Blue Gem Enterprise - FORM 10-Q

Attached files

file	filename
EX-31 - Blue Gem Enterprise	ex31.htm
EX-32 - Blue Gem Enterprise	ex32.htm
EX-10.9 - Blue Gem Enterprise	ex10-9.htm
EX-10.11 - Blue Gem Enterprise	ex10-11.htm
EX-10.12 - Blue Gem Enterprise	ex10-12.htm
EX-10.10 - Blue Gem Enterprise	ex10-10.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended August 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 333-153441

BLUE GEM ENTERPRISE, INC.

(Exact name of small business issuer as specified in its charter)

Nevada		2080		20-8043372
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

12805 N. W. 42 Ave.

Opa-locka, Florida, 33054

(Address of principal executive offices)

Telephone: (305) 688-8334

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

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

Yes o No x

As of October 14, 2010, the issuer had 156,960,587 shares of common stock, $0.001 par value per share outstanding, which includes 20,000,000 shares which the Registrant has agreed to issue in connection with the Exchange, described and defined below, 2,000,000 shares sold in May 2010 and 600,000 shares sold in September 2010, which have not been physically issued to date.

TABLE OF CONTENTS

	Page
PART I.
Item 1. Financial Statements	F-1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3. Quantitative and Qualitative Disclosures About Market Risks	12

Item 4. Controls and Procedures	12

PART II.
Item 1. Legal Proceedings	15

Item 1A. Risk Factors	15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3. Defaults Upon Senior Securities	26

Item 4. (Removed and Reserved)	26

Item 5. Other Information	26

Item 6. Exhibits	26

SIGNATURES	27

ITEM 1. FINANCIAL STATEMENTS

BLUE GEM ENTERPRISE, INC.
Condensed Balance Sheets

	August 31, 2010			May 31, 2010

ASSETS

CURRENT ASSETS
Cash and equivalents	$	8,988		$	-
Accounts receivable, net		53,794			71,106
Inventory		155,621			-
Other current assets		895,881			190,000
TOTAL CURRENT ASSETS		1,114,284			261,106

PROPERTY AND EQUIPMENT, NET		3,141			-

OTHER ASSETS		5,000			-

TOTAL ASSETS	$	1,122,425		$	261,106

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	228,838		$	83,617
Accrued liabilities		78,913			40,000
Notes payable to related parties		90,000			-
Due to affiliate		28,120			35,811
TOTAL CURRENT LIABILITIES		425,871			159,428

TOTAL LIABILITIES		425,871			159,428

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
500,000,000 shares of common stock authorized at $0.001 par value
135,610,087 and 121,911,871 shares issued and outstanding at
August 31, 2010 and May 31, 2010, respectively		135,610			121,912
Additional paid-in capital		2,080,850			1,052,588
Accumulated deficit		(542,033	)		(230,474	)
Contra equity, due from affiliate		(977,873	)		(842,348	)
TOTAL STOCKHOLDERS' EQUITY		696,554			101,678

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,122,425		$	261,106
The accompanying notes are an integral part of these condensed financial statements.

F-1

BLUE GEM ENTERPRISE, INC.
Condensed Statements of Operations

For The Three-Months Ended August 31,	2010			2009

NET SALES	$	718,932		$	-

COSTS OF SALES		700,879			-

GROSS PROFIT		18,053			-

OPERATING EXPENSES
Accounting fees		28,721			-
Bad debt		180,788			-
Computer expense		3,388			-
Consulting		3,500			-
Investor relations		17,000			-
Office expense		12,229			6,759
Payroll		8,076			-
Professional fees		53,895			-
Rent		22,015			-
TOTAL OPERATING EXPENSES		329,612			6,759

NET LOSS	$	(311,559	)	$	(6,759	)

Basic loss per share	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding (post split)		129,000,000			107,236,852
The accompanying notes are an integral part of these condensed financial statements.

F-2

BLUE GEM ENTERPRISE, INC.
Condensed Statements of Changes in Stockholders' Equity


	Shares of
	Common Stock						Additional						Contra Equity,			Total
	Issued and			Common			Paid-in			Accumulated			Due From			Stockholders'
$0.001 par value; 500,000,000 shares authorized	Outstanding			Stock			Capital			Deficit			Affiliate			Equity
BALANCE AT MAY 31, 2009		6,520,000		$	6,520		$	56,480		$	(55,182	)	$			$	7,818

STOCK SPLIT AND REVALUATION OF PAR VALUE		100,716,863			100,717			(100,717	)								-

SALE OF COMMON STOCK		12,625,008			12,625			1,037,375			-						1,050,000

ISSUANCE OF COMMON STOCK FOR SERVICES		2,050,000			2,050			59,450									61,500

LOAN TO AFFILIATE														(842,348	)		(842,348	)

NET LOSS					-			-			(175,292	)					(175,292	)

BALANCE AT MAY 31, 2010		121,911,871			121,912			1,052,588			(230,474	)		(842,348	)		101,678

SALE OF COMMON STOCK		14,448,216			14,448			1,087,512			-						1,101,960

RESCISSION OF COMMON STOCK		(750,000	)		(750	)		(59,250	)								(60,000	)

LOAN TO AFFILIATE														(135,525	)		(135,525	)

NET LOSS					-			-			(311,559	)					(311,559	)

BALANCE AT AUGUST 31, 2010		135,610,087		$	135,610		$	2,080,850		$	(542,033	)	$	(977,873	)	$	696,554
The accompanying notes are an integral part of these condensed financial statements.

F-3

BLUE GEM ENTERPRISE, INC.
Condensed Statements of Cash Flows

For The Three-Months Ended August 31,	2010			2009

Net loss	$	(311,559	)	$	(6,759	)

Adjustments to reconcile net loss to net cash
used for operating activities:
Changes in assets and liabilities:
Decrease in accounts receivable		17,312			-
Increase in inventory		(155,621	)		-
Increase in other current assets		(705,881	)		-
Increase in other assets		(5,000	)		-
Increase in accounts payable		145,221			-
Increase in accrued liabilities		38,913			-
NET CASH USED FOR OPERATING ACTIVITIES		(976,615	)		(6,759	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(3,141	)		-
NET CASH USED FOR INVESTING ACTIVITIES		(3,141	)		-

CASH FLOWS FROM FINANCING ACTIVITIES
Net advances to related parties		(143,216	)		-
Issuance of notes payable to related parties		90,000			-
Proceeds from sale of common stock		1,101,960			-
Rescission of common stock		(60,000	)		-
NET CASH PROVIDED BY FINANCING ACTIVITIES		988,744			-

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS		8,988			(6,759	)

CASH AND EQUIVALENTS - BEGINNING OF THE PERIOD		-			7,818

CASH AND EQUIVALENTS - END OF THE PERIOD	$	8,988		$	1,059
The accompanying notes are an integral part of these condensed financial statements.

F-4

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Business

Blue Gem Enterprise, Inc. (the "Company") was incorporated in the State of Nevada on November 28, 2006, and re-domiciled in April, 2010 to a Florida corporation (changing its then name from Blue Gem Enterprise to Blue Gem Enterprise, Inc., to be consistent with Florida law). The Company originally operated as a mineral exploration company. Pursuant to a stock purchase agreement dated October 15, 2009, a change of control of the Company occurred, and the Company changed its operations and became a full service Direct Store Beverage Distribution company. The Company plans to manage and distribute select allied brands on an exclusive basis pursuant to exclusive agreements with manufacturers of non-alcoholic beverages.

The Company was previously in the development stage and became an operating company during the year ended May 31, 2010, since the Company began earning revenues in May, 2010.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations have been reflected herein.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company uses estimates when accounting for depreciation, inventory obsolescence reserves, and allowance for bad debts.

Cash and Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at date of purchase to be cash equivalents.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from the outstanding balances. Delinquent amounts that are outstanding after management has conducted reasonable collection efforts are written off through a charge to operations in the current period. An allowance for bad debts is made based on management’s estimates.

Inventory

Inventory consists principally of finished goods and is valued at the lower of cost or market, with cost determined on the average cost basis and market determined based on the net realizable value.

Property and Equipment

Property and equipment is recorded at cost. Expenditures for maintenance and repairs are charged against operations in the current period. Renewals and betterments that materially extend the life of the assets are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

F-5

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Long-lived Assets

Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use and sale of these assets. When any such impairment exists, the related assets will be written down to fair value. The Company did not recognize impairment during the current period.

Revenue and Cost Recognition

The Company recognizes revenues upon customers’ receipt of merchandise. Costs are expensed when incurred. The Company expenses freight costs as incurred during the current period.

Concentration of Credit Risk

The Company maintains cash balances at one bank. Accounts at this institution are insured by the Federal Deposit Insurance Corporation for up to $250,000. Balances, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and equivalents. At August 31, 2010 and May 31, 2010, the Company did not have any balances in excess of federally insured limits.

Stock-Based Compensation

The Company follows ASC 718-10, "Stock Compensation", which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options.

Income Taxes

The Company has adopted the provisions of ASC 740-10-50, "Accounting for Uncertainty in Income Taxes," which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertain income tax positions. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken on an income tax return. ASC 740-10-50 presents a two-step process for evaluating a tax position. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, based on the technical merits of the position. The second step is to measure the benefit to be recorded from tax positions that meet the more-likely-than-not recognition threshold, by determining the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement, and recognizing that amount in the financial statements. ASC 740-10-50 is effective for fiscal years beginning after December 15, 2008, or in fiscal 2009 for the Company. Adoption of the interpretation has had no financial impact on the Company for the three-month period ended August 31, 2010 or the year ended May 31, 2010.

F-6

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss Per Share

In accordance with ASC 260 – “Earnings Per Share”, basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

NOTE 2. ACCOUNTS RECEIVABLE

Account receivable consisted of the following:


	August 31, 2010		May 31, 2010

Accounts receivable	$	53,794	$	71,106
Less allowance for bad debts		-		-

	$	53,794	$	71,106

NOTE 3. OTHER CURRENT ASSETS

At August 31, 2010 and May 31, 2010, the Company had prepaid $895,881 and $190,000, respectively for inventory of the 20 ounce and 32 ounce sizes of Title sports drink for which product had not yet been received.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment at August 31, 2010 consisted of the following:

Furniture and equipment	$	3,141
Less accumulated depreciation		-

	$	3,141

There was no property and equipment at May 31, 2010.

NOTE 5. NOTES PAYABLE

In August 2010, the Company was advanced a total of $90,000 from three related parties ($30,000 each), who are greater than 5% stockholders of the Company. The loans bear interest at 8% per annum, are unsecured, and mature on December 31, 2010.

