Edgar Filing: BLUE HOLDINGS, INC.

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

FORM 10-KSB

|X| Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

|_| Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934

Commission file number 000-33297

BLUE HOLDINGS, INC.
(Name of Small Business Issuer In Its Charter)

NEVADA 88-0450923
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)

5804 EAST SLAUSON AVENUE
COMMERCE, CALIFORNIA 90040
(Address of Principal Executive Offices and Zip Code)

(323) 725-5555
(Issuer's telephone Number)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value
(Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. |_|

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days. Yes |X| No |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.) Yes |_| No |X|

The issuer's revenues for the fiscal year ended December 31, 2005 were
$36,365,205.

At March 1, 2006, the aggregate market value of the voting stock held by
non-affiliates of the issuer was $21,413,348.

At March 1, 2006, the issuer had 26,057,200 shares of Common Stock, $0.001 par
value, issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement to be filed with the Securities and
Exchange Commission are incorporated by reference into Part III, Items 9, 10,
11, 12 and 14 of this Form 10-KSB.

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BLUE HOLDINGS, INC.
2005 FORM 10-KSB ANNUAL REPORT

TABLE OF CONTENTS

PART I 3
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ITEM 1. DESCRIPTION OF BUSINESS...........................................3

ITEM 2. DESCRIPTION OF PROPERTY..........................................15

ITEM 3. LEGAL PROCEEDINGS................................................15

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............15

PART II 16
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........16

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........17

ITEM 7. FINANCIAL STATEMENTS.............................................24

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES........................................42

ITEM 8A. CONTROLS AND PROCEDURES..........................................42

ITEM 8B. OTHER INFORMATION................................................42

PART III 43
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT................43

ITEM 10. EXECUTIVE COMPENSATION...........................................43

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS..................................43

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................43

ITEM 13. EXHIBITS.........................................................43

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES...........................43

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PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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This 2005 Annual Report on Form 10-KSB, including the sections entitled
"Risk Factors," "Management's Discussion and Analysis or Plan of Operation" and
"Business," contains "forward-looking statements" that include information
relating to future events, future financial performance, strategies,
expectations, competitive environment, regulation and availability of resources.
These forward-looking statements include, without limitation, statements
regarding: statements concerning projections, predictions, expectations,
estimates or forecasts for our business, financial and operating results and
future economic performance; statements of management's goals and objectives;
and other similar expressions concerning matters that are not historical facts.
Words such as "may," "will," "should," "could," "would," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes" and "estimates," and similar expressions, as well as statements in
future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the
times at, or by which, that performance or those results will be achieved.
Forward-looking statements are based on information available at the time they
are made and/or management's good faith belief as of that time with respect to
future events, and are subject to risks and uncertainties that could cause
actual performance or results to differ materially from those expressed in or
suggested by the forward-looking statements. Important factors that could cause
these differences include, but are not limited to:

o our failure to implement our business plan within the time
period we originally planned to accomplish; and

o other factors discussed under the headings "Risk Factors,"
"Management's Discussion and Analysis or Plan of Operation"
and "Business."

Forward-looking statements speak only as of the date they are made. You
should not put undue reliance on any forward-looking statements. We assume no
obligation to update forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting forward-looking
information, except to the extent required by applicable securities laws. If we
do update one or more forward-looking statements, no inference should be drawn
that we will make additional updates with respect to those or other
forward-looking statements.

All references to "we," "our," "us" and the "Company" in this Annual
Report on Form 10-KSB refer to Blue Holdings, Inc. and its subsidiaries.

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

We design, develop, market and distribute high end fashion jeans,
apparel and accessories under the brand names "Antik Denim," "Yanuk," "U" and
"Taverniti So Jeans." We also plan to design, develop, market and distribute
jeans and accessories under other brands that we may license or acquire from
time to time. Our products currently include jeans, jackets, belts, purses and
T-shirts. We currently sell our products in the United States, Canada, Japan and
the European Union directly to department stores and boutiques and through
distribution arrangements in certain foreign jurisdictions. We are headquartered
in Commerce, California and maintain two showrooms in New York and Los Angeles.
We opened a retail store in Los Angeles during August 2005.

We operate in the high end fashion denim industry. Our competitors are
companies such as Levi Strauss, Calvin Klein, Joe's Jeans, True Religion
Apparel, Seven For All Mankind and Citizens of Humanity. Our competitive edge
lies in our ability to create innovative concepts and designs, to develop
products with

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extraordinary fit, and to expand our high quality fabrics and finishes,
treatments and embellishments (including our copyrighted pockets, hand stitching
and embroidery detail).

CORPORATE BACKGROUND

Blue Holdings, Inc. was incorporated in the State of Nevada on February
9, 2000 under the name Marine Jet Technology Corp. From our inception through
January 2005, we focused on developing and marketing boat propulsion technology.
Between January and February 2005, we entered into separate transactions
whereby, among other matters, Keating Reverse Merger Fund, LLC ("KRM Fund"), an
existing shareholder of the Company, agreed to purchase a substantial majority
of our outstanding common stock, and Intellijet Marine, Inc., a company formed
by our former majority shareholder and principal executive officer and director,
Jeff P. Jordan, acquired all of our boat propulsion technology assets and
assumed all of our then existing liabilities.

Between February 4, 2005 and April 29, 2005, we existed as a public
"shell" company with nominal assets.

REVERSE ACQUISITION AND SIGNIFICANT DEVELOPMENTS IN 2005

On April 14, 2005, we entered into an Exchange Agreement (the "Antik
Exchange Agreement") with Antik Denim, LLC, a California limited liability
company formed in September 2004 ("Antik"), the members of Antik (the "Antik
Members"), and KRM Fund. The closing of the transactions contemplated by the
Antik Exchange Agreement occurred on April 29, 2005. At the closing, we acquired
all of the outstanding membership interests of Antik (the "Antik Interests")
from the Antik Members, and the Antik Members contributed all of their Antik
Interests to us. In exchange, we issued to the Antik Members 843,027 shares of
our Series A Convertible Preferred Stock, par value $0.001 per share (the
"Preferred Shares"), which, as a result of the approval by a substantial
majority of our outstanding shareholders entitled to vote and the approval by
our Board of Directors, of amendments to our Articles of Incorporation that (i)
changed our name to Blue Holdings, Inc., (ii) increased our authorized number of
shares of common stock to 75,000,000, and (iii) adopted a 1-for-29 reverse stock
split, on June 7, 2005 converted into 708,984,875 shares of our common stock on
a pre-reverse stock split basis and 24,447,783 shares of our common stock on a
post-reverse stock split basis.

At the closing, Antik became our wholly-owned subsidiary. The exchange
transaction with Antik was accounted for as a reverse merger (recapitalization)
with Antik deemed to be the accounting acquirer, and we were deemed to be the
legal acquirer.

As of March 1, 2006, the former members of Antik held approximately
87.8% of the outstanding shares of our common stock.

On July 5, 2005, we entered into a license agreement with Yanuk Jeans
LLC, a company wholly-owned by Paul Guez, to sell products under the "Yanuk"
label. This agreement became effective as of July 1, 2005, and will expire on
June 30, 2015. Under the terms of the agreement, we became the exclusive
licensor for the design, development, manufacture, sale, marketing and
distribution of "Yanuk" branded products to the wholesale and retail trade. The
agreement provides for annual royalty payments equal to six percent of all net
sales that we generate from sale of the licensed products or annual minimum
royalty payments. In addition, during the term of the license agreement, we have
the option to purchase from Yanuk Jeans LLC the property licensed under the
agreement.

On September 8, 2005, Antik entered into an agreement with Titan
Industries, Inc. that provides Titan with an exclusive right to use the "Antik
Denim" trademark for the sale of men's and women's footwear in the United States
and its possessions and territories, Canada and Mexico, and a right of first
refusal for similar use of the trademark in Europe and South America.

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On October 6, 2005, we entered into a five-year license agreement with
Yanuk Jeans LLC, effective October 5, 2005. Under the terms of the license
agreement, we became the exclusive licensor for the design, development,
manufacture, sale, marketing and distribution of Yanuk Jeans LLC's "U" brand
products to the wholesale and retail trade. The agreement provides for annual
royalty payments equal to five percent of all net sales that we generate from
sale of the licensed products or annual minimum royalty payments. In addition,
during the term of the license agreement, we have the option to purchase from
Yanuk Jeans LLC the property licensed under the license agreement.

On October 31, 2005, we entered into an Exchange Agreement (the
"Taverniti Exchange Agreement") with Taverniti So Jeans, LLC, a California
limited liability company formed in September 2004 ("Taverniti"), and the
members of Taverniti (the "Taverniti Members"). Under the Taverniti Exchange
Agreement, the Company acquired all of the outstanding membership interests of
Taverniti (the "Taverniti Interests") from the Taverniti Members, and the
Taverniti Members contributed all of their Taverniti Interests to the Company.
In exchange, we issued to the Taverniti Members, on a pro rata basis, an
aggregate of 500,000 shares of our Common Stock, par value $0.001 per share, and
paid to the Taverniti Members, on a pro rata basis, an aggregate of Seven
Hundred Fifty Thousand Dollars ($750,000). At the closing of the exchange
transaction, Taverniti became our wholly-owned subsidiary.

Paul Guez, the Company's Chairman, Chief Executive Officer, President
and majority shareholder, was and remains the sole manager and was member of
Taverniti. Elizabeth Guez, Paul Guez's spouse and the Company's former Chief
Operating Officer, was a member of Taverniti. Two other members of Mr. and Mrs.
Guez's family, including Gregory Abbou, the President of Taverniti, were the
remaining members of Taverniti. Taverniti is the exclusive licensee for the
design, development, manufacture, sale, marketing and distribution of the
"Taverniti So Jeans" trademark in the denim and knit sports wear categories for
men and women. It is paying royalties to Taverniti Holdings LLC in the ranges of
5-8 percent depending on the net sales of the licensed products pursuant to a
license agreement with Taverniti Holdings LLC. Taverniti Holdings LLC is jointly
owned by Paul Guez (60%) and Jimmy Taverniti (40%), the designer of the products
for the brand, and Mr. Guez is the sole manager. The license agreement was
signed in May 2004 and expires on December 31, 2015.

BUSINESS STRATEGY

We strive to build on our position in the principal markets in which we
compete by focusing on the following four core elements of our business
strategy.

PRODUCT STRATEGY

Our overall product strategy is to offer multiple brands of apparel in
the premium and better denim segments. As a result of the license agreements
with Yanuk Jeans, LLC and the acquisition of Taverniti So Jeans LLC, we
currently market our products under the "Antik Denim," "Taverniti So Jeans",
"Yanuk" and "U" brands and plan to continue to further expand our brand
portfolio by acquisition and/or license of existing apparel companies and/or
brands, as applicable, in the premium or better segments of the industry, or the
creation of new brands by our internal design team. Although no definitive
arrangement or plan is currently in place, we expect our management to
periodically review potential acquisition and licensing opportunities to expand
our product line and brands in these targeted market segments. Our goal is to
employ a multi-brand strategy to reduce risks associated with the natural life
cycle of a single brand and to appeal to a broader customer base with different
looks from different brands. We believe the increase in demand for premium denim
products over the last couple of years and relatively high retail price points
for premium jeans, ranging from approximately $150 to $400, offers us a
significant opportunity to increase our revenues and improve our profitability.

We also intend to license our proprietary owned and licensed trademarks
with respect to products that we believe are not in our core line of business.
While there is no existing plan with respect to the types of products to which
we intend to license our proprietary trademarks, on September 8, 2005, Antik
entered into a license agreement with Titan Industries, Inc. that provides Titan
with an exclusive right to use the "Antik Denim" trademark for the sale of men's
and women's footwear in the United States and its possessions and territories,
Canada and Mexico, and a right of first refusal for similar use of the trademark
in Europe and South America.

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Our senior management team has significant experience in developing and
marketing multiple premium denim products and brands, which we believe
demonstrates a capability to implement our product strategy. Over the last
thirty years, Mr. Guez, our Chairman, Chief Executive Officer and President, has
engaged in the design, marketing, manufacturing and wholesale distribution of
premium fashion and denim collections, including Sasson Jeans and more recently,
a growing stable of contemporary brands, such as Duarte Jeans, Elvis, Memphis
Blues and Grail Jeans. Our principal designers, Philippe Naouri and Alex
Caugant, Jimmy Taverniti and Benjamin Taverniti have previously assisted
world-renowned casual apparel companies such as Chevignon, Diesel, GOA, and
Replay in the design and development of successful brands and products.

OPERATING STRATEGY

Our operating strategy is to continue to build on our strengths in
brand development, marketing, distribution and product sourcing capabilities to
become the leading company in the high fashion denim apparel industry. Our goal
is to leverage the expertise and relationships gained by our executive
management and product design teams' prior experience in creating and developing
premium denim apparel brands, product sourcing and manufacturing in the US,
Mexico and Asia, and distributing to high-end retail channels both domestically
and internationally.

Historically, we have relied on the services and staff of companies
affiliated with Mr. Paul Guez in several areas of our business operations. We
are moving away from this model and we are in the process of building a team of
professionals with significant prior experience and established relationships in
the denim apparel industry to assume the responsibility for coordinating product
manufacturing, material sourcing, and sales and marketing.

GROWTH STRATEGY

We plan to continue to expand our operations, revenues, and profits
through our internal growth and the acquisition and/or license of complimentary
apparel brands or companies that we may identify from time to time. We
anticipate that our internal growth will be driven by (1) expansion of our
product lines by introducing new styles, including at varying price points, and
complimentary products and accessories, (2) expansion of our wholesale
distribution, both domestically and internationally through high end retailers
(3) the opening of select retail flagship stores domestically and the licensing
of operators overseas to open stores to promote the identity of our brands, and
(4) a broader retail strategy focusing on the launch and operation of stores
retailing our various brands. Our first retail store opened on August 27, 2005
on Melrose Avenue in Los Angeles. We anticipate that our growth strategy through
acquisitions and/or licenses will involve the acquisition or license of
additional companies and/or brands, as applicable, depending upon a company's
and/or a brand's sales revenues, name and brand recognition, and/or synergies
with the "Antik Denim," "Taverniti So Jeans", "Yanuk" and "U" brands, with the
ultimate goal of building a portfolio of lifestyle brands in the premium and
better segments of the denim industry. In line with this strategy, we licensed
the rights to the "U" brand from Yanuk Jeans LLC, and completed the acquisition
of Taverniti. Although no other definitive arrangement or plan is currently in
place, we expect our management to periodically review and evaluate potential
acquisition and licensing opportunities and make recommendations to our Board of
Directors.

