UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the quarterly period ended March 31, 2011

[ ] 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)

510 4th Street North, Watkins, Minnesota, USA  55389

(Address of principal executive offices)

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 xxx   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 ___   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 XXX

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of 5/16/2011: 44,454,926 Common Shares w/o par value

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PART I

FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

INTERNATIONAL BARRIER TECHNOLOGY INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

2

INTERNATIONAL BARRIER TECHNOLOGY INC.

INTERIM CONSOLIDATED BALANCE SHEETS

March 31, 2011 and June 30, 2010

(Stated in US Dollars)

(Unaudited)

SEE ACCOMPANYING NOTES

3

INTERNATIONAL BARRIER TECHNOLOGY INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

for the three and nine months ended March 31, 2011 and 2010

(Stated in US Dollars)

(Unaudited)

SEE ACCOMPANYING NOTES

4

INTERNATIONAL BARRIER TECHNOLOGY INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

for the nine months ended March 31, 2011 and 2010

(Stated in US Dollars)

(Unaudited)

SEE ACCOMPANYING NOTES

5

INTERNATIONAL BARRIER TECHNOLOGY INC.

INTERIM CONSOLIDATED STATEMENT CHANGES IN STOCKHOLDERS’ EQUITY

for the period ended March 31, 2011

(Stated in US Dollars)

(Unaudited)

SEE ACCOMPANYING NOTES

6

INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 1

Nature of Operations and Ability to Continue as a Going Concern

The Company develops, manufactures and markets proprietary fire resistant building materials branded as Blazeguard in the United States of America and, as well, the Company owns the exclusive U.S. and international rights to the Pyrotite® fire retardant technology.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its obligations and commitments in the normal course of operations.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  At March 31, 2011 the Company had an accumulated deficit of $14,391,229 (June 30, 2010 - $15,256,546) since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management has no formal plan in place to address this concern but considers obtaining additional funds by equity financing and/or from bank financing.  While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds for operations.

The Company was incorporated under the British Columbia Company Act and is publicly traded on the TSX Venture Exchange in Canada (“TSX-V”) and the OTC Bulletin Board in the United States of America.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.  It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements of the Company for the year ended June 30, 2010.  The interim results are not necessarily indicative of the operating results expected for the full fiscal year ending on June 30, 2011.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading.

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 2

Significant Accounting Policies

Fair Value Measurements

The book value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, bank loan facility, long-term debt and obligation under capital leases 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.

As at March 31, 2011, the Company’s Level 3 liabilities consisted of the warrants issued in connection with the Company’s offering of equity units in a private placement and share purchase options granted to non-employees.  The resulting Level 3 liabilities have no active market and are required to be measured at their fair value each reporting period based on information that is unobservable.  A summary of the Company’s Level 3 liabilities for the nine months ended March 31, 2011 and the 12 months ended June 30, 2010 is as follows:

Recent Accounting Pronouncements Not Yet Adopted

In April 2010, the FASB issued ASU No. 2010-13, “Compensation – Stock Compensation,” or ASU 2010-13, which amends ASC Topic 718 to address the classification of an employee share-based payment award with an exercise price denominated in a currency of a market in which the underlying security trades.  Specifically, an employee share-based payment award denominated in a currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance or service condition and therefore would not classify the award as a liability if it otherwise qualifies as equity.  This update is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010.  The Company is currently evaluating the effect of ASU 2010-13 will have on its financial statements.

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 2

Significant Accounting Policies – (cont’d)

Recently Adopted Accounting Pronouncements

In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

Note 3

Inventory

Note 4

Warrant Liability

During the year ended June 30, 2010, the Company sold 15,000,000 units at $ 0.10 CDN per unit for total proceeds of $1,482,974 ($1,500,000 CDN).  Each unit consisted of one common share and one common share purchase warrant entitling the holder to purchase an additional common share at $CDN 0.15 for a period of two years.  Upon the adoption of the guidance in ASC 815-40-15 which became effective for the fiscal year that commenced July 1, 2009, the Company recorded the warrants issued as derivative liabilities due to their exercise price being denominated in a currency other than the Company’s US dollar functional currency.

The warrant liability is accounted for at its respective fair values as follows:

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 4

Warrant Liability – (cont’d)

The Company used the Black-Scholes model to estimate the fair value of the warrants with the following assumptions:

The warrant liability will be re-valued at the end of each reporting period with the change in fair value of the derivative liability recorded as a gain or loss in the Company’s Consolidated Statements of Operations.  The fair value of the warrants will continue to be classified as a liability until such time as they are exercised, expire or there is an amendment to the respective agreements that renders these financial instruments to be no longer classified as a liability.

