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EX-31.1 - CERTIFICATION - SafeBrain Systems, Inc.sfbr_ex311.htm
EX-31.2 - CERTIFICATION - SafeBrain Systems, Inc.sfbr_ex312.htm
EX-32.1 - CERTIFICATION - SafeBrain Systems, Inc.sfbr_ex321.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No. 000-50493

SAFEBRAIN SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
98-0412431
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
     
100-224 11th Avenue S.W.
Calgary, Alberta, Canada   
  T2R 0C3
(Address of Principal Executive Offices)   (Zip Code)
 
(403) 801-1506
(Registrant’s Telephone Number Including Area Code)

ALVERON ENERGY CORP.
(Former Name, Address and Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

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 o

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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Larger accelerated filer o Accelerated filer   o
Non-accelerated filer  o Smaller reporting company    x
 
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 62,487,233 shares outstanding as of September 21, 2012.
 


 
 

 
 
SAFEBRAIN SYSTEMS INC.
(formerly Alveron Energy Corp.)
(A Development Stage Company)
 
CONSOLIDATED BALANCE SHEETS
As of JULY 31, 2012 and OCTOBER 31, 2011
 
   
July 31,
2012
   
October 31,
2011
 
 
 
(unaudited)
       
ASSETS
Current Assets:
           
Cash and cash equivalents
  $ 3,651       109  
Total Current Assets
    3,651       109  
                 
Other Assets:
               
        Other Receivable
    16,256       -  
Intangible assets, net of amortization
    758,438       -  
Equipment, net of accumulated depreciation
    121,184       -  
Total Current Assets
    895,878       109  
                 
Total Assets
  $ 899,529       109  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
               
Accounts payable and accrued liabilities
  $ 108,112       46,005  
Payable for Safebrain Technology
    297,959       -  
Related party note
    619,313       482,731  
Total Current Liabilities
    1,025,384       528,736  
                 
Total Liabilities
    1,025,384       528,736  
                 
STOCKHOLDERS' DEFICIT
               
Capital stock  - $.001 par value, 100,000,000 common shares authorized, 
52,140,000 common shares outstanding as of July 31, 2012 and October 31, 2011, respectively
    52,140       52,140  
Additional paid in capital
    184,342       184,342  
Stock payable
    1,266,488       -  
Deficit accumulated during the development stage
    (1,628,825 )     (765,109 )
Total Stockholders' Deficit
    (125,855 )     (528,627 )
                 
Total Liabilities and Total Stockholders' Deficit
  $ 899,529       109  
 
The accompany notes are integral part of these consolidated financial statements.
 
 
2

 
 
SAFEBRAIN SYSTEMS INC.
(formerly Alveron Energy Corp.)
(A Development Stage Company)
Unaudited
 
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended July 31, 2012 and 2011, and Cumulative from November 18, 2003
(Date of Inception) Through July 31, 2012
 
                           
November 18, 2003
 
   
Three Months
   
Three Months
   
Nine Months
   
Nine Months
   
(Date of Inception)
 
   
Ended
   
Ended
   
Ended
   
Ended
   
Through
 
   
July 31,
   
July 31,
   
July 31,
   
July 31,
   
July 31,
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
                               
Revenues
  $ -       -       -       -       -  
                                         
Expenses
                                       
Professional fees
    55,190       145       75,335       8,145       140,843  
Consulting Expense
    522,240       -       522,240       26,000       552,240  
Interest expense
    19,111       10,944       32,227       29,928       76,551  
Office and Administrative
    206,040       305       213,647       3,498       247,082  
Loss on investment
    -       352,502       -       545,964       589,900  
Amortization Expense
    16,562       -       16,562       -       16,562  
Depreciation Expense
    3,816       -       3,816       -       3,816  
Foreign currency translation
  $ (111 )     -       (111 )     86       1,831  
                                         
Total operating expenses
    822,848       363,896       863,716       613,621       1,628,825  
                                         
Net Loss
    (822,848 )     (363,896 )     (863,716 )     (613,621 )     (1,628,825 )
                                         
Loss per Common Share - Basic and Diluted
  $ (0.02 )     (0.01 )     (0.02 )     (0.01 )        
                                         
Weighted average number of shares outstanding
during the periods basic and diluted
    52,140,000       52,140,000       52,140,000       52,140,000          
 
The accompany notes are integral part of these consolidated financial statements.
 
