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, 2015

¨ 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 11/16/2015: 47,807,426 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, 2015 and June 30, 2015 (Stated in US Dollars) (Unaudited)
		September 30,	June 30,
		2015	2015
ASSETS			(audited)
Current
Cash and cash equivalents		$       1,040,870	$               804,452
Accounts receivable		327,945	405,859
Inventory - Note 3		567,495	640,219
Prepaid expenses and deposits		31,674	59,879
Total Current Assets		1,967,984	1,910,409
Property, plant and equipment		3,051,655	3,014,476
Total Assets		$             5,019,639	$            4,924,885
LIABILITIES
Current
Accounts payable and accrued liabilities		$                744,626	$               653,931
Obligation under capital leases		32,776	48,740
Total Current Liabilities		777,402	702,671
Deferred revenue		50,000	-
Convertible debentures - Note 4		240,000	240,000
Obligation under capital leases		36,904	40,139
Total Liabilities		1,104,306	982,810
STOCKHOLDERS' EQUITY
Common Stock - Note 5
Authorized:
100,000,000 common shares without par value
Issued:
47,807,426 common shares (June 30, 2015:  47,807,426)		15,934,256	15,934,256
Additional paid-in capital		1,509,283	1,509,283
Accumulated deficit		(13,528,206)	(13,501,464)
Total Stockholders' Equity		3,915,333	3,942,075
Total Liabilities and Stockholders' Equity		$            5,019,639	$            4,924,885

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, 2015 and 2014 (Stated in US Dollars) (Unaudited)
				Three months ended
				September 30,
				2015	2014
Sales - Note 6				$              2,133,813	$          2,472,378
Cost of Sales				1,841,954	1,907,846
Gross Profit				291,859	564,532
Expenses
Accounting and audit fees				27,766	46,859
Filing Fees				8,789	3,631
Insurance				18,848	21,907
Bank charges and interest				40	40
Legal fees				18,653	19,243
Office and miscellaneous				13,676	20,693
Sales, marketing, and investor relations				7,057	12,054
Telephone				3,118	3,370
Transfer agent fees				745	1,403
Wages and management fees				211,947	106,254
Total Administrative Expenses				310,639	235,454
Operating income (loss)				(18,780)	329,078
Foreign exchange gain (loss) and other income				325	307
Interest on long-term obligations				(8,287)	(13,972)
Total Other Expense				(7,962)	(13,665)
Net income (loss) for the period				$                 (26,742)	$             315,413
Basic and diluted income per share				$                       0.00	$                   0.01
Weighted average number of shares outstanding:
Basic				47,807,426	44,454,926
Diluted				52,363,536	51,102,624

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended September, 2015 and 2014
(Stated in US Dollars)
(Unaudited)
		Three months ended
		September 30,
		2015	2014
Operating Activities
Net income (loss) for the period		$             (26,742)	$             315,413
Items not involving cash:
Depreciation - plant and equipment		88,402	81,630
Stock-based compensation - consulting		-	-
Stock-based compensation - wages		-	-
Changes in non-cash working capital balances related to operations:
Accounts receivable		127,914	57,859
Inventory		72,724	20
Prepaid expenses and deposits		28,205	(37,400)
Accounts payable and accrued liabilities		90,695	(6,182)
Net cash provided by operating activities		381,198	411,340
Cash Flows used in Financing Activities
Repayment of long term debt		-	(15,499)
Decrease in obligations under capital lease		(19,199)	(16,532)
Net cash used in financing activities		(19,199)	(32,031)
Cash Flows used in Investing Activities
Acquisition of equipment		(125,581)	(103,867)
Net cash used in investing activities		(125,581)	(103,867)
Increase in cash and cash equivalents during the period		236,418	275,442
Cash and cash equivalents, beginning of the period		804,452	708,926
Cash and cash equivalents, end of the period		$          1,040,870	$             984,368
Supplemental Cash Flow Information
Cash paid for interest		$               8,287	$               13,972
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, 2015
(Stated in US Dollars)
(Unaudited)
	Common Stock
					Additional
	Issued		Amount		Paid-in		Accumulated
	Shares				Capital		Deficit		Total
Balance, June 30, 2014	44,554,926		$ 15,478,926		$     1,639,363		$(14,203,045)		$  2,915,244
Exercise of options	3,252,500		325,250		-		-		325,250
Fair value of stock options exercised			130,080		(130,080)		-		-
Net income for the period	-		-		-		701,581		701,581
Balance, June 30, 2015	47,807,426		15,934,256		1,509,283		(13,501,464)		3,942,075
Net income (loss) for the period	-		-		-		(26,742)		(26,742)
Balance, September 30, 2015	47,807,426		$  15,934,256		$     1,509,283		$(13,528,206)		$  3,915,333

