UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





(Mark One)[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended  December 31, 2012[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to __________





000-53614Commission File NumberBLUFOREST, INC.(Exact name of registrant as specified in its charter)Nevada
26-2294927(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)Ave. Republica del Salvador y Shyris Edificio Onix piso 10-C Quito Ecuador
N/A(Address of principal executive offices)
(Zip Code)(855) 509-5508(Registrant’s  telephone number, including area code)





Securities registered pursuant to Section 12(b) of the Exchange Act:Title of each class
Name of each exchange on which registeredn/a
n/a





Securities registered pursuant to Section 12(g) of the Exchange Act:Common StockTitle of  class





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.





Yes
[   ]
No
[X]





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.





Yes
[   ]
No
[X]





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.





Yes
[X]
No
[   ]


1





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).





Yes
[X]
No
[  ]





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.





Yes
[   ]
No
[X]





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 Act.





Large accelerated filer
[   ]
Accelerated filer
[ X ]Non-accelerated filer
[   ]
Smaller reporting company
[   ](Do not check if a smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).





Yes
[  ]
No
[X]





State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.





The aggregate market value of voting common stock held by non-affiliates was approximately $178,380,579 as of June 29, 2012 assuming solely for the purpose of this calculation that all directors, officers and greater than 10% stockholders of the registrant are affiliates. Shares of common stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.





APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS DURING THE PAST 5 YEARS:





Indicate by check mark whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.





Yes
[   ]
No
[   ]





APPLICABLE ONLY TO CORPORATE REGISTRANTS





Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.





103,474,000 common shares outstanding as of March 14, 2013





DOCUMENTS INCORPORATED BY REFERENCE





List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes.


None


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TABLE OF CONTENTS





PagePART IItem 1
Business
4Item 1A
Risk Factors
9Item 1B
Unresolved Staff Comments
14Item 2
Properties
14Item 3
Legal Proceedings
15Item 4
Mine Safety Disclosure
15PART IIItem 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
16Item 6
Selected Financial Data
17Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
18Item 7A
Quantitative and Qualitative Disclosures About Market Risk
22Item 8
Financial Statements and Supplementary Data
22Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
23Item 9A
Controls and Procedures
23Item 9B
Other Information
25PART IIIItem 10
Directors, Executive Officers and Corporate Governance
25Item 11
Executive Compensation
28Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
29Item 13
Certain Relationships and Related Transactions, and Director Independence
31Item 14
Principal Accounting Fees and Services
31PART IVItem 15
Exhibits, Financial Statement Schedules
33Signatures
34Exhibit Index


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Forward Looking Statements




The information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate,” "predict," "potential" or "continue," the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks described below, and, from time to time, in other reports the Company files with the United States Securities and Exchange Commission (the “SEC”). These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements.




Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.





The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Private Securities Litigation Reform Act of 1995 are unavailable to us.





Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.





In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.





As used in this Annual Report, the terms "we," "us," "Company," "our" and "Greenwood" mean Greenwood Gold Resources, Inc. unless otherwise indicated.





ITEM 1.    BUSINESS





Corporate Information





Our Current Address is: Ave. Republica del Salvador y Shyris Edificio Onix piso 10-C Quito Ecuador.  Our telephone number is (855) 509-5508.





Our common stock is quoted on the OTCBB (“Over-the-Counter Bulletin Board”) under the symbol "BLUF".




4


Overview





We are a carbon offsets marketing company. Initially, we intend to sell carbon offsets through our website to voluntary markets where no verification is required. A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere. Source: World Resources Institute. Carbon offsets are measured in metric tons of carbon dioxide-equivalent and may represent six primary categories of greenhouse gases: carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and sulfur hexafluoride. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.





Once we are able to complete the verification process, we will sell verified carbon offsets through other markets. We intend to market and sell Verified Emission Reduction (VER) and Reduced Emissions from Deforestation and Degradation (REDD) carbon offsets through global restoration projects. The offsets will be validated and verified for sale to companies, foundations, and other entities that, for branding, policy and corporate social responsibility reasons, wish to offset their carbon footprints to support climate change mitigation efforts. Our focus is on reforestation, ideally with generators, who provide work opportunities and benefits to the indigenous people.





General Development of Business





We were incorporated on March 26, 2008 in the State of Nevada for the purposes of exploring for minerals, including but not limited to gold and silver.





We had engaged in a verbal agreement to acquire and explore a mineral property located in Newfoundland, Canada with the Company’s Chief Executive Officer and shareholder – Gary D. Alexander. During fiscal 2010,, Mr. Alexander sold all of his shares of the Company and resigned from all offices and as a director, thus effecting a change in control of the Company.    As a consequence, the Company and Mr. Alexander agreed to terminate the option over the Newfoundland property.





On February 17, 2011, we entered into an option agreement (the “Agreement”) with Candorado Operating Company Ltd.(“Candorado”), whereby we optioned the rights to earn up to a 100% interest in and to certain mining claims knows as Summer located in British Columbia, Canada (the “Property”). On August 20, 2011, the Company received notification of termination of the Agreement effective as of August 18, 2011 from Candorado due to an event of default. The Company issued the shares as required under the Agreement but failed to meet the payment and exploration expenditure requirements as required to be made by August 17, 2011. There are no further requirements under the Agreement to be effected by the Company to Candorado and the Company has no further rights or interest in the Property.





On February 15, 2011, the Company approved a 20:1 forward split of the Company’s stock. Following this split, the Company’s authorized capital increased to 1,500,000,000 common shares with a par value of $0.001 per share and the outstanding shares of the Company’s capital stock increased to 126,555,000.





On June 9, 2011, the Board of Directors and the shareholders holding a majority of the total issued and outstanding shares of common stock of the Company approved a decrease in the authorized capital of the Company from one billion five hundred million (1,500,000,000) shares of common stock to four hundred million (400,000,000) shares of common stock, par value $0.001.





On February 6, 2012, the Board of Directors of the Company and the controlling shareholder of the Company approved the reverse split of the issued and outstanding shares of the Company on the basis of 1 share for every 500 shares then issued and outstanding. The record date for the reverse split was set at February 20, 2012, and the Effective Date approved by FINRA was determined to be March 23, 2012.





On February 14, 2012, the Company, authorized the execution of an acquisition agreement (the “ORE Acquisition Agreement”) between the Company and Oceanview Real Estate Company Ltd., a private company organized under the laws of Canada (“ORE”), pursuant to which the Company was to acquire all of ORE’s right, title and interest in and to real property located in Ecuador, known as the Hacienda Juval, consisting of approximately 80,197 hectares (the “Property”). Pursuant to Section 2.1(f) of the ORE Acquisition Agreement, ORE represented and warranted that it had marketable title to the Property and pursuant to Section 4.2, at closing, ORE was to deliver to the Company such documents as may be required to transfer the Property to the Company and any related contracts or agreements in regard to the Property. ORE did not deliver such documents to the Company and, therefore, the Company and ORE rescinded the ORE Acquisition Agreement.


5




On March 19, 2012, the Company incorporated BluForest Canada Ltd. (“BluForest”) as a wholly owned subsidiary of the Company.   Currently, the majority of the operations of the Company are planned to be undertaken by the Company from its principal offices in Ecuador. On May 8, 2012, the Company’s Board of Directors and shareholders holding a majority of the issued and outstanding shares of the Company approved the change of name from Greenwood Gold Resources Inc. to BluForest Inc. to better reflect the new business operations of the Company. FINRA received all necessary documentation and announced the name change of the Company to “BluForest Inc.” to take effect on June 5, 2012.





On March 22, 2012, FINRA advised the Company that they have finalized their review of the reverse split proposed on February 6, 2012,  and that the Effective Date for the reverse split is March 23, 2012.  This reverse split has been retroactively applied to the common stock balances at March 31, 2012 and December 31, 2011, and is reflected in all common stock activity presented in these financial statements.





On March 30, 2012, the Company entered into a purchase of acquisition agreement (“Purchase of Acquisition Agreement”) with Global Environmental Investments Limited, a Belize corporation (“GEIL”), regarding a property known as “El Juval” (the “Property”) which encompasses approximately 105,000 hectares of property in Ecuador. Previously, GEIL had entered into an acquisition agreement (the “Acquisition Agreement”) with Fundacion Nelson Velasco Aguirre, a foundation established pursuant to the law of Ecuador (“NVA”) under which agreement NVA transferred control of the Property to GEIL. NVA held title and maintained legal ownership of the Property but permitted control over the Property to pass to GEIL through a voting trust agreement dated March 16, 2012 (the “Voting Trust Agreement”) among NVA, GEIL and Fred Nikoo, as voting trustee.  On June 15, 2012, the Company appointed Amanda Miller as the voting trustee on behalf of the Company in the place of Mr. Nikoo.





In consideration of the assignment of the Voting Trust Agreement by GEIL to the Company, GEIL and/or its designees were issued 75,000,000 shares of restricted common stock of the Company, representing a controlling interest of approximately 75%, thus effecting a change in control of the Company.  The Property is located in the province of Monora Santiago on the border between this province and the provinces of Azuay, Canar and Chimborazo. El Juval is located in the center of the Andean region of Ecuador, therefore the area of El Juval corresponds to the higher sections of the Cordillera Oriental (Eastern side of the Andes. Approximately 70% of the area of El Juval belongs to the territory of Sangay National Park, making it a suitable location for carbon offsets marketing.





On June 27, 2012, the Company authorized the execution of that certain acquisition agreement (the “Acquisition Agreement”) between the Company and Ecuador Farms S.A., Develfarms, an Ecuadorian corporation (“Ecuador Farms S.A.”), regarding property known as Hacienda Forestal San Agustin (“The Property”) consisting of approximately 30,000 Hectares.





On September 30, 2012 the Board of Directors and the controlling shareholder of the Company, Global Environmental Investments Ltd. (“G.E.I.L.”), approved the surrender for cancellation of 23 Million shares owned by G.E.I.L.


The shares were surrendered voluntarily by G.E.I.L. and no consideration was provided by the Company. Effective upon the cancellation of the shares surrendered by G.E.I.L., the Total Issued and Outstanding Shares will be 104,193,166.





On November 1, 2012, James Donihee resigned as a Director of BluForest Inc. and as a Director of Bluforest Canada Ltd., the Company's wholly owned subsidiary.  Charles Miller CEO accepted Mr. Donihee’s resignation as Director of BluForest Canada Ltd. and BluForest Inc., and is the sole officer and director of BluForest, Inc. following the resignation.





On January 21, 2013 FINRA confirmed receipt of all necessary documents and approvals for BluForest Inc. request for a 30:1 rollback. This corporate action will take effect at the open of business, 1/23/2013. The new symbol on this date will be BLUFD. Please note that a "D" has been appended as the 5th character for 20 business days including the effective date.


On December 5, 2012 our Board of Directors and one shareholder holding approximately 65.98% of our voting power as of the Record Date have giving written consent as of December 5, 2012, to approve the following:





1.
To amend the Company’s Articles of Incorporation to affect a 30 to 1 reverse stock split on the Company’s outstanding common stock (the “Reverse Split”).




6





These actions were approved on December 5, 2012, by our Board of Directors and two shareholders who hold a majority of issued and outstanding voting securities.





On January 10, 2013, Amanda Miller resigned as an Officer of BluForest Inc. Charles Miller CEO accepted Ms. Miller’s resignation as Officer of BluForest Inc.  Ms. Miller did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.





On November 21 the Company entered into a transaction for the pre-purchase of 66,000 Certified Emission Reduction Credits to Global Resource Energy (GBEN). Total purchase price of $660,000.00 is to be paid to BluForest in the form of 3,000,000 restricted shares of Global Resource Energy Inc.


Our Current Business





As the result of these acquisitions we are a carbon offsets marketing company. Initially, we intend to sell carbon offsets through our website to voluntary markets where no verification is required. A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere. [Source: World Resources Institute]. Carbon offsets are measured in metric tons of carbon dioxide-equivalent and may represent six primary categories of greenhouse gases: carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and sulfur hexafluoride. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.





Once we are able to complete the verification process, we will sell verified carbon offsets through other markets. We intend to market and sell Verified Emission Reduction (VER) and Reduced Emissions from Deforestation and Degradation (REDD) carbon offsets through global restoration projects.





According to a study published by Roberto Sánchez (2003), during the period between the years of 1991 and 2000, approximately 17,828.32 km2 of natural forests in Ecuador disappeared, at an annual deforestation rate of 1.47%.





The main causes are the advance of the agricultural frontier and an expansion of the urban area, followed by the deforestation phenomenon. All these activities have significantly affected the Sangay National Parkhowever, in spite of all these problems, the best conserved area corresponds to the area of El Juval, according to a report prepared by Msc. Paul Tufino.   A copy of which is attached as an exhibit to this filing.




We intend to generate revenue through the sale of carbon offsets. Carbon offsets will be generated through three separate methods:




1.
Afforestation.  Establishing forests on bare or cultivated land that has not been forested in recent history.




2.
Reforestation.  Re-growing forests in areas formerly forested that have been harvested.




3.
Reducing emissions from Deforestation and Degradation.. Deforestation refers to direct human-induced, long-term conversion of forests to non-forest land. Degradation refers to gradual, direct human-induced loss of forest carbon stocks.




Through these three methods we intend to generate carbon offsets which represent the carbon consumption capability of the planted and/or protected trees. The carbon offsets will be validated and verified to international standards for sale to various entities.




The carbon offsets are generated through a process called carbon sequestration. Carbon sequestration is the uptake and storage of carbon, especially by trees and plants that absorb carbon dioxide and release oxygen.




We are currently looking to form additional partnerships with other private landowners and municipalities in order to obtain the rights to exclusively market the carbon offsets generated on their property. We intend to do this by bearing all the initial costs of the carbon offset verification and marketing. With private land owners we intend to create partnerships where profit sharing arrangements can be made.




Market, Customers and Distribution Methods




Currently, there are two markets for the sale of carbon offsets, the Voluntary Market and the Compliance Market.




The Voluntary Market involves individuals, companies, and organizations who purchase carbon offsets voluntarily to mitigate or neutralize their own greenhouse gas emissions from transportation, electricity use, and other sources. These groups are not obligated to purchase carbon offsets, but choose to for various reasons. Carbon offset products used in voluntary markets are generally referred to as Verified Emissions Reductions (“VER’s”).