F-7

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 6. STOCKHOLDERS' EQUITY

Change in Control

On July 29, 2009 the Company entered into an agreement with Belmont Partners, LLC (“Belmont”) pursuant to which Belmont acquired 82,236,850 shares of the Company's common stock from certain stockholders of the Company.

Stock Split

In September 2009, the Directors of the Company approved a 16.44737 for 1 forward stock split (the “Forward Split”) of the Company’s issued and outstanding common stock and an increase in its authorized shares of common stock to 200,000,000 shares of common stock, $0.001 par value per share by written consent in lieu of a special meeting in accordance with the Nevada Corporation Law. The Financial Industry Regulatory Authority FINRA declared its Forward Split effective with a record date of September 18, 2009, and a payable date of September 30, 2009. Unless otherwise stated, the Forward Split has been retroactively reflected throughout this report.

Change in Control

On October 15, 2009 (the “Closing Date”), Allan Sepe acquired a majority of the issued and outstanding common stock of the Company from Belmont, in accordance with a common stock purchase agreement (the “Stock Purchase Agreement”) by and among Allan Sepe, Belmont, and the Company. On the Closing Date, pursuant to the terms of the Stock Purchase Agreement, Allan Sepe acquired 82,236,850 shares of the Company’s issued and outstanding common stock representing approximately 76.68% of the Company’s then issued and outstanding shares of common stock, for a total purchase price of $235,000. Effective October 15, 2009, Allan Sepe was appointed as the Company's President, Chief Executive Officer, and Chairman of the Board.

Plan of Conversion

In April 2010, the Company entered into a Plan of Conversion to re-domicile from a Nevada corporation to a Florida corporation (the “Conversion”). Pursuant to and in connection with the Conversion, the Company changed its name to Blue Gem Enterprise, Inc. in order to comply with Florida law. The Company also adopted new Bylaws and authorized the Board of Directors to issue up to 10,000,000 shares of its $0.001 par value preferred stock, with such designations, rights and privileges as the Board determines in their sole determination from time to time. The Company did not effect any other material changes to its corporate governance documents other than as described above in connection with the Conversion, which was effective with the Secretary of State of Florida on June 9, 2010, and the Nevada Secretary of State on June 17, 2010.

Sale of Common Stock

During the three-month period ended August 31, 2010, the Company entered into Securities Purchase Agreements with nine “accredited investors” and sold such investors an aggregate of 14,448,216 shares of its restricted common stock in consideration for $1,101,960 (between $0.065 and $0.08 per share), which funds have largely been spent in connection with the prepayment of inventory as is further described in Note 8, related party transactions.

F-8

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 6. STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock Rights

Holders of shares of common stock are entitled to one vote per share on each matter submitted to a vote of shareholders. In the event of liquidation, holders of common stock are entitled to share pro rata in the distribution of assets remaining after payment of liabilities, if any. Holders of common stock have no cumulative voting rights, and, accordingly, the holders of a majority of the outstanding shares have the ability to elect directors. Holders of common stock have no preemptive or other rights to subscribe for shares. Holders of common stock are entitled to such dividends as may be declared by the Board out of funds legally available therefore. The outstanding shares of common stock are validly issued, fully paid and non-assessable.

Increase in Authorized Shares

In August, 2010, Allan Sepe, the majority shareholder of the Company and the Board of Directors approved an increase in the number of its authorized shares of common stock of the Company to 500,000,000, while keeping the par value at $0.001 per share.

Equity Compensation Plans

The Company does not have any equity compensation plans in place, whether approved by the shareholders or not.

Loss Per Share

For the three-month periods ended August 31, 2010 and 2009, the Company had no stock or stock equivalents that were anti-dilutive and excluded in the loss per share computation.

NOTE 7.

INCOME TAXES

The provision for income taxes reported differs from the amounts computed by applying aggregate income tax rates for the loss before tax provision due to the following:


	2010			2009
Net loss before income taxes	$	311,559		$	6,759
Maximum statutory tax rate		x 34%			x 34%
Estimated recovery of income taxes		105,900			2,300
Valuation allowance		( 105,900	)		( 2,300	)

	$	-		$	-

At August 31, 2010, the Company had net operating loss carry-forwards of approximately $540,000 which are available to reduce taxable income in future taxation years and expire at various times through 2030.

The potential future tax benefits of these expenses and losses carried-forward have not been reflected in these financial statements due to the uncertainty regarding their ultimate realization.

F-9

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 7.

INCOME TAXES (CONTINUED)

The Company has not filed income tax returns since inception in the United States and Canada. Both taxing authorities prescribed penalties for failing to file certain tax returns and supplemental disclosures. Upon filing there could be penalties and interest assessed. Such penalties vary by jurisdiction and by assessing practices and authorities. As the Company has incurred losses since inception there would be no material known or anticipated exposure to penalties for income tax liability. However, certain jurisdictions may assess penalties failing to file returns and other disclosures and for failing to file other supplementary information associated with foreign ownership, debt and equity positions. Inherent uncertainties arise over tax positions taken with respect to transfer pricing, related party transactions, tax credits and tax based incentives. Management has considered the likelihood and significance of possible penalties associated with its current and intended filing positions and has determined, based on their assessment, that such penalties, if any, would not be expected to be material.

NOTE 8.

RELATED PARTY TRANSACTIONS

The Company is related to several entities by virtue of common ownership and control. These entities buy and sell inventory with each other, borrow funds and repay advances with each other, sublease office space from each other, and share overhead.

Title Beverage Distribution, Inc.

Prior to the closing of the Exchange (defined below), the Company was related by common ownership to Title Beverage Distribution, Inc. (“Title”), which became a wholly-owned subsidiary of the Company as a result of the Exchange. Allan Sepe, an 80% stockholder of Title prior to the Exchange, acquired 76.68% of the outstanding shares of Blue Gem Enterprise, Inc. on October 15, 2009. Mr. Sepe serves as President and Chief Executive Officer of both the Company and Title. The Company had advanced $977,873 and $842,348 to Title as of August 31, 2010 and May 31, 2010, respectively, which has been reflected on the condensed balance sheets as a reduction to stockholders' equity. No repayment terms for the advance had been scheduled.

The Electric Beverage Company, Inc.

The majority stockholder of The Electric Beverage Company, Inc. (“EBC”) is Kevin Sepe. He is the brother of Allan Sepe, the majority stockholder of the Company. The Company has advanced funds to EBC for the prepayment of inventory. The balance of these prepayments was $895,791 and $190,000 at August 31, 2010 and May 31, 2010, respectively.

Share Exchange Agreement

On December 8, 2009, the Company entered into a letter of intent with Title to enter into a merger agreement between the parties. However, the parties subsequently mutually agreed to instead affect a share exchange. On August 13, 2010, the Company, Title, and the stockholders of Title entered into a Share Exchange Agreement (the “Exchange”). Pursuant to the Exchange, the majority stockholders of Title agreed to exchange all of their shares of Title on a one-for-one basis for shares of common stock of the Company; provided that in lieu of the shares of the Company’s common stock which would have otherwise been due to Mr. Sepe, Mr. Sepe agreed to accept 1,000 shares of the Company’s Series A Preferred Stock (described in greater detail in Note 11). The closing of the Exchange occurred upon the completion of the audit of Title, which the Company finalized on September 14, 2010. As a result of the Exchange, Title became a wholly-owned subsidiary of the Company.

F-10

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 8.

RELATED PARTY TRANSACTIONS (CONTINUED)

Distribution Agreement

Title and EBC previously entered into an exclusive distribution agreement for the distribution of Title Sports Drink. The agreement, which appointed Title as the sole distributor of Title Sports Drink was for a term of three years with an automatic three year renewal, unless either party provided notification of their intention to cancel. The agreement called for increasing annual minimum purchase obligations and could be terminated by EBC in the event that these minimum purchases are not met. For the year ended May 31, 2010, Title did not comply with its minimum purchase obligations. In response to this violation, in August, 2010, EBC agreed to amend the original agreement and waive the first year limits in exchange for consideration of $100,000. In addition, the Company also made an aggregate of $1,015,000 of pre-payments of product from May through July 2010, on behalf of Title and in anticipation of the Exchange and $700,000 in advances to Title, which advances were subsequently advanced to EBC, which advances to Title will be forgiven by the Company in connection with and pursuant to the Exchange. The amended and restated agreement (the "Amended Distribution Agreement") extends the exclusive distribution agreement to a six and a half-year term, while reducing the annual minimum purchase obligations in each of the remaining years. The amended and restated agreement also provides for the right of first refusal on any new products developed by EBC during the duration of the amended agreement. In the event Title’s purchases of the Title Sports Drink do not, in any given year, equal or exceed the minimum purchase requirements to maintain exclusivity, Title may, within ten business days following the expiration of such year, (a) remit to EBC in immediately available funds an amount equal to the difference between Title's purchases for the year and the minimum purchase requirement, as documented in writing and provided to Title prior to the due date of such payments, or (b) at Title's option, credit the amount of the exclusivity extension fee against any remaining balance due in connection with the pre-payment.

During the year ended May 31, 2010, EBC advanced $35,811 for various legal and investor relations expenses on behalf of the Company. The advance is non-interest bearing and payable upon demand. For the three-month period ended August 31, 2010, the Company repaid EBC $32,691 for amounts due as of May 31, 2010 and further advanced EBC additional funds of $25,000.

A summary of balances with related parties as of August 31, 2010 and May 31, 2010 is as follows:

	August 31, 2010		May 31, 2010
Due from Title	$	977,873	$	842,348
Due from EBC for prepaid inventory	$	895,791	$	190,000
Due to EBC for advances	$	28,120	$	35,811

A summary of transactions with these related parties for the three-month period ended August 31, 2010 is as follows:

Purchases from EBC	$	705,791
Sublease income from Title	$	3,816
Advances to Title	$	1,877,887
Repayments from Title	$	1,742,362
Borrowings from EBC	$	25,000
Repayments to EBC	$	32,691

There were no related party transactions for the three-month period ended August 31, 2009.

F-11

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 9.

CONCENTRATIONS

One customer accounted for approximately 57% and 63% of accounts receivable at August 31, 2010 and May 31, 2010, respectively. Additionally, two customers accounted for approximately 68% of the net sales for the three-month period ended August 31, 2010. Sales of dairy products accounted for approximately 93% of the Company’s net sales for the three-month period ended August 31, 2010. The Company purchased 100% of its dairy products from one vendor during the three-month period ended August 31, 2010. The Company did not have any sales or purchases during the three-month period ended August 31, 2009, as it was in the development stage.

NOTE 10.