SEE ACCOMPANYING NOTES

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2015

(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, 2015 included in the Annual Report on Form 10-K filed with the SEC on September 28, 2015.  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, 2015, and the consolidated results of operations and cash flows for the three months ended September 30, 2015.  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, 2015 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 and share purchase warrants, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants, 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, 2015

(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.  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 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, 2015, the convertible debentures had a fair value of $536,840 (June 30, 2015:  $790,630).

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 $69,679 (June 30, 2015:  $88,879).  

As at September 30, 2015, the Company has no assets or liabilities that have fair values measured using Level 3 inputs.

Note 3

Inventory

	September 30, 2015		June 30, 2015
Raw materials	$             377,584		$          387,469
Finished goods	189,911		252,750
	$             567,495		$          640,219

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2015

(Stated in US Dollars)

(Unaudited)

  

Note 4  

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, 2015 the Company had received $240,000 (2014:  $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, 2015, the Company incurred interest charges of $7,200 (2014:  $7,200) on these convertible debentures.

Note 5  

Common Stock

Escrow:

At September 30, 2015, there are 48,922 (2014 – 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, 2015 and June 30, 2015, 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, 2015, the Company has outstanding options that were granted to directors, officers, and consultants to purchase 1,077,500 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, 2015 is presented below:

					Weighted
					Average
			Number of		Exercise
			Shares		Price
Outstanding, June 30, 2015			1,077,500		$          0.097
Outstanding, September 30, 2015			1,077,500		$          0.097
Exercisable, September 30, 2015			1,077,500		$          0.097
Exercisable, June 30, 2015			1,077,500		$          0.097

The following summarizes information about the stock options outstanding at September 30, 2015:

Number		Exercise				Remaining
		Price		Expiry Date		Contractual Life
1,077,500		$0.097		August 2, 2016		0.84 years
1,077,500

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INTERNATIONAL BARRIER TECHNOLOGY INC.

Notes to the Condensed Consolidated Interim Financial Statements

September 30, 2015

(Stated in US Dollars)

(Unaudited)

Note 6

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, 2015, two customers accounted for 100% of total sales revenue:

		Three months ended
	September 30, 2015		September 30, 2014
Customer #1	68%		75%
Customer #2	32%		25%

The accounts receivable from each of these customers at September 30, 2015 were $189,837 and $122,586, respectively (2014:  $160,586 and $17,247, 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 is successfully 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 Barrier’s fire-rated structural panels in areas where the building code requires the use of a fire-rated building panel.

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 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.

Sales revenue reported for the quarterly period ending September 30, 2015 was $2,133,813 in comparison to $2,472,378 generated in the same comparable period in 2014. Total sales volume, as measured by surface volume of product shipped declined to 5,162,100 sq. ft., from the 6,355,100 sq. ft. shipped in the previous year.   

Shipments into the Residential Roof Deck, Wall Assembly, and Structural Insulated Panel Market Sectors (LP FlameBlock) during the quarter decreased 25% over shipments in the comparable quarter last year, while sales into the Commercial Modular Market (FR Deck Panel) remained consistent with Q1 a year ago.  The decline in shipments, year to year, was based more on manufacturing efficiency than on falling demand.  Production capacity was negatively impacted by Barrier’s commitment to produce fire-treated I-Joist web stock in Watkins.

The fire resistance of I-Joist is a timely and important topic in North America’s building environment at this time.  Web stock material treated at Watkins is being used to assist in the development of a committed market demand for Pyrotite® technology.  Concurrently, plans and decisions for manufacturing or licensing the production of treated I-Joist in the long-term are being developed and made.  Barrier anticipates the negative impact I-Joist R&D has on shipments will diminish as efficiencies in production at Watkins improve with experience.

