Edgar Filing: BLUE HOLDINGS, INC.

SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

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BLUE HOLDINGS, INC.
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BLUE HOLDINGS, INC.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TIME............................ 10:00 a.m. Pacific Time on May 22, 2006

PLACE........................... Blue Holdings, Inc.
5804 E. Slauson Ave.
Commerce, CA 90040

ITEMS OF BUSINESS............... (1) The election of 5 directors;

(2) To ratify the appointment of
Weinberg & Company, P.A., as our
independent public accountants for
the year ending December 31, 2006;
and

(3) To transact such other business as
may properly come before the
Meeting and any adjournment or
postponement.

RECORD DATE..................... You can vote if, at the close of business on
March 27, 2006, you were a stockholder of
the Company.

PROXY VOTING.................... All stockholders are cordially invited to
attend the Annual Meeting in person.
However, to ensure your representation at
the Annual Meeting, you are urged to vote
promptly by signing and returning the
enclosed Proxy card.

/s/ Paul Guez
-----------------------------------
April 5, 2006 Paul Guez
CHIEF EXECUTIVE OFFICER & PRESIDENT

BLUE HOLDINGS, INC.
5804 EAST SLAUSON AVENUE
COMMERCE, CA 90040
(323) 725-5555
PROXY STATEMENT
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These Proxy materials are delivered in connection with the solicitation by the
Board of Directors of Blue Holdings, Inc., a Nevada corporation ("BLHL," the
"Company," "we," "us," or "our"), of Proxies to be voted at our 2006 Annual
Meeting of stockholders and at any adjournments or postponements thereof.

You are invited to attend our Annual Meeting of stockholders on May 22, 2006,
beginning at 10:00 a.m. Pacific Time. The meeting will be held at the Company's
principal executive offices, located at 5804 East Slauson Avenue, Commerce, CA
90040.

It is anticipated that the 2005 Annual Report and this Proxy Statement and the
accompanying Proxy will be mailed to stockholders on or about April 7, 2006.

STOCKHOLDERS ENTITLED TO VOTE. Holders of our Common Stock at the close of
business on March 27, 2006 are entitled to receive this notice and to vote their
shares at the Annual Meeting. Common stock is the only outstanding class of
securities of the Company entitled to vote at the Annual Meeting. As of March 1,
2006, there were 26,057,200 shares of Common Stock outstanding.

CHANGES IN CONTROL

On April 14, 2005, we entered into an Exchange Agreement ("Antik Exchange
Agreement") with Antik. The closing of the transactions contemplated by the
Antik Exchange Agreement occurred on April 29, 2005. At the closing, we acquired
all of the membership interests of Antik ("Antik Interests") from the members of
Antik ("Antik Members"), and the Antik Members contributed all of their Antik
Interests to us. In exchange, we issued to the Antik Members 843,027 Preferred
Shares, which, as a result of the approval by a substantial majority of our
outstanding stockholders entitled to vote and the approval by our Board of
Directors of amendments to our Articles of Incorporation, converted into
24,447,783 shares of our common stock on a post-reverse stock split basis. As of
March 1, 2006, the Antik Members beneficially owned 87.8% of our issued and
outstanding shares of Common Stock.

PROXIES. Your vote is important. If your shares are registered in your name, you
are a stockholder of record. If your shares are in the name of your broker or
bank, your shares are held in street name. We encourage you to vote by Proxy so
that your shares will be represented and voted at the meeting even if you cannot
attend. All stockholders can vote by written Proxy card. Your submission of the
enclosed Proxy will not limit your right to vote at the Annual Meeting if you
later decide to attend in person. IF YOUR SHARES ARE HELD IN STREET NAME, YOU
MUST OBTAIN A PROXY, EXECUTED IN YOUR FAVOR, FROM THE HOLDER OF RECORD IN ORDER
TO BE ABLE TO VOTE AT THE MEETING. If you are a stockholder of record, you may
revoke your Proxy at any time before the meeting either by filing with the
Secretary of the Company, at its principal executive offices, a written notice
of revocation or a duly executed Proxy bearing a later date, or by attending the
Annual Meeting and expressing a desire to vote your shares in person. All shares
entitled to vote and represented by properly executed Proxies received prior to
the Annual Meeting, and not revoked, will be voted at the Annual Meeting in
accordance with the instructions indicated on those Proxies. If no

instructions are indicated on a properly executed Proxy, the shares represented
by that Proxy will be voted as recommended by the Board of Directors.

QUORUM. The presence, in person or by Proxy, of a majority of the votes entitled
to be cast by the stockholders entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Abstentions and broker non-votes will be
included in the number of shares present at the Annual Meeting for determining
the presence of a quorum. Broker non-votes occur when brokers, who hold their
customers' shares in street name, sign and submit proxies for such shares and
vote such shares on some matters, but not others. Typically, this would occur
when brokers have not received any instructions from their customers, in which
case the brokers, as the holders of record, are permitted to vote on "routine"
matters, which typically include the election of directors.

VOTING. Each share of our Common Stock is entitled to one vote on each matter
properly brought before the meeting. Abstentions will be counted toward the
tabulation of votes cast on proposals submitted to stockholders and will have
the same effect as negative votes, while broker non-votes will not be counted as
votes cast for or against such matters.

At the Annual Meeting, the stockholders will consider and vote upon proposals to
(1) elect five directors and (2) ratify the appointment of Weinberg & Company,
P.A., as our independent public accountants for the fiscal year ending December
31, 2006, and such other proposals as may properly come before the Annual
Meeting or any adjournment thereof. The five nominees for directors who receive
the highest number of votes will be elected. The ratification of the independent
accountants requires the affirmative vote of a majority of the total votes cast
on the proposal.

SOLICITATION OF PROXIES

All expenses of our solicitation of proxies, including the cost of mailing this
Proxy Statement to our stockholders, will be borne by us. In addition to
solicitation by use of the mails, proxies may be solicited from stockholders by
our directors, officers and employees in person or by telephone or other means
of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. We may retain a proxy
solicitation firm for assistance in connection with the solicitation of proxies
for the Annual Meeting. Arrangements will also be made with brokerage houses,
custodians, nominees and fiduciaries for the forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such brokerage
houses, custodians, nominees and fiduciaries, and we will reimburse such
brokerage houses, custodians, nominees and fiduciaries for their reasonable
expenses incurred in connection therewith.

OTHER MATTERS

In the event a stockholder proposal was not submitted to the Company prior to
the date of this Proxy Statement, the enclosed Proxy will confer authority on
the Proxyholders to vote the shares in accordance with their best judgment and
discretion if the proposal is presented at the Meeting. As of the date hereof,
no stockholder proposal has been submitted to the Company, and management is not
aware of any other matters to be presented for action at the Meeting. However,
if any other matters properly come before the Meeting, the Proxies solicited
hereby will be voted by the Proxyholders in accordance with the recommendations
of the Board of Directors. Such authorization includes authority to appoint a
substitute nominee for any Board of Directors' nominee identified herein where
death, illness or other circumstance arises which prevents such nominee from
serving in such position and to vote such Proxy for such substitute nominee.

ITEM 1: ELECTION OF DIRECTORS

Item 1 is the election of five members of the Board of Directors. Our Board of
Directors currently consists of five members. At each annual meeting of the
Company's stockholders, directors are elected for a one-year term. At the 2006
Annual Meeting, each director will be elected for a term expiring at the 2007
Annual Meeting. Our bylaws presently provide that the number of directors shall
not be less than two nor more than seven, and that subject to this limitation,
the number of directors may changed from time to time by resolution of our Board
of Directors. The number of directors is currently fixed at five.

Unless otherwise instructed, the Proxy holders will vote the Proxies received by
them for the nominees named below. If any nominee is unable or unwilling to
serve as a director at the time of the Annual Meeting, or any postponement or
adjournment thereof, the Proxies will be voted for such other nominee(s) as
shall be designated by the then current Board of Directors to fill any vacancy.
The Company has no reason to believe that any nominee will be unable or
unwilling to serve if elected as a director.

The Board of Directors proposes the election of the following nominees as
members of the Board of Directors:

Paul Guez
Kevin R. Keating
Marshall Geller
Gary Freeman
Robert G. Lynn

The five nominees for election as directors at the Annual Meeting who receive
the highest number of affirmative votes will be elected.

The principal occupation and certain other information about the nominees and
certain executive officers are set forth on the following pages.

RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED ABOVE.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, positions and ages of the Company's
current executive officers and directors. At each annual meeting of the
Company's stockholders, directors are elected for a one-year term. At the 2006
Annual Meeting, each director will be elected for a term expiring at the 2007
Annual Meeting. Officers are appointed by the Board of Directors and their terms
of office are, except to the extent governed by an employment contract, at the
discretion of the Board of Directors.

NAME AGE POSITION HELD
-------------------- ------ ----------------------------------------------------
Paul Guez (2) 61 Chairman, Chief Executive Officer and President
-------------------- ------ ----------------------------------------------------
Patrick Chow 53 Chief Financial Officer and Secretary
-------------------- ------ ----------------------------------------------------
Philippe Naouri 35 President of Antik Denim, LLC
-------------------- ------ ----------------------------------------------------
Gregory Abbou (2) 29 President of Taverniti So Jeans, LLC
-------------------- ------ ----------------------------------------------------
Kevin R. Keating 66 Director
-------------------- ------ ----------------------------------------------------
Marshall Geller (1) 67 Director
-------------------- ------ ----------------------------------------------------
Gary Freeman (1) 38 Director
-------------------- ------ ----------------------------------------------------
Robert G. Lynn (1) 56 Director
-------------------- ------ ----------------------------------------------------

(1) Member of the Audit Committee, Governance and Nominating Committee and
Compensation Committee of the Board of Directors of the Company.