SUPPLY STRATEGY

We purchase our fabric, thread and other raw materials from various
industry suppliers within the United States and abroad. We do not currently have
any long-term agreements in place for the supply of our fabric, thread or other
raw materials. The fabric, thread and other raw materials used by us are
available from a large number of suppliers worldwide. During fiscal 2005, other
than Blue Concept LLC which is a related party and from which we purchased
fabric, only one supplier comprised greater than 10% of the Company's purchases.
Purchases from that supplier represented 12.7% of our total supply purchases.

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OUR PRODUCTS

Our principal products are high end fashion jeans that we design,
manufacture, market, distribute and sell, including through our wholly-owned
subsidiaries, Antik and Taverniti, under the "Antik Denim", "Taverniti So Jeans"
and "Yanuk" labels. These jeans are sold in the United States and abroad to
upscale retailers and boutiques. We currently sell men's and women's styles and
have launched a children's line for both "Antik Denim" and "Taverniti So Jeans."
"Antik Denim," "Yanuk" and "Taverniti So Jeans" brand jeans are made from high
quality fabrics milled in the United States, Japan, Italy and Spain and are
processed with cutting edge treatments and finishes. Our concepts and designs,
including Antik Denim's distinct vintage western flair, and our extraordinary
fit, embellishments, patent pending pockets, unique finishes, hand stitching,
embroidery detail and other attention to detail and quality give "Antik Denim,"
"Yanuk" and "Taverniti So Jeans" brand jeans and apparel a competitive advantage
in the high end fashion jean market. Antik branded products currently account
for a large majority of our sales. In 2005, Antik branded products accounted for
approximately 70% of our net sales, "Taverniti So Jeans" branded products
accounted for approximately 19.5% of our net sales, and "Yanuk" branded products
accounted for approximately 10.5% of our net sales, for the year. We expect that
our "Taverniti So Jeans" branded products will account for a larger percentage
of our overall sales in 2006.

Our jeans are available in multiple combinations of washes, fabrics and
finishes, with as many as 20 different combinations of colors, fabrics and
finishes on certain styles. Indeed, we introduce new versions of our major
styles each month in different colors, washes and finishes. Although the
majority of our sales arise from the sale of jean products, our product line is
balanced by tops, including knits and wovens, and accessories, the sales of
which we anticipate will continue to grow.

With the license of the "U" brand from Yanuk Jeans LLC, we plan to
design, develop, market and distribute jeans and accessories under the "U" brand
at price points different from those of "Antik Denim," "Yanuk" and "Taverniti So
Jeans."

MARKETING, DISTRIBUTION AND SALES

We market, distribute and sell "Antik Denim" brand products and, as a
result of license agreements with Yanuk Jeans LLC, "Yanuk" and "U" brand
products, in the United States and internationally in a number of other
countries such as Canada, Belgium, France, Germany, Sweden, Italy, Korea and
Japan. As a result of the acquisition of Taverniti in October 2005, we will
similarly market, distribute and sell "Taverniti So Jeans" brand products. In
2005, 18% of our total sales came from overseas customers.

We market and distribute our products by participating in industry
trade shows, as well as through our show rooms in Los Angeles and New York. We
maintain distributor relationships in the United Kingdom, France, Germany,
Sweden, Greece, Belgium, Italy, Mexico and Japan. Except for Mexico, Japan and
Canada, we currently have no exclusive or long term distribution agreements with
any party covering any territory, and do not depend on any single distributor to
distribute our products. Our distributors often, but not always, purchase
products from us at a discount for resale to their customers in their respective
territories. Our distributors warehouse our products at their expense and they
ship to and collect payment from their customers directly.

Our products are sold in the United States to department stores and
boutiques such as Saks Fifth Avenue, Neiman Marcus, Nordstrom, Bloomingdales,
Bergdorf Goodman, Atrium, Fred Segal, Intermix, Kitson and Bendel, as well as
smaller boutiques throughout the country. Our products are sold internationally
to department stores and boutiques such as Lane Crawford in Hong Kong, Harrods
and Harvey Nichols in the United Kingdom, Barneys and Isetan in Japan, Galleries
Lafayette in France, and Holt Renfrew in Canada.

We intend to operate certain flagship stores domestically and to
license overseas operators to open retail stores that focus on high end fashion
denim generally, and the "Antik Denim," "Yanuk," "U" and

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"Taverniti So Jeans" brands, in particular. We also intend to explore a broader
retail strategy focusing on the launch and operation of stores retailing our
various brands. While there is no existing plan with respect to the roll-out of
such stores, our first retail store was opened on August 27, 2005 on Melrose
Avenue in Los Angeles.

MANUFACTURING

We presently outsource all of our manufacturing to contract vendors
using just in time ordering. We use several contract vendors for our
manufacturing needs with the bulk of purchases (approximately 70%) currently
made from domestic (U.S.) factories. We are increasing the use of factories in
Mexico and the Far East. We do not rely on any one manufacturer and we believe
additional manufacturing capacity is available to meet our current and planned
needs. We maintain rigorous quality control systems for both raw and finished
goods. We will continue to outsource the majority of our production capacity to
maintain low fixed expenses. We will add additional contractors as required to
meet our needs. During fiscal 2005, three sub-contractors accounted for 13.76%,
12.91% and 12.68%, respectively, of our manufacturing. One of these
sub-contractors, which principally provided manufacturing services to Taverniti,
is Azteca Production International Inc., a company co-owned by Paul Guez, our
Chairman and Chief Executive Officer.

We believe we can realize significant cost savings in product
manufacturing because of our strong relationships with a diverse group of U.S.
and international contract manufacturers established by our management team
through their prior experience in the apparel industry. In addition, the
increase in production volume as a result of our multi-brand strategy will give
us economies of scale to achieve more cost savings.

COMPETITION

The high-end fashion denim industry is very competitive and fragmented.
Our competitors are companies such as Levi Strauss, Calvin Klein, Joe's Jeans,
True Religion Apparel, Seven For All Mankind and Citizens of Humanity.

Our competitive edge lies in our ability to create innovative concepts
and designs, to develop products with extraordinary fit, and to expand our high
quality fabrics and finishes, treatments and embellishments (including our
patent pending pockets, hand stitching and embroidery detail). We believe that
we offer value products that can successfully compete in the high end fashion
denim industry.

TRADEMARKS AND OTHER INTELLECTUAL PROPERTY

Antik, is the holder of trademark applications for the "Antique Denim"
and "Antik Denim" marks in the United States and various other foreign
jurisdictions. Antik also owns several proprietary concepts and designs,
including pending trademark and patent applications on its pocket designs. Yanuk
Jeans LLC, from whom we hold exclusive licenses to exploit products based on the
"Yanuk" and "U" brands, is the holder of several United States and foreign
trademarks.

Taverniti is the exclusive licensee for the design, development,
manufacture, sale, marketing and distribution of the "Taverniti So Jeans"
trademark in the denim and knit sportswear categories for men and women. It is
paying royalties to Taverniti Holdings LLC in the range of 5-8 percent depending
on the net sales of the licensed products pursuant to a license agreement with
Taverniti Holdings LLC. Taverniti Holdings LLC is jointly owned by Paul Guez
(60%) and Jimmy Taverniti (40%), the designer of the products for the brand, and
Mr. Guez is the sole manager. The license agreement was signed in May 2004 and
expires on December 31, 2015.

We anticipate continuing to expand the "Antik Denim," "Yanuk," "U" and
"Taverniti So Jeans" brands, and their proprietary trademarks and designs,
worldwide. We also anticipate taking, and have already taken, coordinated action
to curb an increase in the domestic and international counterfeiting of Antik's
stylized pocket design and other intellectual property, including, without
limitation, through litigation if necessary.

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GOVERNMENT REGULATION AND SUPERVISION

We benefit from certain international treaties and regulations, such as
the North American Free Trade Agreement (NAFTA), which allows for the duty and
quota free entry into the United States of certain qualifying merchandise.
International trade agreements and embargoes by entities such as the World Trade
Organization also can affect our business, although their impact has
historically been favorable.

We have implemented various programs and procedures, including
unannounced inspections, to ensure that all of the apparel manufacturers with
whom we contract fully comply with employment and safety laws and regulations
governing their place of operation.

DESIGN AND DEVELOPMENT

Mr. Guez, along with a team of designers, is responsible for the design
and development of our product lines. There is no formal research and
development plan at this time, however, since inception, we have apportioned
significant resources on our research and development activities related to our
designs. In 2005, our expenses on design and development amounted to
approximately $1.7 million.

EMPLOYEES

As of February 17, 2006, we had 130 employees, not including our four
executive officers, Paul Guez, our Chairman, Chief Executive Officer and
President, and Patrick Chow, our Chief Financial Officer and Secretary, Philippe
Naouri, President of Antik Denim LLC and Gregory Abbou, President of Taverniti
So Jeans LLC. Mr. Guez leads our product development, marketing and sales, and
Mr. Chow oversees all financial aspects of our business. Our employees are not
unionized and except as described in other portions of this Annual Report on
Form 10-KSB, no employees are subject to existing employment agreements.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and
other information with the U.S. Securities and Exchange Commission ("SEC").
Copies of this Annual Report on Form 10-KSB and each of our other periodic and
current reports, and amendments to all such reports, that we file or furnish
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are
available free of charge on our website (www.blueholdings.com) as soon as
reasonably practicable after the material is electronically filed with, or
furnished to, the SEC. The information contained on our website is not
incorporated by reference into this Annual Report on Form 10-KSB and should not
be considered part of this Annual Report on Form 10-KSB.

In addition, you may read and copy any document we file with the SEC at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov, which contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC.

RISK FACTORS

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT TO EVALUATE
WHETHER WE WILL OPERATE PROFITABLY.

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Antik and Taverniti were formed in September 2004 to design, develop,
manufacture, market, distribute and sell high end fashion jeans, apparel and
accessories. As a result, we do not have a meaningful historical record of sales
and revenues nor an established business track record. While our management
believes that we have an opportunity to be successful in the high end fashion
jean market, there can be no assurance that we will be successful in
accomplishing our business initiatives, or that we will achieve any significant
level of revenues, or continue to recognize net income, from the sale of our
products.

Unanticipated problems, expenses and delays are frequently encountered
in increasing production and sales and developing new products, especially in
the current stage of our business. Our ability to continue to successfully
develop, produce and sell our products and to generate significant operating
revenues will depend on our ability to, among other matters:

- successfully market, distribute and sell our products or enter
into agreements with third parties to perform these functions
on our behalf; and

- obtain the financing required to implement our business plan.

Given our limited operating history, our license agreements with Yanuk
Jeans LLC, our acquisition of Taverniti, and our lack of long-term sales history
and other sources of revenue, there can be no assurance that we will be able to
achieve any of our goals and develop a sufficiently large customer base to be
profitable.

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE.

We may not be able to fund our future growth or react to competitive
pressures if we lack sufficient funds. Currently, management believes we have
sufficient cash on hand and cash available through our factor to fund existing
operations for the foreseeable future. However, in the future, we may need to
raise additional funds through equity or debt financings or collaborative
relationships, including in the event that we lose our relationship with our
factor. This additional funding may not be available or, if available, it may
not be available on commercially reasonable terms. In addition, any additional
funding may result in significant dilution to existing shareholders. If adequate
funds are not available on commercially acceptable terms, we may be required to
curtail our operations or obtain funds through collaborative partners that may
require us to release material rights to our products.

FAILURE TO MANAGE OUR GROWTH AND EXPANSION COULD IMPAIR OUR BUSINESS.

Management believes that we are poised for significant growth in 2006.
However, no assurance can be given that we will be successful in maintaining or
increasing our sales in the future. Any future growth in sales will require
additional working capital and may place a significant strain on our management,
management information systems, inventory management, sourcing capability,
distribution facilities and receivables management. Any disruption in our order
processing, sourcing or distribution systems could cause orders to be shipped
late, and under industry practices, retailers generally can cancel orders or
refuse to accept goods due to late shipment. Such cancellations and returns
would result in a reduction in revenue, increased administrative and shipping
costs and a further burden on our distribution facilities.

Additionally, we intend from time to time to open and/or license retail
stores focusing on the "Antik Denim," "Yanuk," "Taverniti So Jeans" and other
brands, and to acquire and/or license other businesses and brands, as
applicable, as we deem appropriate. If we are unable to adequately manage our
retail operations, or to properly integrate any business or brands we acquire
and/or license, this could adversely affect our results of operation and
financial condition.

WE CURRENTLY OWN OR LICENSE, AND OPERATE, A LIMITED NUMBER OF PRINCIPAL
BRANDS. IF WE ARE UNSUCCESSFUL IN MARKETING AND DISTRIBUTING THOSE BRANDS OR IN
EXECUTING OUR OTHER STRATEGIES, OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION WILL BE ADVERSELY AFFECTED.

While our goal is to employ a multi-brand strategy that will ultimately
diversify the fashion and other risks associated with reliance on a limited
product line, we currently operate, directly and through our wholly-

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owned subsidiaries Antik and Taverniti, a limited number of principal brands,
most of which are being operated pursuant to very recent license or acquisition
agreements. If we are unable to successfully market and distribute our branded
products, or if the recent popularity of premium denim brands decreases, or if
we are unable to execute on our multi-brand strategy to acquire and/or license
additional companies and/or brands, as applicable, identified by our management
from time to time, our results of operations and financial condition will be
adversely affected.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

Management expects that we will experience substantial variations in
our net sales and operating results from quarter to quarter. We believe that the
factors which influence this variability of quarterly results include:

- the timing of our introduction of new product lines;
- the level of consumer acceptance of each new product line;
- general economic and industry conditions that affect consumer
spending and retailer purchasing;
- the availability of manufacturing capacity;
- the seasonality of the markets in which we participate;
- the timing of trade shows;
- the product mix of customer orders;
- the timing of the placement or cancellation of customer
orders;
- the weather;
- transportation delays;
- quotas and other regulatory matters;
- the occurrence of charge backs in excess of reserves; and
- the timing of expenditures in anticipation of increased sales
and actions of competitors.