COMMITMENTS AND CONTINGENCIES

In January 2010, the Company entered into a Consulting Agreement with EBC and Taylor, Inc., whose President is Lawrence Taylor (“Taylor”), pursuant to which Taylor agreed to perform certain consulting services for the Company and EBC, including making six (6) personal appearances at functions of EBC and/or the Company. The Consulting Agreement has a one year term, and is automatically renewed for additional one year terms in the event the agreement is not terminated by either party at least 30 days prior to the expiration of the term. The Company agreed to issue Taylor 1,000,000 restricted shares of common stock and EBC agreed to issue Taylor 250,000 shares of its common stock.

In May 2010, the Company began distributing milk in the South Florida area through an understanding with American Fruit & Produce Corp. (“AFP”). Additionally, in July 2010, the Company began distributing produce (including watermelon and other fruit) through a verbal agreement with AFP. The Company currently distributes produce, milk, other dairy products, and fruit through verbal agreements with AFP. In connection with the understandings, the Company purchases the products directly from AFP and distributes them to certain stores throughout Florida.

On January 14, 2010, the Company, as lessor, entered into a sublease agreement with Title, in connection with the lease of an office and warehouse facility in Apopka, Florida. The terms of the lease are month-to-month and may be terminated with a minimum 30-day notification. The lease has a monthly rental payment of $1,200 plus sales tax. Rent expense, net of sublease rental income, for the three-month periods ended August 31, 2010 and 2009, was $0 and $0, respectively.

In July 2010, The Company entered into an Investment Banking Agreement with Ladenburg Thalmann & Co. (“Ladenburg”). Pursuant to the agreement, Ladenburg agreed to serve as its exclusive financial advisor in connection with among other things, a financing transaction, merger, consolidation or combination. The agreement has a term of 18 months, provided that after 12 months either Ladenburg or the Company may terminate the agreement with thirty days prior written notice. In the event the agreement is not terminated by either party, the agreement automatically renews for additional one year periods. In consideration for Ladenburg agreeing to the terms of the agreement, the Company agreed to grant it a non-refundable upfront fee of 5-year warrants to purchase 1,660,000 shares of its common stock at an exercise price of $0.14 per share, which warrants contain an anti-dilution provision, a cashless exercise right and piggyback registration rights. The Company also agreed to pay Ladenburg a monthly fee of $10,000 for the first three months of the agreement and a fee of $15,000 and warrants to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.14 per share for each additional month the agreement is in place beginning on the fourth month of the agreement. The Company is currently in discussions with Ladenburg regarding the modification of the Investment Banking Agreement, and ceased making payments in August 2010 and has not granted warrants to Ladenburg in anticipation of such modification. No amounts have been accrued as of August 31, 2010 as it is expected that the contract will be terminated and no additional amounts will be due.

F-12

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 10.

COMMITMENTS AND CONTINGENCIES (CONTINUED)

In May 2010, the Company entered into a lease with an unrelated third-party for refrigerated warehouse space in West Palm Beach, Florida. The lease is for a period of seven months with monthly rent for the leased space of $4,000 per month.

In July 2010, the Company began leasing office space from AFP in Opa-Locka, Florida, under a verbal agreement, which is currently its principal business location. The terms of the lease are month-to-month with monthly rent for the leased space of $1,484 per month.

In August 2010, the Company entered into four leases for heavy duty cargo vans. The leases are for a period of 24 months with a combined monthly payment of $2,592. The leases are treated as operating leases as they do not qualify as capital leases.

Minimum future rental payments under non-cancelable operating leases having remaining terms in excess of one year and in the aggregate for years ending subsequent to August 31, 2010 are as follows:

2011	$	31,104
2012		28,512

	$	59,61

NOTE 11.

SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through October 15, 2010, the date the financial statements were issued.

In September 2010, the Company began leasing warehouse space from AFP in Opa-Locka, Florida, under a verbal agreement. The terms of the lease are month-to-month with monthly rent for the leased space of $1,365 per month.

On September 9, 2010, the Company was advanced $25,000 from a related party, who is the brother-in-law of Allan Sepe. The loan bears interest at the rate of 8% per annum, is unsecured, and matures on December 31, 2010.

On September 14, 2010, the Company, Title, and the stockholders of Title closed the Exchange.

In September 2010, 1,000 shares of Series A Preferred Stock were designated, and were subsequently issued to Allan Sepe, the Company’s Chief Executive Officer, Director and largest shareholder in connection with the Company’s entry into the Exchange. The Series A Preferred Stock is not entitled to any dividends, liquidation preference, conversion rights, or redemption rights. The Series A Preferred Stock does however have the right, voting as a separate class, at any annual or special meeting of shareholders to elect one director of the Company in the event the Company has three (3) or fewer Directors, or in the event the Company has five (5) or more Directors, such number of Directors as equal to the total number of Directors of the Company multiplied by 0.333 and rounded up to the nearest whole number. Additionally, the Series A Preferred Stock has the right to approve any Change of Control (as defined in such Series A Preferred Stock designation).

On September 22, 2010, the Company entered into a Securities Purchase Agreement with one "accredited investor" and sold such investor an aggregate of 600,000 shares of its restricted common stock in consideration for $30,000 ($0.05 per share).

F-13

BLUE GEM ENTERPRISE, INC.

Notes to Condensed Financial Statements

NOTE 11. SUBSEQUENT EVENTS (CONTINUED)

On September 28, 2010, October 1, 2010 and October 8, 2010, the Company was advanced $5,000, $8,000 and $20,000, respectively, from a related party, who is a more than 5% stockholder of the Company. The loans bear interest at 8% per annum and are payable on December 31, 2010.

NOTE 12. GOING CONCERN

As shown in the accompanying financial statements, the Company incurred a net loss of $311,559 and has used, rather than provided, cash in its operations for the three-months ended August 31, 2010. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The Company is currently seeking funding from outside investors. In the event no investors are secured, the Company will request that management provide the Company with temporary funding as they have done in the past. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

F-14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Portions of this Form 10-Q, including disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical fact contained in this Report on Form 10-Q, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” or “should,” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Quarterly Report on Form 10-Q, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to differ materially from those contained in any forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements, except as expressly required by law.

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Quarterly Report on Form 10-Q. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our statements to actual results or changed expectations. Unless otherwise stated, references in this Form 10-Q to “we”, the “Company,” “us” or “Blue Gem”, refer to Blue Gem Enterprise, Inc. and its wholly-owned subsidiary, Title Beverage Distribution, Inc. (“Title”). References in this Form 10-Q, unless another date is stated are to August 31, 2010.

Corporate History

On November 28, 2006, we were incorporated under the laws of the State of Nevada for the purpose of conducting mineral exploration activities.

On July 29, 2009 the Company entered into a material agreement with Belmont Partners, LLC (“Belmont”) pursuant to which Belmont acquired 82,236,850 shares of the Company's common stock from certain shareholders of the Company. The transaction was approved by both a board resolution dated July 23, 2009, and a majority of the Company's shareholders in a shareholder resolution dated the same day. Following the transaction, Belmont controlled approximately 76.69% of the Company's then outstanding capital stock.

In September 2009, the Directors of the Company approved a 16.44737 for 1 forward stock split (the “Forward Split”) of the Company’s issued and outstanding common stock and an increase in our authorized shares of common stock to 200,000,000 shares of common stock, $0.001 par value per share by written consent in lieu of a special meeting in accordance with the Nevada Corporation Law. FINRA declared our Forward Split effective with a record date of September 18, 2009, and a payable date of September 30, 2009. Unless otherwise stated, the Forward Split has been retroactively reflected throughout this report.

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On October 15, 2009 (the “Closing Date”), Allan Sepe acquired the majority of the issued and outstanding common stock of the Company, from Belmont, in accordance with a common stock purchase agreement (the “Stock Purchase Agreement”) by and among Allan Sepe, Belmont and the Company. On the Closing Date, pursuant to the terms of the Stock Purchase Agreement, Allan Sepe acquired eighty two million two hundred thirty-six thousand eight hundred fifty (82,236,850) shares of the Company’s issued and outstanding common stock representing approximately 76.68% of the Company’s then issued and outstanding shares of common stock, for a total purchase price of two hundred thirty-five thousand dollars ($235,000).

Effective October 15, 2009, Allan Sepe was appointed as the Company's President, Chief Executive Officer and Chairman of the Board.

On December 8, 2009, the Company entered into a letter of intent with Title Beverage Distribution, Inc. (“Title”) to enter into a merger agreement between the parties. However, we subsequently mutually agreed with Title to instead affect a share exchange. On or around August 13, 2010, we, Title and the shareholders of Title entered into a Share Exchange Agreement (the “Exchange”). Pursuant to the Exchange, the shareholders of Title, Allan Sepe, who is also the President of Title and our Chief Executive Officer and sole Director, who held 80,000,000 shares of common stock of Title prior to the Exchange; Robert Friedopfer, who held 10,000,000 shares of common stock of Title prior to the Exchange; and Ronny Halperin, who held 10,000,000 shares of common stock of Title prior to the Exchange (collectively the “Title Shareholders”) agreed to exchange all of their shares of Title on a one-for-one basis for shares of common stock of the Company; provided that in lieu of the shares of the Company’s common stock which would have otherwise been due to Mr. Sepe, Mr. Sepe agreed to accept 1,000 shares of the Company’s Series A Preferred Stock (as further described below). The closing of the Exchange occurred upon the completion of the audit of Title, which we finalized on September 14, 2010. As a result of the Exchange, Title became our wholly-owned subsidiary.

Upon closing of the Exchange, we ceased our status as a “shell company,” as defined in Rule 12b-2 under the Exchange Act. As a result, we will operate both our pre Exchange activities, which were minimal, and our wholly-owned subsidiary’s, Title’s, moving forward.

In April 2010, we entered into a Plan of Conversion to re-domicile from a Nevada corporation to a Florida corporation (the “Conversion”). The Conversion was approved by our sole Director and largest shareholder Allan Sepe (who also serves as our Chief Executive Officer). Pursuant to and in connection with the Conversion, we changed our name to Blue Gem Enterprise, Inc. in order to comply with Florida law. We also adopted new Bylaws and authorized the Board of Directors to issue up to 10,000,000 shares of our $0.001 par value preferred stock, with such designations, rights and privileges as the Board determines in their sole determination from time to time. We did not effect any other material changes to our corporate governance documents other than as described above in connection with the Conversion, which was effective with the Secretary of State of Florida on June 9, 2010, and the Nevada Secretary of State on June 17, 2010.

On or around August 9, 2010, the Board of Directors and the Company’s largest shareholder, Allan Sepe, who is also the Company’s Chief Executive Officer and sole Director, approved an increase in the number of authorized shares of common stock of the Company to 500,000,000 shares of common stock, while keeping the par value, $0.001 par value per share of the Company’s common stock the same. We filed Articles of Amendment with the Secretary of State of Florida to affect the increase in our authorized shares, which Articles of Amendment were effective on August 10, 2010.