(2) Mr. Guez is the father-in-law of Mr. Abbou.

DIRECTORS

PAUL GUEZ PAUL GUEZ became our Chairman, Chief Executive Officer and
President on April 29, 2005. Mr. Guez is the sole Manager of
Antik and Taverniti, and is a co-owner of Blue Concept, LLC
("Blue Concept") and its several affiliates, which are engaged
in the design, marketing, manufacturing and wholesale
distribution of premium fashion collections for a growing
stable of contemporary brands, including "Duarte Jeans,"
"Elvis," "Memphis Blues" and "Grail Jeans." For the nine year
period prior to the formation of Blue Concept in 2002, Mr.
Guez co-operated Azteca Production International, Inc., a Los
Angeles based manufacturer of denim apparel. Mr. Guez started
his career in the apparel industry in 1976, when he launched
Sasson Jeans.

KEVIN R. KEATING KEVIN R. KEATING has served on our Board of Directors since
January 2005 and prior to the consummation of our exchange
transaction with Antik, served as our sole officer and
director. Mr. Keating is an investment executive and for the
past nine years has been the Branch Manager of the Vero Beach,
Florida, office of Brookstreet Securities Corporation.
Brookstreet is a full-service, national network of independent
investment professionals. Mr. Keating services the investment
needs of private clients with special emphasis on equities. He
is currently a director of public companies including 99 Cent
Stuff Inc., Catalyst Lighting Group, Inc., Wentworth I, Inc.,
Qorus.com, Inc., Multilink Telecommunications, Inc., and
Century Pacific Financial Corporation. For more than 35 years,
he has been engaged in various aspects of the investment
brokerage business. Mr. Keating began his Wall Street career
with the First Boston Company in New York in 1965. From 1967
through 1974, he was employed by several institutional
research boutiques where he functioned as Vice President
Institutional Equity Sales. From 1974 until 1982, Mr. Keating
was the President and Chief Executive Officer of Douglas
Stewart, Inc., a New York Stock Exchange member firm. Since
1982, he has been associated with a variety of firms as a
registered representative servicing the needs of individual
investors. Mr. Keating is also the manager and sole member of
Vero Management, LLC, which had a management agreement with
our predecessor entity that was terminated effective as of the
closing of the exchange transaction with Antik.

MARSHALL GELLER MARSHALL GELLER became a member of our Board of Directors on
August 1, 2005. Mr. Geller is a co-founder and Senior Managing
Director of St. Cloud Capital Partners, L.P., a Los Angeles,
California-based mezzanine fund formed in December 2001. He is
also the Chairman and CEO of Geller & Friend Capital Partners,
a Los Angeles based private merchant bank. He has extensive
experience initiating, arranging and making investments in
public and private companies. Mr. Geller spent over twenty
years as Senior Managing Director for Bear, Stearns & Company,
with oversight of all operations in Los Angeles, San
Francisco, Chicago, Hong Kong and the Far East. He is
currently a director of public companies including 1st Century
Bank, NA, ValueVision Media, Inc., and GP Strategies
Corporation. Mr. Geller also serves as a member of the Board
of Governors of Cedars-Sinai Medical Center, Los Angeles. He
was previously the Interim Co-Chairman of Hexcel Corporation
and Interim President and COO of Players International, Inc.
Mr. Geller graduated from California State University, Los
Angeles, with a BS in Business Administration, where he
currently serves on the Dean's Advisory Council for the
College of Business & Economics.

GARY FREEMAN GARY FREEMAN became a member of our Board of Directors on
December 16, 2005. Mr. Freeman is currently a Partner in
Bandari, Beach, Lim & Cleland's Audit and Accounting services
division. Having more than 15 years of experience in
accounting and consulting, Mr. Freeman has provided his
expertise to a variety of privately and publicly-held growth
businesses in strategic planning, business consulting,
auditing and accounting services. Mr. Freeman has also assumed
interim senior level management roles at public and private
companies during his career, including as Co-President and
Chief Financial Officer of Trestle Holdings (TLHO.OB). Mr.
Freeman's previous experience includes ten years with BDO
Seidman, LLP, including two years as an Audit Partner.

ROBERT G. LYNN ROBERT G. LYNN became a member of our Board of Directors on
December 16, 2005. Mr. Lynn joins the company with over 30
years of retail management experience. Most recently, Mr. Lynn
served as the Chief Operating Officer of Value City Department
Stores, which operates 113 stores with a wide assortment of
designer, department, discount and specialty store brands at
prices substantially lower than competing department and
discount stores. Prior to joining Value City, Mr. Lynn served
as President and Chief Operating Officer of Bradlees, Inc.
where he implemented and successfully executed a turnaround
strategy. He also served as the Vice Chairman and Chief
Operating Officer at American Eagle Outfitters, Inc. Mr. Lynn
began his career at Woolworth Corporation and served as
President and Chief Executive Officer of the F.W. Woolworth
Company from 1989 until 1993. Mr. Lynn received a BA in
English from Saint Michael's College.

EXECUTIVE OFFICERS

PATRICK CHOW PATRICK CHOW became our Chief Financial Officer and Secretary
on April 29, 2005. Mr. Chow was Chief Financial Officer and a
director of Tarrant Apparel Group from January 2002 to August
2004 and stayed as a consultant until January, 2005. He joined
Tarrant as Treasurer in November, 1998. From 1996 to 1998, he
served as General Manager of Fortune Chart Consultants Limited
in Hong Kong where he provided financial consulting services
to corporate clients. Mr. Chow has a Bachelor of Arts degree
from the University of Hong Kong and two diplomas in Banking
and Financial Studies from the Chartered Institute of Bankers,
United Kingdom.

PHILIPPE NAOURI PHILIPPE NAOURI became the President of Antik on November 14,
2005. Mr. Naouri co-founded Antik in September 2004 and has
served as a designer for Antik since its founding. Prior to
co-founding Antik, Mr. Naouri operated his own antique denim
warehouse in Texas for 16 years. Mr. Naouri's 20-year
commitment to vintage denim, measured by his obsessive
knowledge of detailing and craftsmanship, earned him the title
"The King of Vintage" in the fashion industry. Mr. Naouri has
sold his most exclusive and inspirational vintage designs to,
and has consulted on styles, details and washes for, companies
such as Replay, Diesel, G-star, Levis and Chevignon. In 1991,
he organized the first ever antique Levis auction held in
Drouot, France, in partnership with Levis. In the book "Jeans
of Heroes," Lincoln Editions, 1994, Mr. Naouri was dubbed the
"French Connection of Denim."

GREGORY ABBOU GREGORY ABBOU became the President of Taverniti So Jeans, LLC,
our wholly-owned subsidiary ("Taverniti"), on November 14,
2005. Since April 2004, Mr. Abbou has overseen the
merchandizing, marketing and brand distribution of Taverniti,
a company co-founded by Mr. Abbou. Prior to forming Taverniti,
Mr. Abbou oversaw international distribution for Yanuk Jeans
LLC. In 1999, Mr. Abbou became the sales manager for Arayal, a
new European designer brand, fostering distribution of Arayal
apparel throughout Europe in less than one year. Mr. Abbou
moved to Los Angeles in 2001 to develop awareness of the
Arayal brand in the United States. Shortly thereafter, Arayal
opened its first flagship store in Beverly Hills, California.

FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS

MEETINGS AND COMMITTEES

The Board of Directors held 14 meetings during fiscal 2005. The Board of
Directors also acted 6 times by unanimous written consent during fiscal 2005.
All directors attended 75% or more of all the meetings of the Board of Directors
and those committees on which they served in fiscal 2005. The Board of Directors
has an Audit Committee, Compensation Committee and Governance and Nominating
Committee.

AUDIT COMMITTEE

The Audit Committee currently consists of Messrs. Freeman, Geller and Lynn. Mr.
Freeman serves as the Chairman of the Audit Committee. The Board of Directors
has determined that Mr. Freeman is an audit committee financial expert, as
defined in Item 401(e)(2) of Regulation S-B. Messrs. Geller, Lynn and Freeman
are "independent," as that term is defined in Section 4200 of the Marketplace
Rules as required by the NASDAQ Stock Market. The Audit Committee is responsible
for the engagement of the Company's independent public accountants, reviews the
scope of the audit to be conducted by the independent public accountants, and
periodically meets with the independent public accountants and the Chief
Financial Officer of the Company to review matters relating to the Company's
financial statements, the Company's accounting principles and its system of
internal accounting controls. The Audit Committee reports its recommendations as
to the approval of the financial statements of the Company to the Board of
Directors. The role and responsibilities of the Audit Committee are more fully
set forth in a written charter adopted by the Board of Directors. The Audit
Committee reviews and reassesses the Amended and Restated Audit Committee
Charter annually and recommends any changes to the Board of Directors for
approval. The Audit Committee held 5 meetings during fiscal 2005. Attached as
Appendix A is the Amended and Restated Audit Committee Charter.

REPORT OF AUDIT COMMITTEE

The Audit Committee of the Board of Directors currently consists of Messrs.
Freeman, Geller and Lynn. The Board of Directors has determined that Mr. Freeman
is an audit committee financial expert, as defined in Item 401(e)(2) of
Regulation S-B and Mr. Freeman serves as the Chairman of the Audit Committee.
Messrs. Geller, Lynn and Freeman are "independent," as that term is defined in
Section 4200 of the Marketplace Rules as required by the NASDAQ Stock Market.