As a result of fluctuations in our revenue and operating expenses that
may occur, management believes that period-to-period comparisons of our results
of operations are not a good indication of our future performance. It is
possible that in some future quarter or quarters, our operating results will be
below the expectations of securities analysts or investors. In that case, our
common stock price could fluctuate significantly or decline.

THE FINANCIAL CONDITION OF OUR CUSTOMERS COULD AFFECT OUR RESULTS OF
OPERATIONS.

Certain retailers, including some of our customers, have experienced in
the past, and may experience in the future, financial difficulties, which
increase the risk of extending credit to such retailers and the risk that
financial failure will eliminate a customer entirely. These retailers have
attempted to improve their own operating efficiencies by concentrating their
purchasing power among a narrowing group of vendors. There can be no assurance
that we will remain a preferred vendor for our existing customers. A decrease in
business from or loss of a major customer could have a material adverse effect
on our results of operations. There can be no assurance that our factor will
approve the extension of credit to certain retail customers in the future. If a
customer's credit is not approved by the factor, we could assume the collection
risk on sales to the customer itself, require that the customer provide a letter
of credit, or choose not to make sales to the customer.

OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH IMPORTING PRODUCTS.

A portion of our import operations are subject to tariffs imposed on
imported products and quotas imposed by trade agreements. In addition, the
countries in which our products are imported may from time to time impose
additional new duties, tariffs or other restrictions on their respective imports
or adversely modify existing restrictions. Adverse changes in these import costs
and restrictions, or our suppliers' failure to comply with customs or similar
laws, could harm our business. We cannot assure that future trade agreements
will not provide our competitors with an advantage over us, or increase our
costs, either of which could have an adverse effect on our business and
financial condition.

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Our operations are also subject to the effects of international trade
agreements and regulations such as the North American Free Trade Agreement, and
the activities and regulations of the World Trade Organization. Generally, these
trade agreements benefit our business by reducing or eliminating the duties
assessed on products or other materials manufactured in a particular country.
However, trade agreements can also impose requirements that adversely affect our
business, such as limiting the countries from which we can purchase raw
materials and setting duties or restrictions on products that may be imported
into the United States from a particular country.

Our ability to import raw materials in a timely and cost-effective
manner may also be affected by problems at ports or issues that otherwise affect
transportation and warehousing providers, such as labor disputes. These problems
could require us to locate alternative ports or warehousing providers to avoid
disruption to our customers. These alternatives may not be available on short
notice or could result in higher transit costs, which could have an adverse
impact on our business and financial condition.

OUR DEPENDENCE ON INDEPENDENT MANUFACTURERS AND SUPPLIERS OF RAW
MATERIALS REDUCES OUR ABILITY TO CONTROL THE MANUFACTURING PROCESS, WHICH COULD
HARM OUR SALES, REPUTATION AND OVERALL PROFITABILITY.

We depend on independent contract manufacturers and suppliers of raw
materials to secure a sufficient supply of raw materials and maintain sufficient
manufacturing and shipping capacity in an environment characterized by declining
prices, labor shortages, continuing cost pressure and increased demands for
product innovation and speed-to-market. This dependence could subject us to
difficulty in obtaining timely delivery of products of acceptable quality. In
addition, a contractor's failure to ship products to us in a timely manner or to
meet the required quality standards could cause us to miss the delivery date
requirements of our customers. The failure to make timely deliveries may cause
our customers to cancel orders, refuse to accept deliveries, impose
non-compliance charges through invoice deductions or other charge-backs, demand
reduced prices or reduce future orders, any of which could harm our sales,
reputation and overall profitability.

We do not have long-term contracts with any of our independent
contractors and any of these contractors may unilaterally terminate their
relationship with us at any time. While management believes that there exists an
adequate supply of contractors to provide products and services to us, to the
extent we are not able to secure or maintain relationships with independent
contractors that are able to fulfill our requirements, our business would be
harmed.

We have initiated standards for our suppliers, and monitor our
independent contractors' compliance with applicable labor laws, but we do not
control our contractors or their labor practices. The violation of federal,
state or foreign labor laws by one of our contractors could result in us being
subject to fines and our goods that are manufactured in violation of such laws
being seized or their sale in interstate commerce being prohibited. To date, we
have not been subject to any sanctions that, individually or in the aggregate,
have had a material adverse effect on our business, and we are not aware of any
facts on which any such sanctions could be based. There can be no assurance,
however, that in the future we will not be subject to sanctions as a result of
violations of applicable labor laws by our contractors, or that such sanctions
will not have a material adverse effect on our business and results of
operations.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS.

The loss of or inability to enforce our trademarks or any of our other
proprietary or licensed designs, patents, know-how and trade secrets could
adversely affect our business. If any third party copies or otherwise gains
access to our trademarks or other proprietary rights, or develops similar
products independently, it may be costly to enforce our rights and we would not
be able to compete as effectively. Additionally, the laws of foreign countries
may provide inadequate protection of intellectual property rights, making it
difficult to enforce such rights in those countries.

We may need to bring legal claims to enforce or protect our
intellectual property rights. Any litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources. In

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addition, notwithstanding the rights we have secured in our intellectual
property, third parties may bring claims against us alleging that we have
infringed on their intellectual property rights or that our intellectual
property rights are not valid. Any claims against us, with or without merit,
could be time consuming and costly to defend or litigate and therefore could
have an adverse affect on our business.

THE LOSS OF PAUL GUEZ OR OUR LEAD DESIGNERS WOULD HAVE AN ADVERSE
EFFECT ON OUR FUTURE DEVELOPMENT AND COULD SIGNIFICANTLY IMPAIR OUR ABILITY TO
ACHIEVE OUR BUSINESS OBJECTIVES.

Our success is largely dependent upon the expertise and knowledge of
our Chairman, Chief Executive Officer and President, Paul Guez, and our lead
designers, and our ability to continue to hire and retain other key personnel.
The loss of Mr. Guez, or any of our other key personnel, could have a material
adverse effect on our business, development, financial condition, and operating
results. We do not maintain "key person" life insurance on any of our management
or key personnel, including Mr. Guez.

RISKS RELATED TO OUR INDUSTRY

OUR SALES ARE HEAVILY INFLUENCED BY GENERAL ECONOMIC CYCLES.

Apparel is a cyclical industry that is heavily dependent upon the
overall level of consumer spending. Purchases of apparel and related goods tend
to be highly correlated with cycles in the disposable income of our consumers.
Our customers anticipate and respond to adverse changes in economic conditions
and uncertainty by reducing inventories and canceling orders. As a result, any
substantial deterioration in general economic conditions, increases in interest
rates, acts of war, terrorist or political events that diminish consumer
spending and confidence in any of the regions in which we compete, could reduce
our sales and adversely affect our business and financial condition.

OUR BUSINESS IS HIGHLY COMPETITIVE AND DEPENDS ON CONSUMER SPENDING
PATTERNS.

The apparel industry is highly competitive. We face a variety of
competitive challenges including:

- anticipating and quickly responding to changing consumer
demands;
- developing innovative, high-quality products in sizes and
styles that appeal to consumers;
- competitively pricing our products and achieving customer
perception of value; and
- the need to provide strong and effective marketing support.

WE MUST SUCCESSFULLY GAUGE FASHION TRENDS AND CHANGING CONSUMER
PREFERENCES TO SUCCEED.

Our success is largely dependent upon our ability to gauge the fashion
tastes of our customers and to provide merchandise that satisfies retail and
customer demand in a timely manner. The apparel business fluctuates according to
changes in consumer preferences dictated in part by fashion and season. To the
extent we misjudge the market for our merchandise, our sales may be adversely
affected. Our ability to anticipate and effectively respond to changing fashion
trends depends in part on our ability to attract and retain key personnel in our
design, merchandising and marketing staff. Competition for these personnel is
intense, and we cannot be sure that we will be able to attract and retain a
sufficient number of qualified personnel in future periods.

OUR BUSINESS MAY BE SUBJECT TO SEASONAL TRENDS.

In the experience of our management, operating results in the high end
fashion denim industry have been subject to seasonal trends when measured on a
quarterly basis. This trend is dependent on numerous factors, including:

- the markets in which we operate;
- holiday seasons;
- consumer demand;

- 13 -

- climate;
- economic conditions; and
- numerous other factors beyond our control.

OTHER RISKS RELATED TO US

OUR SALE OF SECURITIES IN ANY EQUITY OR DEBT FINANCING COULD RESULT IN
DILUTION TO OUR SHAREHOLDERS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR EARNINGS.

Any sale of shares by us in future private placement or other offerings
could result in dilution to our existing shareholders as a direct result of our
issuance of additional shares of our capital stock. In addition, our business
strategy may include expansion through internal growth, by acquiring
complementary businesses, by acquiring or licensing additional brands, or by
establishing strategic relationships with targeted customers and suppliers. In
order to do so, or to fund our other activities, we may issue additional equity
securities that could dilute our shareholders' stock ownership. We may also
assume additional debt and incur impairment losses related to goodwill and other
tangible assets if we acquire another company and this could negatively impact
our results of operations.

INSIDERS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH COULD
LIMIT OUR SHAREHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS.

As of March 1, 2006, our Chief Executive Officer, Paul Guez, Chief
Financial Officer, Patrick Chow, and three members of our design team, Messrs.
Naouri, Caugant and Meyer Abbou, all former members of Antik, owned
approximately 88.3% of the outstanding shares of our common stock. Paul and
Elizabeth Guez, Mr. Guez's wife and the Company's former Chief Operating
Officer, alone owned approximately 72.2% of the outstanding shares of our common
stock at March 1, 2006. Accordingly, our executive officers and key personnel
have the ability to affect the outcome of, or exert considerable influence over,
all matters requiring shareholder approval, including the election and removal
of directors and any change in control. This concentration of ownership of our
common stock could have the effect of delaying or preventing a change of control
of us or otherwise discouraging or preventing a potential acquirer from
attempting to obtain control of us. This, in turn, could have a negative effect
on the market price of our common stock. It could also prevent our shareholders
from realizing a premium over the market prices for their shares of common
stock.

OUR STOCK PRICE HAS BEEN VOLATILE.

Our common stock is quoted on the Over-The-Counter Bulletin Board, and
there can be substantial volatility in the market price of our common stock. The
market price of our common stock has been, and is likely to continue to be,
subject to significant fluctuations due to a variety of factors, including
quarterly variations in operating results, operating results which vary from the
expectations of securities analysts and investors, changes in financial
estimates, changes in market valuations of competitors, announcements by us or
our competitors of a material nature, loss of one or more customers, additions
or departures of key personnel, future sales of common stock and stock market
price and volume fluctuations. In addition, general political and economic
conditions such as a recession, or interest rate or currency rate fluctuations
may adversely affect the market price of our common stock.

In addition, the stock market in general has experienced extreme price
and volume fluctuations that have affected the market price of our common stock.
Often, price fluctuations are unrelated to operating performance of the specific
companies whose stock is affected. In the past, following periods of volatility
in the market price of a company's stock, securities class action litigation has
occurred against the issuing company. If we were subject to this type of
litigation in the future, we could incur substantial costs and a diversion of
our management's attention and resources, each of which could have a material
adverse effect on our revenue and earnings. Any adverse determination in this
type of litigation could also subject us to significant liabilities.

ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO INVESTORS.

- 14 -

Some investors favor companies that pay dividends, particularly in
general downturns in the stock market. We have not declared or paid any cash
dividends on our common stock. We currently intend to retain any future earnings
for funding growth, and we do not currently anticipate paying cash dividends on
our common stock in the foreseeable future. Because we may not pay dividends,
your return on this investment likely depends on your selling our stock at a
profit.

ITEM 2. DESCRIPTION OF PROPERTY

Our principal executive offices and warehouse are located at 5804 East
Slauson Avenue, Commerce, California 90040. Our telephone number is (323)
725-5555. It is from this facility that we conduct all of our executive and
administrative functions, and ship products to our customers. We also maintain
showrooms in both Los Angeles and New York City. Going forward, we intend to pay
for the use of these showrooms based on our actual use. The cost of operations
at the Commerce facility and the showrooms is shared by several companies and
the portion of the cost that we paid in 2005 was allocated to us under our
service agreement with Blue Concept LLC. The entire Commerce facility consists
of approximately 270,222 sq. ft. We now utilize approximately 67,000 sq. ft. of
the Commerce, California facility.

In 2005, under our service agreement with Blue Concept LLC, we utilized
the space at a monthly cost of approximately $15,000. Under our service
agreement with Blue Concept LLC, we also paid a monthly service fee of $78,500
in exchange for additional services in the following areas: MIS, human
resources, sales, customer service, EDI Support, quality control, purchasing,
import/export services, graphic design, laundry and distribution. We shared 15%
of the actual telephone, utilities and office supply expenses incurred by Blue
Concept LLC, as evidenced by actual invoices presented to us.

On August 27, 2005, we opened a retail store in Los Angeles, California
and assumed all the obligations of a 10-year property lease, which was
previously signed by Blue Concept LLC in April, 2005.

ITEM 3. LEGAL PROCEEDINGS

Except as described below, we are not involved in any legal proceedings
that require disclosure in this report.

In August and September, 2005, the Company filed complaints against a
number of companies that we believe encroached on our highly identifiable,
stylized "Antik" pocket design. The complaints were filed in the United States
District Court in Los Angeles, California. The unique design in question is
copyrighted, and is the subject of pending trademark and design patent
registration claims. The complaints alleged, among other matters, that the
companies were violating federal and state trademark, copyright, unfair trade
practices and unfair competition statutes and laws, and sought damages and
injunctive relief against all parties. Prior to December 31, 2005, we received
from one company $15,000 in settlement which was used to cover legal expenses
for these litigations. Subsequent to the year end, we entered into two more
settlement agreements and have received approximately $457,000 in settlement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's shareholders in
the quarter ended December 31, 2005.

