UNITED STATES
                             WASHINGTON, D.C. 20549


                                    FORM 8-K
                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                 Date of Report:

                        (Date of earliest event reported)

                                  JULY 8, 2008


                               BLUE HOLDINGS, INC.
               (Exact name of registrant as specified in charter)

         (State or other Jurisdiction of Incorporation or Organization)

       000-33297                                          88-0450923
(Commission File Number)                       (IRS Employer Identification No.)

                    5804 E. SLAUSON AVE., COMMERCE, CA 90040
                         (Address of Principal Executive
                              Offices and zip code)

                                (323)  725-5555
              (Registrant's telephone number, including area code)

          (Former Name or Former Address, if Changed Since Last Report)

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing  obligation  of  registrant  under any of the
following provisions:

[_]      Written  communications  pursuant to Rule 425 under the  Securities Act
         (17 CFR 230.425)

[_]      Soliciting  material  pursuant to Rule 14a-12(b) under the Exchange Act
         (17 CFR 240.14a-12(b))

[_]      Pre-commencement  communications  pursuant to Rule  14d-2(b)  under the
         Exchange Act (17 CFR 240.14d-2(b))

[_]      Pre-commencement  communications  pursuant to Rule  13e-4(c)  under the
         Exchange Act (17 CFR 240.13e-4(c))



         Information  included  in this  Current  Report on Form 8-K may contain
statements which  constitute  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934,  both as amended.  Those  statements  include  statements
regarding our intent, belief or current expectations.  Prospective investors are
cautioned that any such forward-looking  statements are not guarantees of future
performance  and involve risks and  uncertainties,  and that actual  results may
differ materially from those projected in the forward-looking  statements.  Such
risks and uncertainties  include,  among other things, our ability to face stiff
competition,  our  ability to  profitably  manage our  business,  the  financial
strength of our  customers,  the  continued  acceptance  of our existing and new
products by our existing and new customers,  the risks of foreign manufacturing,
competitive  and  economic  factors in the  textile  and  apparel  markets,  the
availability  of raw materials,  the ability to manage  growth,  weather-related
delays,  dependence  on  key  personnel,  general  economic  conditions,  global
manufacturing costs and restrictions, and other risks and uncertainties that may
be  detailed  herein,  or from time to time in our other  filings  made with the
Securities and Exchange Commission.


         On July 8,  2008,  the Audit  Committee  of the  Registrant's  Board of
Directors  (the "Audit  Committee")  determined  that the  Registrant's  audited
financial  statements  for the year ended  December 31, 2007,  and the unaudited
financial  statements  for the fiscal  quarters  ended June 30 and September 30,
2007, need to be restated due to accounting  errors in the Registrant's  related
party accounts and should no longer be relied upon.

         From time to time Paul Guez, the Registrant's Chairman of the Board and
majority  stockholder,  and his  spouse  Elizabeth  Guez  made  advances  to the
Registrant  to  support  its  working   capital   needs.   These  advances  were
non-interest bearing and unsecured,  with no formal terms of repayment.  On July
1, 2006,  the  Registrant  converted  these  advances  to a line of credit in an
agreement  with Mr. Guez which allows the  Registrant to borrow from him up to a
maximum  of  $3,000,000  at an  interest  rate of 6% per annum  (the  "Revolving
Line").  The  Registrant  may repay the  advances in full or in part at any time
until the Revolving Line expires and repayment is required on December 31, 2008.
In early May 2008,  Mr.  Guez  informed  the  Registrant  of claims  for sums he
believed  were due and owing to him  pursuant to advances  made to and  payments
made on behalf of the Registrant  during fiscal 2007 that were separate from the
Revolving Line.

         In  light  of  this  dispute  on May  19,  2008,  the  Audit  Committee
determined that the Registrant's audited financial statements for the year ended
December 31, 2007,  and the unaudited  financial  statements  for certain of the
fiscal  quarters  therein,  may need to be restated due to potential  accounting
errors in the Registrant's related party accounts. The Audit Committee commenced
a review of these  potential  errors  and  instructed  management  to review the
Registrant's books and records to obtain a summary of transactions  recorded and
amounts owed per such records.  These investigations  revealed accounting errors
in the  Registrant's  related party  accounts  pertaining to royalties and other
liabilities  that  were  written  off in error  and  inaccurate  entries  in the
Registrant's  related  party  general  ledger.  The  Registrant  has agreed to a
settlement proposal with Mr. Guez.


         The Registrant's management has also reviewed the Registrant's deferred
tax asset and as a result,  in accordance with SFAS 109,  "Accounting for Income
Taxes," has  informed the Audit  Committee  that a valuation  allowance  must be
established against the Registrant's remaining unreserved deferred tax asset.

         The precise effect of any potential  restatement on the  aforementioned
financial  statements is currently  unknown.  The  Registrant's  Chief Financial
Officer  has  discussed  with the  Registrant's  registered  independent  public
accounting firm the matters disclosed in this report.



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

                                   BLUE HOLDINGS, INC.

Date:  July 14, 2008               By:  /S/ ERIC HOHL
                                        Eric Hohl
                                        Chief Financial Officer