The Audit Committee is responsible for the engagement of the Company's
independent public accountants, reviews the scope of the audit to be conducted
by the independent public accountants, and periodically meets with the
independent public accountants and the Chief Financial Officer of the Company to
review matters relating to the Company's financial statements, the Company's
accounting principles and its system of internal accounting controls. The Audit
Committee reports its recommendations as to the approval of the financial
statements of the Company to the Board of Directors.

The role and responsibilities of the Audit Committee are more fully set forth in
a written charter adopted by the Board of Directors in December 2005. The Audit
Committee reviews and reassesses the Amended and Restated Audit Committee
Charter annually and recommends any changes to the Board of Directors for
approval.

In fulfilling its responsibilities for the financial statements for fiscal year
2005, the audit committee:

o Reviewed and discussed the audited financial statements for
the year ended December 31, 2005 with management and Weinberg
& Company, P.A. ("Weinberg"), the Company's independent
registered public accounting firm;

o Discussed with Weinberg the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the
conduct of the audit; and

o Received written disclosures and a letter from Weinberg
regarding its independence as required by Independence
Standards Board Standard No. 1, and has discussed with
Weinberg their independence.

Based on its review of the audited financial statements and discussions with
management and Weinberg, the Audit Committee recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2005 for filing with the Securities and
Exchange Commission.

Audit Committee: Gary Freeman, Chairman
Robert G. Lynn
Marshall Geller

COMPENSATION COMMITTEE

The Compensation Committee currently consists of Messrs. Freeman, Marshall and
Lynn. Mr. Lynn serves as the Chairman of the Compensation Committee. Messrs.
Geller, Lynn and Freeman are "independent," as that term is defined in Section
4200 of the Marketplace Rules as required by the NASDAQ Stock Market. Generally,
the Compensation Committee is responsible for considering and making
recommendations to the Board of Directors regarding executive compensation and
is responsible for administering the Company's stock option and executive
incentive compensation plans. The role and responsibilities of the Compensation
Committee are more fully set forth in a written charter adopted by the Board of
Directors in December 2005. The Compensation Committee reviews and reassesses
the Compensation Committee Charter annually and recommends any changes to the
Board of Directors for approval. A current copy of the Compensation Committee
Charter is available on the Company's website at www.blueholdings.com. The
Compensation Committee was formed in December 2005 and did not hold any meetings
during fiscal 2005.

GOVERNANCE AND NOMINATING COMMITTEE

The Governance and Nominating Committee currently consists of Messrs. Freeman,
Marshall and Lynn. Mr. Geller serves as the Chairman of the Governance and
Nominating Committee. Messrs. Geller , Lynn and Freeman are "independent," as
that term is defined in Section 4200 of the Marketplace Rules as required by the
NASDAQ Stock Market. Generally, the Governance and Nominating Committee is
responsible for overseeing the Company's corporate governance matters and
assisting the Board in determining qualified individuals to serve as Board
members. The role and responsibilities of the Governance and Nominating
Committee are more fully set forth in a written charter adopted by the Board of
Directors in December 2005. The Governance and Nominating Committee reviews and
reassesses the Governance and Nominating Committee Charter annually and
recommends any changes to the Board of Directors for approval. A current copy of
the Governance and Nominating Committee Charter is available on the Company's
website at www.blueholdings.com.

In carrying out its function to nominate candidates for election to the Board of
Directors, the Governance and Nominating Committee considers the mix of skills,
experience, character, commitment, and diversity of background, all in the
context of the requirements of the Board of Directors at that point in time. The
Governance and Nominating Committee believes that each candidate should be an
individual who has demonstrated integrity and ethics in such candidate's
personal and professional life, has an understanding of elements relevant to the
success of a publicly-traded company and has established a record of
professional accomplishment in such candidate's chosen field. Each candidate
should be prepared to participate fully in board activities, including
attendance at, and active participation in, meetings of the Board of Directors,
and not have other personal or professional commitments that would, in the
nominating committee's judgment, interfere with or limit such candidate's
ability to do so.

The Governance and Nominating Committee also oversees the corporate governance
principles generally applicable to the Company. The Board of Directors may from
time to time assign other functions to the Governance and Nominating Committee.
Notwithstanding the provisions set forth in Governance and Nominating Committee
Charter, if the Company is legally required by contract or otherwise to provide
third parties with the ability to nominate directors (e.g., preferred stock
rights to elect directors upon a dividend default, stockholder agreements and
management agreements), the selection and nomination of such directors need not
be subject to the Governance and Nominating Committee's nominating and review
process. The Governance and Nominating Committee was formed in December 2005 and
did not hold any meetings during fiscal 2005.

A stockholder of the Company may nominate one or more persons for election as a
director at an annual meeting of stockholders. Candidates nominated by
stockholders will be reviewed according to the requirements set out in the
Governance and Nominating Committee Charter.

CODE OF ETHICAL CONDUCT

Our Board of Directors has adopted a Code of Ethical Conduct (the "Code of
Conduct"). We require all employees, directors and officers, including our Chief
Executive Officer and Chief Financial Officer, to adhere to the Code of Conduct
in addressing legal and ethical issues encountered in conducting their work. The
Code of Conduct requires that these individuals avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and ethical manner and otherwise act with integrity and in our best interest.
The Code of Conduct contains additional provisions that apply specifically to
our Chief Financial Officer and other financial officers with respect to full
and accurate reporting. The Code of Conduct is available on our website at
www.blueholdings.com.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS.

Our Board of Directors has adopted three methods by which our stockholders may
communicate with the Board of Directors regarding matters of substantial
importance to the Company. These methods are as follows:

1. PROCEDURES FOR SUBMISSION OF COMMUNICATIONS REGARDING AUDIT AND
ACCOUNTING MATTERS. Pursuant to the duties and responsibilities delegated to the
Audit Committee of our Board of Directors in its Amended and Restated Audit
Committee Charter, our Audit Committee adopted procedures for (a) the receipt,
retention, and treatment of communications received by us regarding accounting,
internal accounting controls, or auditing matters; and (b) the submission by our
employees, on a confidential and anonymous basis, of communications regarding
questionable

accounting or auditing matters. These procedures allow any person to submit a
good faith communication regarding these various audit, internal accounting
control and accounting matters to the Audit Committee, or to our management, and
any employee to do so on a confidential and anonymous basis, without fear of
dismissal or retaliation of any kind. Ultimately, the Audit Committee will
oversee treatment of communications in this area, and therefore any submissions
would be reviewed by those members of the Board of Directors serving on the
Audit Committee. The Audit Committee also may submit such communications to the
Board of Directors for review and oversight as well. The Procedures for
Submission of Audit and Accounting Matters can be found on the Company's website
at www.blueholdings.com.

2. CODE OF ETHICAL CONDUCT. Our Code of Ethical Conduct identifies the
e-mail addresses for each of our Chief Financial Officer, Patrick Chow, and the
Chairman of the Audit Committee of our Board of Directors, Gary Freeman. This
allows individuals to contact those Board members in connection with matters
concerning the code and our Company's overall ethical values and standards.

3. INVESTOR RELATIONS. Our Chief Financial Officer and Corporate
Secretary, Patrick Chow, addresses all of our investor relations matters.
Stockholders are free to contact Mr. Chow at 323-725-5555. Mr. Chow determines
whether inquiries or other communications with respect to investor relations
should be relayed to our Board of Directors or to other management. Typical
communications relayed to our Board of Directors or other management involve
stockholder proposal matters, audit and accounting matters addressed in item 1
above, and matters related to our code of ethical conduct addressed in item 2
above.

While we do not require members of our Board of Directors to attend the
Company's Annual Meeting of stockholders, each director is encouraged to do so.
In lieu of holding an annual meeting of stockholders in 2005, our stockholders
acted by written consent to change the Company's name, authorize a reverse stock
split, approve an amendment to our articles of incorporation, as amended, and to
approve the adoption of a stock incentive plan.

DIRECTOR COMPENSATION

Our non-employee directors receive cash compensation equal to $5,000 per year,
paid quarterly, and options to purchase 30,000 shares of our Common Stock, for
their services as directors, and are also reimbursed for their reasonable
expenses incurred on our behalf or in attending meetings. Additionally, the
Chairman of the Audit Committee of the Board of Directors receives cash
compensation equal to $2,000 per year, paid quarterly, for his services as the
Chairman. In August 2005, we granted to Mr. Keating an option to purchase an
additional 2,000 shares of our common stock at an exercise price of $8.10 per
share in consideration for his service at that time as Chairman of the Audit
Committee of the Board of Directors. In December 2005, we granted Mr. Freeman an
option to purchase 32,000 shares of our common stock at an exercise price of
$5.30 per share in connection with his joining the Board and serving as the
Chairman of the Board's Audit Committee. In December 2005, we also granted Mr.
Lynn, one of our non-employee directors, an option to purchase 31,500 shares of
our common stock at an exercise price of $5.30 per share in connection with his
joining the Board and serving as the Chairman of the Board's Compensation
Committee. In addition we granted Mr. Geller an option to purchase an additional
1,500 shares of our common stock at an exercise price of $5.30 per share in
consideration for his serving as the Chairman of the Board's Governance and
Nominating Committee. These options were granted under our 2005 Stock Incentive
Plan.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth, as to the Chief Executive Officer, the other
three most highly compensated executive officers and the two individuals for
whom disclosure would have been provided pursuant to Item 402(a)(2)(ii) of
Regulation SB but for the fact that the individuals were not serving as
executive officers of the Company at the end of the fiscal year ended December
31, 2005 (collectively the "Named Executive Officers") whose compensation
exceeded $100,000 during the fiscal year ended December 31, 2005 and the period
which commenced on September 13, 2004 (the inception of Antik and Taverniti and
ended December 31, 2004, information concerning all compensation paid for
services to us in all capacities. The compensation table excludes other
compensation in the form of perquisites and other personal benefits that
constituted less than 10% of the total annual salary and bonus for the executive
officer during the applicable fiscal year.