- 15 -

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

COMMON STOCK

Our common stock is quoted on the Over-The-Counter Bulletin Board under
the symbol "BLHL." The following table sets forth, for the periods indicated,
the high and low bid information for the common stock, as determined from
sporadic quotations on the Over-The-Counter Bulletin Board as reported by the
NASDAQ Stock Market. The information has been adjusted to reflect a 1-for-29
reverse stock split of our common stock which took effect on June 7, 2005. The
following quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 2004
First Quarter........................ $4.06 $2.90
Second Quarter....................... $4.06 $2.03
Third Quarter........................ $14.79 $2.03
Fourth Quarter....................... $2.47 $1.16

YEAR ENDED DECEMBER 31, 2005
First Quarter........................ $17.40 $1.02
Second Quarter....................... $28.71 $4.64
Third Quarter ....................... $10.25 $5.65
Fourth Quarter ...................... $8.85 $4.50

On March 1, 2006, the closing sales price of our common stock as
reported on the Over-The-Counter Bulletin Board was $4.90 per share.

HOLDERS OF COMMON STOCK

As of March 1, 2006, there were 104 record holders and 390 beneficial
holders of our common stock, with 26,057,200 shares outstanding. The number of
holders of record is based on the actual number of holders registered on the
books of our transfer agent and does not reflect holders of shares in "street
name" or persons, partnerships, associations, corporations or other entities
identified in security position listings maintained by depository trust
companies.

DIVIDEND RIGHTS

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of our common stock
are entitled to receive dividends out of funds legally available at the times
and in the amounts that our board may determine. We have not paid any dividends
in the past and have no current plan to pay any dividends. We intend to devote
all funds to the operation of our businesses.

- 16 -

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ TOGETHER WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF BLUE HOLDINGS, INC. AND THE NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON
FORM 10-KSB. THIS DISCUSSION SUMMARIZES THE SIGNIFICANT FACTORS AFFECTING OUR
OPERATING RESULTS, FINANCIAL CONDITIONS AND LIQUIDITY AND CASH-FLOW FOR THE
FISCAL YEARS ENDED DECEMBER 31, 2004 AND 2005. THIS DISCUSSION CONTAINS FORWARD
LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES AND ARE BASED ON
JUDGMENTS CONCERNING VARIOUS FACTORS THAT ARE BEYOND OUR CONTROL. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE DISCUSSED BELOW AND
ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-KSB, PARTICULARLY UNDER THE CAPTION
"CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS" AND IN ITEM 1. BUSINESS
UNDER THE CAPTION "RISK FACTORS."

OVERVIEW

Blue Holdings, Inc. designs, develops, markets and distributes high end
fashion jeans and accessories under the brand name names "Antik Denim," "Yanuk,"
"U" and "Taverniti So Jeans." We plan to also design, develop, market and
distribute jeans and accessories under other brands that we may license or
acquire from time to time. Our products currently include jeans, jackets, belts,
purses and T-shirts. We currently sell our products in the United States,
Canada, Japan and the European Union directly to department stores and boutiques
and through distribution arrangements in certain foreign jurisdictions. We are
headquartered in Commerce, California and maintain two showrooms in New York and
Los Angeles. We opened a retail store in Los Angeles during August 2005.

Blue Holdings, Inc. was incorporated in the State of Nevada on February
9, 2000 under the name Marine Jet Technology Corp. Since our inception and
through January 2005, we focused on developing and marketing boat propulsion
technology. Between January and February 2005, we entered into separate
transactions whereby, among other matters, Keating Reverse Merger Fund, L.L.C.
("KRM Fund"), an existing shareholder of the Company, agreed to purchase a
substantial majority of our outstanding common stock, and Intellijet Marine,
Inc., a company formed by our former majority shareholder and principal
executive officer and director, Jeff P. Jordan, acquired all of our boat
propulsion technology assets and assumed all of our then existing liabilities.

Between February 4, 2005 and April 29, 2005, we existed as a public
"shell" company with nominal assets.

On April 14, 2005, we entered into an Exchange Agreement (the "Exchange
Agreement") with Antik Denim, LLC, a California limited liability company
("Antik"), the members of Antik (the "Antik Members"), and KRM Fund. The closing
of the transactions contemplated by the Exchange Agreement occurred on April 29,
2005. At the closing, we acquired all of the outstanding membership interests of
Antik (the "Interests") from the Antik Members, and the Antik Members
contributed all of their Interests to us. In exchange, we issued to the Antik
Members 843,027 shares of our Series A Convertible Preferred Stock, par value
$0.001 per share (the "Preferred Shares"), which, as a result of the approval by
a substantial majority of our outstanding shareholders entitled to vote and the
approval by our Board of Directors, of amendments to our Articles of
Incorporation that (i) changed our name to Blue Holdings, Inc., (ii) increased
our authorized number of shares of common stock to 75,000,000, and (iii) adopted
a 1-for-29 reverse stock split, on June 7, 2005 converted into 708,984,875
shares of our common stock on a pre-reverse stock split basis and 24,447,783
shares of our common stock on a post-reverse stock split basis.

At the closing, Antik became our wholly-owned subsidiary. The exchange
transaction was accounted for as a reverse merger (recapitalization) with Antik
deemed to be the accounting acquirer, and us deemed to be the legal acquirer.

After completing the exchange transaction with Antik, we completed the
following significant transactions in fiscal 2005:

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o On July 5, 2005, we entered into a license agreement with
Yanuk Jeans LLC, a company owned by Paul Guez, to sell
products under the "Yanuk" label. This agreement became
effective from July 1, 2005 and will expire on June 30, 2015.
Under the terms of the agreement, we became the exclusive
licensor for the design, development, manufacture, sale,
marketing and distribution of the "Yanuk" brand products to
the wholesale and retail trade. We pay to Yanuk Jeans LLC a
royalty of six percent of all net sales of the licensed
products and will pay a guaranteed minimum royalty on an
annual basis. In addition, during the term of the license
agreement, we have the option to purchase from Yanuk Jeans LLC
the property licensed under the agreement.

o On September 8, 2005, Antik entered into an agreement with
Titan Industries, Inc. that provides Titan with an exclusive
right to use the "Antik Denim" trademark for the sale of men's
and women's footwear in the United States and its possessions
and territories, Canada and Mexico, and a right of first
refusal for similar use of the trademark in Europe and South
America.

o On October 6, 2005, we entered into a five-year license
agreement with Yanuk Jeans LLC, effective October 5, 2005.
Under the terms of the agreement, we became the exclusive
licensor for the design, development, manufacture, sale,
marketing and distribution of Yanuk Jeans LLC's "U" brand
products to the wholesale and retail trade. We pay to Yanuk
Jeans LLC a royalty of five percent of all net sales of the
licensed products and shall pay a guaranteed minimum royalty
on an annual basis. In addition, during the term of the
license agreement, we have the option to purchase from Yanuk
Jeans LLC the property licensed under the agreement.

o On October 31, 2005, we entered into an exchange agreement
with Taverniti So Jeans, LLC, a California limited liability
company ("Taverniti"), and the members of Taverniti (the
"Taverniti Members"). Under the exchange agreement, we
acquired all of the outstanding membership interests of
Taverniti (the " Taverniti Interests") from the Taverniti
Members, and the Taverniti Members contributed all of their
Taverniti Interests to us. In exchange, we issued to the
Taverniti Members, on a pro rata basis, an aggregate of
500,000 shares of our Common Stock, par value $0.001 per
share, and paid to the Taverniti Members, on a pro rata basis,
an aggregate of Seven Hundred Fifty Thousand Dollars
($750,000). At the closing of the exchange transaction,
Taverniti became our wholly-owned subsidiary.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues. On an
ongoing basis, we evaluate estimates, including those related to returns,
discounts, bad debts, inventories, intangible assets, income taxes,
contingencies and litigations. We base our estimates on historical experience
and on various assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

- 18 -

REVENUE

Revenue is recognized when merchandise has been shipped against a
customer's written purchase order, the risk of ownership has passed, selling
price has been fixed and determined and collectibility is reasonably assured
either through payment received, or fulfillment of all the terms and conditions
of the particular purchase order. Revenue is recorded net of estimated returns,
charge backs and markdowns based on management's estimates and historical
experience.

ACCOUNTS RECEIVABLES

Trade accounts receivable are recorded at invoiced amounts, less
amounts accrued for returns, discounts and allowances. An allowance is provided
for specific customer accounts where collection is doubtful and for inherent
risk in our ability to ultimate collect. There is no off-balance sheet credit
exposure related to customer receivables.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out ("FIFO") method.

INCOME TAXES:

We account for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes" Under SFAS No. 109, income taxes are recognized for the amount
of taxes payable or refundable for the current year and deferred tax liabilities
and assets are recognized for the future tax consequences of transactions that
have been recognized in our financial statements or tax returns. A valuation
allowance is provided when it is more likely than not that some portion or all
of the deferred tax asset will not be realized.

RESULTS OF OPERATIONS

The acquisition of Antik Denim, LLC ("Antik") is accounted for as a
reverse merger (recapitalization) in the accompanying financial statements with
Antik deemed to be the accounting acquirer, and Blue Holdings deemed to be the
legal acquirer. The exchange transaction with Taverniti So Jeans LLC is
accounted for as a combination of entities under common control, and its 2004
and 2005 results are combined with those of Antik and Blue Holdings, Inc.,
respectively. Accordingly, our results of operations before the completion of
these transactions, including our operating results before April 29, 2005 (when
we completed the acquisition of Antik), reflect the operations of Antik and
Taverniti.

Both Antik and Taverniti commenced their operations in September 2004
and were in their early stage of operation during the three months ended
December 31, 2004. As such, a comparison of results for the three months ended
December 31, 2004, and those for the corresponding period ended December 31,
2005, would not be meaningful.

TWELVE MONTHS ENDED DECEMBER 31, 2005

We recorded net sales of $36.4 million for the twelve months ended
December 31, 2005. Gross profit for the twelve months ended December 31, 2005
was $18 million, or 49.4%. Out of the net sales of $36.4 million, Antik
accounted for 70% of the total, Taverniti 19.5% and Yanuk 10.5%. We expect all
the brands will enjoy very healthy growth in 2006. Additionally, as we implement
our product and growth strategy, we expect Taverniti will account for a larger
percentage of our net sales in 2006.

Selling, distribution and administrative expenses for the twelve months
ended December 31, 2005 totaled $10.5 million and included royalties, design and
sales-related expenses such as advertising, commissions, travel and trade show
expense. The principal components were payroll ($2.5 million), legal and

- 19 -

professional ($1.8 million), advertising ($0.8 million), royalties ($0.8
million) and fees paid to Blue Concept, LLC under the service agreement ($1.5
million). Net Income after provision for taxes was $5.1 million or 14.1 % of net
sales. Our tax provisions for Antik Denim, LLC were based on income between
April 30 and December 31, 2005 and those for Taverniti, on the income between
October 31 and December 31, 2005. The selling, distribution and administrative
expenses had been growing rapidly in line with the expansion of our business. We
believe our fixed overhead expenses have by now stabilized and we will be able
to maintain further growth without significant increase to such expenses.

During the year, expenses related to the exchange transaction between
Antik Denim, LLC and Marine Jet Technology Corp. amounted to a total of $0.5
million.

PERIOD FROM SEPTEMBER 13, 2004 (INCEPTION) THROUGH DECEMBER 31, 2004

We recorded net sales of $0.37 million for the period between September
13, 2004 and December 31, 2005. Gross profit for the period was $0.2 million, or
56.8%. Anitk accounted for 100% of the total net sales. Selling, distribution
and administrative expenses for the period totaled $1.6 million. The principal
components were development costs ($0.5 million), cost allocations from related
companies ($0.5 million), design and consulting ($0.2 million), and
preproduction costs ($0.1 million). Net loss after provision for taxes was $(1.4
million).

Net cash used in operating activities for the period from inception
through December 31, 2004 was $(0.7 million). The deficit was created by an
increase in inventory by $0.9 million, and by increases in due from factor and
accounts receivables of $0.4 million and $0.1 million respectively. This deficit
was financed by increase in accounts payable by $1.1 million and paid-in capital
of $0.8 million.

LIQUIDITY AND CAPITAL RESOURCES

For the twelve months ended December 31, 2005, net cash used in
operating activities was $4.2 million. The deficit was primarily due to an
increase of $7.8 million in inventory, $0.3 million in due from factor and $4.2
million in accounts receivables. Net cash provided by financing activities was
$5.3 million consisting of short-term borrowings of $4.6 million, and $0.7
million in cash contribution by shareholders. The Company utilized $0.95 million
in investing activities which consisted of the purchase of equipment for $0.2
million and a deemed distribution of $750,000 made to previous members of
Taverniti So Jeans LLC as part of the consideration for our purchase of all
their respective membership interests in October 2005.

Since the beginning of 2005, Mr. Guez has personally contributed
$1,200,000 in fabric inventory and $686,200 in cash to the Company. From time to
time, he also supports the Company with temporary advances. As of December 31,
2005, the Company had advances totaling $96,875 from Mr. Guez which are included
in amounts due to related parties on the accompanying balance sheet.

We use a factor, FTC Commercial Corp., for working capital and credit
administration purposes. Under the various factoring agreements entered into
separately by Blue Holdings, Antik Denim, LLC and Taverniti So Jeans LLC, the
factor purchases all the trade accounts receivable assigned by us and assumes
all credit risk with respect to those accounts approved by it.

The factor agreements provide that we can obtain an amount up to 90% of
the value of our purchased customer invoices, less a reserve of 10% of unpaid
accounts purchased and 100% of all accounts that are disputed. The factor
agreements, which have all been amended to terminate on July 24, 2006, provide
for the automatic renewal of the agreements after that date, subject to 120
days' termination notice from any party. We receive amounts against purchased
customer invoices on a recourse basis or a non-recourse basis under these
agreements. Amounts received against customer invoices purchased on a recourse
basis are classified as "short-term borrowings" and amounts received against
customer invoices purchased on a non-recourse basis are reflected on a net basis
against such receivables purchased by the factor in "due from factor" on the
balance sheets included in our financial statements.