Note 5

Long-term debt

Principal payments of long-term debt are due as follows:

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 6

Common Stock

Escrow:

At March 31, 2011, there are 48,922 (June 30, 2010 – 48,922) shares are held in escrow by the Company’s transfer agent.  These shares are issuable in accordance with a time release clause in the escrow share agreement.  As at March 31, 2011 and June 30, 2010, all of the shares held in escrow are issuable but the Company has yet to request their release.

Commitments:

Stock-based Compensation Plan

At March 31, 2011, the Company has outstanding options that were granted to directors, officers and consultants the option to purchase 3,990,000 common shares of the Company.

A summary of the status of company’s stock option plan for the nine months ended March 31, 2011 is presented below:

The following summarizes information about the stock options outstanding at March 31, 2011:

Non-Employee Share Purchase Options

In accordance with the guidance of ASC 815-40-15, stock options granted to non-employees with exercise prices that are not denominated in the functional currency of the Company are determined not to be indexed to the Company’s stock and are required to be accounted for as derivative liabilities in accordance with ASC 815 “Derivatives and Hedging”.

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 6

Common Stock – (cont’d)

Commitments: – (cont’d)

Stock-based Compensation Plan – (cont’d)

Non-Employee Share Purchase Options – (cont’d)

The non-employee share purchase option liabilities are accounted for at their respective fair values and are summarized as follows:

The non-employee options are required to be re-valued with the change in fair value of the liability recorded as a gain or loss on the change of fair value of derivative liability and included in other items in the Company’s Consolidated Statements of Operations at the end of each reporting period.  The fair value of the options will continue to be classified as a liability until such time as they are exercised, expire or there is an amendment to the respective agreements that renders these financial instruments to be no longer classified as a liability.

Employee Share Purchase Options

Share options granted to employees that are exercisable in Canadian dollars are accounted for as liabilities because these option awards contain a condition that is other than a market, performance or service condition.

The share purchase option liabilities are accounted for at their respective fair values and are summarized as follows:

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INTERNATIONAL BARRIER TECHNOLOGY INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

Note 6

Common Stock – (cont’d)

Commitments: – (cont’d)

Stock-based Compensation Plan – (cont’d)

Employee Share Purchase Options – (cont’d)

Stock based compensation amounts for the vesting of stock options and the change in fair value of stock options classified as derivative liabilities are classified in the Company’s Statement of Operations as follows:

Note 7

Related Party Transactions

The Company was charged the following by directors of the Company or private companies with common directors during the nine months ended March 31, 2011 and 2010:

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 nine months ended March 31, 2011, two customers accounted for 97% (each representing 75% and 22%, respectively) (2010: one customer, 79%) of sales revenue.  The amounts receivable from each of these customers at March 31, 2011 were $33,897 and $28,132 respectively (2010: $21,264).  The loss of either of these customers or the curtailment of purchases by such customers could have a material adverse effect on the Company’s financial condition and results of operations.

Note 9

Comparative Figures

Some comparative figures have been reclassified to conform with the current year presentation.

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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.

International Barrier Technology Inc. (Barrier) manufactures and sells fire-rated building materials primarily in the United States.  Barrier has a patented fire protective material (Pyrotite™) that is applied to building materials to greatly improve their respective fire resistant properties. Coated wood panel products are sold to builders through building product distribution companies all over the USA.  Four of the top five multifamily homebuilders in the USA currently utilize Barrier’s fire rated structural panel Blazeguard® in areas where the building code requires the use of a fire rated building panel.

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 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 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 introduced a fire rated OSB trademarked LP^® Flameblock^® Fire-Rated OSB Sheathing (LP^® FlameBlock^®) and MuleHide has been selling MuleHide FR Deck Panel (FR Deck Panel) to commercial modular building manufacturers since 2004.

Discussion of Operations

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 on their website at www.sedar.com.  Finally, we also make Canadian and USA reports available on the Company’s website: www.intlbarrier.com.