In August 2010, the Board of Directors of the Company approved the designation of 1,000 shares of Series A Preferred Stock, which shares of preferred stock were designated in September 2010, and were subsequently issued to Allan Sepe, the Company’s Chief Executive Officer, Director and largest shareholder in connection with the Company’s entry into the Exchange (as described above).

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The Series A Preferred Stock is not entitled to any dividends, liquidation preference, conversion rights, or redemption rights. The Series A Preferred Stock does however have the right, voting as a separate class, at any annual or special meeting of shareholders to elect one director of the Company in the event the Company has three (3) or fewer Directors, or in the event the Company has five (5) or more directors, such number of Directors as equal to the total number of Directors of the Company multiplied by 0.333 and rounded up to the nearest whole number. For example, if the Company has five Directors, the Series A Preferred Stock, voting separately as a class has the right to appoint two Directors (5 x 0.333 = 1.655, rounded up to the nearest whole number is 2). Additionally, the Series A Preferred Stock has the right to approve any “Change of Control,” defined as (i) the adoption of a plan of merger or consolidation of the Company with any other individual, entity, or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the approval by the Board of Directors of the Company of an agreement providing for the sale or transfer (other than as security for obligations of the Company) of substantially all of the assets of the Company, or the Company taking action to affect such sale or transfer; or (iii) in the absence of a prior expression of approval by a majority of outstanding shares of the Series A Preferred Stock, the acquisition of more than 25% of the Company's voting capital stock by any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company).

No amendment to the Company’s Series A Stock shall be made while such Series A Stock is issued and outstanding to amend, alter or repeal the Articles of Incorporation or Bylaws of the Company to adversely effect the rights of the Series A Stock holders; authorize or issue any additional shares of preferred stock; or effect any reclassification of the Series A Stock unless a majority of the outstanding Series A Stock vote to approve such modification or amendment.

The Series A Preferred Stock and the rights associated therewith, could act to prevent or delay a change in control.

On or around August 13, 2010, we, Title, and the shareholders of Title entered into the Exchange, described in greater detail above, which Exchange closed on September 14, 2010.

Business Operations

Pursuant to the change in control of the Company affected in connection with the Stock Purchase Agreement, the Company changed its business plan from mineral exploration, to become a full service Direct Store Food and Beverage Distribution company. We expect to manage and distribute select allied brands like, Title Sports Drink (as described below), for food and beverage manufacturers, with whom we hope to enter into distribution agreements in the future.

Business Operations of Title

Title, our wholly-owned subsidiary as a result of the Exchange, is a full service Direct Store Food and Beverage Distribution company that competes in all areas of the non-alcohol beverage industry including; ice teas, juices, nutritional shakes, energy shots, sports drinks, selective food products, and more. Title’s current main distribution product is Title Sports Drink.

Title Sports Drink is owned and produced by The Electric Beverage Company, Inc. (“EBC”). The beneficial owner of EBC is Kevin Sepe, the brother of the Company’s Chief Executive Officer and largest shareholder, Allan Sepe, who also serves as Chief Executive Officer of Title, and performs services for EBC; provided however that he has ceased being paid by EBC effective August 2010. Additionally, the former Chief Executive Officer of EBC is Robert Friedopfer, a significant employee of the Company and greater than 5% shareholder of the Company.

Title Sports Drink is an all natural sports drink, with no artificial dyes or preservatives giving it what we believe is a unique selling proposition. Title Sports Drink, also called Title Run (which currently comes in three flavors, Berry, Optimal Orange and Lemon Frenzy). Additionally, as a result of the Distribution Agreement (described below), we have the right of first refusal to distribute additional products and/or Title Sport Drink brands which EBC may choose to produce and distribute in the future.

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EBC’s radio commercials are broadcasted throughout the Florida market. Certain high profile athletes such as Ronnie Brown, Terrell Owens, Vontae Davis, and Heavyweight Champion Boxer Cedric Boswell, among others, are official endorsers of Title Sports Drink. Title operates out of Opa-locka and Opopka Florida and is currently selling Title Sports Drink and distributing it in the state of Florida servicing numerous Publix Supermarkets, Walgreens, Sedano’s, Navarro Discount Pharmacies, Albertsons, and Sweetbay Grocery Stores representing more than 1,500 independent stores in Florida and Georgia.

Effective August 31, 2009, EBC and Title entered into an Exclusive Distribution Agreement, which was subsequently amended and restated on August 27, 2010, to be effective as of August 31, 2009 (the “Distribution Agreement”), which amendment added the Company as a party to such agreement. Pursuant to the Distribution Agreement, EBC agreed to manufacture products (including Title Sports Drink and certain other products which the parties may add to such agreement by amendment from time to time, the “Products”) and that Title would be the exclusive distributor of such products in the United States.

As well as providing for Title’s exclusive distribution rights, the Distribution Agreement documents an aggregate of $1,015,000 of pre-payments (the “Pre-Payment”) of product made from May through July 2010, by the Company on behalf of Title and in anticipation of the Exchange, both in an effort to secure and protect its future rights under the Distribution Agreement and the relationship between Title and EBC (the “Protective Reasons”). The Distribution Agreement also documented $700,000 in advances by the Company to Title, of which a substantial portion was subsequently paid to EBC, which advances to Title will be forgiven by the Company in connection with and pursuant to the Exchange, and additional $100,000 in advances from Title to EBC (the “Advances”). In consideration for $100,000 of the Advances, EBC agreed to amend the Distribution Agreement to reduce certain minimum required volumes required by the Distribution Agreement, to extend the term of the Distribution Agreement and to revise certain other provisions of the Distribution Agreement, which have been reflected in the description of the Distribution Agreement as provided herein. We were also provided a security interest in the distribution rights and certain cases of Product held by Title in order to secure the Advances, which security interest expired in connection with the closing of the Exchange.

Title was also granted a right of first refusal and a right of last refusal to distribute any additional products of EBC from time to time, as further provided in the Distribution Agreement.

Title’s right to be the exclusive distributor of EBC’s products is subject to Title meeting certain aggregate minimum distribution volumes for such products during each calendar year that the Distribution Agreement is in effect, which volumes increase year to year, and which initial required volumes Title was unable to meet in connection with the initial period of the agreement, which failure EBC waived in connection with the parties entry into the Amended and Restated Distribution Agreement. In the event the Pre-Payment has been satisfied in full and Title fails to meet any Volume Requirement, EBC may terminate Title’s distribution rights to the Products, subject to Title’s right to pay EBC an amount equal to the difference between the minimum purchase requirement for such year minus the amount of Title’s purchases of Products for such year (each a “Volume Shortfall”). In the event the Pre-Payment is still outstanding, the amount of any Volume Shortfall may be credited against the then outstanding balance of the Pre-Payment in Title’s sole discretion.

Unless terminated earlier due to a material breach of the Distribution Agreement by either party, Title’s failure to meet the minimum volume requirements and/or any other termination right provided in the Distribution Agreement, the Distribution Agreement will remain in effect until December 31, 2015, subject to renewals thereof with the mutual agreement of the parties.

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The amounts owed pursuant to the Pre-Payment will be decreased by Title’s cost of products produced by EBC and delivered to the Company from time to time. The Pre-Payment does not accrue any interest. The Pre-Payment was made, in part, in anticipation of certain orders procured by EBC for EBC’s products placed from chain stores (the “Direct Orders”). EBC agreed to assign the revenues it receives from the Direct Orders to the Company and the Company agreed to credit those revenues against the outstanding principal balance of the Pre-Payment, and to provide us a security interest in the cases of products to be produced in connection with the Direct Orders in order to secure the repayment of the Pre-Payment, which understandings are evidenced by the parties entry into a Collateral Assignment of Revenues Agreement.

Additionally, from time to time we have loaned Title funds to support its ongoing operations including the loan of substantially all of the funds we raised in connection with the subscription agreements described below under “Recent Sales Of Unregistered Securities.” The amount loaned had no stated due date, did not bear interest and was forgiven in connection with the Exchange.

EBC has advanced us funds from time to time, which funds totaled $28,120 as of August 31, 2010, and are payable on demand, unsecured, and non-interest bearing.

Additional Products Distributed Through Blue Gem

In addition to the acquisition of Title, we have recently expanded our product distribution offerings to include refrigerated dairy products, fresh produce and nationally known fresh and healthy food and beverages to a myriad of chain stores, local and regional independents as well as stores like Walgreens and Hess, located in Florida. In connection therewith, in May 2010, we began distributing milk in the South Florida area through an understanding with American Fruit & Produce Corp. (“AFP”). Additionally, in July 2010, we began distributing produce (including watermelon and other fruit) through a verbal agreement with AFP. We currently distribute produce, milk, other dairy products and fruit through verbal agreements with AFP. In connection with the understandings, we purchase the products directly from AFP and distribute them to certain stores throughout Florida. We also agreed to rent office and warehouse space from AFP at 12805 N. W. 42 Ave., Opa-locka, Florida, 33054, which is currently our principal business location. The monthly rent for the leased space is approximately $2,850 per month.

Currently we also distribute the following products, in addition to Title Sports Drink and those distributed through AFP:

·	Harvest Fresh Products (nut and snack bars, namely Wings of Nature Bars);
·	Apple Rush (an apple flavored fruit beverage);

·	Xingtea (a natural tea beverage): and
·	Myoplex (a nutritional shake).

There are no agreements in place for the distribution of the products described above, except for Myoplex (see below).

Recent Material Agreements:

Effective in June 2010, we entered into a distribution agreement with Abbott Nutrition (“Abbott”) to become Abbott’s exclusive distributor (the “Abbott Agreement”), to distribute and sell certain Myoplex shake and protein products to retailers in certain counties throughout Florida. We also agreed to meet certain mutually agreed upon distribution levels for Abbott’s products in order to maintain the rights to distribute the products. Abbott agreed to provide us a right of first refusal to distribute certain other Abbott products which Abbott desires to distribute from time to time. Pursuant to the Abbott Agreement, we agreed to purchase the products we will distribute from Abbott at predetermined wholesale prices (subject to revision with no less than 60 days prior notice from Abbott). Pursuant to the Abbott Agreement we were also provided a non-exclusive license to promote, sell and distribute the distributed products. The Abbott Agreement has a three year term, automatically renewable for additional one year terms, if not terminated by either party at least 90 days in advance of the then current term, and can also be terminated by Abbott immediately if we breach the terms of the Abbott Agreement, fail to meet the distribution requirements set forth in the Abbott Agreement or there is a material change in the control of or assets of the Company without the prior consent of Abbott. The Abbott Agreement can also be terminated by either party at any time, subject to the payment of liquidated damages in the event Abbott terminates the Abbott Agreement for any reason other than cause or the occurrence of an automatic termination under the Abbott Agreement in the event of the occurrence of certain events including our entry into bankruptcy or a similar transaction.