- 20 -

In addition, the factor also makes available to Blue Holdings, Antik
Denim LLC and Taverniti So Jeans LLC a combined credit line of up to the lower
of $1.5 million against inventory, and 33.3% of the value of eligible raw
materials and finished goods.

As of December 31, 2005, the amount of the reserve held by the factor
was approximately $0.79 million. The factor commission was 0.8% of the customer
invoice amount for terms up to 90 days, plus one quarter of one percent (.25%)
for each additional thirty-day term. Effective January 1, 2006, the factor
commission is 0.75% if the aggregate amount of approved invoices is below $10
million per annum, and will be reduced by 5 basis points for each increase by
$10 million in the aggregate amount of approved invoices. The Company is
contingently liable to the factor for merchandise disputes, customer claims and
the like on receivables sold to the factor. To the extent that the Company draws
funds prior to the deemed collection date of the accounts receivable sold to the
factor, interest is charged at the rate of 1% over the factor's prime lending
rate per annum. Factor advances and ledger debt are collateralized by the
non-factored accounts receivable, inventories and the personal guarantees of
Paul Guez, our Chairman, Chief Executive Officer, President and majority
shareholder, and the living trust of Paul and Elizabeth Guez.

During the fourth quarter of 2005, we drew down the $1.5 million credit
facility against inventory. The factor also purchased customer invoices on a
"with recourse" basis. These short-term borrowings amounted to $4.6 million as
of December 31, 2005 and were used to finance the acquisition of the Taverniti
business and the payment of income taxes. The factor commission is 0.4% for
receivables purchased subject to recourse. Receivables subject to recourse
approximated $4.3 million net of reserves as of December 31, 2005.

Our primary source of liquidity is expected to be cash flow generated
from operations, cash and cash equivalents currently on hand, and working
capital attainable through our factor. We may seek to finance future capital
needs through various means and channels, such as issuance of long-term debt or
sale of equity securities.

OFF-BALANCE SHEET ARRANGEMENTS

Financial instruments that potentially subject the Company to
off-balance sheet risk consist of factored accounts receivable. The Company
sells certain of its trade accounts receivable to a factor and is contingently
liable to the factor for merchandise disputes and other customer claims.

As of December 31, 2005, the factor holds $2,326,293 of accounts
receivable purchased from us on a without recourse basis and has made advances
to us of $1,535,970 against those receivables, resulting in a net balance amount
Due from Factor of $790,323 as of December 31, 2005. The Company has accounted
for the sale of receivables to the factor in accordance with SFAS No.140,
"Accounting for the Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The amount of the reserve held by the factor
against these receivables was approximately $790,323. (See Note 3 to
consolidated financial statements).

CONTRACTUAL OBLIGATIONS

The following summarizes our contractual obligations at December 31,
2005 and the effects such obligations are expected to have on liquidity and cash
flow in future periods:

- 21 -

PAYMENTS DUE BY PERIOD

Total 2006 2007 2008 2009 2010 Thereafter
---------- ---------- ---------- ---------- ---------- ---------- ----------

Guaranteed minimum royalties -
Related Parties ............ 10,420,608 680,000 768,000 887,300 1,013,530 1,172,383 5,899,395
Employment contracts ......... 2,286,452 480,000 480,000 480,000 480,000 366,452 --
Lease obligations ............ 3,084,266 282,033 289,896 297,994 306,335 294,973 1,613,035
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total contractual obligations 15,791,326 1,442,033 1,537,896 1,665,294 1,799,865 1,833,808 7,512,430
========== ========== ========== ========== ========== ========== ==========

On July 5, 2005, we entered into a ten-year license agreement with
Yanuk Jeans LLC, effective July 1, 2005. Under the terms of the agreement, we
became the exclusive licensor for the design, development, manufacture, sale,
marketing and distribution of Yanuk Jeans LLC's "Yanuk" brand products. We pay
to Yanuk Jeans LLC a royalty of six percent of all net sales of such products
and shall pay a guaranteed minimum royalty on a quarterly basis. Also we have
the option to purchase from Yanuk Jeans LLC the property licensed under the
agreement.

On September 8, 2005, Antik entered into a license agreement with Titan
Industries, Inc. that provides Titan with an exclusive right to use the "Antik
Denim" trademark for the sale of men's and women's footwear in the United States
and its possessions and territories, Canada and Mexico, and a right of first
refusal for similar use of the trademark in Europe and South America.

On October 6, 2005, we entered into a five-year license agreement with
Yanuk Jeans LLC, effective October 5, 2005. Under the terms of the agreement, we
became the exclusive licensor for the design, development, manufacture, sale,
marketing and distribution of Yanuk Jeans LLC's "U" brand products to the
wholesale and retail trade. We pay to Yanuk Jeans LLC a royalty of five percent
of all net sales of the licensed products and shall pay a guaranteed minimum
royalty on an annual basis. In addition, during the term of the license
agreement, the Company has the option to purchase from Yanuk Jeans LLC the
property licensed under the agreement.

On July 8, 2005, we entered into an Employment Agreement with Philippe
Naouri. This agreement was amended on August 23, 2005. Pursuant to the terms of
Mr. Naouri's employment agreement, as amended, Mr. Naouri was engaged by us as
the President of Antik for a term of 5 years commencing on July 11, 2005 and
terminating on July 10, 2010. Mr. Naouri will receive an annual salary of
$240,000 and is entitled to participate in our bonus, incentive, stock option,
savings, welfare benefit and retirement plans as he becomes eligible. The
parties to the Employment Agreement have agreed to resolve all disputes arising
under the Employment Agreement through binding arbitration.

On November 14, 2005, we entered into an Employment Agreement with Mr.
Alex Caugant. Mr. Caugant was engaged by Antik as a Senior Vice President for a
term of 5 years commencing on November 14, 2005 and terminating on November 13,
2010. Mr. Caugant will receive an annual salary of $240,000 and is entitled to
participate in our bonus, incentive, stock option, savings, welfare benefit and
retirement plans as he becomes eligible. The parties to the Employment Agreement
have agreed to resolve all disputes arising under the Employment Agreement
through binding arbitration.

On August 27, 2005, we opened a retail store on Melrose Avenue, Los
Angeles, California and took over all the obligations of a 10-year property
lease which was entered into by Blue Concept LLC in April 2005. The lease will
expire on March 15, 2015.

- 22 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Blue Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Blue Holdings,
Inc. and subsidiaries as of December 31, 2005 and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 2005 and from September 13, 2004 (Inception) to December 31, 2004.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Blue
Holdings, Inc. and subsidiaries as of December 31, 2005 and the consolidated
results of their operations and their cash flows for the year ended December 31,
2005 and for the period September 13, 2004 (Inception) to December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Weinberg & Company, P.A.
----------------------------
Weinberg & Company, P.A.
Los Angeles, California
March 10, 2006

- 23 -

ITEM 7. FINANCIAL STATEMENTS

BLUE HOLDINGS INC. (FORMERLY KNOWN AS MARINE JET TECHNOLOGY CORP.)
& SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2005

ASSETS

Current assets:
Cash ............................................. $ 228,127
Due from factor, net of reserves of $96,849 ...... 693,474
Accounts receivable, net of reserves of $484,421
- Purchased by factor on with recourse basis ..... $ 4,287,163
- Others ......................................... 2,504 4,289,667
-----------
Due from related parties ......................... 15,974
Inventories ...................................... 9,925,162
Deferred income taxes ............................ 492,574
Prepaid expenses and other current assets ........ 351,919
-----------
Total current assets .......................... 15,996,897

Deferred income taxes ............................ 1,671,135
Property and equipment, less accumulated depreciation 198,927
-----------
Total assets ........................................ $17,866,959
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Bank overdraft ................................... $ 616,020
Accounts payable ................................. 2,911,598
Short-term borrowings ............................ 4,583,936
Due to related parties ........................... 469,186
Income taxes payable ............................. 650,468
Accrued expenses and other current liabilities ... 599,166
-----------
Total current liabilities ..................... 9,830,374
-----------

Stockholders' equity
Common Stock $0.001 par value,
Authorized 75,000,000 shares,
26,057,200 shares issued and outstanding ...... 26,057
Additional paid-in capital ....................... 4,996,752
Retained earnings ................................ 3,013,776
-----------
Total stockholders' equity .................... 8,036,585
-----------
Total liabilities and stockholders' equity .......... $17,866,959
===========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- 24 -

BLUE HOLDINGS INC. (FORMERLY KNOWN AS MARINE JET TECHNOLOGY CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended From September
December 31, 13, 2004
(Inception) to
December 31,
2005 2004
------------ ------------
(As restated)

Net sales ..................................... $ 36,365,205 $ 365,290

Cost of goods sold ............................ 18,384,869 157,545
------------ ------------

Gross profit .................................. 17,980,336 207,745

Selling, distribution & administrative expenses 10,490,023 1,581,480
------------ ------------

Income (loss) before interest expense,
expenses relating to exchange transaction
and provision for income taxes ................ 7,490,313 (1,373,735)

Interest expense .............................. 122,434 0

Expenses relating to exchange transaction ..... 527,617 0
------------ ------------

Income (loss) before provision for income taxes 6,840,262 (1,373,735)

Provision for income taxes .................... 1,700,651 1,600
------------ ------------

Net income (loss) ............................. $ 5,139,611 $ (1,375,335)
============ ============

Basic and diluted income (loss) per share ..... $ 0.20 $ (0.06)
============ ============

Basic and diluted weighted average shares ..... 25,698,539 24,947,783
============ ============

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- 25 -

BLUE HOLDINGS INC. (FORMERLY KNOWN AS MARINE JET TECHNOLOGY CORP.)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 13, 2004 (INCEPTION) TO DECEMBER 31, 2004
FOR THE YEAR ENDED DECEMBER 31, 2005

Shares Issued
Members Equity ------------------------- Additional
-------------------------- Par Value Paid In Retained
Antik Taverniti Number 0.001 Capital Earnings Total
----------- ----------- ----------- ----------- ----------- ----------- -----------

Initial members' contri-
butions, cash .............. $ 750,000 $ 100,000 -- $ -- $ -- $ -- $ 850,000

Initial members' contri-
butions, services .......... 500,000 -- -- -- -- -- 500,000

Members' withdrawals ........ (79,190) -- -- -- -- -- (79,190)

Net loss for the period ..... (1,131,754) (243,581) -- -- -- -- (1,375,335)

----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 2004 .. 39,056 (143,581) -- -- -- -- (104,525)

Contributions ............... 1,886,200 -- -- -- -- -- 1,886,200

Issuance of shares upon
reverse merger ............ -- -- 24,447,783 24,448 (24,448) -- --

Old Marine Jet shares ....... -- -- 1,007,338 1,007 (1,007) -- --

Change in tax status of Antik
from LLC to Corp. upon
exchange transaction ....... (1,925,256) -- -- -- 3,057,010 (1,131,754) --

Shares issued to Finder ..... -- -- 102,079 102 177,515 -- 177,617

Acquisition of Taverniti .... -- -- 500,000 500 -- (750,500) (750,000)

Change in tax status of
Taverniti from LLC to Corp.
upon exchange transaction .. -- 143,581 -- -- 100,000 (243,581) --

Deferred tax benefit arising
from combination of
Taverniti .................. -- -- -- -- 1,687,682 -- 1,687,682

Net Income for the year ..... -- -- -- -- -- 5,139,611 5,139,611
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 2005 .. $ -- $ -- 26,057,200 $ 26,057 $ 4,996,752 $ 3,013,776 $ 8,036,585
=========== =========== =========== =========== =========== =========== ===========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- 26 -

BLUE HOLDINGS INC. (FORMERLY KNOWN AS MARINE JET TECHNOLOGY CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS

From September
13, 2004
For the year (Inception) to
ended December December 31,
31, 2005 2004
----------- -----------
(As restated)
Cash flows from operating activities:
Net Income (loss) ................................ $ 5,139,611 $(1,375,335)
Adjustments to reconcile net income (loss)
to cash used in operating activities:
Depreciation ................................. 18,399 1,150
Non-cash development costs ................... -- 500,000
Stock based exchange transaction expense ..... 177,617 --
Changes in assets and liabilities:
Accounts receivable .......................... (4,163,994) (125,673)
Due from factor .............................. (314,880) (378,594)
Inventories .................................. (7,782,543) (942,619)
Due to related parties ....................... (107,046) 576,232
Deferred income tax .......................... (475,742) --
Due from related parties ..................... (14,391) (1,583)
Prepaid expenses and other current assets .... (213,795) (138,124)
Income tax payable ........................... 650,468 --
Bank overdraft ............................... 616,020
Accounts payable ............................. 1,852,417 1,059,178
Due to customers ............................. (103,434) 103,434
Other current liabilities .................... 544,609 54,276
----------- -----------
Net cash used in operating activities ............ (4,176,684) (667,658)
----------- -----------

Cash flows from investing activities:
Purchase of equipment ........................ (199,960) (18,517)
----------- -----------
Net cash used in investing activities ............ (199,960) (18,517)
----------- -----------

Cash flows from financing activities:
Short-term borrowings ........................ 4,583,936 --
Contribution of capital ...................... 686,200 770,810
Distribution upon Taverniti combination ...... (750,000) --
----------- -----------
Net Cash provided by financing activities ........ 4,520,136 770,810
----------- -----------

Increase in Cash at the end of the period ........ 143,492 84,635
Cash at beginning of period ..................... 84,635 --
----------- -----------
CASH AT END OF PERIOD .......................... $ 228,127 $ 84,635
=========== ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW STATEMENT

Cash paid for income tax ......................... $ 1,565,000 $ 1,600
=========== ===========

Cash paid for interest ........................... $ 122,434 $ --
=========== ===========

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES

Non-cash Development Costs ....................... $ -- $ 500,000
=========== ===========

Inventory contributed by a member at its
historical cost ............................... $ 1,200,000 $ --
=========== ===========

Deferred tax asset realized from the
combination of Taverniti ...................... $ 1,687,682 $ --
=========== ===========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- 27 -

NOTE 1 - BASIS OF PRESENTATION, ORGANIZATION AND NATURE OF OPERATIONS

(a) ORGANIZATION:

Blue Holdings, Inc. (a Nevada corporation formerly known as Marine
Jet Technology Corp.) was incorporated in the State of Nevada on February 9,
2000. On April 14, 2005, Blue Holdings entered into an Exchange Agreement with
Antik Denim, LLC ("Antik"). At the closing of the transactions contemplated by
the Exchange Agreement, which occurred on April 29, 2005, Blue Holdings acquired
all of the outstanding membership interests of Antik (the "Interests") from the
members of Antik, and the members contributed all of their Interests to Blue
Holdings. In exchange, Blue Holdings issued to the members 843,027 shares of
Series A Convertible Preferred Stock, par value $0.001 per share, of Blue
Holdings ("Preferred Shares"), which, on June 7, 2005, as a result of a change
to Marine Jet Technology Corp.'s name to Blue Holdings, Inc. and a 1 for 29
reverse stock split, were converted into 24,447,783 shares of Blue Holding's
common stock on a post-reverse stock split basis.

