10		May 15, 2015		0.62 years
1,077,500		$0.097		August 2, 2016		1.84 years
4,330,000

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2014

(Stated in US Dollars)

(Unaudited)

Note 6  

Common Stock – (cont’d)

Commitments – (cont’d)

Stock-based Compensation Plan – (cont’d)

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%.

Stock-based compensation amounts for the three month period ended September 30, 2014 are classified in the Company’s Statement of Operations as follows:

	September 30, 2014		September 30, 2013
Wages and Management Fees	$                            -		$                      63,139
Consulting	-		2,220
Total Stock Based Compensation	$                            -		$                      65,359

Note 7

Non Cash Transactions

Investing and financing activities that affect recognized assets or liabilities but that do not result in cash receipts or cash payments are excluded from the consolidated statements of cash flows.  During the three months ended September 30, 2014, the Company acquired equipment totalling $33,523 by way of a capital lease  

During the three months ended September 30, 2013, there were  no non-cash investing and financing activities  excluded from the condensed consolidated statement of cash flows.

Note 8

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 Company’s revenues and long-term assets are located in the United States.

During the three months ended September 30, 2014, two customers accounted for 100% of total sales revenue:

		Three months ended
	September 30, 2014		September 30, 2013
Customer #1	75%		73%
Customer #2	25%		24%

The accounts receivable from each of these customers at September 30, 2014 were $160,586 and $17,247, respectively (2013:  $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 Company’s financial condition and results of operations.

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ITEM 2.  MANAGEMENT’S 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 Company’s 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. Barrier’s primary business is in the United States, but also has a license agreement with a major OSB producer in the European Union.  In addition, Barrier is working to develop distribution partnerships and manufacturing technology license agreements 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 Barrier’s 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.

Barrier’s financial statements are filed with both the SEC (USA) and SEDAR (Canada) and are disclosed in US dollars utilizing US generally accepted accounting principles.  Barrier’s filings with the SEC consist of quarterly reviews 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.

Sales revenue reported for the quarterly period ending September 30, 2014 was up 8% to $2,472,378 in comparison to $2,282,153 generated in the same comparable period in 2013. Total sales volume, as measured by surface volume of product shipped, was 6,355,100 sq. ft.  This is a 14% increase from the 5,560,500 sq. ft. shipped during the previous comparable period and the second largest quarterly shipment volume (second to last quarter Apr-Jun 2014).  

Shipments into the Residential Roof Deck, Wall Assembly, and Structural Insulated Panel Market Sectors (LP FlameBlock) during the quarter increased 13% over shipments in the comparable quarter last year.  Sales into the Commercial Modular Market (FR Deck Panel) increased 18% in comparison to Q1 a year ago.

Barrier and LP conduct business guided by a Supply Agreement that had a term ending on December 31, 2013.  The Agreement contains a provision to extend the term annually, upon mutual agreement of both parties.  As 2013 came to a close, it was clear that further discussions were warranted to determine how best to strategize future production capacity expansion plans in the US while protecting LP Corporation and Barrier’s respective business interests.

While Supply Agreement modifications are being discussed, relative to the inherent changes required for future possible expansion, Barrier and LP have agreed to continue operating with  extensions of the existing Agreement, as needed, to enable purposeful discussions to continue long enough to insure both parties interests have been discussed and accommodated as best possible.

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The relationship with LP has contributed to an increase in sales volume to record levels and Barrier anticipates that sales will continue to grow substantially through the sustained efforts of LP’s 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.

Gross profit for the quarterly period ended September 30, 2014 was $564,532 vs. $421,611 in the previous year quarter. The gross margin, as a percentage of sales revenue, increased to 23% in the current quarter from 18% in the prior comparable period.  In the near term, gross margins are anticipated to remain relatively flat or perhaps to improve slightly based on continued gains in production efficiency. Capacity limitations at the current manufacturing facility in Watkins Minnesota, however, are being approached and further improvement in scale efficiency will be delayed until additional production capacity is added. The development of additional manufacturing capability is anticipated by late 2015.

Cost of sales increased to $1,907,846 from $1,860,542 in the prior year quarterly period.  The increase is attributable to the increase in volume produced.  Barrier created gains in manufacturing efficiency as measured by the average cost per square foot of production which decreased from $0.33 to $0.30 during the comparable reporting period.

Substrate cost and materials/labor were the major expenses in this category.  Substrate accounted for $407,363 for the period versus $436,064 in the same period last year. Materials and labor accounted for an additional $1,118,402 in the three month period in 2014 versus $1,027,630 in 2013.

