Stocks Reporter December pick ** BLUE **

Business Description

Blue Holdings Inc., based in Commerce, CA, was formed by Paul Guez in September 2004.  Through its wholly owned subsidiary Antik Denim, LLC, Blue Holdings designs, manufactures, and markets high-end vintage denim fashion jeans, apparel and accessories with an Old West flair.  The Company is managed by seasoned fashion industry executives and professionals, and currently has over 122 employees. Blue Holdings completed a reverse merger transaction with Marine Jet Technology Corp. The common stock of Blue Holdings, Inc. is traded on the NASDAQ Capital Market under the symbol “BLUE”. Besides owning the “Antik Denim” brand, the Company is a licensee of three other brands: “Taverniti So Jeans”, “Faith Connexion” and “Yanuk”.

Value Proposition

Blue Holdings Inc. is a rapidly growing designer and distributor of high-end fashion products capitalizing on the current denim fashions in the U.S. and internationally.  The Company is recognized as one of the premier denim companies in the industry.  Antik Denim, Taverniti, Faith Connexion and Yanuk are all enjoying strong growth both domestically and internationally.

Investment Highlights

Brand Recognition. Since the introduction of its products in late 2004, Antik Denim and Taverniti have become recognized brands in both the United States and internationally, worn by such celebrities as Cameron Diaz, Jennifer Lopez and Paris Hilton.  The Antik Denim signature designs of ornately decorated jeans with hand-wrought embroidery, patchwork pockets are the latest “must have” among Hollywood celebrities.  The Antik Denim brand was featured on In Touch magazine as one of “Hollywood’s Must-have Denim.” Antik Denim, Taverniti, Faith Connexion and Yanuk brands have been seen on celebrities like Teri Hatcher, Hilary Duff, Jennifer Lopez, Jessica Simpson, Charlize Theron Kate Hudson and many more. Adding to the excitement have been fashion layouts in trend-setting publications such as Elle, Life & Style, Glamour, Marie Claire, Lucky, Bazaar, and Nylon.
Featured Designers.  The designers of the Antik Denim brand have very strong track records in the fashion industry and have designed for major brands such as Diesel, Replay, and Chevignon. Taverniti So Jeans designed by renowned designer Jimmy Traverniti is known for his vintage military look, detailed patch work, and washes. Ilan Delouis the creator of Faith Connexion has designed a collection with a distinctive positive message.

Product Distribution. The Company’s high-end denim jeans retail between $148-$350 per pair.  The Company has a two retail boutiques, located on Melrose Avenue in Los Angeles and the Westfield Fashion Mall in San Fransico and has showrooms in Los Angeles, New York, and Dallas. It sells its products in high-end boutiques and department stores, including Saks Fifth Avenue, Neiman Marcus, Nordstrom, Bloomingdales, Macy’s East, Kitson, Fred Segal, and Atrium. Besides the stores in the U.S., the Company’s products are also sold in fine retail stores located in Canada, Mexico, U.K. (and throughout Europe), Japan, Brazil, Israel, Lebanon, UAE, South Africa, and Korea.

Stocks Reporter has received no compensation in the form of cash or securities for coverage and has no position of BLUE shares

Board of Directors

Paul Guez, Chairman
Mr. Guez has served as the Chairman of the Board of Directors since July 2007 and was previously the Company’s, Chief Executive Officer. Prior to his undertakings with Blue Holdings, Mr. Guez was the Chief Executive Officer of Blue Concept LLC, a Los Angeles-based fashion incubator. 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 began his career in the apparel industry in 1976, when he founded Sasson Jeans.

Gary Freeman, Director, Chairman–Audit committee, Member–Compensation Committee, Governance and Nominating Committee, Audit Committee Financial Expert
Mr. Freeman has served on the Company’s Board of Directors since December 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.