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We believe that these large national brands like Myoplex and Abbott Nutrition, sought out Blue Gem to distribute their brands bypassing much larger and established distributors because of the “hard to find” network Blue Gem is creating. For reasons like cost and competing portfolios, we believe that independent food and beverage companies along with national brands seeking specialty distribution find it difficult or impossible to have their products delivered to retailers via the direct store delivery (“DSD”) system that Blue Gem is building (as described in greater detail below). We offer our brands personal attention and growth opportunities which we do not believe that larger distribution companies with significant number of products are able to offer. We plan to continue to expand this model as the demand from manufacturers continues to grow.

Through the acquisition of Title and our entry into the agreements described above, we believe we are building a portfolio of non-competing innovative brands and products to gain traction in the rapidly expanding healthy, “good for you” food and beverage industry. Our business model seeks to garner exclusive agreements with food and beverage manufacturers to market and distribute their products.

On the retail side, we believe that many national and specialty chains are looking to add value, products and services for their customer base by expanding the products offered in their stores, like pre-packaged fresh products and pre-cut fruit recently introduced at Walgreens stores in South Florida. Implementing these healthy food and beverage initiatives requires expertise, and distributors like Blue Gem. As stated above, we now deliver fresh fruit, produce, milk, juice, eggs and other refrigerated products to our customer base. We are working together with our partners to create new innovative ways to merchandise and distribute fresh products in stores that have never sold them before. Delivering via company leased vehicles and from time to time, distributor owned vehicles, we believe that we are building a unique cold chain Direct Store Distribution (“DSD”) network, allowing for controlled growth through existing and new territories.

Historically, national brands looking for a distributor in Florida needed to contract with several independent distributors throughout the state and many times under staffed small DSD companies to reach a majority of the state. We believe we have solved that problem by providing DSD throughout the state creating a single logistics partner and have seen positive results from these actions, including the recent distribution agreements with Abbott and AFP, as described above, as well as Title’s distribution of Title Sport Drink.

Additional Recent Material Agreements:

In July 2010, we entered into an Investment Banking Agreement with Ladenburg Thalmann & Co. (“Ladenburg”). Pursuant to the agreement, Ladenburg agreed to serve as our exclusive financial advisor in connection with among other things, a financing transaction, merger, consolidation or combination. The agreement has a term of 18 months, provided that after 12 months either Ladenburg or the Company may terminate the agreement with thirty (30) days prior written notice. In the event the agreement is not terminated by either party, the agreement automatically renews for additional one year periods. In consideration for Ladenburg agreeing to the terms of the agreement, we agreed to issue it a non-refundable upfront fee of five year warrants to purchase 1,660,000 shares of our common stock at an exercise price of $0.14 per share, which warrants contain an anti-dilution provision, a cashless exercise right and piggyback registration rights. We also agreed to pay Ladenburg a monthly cash fee of $10,000 for the first three months of the agreement and a fee of $15,000 in cash and warrants to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.14 per share for each additional month the agreement is in place beginning on the fourth month of the agreement.

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We also agreed that in the event we undertake certain debt financings as described in the agreement, we would pay Ladenburg a cash fee equal to the greater of $300,000 or 5% of the funding raised; in the event we undertake a mezzanine financing as described in the agreement, we would pay Ladenburg a cash fee of the greater of $350,000 or 5% of the funding raised; in the event we sell equity securities in a transaction described in the agreement, we would pay Ladenburg a cash fee equal to the greater of $400,000 or 7% of the amount raised and grant Ladenburg warrants to purchase shares of the Company’s common stock equal to 10% of the number of shares sold in the offering at an exercise price equal to the per share equivalent price paid by the investor and with such terms and conditions as the purchaser’s warrants, which shall further contain an anti-dilution provision, a cashless exercise right and piggyback registration rights; and in the event the Company undertakes certain merger, acquisition or combination transactions, we agreed to pay Ladenburg a cash fee equal to the greater of $300,000 or 3% of the consideration paid. The agreement also provides the Company the right to raise up to $500,000 in funding within the first six months of the agreement without requiring the Company to pay any fees to Ladenburg, in the event that Ladenburg did not introduce the source of the funding to the Company. Finally, the agreement provided for Ladenburg to have the right of first refusal to serve as the Company’s advisor in connection with certain capital raising, investment banking or similar transactions in the event the Company determines that it requires such services at any time during the two year period following the termination of the agreement.

We are currently in discussions with Ladenburg regarding the modification of the Investment Banking Agreement, and have ceased making payments and have not granted any warrants to Ladenburg to date in anticipation of such modification.

On or around October 1, 2010, Allan Sepe, the Chief Executive Officer, sole Director and largest shareholder of the Company entered into a Loan/Option Agreement (the “Option Agreement”) with The Sterling Group, a third party (the “Sterling Group”). Pursuant to the Option Agreement, Mr. Sepe agreed to loan the Sterling Group 10,000,000 shares of restricted common stock of the Company which he held (the “Loaned Shares”), which loan the Sterling Group agreed to repay by either delivering to Mr. Sepe (i) 10,000,000 shares of the Company’s common stock or paying Mr. Sepe (ii) $0.08 per share for the Loaned Shares (upon which payment the Loaned Shares, or such portion thereof shall be considered purchased by the Sterling Group), no later than September 15, 2015. The agreement also provided that the amount due in connection with the repayment of the Loaned Shares would automatically be (a) decreased by 20% on each anniversary date of the parties entry into the Option Agreement, provided that the Sterling Group or an affiliate of the Sterling Group is employed by or providing consulting services for the Company on such anniversary date; or (b) deemed completely satisfied in the event the Company obtains at least $20,000,000 in aggregate funding from transactions negotiated by the Sterling Group, or upon the Company being acquired, merged with or entering into a similar transaction originated or negotiated by the Sterling Group ((a) and (b), each a “Loan Satisfaction”), subsequent to which the Sterling Group would own the Loaned Shares (or any portion thereof) free of any repayment or other requirements. Finally, the Option Agreement provided the Sterling Group an option to purchase the remaining 10,000,000 shares of the Company’s common stock subject to the Option Agreement held by Mr. Sepe at an exercise price of $0.08 per share, exercisable until September 30, 2015, provided that the amount of the option is decreased by the amount of any Loan Satisfaction.

The description of the various material agreements and understandings of Title and the Company as described herein are qualified in all respects by the actual terms, conditions and provisions of such agreements and understandings.

Recent Corporate Events:

In August 2010, the Company began delivering Myoplex to independent stores and received its first order from Walgreens for $100,000 of Myoplex under the Abbott agreement (described above), which we began distributing to 300 South Florida Walgreens stores.

In September 2010, we began distributing Myoplex to approximately 239 Hess gas stations throughout Florida.

In late August 2010, we began distributing Title Sports Drink to Sweetbay Grocery Stores throughout Florida.

In July 2010, we began distributing to the first three prototype Walgreens stores our “fresh” fruit and produce program. After a successful test period, we were given authorization to expand to the next 30 Walgreens stores in South Florida beginning September 1, 2010. We are placing end cap coolers along with produce tables in these stores.

Growth Strategy/Plan of Operations:

Moving forward, we plan to work to expand our distribution network throughout Florida and Georgia, with the intention of forming strategic relationships with retailers and brand owners.

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Allied Brand Owners

The Company intends to provide start-up and independent food and beverage companies an effective route to market. The Company anticipates partnering with innovative, competitive allied brands and helping launch their products in the fragmented South Florida market. We plan to continue to cultivate a non-competing portfolio of brands, by choosing the best brand available to us in each category, based on the market and perceived consumer needs.

Retailers

The Company plans to continue to build relationships with independent store owners as well as store chains to effectively place and launch new beverage brands. Most new food and beverage categories--like energy drinks or natural snacks--are launched through independent retail stores using Direct Store Distribution. Independent retailers rely on impulse purchase and immediate consumption to sell products. Direct distribution enables quicker adapting and responding to changing consumer needs.

The Company also intends to expand its distribution to include a network of a variety of retail formats including additional conventional supermarkets, drugstore chains, schools, delis, multicultural stores, independent convenience stores, and gas stations.

Nutritional Coolers

Throughout the remainder of fiscal 2010, we plan to work to place “nutritional coolers” in chains, such as Walgreens, and independent retailer locations throughout Florida. The coolers are planned to provide placement for new and emerging "Healthy Products", the manufacturers of which are looking to secure valuable placement on the crowded shelves of today's retailers. We plan to service the coolers ourselves and stock them with all natural beverages like Title Sports Drink and Myoplex; and a selection of ready-to-go fresh produce, salads, sandwiches and other on-the-go nutritional products.

COMPARISON OF OPERATING RESULTS

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2010, COMPARED TO THE THREE MONTHS ENDED AUGUST 31, 2009

For the three months ended August 31, 2010, we had total net sales of $718,932. We had no sales for the three months ended August 31, 2009, as we operated as a start-up mineral exploration company until approximately December 2009, when we determined it was in our best interest to change our business focus to that of a food and beverage distribution company.

We had total cost of sales of $700,879 for the three months ended August 31, 2010, compared to no cost of sales for the three months ended August 31, 2009 (as we had no sales during that period).

We had total gross profit of $18,053 for the three months ended August 31, 2010, compared to no gross profit for the three months ended August 31, 2009.

We had total operating expenses of $329,612 for the three months ended August 31, 2010, compared to total operating expenses of $6,759 for the three months ended August 31, 2009, an increase in total operating expenses of $322,853 from the prior period. Operating expenses for the three months ended August 31, 2010, were composed mainly of $180,788 of bad debt expense, $53,895 of professional fees (compared to $6,759 of professional fees for the three months ended August 31, 2009), $28,721 of accounting fees, $22,015 of rent and $17,000 of investor relations expenses. Total expenses of $6,759 for the three months ended August 31, 2009 solely represented professional fees.

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We had a total net loss of $311,559 for the three months ended August 31, 2010, compared to a total net loss of $6,759 for the three months ended August 31, 2009, an increase in net loss of $304,800 from the prior three month period.

The results of operations for the three months ended August 31, 2010 and 2009 do not include the operations of Title, as the Exchange did not close until September 14, 2010.