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Sales revenue reported for the quarter ending March 31, 2011 was up 11% to $734,503 for the three-month period in comparison to $659,585 generated in the same quarter in 2010.  Year-to-date sales increased 23% to $2,490,996 vs. $2,031,838.  Total sales volume, as measured by surface volume of product shipped, was 1,572,400 sq. ft.  This is a 25% increase from the 1,261,100 sq. ft. shipped during the same quarter in the previous year.  Sales for the nine months ending March 31, 2011 (fiscal year-to-date) are up 45% to 5,100,600 sq. ft. vs. 3,506,800 sq. ft. in the same period in 2010.

Sales into the Residential Roof Deck, Wall Assembly, and Structural Insulated Panel Market Sectors (LP FlameBlock) increased 220% during the quarter and 205% during the 9 month fiscal reporting period. Shipments into the Commercial Modular Market (FR Deck Panel) decreased 30% in the quarterly period but have increased 8% fiscal year-to-date.  

On January 18, 2011, LP and Barrier extended their existing Supply Agreement through December 31, 2013. LP is the largest producer of Oriented Strand Board (OSB) in the world and believes that Barrier’s Pyrotite Technology helps them achieve their strategy of providing a number of value added OSB products to the building community. The agreement gives LP the exclusive right to sell Pyrotite® treated panel products in North America, in all markets other than commercial modular (MuleHide Products, Inc.), under their brand name LP^® FlameBlock^® Fire-Rated OSB Sheathing.

Barrier anticipates the relationship with LP may significantly increase sales volume. Reported sales revenue for LP products, however, will only include the charges for treatment services, not the underlying OSB substrate which will be provided as a “pass through” item by LP.  Prior to the LP agreement, Barrier purchased OSB from local distributors and included that pass through cost in financial statements.  Barrier’s margin for LP FlameBlock will be based on the treatment of the OSB only.

Gross profit for the quarter was ($15,719) vs. $1,227 in the previous year. Year-to-date gross profits for the nine month period were $127,133 an nearly identical figure for the same period in 2010, $127,242).  During the quarter, a capital improvement project was implemented on the automated manufacturing line. Required downtimes in production during this project and the effect of having to implement new manufacturing techniques (start-up time) affected short-term gross profit by temporarily creating manufacturing inefficiencies.

The purpose of the project was to reduce production downtimes and improve efficiency by increasing the uniformity of Pyrotite coverage on OSB panels. Barrier expects a quick recovery and improvements in efficiencies will provide for a quick payback on the over cost involved; approximately $100,000. The year-to-date gross margin, as a percentage of sales revenue was 5% in comparison to 6% in the prior year.  Barrier is intently focused on improving gross margins through the remainder of this fiscal year and beyond. Manufacturing efficiencies are expected to be gained not only from improved production technology but also through the efficiencies created by steady and increased sales volumes, allowing and the ability to spread overhead cost across a larger manufacturing/sales volume base.

Cost of sales in the three and nine-month periods ending March 31, 2011 increased to $750,222 and $2,363,863 from $658,358 and $1,904,596 in the previous year.  The increase is attributable to higher production volumes.  Moderate gains in efficiency are reflected in the decreased quarterly and year-to-date average cost per sq.ft. of production ($0.48 vs. $0.52 quarterly and $0.46 vs. to $0.54 year-to-date) in the comparable period.

R&D expenses and activity has generally been limited to those areas allowing LP to introduce LP^® FlameBlock^® into targeted markets such as the Wildland Urban Interface (WUI) zoned properties in California and for fire rated wall assemblies in wood framed commercial buildings.  Barrier’s International Code Council Evaluations Services Report (ICC-ES 1365) has been updated and it now

15

includes LP Building Products, Inc. as an “additional listee”.  This allows LP to sell their LP^® FlameBlock^® product in any application originally certified for Blazeguard®, Barrier’s original fire rated sheathing product.

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 year-to-date from $197,596 in 2010 to $200,151.  The expense reflects scheduled depreciation of the new manufacturing line equipment and building expansion.  Amortization, another non-cash category of reporting, of the worldwide Pyrotite technology (including patents, technical know-how, and trademarks) began when Barrier purchased it in 2004 and will continue at existing rates until it is fully depreciated.

Administrative expenses in the reported three and nine-month period decreased from $652,251 and $1,075,289 respectively to $160,844 and $502,362.  Administrative costs per sq. ft. decreased both quarterly (from $0.52 to $0.10) and year-to-date (from $0.31 to $0.10). While changes in derivative value (see Note 6) affected administrative costs significantly in this reporting period, Barrier continues to focus on how increased sales volume will help reduce admin cost per square foot shipped.  As volumes continue to increase, a continued trend for overall reduction in the average cost of administrative expense per sq.ft. will be manifest. Barrier expects the reduction in the average cost of administration to have a significant impact on bottom line performance in future reporting periods.