Harry Haralambus
Mr. Haralambus has served on the Company’s Board of Directors since May 2007. Mr. Haralambus is currently President of the Lambus Group, which specializes in international consulting, distribution and licensing for apparel products. Mr. Haralambus has in the past been associated with such high-end brands as Joe’s Jeans, Earl Jean, Guess, Kate Spade and Ralph Lauren. He also manages a group of privately held companies related to the apparel industry, accessories, cosmetics and perfume, real estate, licenses and franchises. Mr. Haralambus is a board member of a number of privately held companies, including Simple Beauty UK Limited, The Lambus Corporation and American Rag Cie. He graduated from the University of Cape Town, South Africa with majors in business and law.

Leonard Hecht
Mr. Hecht has served on the Company’s Board of Directors since May 2007. Mr. Hecht brings over 45 years of management experience, primarily in turnarounds, acquisitions and divestitures, strategic planning and general management consulting. He is the Founder and President of Chrysalis Capital Group, an investment banking firm in Southern California. Prior to this, from 1987-1993, he was Managing Director of the Technology Assessment Group at Houlihan Lokey Howard & Zukin. Mr. Hecht has served as Vice Chairman and Chief Executive Officer of publicly-traded Quantech Electronics Corp. and was a Founding Principal of Xerox Development Corp. He began his career in 1961 at IBM Corporation and moved to investment banking in 1969 as a Vice President of Corporate Finance at Cantor Fitzgerald & Company and as a consultant. Mr. Hecht received a B.B.A. from City College of New York and attended New York University’s School of Law.

Kevin R. Keating, Director
Mr. Keating has served on the Company’s 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 Marine that was terminated effective as of the Closing.

Blueholdings Brands

Antik Denim

Los Angeles-based Antik Denim is a wholly owned subsidiary of Blue Holdings Incorporated, formed in 2004.

Antik Denim has quickly become a recognized premium denim brand in the U.S. and internationally. The manufacturing of the collections is distinguished by a craftsmanship and care reminiscent of a lost art. Each pair is individually decorated, chasing an era when things were made by hand. Exclusive Japanese, Italian and American fabrics are used for their quality and comfort.

Antik Denim is a favorite among style-conscious men and woman. The brand offers a complete wardrobe in addition to jeans, including vintage-styled T-shirts, bags, and belts. Red Carpet celebrities include: Johnny Depp, Kate Hudson, Cameron Diaz, Teri Hatcher, Julia Roberts, Hilary Duff, Lindsay Lohan, Ashlee Simpson, Nicole Richie, Paris Hilton, Eva Longoria, Jennifer Lopes, and Vince Vaughn.

The Antik Denim brand is fast expanding and opened it’s flagship store on Melrose Ave. in Hollywood August 19th 2005.

Antik Denim is destined to become the new American classic. Its not about denim: its about the pleasure of denim. Antik Denim’s comfortable fit, premium material, and an attention to details has raised the bar.

Taverniti

Jimmy Taverniti redefined the influence of “American Vintage Style” in Europe during the 1980’s. Jimmy interpreted this signature style fusing sophisticated fabrications with intricate attention to detailing and construction.

“I love what is worn and weathered” says Jimmy. His passion for vintage styling drives him to create and experiment with new wash techniques as well as dye processes. From the beginning, Jimmy strongly believed that the look and feel Vintage Fashion would continue to influence modern sportswear and define a relaxed, yet elegant lifestyle. He was right. Jimmy is one of the first contemporary designers to refine this naturally worn and chic look.

All of the fabrics Jimmy uses are carefully analyzed before being integrated into his line. Silk, denim and leather are among his favorites. Indigo dye, natural pigments, and random discoloration are some of the effects that have been pioneered by Jimmy for the Taverniti collection.

In 2004, Jimmy and his long-time friend Paul Guez (founder of Sasson Jeans) joined forces to launch “Taverniti So Jeans”. This exclusive denim collection gives Jimmy the opportunity to apply his vintage expertise to a purely contemporary jeans line.

Jimmy’s team continue to develop new wash treatments and fits, using the finest premium denim for the jeans collection. Jimmy has rounded out the Taverniti So collection with tops and outerwear made from sensuous knits and striking wovens. The fabrics are sourced around the USA, and many are from Japan and Europe. The styling is “vintage chic”. Each piece is intentionally finished with the worn “patina”. Casual yet elegant, Taverniti So Jeans continues to evolve the collection this year with the heritage of an All-American vintage aesthetic.