ANNUAL
COMPENSATION LONG TERM COMPENSATION
------------------ -------------------------
NUMBER OF
FISCAL YEAR SECURITIES ALL
NAME ENDED UNDERLYING OTHER
PRINCIPAL POSITION DECEMBER 31, SALARY BONUS OPTIONS COMPENSATION
--------------------------------- ------------ -------- ------- ---------- ------------

Paul Guez ....................... 2005 -- -- -- --
President & Chief ............ 2004 -- -- -- --
Executive Officer
--------------------------------- ------------ -------- ------- ---------- ------------
Richard Spielberg (1) ........... 2005 $196,000 -- -- (1)
President of Sales, 2004 $ 58,882 -- -- --
Taverniti So Jeans LLC
--------------------------------- ------------ -------- ------- ---------- ------------
Irene Guez (2) .................. 2005 $150,000 $25,000 -- --
Vice President of Sales, ..... 2004 $ 20,892 -- -- --
Taverniti So Jeans LLC
--------------------------------- ------------ -------- ------- ---------- ------------
Philippe Naouri ................. 2005 $145,696 -- -- --
President, Antik Denim, LLC .. 2004 -- -- -- --
--------------------------------- ------------ -------- ------- ---------- ------------
Gregory Abbou (3) ............... 2005 $139,455 $25,000 -- --
President, ................... 2004 $ 21,077 -- -- --
Taverniti So Jeans, LLC
--------------------------------- ------------ -------- ------- ---------- ------------
Patrick Chow .................... 2005 $127,390 -- 300,000 --
Chief Financial Officer ...... 2004 -- -- -- --
--------------------------------- ------------ -------- ------- ---------- ------------

(1) Mr. Spielberg was also granted the use of a company car and an
apartment in Los Angeles, California. Mr. Spielberg left the employment
of the Company on December 2, 2005.

(2) Ms. Guez is the daughter of Paul Guez, our Chairman, Chief Executive
Officer and President.

(3) Mr. Abbou is the husband of Irene Guez and the son-in-law of Paul Guez,
our Chairman, Chief Executive Officer and President.

FISCAL 2005 OPTION GRANTS TABLE

The following table sets forth the stock options granted to our Chief Executive
Officer and each of the other Named Executive Officers during the fiscal year
ended December 31, 2005.

PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR SHARE DATE
------------------ ------------ ------------- -------------- ----------
Paul Guez -- -- -- --
Richard Spielberg -- -- -- --
Irene Guez -- -- -- --
Philippe Naouri -- -- -- --
Gregory Abbou -- -- -- --
Patrick Chow 300,000 100% $7.40 10/24/2015
------------------ ------------ ------------- -------------- ----------

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information concerning our equity compensation
plans as of December 31, 2005.

NUMBER OF SECURITIES NUMBER OF SECURITIES REMAINING
TO BE ISSUED UPON WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
-------------------------------- -------------------- ----------------------- --------------------------------

Equity compensation plans 427,000 $7.18 2,073,000
approved by security holders[1]
Equity compensation plans not
approved by security holders
TOTAL 427,000 $7.18 2,073,000

[1] Plan represents the 2005 Incentive Stock Option Plan.

EMPLOYMENT AGREEMENTS

Antik executed a letter agreement dated March 21, 2005 with Messrs. Naouri and
Caugant, two of its principal designers and former members, pursuant to which
Antik agreed that, to the extent Antik closed its exchange transaction with the
Company, Antik would, or would use its best efforts to cause the Company to,
enter into employment agreements with each of Messrs. Naouri and Caugant whereby
such individuals would (i) perform fashion design services for Antik or the
Company, (ii) be entitled to receive annual salaries of $240,000, plus bonuses
based on net sales arising from "Antik Denim" brand apparel, and (iii) be
entitled to receive such other benefits as Antik or the Company may elect to
offer to our other employees from time to time.

On July 8, 2005, we entered into an Employment Agreement with Philippe Naouri
based on the foregoing letter agreement entered into with Antik. This agreement
was amended on August 23, 2005. Pursuant to the terms of Mr. Naouri's employment
agreement, as amended, Mr. Naouri was engaged as the President of Antik Denim,
LLC, in charge of design, development, manufacturing, marketing and wholesale of
apparel and related accessories bearing the "Antik Denim" trademark, for a term
of 5 years commencing on July 11, 2005 and terminating on July 10, 2010. Mr.
Naouri receives an annual salary of $240,000 and is entitled to participate in
our bonus, incentive stock option, savings and retirement plans as such plans
become available. On November 14, 2005, Antik engaged Mr. Naouri to serve as its
President. Mr. Naouri continues to provide services to Antik pursuant to his
Employment Agreement with the Company. The parties to the Employment Agreement
have agreed to resolve all disputes arising under the Employment Agreement
through binding arbitration.

On November 14, 2005, Antik entered into an Employment Agreement with Mr.
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. Mr. Caugant continues to provide
services to Antik pursuant to his Employment Agreement with the Company. The
parties to the Employment Agreement have agreed to resolve all disputes arising
under the Employment Agreement through binding arbitration.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents information regarding the beneficial ownership of
our common stock as of March 1, 2006 by each of the named executive officers,
each of our directors, all of our directors and executive officers as a group,
and each stockholder known by us to be the beneficial owner of more than 5% of
our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities. Unless
otherwise indicated below, to our knowledge, the persons and entities named in
the table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable. Shares
of our common stock subject to options from the Company that are currently
exercisable or exercisable within 60 days of March 1, 2006 are deemed to be
outstanding and to be beneficially owned by the person holding the options for
the purpose of computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the percentage ownership of
any other person.

The information presented in this table is based on 26,057,200 shares of our
common stock outstanding on March 1, 2006. Unless otherwise indicated, the
address of each of the executive officers and directors and 5% or more
stockholders named below is c/o Blue Holdings, Inc., 5804 E. Slauson Ave.,
Commerce, California 90040.

NUMBER OF SHARES
BENEFICIALLY OWNED
---------------------------
PERCENTAGE OF
SHARES
NAME OF BENEFICIAL OWNER NUMBER OUTSTANDING
-------------------------------------------- ---------- --------------
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
-------------------------------------------- ---------- --------------
Paul Guez (1) .............................. 18,808,647 72.2%
Philippe Naouri ............................ 1,194,741 4.6%
Patrick Chow (2) ........................... 130,000 *
Richard Spielberg .......................... 0 *
Irene Guez ................................. 62,500 *
Gregory Abbou .............................. 62,500 *
Kevin R. Keating (3) ....................... 68,983 *
Gary Freeman (4) ........................... 12,000 *
Robert G. Lynn (5) ......................... 11,500 *
Marshall Geller (6) ........................ 1,500 *
All 8 directors and executive
officers as a group (7) ................. 20,352,371 77.7%
-------------------------------------------- ---------- --------------
5% STOCKHOLDERS:
-------------------------------------------- ---------- --------------
Elizabeth Guez (1) ......................... 18,808,647 72.2%
Meyer Abbou ................................ 1,334,741 5.1%
Alexandre Caugant .......................... 1,364,741 5.2%
-------------------------------------------- ---------- --------------

* Less than 1%

(1) Consists of 16,621,147 shares of common stock beneficially held by Paul
Guez, and 2,187,500 shares of common stock beneficially held by
Elizabeth Guez, Paul Guez' spouse.

(2) Includes 100,000 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options.

(3) Includes 12,000 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options. Kevin R. Keating, a director of the company,
is the father of the principal member of Keating Investments, LLC.
Keating Investments, LLC is the managing member of KRM Fund. Keating
Investments, LLC is also the managing member and 90% owner of Keating
Securities, LLC, a registered broker-dealer. Kevin R. Keating is not
affiliated with and has no equity interest in Keating Investments, LLC,
KRM Fund or Keating Securities, LLC and disclaims any beneficial
interest in the shares of our common stock owned by KRM Fund.
Similarly, Keating Investments, LLC, KRM Fund and Keating Securities,
LLC disclaim any beneficial interest in the shares of our common stock
currently owned by Kevin R. Keating.

(4) Consists of 12,000 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options.

(5) Consists of 11,500 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options.

(6) Consists of 1,500 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options.

(7) Includes 147,000 shares of common stock that may be acquired from the
Company within 60 days of March 1, 2006 upon the exercise of
outstanding stock options.

CHANGES IN CONTROL

We do not have any arrangements which may at a subsequent date result in a
change in control.

CERTAIN TRANSACTIONS WITH SIGNIFICANT STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS

Other than the transactions described below, since September 13, 2004 (inception
of Antik and Taverniti) there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:

o in which the amount involved exceeds $60,000; and

o in which any director, executive officer, other stockholders
of more than 5% of our common stock or any member of their
immediate family had or will have a direct or indirect
material interest.