 
3

 
 
SAFEBRAIN SYSTEMS INC.
(formerly Alveron Energy Corp.)
(A Development Stage Company)
Unaudited
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended July 31, 2012 and 2011, and Cumulative from November 18, 2003 (Date of Inception) Through July 31, 2012
 
               
November 18, 2003
 
   
Nine Months
   
Nine Months
   
(Date of Inception)
 
   
Ended
   
Ended
   
Through
 
   
July 31
   
July 31
   
July 30
 
   
2012
   
2011
   
2012
 
                   
Cash Flows from Operating Activities
                 
Net (loss) earnings
  $ (863,716 )   $ (613,621 )   $ (1,628,825 )
Adjustments to reconcile net loss to net cash used by Operating activities:
                       
Common stock issued for services
    -       26,000       30,000  
Depreciation and Amortization Expense
    20,378       -       20,378  
Interest accrued on convertible note
    -       -       6,220  
    Loss on discontinued operations
    -       545,964       545,965  
Repayment in excess of lending
    -       5,000       5,000  
Changes in operating assets and liabilities:
                       
Other receivable
    (16,256 )     -       (16,256 )
    Accounts payable and accrued liabilities
    62,107       24,045       402,932  
                         
Net cash used in continuing operating activities
    (797,487 )     (12,612 )     (932,545 )
Net cash used in discontinued operating activities
    -       (44,206 )     (44,206 )
Cash flows used in operating activities
    (797,487 )     (56,818 )     (976,751 )
                         
Cash Flows from Investing Activities
                       
Acquisition of assets
    (602,041 )     -       (602,041 )
Discontinued investing activities
    -       (501,758 )     (501,758 )
Cash used for investing activities
    (900,000 )     (501,758 )     (1,103,799 )
                         
Cash Flows from Financing Activities
                       
Proceeds from convertible note
            -       6,000  
Repayment of note
    (217,712 )     (11,000 )     (228,712 )
Proceeds from sale of common stock and warrants
    1,266,488       -       1,327,688  
Advances from related party
    354,294       563,553       951,747  
Stockholder contributions
    -       -       37,199  
Net cash used in continuing financing activities
    1,403,070       552,533       2,093,922  
Net cash provided by discontinued financing activities
            (9,721 )     (9,721 )
                         
Cash flows provided by financing activities
    1,403,070       542,832       2,084,201  
                         
Net (Decrease) Increase in Cash
    3,542       (15,744 )     3,651  
                         
Cash and Cash Equivalents beginning of period
    109       15,858       -  
                         
Cash and Cash Equivalents end of period
  $ 3,651     $ 115     $ 3,651  
                         
NON-CASH ACTIVITIES
                       
Payable for Safebrain Technology
  $ 297,959     $ -     $ 297,959  
                         
Supplemental Cash Flow Information
                       
Interest paid
            -       -  
Income taxes paid
            -       -  
 
The accompany notes are integral part of these consolidated financial statements.
 
 
4

 
 
SAFEBRAIN SYSTEMS INC.
(formerly Alveron Energy Corp.)
(A DEVELOPMENT STAGE COMPANY)

Notes to Interim Financial Statements
July 31, 2012
Unaudited
 
1.            History and Organization

Modena I, Inc. was a development stage company which was incorporated under the laws of the State of Delaware on November 18, 2003.  From inception to September 2007, the Company was focused on providing a vehicle for a foreign or domestic non-public company to become an SEC reporting (publicly-traded) company. To this end, we intended to locate and negotiate with a business entity for the combination of that target company with the Company.  Since September 2007, the Company has shifted its focus to becoming a wind and hydro electric energy generation company.
 