Depreciation on plant and equipment is included in cost of sales category. Depreciation, which has non-cash impact on Barrier’s actual cash flow, increased slightly from $78,544 in Q1 2014 to $81,630 in Q1 2015.  The expense reflects scheduled depreciation of the newer manufacturing line equipment and building expansion.  

Administrative expenses for the quarter ended September 30, 2014 decreased to $235,454 from $301,919 in the prior year quarterly period.  The administrative costs per sq. ft. were $0.037 for the quarter comparison which was an improvement from $0.054 reported through September 30, 2013. The positive impact of increased sales volume reducing administrative cost per square foot shipped was captured during this reporting period.

Accounting and Audit Fees decreased from $47,166 to $46,859.  A significant portion of the cost for accounting services is related to the year-end audit of Barrier’s annual financial statements.  

Insurance costs have increased from $18,416 to $21,907.  The difference is due to annually adjusted premiums based on larger sales volume.

Legal fees decreased from $28,987 in Q1 2014 to $19,243 in Q1 2015.  Legal fees the past two years were expended on activities in support of developing strategic partners and technology licensees, the year-end Annual General Meeting, as well as in monitoring and protecting Pyrotite® patents and trademarks.

Barrier has four issued patents, two in the US, a patent in Australia, and a 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 $7,265 to $12,054 for the current quarter reported, year to year. During the reporting period, there were sales trips directly related to the expansion of product markets and potential manufacturing expansion sites.

Barrier’s cost for sales and marketing will continue to remain at relatively low levels compared to sales volume as our partners, LP and MuleHide Products, perform the majority of those functions themselves. Barrier remains active in a support role by providing necessary technical sales support but most of the day to day market and sales development activities are already being performed by the capable sales and marketing staff of LP and MuleHide Products resulting in improved sales but also lower costs for Barrier.

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Wages and management fees decreased to $106,254 from $168,052.  The major decrease in the fee is attributed to the non-cash valuation of options granted during the prior year quarterly reporting period.  

Operating Income of $329,078 is being reported for the quarterly period ending September 30, 2014, whereas in the same period in 2013, operating income of $119,692 was reported.

The significant improvement in operating income is a result of increased sales volumes and focus on manufacturing efficiency. It is Barrier’s fundamental belief that sustained increased sales volume coupled with an intense focus on manufacturing efficiency is the best pathway to long-term profitability.

Other items include income and costs not directly related to business operations.  Other income items reported during the quarterly ended September 30, 2014 herein includes interest/other income of $307.  To compare, for the same reporting period last year there was a foreign exchange loss of $2,326 and interest/other income of $98.  

Interest on Long Term Debt has decreased from $15,844 to $13,972 for the 3-month reporting period as a result of larger principal payments as long term debt ages.

Net Income.  Net income of $315,413 is being reported for the quarter ended September 30, 2014, whereas in the same period in 2013, net income of $101,620 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 Company’s financial results for the nine most recently completed quarters:

	Sept 30 2014	Jun 30 2014	Mar 31 2014	Dec 31 2013	Sept 30 2013	Jun 30 2013	Mar 31 2013	Dec 31 2012
Volume shipped (MSF)	6,355	6,650	4,169	3,371	5,561	5,162	3,625	2,506
Total Revenues (000)	$2,472	$2,778	$1,700	$1,394	$2,282	$2,426	$1,695	$977
Operating Income(loss) (000)	$329	$520	$85	($29)	$120	$218	$50	($125)
Net income (loss) (000)	$315	$457	$72	($45)	$102	$201	$36	($135)
EPS (Loss) Per Share	$0.01	$0.01	$0.00	$0.00	$0.00	$0.00	$0.00	$0.00

Selected Annual Information

The following financial data is for the three most recent years ended June 30:

	2014	2013	2012
Total Revenue	$8,154.0	$5,995.0	$4,144.8
Net income (loss)	$586.0	$(58.6)	$(139.7)
Per share	$0.01	$0.00	$0.00
Per share, fully diluted	$0.01	$0.00	$0.00
Total assets	$4,317.3	$3,921.9	$3,708.0
Total long-term financial liabilities	$687.1	$818.1	$900.0
Cash dividends declared per share	Nil	Nil	$Nil

New product and market development

Barrier continues to provide support to LP for a number of new product and market development initiatives including activity directed specifically toward applications in geographic areas where wildfires are prevalent and where building code development is becoming more restrictive with respect to designing for improved fire resistance. Focus has continued on developing products engineered to meet requirements established for Wildland/Urban Interface (WUI) zones. WUI zones are primarily located in the western US, and are areas where special building codes have been developed to help save homes if a brush fire should occur.