GENERAL

During the twelve months ended December 31, 2005, we purchased $617,604 of
fabric and $2,276,386 of finished goods from Blue Concept which is co-owned by
Paul Guez and Elizabeth Guez. Paul Guez is the majority stockholder, Chairman,
Chief Executive Officer and President of the Company. Elizabeth Guez is the wife
of Paul Guez and was also the Chief Operating Officer of the Company until her
resignation in December 2005. Paul Guez was also the Chief Executive Officer of
Blue Concept but resigned from that company in December 2005. During the twelve
months ended December 31, 2005, we sold to Blue Concept $67,476 of fabric.

During the twelve months ended December 31, 2005, we sold finished goods for
$855,651 to companies owned by Paul Guez., Out of that amount, $741,340 were
sold to Blue Concept Europe Limited.

Azteca Production International Inc. is one of our contractors in Mexico and is
co-owned by Paul Guez. In fiscal 2005, we paid them a total of $2,122,000 in
sewing and processing charges. Azteca is a principal manufacturer for Taverniti
So Jeans LLC.

On October 31, 2005, we entered into an Exchange Agreement ("Taverniti Exchange
Agreement") with Taverniti. Under the Taverniti Exchange Agreement, we acquired
all of the membership interests of Taverniti ("Taverniti Interests") from the
members of Taverniti ("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
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 with
Taverniti, Taverniti became our wholly-owned subsidiary. Paul Guez was the sole
manager and a member of Taverniti. Elizabeth Guez was also a member of
Taverniti. Two other members of Mr. and Mrs. Guez's family, including Gregory
Abbou, the President of Taverniti and Mr. And Mrs. Guez's son-in-law, were the
remaining members of Taverniti. The Company's acquisition of Taverniti was
approved by a majority of our Board of Directors including all of our
independent directors.

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 for the year ended December 31, 2005 amounted to
$507,897.

On October 6, 2005, we entered into a ten-year License Agreement, effective
October 5, 2005, with Yanuk Jeans LLC. 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. We pay to Yanuk Jeans LLC a royalty of five percent
(5%) of all net sales of the products licensed under the agreement and a
guaranteed minimum royalty on an annual basis as further set forth in the
License Agreement. 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, consisting of certain trademark applications and a copyright,
at the fair market value of such property on the date of the exercise of the
purchase option. Yanuk Jeans LLC is wholly-owned by Paul Guez. The License
Agreement was approved by a majority of our Board of Directors including all of
our independent directors. We did not ship any goods under the brand in 2005.

On August 27, 2005, we opened a retail store in Los Angeles and assumed all the
obligations of a ten-year property lease which was entered into by Blue Concept
in April, 2005. The lease is guaranteed by Paul and Elizabeth Guez. Our entry
into the property lease was approved by a majority of our Board of Directors
including all of our independent directors.

On July 5, 2005, we entered into a ten-year License Agreement, effective July 1,
2005, with Yanuk Jeans LLC. 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 "Yanuk" brand products to the wholesale
and retail trade. We pay to Yanuk Jeans LLC a royalty of six percent (6%) of all
net sales of the products licensed under the agreement and a guaranteed minimum
royalty on a quarterly basis as further set forth in the License Agreement. 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,
consisting of certain trademarks and a design patent, at the fair market value
of such property on the date of the exercise of the purchase option. Yanuk Jeans
LLC is wholly-owned by Paul Guez. The License Agreement was approved by a
majority of our Board of Directors including all of our including all of our
directors independent of and not affiliated with Yanuk Jeans LLC. Royalties for
the six months ended December 31, 2005 totaled $223,773.

The cost of operations at our Commerce facility and our Los Angeles and New York
showrooms is shared by several companies and is allocated to us pursuant to our
Service Agreement ("Service Agreement") with Blue Concept, which is dated to be
effective May 18, 2005. We utilize approximately 67,000 sq. ft of the Commerce,
California facility and pay approximately $15,000 per month pursuant to this
agreement with Blue Concept. We believe that the facilities utilized by us are
well maintained, in good operating condition and adequate to meet our current
and foreseeable needs. The Service Agreement with Blue Concept also provides
that (i) in consideration of a monthly service fee of $78,500, Blue Concept
provides us services in the following areas: MIS, human resources, sales,
customer service, EDI Support, quality control, purchasing, import/export
services, graphic design, laundry

and distribution; and (ii) we share with Blue Concept 15% of the actual
telephone, utilities and office supply expenses incurred by Blue Concept, as
evidenced by actual invoices presented to us. The Service Agreement was approved
by a majority of our Board of Directors including all of our directors
independent of and not affiliated with Blue Concept. During the period from
inception, September 13, 2004, to December 31, 2004 and for the twelve months
ended December 31, 2005, the Company reimbursed $390,185 and $1,548,420,
respectively, for these expenses.

On April 14, 2005, we entered into an Exchange Agreement ("Antik Exchange
Agreement") with Antik. The closing of the transactions contemplated by the
Antik Exchange Agreement occurred on April 29, 2005. At the closing, we acquired
all of the membership interests of Antik ("Antik Interests") from the members of
Antik ("Antik Members"), and the Antik Members contributed all of their Antik
Interests to us. In exchange, we issued to the Antik Members 843,027 Preferred
Shares, which, as a result of the approval by a substantial majority of our
outstanding stockholders 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. Paul Guez is the sole manager of Antik and was a
member of Antik. Philippe Naouri, the President of Antik was also a member of
Antik.

Pursuant to the provisions of the Antik Exchange Agreement, the Antik Members
agreed that, in the event that our stockholders' equity (on a consolidated basis
following the closing of the transactions contemplated by that agreement) as
reported in our Quarterly Report on Form 10-QSB for the quarter ended June 30,
2005 (the "Consolidated Equity") was less than $5,000,000, the members would
contribute, within fifteen (15) days following the filing of such periodic
report, equity capital to us 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 the our capital stock
would be issued in consideration of such Required Contribution, and therefore,
the existing stockholders, including the Antik Members, would not be further
diluted.

On June 27, 2005, we, Antik, the Antik Members and KRM Fund, a beneficiary of
certain provisions of the Exchange Agreement, amended the Exchange Agreement to
require that the Required Contribution is to be made, if at all, in connection
with the Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2005. The Company's Consolidated Equity as of September 30, 2005
was $5,570,413 and no such additional contribution by the Antik Members was
required.

Antik executed a letter agreement dated March 21, 2005 with Messrs. Naouri and
Caugant, two of its principal designers and former members, pursuant to which
Antik agreed that, to the extent Antik closed its exchange transaction with the
Company, Antik would, or would use its best efforts to cause the Company to,
enter into employment agreements with each of Messrs. Naouri and Caugant whereby
such individuals would (i) perform fashion design services for Antik or us, (ii)
be entitled to receive annual salaries of $240,000, plus bonuses based on net
sales arising from "Antik Denim" brand apparel, and (iii) be entitled to receive
such other benefits as Antik or we may elect to offer to our other employees
from time to time.

On July 8, 2005, we entered into an Employment Agreement with Philippe Naouri
based on the foregoing letter agreement entered into with Antik. 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
Denim LLC, in charge of design, development, manufacturing, marketing and
wholesale of apparel and related accessories bearing the "Antik Denim"
trademark, 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 and
retirement plans as such plans become available. On November 14, 2005, Antik
engaged Mr. Naouri to serve in the newly created position of President of Antik.
Mr. Naouri continues to provide services to Antik pursuant to his Employment
Agreement with the Company. The parties to the Employment Agreement have agreed
to resolve all disputes arising under the Employment Agreement through binding
arbitration.

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. Mr.
Caugant continues to provide services to Antik pursuant to his Employment
Agreement with the Company. The parties to the Employment Agreement have agreed
to resolve all disputes arising under the Employment Agreement through binding
arbitration.

On February 28, 2005, in accordance with the provisions of the Operating
Agreement of Antik, Paul Guez contributed piece goods inventory with a fair
market value at cost of $1,200,000 to Antik. During fiscal 2005, Mr. Guez has
also contributed $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.

On February 17, 2005, we entered into a contract with Vero Management, LLC
("Vero") for managerial and administrative services. Vero was not engaged to
provide, and Vero did not render, legal, accounting, auditing, investment
banking or capital formation services. Kevin R. Keating is the manager of Vero.
The term of the contract was for one year. In consideration of the services
provided, Vero was paid $1,000 for each month in which services are rendered.
The agreement with Vero terminated on the closing date of the exchange
transaction with Antik.

On February 17, 2005, we issued 34,483 shares of our common stock (on a
post-reverse-stock-split basis) to Kevin R. Keating for services rendered to us
with a fair value of $10,000.

On February 17, 2005, we issued 172,414 shares of our common stock (on a
post-reverse-stock-split basis) to KRM Fund for an aggregate purchase price of
$50,000.

At the closing date of the exchange transaction with Antik, we entered into a
certain financial advisory agreement with Keating Securities, LLC under which
Keating Securities, LLC was compensated by us for its advisory services rendered
to us in connection with the closing of the exchange transaction. The
transaction advisory fee was $350,000 with the payment thereof made at the
closing.

On January 11, 2005, Mr. Jeff Jordan, the President of our predecessor entity,
entered into a Securities Purchase Agreement ("Purchase Agreement") with Keating
Reverse Merger Fund, LLC ("KRM Fund"), under which KRM Fund agreed to purchase,
and Mr. Jordan agreed to sell, an aggregate of 15,306,500 shares of our common
stock (on a pre-reverse-stock-split basis) owned by him for a purchase price of
$440,000, or $0.029 per share. Mr. Jordan completed the sale of his shares to
KRM Fund on February 9, 2005. Kevin R. Keating, a director of the Company, is
the father of the principal member of Keating Investments, LLC. Keating
Investments, LLC is the managing member of KRM Fund and, prior to the closing
date of the exchange transaction with Antik, was our majority stockholder.
Keating Investments, LLC is also the managing member and 90% owner of Keating
Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated
with and has no equity interest in Keating Investments, LLC, KRM Fund or Keating
Securities, LLC and disclaims any beneficial interest in the shares of our
common stock owned by KRM Fund. Similarly, Keating Investments, LLC, KRM Fund
and Keating Securities, LLC disclaim any beneficial interest in the shares of
our common stock currently owned by Kevin R. Keating.