LIQUIDITY AND CAPITAL RESOURCES

We had total assets of $1,122,425 as of August 31, 2010, which included total current assets of $1,114,284, representing $8,988 of cash, $53,794 of accounts receivable, net, $155,621 of inventory, and $895,881 of other current assets (which included $895,791 in connection with the Pre-Payment); total long term assets of $8,141, consisting of property and equipment of $3,141 and $5,000 of other assets.

We had total liabilities of $425,871 as of August 31, 2010, which were solely current liabilities, consisting of accounts payable of $228,838, $78,913 of accrued liabilities, $90,000 of notes payable to related parties (in connection with the outstanding notes described below), and $28,120 due to EBC, a related party.

We had total working capital of $688,413 and a total accumulated deficit of $542,033 as of August 31, 2010.

We had total net cash used for operating activities of $976,615 for the three months ended August 31, 2010, which included $311,559 of net loss, $705,881 of increase in other current assets, and $155,621 of increase in inventory, offset by $145,221 of increase in accounts payable.

We had $3,141 of net cash used for investing activities for the three months ended August 31, 2010, which was solely due to purchase of furniture and equipment.

We had net cash provided by financing activities of $988,744, which included $1,101,960 of proceeds from the sale of common stock (representing the sales described below) and $90,000 of proceeds from the sale of the notes described below offset by $143,216 of net advances to related party and $60,000 of rescission of purchase of common stock (which rescission has been retroactively reflected in the description of the shares sold as provided below).

The Company’s Balance Sheet as of August 31, 2010 does not include the assets or liabilities of Title, as the Exchange did not close until September 14, 2010.

In April through July 2010, the Company entered into Securities Purchase Agreements with eleven “accredited investors” and sold such investors an aggregate of 26,323,216 shares of our restricted common stock in consideration for $2,090,000 in funding (or between $0.065 and $0.08 per share), which funds we have largely spent in connection with the Pre-Payment and Advances as described above in connection with the Distribution Agreement.

In August 2010, the Company was advanced a total of $90,000 from three related parties ($30,000 each), which parties included Allan Sepe, the Company’s President, sole Director and largest shareholder, Robert Friedopfer, a greater than 5% shareholder of the Company, a significant employee of the Company and the Chief Executive Officer of EBC, and Ronny Halperin, a greater than 5% shareholder of the Company. The loans bear interest at 8% per annum and are payable on December 31, 2010.

In September 2010, the Company was advanced $25,000 from a related party, who is the brother-in-law of Allan Sepe. The loan bears interest at the rate of 8% per annum and is payable on December 31, 2010.

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In September 2010 and October 2010, the Company was advanced $5,000 and $28,000, respectively, from Ronny Halperin, a greater than 5% shareholder of the Company, and an entity Mr. Halperin beneficially owns, respectively. All loans bear interest at 8% per annum and are payable on December 31, 2010.

We do not have enough cash on hand to operate for the next 12 months; however, we will rely on financing and additional funds from third party investors and affiliates of the Company. The additional funding will likely come from debt and equity financing from the sale of our common stock. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our activities. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our business operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act of 1934, as amended), we are not required to provide the information called for by this Item 3.

ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the evaluation and the identification of the material weaknesses in our internal control over financial reporting our Chief Executive Officer and our Principal Financial Officer concluded that, as of August 31, 2010, our disclosure controls and procedures were not effective, for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the Company under the Securities Exchange Act of 1934, as amended.

Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in this report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects. To address the material weaknesses in our internal control over financial reporting described below, we performed additional analysis and other post-closing procedures in order to prepare the consolidated financial statements included in this report.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (US GAAP) and includes those policies and procedures that:

-	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

-	provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

-	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

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Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

As of May 31, 2010, the end of the Company’s last fiscal year, management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.

Based on that evaluation, management concluded that, during the period covered by such 2010 Annual Report, that such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that taken together may be considered to be a material weakness.

A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control

deficiencies that represent material weaknesses at May 31, 2010:

(1)	lack of a functioning audit committee and lack of an independent board of directors capable of performing the audit function;

(2)	inadequate segregation of duties associated with accounting functions, due to limited number of personnel, which makes the reporting process susceptible to management override;

(3)	lack of maintenance of sub-ledgers which are reconciled to the general ledger on a regular basis, and lack of adequate accounting software to efficiently conduct and facilitate the audit process;

(4)	lack of segregation of funds between separate bank accounts for the Company and various related parties;

(5)	lack of documented policies and procedures; and

(6)	insufficient use of the third party specialists in the areas which involve a significant level of judgment and in complicated areas of accounting.

Management believes that the material weaknesses set forth above did not have a material affect on the Company's financial reporting in 2010. However, management believes that the lack of a functioning audit committee and lack of an independent board of directors can adversely affect reporting in the future years, when our operations become more complex and less transparent and require higher level of financial expertise from the overseeing body of the Company.

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We are committed to improving our financial organization. As part of this commitment, we will, as soon as adequate funds are available to the Company (1) appoint one or more outside Directors to our Board of Directors who shall be appointed to an audit committee of the Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate duties consistent with control objectives and will increase our personnel resources, which may include engaging a Chief Financial Officer separate from our Chief Executive Officer; (3) hire independent third parties to provide expert advice; (4) invest in accounting software to help facilitate the audit process; and (5) begin maintaining separate sub-ledgers to be reconciled against the general ledger. Additionally, beginning in August 2010, the Company began maintaining its funds and recording its operating transactions in a separate bank account segregated from the accounts of its various related parties in an effort to improve its financial organization and internal controls and procedures.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes during the period covered by this Quarterly Report on Form 10-Q in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. Neither we nor Title are currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We and/or Title may become involved in material legal proceedings in the future.

ITEM 1A. RISK FACTORS

Our securities are highly speculative and should only be purchased by persons who can afford to lose their entire investment in our Company. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent. The Company's business is subject to many risk factors, including the following:

General Risks Related To The Company

We May Not Be Able To Continue Our Business Plan Without Additional Financing.

We had a total net loss of $175,292 for the year ended May 31, 2010 and Title had a net loss of $475,017 for the period from August 31, 2009 (inception) through April 30, 2010, we also had a total net loss of $311,559 for the three months ended August 31, 2010. We had a total accumulated deficit of $542,033 as of August 31, 2010. Title had negative working capital of $505,140 and a total accumulated deficit of $75,017 as of April 30, 2010. In April through July 2010, we entered into Securities Purchase Agreements with eleven “accredited investors” and sold such investors an aggregate of 26,323,216 shares of our restricted common stock in consideration for $2,090,000 in funding (or between $0.065 and $0.08 per share), which funds we have largely spent in connection with the Pre-Payment and Advances as described above in connection with the Distribution Agreement. In September 2010, we entered into a Securities Purchase Agreement with an “accredited investor” and sold such investor an aggregate of 600,000 shares of our restricted common stock in consideration for $30,000 in funding ($0.05 per share), which funds we have largely spent for working capital.

As such, we do not have enough cash on hand to operate for the next 12 months and anticipate only being able to operate for the next three months with our current available cash. We anticipate the need for approximately $1,000,000 in additional funding to support our operations and planned business activities for the next twelve months. We plan to rely on financing and additional funds from affiliates of the Company and third party investors in order to support our operations and pay our expenses in the near term. Additional funding will likely come from debt and equity financing from the sale of our common stock. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration activities. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our business operations. If we are unable to raise the funds we require, your investment could become worthless.

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Shareholders May Be Diluted Significantly Through Our Efforts To Obtain Financing, Satisfy Obligations And/Or Complete Acquisitions Through The Issuance Of Additional Shares Of Our Common Stock Or Other Securities.

We have no committed source of financing. Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or other securities. Additionally, moving forward, we may attempt to conduct acquisitions and/or mergers of other entities or assets using our common stock or other securities as payment for such transactions. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock and preferred stock with various preferences and other rights. If such transactions occur, this may result in substantial dilution of the ownership interests of existing shareholders, and dilute the book value of the Company’s common stock.

Our Largest Shareholder, Allan Sepe Can Vote An Aggregate Of Approximately 40% Of Our Common Stock, And Holds All Of The Outstanding Shares Of Our Series A Preferred Stock, And As A Result, Will Exercise Significant Control Over Corporate Decisions.

Allan Sepe, who is also our President and Chairman, is our largest shareholder currently voting approximately 40% of our outstanding common stock. Additionally, Mr. Sepe holds all 1,000 shares of our designated shares of Series A Preferred Stock. The Series A Preferred Stock has the right, voting as a separate class, at any annual or special meeting of shareholders to elect one director of the Company in the event the Company has three (3) or fewer Directors, or in the event the Company has five (5) or more directors, such number of Directors as equal to the total number of Directors of the Company multiplied by 0.333 and rounded up to the nearest whole number. Additionally, the Series A Preferred Stock has the right to approve any Change of Control, defined as (i) the adoption of a plan of merger or consolidation of the Company with any other individual, entity, or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the approval by the Board of Directors of the Company of an agreement providing for the sale or transfer (other than as security for obligations of the Company) of substantially all of the assets of the Company, or the Company taking action to affect such sale or transfer; or (iii) in the absence of a prior expression of approval by a majority of outstanding shares of the Series A Preferred Stock, the acquisition of more than 25% of the Company's voting capital stock by any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company). Due to Mr. Sepe’s ownership of the Series A Preferred Stock, and the voting rights of such Series A Preferred Stock, he will appoint any and all Directors of the Company until such time as the Company’s Board of Directors has more than one (1) member, if ever, at which time he will continue to have rights to appoint at least one-third of such Board of Directors, solely as a result of his ownership of the Series A Preferred Stock.

As a result of the above, Mr. Sepe exercises significant control in determining the outcome of corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Any investors who purchase shares will be minority shareholders and as such will have little to no say in the direction of the Company and the election of Directors. Investors in the Company should keep in mind that even if you own shares of the Company's common stock and wish to vote them at annual or special shareholder meetings, your shares will likely have little effect on the outcome of corporate decisions or the election of Directors. Furthermore, investors should be aware that Mr. Sepe may choose to elect new Directors to the Board of Directors of the Company and/or take the Company in a new business direction altogether, and that current shareholders of the Company will have little to no say in such matters as Mr. Sepe is currently our largest shareholder.

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We Rely Upon Key Personnel And If They Leave Us, Our Business Plan And Results Of Operations Could Be Adversely Affected.

We rely heavily on our Chief Executive Officer and sole Director, Allan Sepe, as well as Title’s employee, Robert Friedopfer, who is also the former Chief Executive Officer of EBC. Their experience and input create the foundation for our business and they are responsible for the directorship and control over our operations. We do not currently have an employment agreement or "key man" insurance policy on either Mr. Sepe or Mr. Friedopfer. Moving forward, should we lose the services of Mr. Sepe or Mr. Friedopfer, for any reason, we will incur costs associated with recruiting replacements and delays in our operations. If we are unable to replace either Mr. Sepe or Mr. Friedopfer with another suitably trained individual or individuals, we may be forced to scale back or curtail our business plan. As a result of this, your investment in us could become devalued.