On April 12, 2010 the Board of Directors of Modena I, Inc. (the “Company”) filed a Certificate of Amendment to the Articles of Incorporation with the Secretary of State of Delware changing the Company’s name to Alveron Energy Corp.
 
On April 20, 2012, the Company underwent a change of control where the former President and Director of the Company sold 39,900,000 common shares to a company controlled by the current President and Director of the Company.
 
On May 14, 2012, we acquired 100% of SafeBrain System (“SafeBrain”) from Rod Newlove for $900,000.  Safebrain is a corporation duly organized, validly existing, and in good standing under the laws of Saskatchewan, Canada.  Following payment, Newlove will transfer all rights to SafeBrain System to the Company.  The SafeBrain Systems works in two ways; the Cranium Impact Analyzer Sensor (“C.I.A”) is mounted on the helmet of athlete; The SafeBrain software allows in-depth analysis of any impact event and can be customized for the notification and data logging settings for each athlete. The Company plans to market the SafeBrain System to non-professional athletes who participate in sports that require helmets such as hockey, football, biking, motor-cross, skiing and snowboarding.   As of July 31, 2012 the Company has paid $602,041, the remaining $297,959 is recorded as technology acquisition payable. The assets acquired composed of $125,000 of equipment, and $775,000 of Intangible assets.
 
2.            Going Concern
 
These accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has a working capital deficit of $1,021,733 and has no current revenue stream. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
 
 
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The Company's ability to continue as a going concern is also contingent upon its ability to complete certain capital formation activities and generate working capital operations in the future. Management's plan in this regard is to secure additional funds through equity financing activities, and from loans made by the Company's stockholder.
 
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.

3.            Basis of Presentation

The Company has not earned any revenues from limited principal operations and accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in FASB Pronouncements. Among the disclosures required are that the Company's financial statements be identified as those of a development stage company, and that the statements of operation, stockholders' deficit and cash flows disclose activity since the date of the Company's inception.

The interim condensed financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. 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 are adequate to not make the information presented misleading.

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 condensed financial statements be read in conjunction with the financial statements of the Company for the year ended October 31, 2011 and notes thereto included in the Company's 10-K annual report. The Company follows the same accounting policies in the preparation of interim reports.

In preparing financial statements, the Company's management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. We review our estimates on an on-going basis, including those related to contingencies and income taxes. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.

Results of operations for the interim periods are not indicative of annual results.

4.            Principle of Consolidation

The accounts of all of our wholly-owned subsidiaries are included in the consolidation of these financial statements from the date of acquisition.  All significant intercompany accounts and transactions have been eliminated in consolidation.  During the current quarter we have consolidated the joint venture as discussed in note 9 below. The Company records net income attributable to non-controlling interest in the consolidated statements of operations for any non-owned portion of its consolidated subsidiary.  Non-controlling interest being accounted for in owners’ equity on the consolidate balance sheet.
 
 
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5.            Summary of Significant Accounting Policies
 
a)            Fair Value of Financial Instruments
 
The Company adopted ASC No. 820-10 (ASC 820-10), Fair Value Measurements. ASC 820-10 relates to financial assets and financial liabilities.
 
ASC 820-10 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.
 
ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property. ASC 820-10 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:
 
Level 1
 
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
 
Level 2
 
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
 
Level 3
 
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
 
The Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
 
 
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b)            Earnings or Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

c)            Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

d)            Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of October 31, 2011 and July 31, 2012, there were no cash equivalents.

e)            Recent Accounting Pronouncements
 
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operation.

f)             Foreign Currency Translation

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into United States dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

g)            Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
 
 
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h)            Other Receivable

The Other Receivable represents Harmonized Sales Tax Receivable for expenses incurred by the Company in Canada.  Companies that generate revenue are subject to Harmonized Sales Tax, and are collected up front when purchases are made.  Since the Company has no operations, the Tax collected is refundable as such the Company has recorded a receivable of $16,256 as a of July 31, 2012.

i)            Property and Equipment

Property and equipment are stated at cost and are amortized over their estimated useful lives using straight line depreciation method.  Upon retirement or disposition of equipment, the cost and accumulated amortization are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized.