Barrier and LP conduct business guided by a Supply Agreement.  In August 2015, LP and Barrier negotiated some refinements to the agreement and extended it through December 31, 2019.  In addition, Barrier granted a license to LP for the manufacture and distribution of Pyrotite® products in a plant in Clarke County Alabama.  This license agreement will provide an additional revenue stream for Barrier.  LP has announced plans to begin construction of this manufacturing facility prior to calendar year end 2015.      

Barrier’s 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

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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, 2015 was $291,859 vs. $564,532 in the previous year quarter. The gross margin, as a percentage of sales revenue, decreased to 14% in the current quarter from 23% 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 fire-rated I-joist production efficiency.

Cost of sales decreased to $1,841,954 from $1,907,846 in the prior year quarterly period.  The decrease is attributable to the decrease in volume produced.  Manufacturing efficiency as measured by the average cost per square foot of production was $0.36 vs. $0.30 during the comparable reporting period last year.

Substrate cost and materials/labor were the major expenses in this category.  Substrate accounted for $418,546 for the period versus $407,363 in the same period last year. Materials and labor accounted for an additional $1,054,283 in the three month period in 2015 versus $1,118,402 in 2014.

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 $81,630 in Q1 2015 to $88,402 in Q1 2016.  The expense reflects scheduled depreciation of the newer manufacturing line equipment and building improvements.  

Administrative expenses for the quarter ended September 30, 2015 increased to $310,639 from $235,454 in the prior year quarterly period.  The administrative costs per sq. ft. were $0.06 for the quarter in comparison to $0.04 reported through September 30, 2014.

Accounting and Audit Fees decreased from $46,859 to $27,766.  A significant portion of the cost for accounting services is related to the year-end audit of Barrier’s annual financial statements.  The year-to-year cost differential reported here is related to the timing of invoices from the year-end audit and is expected to be more even year to year, once the next quarterly financial statements are published.   

Insurance costs have decreased slightly from $21,907 to $18,848.

Legal fees decreased slightly from $19,243 in Q1 2015 to $18,653 in Q1 2015.  Legal fees the past two years were expended on activities in support of developing strategic partners and technology licensees, beginning preparations for 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®.  In addition, Barrier has a provisional patent from the US Patent Office for the process of treating I-Joists with Pyrotite^®

 

Sales, marketing, and investor relations expenses decreased from $12,054 to $7,057 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.

The majority of sales and marketing activities for traditional uses of Barrier’s Pyrotite® treated structural wood panels continue to be performed by Louisiana Pacific, Inc.  This helps Barrier keep the cost of sales and marketing as low as reasonably possible.

Wages and management fees increased to $211,947 from $106,254.  The major increase in the fee is attributed to Board of Director remuneration for the execution of the Louisiana-Pacific Corporation Technology License Agreement.  

Operating Loss of $(18,780) is being reported for the quarterly period ending September 30, 2015, whereas in the same period in 2014, operating income of $329,078 was reported.

The decline in operating income is a result of lower sales volume during the quarter.  It is Barrier’s fundamental belief that increased sales volume coupled with an intense focus on manufacturing efficiency is the best pathway to long-term profitability.

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Other items include income and costs not directly related to business operations.  Other income items reported during the quarterly ended September 30, 2015 herein includes interest/other income of $325.  To compare, for the same reporting period last year there was interest/other income of $307.  

Interest on Long Term Debt has decreased from $13,972 to $8,287 for the 3-month reporting period as a result of larger principal payments as long term debt ages.  

Net  Loss.  Net loss of $(26,742) is being reported for the quarter ended September 30, 2015, whereas in the same period in 2014, net income of $315,413 was reported.

Barrier remains focused on cutting costs and improving efficiencies wherever it can.  This includes operating the manufacturing line with maximum efficiency. During the reporting period, Barrier began to manufacture a new product, fire-rated I-joist material, which impacted short-term manufacturing efficiencies.  New techniques are expected to be approved and implemented by the end of Q2.  Barrier continues to keep a vigilant handle on costs to help keep operational costs as low as possible and enable financial improvements to continue.