Our Auditors Have Expressed Substantial Doubt As To Whether Our Company Can Continue As A Going Concern.

We had a total net loss of $175,292 for the year ended May 31, 2010 and Title had a net loss of $475,017 for the period from August 31, 2009 (inception) through April 30, 2010, we also had a total net loss of $311,559 for the three months ended August 31, 2010. We had a total accumulated deficit of $542,033 as of August 31, 2010. Title had negative working capital of $505,140 and a total accumulated deficit of $75,017 as of April 30, 2010. As such, our auditors, in their report dated September 14, 2010, as included in our Form 10-K for the year ended May 31, 2010, and Title’s auditors in Title’s audited financial statements for the period from August 31, 2009 (inception) through April 30, 2010, as incorporated by reference herein, have raised substantial doubt as to whether our Company (including Title) can continue as a going concern, particularly in the event that we cannot generate sufficient cash flow to conduct our operations and/or obtain additional sources of capital and financing.

Our Insurance Coverage May Be Inadequate To Insure Against All Material Risks.

We maintain insurance against some, but not all of the potential risks and losses our operations are subject to. There can be no assurance that insurance obtained by us will be adequate to and/or in sufficient amounts necessary to cover all losses or liabilities. The occurrence of a significant event not fully insured or indemnified against, could materially and adversely affect our financial condition and operations, which could lead to any investment in us becoming worthless.

We May Not Be Able To Successfully Manage Our Growth, Which Could Lead To Our Inability To Implement Our Business Plan.

Our growth is expected to place a significant strain on our managerial, operational and financial resources, especially considering that we currently only have one Director and one executive officer and a small number of employees. Further, as we enter into additional contracts, we will be required to manage multiple relationships with various consultants, businesses and other third parties. These requirements will be exacerbated in the event of our further growth. There can be no assurance that our systems, procedures and/or controls will be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully implement our business plan. If we are unable to manage our growth effectively, our business, results of operations and financial condition will be adversely affected, which could lead to us being forced to abandon or curtail our business plan and operations.

We Have A Limited Operating History In Our Current Business Focus Of Food And Beverage Distribution And Because Of This It May Be Difficult To Evaluate Our Chances For Success.

We were formed on November 28, 2006, for the purpose of conducting mineral exploration activities. In October 2009, we changed our business focus to Food and Beverage Distribution services. As such, we have a limited history in our current business focus of Food and Beverage Distribution. However, the Company has hired various personnel with experience in Food and Beverage Distribution services. We are a relatively new company and, as such, run a risk of not being able to compete in the marketplace because of our relatively short existence. New companies in the competitive environment of Food and Beverage Distribution may have difficulty in continuing in the highly competitive Food and Beverage Distribution industry, and as a result, we may be forced to abandon or curtail our business plan. Under such a circumstance, the value of any investment in us may become worthless.

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We Incur Significant Increased Costs As A Result Of Operating As A Fully Reporting Company As Well As In Connection With Section 404 Of The Sarbanes Oxley Act.

We incur legal, accounting and other expenses in connection with our status as a fully reporting public company. The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and rules subsequently implemented by the SEC have imposed various requirements on public companies, including requiring changes in corporate governance practices. As such, our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 and our continued status as a publicly reporting company will require that we incur substantial accounting, legal and filing expenses and expend significant management efforts. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Risks Relating To The Operations Of The Company And Title

We Face Intense Competition For Our Products And As A Result, We May Be Unable To Compete In The Market For Food and Beverage Distribution.

The market for food and beverage distribution is highly competitive and fragmented. The Company expects competition to intensify in the future. We plan to compete in each of our markets with numerous national, regional and local companies, many of which have substantially greater financial, managerial and other resources than those presently available to us. Numerous well-established companies are focusing significant resources on providing food and beverage distribution services that will compete with our services. No assurance can be given that we will be able to effectively compete with these other companies or that competitive pressures, including possible downward pressure on the prices we charge for our services, will not rise. In the event that we cannot effectively compete on a continuing basis or competitive pressures arise, such inability to compete or competitive pressures will have a material adverse effect on our business, results of operations and financial condition.

Effect Of Government Regulations On Our Future Operations And Potential Issues Such Changes In Regulations Could Create.

The products that we distribute and plan to distribute in the future are subject to U.S. Food and Drug Administration (“FDA”) approval, including the primary product that Title distributes, Title Sports Drink. If the products we distribute were to have issues with the FDA, or the FDA were to enact stricter rules and regulations in the future and the products we plan to market are unable to meet such new laws or regulations, we may be prohibited from marketing or distributing such products, or could be forced to expend additional resources in complying with such regulations. As a result, any investment in our securities could become worthless.

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We May Be Forced to Expend Additional Resources To Update or Upgrade Our Facilities And Face Additional Costs In Order To Comply With Industry or Product Standards.

Currently, we do not store Title Sports Drink in a refrigerated warehouse, but we do maintain a temperature controlled warehouse for Title Sports Drink and Myoplex products we distribute and also use a limited number of refrigerated trucks which we use to distribute produce to Walgreens. It is possible that because of Title Sports Drink’s “all natural” nature and the fact that no artificial preservatives are added to Title Sports Drink, it may be more susceptible to heat and/or other environmental factors than other traditional sports drinks. If industry standards or our customers necessitate that we refrigerate Title Sports Drink and/or if we receive contracts to distribute additional products in the future which require warehouse refrigeration or other requirements which force us to expend additional resources and capital in order to comply with, our result of operations may be adversely affected, we may be unable to comply with such industry or contract standards, and we may be forced to curtail our business operations, which could cause any investment in the Company to become devalued. Additionally, we may incur substantial costs in the future to upgrade or keep up-to-date various facilities and equipment or restructure our operations, including closing existing facilities or opening new ones. If our investment and restructuring costs are higher than anticipated or our business does not develop as anticipated to appropriately utilize new or upgraded facilities in the future, our costs and financial performance could be negatively affected.

Payments Due To Us In Connection With The Distribution Of Products, Including Title Sports Drink, Are Dependent On Such Products Being Timely Sold And We Do Not Receive Payments For Products Returned To Us As Unsold.

We receive revenues through the Distribution Agreement (described above) from our distribution and sale of Title Sports Drink, which is produced by EBC. Through the Distribution Agreement, we purchase Title Sports Drink from EBC at a pre-determined wholesale cost per unit and then distribute such products to independent resellers throughout the state of Florida. Similarly, we purchase other products we distribute from time to time and then distribute such products to resellers to sell such products on our behalf. We receive payment from such resellers only for products which are sold and we bear the cost of any products which are returned to us as unsold. As such, if products we purchase from EBC or third parties are not timely sold and/or are returned to us as unsold, we may incur a loss in connection with the failure to timely sell such pre-purchased products and bear the risk that such products will not be sold by the resellers in a timely fashion, if it all. As a result, the failure of the products we distribute, including Title Sports Drink, to be timely sold, or to sell at all, could cause us to incur a loss on the sale of such products, write off the initial purchase of such products, or could cause a significant delay from the time we purchase such products from EBC and receive payment for such products (if at all), which could cause a material adverse effect on our results of operations, and could cause our results of operations to significantly vary from quarter to quarter. Any material adverse change in our results of operations, delay in our receipt of payment for pre-purchased products (including Title Sports Drink), or return of unsold products by our resellers could cause the value our securities to decline in value or become worthless.

Effect Of Unfavorable Publicity Regarding The Products We Distribute.

We believe that the market for our products will be affected by national media attention regarding the consumption of sports drinks, in relation to Title Sports Drink, as well as the consumption of dairy products and produce in connection with our other distribution arrangements. Future negative publicity regarding the potential effects of the daily consumption and/or excess consumption of sports drinks and/or negative publicity regarding the health effects of dairy products or other produce, including national and regional recalls on such products due to contamination, even if the products we distribute are not affected by such recalls, could have a material adverse effect on the marketability of the products we distribute. If the products or companies we distribute products for were to suffer adverse media attention, it could cause the value of our common stock to decrease, and could lead to any investment you have in us becoming worthless.

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Our Sales Experience Large Fluctuations Due To The Seasonality Of The Products We Distribute.

Title generally experiences greater sales, mainly relating to increased distribution of Title Sports Drink, in the spring and summer, as in our opinion, there are a greater number of individuals exercising and performing warm weather activities which may necessitate the need for a sports drink during those seasons rather than the fall and winder. As such, our results of operations for any one quarter may not be indicative of the results of operations for any other quarter and/or our yearly results of operations.

The Products We Distribute Require A Significant Supply Of Raw Materials And Energy, The Limited Availability Or Increased Costs Of Which And/Or Issues With Crops Associated With The Produce We Distribute Could Adversely Affect Our Business And Financial Results.

The manufacture and production of the products we distribute are highly dependent on certain ingredients, packaging materials, other raw materials, and energy. If the suppliers of our customers ingredients, packaging materials, other raw materials or energy are impacted by an increased demand for their products, business downturn, weather conditions (including those related to climate change), natural disasters, governmental regulation, terrorism, strikes or other events, and they are not able to effectively obtain the products from another supplier, they could experience an interruption in the supply of such products or increased costs of such products. Any sustained interruption in the supply of ingredients, packaging materials, other raw materials or energy, or increased costs thereof, could have a material adverse effect on our customers’ ability to produce the products we distribute, and therefore, our ability to distribute such products, which could have a material adverse effect on our business and financial results.

Similarly, any issues associated with the production, growing, cultivation, picking or packing of the produce or dairy products we distribute could decrease our customers supply of products, increase the required price of such products or otherwise provide such customers less incentive to produce such products, which could in turn reduce their demand for our distribution services, and cause our results of operations to be materially adversely affected.

Increase In The Cost, Disruption Of Supply Or Shortage Of Energy Or Gas Could Affect Our Profitability.

We operate trucks and other motor vehicles which we use to distribute and deliver beverage and food products. In addition, we use a significant amount of gas for such vehicles and energy in our warehouses. An increase in the price, disruption of supply or shortage of fuel and other energy sources that may be caused by increasing demand or by events such as natural disasters, power outages, oil spills, or the like would increase our operating costs and, therefore, could negatively impact our profitability.

Because Title Depends Upon EBC To Provide Title Sports Drink To Title To Distribute, Changes In Title’s Relationship With EBC Could Adversely Affect Our Business And Financial Results. Additionally, The Distribution Agreement Provides EBC The Right To Terminate Our Relationship If We Fail To Meet Certain Minimum Distribution Quotas.