As such, immediately following the closing and upon the conversion
of the Preferred Shares, the Antik members and Elizabeth Guez, our former Chief
Operating Officer and wife of Paul Guez, owned approximately 95.8% of the total
issued and outstanding common stock of Blue Holdings on a fully-diluted basis.
Following completion of the exchange transaction, Antik became a wholly-owned
subsidiary of Blue Holdings. The acquisition is accounted for as a reverse
merger (recapitalization) in the accompanying financial statements with Antik
deemed to be the accounting acquirer, and Blue Holdings deemed to be the legal
acquirer. As such the financial statements herein include those of Antik since
September 13, 2004 (the date of its inception). All assets and liabilities of
Marine Jet Technology Corp. were assumed by the major shareholder of Blue
Holdings, Inc. prior to the exchange transaction and were inconsequential to the
merged companies.

On June 7, 2005, Marine Jet Technology Corp. changed its name to
Blue Holdings, Inc., and increased its authorized number of shares of common
stock to 75,000,000. Pursuant to the provisions of the Exchange Agreement with
Antik, the former members of Antik agreed that, in the event that the
shareholders' equity of Blue Holdings (on a consolidated basis following the
closing of the transactions contemplated by the Exchange Agreement), as reported
in Blue Holdings' Quarterly Report on Form 10-Q for the quarter ended June 30,
2005 (the "Consolidated Equity"), was less than $5,000,000, the former members
would contribute, within fifteen (15) days following the filing of such periodic
report, equity capital to Blue Holdings in an amount equal to the difference
between $5,000,000 and the actual Consolidated Equity reported in such periodic
report ("Required Contribution"). In the case of such Required Contribution,
each of the Antik members agreed that no additional shares of capital stock of
Blue Holdings would be issued in consideration of such Required Contribution,
and therefore, the existing shareholders of Blue Holdings, including Antik's
former members, would not be further diluted. By an amendment dated June 27,
2005, the date of June 30, 2005 for calculation of the Consolidated Equity was
amended to September 30, 2005. The Company's Consolidated Equity as of September
30, 2005 was $5,570,413, and as of December 31, 2005 was $8,036,585 and no such
additional contribution by the members will be required.

- 28 -

($750,000). At the closing of the exchange transaction, Taverniti became a
wholly-owned subsidiary of the Company. Paul Guez, the Company's Chairman, Chief
Executive Officer, President and majority shareholder, was and remains the sole
manager and was member of Taverniti. Elizabeth Guez, Paul Guez's spouse and the
Company's former Chief Operating Officer, was a member of Taverniti. Two other
members of Mr. and Mrs. Guez's family, including Gregory Abbou, the President of
Taverniti, were the remaining members of Taverniti. The transaction has been
accounted for as a combination of entities under common control. As such, the
financial statements herein have been presented to include the operations of
Taverniti since September 13, 2004, the date of its inception, and the $750,000
payment was considered as a deemed distribution to the members of the Taverniti
upon the closing of the combination.

(b) NATURE OF OPERATIONS:

The Company operates exclusively in the wholesale apparel industry.
The Company designs, develops, markets and distributes high fashion jeans and
accessories under the brand names "Antik Denim," "Yanuk," "U," and as of October
31, 2005, "Taverniti So Jeans." The Company's products currently include jeans,
jackets, belts, purses and T-shirts. The Company currently sells its products in
the United States, Canada, Japan and the European Union directly to department
stores and boutiques and through distribution arrangements in certain foreign
jurisdictions. The Company is headquartered in Commerce, California and
maintains showrooms in New York and Los Angeles. The Company opened a retail
store in Los Angeles during August 2005, whose operations are not yet
significant to the consolidated operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) USE OF ESTIMATES:

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

(b) INVENTORY VALUATION:

Inventories are stated at the lower of cost (first-in, first-out
method) or market.

Revenue is recognized when merchandise is shipped to the customer
based upon agreed terms and is recorded net of estimated returns, charge backs
and markdowns based upon management's estimates and historical experience. We
sometimes arrange, on behalf of manufacturers, for the purchase of fabric from a
single supplier. We have the fabric shipped directly to the cutting factory and
invoice the factory for the fabric. The factories then pay us for the fabric
with offsets against the price of the finished goods.

(d) ADVERTISING:

Advertising costs are expensed as of the first date the
advertisements take place. Advertising expenses included in selling expenses
approximated $448,203 and $772,062 for the three and twelve months ended
December 31, 2005, respectively.

(e) PROPERTY AND EQUIPMENT:

Property and equipment is stated at cost. Depreciation is provided
by the straight-line method at rates calculated to amortize cost over the
estimated useful lives of the respective assets.

- 29 -

Upon sale or retirement of such assets, the related cost and
accumulated depreciation are eliminated from the accounts and gains or losses
are reflected in operations. Repairs and maintenance expenditures not
anticipated to extend asset lives are charged to operations as incurred.

(f) IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES:

Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

(g) CONCENTRATION OF CREDIT RISK:

Financial instruments, which potentially expose us to concentration
of credit risk, consist primarily of cash, trade accounts receivable, and
amounts due from our factor. Concentration of credit risk with respect to trade
accounts receivable at December 31, 2005 is limited due to the number of
customers comprising the Company's customer base and their dispersion throughout
the United States and abroad. The Company extends unsecured credit to its
customers in the normal course of business.

The Company's cash balances on deposit with banks are guaranteed by
the Federal Deposit Insurance Corporation up to $100,000. The Company may be
exposed to risk for the amounts of funds held in one bank in excess of the
insurance limit. In assessing the risk, the Company's policy is to maintain cash
balances with high quality financial institutions.

The Company's products are primarily sold to department stores and
specialty retail stores. These customers can be significantly affected by
changes in economic, competitive or other factors. The Company makes substantial
sales to a relatively few, large customers. In order to minimize the risk of
loss, the Company assigns certain amount of domestic accounts receivable to a
factor without recourse or requires letters of credit from its customers prior
to the shipment of goods. For non-factored receivables, account-monitoring
procedures are utilized to minimize the risk of loss. Collateral is generally
not required. The top three customers accounted for 10.7%, 6.9% and 5.3% of
total sales respectively in the twelve months ended December 31, 2005. As of
December 31, 2005, one customer accounted for 19.5 % of total accounts
receivable.

(h) MERCHANDISE RISK:

The Company's success is largely dependent upon its ability to
gauge the fashion tastes of its targeted consumers and provide merchandise that
satisfies consumer demand. Any inability to provide appropriate merchandise in
sufficient quantities in a timely manner could have a material adverse effect on
the Company's business, operating results and financial condition.

(i) ACCOUNTS RECEIVABLE - ALLOWANCE FOR RETURNS, DISCOUNTS AND BAD
DEBTS:

The Company evaluates its ability to collect accounts receivable
and the circumstances surrounding chargebacks (disputes from the customer) based
upon a combination of factors. In circumstances where the Company is aware of a
specific customer's inability to meet its financial obligations (such as in the
case of bankruptcy filings or substantial downgrading by credit sources), a
specific reserve for bad debts is taken against amounts due to reduce the net
recognized receivable to the amount reasonably expected to be collected. For all
other customers, the Company recognizes reserves for bad debts and uncollectible
chargebacks based on its historical collection experience. If collection
experience deteriorates (for example, due to an unexpected material adverse
change in a major customer's ability to meet its financial obligations to the
Company), the estimates of the recoverability of amounts due could be reduced by
a material amount.

- 30 -

(j) CASH AND BANK OVERDRAFT

Bank overdraft of $616,020 as of December 31, 2005 is comprised of
issued but unpresented checks and is to be offset by cash at bank of $228,127.

(k) INCOME TAX

The Company accounts for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes" Under SFAS No. 109, income taxes are
recognized for the amount of taxes payable or refundable for the current year
and deferred tax liabilities and assets are recognized for the future tax
consequences of transactions that have been recognized in the Company's
financial statements or tax returns. A valuation allowance is provided when it
is more likely than not that some portion or all of the deferred tax asset will
not be realized.

(l) STOCK-BASED COMPENSATION:

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") established a fair value method of
accounting for stock-based compensation plans and for transactions in which an
entity acquires goods or services from non-employees in exchange for equity
instruments. SFAS No. 123 also encouraged, but does not require companies to
record Compensation cost stock-based employee compensation. SFAS No. 123 was
amended by Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure", which requires companies
to disclose in interim financial statements the pro forma effect on net income
(loss) and net income (loss) per common share of the estimated fair market value
of stock options or warrants issued to employees. The Company has chosen to
continue to account for stock-based compensation utilizing the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", with pro forma disclosures of net income (loss) as
if the fair value method had been applied. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the fair market price of the
Company's stock at the date of grant over the amount an employee must pay to
acquire the stock.

The exercise price of stock options and warrants issued to employees
was not less than the fair market value of the Company's common stock on the
date of grant, and in accordance with accounting for such options utilizing the
intrinsic value method, there was no related compensation expense recorded in
the Company's consolidated financial statements. Had compensation cost for
stock-based compensation been determined based on the fair value at the grant
dates consistent with the method prescribed by SFAS No. 123, the Company's net
income (loss) and net income (loss) per share for the year ended December 31,
2005 and the period September 13, 2004 to December 31, 2005 would have been as
follows:

PERIOD ENDED DECEMBER 31,
-----------------------------
2005 2004
------------- -------------
(as restated)

Net Income (loss):
As reported ........ $ 5,139,611 $ (1,375,335)
Pro forma .......... $ 4,701,584 $ (1,375,335)

Net Income (loss) per share:
As reported .... $ 0.20 $ (0.06)
Pro forma ...... $ 0.18 $ (0.06)

The fair value of options granted are estimated on the date of
grant utilizing the Black-Scholes option-pricing model with the following
weighted-average assumptions: expected life of 3 years; expected volatility of
46.01%; risk-free interest rate of 4.5% and a 0% dividend yield. There were no
options issued to officers,

- 31 -

directors or employees in 2004. Our stock prices prior to April 29, 2005 were
not reflective of the performance of our Company subsequent to the exchange
transaction with Antik. Prior to June 7, 2005, when we completed our reverse
stock split at the ratio of 1 to 29, we believe some of the price fluctuations
of our stock were caused by confusion in the marketplace regarding the reverse
stock split and the prior exchange transaction. We therefore ignore those prices
in our calculation of the expected volatility and base our analysis only on our
stock price in the period between June 7, 2005 and December 31, 2005.

(m) NET INCOME (LOSS) PER SHARE

Statement of Financial Accounting Standards No. 128, "Earnings per
Share", requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS"). Basic earnings (loss) per share is
computed by dividing earnings (loss) available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution, using the treasury stock
method, that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. In computing
diluted earnings per share, the treasury stock method assumes that outstanding
options and warrants are exercised and the proceeds are used to purchase common
stock at the average market price during the period. Options and warrants will
have a dilutive effect under the treasury stock method only when the average
market price of the common stock during the period exceeds the exercise price of
the options and warrants.

At December 31, 2005, potentially dilutive securities consisted of
outstanding common stock options to acquire 427,000 shares (there were none at
December 31, 2004). These potentially dilutive securities were not included in
the calculation of income per share for the year ended December 31, 2005 as the
exercise price of the options exceeded the average market price of the shares.
Accordingly, basic and diluted loss per share is the same for the year ended
December 31, 2005 and the period from September 13, 2004 (Inception) to December
31, 2004. Weighted average shares outstanding gives effect to the 24,447,783
shares issued upon the reverse merger with Antik Denim LLC and 500,000 shares
issued upon the combination of Taverniti So Jeans LLC as if these transactions
occurred at inception.

(n) SHIPPING AND HANDLING COSTS:

Freight charges are included in selling, distribution and
administrative expenses in the statement of operations and approximated $297,956
for the year ended December 31, 2005.

(o) MAJOR SUPPLIERS:

During the year ended December 31, 2005, two suppliers comprised
greater than 10% of the Company's purchases. Purchases from these suppliers were
19.9% and 12.7% respectively. One of them is Blue Concept LLC which is co-owned
by Paul Guez.

(p) MAJOR CUSTOMER:

During the year ended December 31, 2005, one customer comprised of
greater than 10% of the Company's sales. Sales to that customer were 10.7%.

(q) FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of cash, due from factor, accounts receivable,
accounts payable, due to (from) related parties, income-tax payable, accrued
expenses and other current liabilities approximate fair value because of the
short maturity of these items.

- 32 -

(r) OFF-BALANCE SHEET RISK:

Financial instruments that potentially subject the Company to
off-balance sheet risk consist of factored accounts receivable. As described in
Note 3, the Company sells certain of its trade accounts receivable to a factor
and is contingently liable to the factor for merchandise disputes and other
customer claims. The total amount of receivables purchased by the factor
approximated $2,326,293 as of December 31, 2005 before reserves.

NOTE 3 - DUE FROM FACTOR

We use a factor for working capital and credit administration purposes.
Under the various factoring agreements entered into separately by Blue Holdings,
Antik Denim LLC and Taverniti So Jeans LLC, the factor purchases all the trade
accounts receivable assigned by the Company and its subsidiaries and assumes all
credit risk with respect to those accounts approved by it.