Accounting and Audit Fees decreased in the quarter ending March 31, 2011 vs. the same time period last year ($5,243 vs. $13,088) and year-to-date ($61,877 vs. $64,439).

Insurance costs have decreased to $11,300 for the three months and increased slightly to $61,117 for nine months in comparison to $19,344 and $56,573 the previous year.  The difference for the year-to-date period is due to annually adjusted premiums based on larger sales volume.

Legal fees decreased to $17,784 for the three-month period and $50,651 for the nine months ending March 31, 2011.  For the same period in the prior year, legal fees were $49,963 and $68,991 respectively.  Legal fees were expended on activities in support of protecting Pyrotite® patents and trademark registration as well as for help in the drafting and review of certain business correspondence.  Barrier believes protecting its technology and trademarks is an important step in positioning itself to develop strategic partners and potential technology licensees.

Sales, marketing, and investor relations expenses increased from $769 to $30,993 during the quarter and from $8,568 to $145,728 year-to-date.  The major reason for the increase in expense under this category was an enhanced effort placed on investor relations.  Barrier contracted with an external investor relations and media firm, The Investor Relations Group “IRG,” from July through November 30, 2010.  The partnership fit into a strategy of increasing investor awareness of Barrier’s improving business to the investment community.  Barrier plans to continue to support investor relations and public relations and has contracted with an investor relations professional to perform that function, for the time being, on a full-time basis.

Barrier’s direct 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 staffs of LP and MuleHide Products resulting in improved sales but also lower costs for Barrier.

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Loss Before Other items of ($176,563) is being reported for the quarter ending March 31, 2011, whereas in the same period in 2010, a loss of ($651,024) was reported.  A loss of ($375,229) is reported for the year-to-date period vs. ($948,047) in the comparable year-to-date period in 2010.

Barrier anticipated losses early in the LP relationship. LP and Barrier targeted a market-based price that is more competitive to past product pricing and at a level that will support improved market share. As sales increase, gross margins and profits are expected to improve.

Other items include income and costs not directly related to business operations.  Other income items reported during the quarterly period herein includes a foreign exchange gain and interest income of $9,026.  To compare, for the same reporting period last year there was a foreign exchange/interest income gain of $67,622.  Year-to-date the foreign exchange/interest income gain was $42,209 vs. $79,064 in the prior year.

Interest on Long Term Debt has decreased from $20,587 to $10,027 for the quarterly reporting period and decreased from $64,827 to $37,353 year-to-date as overall long-term debt continues to decrease.

In March 2010, Barrier issued, and sold in a private placement, 15 million shares of stock at the price of CDN$0.10 per share.  In addition, the purchasers of the shares were awarded the right to buy an additional share (warrant) at CDN$0.15. As well, Barrier granted options that were exercisable in Canadian currency whereas the functional currency of the company is the US dollar.  As a result of these transactions, Barrier is required to record these instruments as derivative liabilities that are re-measured to their fair value each reporting period.  During the nine months ended March 31, 2011, the Company reported a fair value gain of $188,690 for the quarter and $1,235,690 year-to-date on the derivative liability.

Net Income.  A net income of $11,126 is being reported for the quarter ending March 31, 2011, whereas in the same period in 2010, a net loss of ($1,883,589) was reported.  For the nine months ending March 31, 2011, the net income is $865,317 vs. a net loss of ($2,213,410) in the prior year. Barrier remains focused on cutting costs and improving efficiencies wherever it can.  This includes operating the manufacturing line with maximum efficiency, as the economy remains unsettled and residential construction slowly begins to recover.  Keeping a vigilant handle on costs will help keep operational costs as low as possible and enable recovery to occur sooner and at lower volumes than previously possible.

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

Summary of Quarterly Results

Selected Annual Information

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New product and market development

Barrier successfully certified and listed a fire-rated return air plenum product with the International Code Council (ICC-ES) during this period. In addition, new product labels were approved, enabling the FlameBlock product to be better marketed and utilized in Canada. Prior to this fiscal quarter, the thinnest FlameBlock panel marketed was a 15/32 performance grade panel. During this quarter LP and Barrier worked closely together to successfully certify, list, and launch a 7/16 performance grade panel which has proven to be a more competitive match to FRT plywood than the 15/32 panel in many market geographies.