The Compliance Market (or regulated market) involves companies, governments or other entities that buy carbon offsets in order to comply with regulations on the total amount of carbon dioxide they are allowed to emit.




7


Initially, we intend to sell carbon offsets that have not yet been verified through our website that is currently under construction (www.bluforest.com). Once the carbon offsets are verified we will sell them through our website, in private transactions or on a regulated market or exchange.




According to recent publications related to forest carbon markets, the average weighted price per tonne of CO2 sequestered went for $8.89 per tonne. Prices ranged from $1 to $50 with data taken from 78 different forest-based carbon projects located around the world. A typical 21 year old teak tree will have stored just over one metric ton of carbon dioxide and removed almost five metric tons of carbon dioxide from the atmosphere just by growing. When a tree is burnt down for land clearance, or dies and rots, the carbon stored therein is released once more into the atmosphere.




Competition





The carbon credit industry is a competitive industry. We compete with numerous other participants in the search for properties and in the marketing of the sale of carbon offsets. Our competitors will include companies that have substantially greater financial resources, staff and facilities than those of the Company. Our failure to maintain a competitive position within the market could have a materially adverse effect on our business, financial condition and results of operations.





Intellectual Property




We do not have any intellectual property at this time, although we intend to trademark BluForest Inc. which is our intended company name and the name under which we will market our carbon assets.





Research and Development





We have not incurred any research expenditures since our incorporation.





Reports to Security Holders





We are subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. After the effectiveness of this Registration Statement we will begin filing Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission in order to meet our timely and continuous disclosure requirements.  We may also file additional documents with the Commission if they become necessary in the course of our company’s operations.




The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.




Government Regulations




The regulatory environment of carbon offsets is presently handled by third party organizations that verify the validity and quality of carbon offsetting projects. In order to sell VERs and Reduced Emissions from Deforestation and Degradation credits (“REDD's”) we will be required to have a third party verify the project with an onsite visit. We intend to verify any carbon offsets through a reputable standard meant to be applicable regardless of a country's current climate policy, and does not apply restrictions of project types, size, location and crediting period.




The verification process is still in its infancy stages and it is possible this process will become more regulated in the future causing increases in time delays and costs.




8


Environmental Regulations





The environmental regulatory environment pertaining to carbon offset trading is evolving rapidly and is expected to remain volatile for the foreseeable future.  Currently several jurisdictions are either considering the introduction, or have introduced environmental regulations that will compel emitters to either reduce or offset their emissions thereby potentially have a positive effect on the carbon offset market.





We are currently compliant with all relevant environmental regulations.




Employees





We currently have engaged a total of four independent contractors.





ITEM 1A.  RISK FACTORS





An investment in our securities should be considered highly speculative due to various factors, including the nature of our business and the present stage of our development. An investment in our securities should only be undertaken by persons who have sufficient financial resources to afford the total loss of their investment. In addition to the usual risks associated with investment in a business, the following is a general description of significant risk factors which should be considered. You should carefully consider the following material risk factors and all other information contained in this Annual Report before deciding to invest in our common stock. If any of the following risks occur, our business, financial condition and results of operations could be materially and adversely affected. Additional risks and uncertainties we do not presently know or that we currently deem immaterial may also impair our business, financial condition or operating results.





Risks Relating to our Company





No history of Cash Revenues.





Our Company has a limited operating history, is in the development stage and has a history of operating losses. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our Company.





We will not receive revenues from operations until we initiate sales of undeveloped carbon assets followed by further development of our projects and sale of certified carbon assets.





We have made advance sales of carbon assets totalling $743,000.




We are at risk to changes in domestic and international carbon policy.




The supply and demand fundamentals of carbon offsets are determined by governments and international consortiums and are beyond our control. Our ability to continue operations will be dependent on the level of adoption and observance of the Kyoto Protocol, the post Kyoto Protocol environment and other initiatives aimed at reducing greenhouse gas emissions. Changes in government and corporate priorities as a result of government deficits, domestic industries or as a result of changes in the prevailing views concerning the impact of greenhouse gases on climate change could adversely affect the observance of the Kyoto Protocol, the adoption of successor protocols, and corporate initiatives.




If we are unable to identify and contract with sufficient and suitable carbon offset generators our business will fail




In order to achieve our business model we need to contract with organizations that generate a substantial amount of carbon offsets. If we are unable to contract with suitable generators our business will fail.




9


If we are unable to find a suitable buyer for carbon offsets our business will fail.




The carbon offsets we initially intend to sell are voluntary. Buyers of voluntary credits are not bound to purchase due to government regulations or international agreements. Buyers of voluntary credits purchase because they believe it is the socially responsible thing to do or in order to increase corporate image. The market for voluntary credits is still in the development stages, however several jurisdictions have implemented mandatory emissions controls (ex. Australia).




Our officers and directors have experience in the forest restoration and carbon industry.




Our current officer and board of director has experience in the industry of ecosystem restoration and carbon credit validation.




If prices of forest-based carbon offsets drop substantially our business could fail.




The principle factors affecting our revenues are factors which affect the price of carbon offsets and are beyond our control. The actual market price of carbon offsets fluctuates drastically. If prices were to fall substantially we will adapt our business model to be profitable.




We are at risk to changes in regulations and verifications that could negatively affect our profitability.




The processes by which carbon offsets are created and verified are subject to change and beyond our control. Governments, lobby groups, private firms, and Environmental Non-Government Organizations "ENGO's" all work to create a more efficient and accountable system to bring carbon offsets available for market and to assure validity. As the industry matures the regulatory environment will as well. These changes could become more demanding in terms of time and costs and negatively affect our profitability.




We are subject to currency fluctuations that could negatively affect our profitability.




Our profitability may be adversely affected by fluctuations in the rate of exchange of the U.S. dollar and other currencies we may do business in. The Company at this time does not expect to hedge against currency fluctuations and changes in exchange rates are beyond our control.




We operate in a competitive industry and will compete against other companies that could negatively affect our profitability.




The carbon credit industry is a competitive industry. We will compete with numerous other participants in the search for, and the acquisition of, properties and in the marketing of the sale of carbon offsets. Our competitors will include companies that have substantially greater financial resources, staff and facilities than those of the Company.




Projects will be at risk of fire, pests and diseases.




Our assets will be made up of the environmental rights attached to carbon stocks in forests. Forests are at risk to damage from fire, pests and diseases. The Company will implement strategies including fuels management, species composition management and pathogen assessments as part of routine monitoring procedures but often forces of nature are outside the control of the company and could require the company to incur losses in order to replace lost carbon stocks.




We may not be able to obtain additional financing.




As at the date of filing, we had limited cash on hand and a working capital deficit. As such, we will require substantial additional financing in order to continue as a going concern. We have not generated any revenue from operations to date. The specific cost requirements needed to maintain operations will depend upon the restoration projects currently owned and those we are able to procure. Specific costs include but are not limited to the following:




·
Travel and project selection




·
Feasibility studies




10


·
Consultants Registration and Validation Project Implementation




·
Measurement and Monitoring Marketing Sale Efforts




The amount of each of the specific costs described above will vary based on the project size, type and location. Reforestation projects have higher costs than do REDD projects due to the need to physically prepare and plant the site.




In order to expand our business operations, we anticipate that we will have to raise additional funding. If we are not able to raise the capital necessary to fund our business expansion objectives, we may have to delay the implementation of our business plan. If sufficient financing is not available or obtainable, we may not be able to continue as a going concern and investors may lose a substantial portion or all of their investment.




Our officers and directors do not own any shares and operations may be influenced by our controlling shareholders.




Charlie Miller, our sole officer and director holds 39,166,000  is the single largest shareholder represents approximately 37.85%, however he does not have controlling, voting shares of the company at this time and a proxy is required to be approved or declined for any changes.




It is possible that there may be indigenous people claims against small portions of our property, which could result in us incurring additional expense.





It is conceivable that indigenous peoples could raise claims against elements of our properties.  Should this occur, it is highly likely that we would experience additional expenses arising from claims against our assets.





We are subject to new corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.





We may face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules, and regulations continue to evolve and may become increasingly stringent in the future. In particular, under rules proposed by the SEC on August 6, 2006, we are required to include management’s report on internal controls as part of our annual report pursuant to Section 404 of the Sarbanes-Oxley Act. We strive to continuously evaluate and improve our control structure to help ensure that we comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules, and regulations is expected to remain substantial. We cannot assure you that we will be able to fully comply with these laws, rules, and regulations that address corporate governance, internal control reporting, and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition, and the value of our securities.




11


Risks Relating to an Investment in our Securities





Because of the early stage of development and the nature of our business, our securities are considered highly speculative.





Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. There is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon our ability to monetize our carbon tax credits. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.





We may, in the future, issue additional common shares that would reduce investors’ percent of ownership and may dilute our share value.





Our Articles of Incorporation authorize the issuance of up to 400,000,000 common shares, $0.001 par value. The future issuance of common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common shares issued in the future on an arbitrary basis. The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the common shares held by our investors, and might have an adverse effect on any trading market for our common shares.





Market for penny stock has suffered in recent years from patterns of fraud and abuse and our stock has been volatile.





Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include: (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons; (iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and, (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequential investor losses.





Our management is aware of the abuses that have occurred historically in the penny stock market. The occurrence of these patterns or practices could in the future increase the volatility of our share price.





Our common shares are subject to the “penny stock” rules of the SEC, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.





The SEC has adopted regulations that generally define a “penny stock” to be any equity security other than a security excluded from such definition by Rule 3a51-1 under the Securities Exchange Act of 1934, as amended. For the purposes relevant to our Company, it is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.





Our common shares are currently regarded as a “penny stock”, since our shares are not listed on a national stock exchange or quoted on the NASDAQ Market within the United States, to the extent the market price for its shares is less than $5.00 per share. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide a customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer's account, and to make a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser's written agreement to the transaction.


To the extent these requirements may be applicable, they will reduce the level of trading activity in the secondary market for the common shares and may severely and adversely affect the ability of broker-dealers to sell the common shares.


12


FINRA sales practice requirements may also limit a stockholders ability to buy and sell our stock.





In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.





There is currently no active market for our common shares and unless an active market develops shareholders may not be able to sell their shares at a profit or at all.





Although, we are a reporting company and our common shares are quoted on the OTCBB, currently under the symbol “BLUF”, there is currently no active market for our common stock and an active trading market may not develop or, if it does develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may have the effect of lowering the market price and therefore your investment could be a partial or complete loss.





Our common stock may experience extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.





Our common stock may be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to) (i) the trading volume of our shares; (ii) the number of securities analysts, market-makers and brokers following our common stock; (iii) changes in, or failure to achieve, financial estimates by securities analysts; (iv) actual or anticipated variations in quarterly operating results; (v) conditions or trends in our business industries; (vi) announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; (vii) additions or departures of key personnel; (viii) sales of our common stock; and (ix) general stock market price and volume fluctuations of publicly-traded and particularly, microcap companies.


Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company’s securities. Although there is no such shareholder litigation currently pending or threatened against the Company, such a suit against us could result in the incursion of substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTCBB and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.





We have not and do not intend to pay any cash dividends on our common shares and, consequently, our stockholders will not be able to receive a return on their shares unless they sell them.





We intend to retain any future earnings to finance the development and expansion of our business. We have not, and do not, anticipate paying any cash dividends on our common shares in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.





A decline in the price of our common stock could affect our ability to raise further working capital, adversely impact our ability to continue operations and may cause us to go out of business.





A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, we may not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.




13





ITEM 1B.  UNRESOLVED STAFF COMMENTS





None





ITEM 2.    PROPERTIES





We have an office address at Ave. Republica del Salvador y Shyris Edificio Onix piso 10-C Quito Ecuador which is provided free of charge by legal counsel.  We closed operations in Canada on January 10, 2013 however are liable for the rent on the previous office of our Canadian subsidiary, BluForest Canada Ltd. We have a one year, renewable for an additional year for $3000 CDN per month, plus taxes which ceases March 31, 2013.





Subsequent to the period covered by this report, the Company divested of its mineral properties or allowed them to default and acquired an interest in certain land assets by way of acquiring the voting rights to Fundacion Nelson Velaso Aquirre, a foundation established pursuant to the laws of Ecuador (“NVA”). We have appended a copy of an Environmental Assessment update prepared by Paul Tufino.





NVA is the legal and beneficial owner of real estate property located in Ecuador known as “El Juval”.  NVA is under the control of the Company pursuant to a voting trust agreement granting the rights to vote to Amanda Miller, the former Secretary and current Counsel of our Company.





Location:





The property called “El Juval” is located in the province of Monora Santiago on the border between this province and the provinces of Azuay, Canar and Chimborazo.  El Juval is located in the center of the Andean region of Ecuador, therefore the area of El Juval corresponds to the higher sections of the Cordillera Oriental (Eastern side of the Andes).  Approximately 90% of the area of El Juval belongs to the territory of Sangay National Park.





Conservation Importance of the area of El Juval:





The conclusions of the analysis carried out by Msc. Paul Tufino show that the area El Juval has significant importance as one of the few remains of forests in this area.  In fact, it practically constitutes the main remnant of Sangay National Park, which has been seriously affected by anthropogenic activities.





In this context, it constitutes an important refuge for endangered species, both within the flora and the fauna. For this reason, it is required that this area is preserved in an effective and sustainable manner.





In fact, in terms of conservation importance, the Sangay National Park and therefore El Juval make part of the eco-regional complex of the Northern Andes. This was identified in the Global 2000 by the World Wildlife Fund as a conservation unit of high priority, based on criteria such as: high diversity of species, rainfall, representation of bio-geographical units, and the high degree of endemism (BirdLife International, 2005).





On the other hand, even though this area is highly valuable from a conservationist viewpoint, it is not possible to disregard, furthermore, its enormous value as a source of “ecosystem services” for the inhabitants of the surrounding areas.