Summary of Quarterly Results.  The following is a summary of the Company’s financial results for the nine most recently completed quarters:

	Sept 30 2015	Jun 30 2015	Mar 31 2015	Dec 31 2014	Sept 30 2014	Jun 30 2014	Mar 31 2014	Dec 31 2013
Volume shipped (MSF)	5,162	5,485	5,268	4,516	6,355	6,650	4,169	3,371
Total Revenues (000)	$2,134	$2,199	$1,965	$1,836	$2,472	$2,778	$1,700	$1,394
Operating Income(loss) (000)	$(19)	$162	$165	$119	$329	$520	$85	($29)
Net income (loss) (000)	$(27)	$128	$154	$105	$315	$457	$72	($45)
EPS (Loss) Per Share	$0.00	$0.01	$0.00	$0.00	$0.01	$0.01	$0.00	$0.00

Selected Annual Information

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

	2015		2014		2013
Total Revenue	$8,472.0		$8,154.0		$5,995.0
Net income (loss)	$702.0		$586.0		$(58.6)
Per share	$0.02		$0.01		$0.00
Per share, fully diluted	$0.01		$0.01		$0.00
Total assets	$4,924.9		$4,317.3		$3,921.9
Total long-term financial liabilities	$328.9		$687.1		$818.1
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.

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.  

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Barrier and LP continue 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.  Both Barrier and LP believe there is significant opportunity in developing EWP products that are rated for performance in a fire situation.

After successful preliminary fire testing and initial test marketing, further testing resulted in a UL certified fire-rated I-Joist listing and small scale commercial production has begun.  Barrier and LP’s EWP Division will be actively pursuing these exciting opportunities during the next fiscal year.  By working together we will endeavor to develop products that will meet code requirements being developed by the International Code Council (ICC), as well as production technology and capacity.  

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.  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.  Particular interest in Barrier’s Pyrotite® technology has been expressed by parties in China, Australia, and South America.

Financial position & financings

Barrier ended the period with a working capital surplus (current assets less current liabilities) of $1,190,582.  Operating cash flow was $381,198 in comparison to $411,340 for the quarter ended September 30, 2014.

Financing activities resulted in net cash outflow of $19,199 in the current quarter compared to a net cash outflow of $32,031 for the comparable period.  

Barrier has a short term revolving line of credit ($500,000) at the local Farmers State Bank of Watkins, in Watkins, Minnesota.  As of September 30, 2015 the balance owing on the revolving line of credit was $0 leaving an additional $500,000 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 $125,581 in the current period in comparison to a net cash outflow of $103,867 in the prior year.  The cash outflow was the result of the acquisition of plant and equipment capital improvements.

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, 2015, the current cash and cash equivalents totaled $1,040,870; there was $500,000 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, 2015 the Company had received $240,000 (2014:  $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, 2015, the Company incurred interest charges of $7,200 (2014:  $7,200) on these convertible debentures.  The convertible debentures mature on January 30, 2017.

Capitalization

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

Issued as of September 30, 2015:  47,807,426 common shares at $15,934,256

Issued as of November 16, 2015:  47,807,426 common shares at $15,934,256

Options outstanding:

The following summarizes information about the stock options outstanding at September 30, 2015:

	Exercise
Number	Price	Expiry Date
1,077,500	$0.097	August 2, 2016
1,077,500

Other Matters

As at September 30, 2015 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, 2015 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, 2015 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, 2015, 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 8K dated 8/5/2015 regarding press release about Fiscal Year-End performance.

2.

Form 8K dated 8/5/2015 regarding press release announcing LP® Building Products adding a FlameBlock manufacturing line in Clarke County, Alabama.

3.

Form 8K dated 9/9/15 regarding Entry into a Material Definitive Agreement whereas International Barrier Technology entered into a Technology License Agreement with Louisiana-Pacific Corporation.

      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 16, 2015	By: /s/ Michael Huddy
	Michael Huddy, President/CEO/Director
Dated:  November 16, 2015	By: /s/ Melissa McElwee
	Melissa McElwee, CFO

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