j)            Intangible Assets

The Company’s intangible assets consist primarily of trademarks, patents, and software which are carried at amortized cost.  All trademarks have legal lives of 10 years and are amortized over their respective legal lives upon approval. The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses recoverability by reference to future cash flows from the products underlying these intangible assets. If these estimates change in the future, the Company may be required to record impairment charges for these assets. As of July 31, 2012, no impairment was record and the Company recorded an amortization expense of $16,562

6.            Acquisition of Assets

On May 14, 2012, we acquired 100% of SafeBrain System (“SafeBrain”) and Creative Electronics Design Services, LTD from Rod Newlove for $900,000.  Safebrain is a corporation duly organized, validly existing, and in good standing under the laws of Saskatchewan, Canada.  Newlove has transferred all assets and rights to SafeBrain System to the Company for $270,000.  Assets include intellectual properties, inventories, and Patent/Trademarks/Copyrights. The SafeBrain Systems works in two ways; the Cranium Impact Analyzer Sensor (“C.I.A”) is mounted on the helmet of athlete; The SafeBrain software allows in-depth analysis of any impact event and can be customized for the notification and data logging settings for each athlete. The Company plans to market the SafeBrain System to non-professional athletes who participate in sports that require helmets such as hockey, football, biking, motor-cross, skiing and snowboarding. In regards to the purchase of Creative Electornics Design Services, LTD, the agreed upon purchase price is $630,000; as of July 31, 2012 $332,041 has been paid and the remaining $297,959 remain accrued and outstanding.  At the acquisition date, Creative Electronic had no assets or liabilities. The Company reviewed the acquisitions taking in consideration the inputs and outputs available them and noted that the acquisition constitutes an asset acquisition and lacks all elements necessary to be considered a business acquisition.
 
Assets acquired:
 
   
Useful Lives
   
July 31, 2012
 
ASSETS
           
Other Assets:
           
Intangible Assets
 
10 Years
    $ 775,000  
Equipment
 
7 Years
      125,000  
Accumulated Depreciation/Amortization
            (20,378 )
Total Other Assets
          $ 879,622  
 
 
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Equipment mainly composed of building materials, injection molds, and Calibration equipments which are recorded at cost and being depreciated for financial account purposes on the straight-line method over their respective estimated useful lives of 7 years.  Upon retirement or other deposition of these assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in the results of operations.  Expenditures for maintenance and repairs are charged to operating expense

Intangible Assets acquired mainly consists of patent, trademark, copyrights, and software, which are carried at amortized cost.  The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. All trademarks have a legal life of 10 years and are amortized over the useful lives.

Equipment depreciation expense was $3,816 for the three and nine month ended July 31, 2012.  Amortization expense for technology for the three and nine months was 16,562.  The company recorded a total of depreciation and amortization expense of $20,738 as of July 31, 2012.
 
7.            Related Party Transactions

Related party transactions are in the normal course of operations and are recorded at amounts established and agreed between the related parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:

During the quarter, $354,294 was loaned by related parties for office and administration fees and professional fees. Since inception, the shareholder has advanced funds for professional fees and other office and general expenses in the amount of $619,313.  The related party loans are considered as unsecured loan with no stated interest rate and due upon demand.  The company imputed interest at 8% per annum, which is comparable to historical borrowing rate that the company has obtained in the past.  These notes are not convertible and no options were attached.  Interest expense recorded as of July 31, 2012 is $30,877. As of October, 2011 and July 31, 2012, the accrued interest is $41,241 and $72,118 respectively.
 
8.            Stockholders’ Activity

During the period, we sold 8,443,253 Units at a price of $0.15 per Unit to a group of private investors. Each Unit consisted of one share of common stock and one warrant. Every two warrants entitle the holder to purchase one share of our common stock a price of $0.35 per share at any time on or before April 30, 2014. The shares for these investments have not been issued as of July 31, 2012 and $1,266,488 is recorded as stock payable.