The Evaluation of Ecosystems of the Millennia defines “ecosystem services” as the benefits that people derive from ecosystems. This may be direct and indirect. Direct benefits refer to the production of supplies (water and food), or the regulation of cycles such as floods, soil degradation, drying, etc. Indirect benefits are related to the functioning of processes of the ecosystem that generates direct services such as the photosynthesis process and the formation and storage of organic matter; the cycle of nutrients; the creation and assimilation of soils, etc.


14





In fact, ecosystem services, particularly the water that flows by multiple springs and rivers located in this area, provides direct and indirect benefits to approximately 112 thousand people, who live in the cantons of which El Juval is part of (Alausí, Santiago, Sucua and Morona) (Table below).





Total area of El Juval and its political distribution.





Area of the propertyProvince of Chimborazo

Alausí Canton                 10,262 haProvince of Morona Santiago

Morona Canton               37,145  ha

Sucua Canton                   19,309 ha

Santiago Canton              12,481 haTotal                                  80,197 ha





Other Property





On June 27, 2012, the Company authorized the execution of that certain acquisition agreement between the Company and Ecuador Farms S.A., Develfarms, an Ecuadorian corporation, regarding property known as Hacienda Forestal San Agustin  consisting of approximately 30,000 Hectares in the province of Esmaraldas.





Other than the  Properties described above, we own no plants or other property.





ITEM 3.     LEGAL PROCEEDINGS





Jovanovic claim





In June, 2012 the Company’s former President, Branislav Jovanovic of Calgary, Alberta, Canada commenced arbitration proceedings against the Company with such proceedings filed with the International Centre for Dispute Resolution in Las Vegas, NV.  The statement of claim filed by the plaintiff in the arbitration proceedings alleged unpaid sums of approximately $150,000 USD.  The Company replied and filed a Statement of Defense in the arbitration proceedings on July 28, 2012.  The Company filed a statement of defense and asserted, amongst other things, that the arbitration proceedings should be terminated.  By way of a direction issued by the International Centre for Dispute Resolution on September 25, 2012 the arbitration was terminated and the claim was dismissed due to inaction by the Plaintiff in prosecuting his claim.





On July 30, 2012 the Company commenced legal proceedings in the Alberta Court of Queen’s Bench in Calgary, Canada against Branislav Jovanovic.  In the claim the Company alleged that Mr. Jovanovic had submitted false expense claims and made other demands for reimbursement for expenses claimed to have been incurred for the Company at the time that he was the sole director and officer.  At the time, in April, 2011 Mr. Jovanovic caused the Company to pay him for these claims with the issuance of stock to himself and other family members.  The amount sought to be repaid was approximately 70,000 shares and at the time the action was commenced, the value of those shares was approximately $300,000 USD.  On October 4, 2012 the Company sought and obtained a temporary injunction from the Alberta Court of Queen’s Bench in Calgary, Canada, stopping Mr. Jovanovic from trading those shares for a period.  After the Court granted an extension to late October, 2012, the temporary injunction expired.  The action is moving forward into document discovery this year.





The day after the initial injunction was granted by the Court in Alberta, Canada, and on October 5, 2012 Mr. Jovanovic started a new lawsuit in US Federal Court in Las Vegas NV seeking an unquantified claim against the Company in debt for a sum claimed to exceed $75,000 USD.  The Company believes that the demand is the same claim Jovanovic sought unsuccessfully in his arbitration proceedings.  In November, 2012 the Company applied in Federal Court to dismiss the Plaintiff’s complaint and on January 8, 2013 the Court did so and dismissed the entire action.  In issuing the order, Judge Hicks ruled that the exclusive jurisdiction for the parties’ dispute was Alberta, Canada where the Company’s action was filed.




Currently, all claims by or on behalf of Branislav Jovanovic against the Company have been dismissed.  The Company expects to continue to press forward with its action to require Mr. Jovanovic to account to the Company for his actions and explain his activities.  Any assessment of the action is premature at this time.




ITEM 4.    MINE SAFETY DISCLOSURES





Not Applicable.


15





PART II





ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters





Market Information





On February 23, 2009, our common stock was approved for quotation on the Financial Industry Regulatory Association’s Over-the-Counter Bulletin Board.  Our shares are listed under the trading symbol BLUF.





The first trade of our common stock occurred in the 3rd quarter of the most recent fiscal year.





Quarter
High ($) (1)
Low ($) (1)4th Quarter ended 12/31/2012
90.009
1.20013rd Quarter ended 9/30/2012
180.018
105.01052nd Quarter ended 6/30/2012
180.9181
60.0061st Quarter ended 3/31/2012
240.024
.60014th Quarter ended 12/31/2011
127.5128
66.00663rd Quarter ended 09/30/2011
630.063
135.01352nd Quarter ended 6/30/2011
15,151.52
225.02251st Quarter ended 3/31/2011
3,000.3
150.015




(1)After giving effect to a reverse split of 30 for 1 on January 21, 2013




Holders





As at March 14, 2013 the Company had 115 shareholders of record of its common stock.





Dividends





We have never declared or paid dividends on our common stock.  We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.





Securities authorized for issuance under equity compensation plans





We do not have any equity compensation plans and accordingly we have no securities authorized for issuance thereunder.





16





Recent Sales of Unregistered Securities




None.





ITEM 6.      SELECTED FINANCIAL DATA




The following table sets forth our selected historical consolidated financial data. The selected consolidated statements of operations data set forth below for the years ended December 31, 2012, and 2011, and the consolidated balance sheet data as of December 31, 2012 and 2011, are derived from our audited consolidated financial statements and notes thereto included elsewhere herein. The selected historical consolidated statements of operations data set forth below for the years ended December 31, 2010 and 2009, and the consolidated balance sheet data set forth below as of December 31, 2010 and 2009, are derived from our audited consolidated financial statements not included herein. This data should be read in conjunction with and is qualified in its entirety by reference to the audited consolidated financial statements and the related notes included elsewhere in this annual report and Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”





The financial data set forth below and discussed in this annual report are derived from the consolidated financial statements of Bluforest, its subsidiaries.





Years EndedDecember 31,2012


2011


2010


2009



2008Statement of Operations Data:Net revenue

$
-


$
-


$
-


$
-


$
-Operating expenses:Professional fees


514,563



-



-



-



-Consulting fees


1,875,081



-



-



-



-General and administrative expenses


238,771



-



-



-



-Depreciation and amortization


777



-



-



-



-Impairment of property for developing carbon assets


75,000,000



-



-



-



-Loss on shares issued to settle debt


199,940,000



-



-



-



-Interest expense


48,846



-



-



-



-Net loss before discontinued operations


277,618,038



-



-



-



-Net loss from discontinued operations (1)


27,018



1,065,533



49,030



16,359



30,756Net loss


277,645,056



1,065,533



49,030



16,359



30,756Basic and diluted loss per share

$
103


$
89


$
6


$
2


$
4Balance Sheet Data:Cash and cash equivalents

$
1,187


$
-


$
-


$
7,320



13,099Property for developing carbon assets


698,875,000



-



-



-



-Total assets


698,962,128



300



-



7,960



13,099Total current liabilities


3,684,652



435,405



53,070



12,500



1,280Total liabilities


3,684,652



435,405



53,070



12,500



1,280Working capital


(3,665,961
)


(435,105
)


(53,070
)


(5,180
)


11,819Stockholders' equity (deficit)


695,277,476



(435,105
)


(53,070
)


(4,540
)


11,819








17





ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Forward Looking Statements





This current report contains forward-looking statements relating to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.





Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance.  You should not place undue reliance on these statements, which speak only as of the date that they were made.  These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events or circumstances or to reflect the occurrence of unanticipated events.





In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.





The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").





Summary





There is limited historical financial information about BluForest, Inc. upon which to base an evaluation of our performance.  We were previously an exploration stage company engaged in acquiring mineral properties for exploration.  However, we were unsuccessful in raising financing to acquire or explore any of the properties we had agreements for and therefore management determined to seek other acquisitions of merit which resulted in a change of control the Company and the acquisition of a project in Ecuador for the development and sale of carbon tax credits.





We are currently a development stage corporation and have not generated any revenues from operations.  We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in carrying out our business plan and competition. There is no assurance that future financing will be available to our Company on acceptable terms.





We intend to raise funds by issuing debt and/or equity securities although we have no current arrangements or agreements to such financings at this time. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations.  Equity financing could result in additional dilution to existing shareholders.





Our proposed program for our property




Subject to having sufficient capital, which we have not yet raised, we intend to proceed with a proposed PPD work program as recommended by a consulting scientist to be retained by us.  We intend to initiate a Project Development Document (PDD) and baseline which will allow us to compile data and profile the Property.




Engage Consultants




We are looking to engage consulting firms that specializes in overseeing the design and implementation of greenhouse gas reduction/sustainability plans, and managing the generation of carbon and renewable energy and energy efficiency credits. Through these consultants we hope to determine the eligibility, feasibility and marketing channels available to sell carbon offsets generated by United Nature’s Plantations. We have not entered into any formal agreements with any consultants.




18




Initiate Calculations




We are currently calculating the carbon offset potential of our initial project by growth and yield data. The carbon potential will be used to calculate revenues while costs will be determined by price of verification, overhead and monitoring costs.




Sale of Non-Verified Offsets




We intend to sell offsets via our website to generate revenue before we have the project verified. However, we plan to verify the offsets as soon as practicable as verified offsets command a premium.




Verification




We will obtain a review by a third party verifier. The verification process is required only once per project. Depending on the size and location of the project the monitoring requirements may vary slightly. The reasons for variation are due to access, species diversity, and forest risks including pests, pathogens and fire. In a forest-based carbon offsetting project all the credits are procured and registered for sale once the project have been verified.




Sale of Offsets




Once the carbon offsets have been verified we will have the ability to sell verified carbon offsets associated with the project either directly through our website or with resellers in the industry, or directly to corporations that may wish to purchase carbon assets to offset their emissions.





Currently, we do not have sufficient funds to carry out our PDD program and will need to raise additional capital from a public offering, a private placement or loans.





We have made advance sales of offsets to Global Resource Energy Inc.





Results of Operations





We generated no revenue for fiscal year periods ended December 31, 2012 and December 31, 2011, respectively.





For the Years Ended December 31, 2012 and 2011





We had a net loss of $1,065,533 for the year ended December 31, 2011 compared to a net loss of $277,645,056 for the year ended December 31, 2012.  The change is explained below.





During the year ended December 31, 2012, we incurred operating expenses from continuing operations of $77,629,192 as compared to $Nil incurred during the year ended December 31, 2011, an increase of $77,629,192. The increase in operating expenses was primarily attributable to the following items: (i) Impairment charge on property for developing carbon assets of $75,000,000 (Note 5 above); (ii) Professional fees of $514,563;(iii) Consulting fees of $1,875,081;and (iv) general and administrative expenses of $238,771. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, and marketing costs. Professional fees include accounting and tax service fees, consulting fees, and legal fees.





During the year ended December 31, 2012 we incurred a net loss from continuing operations of $277,618,038, including interest expenses of $48,846, and a loss on the settlement of debt of $199,940,000 (Note 7 above).




19





As a result of the Purchase of Acquisition Agreement on March 30, 2012 (ref: Note 5 – Purchase of Acquisition Agreement and Commitments), the Company changed its business focus from mining (exploration stage) to marketing of carbon offsets (development stage). Accordingly, the Company has reported discontinued operations on its statement of operations for the year ended December 31, 2012 and 2011, and from inception to date, classified as follows:





Year ended December 31, 2012


Year ended December 31, 2011


From March 26, 2008 (date of inception) to December 31, 2012Discontinued Operating ExpensesProfessional fees

$
2,500


$
272,008


$
336,668Mineral property costs


-



5,417



14,034Salaries and benefits


10,000



120,000



135,500General and administrative expenses


454



52,153



72,475Loss on mineral property


5,000



614,498



619,498Interest expense


9,064



1,457



10,521Total Discontinued Operations

$
27,018


$
1,065,533


$
1,188,696


Liquidity and Capital Resources





As of December 31, 2012 we had $18,691 in total current assets compared to $300 in total current assets for the fiscal year ended December 31, 2011 and total current liabilities of $3,684,652 (2012) as compared to $435,405 (2011) for a working capital deficit of $3,665,961 (2012) compared to $435,105 (2011).
 
 Since inception we have raised funds by way of advances, short term loans and the use of our common stock to raise  working capital.  Net cash from the sale of shares since inception on March 26, 2008 to December 31, 2012 was $102,575.
 
 For fiscal 2012, our expenditures far exceeded our available working capital.   As at December 31, 2012, we owed a total of $3,684,652 and had no available cash with which to pay these liabilities.   Unless we are able to raise additional capital to meet these liabilities and to fund our business plan for the next twelve months, we may not continue as a going concern and we may not be able to continue operations.


20


We estimate that in the next twelve months we will require a minimum of $8,000,000, of which $500,000 will be for outstanding liabilities currently on the balance sheet of the Company, in additional to planned expenditures as below:
 
 Expenses


Q1



Q2



Q3



Q4


TotalSalaries & Wages

$
300,000


$
400,000


$
462,500


$
462,500


$
1,625,000Professional Fees

$
50,000


$
50,000


$
50,000


$
50,000


$
200,000Overhead

$
40,000


$
45,000


$
45,000


$
45,000


$
175,000Land Certification

$
300,000


$
400,000


$
400,000


$
400,000


$
1,500,000Total

$
690,000


$
895,000


$
895,000


$
895,000


$
3,500,000
 
 This budget does not include any funds for the acquisition of any additional projects.
 
 We are formerly an exploration development stage company and are in the early stages of developing our new business plan. As of the date of this report, we have not generated any cash revenues and are just commencing operations under our new business initiative. As a result, we have generated significant operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future as we attempt to undertake our business plan. Our ability to continue may prove more expensive than we currently anticipate and we may incur significant additional costs and expenses. These conditions could further impact our business and have an adverse effect on our financial position, results of operations and/or cash flows.


We cannot sustain our operations from existing working capital and operations over the next 12 months, as we have yet to commence operations, and have not generated any revenues there can be no assurance that we can generate significant revenues from operations.





We will require additional working capital, as we currently have inadequate capital to fund all of our business strategies, which could severely limit our operations. Initiated an offering of our common stock to raise a total of $8M in capital.  There c an be no assurance that any financing will be available or accessible on reasonable terms, either by way of an equity financing or debt. If we cannot raise any additional funding we may either have to suspend operations until we do raise the cash, or cease operations entirely.