Antik was a party to an allocation letter agreement dated January 2, 2005 with
Blue Concept pursuant to which, for the year ended December 31, 2005, the
parties agreed to allocate, and Antik was ultimately liable for, operating
expenses of Blue Concept allocable to Antik. The allocations were to be on terms
no less favorable than those that could be reasonably obtained in arms' length
transactions with independent third parties and were to be subject to final
approval by Antik's, or its successor's, audit committee, as applicable. The
allocation agreement applied to, among other matters, employees of Blue Concept
providing services to or on behalf of Antik, and covered salaries, payroll
taxes, and various employment benefits and benefit plans, including medical,
dental and 401(k) plans for such employees. The allocation agreement also
applied to other expenses consisting of utilities, common area services, rent,
insurance and other office services. This allocation agreement was terminated in
consideration for the Service Agreement described above.

Antik was a party to a similar allocation letter agreement dated December 31,
2004 with Blue Concept, for the period from inception through December 31, 2004.
Pursuant to this letter agreement, Antik was allocated approximately $104,049
per month of operating expenses allocable to its operations, or a total of
$390,185 for the

entire period. Antik has confirmed that such allocations were made on terms no
less favorable than those that could be reasonably obtained in arms' length
transactions with independent third parties.

During the period from inception through December 31, 2004, Paul Guez and
several companies co-owned by Paul Guez, provided advance loans to Antik in the
form of inventory with a fair market value at cost, or cash for working capital
purposes, in an amount equal to $246,857. The advances were unsecured and
non-interest bearing, with no formal terms of repayment. As of December 31,
2005, the principal amount outstanding for such advances was equal to $96,875.

Advances made by the Company's, Antik's and Taverniti's factor are
collateralized by non-factored accounts receivable, inventories, general
intangibles and personal guarantees executed by Paul Guez and The Paul and
Elizabeth Guez Living Trust dated February 13, 1998 (the "Guez Living Trust").
The guarantees provide that the factor may pursue claims against Mr. Guez and
the Guez Living Trust in the event that the Company, Antik or Taverniti, as
applicable, defaults on its obligations to the factor.

In consideration for his initial membership interests in Antik, which were
subsequently exchanged for Preferred Shares in the Antik exchange transaction,
Mr. Guez contributed cash in the amount of $500,000 and certain trademark
applications, and agreed to contribute up to an additional $3,200,000 of cash
and/or property as was to be required by him acting as Manager of Antik. In
February 2005, Mr. Guez contributed the piece goods inventory described above.

In consideration for their initial membership interests in Antik, which were
subsequently exchanged for shares of the preferred stock of the Company in its
exchange transaction with Antik, Messrs. Naouri and Caugant contributed certain
property consisting of trademark and patent applications, as well as proprietary
design concepts and artwork, and Mr. Abbou contributed $250,000 in cash.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers and the holders of more than 10% of our Common
Stock to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of our equity securities. Based
solely on our review of the copies of the forms received by us and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, we believe that, during the year ended December
31, 2005, all of our executive officers, directors and the holders of 10% or
more of our Common Stock complied with all Section 16(a) filing requirements,
except for: Paul Guez who did not timely file 4 reports reporting 4
transactions; Elizabeth Guez who did not timely file 3 reports reporting 4
transactions; Patrick Chow who did not timely file 1 report reporting 1
transaction; Kevin R. Keating who did not timely file 3 reports reporting 5
transactions; Marshall Geller who did not timely file 2 reports reporting 1
transaction; David Weiner who did not timely file 1 report; Philippe Naouri who
did not timely file 1 report reporting 1 transaction; and Keating Reverse Merger
Fund LLC who did not timely file 1 report reporting 1 transaction.

STOCKHOLDER PROPOSALS

Any stockholder who intends to present a proposal at the 2007 Annual Meeting of
stockholders for inclusion in the Company's Proxy Statement and Proxy form
relating to such Annual Meeting must submit such proposal to the Company at its
principal executive offices by December 8, 2006. In addition, in the event a
stockholder proposal is not received by the Company by February 21, 2007, the
Proxy to be solicited by the Board of Directors for the 2007 Annual Meeting will
confer discretionary authority on the holders of the Proxy to vote the shares if
the proposal is presented at the 2007 Annual Meeting without any discussion of
the proposal in the Proxy Statement for such meeting.

SEC rules and regulations provide that if the date of the Company's 2007 Annual
Meeting is advanced or delayed more than 30 days from the date of the 2006
Annual Meeting, stockholder proposals intended to be included in the proxy
materials for the 2007 Annual Meeting must be received by the Company within a
reasonable time before the Company begins to print and mail the proxy materials
for the 2007 Annual Meeting. Upon determination by the Company that the date of
the 2007 Annual Meeting will be advanced or delayed by more than 30 days from
the date of the 2006 Annual Meeting, the Company will disclose such change in
the earliest possible Quarterly Report on Form 10-QSB.

ITEM 2: INDEPENDENT PUBLIC ACCOUNTANTS

Item 2 is the ratification of the firm of Weinberg & Company, P.A. as our
independent public accountant for the current fiscal year ending December 31,
2006. The Audit Committee of the Board of Directors recommended and the Board
has selected, subject to ratification by a majority vote of the stockholders in
person or by proxy at the Annual Meeting, Weinberg as our independent public
accountant for the current fiscal year ending December 31, 2006. We anticipate
that a representative of Weinberg & Company, P.A., will attend the Annual
Meeting for the purpose of responding to appropriate questions. At the Annual
Meeting, a representative of Weinberg & Company, P.A., will be afforded an
opportunity to make a statement if he or she so desires.

If the majority of our stockholders present and entitled to vote at the Annual
Meeting do not ratify the appointment of Weinberg as our auditors for the
current fiscal year, Weinberg will continue to serve as our auditors for the
current fiscal year, and the Audit Committee of the Board of Directors will
engage in deliberations to determine whether it is in our best interest to
continue Weinberg's engagement as our auditors for fiscal 2007.

On April 29, 2005, we ended the engagement of De Joya & Company as our
independent certified public accountants. The decision was approved by the Board
of Directors of the Company.

The report of De Joya & Company on the Company's financial statements for the
fiscal year ended December 31, 2004 did not contain an adverse opinion or
disclaimer of opinion. However, the report was modified due to an uncertainty
about the Company's ability to continue as a going concern. During the Company's
fiscal year ended December 31, 2004 and the subsequent interim period preceding
the termination, there were no disagreements with De Joya & Company on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of De Joya & Company would have caused De Joya & Company to make
reference to the subject matter of the disagreements in connection with its
report on the financial statements for such years or subsequent interim periods.

The Company requested that De Joya & Company furnish it with a letter addressed
to the Securities and Exchange Commission ("SEC") stating whether or not it
agreed with the Company's statements in the Company's filings with the SEC. A
copy of the letter furnished by De Joya & Company in response to that request,
dated April 29, 2005, is filed as Exhibit 16.1 to a Current Report on Form 8-K
filed by the Company with the SEC on May 5, 2005.

On April 29, 2005, Weinberg & Company, P.A. was engaged as the Company's new
independent certified accountants. During the two most recent fiscal years and
the interim period preceding the engagement of Weinberg, the Company has not
consulted with Weinberg regarding either: (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements;
or (ii) any matter that was either the subject of a disagreement or event
identified in paragraph (a)(1)(iv) of Item 304 of Regulation S-B.

AUDIT FEES

Weinberg our independent accountants billed us an aggregate of approximately
$88,844 and $23,325 in fees for professional services rendered for the audit of
our annual financial statements for the fiscal years ended December 31, 2005 and
December 31, 2004, respectively, and the reviews of the financial statements
included in our Form 10-QSB's for fiscal 2005 and 2004.

AUDIT-RELATED FEES

Weinberg billed us an aggregate of approximately $48,461 and $0 in fees for
assurance and related services related to the audit of our annual financial
statements for the fiscal years ended December 31, 2005 and December 31, 2004,
respectively.

Our Audit Committee is directly responsible for interviewing and retaining our
independent accountant, considering the accounting firm's independence and
effectiveness, and pre-approving the engagement fees and other compensation to
be paid to, and the services to be conducted by, the independent accountant. The
Audit Committee does not delegate these responsibilities. During each of the
fiscal years ended December 31, 2005 and December 31, 2004, respectively, our
Audit Committee pre-approved 100% of the services described above.

RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFYING THE
APPOINTMENT OF WEINBERG & COMPANY P.A. AS OUR INDEPENDENT AUDITORS.

SOLICITATION OF PROXIES

It is expected that the solicitation of Proxies will be by mail. The cost of
solicitation by management will be borne by the Company. The Company will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their reasonable disbursements in forwarding solicitation material to
such beneficial owners. Proxies may also be solicited by certain of our
directors and officers, without additional compensation, personally or by mail,
telephone, telegram or otherwise.

ANNUAL REPORT ON FORM 10-KSB

THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WHICH HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2005, WILL BE
MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY, 5804 E. SLAUSON AVENUE, COMMERCE, CA, 90040.