Barrier continues to provide support to LP for new product and market development activity directed specifically toward the Wildland Urban Interface (WUI) zoned properties in California. To date, FlameBlock has been successfully specified and used in these zones as not only an exterior, sheer wall assembly, but also as a soffit material. Thereby, FlameBlock is currently being used to protect an important area identified by the Office of the State Fire Marshall as critical to prevent from igniting during a wildfire.

Global licensing opportunities

Barrier continues to explore opportunities for both Pyrotite technology licensing and distribution of US manufactured products as a part of the LP® Building Products agreement.  LP is active internationally and has offered to potentially extend their influence in Europe, Australia, and South America if the opportunity seems mutually beneficial.  In addition, Barrier continues to explore the opportunity for developing fire resistive panels for the emerging Structural Insulated Panel (SIP) market in Australia with an American company currently doing SIP business there. More information will be presented on these opportunities in subsequent reports as it develops.

Financial position & financings

Barrier ended the period with a working capital deficiency of ($982,761).  The Company generated negative operating cash flow for the nine months ended March 31, 2011 of ($271,665) in comparison to ($50,560) for the nine months ended March 31, 2010.  The net cash outflow from operating activities for the current fiscal period ended was primarily a result of a net income of $865,317, changes in fair value of derivative liability of ($1,235,690) the non-cash items (stock-based compensation of ($269,594) and amortization of $294,563), and an increase in inventory of $46,786.  The Company expects to fund short-term cash needs out of current operations and supplement other short-term needs with the funds raised in the recent private placement that was successfully completed to pay down debt and generate extra working capital.

Investing activities resulted in net cash outflow of ($75,788) in the current period in comparison to a net cash outflow of ($9,621) in the prior year.  The cash outflow was partially the result of the acquisition of plant and equipment capital improvements.

Financing activities resulted in net cash outflow of ($186,858) in the current period compared to a net cash inflow of $1,398,265 for the same period last year.  The cash outflow resulted from repayments on long-term debt and obligations under capital lease.

There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our 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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Although management believes that revenues will increase, management also expects an increase in operating costs. Consequently, the Company expects to incur operating losses and negative cash flow until our products gain market acceptance sufficient to generate a commercially viable and sustainable level of sales, and/or additional products are developed and commercially released and sales of such products made so that we are operating in a profitable manner.

Current and Future Financing Needs

Having undertaken an equity financing during the year ended June 30, 2010, management of the Company believes it has sufficient cash to operate its business for the fiscal year ended June 30, 2011.  At March 31, 2011, the current cash and cash equivalents totaled $328,810 and there were $98,277 available funds to draw on the revolving credit facility.  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:

a. Increased costs of general and administrative expenses;

b. Increased costs of raw materials and freight;

c. Costs associated with the research and development activities; and

d. Costs associated with maintaining property, plant and equipment and intellectual property.

Related Party Transactions

During the nine months ended March 31, 2011 the Company incurred wages and management fees of $145,061 with directors of the Company and companies with common directors.  The Company paid $461,528 in wages and management fees for the same prior year-to-date.

Capitalization

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

Issued as of March 31, 2011: 44,454,926 common shares at $15,463,675

Issued as of May 16, 2011:   44,454,926 common shares at $15,463,675

Options outstanding:

The following summarizes information about the stock options outstanding at March 31, 2011:

At March 31, 2011, the following share purchase warrants were outstanding entitling the holder to purchase one common share for each warrant held as follows:

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Critical Accounting Estimates

Stock-based Compensation Charge and Expense

As described in Note 2 to the audited annual financial statements, the Company accounts for all stock-based payments and awards under the fair value based method.  This fair value of the stock options is estimated at the date of the stock options are granted using the Black-Scholes option-pricing model.  Stock-based payments to non-employees are periodically re-measured until counter-party performance is complete and any change is recognized over the life of the award.  The Company accounts for share purchase options to employees by recording the fair value of the awards on the grant date and the related stock-based compensation expense is recognized over the period in which the options vest.  In addition, this is a non-cash compensation charge and the cash flow effects are realized only at the time of exercise.

Derivative Liability

Management evaluates the equity instruments it issues to determine whether they are required to be accounted for as liabilities.  When they are determined to be recorded as derivative liabilities, they are marked-to-market each reporting period.

The Company uses the Black-Scholes option pricing model to calculate the fair value of the derivative liabilities at each reporting period. The Black Scholes pricing model requires the input of highly subjective assumptions, including the expected price volatility.  Changes in assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of our derivative liability.