9.            Joint Venture

On February 12, 2010, the Company formed a new Joint Venture Corporation, “Yantai Alveron Energy Development Company”, in Shandong, China as per the agreement sign on June 20, 2009. The company ownership was organized per the agreement with Alveron Energy Corp. owning 77% and the joint partners owning the remaining 23% of the new entity. On the date of the Joint Venture, Yantai had no balance sheet or income statement activities. Alveron Energy Corp. transferred a total of $539,900 to this new entity during the quarter ending January 31, 2011 to be used on the feasibility report for a potential 48MW wind energy plant in Shandong, China. Out of the total $539,900, $239,900 was allocated to the Rushan Project and $258,230 to the Longquan Project. As of October 31, 2011 and based on events that have deterred the likely success of the Rushan and Longuan Project, the Company has discontinued operations in the Joint Venture.
 
 
10

 

10.          Fixed Assets
 
Assets and depreciation for the period are as follow:
 
   
July 31,
2012
   
October 31,
2011
 
                 
Equipment
  $ 125,000     $ -  
                 
Accumulated depreciation
  $ (3,816 )   $ -  
                 
Total Fixed Assets    $ 121,184     $ -  
 
Equipment mainly composed of building materials, injection molds, and Calibration equipments which are recorded at cost and being depreciated for financial account purposes on the straight-line method over their respective estimated useful lives of 7 years.  Upon retirement or other deposition of these assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in the results of operations.  Expenditures for maintenance and repairs are charged to operating expense.  Depreciation expense was $3,816 for the three and nine months ended July 31, 2012.

11.          Other Receivable:

The Other Receivable represents Harmonized Sales Tax Receivable for expenses incurred by the Company in Canada.  Companies that generate revenue are subject to Harmonized Sales Tax, and are collected up front when purchases are made.  Since the Company has no operations, the Tax collected is refundable as such the Company has recorded a receivable of $16,256 as a of July 31, 2012.

12.           Subsequent Events
 
 Subsequent to July 31, 2012 we issued the 8,443,253 units for the previous investments and sold an additional 2,000,000 units, at a price of $0.10 per unit, to two private investors.
 
 
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Item 2.   Management’s Discussion and Analysis and Plan of Operation.

We were incorporated in Delaware in November 2003. From November 2003 to February 2010 we were inactive.

In April 2010 we changed our name to Alveron Energy Corp.

Between February 2010 and July 2011 we were involved in a joint venture which was formed to determine the feasibility of building a 48MW wind energy plant in Shandong, China. In July 2011 we discontinued our involvement in the joint venture due to our inability to further fund the project. Total loss from discontinued operation from inception to October 31, 2011 was $589,900.

In March 2012, Michael Scott purchased 39,900,000 shares of our common stock from Sang-Ho Kim who, at that time, was our Chief Executive Officer.

In March 2012, Sang-Ho Kim and Surendran Shanmugan appointed Michael Scott as one of our directors. Following the appointment of Mr. Scott, Mr. Kim resigned as our officer. Following his resignation, Mr. Scott became our Chief Executive Officer and our Principal Financial and Accounting Officer.

In March 2012 Mr. Scott transferred 18,900,000 shares he purchased from Sang-Ho Kim to various shareholders in SafeBrain Systems, Inc. and to other third parties.

Mr. Kim and Mr. Shanmugan resigned as directors on April 15, 2012.

Acquisition of the SafeBrain Technology

On May 25, 2012, we acquired the SafeBrain System (“SafeBrain”) from Rod Newlove for $900,000, of which $602,041 has been paid and the remaining $297,959 was to be paid no later than June 14, 2012.

SafeBrain works in two ways:

     ●
The Cranium Impact Analyzer Sensor (the “C.I.A.”) is mounted on the helmet of an athlete; and
   
     ●
The SafeBrain software allows in-depth analysis of any impact event and can be customized for the notification and data logging settings for each athlete.

The C.I.A. sensor was designed to ensure compatibility with a wide range of athletic helmets. The sensor is approximately the size of a quarter and weighs less than 8 grams. Even at this small size, the C.I.A. patented sensor contains a 3-axis accelerometer, based on a 16-bit microprocessor. The C.I.A. sensor contains a data-logger and real-time clock to provide time-stamped force-readings when used with the SafeBrain software.
 
 
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Placed on the helmet, the small CIA sensor accurately measures G-force on all 3 –axis. An LED indicator light flashes to alert the monitor, coaching staff or an individual when an impact has occurred that has the potential to cause a concussion which requires proper assessment and perhaps medical attention.

On May 15, 2012, we entered into a consulting agreement with a company controlled by Mr. Newlove. The agreement provides that we will pay the consultant $10,000 per month for supervising the manufacturing of, and developing improvements for, the SafeBrain System. In addition, during each twelve-month period during the term of this agreement, we will provide supplies and materials to the Consultant, at a cost not to exceed $5,000 during the twelve-month period, to be used by the Consultant in performing the consulting services.

The consulting agreement will expire on June 30, 2017.
 
Marketing

We plan to market the SafeBrain System to non-professional athletes who participate in sports that require helmets such as hockey, football, biking, motor-cross, skiing and snowboarding.

There are over 1.5 million registered minor hockey players worldwide with over 71% of them being located in North America representing over 50,000 teams.

There are an estimated 1.1 million high school students playing American football and 35,000 college players currently in the USA. Studies published over the last 20 years indicate that 15-20% of high school football players or nearly 250,000 players suffer concussions each year in the United States. According to Safekids.org as of October 25, 2011, thirty-three states in the USA have enacted youth sports concussion related laws. Although the wording varies from state to state the focus is primarily on three main points;

·   Teams are to educate their players and parents about the nature of concussions and brain injury;
·   Coaches who suspect a player has sustained a concussion must remove the player from the game, competition and practice; and
·   A player removed from play due to a concussion must be evaluated by a health care provider and receive written clearance before participating in sports again.

With the demand for extreme sports related competitions growing, sports such as biking, skiing, snow-boarding, motor cross and the like are also garnering significant media exposure for head trauma related injuries most noticeably concussions.

We believe SafeBrain is currently the only product that has state of the art advancement technology with 360 degree impact gauging and monitoring in addition to indicator warning lights that flash the moment of impact.
 
 
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SafeBrain will be marketed to all amateur football and hockey teams starting at the novice level through major junior and professional levels. In addition SafeBrain will also be marketed to individuals and teams in other sports such as skateboarding, skiing, biking, bmx freestyle, motor cross, sport racing and lacrosse. The primary focus for the first eighteen to twenty-four months will be the North American football and hockey markets although there will be no limitations placed on sales in other markets.

Although SafeBrain will benefit from the ongoing media print and television exposure to sports related concussions, to help drive awareness for SafeBrain, the marketing approach will be multifaceted. We will hire a dedicated sales team to assist in generating interest from teams and individuals throughout Canada and the United States. The sales team will be responsible for to following up with teams currently pilot testing the product, setting up media events and interviews, directing targeted traffic to our website, print and content publications as well as organizing booths and displays at all the large sports shows and youth development camps in North America.

We expect our revenues will be derived from three components.
 
Unit sales: Football/Cost $4,995.00

Each SafeBrain System will contain a Team Kit which consists of: 52 C.I.A. Sensors, Safe Brain Software, Netbook PC, Storage Case, Instruction Manual, two data transfer interface cables and 2 C.I.A. emergency replacement sensors.

Unit sales: Hockey/Cost $2,995.00

Each SafeBrain System will contain a Team Kit which consists of: 22 C.I.A. Sensors, Safe Brain Software, Netbook PC, Storage Case, Instruction Manual, two data transfer interface cables and 2 C.I.A. emergency replacement sensors.

Maintenance Agreement and Team Maintenance/Cost $499.00.

The annual maintenance agreements for teams or individuals will include complete battery replacement on all Units as needed, testing, verification and calibration certification on all CIA devices. Data storage is also included to record and store downloaded user data safely and effectively for the entire time any one specific user or team is using the device. A satisfaction guaranteed lifetime warranty also enables easy repair or replacement on any Units sold.

We will also sell individual Units at a cost of $199.00 and annual maintenance costs $49.99 per year.
 
 
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Manufacturing

We do not own any manufacturing facilities. Accordingly, we will use unrelated third parties to manufacture our SafeBrain System. We do not have any written agreements with any person regarding the manufacture of the SafeBrain system or its components.

Plan of Operation

Between April 11, 2012 and July 31, 2012, we sold 8,443,253 Units at a price of $0.15 per Unit to a group of private investors. Subsequent to July 31, 2012 we sold 2,000,000 units, at a price of $0.10 per unit, to two private investors. Each Unit consisted of one share of common stock and one warrant. Every two warrants entitle the holder to purchase one share of our common stock at a price of $0.35 per share at any time on or before April 30, 2014.

As of September 15, 2012 we had generated less than $30,000 in revenue from sales of SafeBrain systems.

As of September 15, 2012 we had cash on hand of approximately $___. We have never earned a profit and we expect to incur losses during the foreseeable future and may never be profitable. We will need to earn a profit or obtain additional financing until we are able to earn a profit. We do not know what the terms of any future financing may be, but any future sale of equity securities would dilute the ownership of existing stockholders. The failure to obtain the capital we require will result in a slower implementation of our business plan. There can be no assurance that we will be able to obtain any capital which is needed. We do not have any commitments from any person to provide us with any additional capital.
 
Our plan of operation and capital requirements for the twelve months ending August 31, 2013 are shown below.
 
Activity  
Estimated
Completion
Date
   
Estimated
Cost
 
             
Production
            100,000  
Research and Development
            50,000  
Marketing
            150,000  
Working Capital
            390,000  
Total
            690,000  
 
 
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General

Our principal offices are located at 100, 224-11th Avenue S.W., Calgary, AB T2R 0C3. Our offices are provided to us free of charge.

Our website is www.safebrain.ca and our telephone number is (403) 801-1506.

As of September 15, 2012 we did not employ any persons on a full time basis.
 
Results of Operation

During the six months ended July 31, 2011 we were involved in a joint venture which was formed to determine the feasibility of building a 48MW wind energy plant in Shandong, China. In July 2011 we discontinued our involvement in the joint venture due to our inability to further fund the project.

On May 25, 2012, we acquired the SafeBrain System and since that date we have been involved with bringing the SafeBrain System to market.

As a result of the:

·
discontinuance of our wind energy joint venture,
·
our inactivity between July 2011 and May 2012, and
·
the start of our new business in May 2012

a comparison of our results of operation for the nine months ended July 31, 2012 with the prior nine month period would not be meaningful.
 
 
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Critical Accounting Policies

Our most critical accounting policies, can be found in our Annual Report on Form 10-K for the fiscal year ended October 31, 2011. There have been no material changes in our existing accounting policies from the disclosures included in our 2011 Form 10-K.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
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PART II
 
OTHER INFORMATION

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

Between April 11, 2012 and July 31, 2012, we sold 8,443,253 Units at a price of $0.15 per Unit to a group of private investors. Subsequent to July 31, 2012 we sold 2,000,000 units, at a price of $0.10 per unit, to two private investors. Each Unit consisted of one share of common stock and one warrant. Every two warrants entitle the holder to purchase one share of our common stock a price of $0.35 per share at any time on or before April 30, 2014.

We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of these securities. The persons who acquired these securities were sophisticated investors and were provided full information regarding our business and operations. There was no general solicitation in connection with the offer or sale of these securities. The persons who acquired these securities acquired them for their own accounts. The certificates representing these securities will bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission or other form of remuneration was given to any person in connection with the sale of these securities.

Item 6.   Exhibits and Reports on Form 8-K

(A)     Exhibits

Exhibit Number
 
Description
     
31.1
 
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1
 
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
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
 
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 
SAFEBRAIN SYSTEMS, INC.
 
       
Date: September 25, 2012     By:  /s/ Michael Scott  
    Michael Scott  
 
  Chief Executive and Financial Officer  
 
 
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