ON BEHALF OF THE BOARD OF DIRECTORS

/s/ Paul Guez
-----------------------------------------------
Paul Guez
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT

Commerce, CA
April 5, 2006

APPENDIX A

AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF BLUE HOLDINGS, INC.

This Amended and Restated Charter identifies the purpose, composition,
meeting requirements, committee responsibilities, annual evaluation procedures
and investigations and studies of the Audit Committee (the "COMMITTEE") of the
Board of Directors (the "BOARD") of Blue Holdings, Inc., a Nevada corporation
(the "COMPANY").

I. PURPOSE

The Committee has been established to: (a) assist the Board in its
oversight responsibilities regarding (1) the integrity of the Company's
financial statements, (2) the Company's compliance with legal and regulatory
requirements, (3) the independent accountant's qualifications and independence
and (4) the Company's internal and disclosure controls; (b) prepare the report
of the audit committee required by the United States Securities and Exchange
Commission (the "SEC") for inclusion in the Company's annual proxy statement;
(c) retain and terminate the Company's independent accountant; (d) approve audit
and non-audit services to be performed by the independent accountant; and (e)
perform such other functions as the Board may from time to time assign to the
Committee. In performing its duties, the Committee shall seek to maintain an
effective working relationship with the Board, the independent accountant and
management of the Company.

II. COMPOSITION

The Committee shall be composed of at least three, but not more than
five, members (including a Chairperson), all of whom shall be "independent
directors," as such term is defined in the rules and regulations of the SEC and
the Nasdaq Stock Market ("NASDAQ"). Notwithstanding the foregoing, the Committee
may have as one of its members, and not the Chairperson of the Committee, for a
term of no longer than two years, a "non-independent director" if the individual
is not a current officer or employee or a family member of an officer or
employee, due to exceptional and limited circumstances pursuant to the rules and
regulations of Nasdaq. The members of the Committee and the Chairperson shall be
selected by the Board and shall serve at the pleasure of the Board. A Committee
member (including the Chairperson) may be removed at any time, with or without
cause, by the Board. The Board may designate one or more independent directors
as alternate members of the Committee, who may replace any absent or
disqualified member or members at any meetings of the Committee. No person may
be made a member of the Committee if his or her service on the Committee would
violate any restriction on service imposed by any rule or regulation of the SEC
or any securities exchange or market on which shares of the common stock of the
Company are traded. The Chairperson shall maintain regular communication with
the chief executive officer, chief financial officer and the lead partner of the
independent accountant.

All members of the Committee shall have a working familiarity with
basic finance and accounting practices and be able to read and understand
financial statements, and at least one member of the Committee shall be a
"financial expert." A member shall be deemed a "financial

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expert" if the Board determines that such person has, through education and
experience as a chief executive officer, public accountant or auditor, or a
principal financial officer, controller, or principal accounting officer of a
company that at the time the person held such position was required to file
periodic reports with the SEC, or experience in one or more positions that
involve the performance of similar functions (or that results, in the judgment
of the Board, in the person having similar expertise and experience), the
following attributes:

o An understanding of generally accepted accounting principles
and financial statements;

o Experience applying such generally accepted accounting
principles in connection with the accounting for estimates,
accruals, and reserves that are generally comparable to the
estimates, accruals, and reserves, if any, used in the
registrant's financial statements;

o Experience preparing or auditing financial statements that
present accounting issues that are generally comparable to
those raised by the registrant's financial statements;

o Experience with internal controls and procedures for financial
reporting; and

o An understanding of audit committee functions.

Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Company or
an outside consultant.

Except for Board and Committee fees, a member of the Committee shall
not be permitted to accept any fees paid directly or indirectly for services as
a consultant, legal advisor or financial advisor or any other fees prohibited by
the rules of the SEC and Nasdaq. In addition, no member of the Committee may be
an "affiliated person" of the Company or any of its subsidiaries (as such term
is defined by the SEC), nor may any member of the Committee have participated in
the preparation of the financial statements of the Company or any of its
subsidiaries during the last three fiscal years. Members of the Committee may
receive their Board and Committee fees in cash, Company stock or options or
other in-kind consideration as determined by the Board or the Compensation
Committee, as applicable, in addition to all other benefits that other directors
of the Company receive. No director may serve on the Committee, without the
approval of the Board, if such director simultaneously serves on the audit
committee of more than three public companies.

III. MEETING REQUIREMENTS

The Committee shall meet as necessary, but at least quarterly, to
enable it to fulfill its responsibilities. The Committee shall meet at the call
of any member of the Committee, preferably in conjunction with regular Board
meetings. The Committee may meet by telephone conference call or by any other
means permitted by law or the Company's Bylaws. A majority of the members of the
Committee shall constitute a quorum. The Committee shall act on the affirmative
vote of a majority of members present at a meeting at which a quorum is present.

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Without a meeting, the Committee may act by unanimous written consent of all
members. The Committee shall determine its own rules and procedures, including
designation of a chairperson pro tempore, in the absence of the Chairperson, and
designation of a secretary. The secretary need not be a member of the Committee
and shall attend Committee meetings and prepare minutes. The Committee shall
keep written minutes of its meetings, which shall be recorded or filed with the
books and records of the Company. Any member of the Board shall be provided with
copies of such Committee minutes if requested.

The Committee may ask members of management, employees, outside
counsel, the independent accountant or others whose advice and counsel are
relevant to the issues then being considered by the Committee, to attend any
meetings and to provide such pertinent information as the Committee may request.

The Chairperson of the Committee shall be responsible for leadership of
the Committee, including preparing the agenda, presiding over Committee
meetings, making Committee assignments and reporting the Committee's actions to
the Board from time to time (but at least once each year) as requested by the
Board.

As part of its responsibility to foster free and open communication,
the Committee should meet periodically with management and the independent
accountant in separate executive sessions to discuss any matters that the
Committee or any of these groups believe should be discussed privately. In
addition, the Committee or at least its Chairperson should meet with the
independent accountant and management quarterly to review the Company's
financial statements prior to their public release consistent with the
provisions set forth below in SECTION IV. The Committee may also meet from time
to time with the Company's investment bankers, investor relations professionals
and financial analysts who follow the Company.

IV. COMMITTEE RESPONSIBILITIES

In carrying out its responsibilities, the Committee's policies and
procedures should remain flexible to enable the Committee to react to changes in
circumstances and conditions so as to ensure the Company remains in compliance
with applicable legal and regulatory requirements. In addition to such other
duties as the Board may from time to time assign, the Committee shall have the
following responsibilities:

A. OVERSIGHT OF THE FINANCIAL REPORTING PROCESSES

1. In consultation with the independent accountant and
management, review the integrity of the
organization's financial reporting processes, both
internal and external.

2. Review and approve all related-party transactions,
unless such responsibility has been reserved to the
full Board or delegated to another committee of the
Board.

3. Consider the independent accountant's judgments about
the quality and appropriateness of the Company's
accounting principles as applied in its

A-3

financial reporting. Consider alternative accounting
principles and estimates.

4. Annually review major issues regarding the Company's
auditing and accounting principles and practices and
its presentation of financial statements, including
the adequacy of internal controls and special audit
steps adopted in light of material internal control
deficiencies.

5. Discuss with management and legal counsel the status
of pending litigation, taxation matters, compliance
policies and other areas of oversight applicable to
the legal and compliance area as may be appropriate.

6. Meet at least annually with the chief financial
officer and the independent accountant in separate
executive sessions.

7. Review all analyst reports and press articles about
the Company's accounting and disclosure practices and
principles.

8. Review all analyses prepared by management and the
independent accountant of significant financial
reporting issues and judgments made in connection
with the preparation of the Company's financial
statements, including any analysis of the effect of
alternative generally accepted accounting principle
("GAAP") methods on the Company's financial
statements and a description of any transactions as
to which management obtained Statement on Auditing
Standards No. 50 letters.(1)

9. Review with management and the independent accountant
the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures, on the
Company's financial statements.

B. REVIEW OF DOCUMENTS AND REPORTS

1. Review and discuss with management and the
independent accountant the Company's annual audited
financial statements and quarterly financial
statements (including disclosures under the section
entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operation") and
any reports or other financial information submitted
to any governmental body, or the public, including
any certification, report, opinion or review rendered
by the independent accountant, considering, as
appropriate, whether the information contained in
these documents is consistent with the information
contained in the financial statements and whether the
independent accountant and legal counsel are
satisfied with the disclosure and content of such
documents.

--------
(1) SAS No. 50 provides performance and reporting standards for written reports
from accountants with respect to the application of accounting principles to new
transactions and financial products or regarding specific financial reporting
issues.

A-4

These discussions shall include consideration of the
quality of the Company's accounting principles as
applied in its financial reporting, including review
of audit adjustments (whether or not recorded) and
any such other inquires as may be appropriate. Based
on the review, the Committee shall make its
recommendation to the Board as to the inclusion of
the Company's audited consolidated financial
statements in the Company's annual report on Form
10-K.

2. Review and discuss with management and the
independent accountant earnings press releases, as
well as financial information and earnings guidance
provided to analysts and rating agencies. The
Committee need not discuss in advance each earnings
release but should generally discuss the types of
information to be disclosed and the type of
presentation to be made in any earnings release or
guidance.

3. Review the regular internal reports prepared by
management.

4. Review reports from management and the independent
accountant on the Company's subsidiaries and
affiliates, compliance with the Company's code(s) of
conduct, applicable law and insider and related party
transactions.

5. Review with management and the independent accountant
any correspondence with regulators or government
agencies and any employee complaints or published
reports that raise material issues regarding the
Company's financial statements or accounting
policies.