The factor agreements provide that we can borrow an amount up to 90% of
the value of our purchased customer invoices, less a reserve of 10% of unpaid
accounts purchased and 100% of all such accounts which are disputed. The factor
agreements, which have all been amended to terminate on July 24, 2006, provide
for automatic renewal after that date subject to 120 days' termination notice
from any party. The factor also makes available to all three companies a
combined line of credit up to the lesser of $1.5 million against inventory, and
33.3% of the value of eligible raw materials and finished goods.

As of December 31, 2005, the factor holds $2,326,293 of accounts
receivable purchased from us on a without recourse basis and has made advances
to us of $1,535,970 against those receivables, resulting in a net balance amount
Due from Factor of $790,323 as of December 31, 2005. The Company has accounted
for the sale of receivables to the factor in accordance with SFAS No.140,
"Accounting for the Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". The amount of the reserve provided by the
Company against these receivables was $96,849.

As of December 31, 2005, the factor also held $4,679,872 of accounts
receivable that were subject to recourse, and as of December 31, 2005, the
Company received advances totaling $4,583,936 against such receivables and
against eligible inventory. The company has included the $4,679,872 in accounts
receivable, and has reflected the $4,583,936 as short term borrowings on the
accompanying balance sheet. The factor commission against such receivables is
0.4% and interest is charged at the rate of 1% over the factor's prime lending
rate per annum.

During the year, the factor commission on receivables purchased on a
without recourse basis was 0.8% of the customer invoice amount for terms up to
90 days, plus one quarter of one percent (.25%) for each additional thirty-day
term. Effective January 1, 2006, the factor commission is 0.75% if the aggregate
amount of approved invoices is below $10 million per annum, 0.70% if below $20
million and 0.65% if below $30 million. The Company is contingently liable to
the factor for merchandise disputes, customer claims and the like on receivables
sold to the factor. To the extent that the Company draws funds prior to the
deemed collection date of the accounts receivable sold to the factor, interest
is charged at the rate of 1% over the factor's prime lending rate per annum.
Factor advances are collateralized by the non-factored accounts receivable,
inventories and the personal guarantees of Paul Guez, our Chairman, Chief
Executive Officer, President and majority shareholder, and the living trust of
Paul and Elizabeth Guez.

- 33 -

NOTE 4 - INVENTORIES
Inventories at December 31, 2005 are summarized as follows:

Raw Materials ........................................ $3,850,916
Work-in-Process ...................................... 2,842,531
Finished Goods ....................................... 3,231,715
----------
TOTAL ................................................ $9,925,162
==========

NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2005 is summarized as follows:

Furniture .................................................... $ 11,217
Leasehold Improvements ....................................... 44,600
Computer Equipment ........................................... 162,659
---------
218,476
Less: Accumulated depreciation and Amortization .............. (19,549)
---------
TOTAL ........................................................ $ 198,927
=========

Depreciation expense was $18,399 for the year ended December 31, 2005 and $1,150
for the period since September 13, 2004 (inception) to December 31, 2004.

NOTE 6 - RELATED PARTY TRANSACTIONS

The Company had sales to related parties of $923,127 for the year ended
December 31, 2005. Before the exchange transaction with Antik, the sales terms
were at a discount of approximately 20% from regular wholesale prices. The terms
were changed to regular wholesale prices after the exchange transaction with
Antik.

The Company also purchased fabric at cost from Blue Concept LLC for
$617,604 during the year ended December 31, 2005. During the year ended December
31, 2005, we reimbursed Blue Concept LLC $1,548,420 for certain expenses
(consisting of salaries, payroll taxes, utilities, common area services, rent,
insurance and other office services) incurred by them on behalf of the Company.
The arrangement was formalized under a Service Agreement signed on May 18, 2005.
Blue Concept LLC is a company co-owned by Paul Guez, the Company's Chairman,
Chief Executive Officer, President and controlling stockholder.

Azteca Production International Inc. is one of our contractors in
Mexico and is co-owned by Paul Guez. During the year ended December 31, 2005, we
paid them sewing and other sub-contracting charges in the amount of $2,122,000.
Azteca principally provided manufacturing services to Taverniti.

Since July 2005, the Company has purchased finished "Yanuk" products
from Blue Concept LLC. These purchases were made at a cost plus basis to cover
the cost of goods sold plus allocated overhead. Off -price "Yanuk" products were
sold on behalf of Blue Concept LLC with an overhead recovery charged to Blue
Concept LLC. During the year ended December 31, 2005, total purchases from Blue
Concept LLC amounted to $2,276,386.

- 34 -

On July 5, 2005 the Company entered into a ten-year license agreement
with Yanuk Jeans LLC, effective July 1, 2005. Under the terms of the agreement,
the Company became the exclusive licensor for the design, development,
manufacture, sale, marketing and distribution of the "Yanuk" brand products to
the wholesale and retail trade. The Company pays to Yanuk Jeans LLC a royalty of
six percent of all net sales of the licensed products and a guaranteed minimum
royalty on an annual basis. In addition, during the term of the license
agreement, the Company has the option to purchase from Yanuk Jeans LLC the
property licensed under the agreement. The royalties for the year ended December
31 paid or payable to Yanuk Jeans LLC totaled $223,773. Yanuk Jeans LLC is
solely owned by Paul Guez.

On October 6, 2005, the Company entered into a five-year license
agreement with Yanuk Jeans LLC, effective October 5, 2005. Under the terms of
the agreement, the Company became the exclusive licensor for the design,
development, manufacture, sale, marketing and distribution of Yanuk Jeans LLC's
"U" brand products to the wholesale and retail trade. The Company pays to Yanuk
Jeans LLC a royalty of five percent of all net sales of the licensed products
and shall pay a guaranteed minimum royalty on an annual basis. In addition,
during the term of the license agreement, the Company has the option to purchase
from Yanuk Jeans LLC the property licensed under the agreement.

Minimum future guaranteed royalty payments under the royalty agreements
are as follows:

"Yanuk" "U"
Years Ending December 31,: Related Party Related Party Total
----------- ----------- -----------
2006 $ 630,000 50,000 680,000

2007 693,000 75,000 768,000

2008 762,300 125,000 887,300

2009 838,530 175,000 1,013,530

2010 922,383 250,000 1,172,383

Thereafter 5,899,395 0 5,899,395
----------- ----------- -----------

$ 9,745,608 $ 675,000 $10,420,608
=========== =========== ===========

Paul Guez and the living trust of Paul and Elizabeth Guez have
guaranteed all advances and ledger debt due to the Company's factor.

On October 31, 2005, the Company entered into an exchange agreement
with Taverniti So Jeans, LLC, a California limited liability company
("Taverniti"), and the members of Taverniti (the "Taverniti Members"). Under the
exchange agreement, the Company acquired all of the outstanding membership
interests of Taverniti (the "Taverniti Interests") from the Taverniti Members,
and the Taverniti Members contributed all of their Taverniti Interests to the
Company. In exchange, the Company issued to the Taverniti Members, on a pro rata
basis, an aggregate of 500,000 shares of the Common Stock, par value $0.001 per
share, of the Company, and paid to the Taverniti Members, on a pro rata basis,
an aggregate of Seven Hundred Fifty Thousand Dollars $(750,000). At the closing
of the exchange transaction, Taverniti became a wholly-owned subsidiary of the
Company. Paul Guez, the Company's Chairman, Chief Executive Officer, President
and majority shareholder, was and remains the sole manager and was a member of
Taverniti. Elizabeth Guez, Paul Guez's spouse and the Company's former Chief
Operating Officer, was a member of Taverniti. Two other members of Mr. and Mrs.
Guez's family, including Gregory Abbou, the President of Taverniti, were the
remaining members of Taverniti.

Taverniti is the exclusive licensee for the design, development,
manufacture, sale, marketing and distribution of the "Taverniti So Jeans"
trademark in the denim and knit sports wear categories for men and women. It is
paying royalties to Taverniti Holdings LLC in the ranges of 5-8 percent
depending on the net sales of the licensed products pursuant to a license
agreement with Taverniti Holdings LLC. Taverniti Holdings LLC is jointly owned
by Paul Guez (60%) and Jimmy Taverniti (40%), the designer of the products for
the brand, and Mr. Guez is the sole manager. The license agreement was signed in
May 2004 and expires on December 31, 2015. Royalties paid or payable for the
year ended December 31, 2005 amounted to $507,897.

- 35 -

NOTE 7 - DUE FROM/TO RELATED PARTIES:

The related parties are the Company's majority shareholder (who is also
the Chairman, Chief Executive Officer and President of the Company) and limited
liability companies that are co-owned by the majority shareholder. These amounts
are all unsecured and non-interest bearing. All non-trade related advances from
related parties have been repaid. Trade-related outstanding items follow regular
payment terms as invoiced.

NOTE 8 - CAPITAL CONTRIBUTION:

The Company was initially formed on September 13, 2004 as a limited
liability company. The Company was formed with 4 members, one of which had a
75.4% ownership interest, and the other 3 members each had an 8.2% ownership
interest. Member contributions in cash were as follows:

A contribution of $500,000 was made by the 75.4 % member and a
contribution of $250,000 was made by an 8.2 % member. The other 8.2% members
each contributed patent and trademark applications, design concepts and other
items to form a complete line of high-end fashion apparel. For financial
statement purposes, the Company valued each of the contributions at $250,000
$(500,000 in total), which was equal to the cash consideration paid by the other
8.2% member. The $500,000 has been reflected as non-cash development costs in
the statement of operations for the period ended December 31, 2004.

During 2005, Mr. Guez has personally contributed $1,200,000 in fabric
inventory and $686,200 in cash to the Company. From time to time, he also
supports the Company with temporary advances. As of December 31, 2005, the
Company had advances totaling $96,875 from Mr. Guez which are included in
amounts due to related parties on the accompanying balance sheet.

NOTE 9 -- INCOME TAX:

Prior to the April 29, 2005 Antik transaction, any federal and state
income tax obligations for the period through and ending on April 29, 2005 were
passed through to the previous owners of Antik. These taxes are payable
individually by each of the previous owners of Antik and not the Company. As
such, there has been no amount included in the provision for income taxes of the
Company relating to the income earned by Antik during this period.

On October 31, 2005, the Company entered into the Taverniti
transaction. Similar to the Antik transaction, any federal and state income tax
obligations for the period through and ending on October 31, 2005 were passed
through to the previous owners of Taverniti. These taxes are payable
individually by each of the previous owners of Taverniti and not by the Company.
As such, there has been no amount included in the provision for income taxes of
the Company relating to the income earned by Taverniti during this period.

In connection with the Taverniti transaction, in exchange for 100%
ownership of Taverniti, the Company issued 500,000 shares of Common Stock of the
Company and paid $750,000 in cash to the previous owners of Taverniti. For
income tax purposes this transaction was a taxable event. For accounting
purposes this transaction was accounted for as combination of entities under
common control. Goodwill in the amount of $4,181,399 was recognized solely for
income tax purposes. The tax effect of this goodwill of $1,687,682 was reported
as a deferred tax asset. Additional paid in capital of the Company was increased
by an equal amount.

The Company's provision for the year ended December 31, 2005 includes
the income of Antik from the period April 30 to December 31, 2005, the dates in
which the Company was the sole owner of Antik. In addition, it includes the
income of Taverniti from the period November 1 to December 31, 2005, the dates
in which the Company was the sole owner of Taverniti.

- 36 -

The provision for income taxes consists of the following for the years
ended December 31:

2005 2004
----------- -----------
Current
Federal ................................ $ 1,690,595 $ 0
State .................................. 485,798 1,600
Deferred
Federal ................................ (397,330) 0
State .................................. (78,412) 0
----------- -----------
Provision for income tax expense .......... $ 1,700,651 $ 1,600
=========== ===========

Any benefit resulting from operating loss carried forward generated in
2004 were passed through the previous owners of Antik and Taverniti.

A reconciliation of the statutory federal income tax rate to the
effective tax rate is as follows for the year ended December 31:

2005 2004
----- -----
Statutory federal rate ........................... 34.0 % (34.0)%
State taxes, net of federal benefit .............. 3.9 0.1
Income not taxed at the Company level ............ (13.9) 34.0
Permanent differences ............................ 1.2 0
Other ............................................ (0.4) 0
----- -----
Effective tax rate ............................... 24.8 % 0.1 %
===== =====

The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset at December 31 are as follows (in
thousands):

- 37 -

2005 2004
---------- ----------
Deferred tax asset:
Current:
Allowance for doubtful accounts ........ $ 195,554 $ --
State taxes ............................ 164,356 --
Reserve for chargebacks ................ 39,096 --
Inventory reserve ...................... 29,643 --
Other .................................. 63,925 --
---------- ----------
Net current deferred tax assets ........... 492,574 --
---------- ----------

Noncurrent:
Goodwill ............................... 1,671,135 --
---------- ----------
Net noncurrent deferred tax assets ........ 1,671,135 --
---------- ----------

Net deferred tax asset ....................... $2,163,709 $ --
========== ==========

The Company did not record any valuation allowance against deferred tax
assets at December 31, 2005. Management has determined, based on the Company's
history of prior operating earnings and its expectations for the future, that
operating income of the Company will more likely than not be sufficient to fully
recognize these deferred tax assets.

The Company's provision for income taxes at December 31, 2005 was based
on income of Antik for the period from April 30, 2005 to December 31, 2005 and
of Taverniti for the period from November 1, 2005 to December 31, 2005, as
adjusted for timing differences outstanding at the date that Blue Holdings
became the sole member of each entity. The Company's income tax provision was
computed based on the federal statutory rate and the average state statutory
rates net of the related federal benefit in effect during those periods. The pro
forma net income taxes and proforma net income below reflect the effect as if
the Company had been taxed in accordance with Subchapter C of the Internal
Revenue Code (a "C" corporation) for the years ended December 31, 2005 and 2004.