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Enhanced focus has been made over this past year on developing products used in multifamily residential projects since the multifamily market is strong and is expected to stay vibrant over the next few years. In particular, Barrier and LP’s introduction of a UL certified 2-hr exterior load bearing wall designed for use in wood-frame buildings of Type III construction is being well received by architects, building code professionals and builders alike. 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.

Most recently, Barrier and LP have begun exploring opportunities related to emerging code requirements for Engineered Wood Products (EWP) such as I-Joist and RimBoard.  I-Joist and Rimboard produced using oriented strand board (OSB) technology are widely used in the building industry but have only recently been put under intense scrutiny for structural performance in a fire.  Barrier and LP believe there is significant opportunity in developing EWP products that are rated for performance in a fire situation.

Preliminary fire tests have already provided positive results and have elicited increased enthusiasm for these projects.  Pyrotite technology seems to provide EWP with sufficient improvement in fire resistance and structural integrity.  Barrier and LP’s EWP Division will be actively researching these exciting opportunities in the ensuing fiscal year and will endeavor to develop products that will meet code requirements being developed by the International Code Council (ICC).

Global licensing opportunities

Barrier continues to explore manufacturing and distribution opportunities for Pyrotite^® technology in geographies outside of the US.  During the fiscal year ended June 30, 2014, Barrier announced a licensing agreement for the manufacture and distribution of Pyrotite^® products in the European Union and Russia.  Kronospan, a world-wide leader in OSB manufacturing, has officially added “OSB Pyrotite ECO” (a fire-resistant OSB panel) to their family of products.  Barrier provided technical assistance in the design of their first manufacturing line, the transfer of production process technology, and material acquisition criteria.  The manufacturing line is now fully operational.  The license agreement provides for a payment made quarterly to Barrier by the Licensee of a royalty based on the volume of product produced. A minimum annual royalty fee was established along with an “up-front” license fee which was paid pursuant to the execution of the license agreement earlier in the year.  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 $838,984.  Operating cash flow was $411,340 in comparison to $82,336 for the quarter ended September 30, 2013.

Barrier has a short term revolving line of credit ($200,000) at the local Farmers State Bank of Watkins, in Watkins, Minnesota.  As of September 30, 2014 the balance owing on the revolving line of credit was $0 leaving an additional $200,000 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 $103,867 in the current period in comparison to a net cash outflow of $26,334 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 $32,031 in the current quarter compared to a net cash outflow of $30,337 for the comparable period.  

There is no assurance that Barrier will operate profitably or will generate positive cash flow in the future. In addition, Barrier’s 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.

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Current and Future Financing Needs

At September 30, 2014, the current cash and cash equivalents totaled $984,368; there was $200,000 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 September 30, 2014 the Company had received $240,000 (2013:  $240,000) in respect of these debentures.  The debentures bear interest at 12% per annum, payable quarterly, and are collateralized by a third charge over the Company’s plant and equipment as well as a charge against the Company’s 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 quarter ended September 30, 2014, the Company incurred interest charges of $7,200 (2013:  $7,200) on these convertible debentures.

Capitalization

Authorized:  100,000,000 common shares without par value.

Issued as of September 30, 2014:  44,554,926 common shares at $15,478,926

Issued as of November 14, 2014:  44,554,926 common shares at $15,478,926

Options outstanding:

The following summarizes information about the stock options outstanding at September 30, 2014:

	Exercise
Number	Price	Expiry Date
3,252,500	$0.10	May 15, 2015
1,077,500	$0.097	August 2, 2016
4,330,000

Other Matters

As at September 30, 2014 the Company did not have any off-balance sheet arrangements to report.

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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 interim report on Form 10-Q, under the direction of the Chief Executive Officer, the Company has evaluated its disclosure controls and procedures as of September 30, 2014 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 Company’s internal control over financial reporting during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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, 2014, 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:

          No Disclosure Necessary

      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

Exhibit 32.1:

Certification Required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 Certification executed by Michael Huddy, President/CEO/Director

Exhibit 32.2:

Certification Required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 Certification executed by Melissa McElwee, CFO

101.INS:    

XBRL Instance Document

101.SCH:   

XBRL Taxonomy Extension Schema Document

101.CAL:   

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF:   

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB:   

XBRL Taxonomy Extension Label Linkbase Document

101.PRE:    

XBRL Taxonomy Extension Presentation Linkbase Document

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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, 2014	By: /s/ Michael Huddy
	Michael Huddy, President/CEO/Director
Dated:  November 14, 2014	By: /s/ Melissa McElwee
	Melissa McElwee, CFO

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