Faith

Faith Connexion’s genesis is the story of mystical encounter between rational and irrational. Ilan Delouis feeds his clothing line with a transversal message, defined by his own lifeline and revolving about three key concepts: kindness, harmony, and Rock ‘n’ Roll.

The message of these two words, “Faith Connexion”, bears witness to Ilan’s strong hope and will to believe in a better world. Jennifer Lopez, Mariah Carey, Laetitia Casta, Axel Rose, Eva Longoria, Lindsay Lohan and other celebrities have been his hope’s standard-bearers by wearing his creations.

Faith Connexion is taking its’ part in the ever changing flow of modernity through a style that features a unique balance of sexy, chic, and Rock ‘n’ Roll details, both in feminine and masculine versions.

Within in the span of a few seasons, Faith Connexion has established itself as an international brand which is already considered a major player in the “Premium/luxury lifestyle” market; a new challenger in the world of luxury.

The first boutique has been inaugurated in Paris. Faith Connexion does not believe in a “just a product” concept. Faith Connexion is a world of meaning, a perception of life and a way of thinking expressed through fashion style.

Chart looks very good http://stockcharts.com/h-sc/ui?s=BLUE&p;=D&yr;=0&mn;=3&dy;=0&id;=p34707403399

http://www.dnrnews.com/site/article.php?id=1022

Rocky Road Ahead for Blue Holdings
BY DAVID LIPKE
11/19/2007
NEW YORK — A year and a half ago, Paul Guez, chairman of Blue Holdings, was riding the denim trend for all it was worth. His trendy Antik Denim and Taverniti So brands were in high demand, he announced plans to acquire the 24-door Up Against The Wall retail chain and promised to nearly triple its size, and he celebrated the company’s listing on the Nasdaq exchange by ringing the opening bell at its headquarters in Times Square.

Since then, however, the business fortunes of L.A.-based Blue Holdings have taken a swift turn for the worse—illustrating the challenges of navigating a maturing premium denim market in which a few top brands have consolidated their positions. Blue Holdings’ deal for Up Against The Wall fell apart as the denim maker could not raise financing. More urgently, Blue Holdings’ sales and earnings—along with its stock price—have tumbled badly in the past year, due to poor product assortments, late deliveries and cleaner jeans trends that overtook Antik Denim’s heavily embellished styles.

For the first nine months of this year, Blue Holdings’ sales slid to $26.3 million, down from $41.6 million in the year-ago period. The company posted a net loss of $3.8 million in the first nine months of this year, compared to net income of $2 million in the same 2006 period.

For the most recent third quarter, ended Sept. 30, the company lost $3.9 million, compared to a loss of $420,860 in the year-ago quarter, as net sales declined 35 percent to $9.5 million.

Since 2006, share prices in Blue Holdings have crumbled from over $6 to about 67 cents last Thursday. Last week, Nasdaq sent the company a warning that it will be delisted unless it can get its stock price above $1 for 10 consecutive trading days.

“The fundamental issue is the company tried to do too much—run three brands, retail stores, line extensions—without the management depth or systems to handle this complex of a task,” said Eric Beder, senior vice-president at investment bank Brean Murray, Carret & Co. “As such, operationally the company imploded, and management is still picking up the pieces and fixing the basic model.”

Asked what Blue Holdings’ prospects may be against larger, better-financed and more recognizable brands like VF Corp.’s 7 For All Mankind, True Religion Apparel, Rock & Republic, Levi’s Capital E and Citizens of Humanity, Beder noted: “We believe Blue Holdings has some unique brands that still have a following. There is room for the company in the marketplace, but the window is closing. Management has to stabilize the company and set the stage for survival first, and then growth. Blue Holdings is in a life-and-death struggle.”

Company founder Guez clearly recognized that fact when he stepped down from the CEO position in July and brought in Glenn Palmer to fill that role. Palmer was previously CEO and president of Rafaella Apparel Group (owned by Cerberus Capital Management), and prior to that held the same position at outerwear maker Amerex Group.

“We like Glenn a lot. He has turnaround experience and he is a very bottom-line, no-nonsense kind of guy. If anyone can turn this company, he can,” said Beder.

Part2

To increase sales, Palmer has decided to focus on growing Antik Denim—Blue Holdings’ largest business—in the department store channel, rather than in the brand’s customary high-end specialty store base. For spring ’08, Antik Denim will begin selling at Macy’s East and Dillard’s doors for the first time. Palmer believes the Macy’s business will reach $5 million within a year. The jeans will be priced from $158 to $198 at retail, down from the $200 to over $300 that were the former retail prices.

“The whole premium market has come down, and you need to be priced according to the market you’re retailing in,” pointed out Palmer.

While the move may alienate tastemaking specialty boutiques, Beder believes it’s a smart initiative considering Blue Holdings’ financial position. “Right now is not the time for management to overlook any potential revenue-generating opportunities,” he said.

Additionally, Palmer is refocusing Antik Denim and Taverniti So on core products and moving away from the fashion-heavy looks the brands were known for. The company is also implementing EDI replenishment systems for its core styles at department stores.

“The denim market became cluttered with a lot of players, and the ones that are succeeding are ones with established core businesses, rather than the pure fashion players,” said Palmer. “Retailers have viewed Antik and Taverniti as fashion, and now we have to build our core offerings.”
To that same end, Blue Holdings is relaunching its Yanuk brand as a non-premium denim and sportswear range for fall ’08, with retail prices ranging from $89 to $125. The company hopes to reach sales of $3 million to $4 million in the first season.

The company’s overseas sales have mirrored weakness domestically, with international sales contributing 20.9 percent of revenue in the first three quarters of 2007, versus 30 percent a year ago. To jump-start that business, the company recently signed a new three-year Canada license for Antik Denim, is in negotiations for a Japan license for Yanuk, and is close to announcing deals for Taverniti So in England, the Far East and the Middle East, according to Palmer.

To cut costs, Blue Holdings has eliminated $2.4 million in annual payroll expenses, or over 35 jobs, since Palmer joined the company. “The cuts came from across the company. We are right-sizing; there was a lot of fat,” he noted bluntly.

One person to exit was Scott Drake, president of sales and COO, who left the company on Sept. 28, after just six months on the job. Drake is a 25-year veteran of the apparel industry, previously holding top positions with denim makers Blue Pen Inc. and Visual Concept Image.

The company also shuttered its nascent Life & Death brand and is reexamining its deal to launch a label with Will.i.am of the music group Black Eyed Peas. However, the company has still not decided whether or not to close its two freestanding stores in L.A. and San Francisco, as it previously announced it would.

To increase cash liquidity, Palmer is reducing the company’s fabric inventory by 200,000 yards and its finished-goods inventory by up to 110,000 units. This should generate about $2.5 million in cash.
During the past quarter, about 27 percent of sales were sold at steep markdowns to off-price channels in a strategic effort to clean out inventory, which caused gross profit margins to decline to 10 percent, down from 30 percent in the year-ago quarter. Going forward, the company hopes margins will reach 50 percent or more.

Despite the daunting challenges facing Blue Holdings, Palmer is confident the company can regain its footing. Its top-priced Taverniti So line continues to sell well at retailers like Saks Fifth Avenue, Neiman Marcus, H. Lorenzo and Atrium, he noted.

“2007 is a transitional year,” he added. “We have streamlined the business around our core brands and positioned the company for sustainable growth.”

For the current fourth quarter, Blue Holdings expects to break even on sales of $7.5 million and is forecasting a return to profitability in the first quarter of 2008.

Beder even has a “buy” rating on the stock, with a $2 price target. “The stock is essentially a lottery ticket at under $1,” he explained. “We believe any type of positive momentum would be enough to drive the shares upward.”

LEVEL 2 hitting up