21


We anticipate that additional funding will be in the form of issuance of debt and/or equity financing from the sale of our common stock. However, we have no assurance that we will be able to raise sufficient funds from the sale of our common stock to pay all of our anticipated expenses.  To date, our investors have advanced a total of $890,638 for general working capital.  The loan is bear interest at 8% per annum and due on demand.  There can be no assurance that they will continue to advance funds as required or that other methods of financing will be available or accessible on reasonable terms.  Management has been exploring a number of options to meet our obligations and future capital requirements, including the possibility of equity offering, debt financing, and business combination but has not entered into any agreement for any of the foregoing.





Going Concern Uncertainties





As of the date of this annual report, there is doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations and loan commitments.  Our future success and viability, therefore, are dependent upon our ability to generate capital financing.  The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders.





Off-balance Sheet Arrangements





We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.





ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Information regarding interest rate risk management and foreign exchange risk management is included in the “Financial Instruments and Risk Management”footnote under “Item 8. Financial Statements and Supplementary Data".


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





All financial information required by this Item is attached hereto below beginning on page F-1.


22


BLUFOREST INC.


(An Exploration Stage Company)





REPORT AND FINANCIAL STATEMENTS





December 31, 2012


(Stated in US Dollars)








PageReport of Independent Registered Public Accounting Firm
F-2Balance Sheets
F-3Statements of  (Loss) Income
F-4Statement of  Changes in Stockholders’ Equity
F-5Statements of Cash Flows
F-6Notes to Financial Statements
F-7 to F-24




F-1




2451 N. McMullen Booth Road

Suite.308

Clearwater, FL 33759



855.334.0934 Toll free




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






To the Board of Directors and




Stockholders of BluForest, Inc.




We have audited the accompanying balance sheets of BluForest, Inc. as of December 31, 2012, and 2011, and the related statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended. We also have audited BluForest, Inc.’s internal control over financial reporting as of December 31, 2012 based on criteria established inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). BluForest, Inc.’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Form 10-K, Item 9. Our responsibility is to express an opinion on these financial statements and an opinion on the company’s internal control over financial reporting based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.




A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BluForest, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, BluForest, Inc. did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).




/s/ DKM Certified Public Accountants
 DKM Certified Public Accountants
 Clearwater, FL
 March 18, 2013


PCAOB RegisteredAICPA Member


F-2


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


CONSOLIDATED BALANCE SHEETS


(Stated in US Dollars)





December 31,

2012


December 31,

2011ASSETSCurrentCash

$
1,187


$
-Other receivable


13,780



-Damage deposit


3,010Prepaid Expenses


714



300Total Current Assets


18,691



300Equipment, net


2,437



-Property for developing carbon assets (Note 5)


698,875,000



-Securities available for sale


66,000



-Total Assets

$
698,962,128


$
300LIABILITIESCurrentBank indebtedness

$
-


$
15Accounts payable and accrued liabilities


925,951



8,957Accounts payable - related parties


739,565



-Advances payable


870,570



-Advances payable – related parties


20,069



-Deferred revenue


743,000



-Discontinued operations


385,497



426,433Total Current Liabilities


3,684,652



435,405STOCKHOLDERS’ DEFICITCapital stock –Authorized:$0.001 par value, 400,000,000 common shares authorized;3,474,000 and 14,150 common shares issued and outstanding at December 31, 2012 and December 31, 2011


3,474



14Additional Paid-in Capital


974,666,003



726,559Other comprehensive income (loss)


(585,267
)


-Accumulated deficit during the exploration stage


(1,188,696
)


(1,161,678
)Accumulated deficit during the development stage


(277,618,038
)


-Total Stockholders’ Equity (Deficit)


695,277,476



(435,105
)Total Liabilities and Stockholders’ Equity (Deficit)

$
698,962,128


$
300





The accompanying notes are an integral part of these consolidated financial statements


F-3


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)


For the year ended December 31, 2012 and 2011


and for period from inception to December 31, 2012


(Stated in US Dollars)





Cumulative resultsYear ended


From March 26, 2008December 31,


(date of inception) to2012


2011


December 31, 2012Revenue

$
-


$
-


$
-Operating Expenses:Impairment of property for developing carbon assets


75,000,000



-



75,000,000Depreciation


777



-



777Professional fees


514,563



-



514,563Consulting fees


1,875,081



-



1,875,081General and administrative expenses


238,771



-



238,771Loss from continuing operations


(77,629,192
)


-



(77,629,192
)Other income (expense):Loss on shares issued to settle debt


(199,940,000
)


-



(199,940,000
)Interest expense


(48,846
)


-



(48,846
)Loss before discontinued operations


(277,618,038
)


-



(277,618,038
)Loss from discontinued operations


(27,018
)


(1,065,533
)


(1,188,696
)Net Loss

$
(277,645,056
)

$
(1,065,533
)

$
(278,806,734
)Comprehensive lossNet loss

$
(277,645,056
)

$
(1,065,533
)

$
(278,806,734
)Unrealized gain (loss) on securities


(594,000)



-



(594,000)Foreign translation gain (loss)


8,733



-



8,733Comprehensive loss

$
(278,230,323
)

$
(1,065,533
)

$
(279,392,001
)Net loss per share – basic and dilutedContinuing operations

$
(103.30
)

$
-Discontinued operations

$
(0.00
)

$
(89.10
)Weighted average shares outstanding – basic and diluted


2,688,197



11,962





The accompanying notes are an integral part of these consolidated financial statements


F-4


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


Statement of Changes in Stockholders’ Deficit


For the period from Inception (March 26, 2008) To December 31, 2012




Common stock



Additional



Accumulated



Accumulated Other



Total Stockholder'sShares issued



Par Value



Paid-in Capital



Deficit



Comprehensive Loss



Equity (Deficit)Balance March 26, 2008 (Date of Inception)


-


$
-


$
-


$
-


$
-


$
-Shares issued for cash on April 1, 2008 at $0.001 per share


3,000,000



3,000



-











3,000Shares issued for cash on April 29, 2008 at $0.005 per share


3,250,000



3,250



13,000











16,250Shares issued for cash on May 29, 2008 at $0.30 per share


77,750



78



23,247











23,325Net loss














(30,756
)






(30,756
)Balance, December 31, 2008


6,327,750



6,328



36,247



(30,756
)


-



11,819Effect of 20:1 Stock Dividend Declared February 20, 2011Cancellation of old common stock


(6,327,750
)


(6,328
)














(6,328
)Issuance of new common stock


126,555,000



126,555



(120,227
)










6,328Effect of 1:500 reverse split declared March 23, 2012Cancellation of old common stock


(126,555,000
)


(126,555
)


126,555











-Issuance of new common stock


253,110



253



(253
)










-Balance, December 31, 2008, restated


253,110



253



42,322



(30,756
)






11,819Net loss














(16,359
)






(16,359
)Balance, December 31, 2009


253,110



253



42,322



(47,115
)


-



(4,540
)Shares issued for services


20,000



20



480











500Net loss














(49,030
)






(49,030
)Balance, December 31, 2010


273,110



273



42,802



(96,145
)


-



(53,070
)Shares issued to settle accounts payable


18,000



18



8,982











9,000Shares issued to settle advances from related party


120,000



120



59,880











60,000Shares issued per option agreement


12,290



12



614,486











614,498Shares issued as result of round-up on reverse split


1,100



1



(1
)










-Net loss














(1,065,533
)






(1,065,533
)Balance, December 31, 2011


424,500



424



726,149



(1,161,678
)


-



(435,105
)Effect of 1:30 reverse split declared January 23, 2013Cancellation of old common stock


(424,500
)


(424
)


424











-Issuance of new common stock


14,150



14



(14
)










-Balance, December 31, 2011, restated


14,150



14



726,559



(1,161,678
)






(435,105
)Shares issued to settle debt


833,333



833



199,999,167











200,000,000Shares issued per purchase agreement


2,500,000



2,500



599,997,500











600,000,000Shares issued per option agreement


891,667



892



173,874,108











173,875,000Shares issued for cash


622



1



59,999











60,000Shares returned to treasury


(766,667
)


(767
)


767











-Fractional shares issued on reverse split


895



1



(1
)










-Stock option granted










7,904











7,904Unrealized losses and foreign currency transaction adjustment


















(585,267
)


(585,267
)Net loss














(277,645,056
)






(277,645,056
)Balance, December 31, 2012


3,474,000


$
3,474


$
974,666,003


$
(278,806,734
)

$
(585,267
)

$
695,277,476





The accompanying notes are an integral part of these consolidated financial statements


F-5


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the year ended December 31, 2012 and 2011


and for period from inception to December 31, 2012


(Stated in US Dollars)





Cumulative resultsYear ended


From March 26, 2008December 31,


(date of inception) to2012


2011


December 31, 2012Cash flows from operating activitiesNet loss

$
(277,645,056
)

$
(1,065,533
)

$
(278,806,734
)Add: loss (income) from discontinued operations


27,018



1,065,533



1,188,696Adjustments to reconcile non-cash items to cash used by operations:Stock based compensation


7,904



-



7,904Impairment of property


75,000,000



-



75,000,000Loss on stock issued to settle debt


199,940,000



-



199,940,000Depreciation


777



-



777Adjustments to reconcile net loss to cash used by operations:Other receivables


(13,780
)


-



(13,780
)Bank indebtedness


(15
)


-



(15)Accounts payable and accrued liabilities


997,054



-



997,054Accounts payable – related parties


739,565



-



739,565Damage deposit


(3,010
)


-



(3,010
)Prepaid expenses


(414
)


-



(414
)Net cash provided by (used in) continuing operations


(949,957
)


-



(949,957
)Net cash provided by (used in) discontinued operations


(14)



(212,156)



(292,795
)Net cash provided by (used in) operating activities


(949,971
)


(212,156
)


(1,242,752
)Cash flows from Investing ActivitiesPurchase of equipment


(3,214
)


-



(3,214
)Net cash provided by (used in) continuing operations


(3,214
)


-



(3,214
)Net cash provided by (used in) discontinued operations


-



-



-Net cash provided by (used in) investing activities


(3,214
)


-



(3,214
)Cash flows from Financing ActivitiesShort term loan


870,570



-



870,570Advances from related parties


200,424



-



200,424Repayment advances from related parties


(180,356
)






(180,356
)Shares issued from private placement


60,000



-



120,575Net cash provided by (used in) continuing operations


950,638



-



993,213Net cash provided by (used in) discontinued operations


(5,000)



212,141



245,206Net cash provided by (used in) financing activities


945,638



212,141



1,238,419Effects of foreign exchange


8,734



-



8,734Increase (decrease) in cash during the period


1,202



(15)



1,187Cash, beginning of period


(15
)


-



-Cash, end of period

$
1,187


$
(15)


$
1,187Supplemental disclosure of cash flow information:Cash paid for:Interest

$
-


$
-


$
-Income taxes

$
-


$
-


$
-Non-cash transactions:Stock options granted for consulting fees


7,904



-



7,904Stock issued for acquisition of tangible assets


773,875,000



-



773,875,000Stock issued for debt settlements


200,000,000



-



200,000,000Deferred revenue, reduction to accounts payable


83,000



-



83,000Deferred revenue , acquisition of trading securities


660,000



-



660,000Non cash transactions provided by discontinued operations


65,000



683,498



748,498$
974,690,904


$
683,498


$
975,374,402





The accompanying notes are an integral part of these consolidated financial statements


F-6


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 1 – Organization and summary of significant accounting policies





Organization and nature of business





Blueforest Inc. (formerly: Greenwood Gold Resources, Inc.) (the “Company”) was incorporated in the State of Nevada on March 25, 2008. The Company, previously an Exploration Stage Company became a Development Stage Company on March 30, 2012. A Development Stage Company, is defined by ASC 915-10 “Accounting and Reporting by Development Stage Enterprises”. During the quarter ended March 31, 2012, through various agreements described below under “Note 5 – Purchase of Acquisition Agreement and Commitments”, the Company revised its business plan, which formerly had been to acquire, explore and develop mineral properties, to focus on the area of carbon offsets marketing. The offsets will be validated and verified for sale to companies, organizations, foundations, and other entities that, for regulatory, branding, policy and corporate social responsibility reasons, wish to offset their carbon footprints to support climate change mitigation efforts. The Company’s current focus will be on the prevention of deforestation and degradation of forested lands as well as reforestation, working with entities that strive to provide benefits to indigenous people in the local areas of our project scope. As a result of this change in business and corporate focus, the Company discontinued its mineral exploration operations and became a Development Stage Company.





On February 15, 2011, the Company approved a 20:1 forward split of the Company’s stock. Following this split, the Company’s authorized capital increased to 1,500,000,000 common shares with a par value of $0.001 per share and the outstanding shares of the Company’s capital stock increased to 126,555,000.





On June 9, 2011, the Board of Directors and the shareholders holding a majority of the total issued and outstanding shares of common stock of the Company approved a decrease in the authorized capital of the Company from one billion five hundred million (1,500,000,000) shares of common stock to four hundred million (400,000,000) shares of common stock, par value $0.001.





On February 6, 2012, the Board of Directors of the Company and the controlling shareholder of the Company approved the reverse split of the issued and outstanding shares of the Company on the basis of 1 share for every 500 shares then issued and outstanding. The record date for the reverse split was set at February 20, 2012, and the Effective Date approved by FINRA was determined to be March 23, 2012.





On February 14, 2012, the Company, authorized the execution of an acquisition agreement (the “ORE Acquisition Agreement”) between the Company and Oceanview Real Estate Company Ltd., a private company organized under the laws of Canada (“ORE”), pursuant to which the Company was to acquire all of ORE’s right, title and interest in and to real property located in Ecuador, known as the Hacienda Juval, consisting of approximately 80,197 hectares (the “Property”). Pursuant to Section 2.1(f) of the ORE Acquisition Agreement, ORE represented and warranted that it had marketable title to the Property and pursuant to Section 4.2, at closing, ORE was to deliver to the Company such documents as may be required to transfer the Property to the Company and any related contracts or agreements in regard to the Property. ORE did not deliver such documents to the Company and, therefore, the Company and ORE rescinded the ORE Acquisition Agreement.





F-7


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 1 – Organization and summary of significant accounting policies - continued





Organization and nature of business- continued





On March 19, 2012, the Company incorporated Bluforest Canada Ltd. (“Bluforest”) as a wholly owned subsidiary of the Company.   Currently, the majority of the operations of the Company are planned to be undertaken by the Company from its principal offices in Ecuador. On May 8, 2012, the Company’s Board of Directors and shareholders holding a majority of the issued and outstanding shares of the Company approved the change of name from Greenwood Gold Resources Inc. to Bluforest Inc. to better reflect the new business operations of the Company. FINRA received all necessary documentation and announced the name change of the Company to “Bluforest Inc.” to take effect on June 5, 2012.





On March 22, 2012, FINRA advised the Company that they have finalized their review of the reverse split proposed on February 6, 2012,  and that the Effective Date for the reverse split is March 23, 2012.




On March 30, 2012, the Company entered into a purchase of acquisition agreement (“Purchase of Acquisition Agreement”) with Global Environmental Investments Limited, a Belize corporation (“GEIL”), regarding a property known as “El Juval” (the “Property”) which encompasses approximately 105,000 hectares of property in Ecuador. Previously, GEIL had entered into an acquisition agreement (the “Acquisition Agreement”) with Fundacion Nelson Velasco Aguirre, a foundation established pursuant to the law of Ecuador (“NVA”) under which agreement NVA transferred control of the Property to GEIL. NVA held title and maintained legal ownership of the Property but permitted control over the Property to pass to GEIL through a voting trust agreement dated March 16, 2012 (the “Voting Trust Agreement”) among NVA, GEIL and Fred Nikoo, as voting trustee.  On June 15, 2012, the Company appointed Amanda Miller as the voting trustee on behalf of the Company in the place of Mr. Nikoo.





In consideration of the assignment of the Voting Trust Agreement by GEIL to the Company, GEIL and/or its designees were issued 2,500,000 post reverse split shares of restricted common stock of the Company, representing a controlling interest of approximately 75%, thus effecting a change in control of the Company.  The Property is located in the province of Monora Santiago on the border between this province and the provinces of Azuay, Canar and Chimborazo. El Juval is located in the center of the Andean region of Ecuador; therefore the area of El Juval corresponds to the higher sections of the Cordillera Oriental (Eastern side of the Andes. Approximately 70% of the area of El Juval belongs to the territory of Sangay National Park, making it a suitable location for carbon offsets marketing.





On June 27, 2012, the Company authorized the execution of that certain acquisition agreement (the “Acquisition Agreement”) between the Company and Ecuador Farms S.A., Develfarms, an Ecuadorian corporation (“Ecuador Farms S.A.”), regarding property known as Hacienda Forestal San Agustin (“The Property”) consisting of approximately 30,000 Hectares. See note 5 for full details related to Ecuador Farms S.A.





As the result of these transactions we are a carbon offsets marketing company. Initially, we intend to sell carbon offsets through our website to voluntary markets where no verification is required. A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere. [Source: World Resources Institute]. Carbon offsets are measured in metric tons of carbon dioxide-equivalent and may represent six primary categories of greenhouse gases: carbon dioxide, methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons and sulfur hexafluoride. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.




F-8


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 1 – Organization and summary of significant accounting policies - continued





Once we are able to complete the verification process, we will sell verified carbon offsets through other markets. We intend to market and sell Verified Emission Reduction (VER) and Reduced Emissions from Deforestation and Degradation (REDD) carbon offsets through global restoration projects.





On December 4, 2012, The Board of Directors and Major Shareholders of the Company have approved a 30 to 1 reverse split of the Company's outstanding common stock.  The aforementioned transaction will require approval from FINRA prior to taking effect.  The reverse split were approved by FINRA on January 23, 2013, and effected on that date. The effect of this reverse split has been retroactively applied to the common stock balances at December 31, 2012, and reflected in all common stock activity presented in these financial statements.




Discontinued Operations





The Company’s former business plan was to acquire, explore and develop mineral properties. Effective March 30, 2012, the Company discontinued these operations and prior periods have been restated in the Company’s consolidated financial statements and related footnotes to conform to this presentation.





Note 2 - Going concern





We have negative working capital, and have incurred substantial losses since inception, and have not yet generated revenues, though we have recorded deferred income during the year as a result of the presale of carbon tax credits.  We are in the Development Stage and while the Company is currently working to monetize certain assets acquired to allow revenues to be generated from the sale of carbon offsets, there are a number of steps to be undertaken prior to being able to realize any revenue from these operations, including but not limited to: (1) obtaining local and national authorization and/or permitting as may be required to meet the necessary criteria to market carbon offsets; (2) industry standard certifications that validate and verify the nature and value of carbon offsets to allow sale of these offsets to global markets; (3) location of a suitable market for the sale of the offsets once verified; (4) raising of additional capital to undertake the Company’s existing business plan; (4) retention of personnel, consultants and management to undertake the Company’s current business plan.  These factors and other factors, which may as yet be unidentified, create substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.





The present ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations.  Management’s immediate plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.





Note 3 – Summary of Significant Accounting Polices





Fiscal Year End





The Company’s fiscal year end is December 31.





F-9


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 3 – Summary of Significant Accounting Polices (continued)





Basis of presentation





These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).  The consolidated financial statements of the Company include the Company and its wholly-owned subsidiary, Bluforest Canada Ltd.  All material intercompany balances and transactions have been eliminated in consolidation.





Estimates





In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended.  Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based compensation, derivative liabilities, debt discounts and common stock issued for assets, services or in settlement of obligations.





Cash and Cash Equivalents





For purposes of reporting within the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.





Development Stage





The Company is in the development stage and has had no revenue. A development stage company is one in which all efforts are devoted substantially to establishing a new business and even if planned principle operations have commenced, revenues are insignificant.





Foreign Currency Translation





The functional currency of Bluforest Canada Ltd, the Company’s wholly owned subsidiary, is the Canadian Dollar. The Company uses the United States dollar as its reporting currency. All transactions initiated in Canadian Dollars are translated to U.S. Dollar in accordance with ASC 830-10-20 “Foreign Currency Translation” as follows:





·
Revenue and expense items at the average rate of exchange in effect on the transaction date;·
Non-monetary assets and liabilities at historical exchange rates, unless such items are carried at market, in which case they are translated at the exchange rate in effect on the balance sheet date; and·
Monetary assets and liabilities at the exchange rate at the balance sheet date.





Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income (loss). Therefore, translation adjustments are not included in determining net income but reported as other comprehensive income.





For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.





No significant realized exchange gains or losses were recorded to December 31, 2012.





F-10


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 3 – Summary of Significant Accounting Polices - continued




Property and Equipment
 
 Property and equipment are recorded at cost. Depreciation and amortization on property and equipment are determined using the straight-line method over the three to five year estimated useful lives of the assets.
 
 Revenue Recognition
 
 The Company recognizes revenue from the sale of Certified Emission Reductions Credits (CER’s). Revenue from the sale of CER’s are recorded upon execution of a firm sale contract for the eligible credits.


Fair Value of Financial Instruments





The Company’s financial instruments consist of cash, receivables, payables, and due to related party. The carrying amount of cash, receivables and payables approximates fair value because of the short-term nature of these items. The carrying amount of the notes payable approximates fair value as the individual borrowings bear interest at market interest rates.





Securities Available for Sale





Trading securities as of December 31, 2012 was comprised of 3,000,000 shares of Global Resource Energy Inc. (Ref Note 6 – deferred revenue) which were in exchange for the pre-purchase of the CER’s on November 12, 2012. The Company recorded the value of the 3M shares received as of November 12, 2012 of $660,000. Since the shares hold is readily determinable, the recorded carrying value is reviewed each reporting period and adjusted to the underlying market price. During the year ended December 31, 2012, the Company recorded loss of $594,000 related to the shares hold.





Income Taxes





The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.





Related Parties





Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.





Stock-based Compensation





Stock-based compensation is accounted for using the Equity-Based Payments to Non-Employees Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company determines the value of stock issued at the date of grant. It also determines at the date of grant, the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.




F-11


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 3 – Summary of Significant Accounting Polices - continued





Loss per Common Share





The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.





Impairment of Property for Developing Carbon Credit





Assets acquired for developing carbon assets are assessed annually for impairment of value, or upon a change in circumstances which in management’s estimation, may result in a change to the carrying value of the recorded assets, and a loss is recognized at the time of the impairment by providing an impairment allowance. An asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount by which the carrying value exceeds its fair value. Impairment of these tangible assets is based on the facts and circumstances surrounding each identified asset based on management’s evaluation. Management’s evaluation follows a multi-step process where (1) recoverability of the carrying value of the asset is reviewed to determine if there is sufficient value recoverable to support the capitalized value at the report date; and, (2) If assets fail the recoverability test, impairment testing is conducted, including the evaluation of various criteria such as: prior history of successful operations; existing (if any) and future projected cash flows ; appraisal reports or evaluations from which management can prepare future cash flow analyses; the Company’s ability to monetize the asset(s) under evaluation; and, Management’s intent regarding future development.





Recent Accounting Pronouncements





The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to December 31, 2011 through the date these financial statements were issued.





Note 4 – Fair Value Measurement





An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.





The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2012 and 2011.





Level 1 inputs - over the counter stock exchange


F-12


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 4 – Fair Value Measurement (continued)





The following tables represent the Company’s financial instruments measured at fair value on a recurring basis at December 31, 2012 for each of the fair value hierarchy levels.  There were no financial instruments measured at fair value at December 31, 2011.





Cost


Gain (loss)


Fair ValueSecurities available for sale – Level 1 input

$
660,000


$
(594,000
)

$
66,000$
660,000


$
(594,000
)

$
66,000





The unrealized loss has been included in other accumulated comprehensive income at December 31, 2012.





Note 5 – Property for Developing carbon assets





The following table summarizes the movements in each group of property acquired for developing carbon assets during the year ended December 31, 2012:





Property One


Property Two


TotalDecember 31, 2011

$
-


$
-


$
-Additions


600,000,000



173,875,000



773,875,000Impairment expenses


(75,000,000
)


-



(75,000,000
)Amortization expenses


-



-



-Balance, September 30, 2012

$
525,000,000


$
173,875,000


$
698,875,000





(1)
ORE Agreement





On February 14, 2012, the Company’s Board of Directors authorized the execution of an acquisition agreement (the “ORE Acquisition Agreement”) between the Company and Oceanview Real Estate Company Ltd., a private company organized under the laws of Canada (“ORE”), pursuant to which the Company was to acquire all of ORE’s right, title and interest in and to real property located in Ecuador, known as the Hacienda Juval, consisting of approximately 80,197 hectares (the “Property”).





Pursuant to Section 2.1(f) of the ORE Acquisition Agreement, ORE represented and warranted that it had marketable title to the Property and pursuant to Section 4.2, at closing; ORE was to deliver to the Company such documents as may be required to transfer the Property to the Company and any related contracts or agreements in regard to the Property. ORE did not deliver such documents to the Company and, therefore, the Company and ORE rescinded the ORE Acquisition Agreement.





(2)
Purchase of Acquisition Agreement – Property One (1)





On March 30, 2012, the Company entered into a purchase of acquisition agreement (“Purchase of Acquisition Agreement”) with Global Environmental Investments Limited, a Belize corporation (“GEIL”), regarding the Property (as defined above), which at the date of the Purchase of Acquisition Agreement includes an additional 25,000 hectares so that it encompasses a total of  approximately 105,000 hectares. On March 16, 2012, GEIL had entered into an acquisition agreement (the “Acquisition Agreement”) with Fundacion Nelson Velasco Aguirre, a foundation established pursuant to the law of Ecuador (“NVA”). In accordance with the Acquisition Agreement, NVA transferred control of the Property to GEIL. NVA held title and maintained legal ownership of the Property but permitted control over the Property to pass to GEIL through a voting trust agreement dated March 16, 2012 (the “Voting Trust Agreement”) among NVA, GEIL and Fred Nikoo, as voting trustee. Effective June 15, 2012, Amanda Miller replaced Fred Nikoo as Voting Trustee.





F-13


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 5 – Property for Developing carbon assets – Continued





(2)
Purchase of Acquisition Agreement – Property One (1 ) (continued)





Therefore, in accordance with the terms and provisions of the Purchase of Acquisition Agreement, GEIL sold all of the rights and interests held by GEIL pursuant to the Acquisition Agreement to the Company in respect of the Property, which now consists of approximately 105,000 hectares.





In consideration of the assignment by GEIL to the Company, GEIL and/or its designees received 2,500,000 post-reverse split shares of restricted common stock of the Company representing approximately 75% of the total issued and outstanding shares of the Company, thus effecting a change in control. In accordance with ASC 805 (formerly FAS 141 (R)) the company recorded the value of the property for developing carbon assets, the Voting Trust over the Property (the “Assets”), on the transaction date, of March 30, 2012 (the “Valuation Date”), at the fair market value of the Company’s common stock based on a closing price of $240.00 per share, for a total value of $600,000,000.  At the Valuation Date the Company considered several factors including (1) an appraisal report on the Property as prepared by M. Paúl Tufiño, a respected authority in the valuation of such environmentally based assets as the Property which provides for a minimum recoverable value of  $5,000 USD per hectare or approximately $525,000,000; (2) a future discounted cash flow analysis prepared by management based on criteria applicable to the monetization of the Asset including certification allowing for the sale of VER and REDD carbon offsets, the carbon offset market and values realizable for the sale of carbon offsets globally, the Property’s available hectares, deforestation rate and the available carbon tax credits per hectare as considered acceptable by Industry.  The discounted future cash flow analysis extends over a period of 25 years discounted at a rate of 10% and provides a minimum realizable value of approximately $540,000,000.   As a result of this review, Management determined to impair the asset in order to reflect the value of the third party appraisal report received on the Property, and accordingly has provided for an impairment allowance of $75,000,000 on the Valuation Date, leaving a capitalized value of $525,000,000 which has been recorded on the balance sheet as Property for Developing carbon assets.





In further accordance with the terms and provisions of the Purchase of Acquisition Agreement, the Company entered into a three year consultant agreement (the “Mainland Consultant Agreement”) with Mainland Investment Ltd. (“Mainland”). The Mainland Consultant Agreement provides for Mainland to provide financial, advisory, marketing and investor relations services and the Company to pay to Mainland an annual compensation of $1,000,000 and grant 1,000,000 stock options exercisable at $1.00 per share for each year of the agreement for a total of 3,000,000 stock options.





Lastly, under the agreement the Company was required to: (i) cause the settlement of debt in the approximate amount of $60,000 due and owing to that certain creditors, as reflected on the financial statements of the Company as of September 30, 2011 (the “$60,000 Debt”) by the issuance of  833,333 post reverse split shares of common stock; and (ii) within ninety days, the Company is required to pay the approximate amount of $152,148 due and owing to Branislav Jovanovic, a former officer and director by a cash payment to Mr. Jovanovic.





During the year ended December 31, 2012, the Company issued the 2,500,000 post reverse split shares to GEIL, and 833,333 post reverse split shares to settle the $60,000 debt. The amount payable to Mr. Jovanovic is in dispute and has become the subject of a court action and therefore remains outstanding.





F-14


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 5 –Purchase of Acquisition Agreement, Acquisition Agreement and Commitments – Continued





(3)  Acquisition Agreement – Property Two (2)





On June 27, 2012, the Company authorized the execution of that certain acquisition agreement (the “Acquisition Agreement”) between the Company and Ecuador Farms S.A., Develfarms, an Ecuadorian corporation (“Ecuador Farms S.A.”), regarding property known as Hacienda Forestal San Agustin (“The Property”) consisting of approximately 30,000 Hectares.





In accordance with the terms and provisions of the Acquisition Agreement, Ecuador Farms S.A. sells, conveys, assigns and transfers to the Company as follows: (i) 100% of Ecuador Farms S.A.’s rights, title and interest in and to the timber, substances and the rights to receive from the Property all benefits thereto, and associated with those rights associated for the use intended by the Company, namely for the development of the Property as a carbon development project for the purpose of generating carbon assets that may be traded on a public market. This includes, for greater certainty and any and all agricultural developments that may be produced from the Property including, without limitation, carbon assets; (ii) 100% of the right, title and interests of Ecuador Farms S.A.in all presently existing and pooling and/or communization agreements, declarations, and/or orders and the properties covered or included in the units (including, without limitation, units formed under orders, rules, regulations or other official acts of any federal, state or other authority having jurisdiction, voluntary unitization agreements, designations, and/or declarations, and any working interest units created under operating agreements or otherwise), which relate to the Property; (iii) 100% of the right, title and interests of Ecuador Farms S.A.. in all presently existing and valid agreements, including sales and sales related contracts, operating agreements and other agreement and contracts which relate to the Property or which relate to the exploration, development, operation or maintenance of the Property or the treatment, storage, transaction or marketing of production from or allocated to the Property; and (iv) 100% of the right, title and interests of Ecuador Farms S.A. in and to all materials, supplies, machinery, equipment, improvements and other personal property and fixtures relating to the Property, and all wells, wellhead equipment, pumping units, flow lines, tanks, buildings, injection facilities, salt water disposal facilities, compression facilities, fathering systems and other equipment, all easements, rights-of-way, surface leases and other surface rights, all permits and licenses and all other appurtenances, used or held for use in connection with or related to the exploration, development, operation or maintenance of any of the Property.





In exchange for the right of the Company to own the Property outright, the consideration shall be One hundred and Seventy Three Million, Eight Hundred and Seventy Five Thousand Dollars USD ($173,875,000), which payment shall be paid by the Company to Ecuador Farms S.A. and/or its designees through the issuance of 891,667 post reverse split shares of newly issued restricted common stock of the Company valued at the market value on the date of issue of $195.00 per share. The stock certificates shall be held in escrow by the Escrow Agent until the definitive transfer of the Property by Ecuador Farms S.A. to the Company shall occur and the Company shall provide its written authorization to the Escrow Agent to release the stock certificates to Ecuador Farms S.A. and/or its designees. In the event the Property is not definitively transferred by Ecuador Farms to the Company as set out in paragraph 5(g) subparagraphs (i), (ii), (iii) and (iv) of the Acquisition Agreement, the Escrow Agent shall return the share certificates to the transfer agent for cancellation and the 891,667 post reverse split shares shall be returned to treasury. In that event, the Agreement shall then be deemed null and void.  The shares remain in escrow as of December 31, 2012 until the definitive transfer of the Property by Ecuador Farms S.A. occurs.





F-15


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 5 –Purchase of Acquisition Agreement, Acquisition Agreement and Commitments – Continued





(4)  Letter of Intent (LOI) - Commonwealth of Northern Ecuador (MNE)





On July 2, 2012, the Company entered into a Letter of Intent (“LOI”) with the Commonwealth of Northern Ecuador wherein BluForest will be granted the rights to carbon assets developed from 1.5 Million hectares of the Commonwealth’s lands. Upon certification to REDD+ standards, the LOI assures BluForest a minimum of 3.4 Million carbon assets annually for a period of five years and contemplates a further five year period pending mutual consent. It is intended by the parties that the LOI will be superseded by a formal agreement within twenty-one days upon completion of due diligence by the parties.  Due diligence period had been extended and a final agreement was executed February 28, 2013.




(5)  Letter of Intent (LOI) - PROFOCO





On October 8, 2012 BluForest Inc. (the "Company") entered into a "Letter of Intent" ("LOI") with UK based Profoco (Protection of Forests and Conservation). Pursuant to the terms of the LOI and subject to further negotiation, BluForest is granted an option to acquire PROFOCO for share based and/or monetary consideration that will be finalized during the due diligence process. It is intended by the parties that the LOI will be superseded by a formal agreement upon completion of due diligence.





BluForest Inc and PROFOCO have not completed Due Diligence and have at this time have no plans to continue to acquire PROFOCO.





Note 6 – Deferred Revenue





(a)
On November 12, 2012, the Company entered a Certified Emission Reductions Pre-sale and Purchase Agreement (“CERSPA”) with Global Resource Energy Inc. (“GBEN”). Under the agreement, GBEN pre-purchase of 66,000 CERs from the Company. Total purchase price of $660,000 was paid in the form of 3,000,000 restricted shares of GBEN. We recorded the pre-sale of $660,000 as deferred revenue presented on the balance sheets as of December 31, 2012.





(b)
On December 24, 2012, the Company entered a Certified Emission Reductions Pre-sale and Purchase Agreement (“CERSPA”) with Mainland Investments Ltd. (“Mainland”). Under the agreement, Mainland pre-purchase of 8,300 CERs from the Company for the purchase price of $83,000. In consideration of the purchase, Mainland agrees to apportion $83,000.00 of the amount owed to it by the Company. We recorded the pre-sale of $83,000 as deferred revenue presented on the balance sheets as of December 31, 2012.





Note 7 – Discontinued Operations





(1)
Candorado Agreement:





On February 17, 2011, the Company and Candorado Operating Company Ltd. (“Candorado”) entered into an Option Agreement (the “Agreement”) whereby the Company optioned the rights to earn up to a 100% interest in and to certain mining claims knows as Summer located in British Columbia, Canada (the “Property”).





On February 22, 2011, the Company directed its transfer agent to issue a total of 12,290 restricted shares of the common stock of the Company,), which represented a total of 4.5% of the total issued and outstanding shares of the Company at the time of issue as required under the Agreement. The fair value of the shares on issue date totaling $614,498 was recorded and reflected on the balance sheets as other assets – Deposit on mineral property.




F-16


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 7 – Discontinued Operations – Continued





(1)
Candorado Agreement(continued):





On August 20, 2011, the Company received notification from Candorado that the Company was in default as of August 18, 2011, and the option agreement was therefore terminated. The Company issued the shares as required under the Agreement but failed to meet the payment and exploration expenditures which were required to be made by August 17, 2011. There are no further requirements under the Agreement to be effected by the Company to Candorado and the Company has no further rights or interest in the Property.  As a result of the termination of the option agreement, the Company has written down its investment totaling $614,498 and allocated the amount to the discontinued expenses.





(2)
Other Agreement





On October 27, 2011, the Company (the “Optionee”) entered into a option agreement with an unrelated third party (the “Optionor”) to acquire a 100% interest, subject only to a 2% royalty, in and to certain mining claims in the Province of Quebec, Canada.  Under the terms of the option agreement, the option was to be exercised by:





(a)    The following cash and stock payments: $10,000 and the issuance of 333 post reverse split shares of restricted common stock,of the Optionee within 30 days of the date of the Agreement;





(b)  The following exploration expenditures: (i) $15,000 on or before April 30, 2012; (ii) $30,000 on or before April 30, 2013; (iii) $50,000 on or before April 30, 2014; (iv) $75,000 on or before April 30, 2015.





During the fiscal year ended December 31, 2011, the $10,000 was not paid by the Company and 10,000 post reverse-split shares required to be issued pursuant to the option agreement had not yet been issued.





In February 2012, the Company paid $5,000 in cash and determined to let its other payment commitments lapse as a result of an acquisition of a new project, which will be the Company’s sole operating focus. The amount of $5,000 is allocated to discontinued expense on the Company’s Consolidated Statements of Operations and repayment in June 2012.





As a result of the Purchase of Acquisition Agreement on March 30, 2012 (ref: Note 5 – Purchase of Acquisition Agreement and Commitments), the Company changed its business focus from mining (exploration stage) to marketing of carbon offsets (development stage). Accordingly, the Company has reported discontinued operations on its statement of operations, classified as follows:





Year ended

December 31, 2012


Year ended

December 31, 2011


From March 26, 2008 (date of inception) to December 31, 2012Discontinued Operating ExpensesProfessional fees

$
2,500


$
272,008


$
336,668Mineral property costs


-



5,417



14,034Salaries and benefits


10,000



120,000



135,500General and administrative expenses


454



52,153



72,475Loss on mineral property


5,000



614,498



619,498Interest expense


9,064



1,457



10,521Total Discontinued Operations

$
27,018


$
1,065,533


$
1,188,696


F-17


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 7 – Discontinued Operations (continued)





Results from Discontinued Operations reported above include amounts due to Mr. Branislav Jovanovic, our Past President and former controlling stockholder. On February 15, 2012, the Company received the resignation of Mr. Jovanovic as its sole officer and director and appointed of Charles Miller as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and a member of the Board of Directors. Concurrently the Company agreed to cause the outstanding debt in the approximate amount of $152,148 due and owing to Branislav Jovanovic, as at January 31, 2012, to be settled in full within 90 days of his resignation. Presently the full amount of the outstanding debt remains unpaid as certain portions are in dispute and expected to undergo an arbitration proceeding.





Note 8 – Equipment





Equipment is recorded at cost. Depreciation of equipment is provided using the straight-line method over the assets estimated useful lives of approximately 3 to 5 years. Equipment, as of September 30, 2012 and December 31, 2011, consisted of the following:





Estimated Useful Lives

December 31, 2012


December 31, 2011Computer Equipment
3 Years

$
3,214


$
-Accumulated depreciation



(777)



-$
2,437


$
-





Depreciation expense for the year ended December 31, 2012 was $777 and 2011 were NIL.





Note 9 – Short-term Loans





The following table provides details of the Company’s short-term loans transactions during the year ended December 31, 2012:





Discontinued Operations



Advances Payable



AccountsPayableBalance, December 31, 2011

$
159,938

(a)

$
-



$
-Advances funds to the company







870,570

(c)-(f)Debt settlement to shares


(60,000
)



-Accrued interest


9,064









39,617

(c) - (f)Balance, December 31, 2012

$
109,002



$
870,570



$
39,617





(a) On May 31, 2011, the Company received funds in the amount of $150,000 pursuant to verbal private placement agreements.  The Company issued 2,000 post-split shares pursuant to those verbal agreements during June, 2011; however, as no subscription agreements were received, the Company returned those shares to the transfer agent for cancellation. On November 22, 2011, the investor decided to transfer the amount of $150,000 to a short-term loan.





On October 7, 2011, the Company further received funds from the same lender in the amount of $9,385, which remains outstanding as of the date of these financial statements.


F-18


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 9 – Short-term Loans (continued)





On March 26, 2012, the Company agreed to settle debt in the amount of $60,000 due and owing as at September 30, 2011 by issuance to the certain Creditor and his assignees an aggregate of 833,333 post reverse split shares of common stock.  833,333 post reverses split shares were reserved for issuance and were valued at fair market value of $240.00 per share on the agreement date, and accordingly we recorded $199,940,000 as loss on the debt settlement.  The shares were issued in full satisfaction of the debt in April 2012.





As at December 31, 2012, the Company owed $99,385 in short term loans to non-related parties. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand, which amount is reflected on the balance sheets as discontinued operations.





During the year ended December 31, 2012, the Company recorded an interest expense of $9,064 in respect of the aforementioned loans, which amount is reflected on the balance sheets as discontinued operations.





(b) On February 1, 2012, the Company received funds from another lender in the amount of $5,000 to pay in cash in respect an option agreement with an unrelated third party to acquire a 100% interest, subject only to a 2% royalty, in and to certain mining claims in the Province of Quebec, Canada.(ref Note 6 – Discontinued Operations). The amounts owing are unsecured, bear interest at 10% per annum, and are due on demand. The loan was paid in full on 28 June, 2012.





(c) On April 3, 2012, the Company received funds from another lender in the amount of $4,023 to pay outstanding invoices.





As at December 31, 2012, the Company owed $4,023 in short term loans to non-related parties. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand, which amount is reflected on the balance sheets as advances payable.





During the year ended December 31, 2012, the Company recorded an interest expense of $240 in respect of the aforementioned loans, which amount is reflected on the balance sheets as accounts payable and accrued liabilities.





(d) On May 18, 2012, the Company received funds from another lender in the amount of $200,682 (CAD$200,000) for operations. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand, which amount is reflected on the balance sheets as advances payable.





During the year ended December 31, 2012, the Company recorded an interest expense of $9,985 in respect of the aforementioned loans, which amount is reflected on the balance sheets as accounts payable and accrued liabilities





(e) On August 16, 2012, the Company received funds from another lender in the amount of $265,152 US (CAD$264,250) for operations. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand, which amount is reflected on the balance sheets as advances payable





During the year ended December 31, 2012, the Company recorded an interest expense of $7,962 in respect of the aforementioned loans, which amount is reflected on the balance sheets as accounts payable and accrued liabilities.


F-19


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 9 – Short-term Loans (continued)





(f) On May 1, 2012, the Company received funds from former President in the amount of $400,713 US for operations. The amounts owing are unsecured, bear interest at 8% per annum, and are due on demand, which amount is reflected on the balance sheets as advances payable. (ref Note 12 – related partiy transactions)





During the year ended December 31, 2012, the Company recorded an interest expense of $21,430 in respect of the aforementioned loans, which amount is reflected on the balance sheets as accounts payable and accrued liabilities.





Note 10 - Common Stock





On February 6, 2012, the Board of Directors of the Company and the controlling shareholder of the Company approved the reverse split of the issued and outstanding shares of the Company on the basis of 1 share for every 500 shares then issued and outstanding. The record date for the reverse split was set at February 20, 2012.  On March 22, 2012, FINRA set the Effective Date for the reverse split as March 23, 2012.





On December 4, 2012, The Board of Directors and Major Shareholders of the Company have approved a 30 to 1 reverse split of the Company's outstanding common stock.  The aforementioned transaction will require approval from FINRA prior to taking effect.  The reverse split were approved by FINRA on January 23, 2013, and effected on that date.





On March 26, 2012, the Company agreed to issue 833,333 post reverse split shares of common stock to a Creditor and/or his assignees (ref Note 7 – short term loan) in settlement of $60,000. The Company valued these common shares at the fair market value on the date the Company and the Creditors agreed to the debt settlement which was $240 per share or $200,000,000.  The 833,333 post reverse split shares were issued on April 9, 2012.





On March 30, 2012, the Company issued 2,500,000 post reverse split shares of common stock to Global Environmental Investments Ltd. per the Purchase of Acquisition Agreement. (Ref Note 5 - Purchase of Acquisition Agreement and Commitments). The Company valued these common shares at the fair market on the date of execution of the Purchase of Acquisition Agreement of $240 per share or $600,000,000.  The 2,500,000 post reverse split shares were issued on April 3, 2012. On September 30, 2012 the Board of Directors and the controlling shareholder of the Company, Global Environmental Investments Ltd. (“G.E.I.L.”), approved the surrender for cancellation of 766,667 post reverse split shares owned by G.E.I.L. The shares were surrendered voluntarily by G.E.I.L. and no consideration was provided by the Company.





On June 27, 2012, the Company issued 891,667 post reverse split shares of restricted common stock to Ecuador Farms S.A. per the Acquisition Agreement (Ref Note 5 (3) - Purchase of Acquisition Agreement, Acquisition Agreement and Commitments). The Company valued these restricted common shares at the fair market on the date of execution of the Acquisition Agreement of $195 per share or $173,875,000.  The shares are held in escrow until the definitive transfer of property occurs from Ecuador Farms S.A.





During the year ended December 31, 2012, the Company issued 556 post reverse split shares of common stock at $90 and 67 post reverse split shares of common stock at $150 per share for cash proceeds of $60,000.





The total issued and outstanding shares are 3,474,000 as of December 31, 2012.




F-20


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 11 – Stock options





On March 15, 2012, the Company entered into a three year consulting agreement (the “Mainland Consulting Agreement”) with Mainland Investments Ltd. (“Mainland”). The Mainland Consulting Agreement requires Mainland to provide to the Company, financial, advisory, and marketing and investor relation services and the Company is required to pay to Mainland annual compensation of $1,000,000 and grant to Mainland a total of 3,000,000 stock options, with 1,000,000 options granted for each year of the contract exercisable at $1.00 per share.





The following table summarizes information concerning stock options outstanding as of December 31, 2012:





Shares


Weighted Average

Grant Date

Fair ValueUnvested, at December 31, 2011


-


$
-Granted


3,000,000Vested


1,000,000Forfeited


-Unvested, at December 31, 2012


2,000,000


$
1.00





The Company recognized stock-based expense as consulting fees of $7,904 during the year ended December 31, 2012. Unrecognized compensation expense related to outstanding stock options as of December 31, 2012 was $15,981 and is expected to be recognized as $7,984 and $7,997 in 2013 and 2014, respectively.





Valuation Assumptions





The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends.





The following table presents the range of the weighted average fair value of options granted and the related assumptions used in the Black-Scholes model for stock option grants made during the year ended December 31, 2012:


Options Granted2012Fair value of options granted

$
0.008Assumptions used:Expected life (years) (a)


3 - 5Risk free interest rate (b)


0.510% - 1.040
%Volatility (c)


369.50
%Dividend yield (d)


0.00
%





a)
Expected life: The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.b)
Risk-free interest rate: The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options.c)
Volatility: The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the Company’s stock price calculated over a period of time representative of the expected life of the options.d)
Dividend yield: The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the stock.


F-21


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 12 – Related party transactions





(1)
Advances from related parties:





The following table summarizes the advances from related parties:





Principal Amount


Accrued

Interest on

Notes payable


Repayment

In principal


Payment

For interest


Balance

December 31, 2012CEO/CFO (a)

$
200,424


$
8,981


$
(180,356
)

$
(8,642
)

$
20,407Former President (b)

$
400,713


$
21,430


$
-


$
-


$
422,143





(2)
Services provided from related parties:





Consulting fees, including

in-house legal services


Payments


Balance

Accounts payable

December 31, 2012


Balance

Accounts payable- related parties

December 31, 2012CEO/CFO (a)

$
750,000


$
41,002


$
-


$
708,998Former President (b)


120,833



104,109



16,724



-Secretary (c)


81,412



51,184







30,228Former CFO, Treasurer (d)


10,889



10,889



-



-$
659,691


$
200,693


$
16,724


$
739,226





(a)
Charles Miller was appointed as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole member of the Board of Directors of the Company effective February 15, 2012 to serve until his successor is duly elected.





(b)
James Donihee is the sole officer and director of the Company’s wholly-owned subsidiary, BluForest Canada Ltd. and is the President and a director of the Company.



On November 1, 2012, James Donihee resigned as a Director of the Company and as a Director of BluForest Canada Ltd., the Company's wholly owned subsidiary.



On November 1, 2012, James Donihee resigned as President of the Company and BluForest Canada Ltd., the Company's wholly owned subsidiary.





(c)
Amanda Miller was appointed as Secretary of the Company on April 2, 2012. Amanda Miller is the daughter of Charles Miller, the Company’s Chief Executive Officer and a member of the board of directors.

On January 10, 2013, Amanda Miller resigned as an Officer of the Company.





(d)
John Shimell is the Former Treasurer, Chief Financial Officer and Director. He resigned effective May 25, 2012.







F-22


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





NOTE 13 – Income Tax





We follow applicable FASB Codification regarding Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.





The provision (benefit) for income taxes for the years ended December 31, 2012, June 30, 2011 by applying the statutory income tax rate was as follows:


December 31,


December 31,2012


2011Deferred tax provision (benefit) attributable to:Deferred income tax provision (benefit) at statutory rate

$
(28,472,500
)

$
(6,200
)Federal income tax expense (benefit)


(68,445,800
)


(356,600
)State income tax expense (benefit), net of federal benefit


(6,643,300
)


(34,600
)Subtotal


(103,561,600
)


(397,400
)Less: reverse valuation allowance


103,561,600



397,400Deferred tax assets

$
--


$
-
 
 The composition of the Company’s deferred tax assets as at December 31, 2012 and December 31, 2011 is as follows:
 
 December 31,


December 31,2012


2011Deferred tax assets:Net operating loss carry forward

$
277,645,056


$
1,065,533Less: Accrued officer compensation


(739,226
)


(16,724
)Unrealized loss on investment


(594,600
)


-Impairment loss


(75,000,000
)


-Less: Valuation allowance


(201,311,230
)


(1,048,809
)Total deferred tax asset

$
-


$
-
 
 The potential income tax benefit of these losses has been offset by a full valuation allowance.
 
 As at December 31, 2012, the Company had estimated non-capital losses for tax purposes of $202,456,184, which may be carried forward to offset future years’ taxable income. These losses will expire as follows:
 
 Year of Expiry

Taxable Losses2028


30,7562029


16,3592030


49,0302031


1,048,8092032


201,311,230$
202,456,184


F-23


BLUFOREST INC.


(FORMERLY GREENWOOD GOLD RESOURCES, INC.)


(A Development Stage Company)


(Formerly An Exploration Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





Note 14 – Commitments and Contingencies




Legal  Issues:




In June, 2012 the company’s former President, Branislav Jovanovic of Calgary, Alberta, Canada commenced arbitration proceedings against the company  with such proceedings filed with the International Centre for Dispute Resolution in Las Vegas, NV.  The statement of claim filed by the plaintiff in the arbitration proceedings alleged unpaid sums of approximately $150,000 USD.  The company replied and filed a Statement of Defence in the arbitration proceedings on July 28, 2012.  The company filed  a statement of defence and asserted, amongst other things, that the arbitration proceedings should be terminated.  By way of a direction issued by the International Centre for Dispute Resolution on September 25, 2012 the arbitration was terminated and the claim was dismissed due to inaction by the Plaintiff in prosecuting his claim.





On July 30, 2012 the company commenced legal proceedings in the Alberta Court of Queen’s Bench in Calgary, Canada against Branislav Jovanovic.  In the claim the company alleged that Mr. Jovanovic had submitted false expense claims and made other demands for reimbursement for expenses claimed to have been incurred for the company at the time that he was the sole director and officer.  At the time, in April, 2011 Mr. Jovanovic caused the company to pay him for these claims with the issuance of stock to himself and other family members.  The amount sought to be repaid was approximately 70,000 shares and at the time the action was commenced, the value of those shares was approximately $300,000 USD.  On October 4, 2012 the company sought and obtained a temporary injunction from the Alberta Court of Queen’s Bench in Calgary, Canada, stopping Mr. Jovanovic from trading those shares for a period. After the Court granted an extension to late October, 2012, the temporary injunction expired.    The action is moving forward into document discovery this year.





The day after the initial injunction was granted by the Court in Alberta, Canada, and on October 5, 2012 Mr. Jovanovic started a new lawsuit in US Federal Court in Las Vegas NV seeking an unquantified claim against the company in debt for a sum claimed to exceed $75,000 USD.  The company believes that the demand is the same claim Jovanovic sought unsuccessfully in his arbitration proceedings.   In November, 2012 the company applied in Federal Court to dismiss the Plaintiff’s complaint and on January 8, 2013 the Court did so and dismissed the entire action.  In issuing the order, Judge Hicks ruled that the exclusive jurisdiction for the parties’ dispute was Alberta, Canada where the company’s action was filed.





Currently, all claims by or on behalf of Branislav Jovanovic against the company have been dismissed.  The company expects to continue to press forward with its action to require Mr. Jovanovic to account to the company for his actions and explain his activities. Any assessment of the action is premature at this time.




Note 15 – Subsequent Events





On January 10, 2013, Amanda Miller resigned as an Officer of the Company.





On January 30, 2013, the Company issued an aggregate of 100,000,000 common shares to various stockholders to settle $900,000 of debt owed to various creditors.


$750,000 was issued to convert the debt of Charles Miller, a related party.  The stock issued diluted the largest shareholder and effected a change in control Charles Miller now owns 39,166,667 Million shares and holds 37.85%





On March 1, 2013 the Company signed the agreement with the Commonwealth of Northern Ecuador to develop and sell verified carbon assets from 1,500,000 hectares.


F-24


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





There are not currently and have not been any disagreements between us and our accountants on any matter of accounting principles, practices or financial statement disclosure.




On January 1, 2012, the audit firm of Randall N. Drake CPA, P.A. changed its name to Drake & Klein CPAs.  The change was reported to the PCAOB as a change of name.  This is not a change of auditors for the Company.
 
 On December 17, 2012, the audit firm of Drake & Klein CPAs changed its name to DKM Certified Public Accountants.  The change was reported to the PCAOB as a change of name.  This is not a change of auditors for the Company.





ITEM 9A.  CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





Our management, under supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of December 31, 2012, because of the material weakness in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures were not effective.





Disclosure controls and procedures are controls and other procedures that are designed to ensure that required information to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that required information to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.





Management’s Report on Internal Control over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR), as defined under Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.





Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making the assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its assessment, management concluded that, as of December 31, 2012, our internal control over financial reporting was not effective and that material weaknesses in ICFR existed as more fully described below.





As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of December 31, 2012:





·
We do not have an independent audit committee or independent board members.While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over our financial statements.  To date we have not established an audit committee.


23




·
Insufficient documentation of financial statement preparation and review procedures - We employ policies and procedures in reconciliation of the financial statements and the financial information based on which the financial statements are prepared, however, the controls and policies we employ are not sufficiently documented.




·
Inadequate staffing and supervision within our bookkeeping operations. We have one consultant involved in bookkeeping functions, who provides two staff members. The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC.




·
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.




·
Ineffective controls over period end financial disclosure and reporting processes.




Management's Remediation Initiatives





As of December 31, 2012, management assessed the effectiveness of our internal control over financial reporting. Based on that evaluation, it was concluded that during the period covered by this report, the internal controls and procedures were not effective due to deficiencies that existed in the design or operation of our internal controls over financial reporting. However, management believes these weaknesses did not have an effect on our financial results. During the course of their evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.





Due to a lack of financial and personnel resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until, if ever, we acquire sufficient financing and staff. We will implement further controls as circumstances, cash flow, and working capital permits. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the period ended December 31, 2012, fairly presents our financial position, results of operations, and cash flows for the periods covered, as identified, in all material respects.





Management believes that the material weaknesses set forth above were the result of the scale of our operations and intrinsic to our small size. Management also believes that these weaknesses did not have an effect on our financial results.





We are committed to improving our financial organization. As part of this commitment, we will, as soon as funds are available to the Company (1) appoint outside directors to our board of directors sufficient to form an audit committee and who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate duties consistent with control objectives and to increase our personnel resources. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary, and as funds allow.