- 38 -

2005 2004
----------- -----------
Income taxes:
As reported ................................ $ 1,700,651 $ 1,600
Proforma ................................... 2,428,205 1,600

Net Income (loss)
As reported ................................ $ 5,139,611 $(1,375,335)
Proforma ................................... 4,412,057 (1,375,335)
Basic & diluted income (loss) per share .... $ 0.17 $ (0.06)

NOTE 10 - COMMITMENTS

(a) ROYALTY AGREEMENTS:

(b) EMPLOYMENT CONTRACTS:

On July 8, 2005, we entered into an Employment Agreement with Philippe
Naouri. This agreement was amended on August 23, 2005. Pursuant to the terms of
Mr. Naouri's employment agreement, as amended, Mr. Naouri was engaged by us as
the President of Antik, for a term of 5 years commencing on July 11, 2005 and
terminating on July 10, 2010. Mr. Naouri will receive an annual salary of
$240,000 and is entitled to participate in our bonus, incentive, stock option,
savings, welfare benefit and retirement plans as he becomes eligible.

On November 14, 2005, Antik entered into an Employment Agreement with
Mr. Alex Caugant. Mr. Caugant was engaged by Antik as a Senior Vice President
for a term of 5 years commencing on November 14, 2005 and terminating on
November 13, 2010. Mr. Caugant will receive an annual salary of $240,000 and is
entitled to participate in our bonus, incentive, stock option, savings, welfare
benefit and retirement plans as he becomes eligible.

- 39 -

Minimum future amount due under employment contracts are as follows:

Years Ending December 31:
2006 $ 480,000
2007 480,000
2008 480,000
2009 480,000
2010 366,452
--------------
$ 2,286,452
==============

On August 27, 2005, the Company opened a retail store on Melrose
Avenue, Los Angeles, California and took over all the obligations of a 10-year
property lease which was entered into by Blue Concept LLC in April 2005. The
lease will expire on March 15, 2015.

Minimum future rental payments under non-cancelable operating leases for this
facility and other operating leases for office equipments in operation at
December 31, 2005 are as follows:

Years Ending December 31:
2006 $ 282,033
2007 289,896
2008 297,994
2009 306,335
2010 294,973
Thereafter 1,613,035
-------------
$ 3,084,266
=============

NOTE 11 - STOCK OPTIONS

Under the Company's 2005 Stock Incentive Plan (the "Company Plan"), the
Company may grant qualified and nonqualified stock options and stock purchase
rights to selected employees. The Company reserved 2,500,000 shares of common
stock for issuance under the Company Plan. Options to purchase 427,000 shares of
common stock were granted in 2005. No options to purchase shares of common stock
were exercised or terminated in 2005.

- 40 -

At December 31, 2005, options outstanding are as follows:

Number of Weighted average
options exercise price
---------- ----------

Balance at January 1, 2005 ................. -- --

Granted .................................... 427,000 $ 7.18
Exercised .................................. -- --

Cancelled .................................. -- --
---------- ----------
Balance at December 31, 2005 ............... 427,000 $ 7.18
========== ==========

Additional information regarding options outstanding as of December 31,
2005 is as follows:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
Number Weighted average
remaining
Number contractual life Weighted average Number Weighted average
Exercise price outstanding (years) exercise price exercisable exercise price
----------------- ------------- ------------------ ------------------ ------------- ------------------

$8.10 62,000 9.43 $8.10 22,000 $8.10

$7.40 300,000 9.61 $7.40 100,000 $7.40

$5.30 65,000 9.62 $5.30 25,000 $5.30

------------- ------------------ ------------------ ------------- ------------------

$5.30 - $8.10 427,000 9.59 $7.18 147,000 $7.15
============= ================== ================== ============= ==================

NOTE 12 - SUBSEQUENT EVENTS

- 41 -

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES:

Not applicable.

ITEM 8A. CONTROLS AND PROCEDURES

As of December 31, 2005, the end of the period covered by this Annual Report on
Form 10-KSB, we conducted an evaluation, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e))
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2005, our disclosure controls and
procedures were effective.

During the quarter ended December 31, 2005, there were no changes in the our
internal control over financial reporting (as defined in Rules 13a-15(f) under
the Exchange Act) that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

Not applicable.

- 42 -

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The information required by item is incorporated by reference from the
information contained in our Proxy Statement to be filed with the Securities and
Exchange Commission ("SEC") no later than April 30, 2006.

ITEM 10. EXECUTIVE COMPENSATION

The information required by item is incorporated by reference from the
information under the captions "Executive Compensation" and "Director
Compensation" contained in our Proxy Statement to be filed with the SEC no later
than April 30, 2006.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The information required by item is incorporated by reference from the
information under the captions "Related Stockholder Matters" and "Security
Ownership of Certain Beneficial Owners and Management" contained in our Proxy
Statement to be filed with the SEC no later than April 30, 2006.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated by reference from
the information under the captions "Certain Relationships and Related
Transactions" contained in our Proxy Statement to be filed with the SEC no later
than April 30, 2006.

ITEM 13. EXHIBITS.

See attached Exhibit Index.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this item is incorporated by reference from
the information under the caption "Independent Public Accountants" contained in
our Proxy Statement to be filed with the SEC no later than April 30, 2006.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

BLUE HOLDINGS, INC.

By: /S/ PAUL GUEZ
--------------------------------------------------
Paul Guez, Chairman of the Board, Chief Executive
Officer and President

Date: March 23, 2006

POWER OF ATTORNEY

The undersigned directors and officers of Blue Holdings, Inc. do hereby
constitute and appoint Paul Guez and Patrick Chow with full power of
substitution and resubstitution, as their true and lawful attorney and agent, to
do any and all acts and things in our name and behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorney and agent, may deem
necessary or advisable to enable said corporation to comply with the Securities
Exchange Act of 1934, as amended and any rules, regulations and requirements of
the Securities and Exchange Commission, in connection with this Annual Report on
Form 10-KSB, including specifically but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto, and we do
hereby ratify and confirm all that said attorneys and agents, or either of them,
shall do or cause to be done by virtue hereof.

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..

SIGNATURE TITLE DATE
--------- ----- ----

/S/ PAUL GUEZ Chairman of the Board of March 23, 2006
--------------------------- Directors, Chief Executive
Paul Guez Officer and President

/S/ PATRICK CHOW Chief Financial Officer March 23, 2006
--------------------------- (Principal Financial and
Patrick Chow Accounting Officer)

/S/ GARY FREEMAN Director March 23, 2006
---------------------------
Gary Freeman

/S/ MARSHALL GELLER Director March 23, 2006
---------------------------
Marshall Geller

/S/ KEVIN KEATING Director March 23, 2006
---------------------------
Kevin Keating

/S/ ROBERT G. LYNN Director March 23, 2006
---------------------------
Robert G. Lynn

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EXHIBIT INDEX

EXHIBIT
NUMBER EXHIBIT TITLE
------- --------------------------------------------------------------------

2.1 Exchange Agreement dated April 14, 2005, among Blue Holdings, Inc.
(formerly known as Marine Jet Technology Corp.), Antik Denim,
L.L.C., each member of Antik Denim, L.L.C. and Keating Reverse
Merger Fund, LLC. (1)

2.2 First Amendment to Exchange Agreement dated June 27, 2005, among
Blue Holdings, Inc., Antik Denim, L.L.C., each member of Antik
Denim, L.L.C. and Keating Reverse Merger Fund, LLC. (2)

2.3 Exchange Agreement dated October 31, 2005, among Blue Holdings,
Inc., Taverniti So Jeans, LLC, and the members of Taverniti So
Jeans, LLC. (3)

3.1 Articles of Incorporation of the Registrant filed February 9, 2000.
(4)

3.1.1 Certificate of Amendment of Articles of Incorporation of the
Registrant filed December 5, 2000. (4)

3.1.2 Certificate of Amendment of Articles of Incorporation of the
Registrant filed January 5, 2001. (4)

3.1.3 Certificate of Amendment of Articles of Incorporation of the
Registrant filed May 16, 2005 and effective June 7, 2005. (5)

3.2 Bylaws of the Registrant adopted February 12, 2000. (4)

4.1 Articles of Incorporation of the Registrant filed February 9, 2000.
(4)

4.1.1 Certificate of Amendment of Articles of Incorporation of the
Registrant filed December 5, 2000. (4)

4.1.2 Certificate of Amendment of Articles of Incorporation of the
Registrant filed January 5, 2001. (4)

4.1.3 Certificate of Amendment of Articles of Incorporation of the
Registrant filed May 16, 2005 and effective June 7, 2005. (5)

4.2 Bylaws of the Registrant adopted February 12, 2000. (4)

10.1 Assumption Agreement dated January 20, 2005, among the Registrant,
Intellijet Marine, Inc. and Jeff P. Jordan. (6)

10.2 Financial Advisory Agreement dated April 29, 2005, between the
Registrant and Keating Securities, LLC. (7)

10.3 License Agreement dated July 5, 2005, between the Registrant and
Yanuk Jeans, LLC. (8)

10.4 Employment Agreement dated July 8, 2005, between the Registrant and
Philippe Naouri. (9)

10.5 Service Agreement dated May 18, 2005, between Antik Denim, L.L.C.
and Blue Concept, LLC. (10)

10.6 First Amendment to Employment Agreement dated August 1, 2005,
between the Registrant and Philippe Naouri. (11)

10.7 Form of Indemnification Agreement between the Registrant and each of
its executive officers and directors. (12)

10.8 License Agreement dated September 8, 2005, between Antik Denim, LLC
and Titan Industries, Inc. (15)

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10.9 License Agreement dated to be effective October 5, 2005, between the
Registrant and Yanuk Jeans, LLC. (13)

10.10 Employment Agreement dated November 14, 2005, between Antik Denim,
LLC and Alexandre Caugant (14)

10.11 Factoring Agreement dated October 18, 2004, between Antik Denim, LLC
and FTC Commercial Corp.

10.12 Factoring Agreement dated November 22, 2004, between Taverniti So
Jeans, LLC and FTC Commercial Corp.

10.13 Factoring Agreement dated July 25, 2005, between Blue Holdings, Inc.
and FTC Commercial Corp.

10.14 Amendment No. 1 to Factoring Agreement dated September 1, 2005,
between Antik Denim, LLC and FTC Commercial Corp.

10.15 Amendment No. 1 to Factoring Agreement dated September 1, 2005,
between Blue Holdings, Inc. and FTC Commercial Corp.

10.16 Amendment No. 1 to Factoring Agreement entered into on December 22,
2005 and dated as of October 1, 2005, between Taverniti So Jeans,
LLC and FTC Commercial Corp.

10.17 Amendment No. 2 to Factoring Agreement entered into on December 22,
2005 and dated as of October 1, 2005, between Antik Denim, LLC and
FTC Commercial Corp.

10.18 Amendment No. 2 to Factoring Agreement entered into on December 22,
2005 and dated as of October 1, 2005, between Blue Holdings, Inc.
and FTC Commercial Corp.

10.19 Amendment No. 2 to Factoring Agreement entered into on December 22,
2005 and dated as of December 1, 2005, between Taverniti So Jeans,
LLC and FTC Commercial Corp.

10.20 Amendment No. 3 to Factoring Agreement entered into on December 22,
2005 and dated as of January 1, 2006, between Antik Denim, LLC and
FTC Commercial Corp.

10.21 Amendment No. 3 to Factoring Agreement entered into on December 22,
2005 and dated as of January 1, 2006, between Blue Holdings, Inc.
and FTC Commercial Corp.

10.22 Amendment No. 3 to Factoring Agreement entered into on December 22,
2005 and dated as of December 21, 2005, between Taverniti So Jeans,
LLC and FTC Commercial Corp.

10.23 Guaranty dated November 28, 2005, among Blue Holdings, Inc., Antik
Denim, LLC and FTC Commercial Corp.

10.24 Guaranty dated July 2005, between Blue Holdings, Inc. and FTC
Commercial Corp.

23.1 Consent of Weinberg & Company, P.C.

24.1 Power of Attorney (included as part of the Signature Page of this
Registration Statement).

31.1 Certification of Principal Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Principal Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 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.

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32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

99.1 2005 Stock Incentive Plan and Form of Stock Option Agreement of the
Registrant. (5)

------------
(1) Filed previously as Exhibit 2.5 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on April 15, 2005, and incorporated herein by this reference.

(2) Filed previously as Exhibit 2(e) to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on June 30, 2005, and incorporated herein by this reference.

(3) File previously as Exhibit 2.1 to the Registrant's Current Report on Form
8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on October 31, 2005, and incorporated herein by this
reference.

(4) Filed previously as an exhibit to the Registrant's Form 10-SB
Registration Statement (File #: 000-33297), filed with the Securities and
Exchange Commission on October 31, 2001, and again on May 1, 2002, and
incorporated herein by this reference.

(5) Filed previously as an exhibit to the Registrant's Form S-8 Registration
Statement (File #: 333-127723), filed with the Securities and Exchange
Commission on August 19, 2005, and incorporated herein by this reference.

(6) Filed previously as Exhibit 10 to the Registrant's Current Report on Form
8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on February 10, 2005, and incorporated herein by this
reference.

(7) Filed previously as an exhibit to the Registrant's Current Report on Form
8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on April 29, 2005, and incorporated herein by this
reference.

(8) Filed previously as Exhibit 10.1 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on July 7, 2005, and incorporated herein by this reference.

(9) Filed previously as Exhibit 10.1 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on July 14, 2005 and incorporated herein by this reference.

(10) Filed previously as Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-QSB (File #: 000-33297), filed with the Securities and Exchange
Commission on August 12, 2005, and incorporated herein by this reference.

(11) Filed previously as Exhibit 10.1 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on August 25, 2005, and incorporated herein by this
reference.

(12) File previously as Exhibit 10.7 to the Registrant's Form SB-2
Registration Statement (File # 333-128288), filed with the Securities and
Exchange Commission on September 13, 2005.

(13) File previously as Exhibit 10.1 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on October 7, 2005, and incorporated herein by this reference.

(14) File previously as Exhibit 10.1 to the Registrant's Current Report on
Form 8-K (File #: 000-33297), filed with the Securities and Exchange
Commission on November 14, 2005, and incorporated herein by this
reference.

(15) Filed previously as Exhibit 10.4 to the Registrant's Quarterly Report on
Form 10-QSB (File #: 000-33297), filed with the Securities and Exchange
Commission on November 8, 2005, and incorporated herein by this
reference.

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