6. Prepare the report of the audit committee required by
the rules of the SEC to be included in the Company's
annual proxy statement.

7. Submit the minutes of all meetings of the Committee
to, or discuss the matters discussed at each
Committee meeting with, the Board.

8. Review any restatements of financial statements that
have occurred or were recommended. Review the
restatements made by other clients of the independent
accountant.

C. INDEPENDENT ACCOUNTANT MATTERS

1. The Committee shall be directly responsible for
interviewing and retaining the Company's independent
accountant, considering the accounting firm's
independence and effectiveness and approving the
engagement fees and other compensation to be paid to
the independent accountant.

2. On an annual basis, the Committee shall evaluate the
independent accountant's qualifications, performance
and independence. To assist in this undertaking, the
Committee shall require the independent accountant to
submit a report (which report shall be reviewed by
the Committee)

A-5

describing (a) the independent accountant's internal
quality-control procedures, (b) any material issues
raised by the most recent internal quality-control
review, or peer review, of the accounting firm or by
any inquiry or investigations by governmental or
professional authorities (within the preceding five
years) respecting one or more independent audits
carried out by the independent accountant, and any
steps taken to deal with any such issues and (c) all
relationships the independent accountant has with the
Company and relevant third parties to determine the
independent accountant's independence. In making its
determination, the Committee shall consider not only
auditing and other traditional accounting functions
performed by the independent accountant, but also
consulting, legal, information technology services
and other professional services rendered by the
independent accountant and its affiliates. The
Committee shall also consider whether the provision
of any of these non-audit services is compatible with
the independence standards under the guidelines of
the SEC and of the Independence Standards Board.

3. Approve in advance any non-audit services to be
provided by the independent accountant and adopt
policies and procedures for engaging the independent
accountant to perform non-audit services.

4. Review on an annual basis the experience and
qualifications of the senior members of the audit
team. Discuss the knowledge and experience of the
independent accountant and the senior members of the
audit team with respect to the Company's industry.
The Committee shall ensure the regular rotation of
the lead audit partner and audit review partner as
required by law and consider whether there should be
a periodic rotation of the Company's independent
accountant.

5. Review the performance of the independent accountant
and terminate the independent accountant when
circumstances warrant.

6. Establish and periodically review hiring policies for
employees or former employees of the independent
accountant.

7. Review with the independent accountant any problems
or difficulties the auditor may have encountered and
any "management" or "internal control" letter
provided by the independent accountant and the
Company's response to that letter. Such review should
include:

(a) any difficulties encountered in the course
of the audit work, including any
restrictions on the scope of activities or
access to required information and any
disagreements with management;

(b) any accounting adjustments that were
proposed by the independent accountant that
were not agreed to by the Company; and

A-6

(c) communications between the independent
accountant and its national office regarding
any issues on which it was consulted by the
audit team and matters of audit quality and
consistency.

8. Communicate with the independent accountant regarding
(a) critical accounting policies and practices to be
used in preparing the audit report, (b) alternative
treatments of financial information within the
parameters of GAAP that were discussed with
management, including the ramifications of the use of
such alternative treatments and disclosures and the
treatment preferred by the independent accountant,
(c) other material written communications between the
independent accountant and management of the Company,
and (d) such other matters as the SEC and Nasdaq may
direct by rule or regulation.

9. Periodically consult with the independent accountant
out of the presence of management about internal
controls and the fullness and accuracy of the
organization's financial statements.

10. Oversee the independent accountant relationship by
discussing with the independent accountant the nature
and rigor of the audit process, receiving and
reviewing audit reports and ensuring that the
independent accountant has full access to the
Committee (and the Board) to report on any and all
appropriate matters.

11. Discuss with the independent accountant prior to the
audit the general planning and staffing of the audit.

12. Obtain a representation from the independent
accountant that Section 10A of the Securities
Exchange Act of 1934 has been followed.

D. INTERNAL/DISCLOSURE CONTROL MATTERS

1. Discuss with management policies with respect to risk
assessment and risk management. Although it is
management's duty to assess and manage the Company's
exposure to risk, the Committee should discuss
guidelines and policies to govern the process by
which risk assessment and management is handled and
review the steps management has taken to monitor and
control the Company's risk exposure.

2. Establish regular and separate systems of reporting
to the Committee by each of management and the
independent accountant regarding any significant
judgments made in management's preparation of the
financial statements and the view of each as to
appropriateness of such judgments.

3. Following completion of the annual audit, review
separately with each of management and the
independent accountant any significant difficulties
encountered during the course of the audit, including
any restrictions on the scope of work or access to
required information.

A-7

4. Review with the independent accountant and management
the extent to which changes or improvements in
financial or accounting practices have been
implemented. This review should be conducted at an
appropriate time subsequent to implementation of
changes or improvements, as decided by the Committee.

5. Advise the Board about the Company's policies and
procedures for compliance with applicable laws and
regulations and the Company's code(s) of conduct.

6. Establish procedures for receipt, retention and
treatment of complaints and concerns regarding
accounting, internal accounting controls or auditing
matters, including procedures for confidential,
anonymous submissions from employees regarding
questionable accounting or auditing matters.

7. Periodically discuss with the chief executive officer
and chief financial officer (a) significant
deficiencies in the design or operation of the
internal controls that could adversely affect the
Company's ability to record, process, summarize and
report financial data and (b) any fraud that involves
management or other employees who have a significant
role in the Company's internal controls.

8. Ensure that no officer, director or any person acting
under their direction fraudulently influences,
coerces, manipulates or misleads the independent
accountant for purposes of rendering the Company's
financial statements materially misleading.

While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent accountant.

V. ANNUAL EVALUATION PROCEDURES

The Committee shall annually assess its performance to confirm that it
is meeting its responsibilities under this Charter. In this review, the
Committee shall consider, among other things, (a) the appropriateness of the
scope and content of this Charter, (b) the appropriateness of matters presented
for information and approval, (c) the sufficiency of time for consideration of
agenda items, (d) frequency and length of meetings and (e) the quality of
written materials and presentations. The Committee may recommend to the Board
such changes to this Charter as the Committee deems appropriate.

VI. INVESTIGATIONS AND STUDIES

The Committee shall have the authority and sufficient funding to retain
special legal, accounting or other consultants (without seeking Board approval)
to advise the Committee. The Committee may conduct or authorize investigations
into or studies of matters within the Committee's scope of responsibilities as
described herein, and may retain, at the

A-8

expense of the Company, independent counsel or other consultants necessary to
assist the Committee in any such investigations or studies. The Committee shall
have sole authority to negotiate and approve the fees and retention terms of
such independent counsel or other consultants.

VII. MISCELLANEOUS

Nothing contained in this Charter is intended to expand applicable
standards of liability under statutory or regulatory requirements for the
directors of the Company or members of the Committee. The purposes and
responsibilities outlined in this Charter are meant to serve as guidelines
rather than as inflexible rules and the Committee is encouraged to adopt such
additional procedures and standards as it deems necessary from time to time to
fulfill its responsibilities. This Charter, and any amendments thereto, shall be
displayed on the Company's website, when available, and a printed copy of such
shall be made available to any shareholder of the Company who requests it.

Adopted by the Audit Committee and approved
by the Board of Directors on December 12, 2005

A-9

BLUE HOLDINGS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned, a stockholder of BLUE HOLDINGS, INC., a Nevada corporation (the
"Company"), hereby nominates, constitutes and appoints Paul Guez and Patrick
Chow, or either one of them, as proxy of the undersigned, each with full power
of substitution, to attend, vote and act for the undersigned at the Annual
Meeting of stockholders of the Company, to be held on May 22, 2006, and any
postponements or adjournments thereof, and in connection therewith, to vote and
represent all of the shares of the Company which the undersigned would be
entitled to vote with the same effect as if the undersigned were present, as
follows:

The Board of Directors recommends a FOR vote on all proposals listed below.

Proposal 1. To elect the following five nominees as directors:

Paul Guez Kevin R. Keating Marshall Geller
Gary Freeman Robert G. Lynn

_____ FOR NOMINEES LISTED (except as marked to the contrary below)
_____ WITHHELD

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below:)

--------------------------------------------------------------------------------
The undersigned hereby confer(s) upon the proxies and each of them discretionary
authority with respect to the election of directors in the event that any of the
above nominees is unable or unwilling to serve.

Proposal 2. To ratify the appointment of Weinberg & Company, P.A., as the
independent public accountants of the Company.

____ FOR ____ AGAINST ____ ABSTAIN

The undersigned hereby revokes any other proxy to vote at the Annual Meeting,
and hereby ratifies and confirms all that said attorneys and proxies, and each
of them, may lawfully do by virtue hereof. With respect to matters not known at
the time of the solicitation hereof, said proxies are authorized to vote in
accordance with their best judgment.

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR,
TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF
AUTHORITY TO VOTE FOR ALL PROPOSALS. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE PROXIES.

The undersigned acknowledges receipt of a copy of the Notice of Annual Meeting
and accompanying Proxy Statement dated April 5, 2006, relating to the Annual
Meeting.

Dated:___________________________, 2006

Signature:_____________________________

Signature:_____________________________
Signature(s) of Stockholder(s)
(See Instructions Below)

The signature(s) hereon should
correspond exactly with the name(s) of
the stockholder(s) appearing on the
Share Certificate. If stock is held
jointly, all joint owners should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
signer is a corporation, please sign
the full corporation name, and give
title of signing officer.

|_| Please indicate by checking this box if you anticipate
attending the Annual Meeting.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE