Securities Law & Instruments

Headnote

Section 144 -- application for variation of cease trade order -- issuer cease traded due to failure to file with the Commission annual financial statements -- issuer has applied for a variation of the cease trade order to permit the issuer to proceed with a financing through the issuance of convertible debentures -- potential investors to be accredited investors and to receive copy of cease trade order and partial revocation order prior to making investment decision -- partial revocation granted subject to conditions.

Applicable Legislative Provisions

Securities Act , R.S.O. 1990, c. S.5, as am., ss. 127, 144.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990 C. S.5 AS AMENDED

(the "Act")

AND

IN THE MATTER OF

AMERICAN INSULOCK INC.

(the "Applicant")

ORDER

(Section 144)

WHEREAS the securities of the Applicant are subject to a temporary cease trade order made by the Director dated October 7, 2009 pursuant to paragraph 2 and paragraph 2.1 of subsection 127(1) and subsection 127(5) of the Act, as extended by a further order made by the Director dated October 19, 2009 pursuant to paragraph 2 of subsection 127(1) of the Act (collectively, the "Cease Trade Order"), ordering that trading in the securities of the Applicant cease until the Cease Trade Order is revoked;

AND WHEREAS the Applicant has made an application to the Ontario Securities Commission (the "Commission") pursuant to subsection 144(1) of the Act (the "Application") for an order revoking the Cease Trade Order;

AND WHEREAS the Applicant has represented to the Commission as follows:

1. The Applicant was incorporated on October 19, 1984 under the BC Company Act under the name Canadian Insulock Corporation. On October 19, 1984 the name was changed to American Insulock Inc.

2. The Applicant is a reporting issuer in British Columbia, Alberta and Ontario and is also subject to a cease trade order issued by the Alberta Securities Commission and the British Columbia Securities Commission. The Applicant has concurrently applied to the Alberta Securities Commission and the British Columbia Securities Commission for a partial revocation of its cease trade order.

3. The Applicant's head office is located in the province of British Columbia.

4. The Applicant is authorized to issue an unlimited number of common shares (the "Common Shares") and an unlimited number of preferred shares, of which 98,144,399 Common Shares and 2,500,000 preferred shares are issued and outstanding.

5. The Applicant's Common Shares were listed on the Canadian National Exchange (the "CNSX"). On October 22, 2009 the CNSX suspended The Applicant's Common Shares from trading due to a breach of ongoing CNSX disclosure requirements. The Applicant was subsequently de-listed on January 19, 2010.

6. The Cease Trade Order was issued as a result of the failure of the Applicant to file its audited annual financial statements, management discussion and analysis related to the audited financial statements for the year ended May 31, 2009 on or before the filing deadline as required by section 4.1 of National Instrument 51-102 -- Continuous Disclosure Obligations (the "Deficiencies").

7. The Applicant's failure to file financial statements was a result of financial distress.

8. As of the date of this Application, the Applicant had not rectified the filing Deficiencies. As a consequence, the Cease Trade Order remains in effect.

9. The Applicant has applied to the Director under National Policy 12-202 -- Revocation of a Compliance Related Cease Trade Order for an order under section 144 of the Act for a partial revocation of the Cease Trade Order solely to permit the Applicant to conduct a financing through the issuance of convertible debentures (the "Debentures").

10. The Applicant seeks to vary the Cease Trade Order to allow it to issue Debentures to a maximum of US $750,000. The Debentures will be issued at the rate of ten percent (10%) per year (computed on the basis of a 365-day year) from the date of issuance until paid, with an option to convert at any time, until payment is made in full, all or any part of the principal amount of the Debentures, plus accrued interest, into Common Shares of the Company, at the conversion price of US $0.05 per Common Share (the "Financing").

11. The proceeds from the Debentures will be used as follows:

(a) To pay outstanding audit fees:

US $

80,494.28

 

(b) To pay outstanding legal fees:

US $

147,500.00

 

(c) To pay outstanding regulatory fees:

US $

17,000.00

 

(d) To pay relisting fees (CNSX)

US $

19,500.00

 

Total:

US $

264,494.28

12. Investors who participate in the Debenture offering (the "Subscribers") will participate pursuant to exemptions in either Section 2.3 or 2.5 of National Instrument 45-106 Prospectus and Registration Exemptions.

13. The Applicant intends to apply to the Commission for a full revocation of the Cease Trade Order after it has rectified the Deficiencies.

14. The Applicant intends to apply to the CNSX for re-instatement for trading after it has rectified the Deficiencies.

15. Prior to the completion of the Financing, the Subscribers will receive:

(a) a copy of the Cease Trade Order;

(b) a copy of this order; and

(c) written notice from the Applicant that all securities of the Applicant, including any and all securities issued pursuant to the Financing will remain subject to the Cease Trade Order following the completion of the transaction.

16. The Applicant will provide to the Commission a written acknowledgment from each Subscriber of their understanding that any of the securities of the Applicant that they purchase may remain subject to the Cease Trade Order indefinitely and therefore not capable of being resold.

17. Other than the Cease Trade Order, the Applicant has not previously been subject to a cease trade order by the Commission.

18. The Applicant's SEDAR and SEDI profiles are up-to-date.

19. The Applicant is not considering, nor is it involved in any discussions relating to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order be and is hereby partially revoked solely to permit the issuance of the Debentures provided that:

(a) prior to completion of the Financing each Potential Investor will:

(i) receive a copy of the Cease Trade Order;

(ii) receive a copy of this partial revocation order; and

(iii) receive written notice from the Issuer, and acknowledge that all of the Issuer's securities, including the securities issued in connection with the Financing will remain subject to the Cease Trade Order until it is revoked, and that the granting of this partial revocation order does not guarantee the issuance of a full revocation order in the future; and

(b) this partial revocation order will terminate on the earlier of:

(i) completion of the Financing; and

(ii) 120 days from the date hereof.

DATED at Toronto, Ontario on this 23rd day of June, 2010.

"Michael Brown"
Assistant Manager, Corporate Finance Branch
Ontario Securities Commission