24




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.





Changes in Internal Control over Financial Reporting





During the period covered by this report, there were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  We are not required to provide an attestation report by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission.





ITEM 9B.  OTHER INFORMATION





There is no further information required to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by the Form 10-K, but that was not reported, whether or not otherwise required by this Form 10-K.





PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Identification of Directors, Executive Officers and Certain Significant Employees





The following table sets forth the names and ages of all directors, executive officers and certain significant employees of the Company as of the filing date of this report, further indicating all positions and offices with the Company held by each such person, their term of office, and any arrangement or understanding between their selves and any other person(s) pursuant to which they were or are to be selected as a director or officer:





Name
Age
Position
Date of AppointmentCharles Miller
49
Director, Chief Executive Officer,
February 15th, 2012Chief Financial Officer





Except as otherwise indicated below, no organization by which any officer or director previously has been employed is an affiliate, parent, or subsidiary of the Company. Furthermore, except as otherwise indicated below, no director or person nominated or chosen to become a director holds any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940, 15 U.S.C. 80a–1, et seq., as amended.





25





Charles Miller, Chief Executive Officer, Chief Financial Officer and Director





Mr. Miller was appointed sole officer and director on February 15, 2012.   He resigned as President, Secretary, and Treasurer on April 2, 2012 to allow for the appointments of additional officers as detailed herein.   He remains a director and the Chief Executive Officer of the Company.  Mr. Miller was then re-appointed Chief Financial Officer after the resignation of Mr. John Shimell on May 25, 2012.





During the prior thirty years, Mr. Miller has been involved in real estate development and in the oil and gas industry. Mr. Miller has been a project development specialist leading multiple large scale developments from the concept and design stages to their completions in both the tourism and oilfield industries.





Mr. Miller focused his practice in real estate development in Central and South America. He also began his professional career in 1979 in the world renowned Canadian oilfield industry where he worked as an engineer, drilling consultant and bending engineer. Mr. Miller has also held consulting positions within the Veilleux Management and Pinnacle Hotel Consulting firms which, in turn, held management contracts with Deloitte and Touch. The aforementioned companies specialized in hotel turn-arounds, which allowed for the successful sales of multiple properties. Mr. Miller’s work in consulting gave him the knowledge and ability to understand the hotelier business, which then enabled him to operate his own hotels. Mr. Miller subsequently proceeded to step out on his own in 1989 through investing in the international tourism industry. This new endeavor made it possible for Mr. Miller to gain extensive contacts in the United States of America and within Europe; and gave him an insight into the workings of international finance and business development. As a result of his prior experience, Mr. Miller has created a large financial base affording him the possibilities to participate in and develop projects around the world.





Mr Miller is currently involved in building the famous Poseidon Building in Manta Ecuador www.oceanview-real-estate.com. Mr. Miller is also the chief executive officer and president of the development company, Oceanview Real Estate Company Inc, and general manager of Oceanview Real Estate Company S.A, which is an operating company in Ecuador accountable for strategic alliances with industry, finance, and government leaders. Mr. Miller is also currently a director and chief executive officer of Wapiti Waste Management and Advanced Flush Systems.





Mr. Miller is not currently an officer or director of any other reporting issuers.








Involvement in Certain Legal Proceedings, Family Relationships





To the best of the issuer’s knowledge, during the past five years, no director, executive officer, promoter or control person of the Company:





·
has any bankruptcy petition filed by or against any business of which the director, executive officer, promoter or control person was a general partner or executive officer either at the time of bankruptcy or within two years prior to that time;


·
was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);


·
was the subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;


·
were the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity;were found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.




26





Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, officers and persons who beneficially owned more than ten percent of the Company’s common stock to file reports of ownership and changes in ownership of common stock.





Based on a review of Forms 3, 4, and 5 and amendments thereto furnished to the registrant during its most recent fiscal year, the following represents each person who did not file on a timely basis reports required by Section 16(a) of the Exchange Act during the most recent fiscal year:





Name
Reporting Person
Form 3/#of transactions
Form 4/# of transactions
Form 5/# of transactionsBranislav Jovanovic
President, Secretary, Treasurer and Director (resigned)
Late/1
Late/1
N/A





Audit Committee and Audit Committee Financial Expert





There is no separately-designated standing audit committee as the Company’s Board of Directors acts as the Company’s audit committee.  The Board of Directors does not have an independent “financial expert” because it does not believe the scope of the Company’s activities to date has justified the expenses involved in obtaining such a financial expert.  In addition, the Company’s Common Stock is not listed on a national exchange and the Company is not subject to the special corporate governance requirements of any such exchange.





Nominating Committee





The Company does not currently have a standing nominating committee and the Company’s entire Board of Directors performs the functions that would customarily be performed by a nominating committee.  The Board of Directors does not believe a separate nominating committee is required at this time due to the size and scope of the Company’s business operations and the limited resources of the Company.





The Company’s stockholders may recommend candidates for nomination as directors.  Any such recommendations should include the nominee’s name, home and business addresses and other contact information, detailed biographical data, and qualifications for board membership, along with information regarding any relationships between the candidate and the Company within the last three fiscal years.  Any such recommendations should be sent to: BluForest Inc., Ave. Republica del Salvador y Shyris Edificio Onix piso 10-C Quito Ecuador.  There have been no recommended nominees from the Company’s stockholders.  The Company pays no fees to third parties for evaluating or identifying potential nominees.





Code of Ethics





The Company has adopted a code of business conduct and ethics for directors, officers and employees.  A copy of the Company’s Code of Ethics was filed as Exhibit 14.1 to Form 10-K for the year ended December 31, 2008 on EDGAR on March 31, 2009. Upon written request to the Secretary of the Company a copy will be provided to any stockholder.   The Company is currently revising its Code of Ethics given that the Company has a new business direction.   The Company expects to have its new Code of Ethics adopted prior to the end of the second quarter on June 30, 2013 and will file such documents with both the Securities and Exchange Commission and post on the Company’s website.




27


ITEM 11.  EXECUTIVE COMPENSATION





Summary Compensation Table





The table below summarizes all compensation awarded to, earned by, or paid to our executive officers of December 31, 2012 and December 31, 2011 for all services rendered in all capacities to us during the last completed fiscal year:





Name and

Principal Position
Fiscal Year ended Dec 31,
Salary

($)
Bonus

($)
Stock Awards

($)
Option

Awards

($)
Non-Equity Incentive Plan Compensation

($)
Nonqualified Deferred

Compensation

($)
All Other Compensation

($)
Total

($)Charles Miller, CEO, CFO
2012
750,000
-0-
-0-
-0-
-0-
-0-
-0-
750,000Amanda Miller, Secretary
2012
81,412
-0-
-0-
-0-
-0-
-0-
-0-
81,412James Donihee, President (resigned)
2012
120,833
-0-
-0-
-0-
-0-
-0-
-0-
120,833Branislav Jovanovic CEO, CFO and President (resigned)
2011
120,000
-0-
-0-
-0-
-0-
-0-
-0-
120,000





Outstanding Equity Awards at Fiscal Year End





None





Compensation of Directors





There was no compensation provided to directors by way of cash or other cash compensation for services rendered as a director during the year ended December 31, 2012, with the exception of the amounts noted above under Summary Compensation.


28


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





Securities  for Issuance under Equity Compensation Plans




None





Security Ownership of Certain Beneficial Owners –


The following table sets forth information, as of March 14, 2013, with respect to the beneficial ownership of the Company’s common stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding common stock.  Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable 5% stockholders have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.





Title of Class
Name and Address of Beneficial Owner
Amount and Nature

of Beneficial Ownership
Percentage of Class (1)Common Stock
Michael McCarthy .

Cor 12 Baymen Ave and Calle Al Mar

Belize City, Belize
17,250,000
16.7%Common Stock
Patricio Izurieta

Av.Amazonas N35-89

Ed.Amazonas 4000, 5to Piso

Casillo 17.01.638

Quito-Ecuador
6,750,000
6.5%Common Stock
Charles Miller

51A Dean Street

P.O. Box 2079

Belize City

Belize
39,166,667
37.8%





(1)
Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to securities.   All shares of common stock subject to options or warrants exercisable within 60 days of April 5, 2012 are deemed to be outstanding and beneficially owned by the persons holding those options or warrants for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person.  They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person.  Subject to the paragraph above, the percentage ownership of outstanding shares is based on 75,424,500 shares of common stock outstanding as of April 9, 2012.





29





Security Ownership of Management





The following table sets forth information, as of March 14, 2013, with respect to the beneficial ownership of the Company’s common stock by each of the Company's officers and directors, and by the officers and directors of the Company as a group.  Information is also provided regarding beneficial ownership of common stock if all outstanding options, warrants, rights and conversion privileges (to which the applicable officers and directors have the right to exercise in the next 60 days) are exercised and additional shares of common stock are issued.





Title of Class
Name of Beneficial Owner
Amount and Nature

of Beneficial Ownership
Percentage of Class (1)Common Stock
Charles Miller
39,166,667
37.9%Common Stock
James Donihee
31,673
0%Common Stock
John Shimell
-0-
0%Common Stock
Amanda Miller
16,667
0%All Officers and Directors as a Group
-0-
37.9%





(1)
Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to securities.   All shares of common stock subject to options or warrants exercisable within 60 days of March 14, 2013 are deemed to be outstanding and beneficially owned by the persons holding those options or warrants for the purpose of computing the number of shares beneficially owned and the percentage ownership of that person.  They are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person.  Subject to the paragraph above, the percentage ownership of outstanding shares is based on 103,475,000shares of common stock outstanding as of March 14, 2013.





Changes in Control




Effective April 3, 2012 Global Environmental Investment Ltd., a company incorporated pursuant to the laws of Belize, Central America, was issued 75,000,000 shares of common stock for the acquisition of the Hacienda Juval Property in Ecuador.The issuance of the shares of common stock of the Company constituted 99.4% of the total issued and outstanding shares at the time of issuance and effected a change in control of the Company.





Effective June 27, 2012 Ecuador Farms S.A. DevelFarms (“S.A. Farms”) a Ecuadorian Company received 26,750,000 shares




Charles Miller, CEO, now owns 39,166,667 shares or 37.85% of total issued and outstanding shares at the time of issuance and effected a change in control of the Company.





There are no additional present arrangements or pledges of our securities which may result in a change in control of the Company.  However, there are no provisions in our Articles of Incorporation or Bylaws that would delay, defer or prevent a change in control.




30





ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





Transactions with Related Persons, Promoters and Certain Control Persons





Transactions with Related Persons





There were no material transactions, or series of similar transactions, since the beginning of the last fiscal year, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or 1% of our total assets at year-end for the last two completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.





Promoters and Certain Control Persons





None.





Parents





There are no parents of our Company.





Director Independence





The Company has not yet developed any categorical standards for determining the materiality of relationships that the Directors may have with the Company.  Our existing director and Chairman of the Board of Directors is not independent.





The Company had expected to develop categorical standards for determining independence and the materiality of relationships that directors may have with the Company and still maintain independence during fiscal 2011, however due to a lack of funding and the fact the that Company had a sole director and officer this did not occur.  The Company, as it develops its business plan under the new business recently acquired, and with the appointment of additional board members, hopes to develop independence standards during fiscal 2012.  The Company will either include its independence standards in its next proxy statement, if developed at that time and will post such information on its website.





ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES




(1) Audit Fees




On January 1, 2012, the audit firm of Randall N. Drake CPA, P.A. changed its name to Drake & Klein CPAs.  The change was reported to the PCAOB as a change of name.  This is not a change of auditors for the Company.
 
 On December 17, 2012, the audit firm of Drake & Klein CPAs changed its name to DKM Certified Public Accountants.  The change was reported to the PCAOB as a change of name.  This is not a change of auditors for the Company.
 
 The aggregate fees billed for each of the last two fiscal years for professional services rendered by DKM Certified Public Accounting; the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:


2012
$
13,5002011
$
8,000




(2) Audit-Related Fees




The aggregate fees billed in each of the last two fiscal years for assurance and related services by Randall N. Drake, CPA, PA; the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:




2012
$
02011
$
0




31




(3) Tax Fees




The aggregate fees billed in each of the last two fiscal years for professional services rendered by Koplas & Company, CPA, PA; the principal accountant for tax compliance, tax advice, and tax planning was:




2012
$
02011
$
0




(4) All Other Fees




The aggregate fees billed in each of the last two fiscal years for the products and services provided by Randall N. Drake, CPA, PA; the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:




2012
$
02011
$
0






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PART IV





ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES





Financial Statements





The information required by this item is incorporated herein by reference to the financial statements and notes thereto listed in Item 8 of Part II and included in this Annual Report.





Schedules





All financial statement schedules are omitted because the required information is included in the financial statements and notes thereto listed in Item 8 of Part II and included in this Annual Report.





Exhibits





The following exhibits are filed as part of this Annual Report:








EXHIBIT INDEX





Incorporated by referenceExhibit
Document Description
Form
Date
Number
Filed herewith3.1
Articles of Incorporation
S-1
July 18, 2008
3.13.1(1)
Certificate of Change to Articles of Incorporation filed with the Nevada Secretary of State
8-K
February 17, 2011
3.13.2
Bylaws
S-1
July 18, 2008
3.24.1
Specimen stock certificate
S-1
July 18, 2008
4.110.1
Option Agreement between the Company and Candorado
8-K
February 22, 2011
10.110.3
Acquisition Agreement between the Company and Ocean View Real Estate Company Ltd.
8-K
February 22, 2012
10.114.1
Code of Ethics
10-K
March 31, 2009
14.131.1
Section 302 Certification - Principal Executive Officer



X31.2
Section 302 Certification - Principal Financial Officer



X32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



X





33


SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





BLUFOREST, INC.Date:
March 18, 2013
By:
/s/ Charles MillerName:
Charles MillerTitle:
Chief Executive Officer (Principal Executive Officer) Principal Financial Officer, Principal Accounting Officer





In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated, who constitute the entire board of directors:





Date:
March 18, 2013
By:
/s/ Charles MillerName:
Charles MillerTitle:
President, Chief Executive Officer (Principal Executive Officer) Principal Financial Officer, Principal Accounting Officer, and Director


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