Other Matters

As at March 31, 2011 the Company did not have any off-balance sheet arrangements to report.

On January 18, 2011, Barrier and LP^® Building Products (LP) extended their exclusive Supply Agreement where Barrier has agreed to provide exclusive fire treatment services for LP on their oriented strand board panel product (OSB) through December 31, 2013.  LP is the largest producer of OSB in the world. LP will market and sell the fire treated OSB in North America under their own trade name LP^® FlameBlock^® Fire-Rated OSB Sheathing. Barrier has agreed not to market or sell Pyrotite® technology coated wood products under the registered trademark Blazeguard^® for as long as the agreement is in place. Barrier will provide technical support.  Barrier will continue to supply MuleHide FR Deck Panel to MuleHide Products, Inc. under the existing Supply Agreement executed between Barrier and MuleHide in 2004.

LP studied available fire retardant technology for OSB for some time and after an exhaustive review of available technologies, selected Pyrotite®, Barrier’s proprietary and patent protected technology.  The Barrier/LP partnership is particularly powerful in that it links the raw manufacturing of the OSB substrate with the company that actually mixes and produces the fire retardant slurry.  Barrier and LP believe that not only will LP^® FlameBlock^® be recognized as the premier fire rated sheathing in the marketplace; it will be priced competitively to alternative products.  LP has a strong sales and distribution network all over North America and will be able to leverage this substantial support network in a way that Barrier was never able to do successfully with its relatively small size.

More descriptive details relating to the long-term relationship of LP and Barrier will be reported as they are developed. Presently, however, Barrier and LP agree that moving quickly to establish both a customer base of support and recognition of the product in the builder community is the number one priority.  Establishing market share now, while the overall building market is slow, will enable LP^® FlameBlock^® sales to grow exponentially as the economy improves.

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LP’s number one market development priority will be roof and exterior wall applications in the wildfire prone areas of California. LP^® FlameBlock^®’s inherent attributes of strength enhancement coupled with superior fire protection will help position it as the premier choice for residential and commercial wood framed construction because along the west coast designing for both fire and earthquake protection is required.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         No Disclosure Necessary

ITEM 4.  CONTROLS AND PROCEDURES

a. Disclosure Controls and Procedures. As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934 (the Exchange Act), the Company’s principal executive officer and principal financial officer evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on this evaluation, these officers concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

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 March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s 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, 2010, 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

         No Disclosure Necessary

         b.  No Disclosure Necessary

         c.  No Disclosure Necessary

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         No Disclosure Necessary

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ITEM 4.  (Removed and Reserved)

ITEM 5.  OTHER INFORMATION

a. Reports on Form 8-K:

1.

Form 8-K filed 1/28/2011, regarding a press release announcing announce the ratification of a three-year supply agreement with LP^® Building Products (LP). The agreement extends the exclusive supply agreement ratified in January 2010 through December 31, 2013. Under the terms of the agreement, Barrier Technology Corporation will continue to manufacture LP^® FlameBlock^® Fire-Rated OSB Sheathing, utilizing Barrier’s proprietary Pyrotite^® Technology, at Barrier’s existing manufacturing facility in Watkins, MN.

Also regarding a press release announcing fiscal year-to-date revenue and sales volumes results for the period July 2010 – December 2010) and month ended December 31, 2010.  Overall revenue generated for the reporting period was $1,756,507, a 28% increase over the $1,372,344 generated during the same period in the prior year.  Sales volume of shipments of Barrier products for the fiscal year-to-date period July 2010 – December 2010 was 3,528,200 sq. ft.

2.

Form 8-K filed 2/1/2011, regarding a press release announcing new Underwriters Laboratories of Canada (ULC) Listing Certifications acquired through recent R&D testing.

b. Information required by Item 407(C)(3) of Regulation S-K:

No Disclosure Necessary

ITEM 6.  EXHIBITS

Exhibit 23.1:  Consent of Auditor, dated October 4, 2010 incorporated by

               reference to Form 10K/A as filed May 11, 2011.

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 David Corcoran, CFO/Director

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 David Corcoran, CFO/Director

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

International Barrier Technology Inc. -– SEC File No. 000-20412

Registrant

Date: May 16, 2011          /s/ Michael Huddy                               

                                Michael Huddy, President/CEO/Director

Date: May 16, 2011          /s/ David Corcoran                              

                                David Corcoran, CFO/Director

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