The majority of Title’s operations consist of services which it performs under the Distribution Agreement with EBC (described above). If Title’s Distribution Agreement was terminated for any reason, it would have a material adverse effect on its and in turn, our business and financial results.

Additionally, the Distribution Agreement provides that if we don’t meet certain minimum volume requirements relating to the distribution of Title Sports Drink (and the Pre-Payment (as defined above) has been repaid), EBC can terminate the Distribution Agreement, subject to our ability to pay EBC cash equal to their loss of revenue associated with such shortfall. As a result, if we were to fail to meet our required minimum sales, EBC could terminate the Distribution Agreement, which would cause our results of operations to be materially adversely affected and could cause any investment in the Company to become worthless.

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We May Have Potential Conflicts Of Interest With EBC, Which Could Result In EBC’s Objectives Being Favored Over Our Objectives.

Our and Title’s past and ongoing relationship with EBC, as well as the relationships between our and Title’s Chief Executive Officer, Allan Sepe, who is also our largest shareholder, and who further serves as an employee of EBC, and Kevin Sepe, Allan’s brother and the majority owner of EBC, as well as Robert Friedopfer, a significant employee of the Company, greater than 5% shareholder of the Company and the former Chief Executive Officer of EBC could give rise to conflicts of interests. Since September 2010, Allan Sepe spends almost exclusively all of his time on Company matters and spends a small amount of time on EBC matters from time to time. These potential conflicts include balancing the objectives of increasing sales volume of Title Sports Drink beverages and maintaining or increasing our profitability versus EBC’s objectives of increasing its production and distribution of Title Sports Drink and increasing its own profitability. Additionally, due to the Pre-Payment, EBC owed us $895,791 as of August 31, 2010 (additionally, we owed EBC $28,120 as of August 31, 2010), making EBC our largest account receivable. Perceived or actual conflicts of interest between Allan Sepe, Kevin Sepe, Robert Friedopfer, us, Title or EBC could cause our results of operations to be materially adversely affected and/or could cause the value of our securities to decline in value or become worthless.

The Loss Of Any Key Customer, Or Failure To Maintain Good Relationships With Our Clients Could Adversely Affect Our Financial Performance.

We must maintain mutually beneficial relationships with our key customers and clients, to effectively compete. This is exacerbated by the fact that Walgreens and Publix accounted for 48% and 52%, respectively, of Title’s accounts receivable balance as of April 30, 2010. Title’s net sales to these customers amounted to 28% and 33%, respectively, for the period from August 31, 2009 (inception) through April 30, 2010. Title purchases 100% of Title Sports Drink from EBC, and for the period from August 31, 2009 (inception) through April 30, 2010, $311,183 or 88% of Title’s total purchases were for the Title Sports Drink. Additionally, $268,124 or 84% of Title’s net sales resulted from sales of the Title Sports Drink for the period from August 31, 2009 (inception) through April 30, 2010.

As larger retailers increase utilization of their own distribution networks and private label brands, the competitive advantages we derive from our individualized distribution operations may be eroded. Failure to appropriately respond to these trends or to offer effective sales incentives and marketing programs to our customers could reduce our ability to secure adequate shelf space at our retailers and adversely affect our financial performance.

Retail consolidation and the current economic environment continue to increase the importance of major customers. Loss of any of our key customers, including Walgreens or Publix, or loss of our key distributors, such as EBC, could have an adverse effect on our business, financial condition and results of operations.

Furthermore, if we are unable to provide an appropriate mix of incentives to our clients through a combination of advertising and marketing support, they may take actions that, while maximizing their own short-term profit, may be detrimental to us. Such actions, could have an adverse effect on our profitability. In addition, any deterioration of our relationships with our bottlers could adversely affect our business or financial performance.

Disruption Of Our Supply Chain Could Have An Adverse Impact On Our Business, Financial Condition And Results Of Operations.

Our ability and that of our suppliers and clients, to make, move and sell products is critical to our success. Damage or disruption to our or their manufacturing or our distribution capabilities due to adverse weather conditions, natural disaster, fire, terrorism, the outbreak or escalation of armed hostilities, pandemic, strikes and other labor disputes or other reasons beyond our or their control, could impair our ability to receive and/or distribute products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to restore our supply chain.

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Unfavorable General Economic Conditions In The United States Could Negatively Impact Our Financial Performance.

Unfavorable general economic conditions, such as a continued recession or economic slowdown in the United States or in the state of Florida, where the majority of our operations are present, could negatively affect the affordability of, and demand for our services or the products we distribute. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases of our clients’ products or by shifting away from more expensive healthy products and beverages to lower-priced products. Decreased consumer demand for the products we distribute, or our distribution services could reduce our revenues and could negatively affect our financial performance.

Our Operations Results of Operations Face Risks Associated With Inclement Weather.

Substantially all of our operations and distributions of products take place in the state of Florida. Florida has historically been prone to inclement weather, including flooding and hurricanes. Hurricanes are most prevalent during the months of June through November. Any tropical storm, hurricane or flooding which affects the state of Florida could cause interruptions in our ability to distribute products, could cause damage to our warehouses or office location and/or could cause damage to the transportation infrastructure we rely on to distribute products throughout Florida. Additionally, any inclement weather in the state of Florida could cause a decline in sales of our customers’ products or force our customers to scale back, delay or cease their operations. As such, in the event that the state of Florida is affected by inclement weather, our results of operations could be materially adversely affected, which could cause the value of our securities to decline in value or become worthless.

A Significant Interruption In The Operation Of Our Warehouse Facilities May Reduce Our Ability to Generate Revenues.

A significant interruption in the operation of our warehouse facilities, whether as a result of a natural disaster or other causes, could significantly impair our ability to operate our business. If there was a significant interruption in the operation of our facilities, we may not have the capacity to service all of our customers out of the remaining facilities and/or may face additional costs associated with operating out of the remaining facilities and we may not be able to service our customers in a timely manner. As a result, our revenues and earnings would be materially adversely affected.

We Generally Do Not Have Long-Term Agreements With Our Customers.

We have entered into written agreements with certain of our customers for varying terms and duration; however, most of our distribution relationships are informal (based solely on purchase orders) and are terminable by either party at will. We currently do not have, nor do we anticipate in the future that we will be able to establish, long-term contractual commitments from many of our clients. In addition, despite the terms of the written agreements with certain of our significant clients, we have no assurance as to the level of performance under those agreements, or that those agreements will not be terminated. There is also no assurance that we will be able to maintain our current relationships or establish and maintain successful relationships with customers in new geographic distribution areas.

We Depend On Key Information Systems And Third Party Service Providers.

We depend on key information systems to accurately and efficiently transact our business, provide information to management and prepare financial reports. We rely on third party providers for a number of key information systems and business processing services. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, natural disasters, terrorist attacks, software, equipment or telecommunications failures, processing errors, computer viruses, hackers, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.

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We Are Subject To Competitive Bidding Situations, The Outcome Of Which Could Negatively Impact Our Results Of Operations.

Many of our customers have become increasingly price sensitive in the current economic climate, which has intensified the competitive environment in which we operate. Moving forward, we anticipate being subject to competitive bidding situations, which may reduce our profitability on sales to several customers. In bidding situations, we are subject to the risk of losing certain customers or potential customers which could negatively impact our sales and profits.

Risks Relating To Our Securities

We Have Not And Do Not Anticipate Paying Any Cash Dividends On Our Common Stock And Because Of This Our Securities Could Face Devaluation In The Market.

We have paid no cash dividends on our common stock to date and it is not anticipated that any cash dividends will be paid to holders of our common stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of our business operations, it is anticipated that any earnings will be retained to finance our business operations and future expansion.

The Market For Our Common Stock Is Subject To Fluctuations.

Our common stock trades on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “BGEM.” The market for our common stock on the OTCBB is subject to fluctuations in response to several factors, including, but not limited to:

(1)	actual or anticipated variations in our results of operations;

(2)	our ability to generate revenues;

(3)	expansion of the products we distribute;

(4)	conditions and trends in the industry in which we operate; and

(5)	future acquisitions we may make.

Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates, or government regulations may adversely affect the market price and liquidity of our common stock.

Shareholders Who Hold Unregistered Shares Of Our Common Stock Are Subject To Resale Restrictions Pursuant To Rule 144, Due To Our Status As A Former “Shell Company.”

Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, prior to the filing of our Form 8-K disclosing the Exchange, we were a “shell company” pursuant to Rule 144, and as such, sales of our securities pursuant to Rule 144 are not able to be made until 1) we have ceased to be a “shell company” (which we believe that we have in connection with the Exchange and the Form 8-K disclosing the Exchange, which was filed on September 20, 2010); 2) we are subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all of our required periodic reports for at least the previous one year period prior to any sale pursuant to Rule 144; and a period of at least twelve months has elapsed from the date “Form 10 information” has been filed with the Commission reflecting the Company’s status as a non-“shell company”, which information was filed on September 20, 2010, and which sales pursuant to Rule 144 can therefore not be made any earlier than September 21, 2011. Because none of our non-registered securities can be sold pursuant to Rule 144, until at least September 21, 2011, any non-registered securities we sell or issue to consultants or employees, in consideration for services rendered or for any other purpose, will have no liquidity until and unless such securities are registered with the Commission and/or until at least the later of (a) September 21, 2011; and (b) six months from the issuance of such securities. Additionally, in the future, if we cease filing reports with the Commission or Rule 144 is not available for the sale of our securities, it may be impossible for holders of our securities to sell such securities. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Additionally, moving forward, our status as a former “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless.

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If We Are Late In Filing Our Quarterly Or Annual Reports With The SEC, We May Be De-Listed From The Over-The-Counter Bulletin Board.

Pursuant to Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing of periodic reports with the SEC, any OTCBB issuer which fails to file a periodic report (Form 10-Q's or 10-K's) by the due date of such report (not withstanding any extension granted to the issuer by the filing of a Form 12b-25), three (3) times during any twenty-four (24) month period is automatically de-listed from the OTCBB. Such removed issuer would not be re-eligible to be listed on the OTCBB for a period of one-year, during which time any subsequent late filing would reset the one-year period of de-listing. If we are late in our filings three times in any twenty-four (24) month period and are de-listed from the OTCBB and trade on the pink sheets, our securities may become worthless and we may be forced to curtail or abandon our business plan.

Investors May Face Significant Restrictions On The Resale Of Our Common Stock Due To Federal Regulations Of Penny Stocks.

Our common stock will be subject to the requirements of Rule 15(g)9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.

State Securities Laws May Limit Secondary Trading, Which May Restrict The States In Which And Conditions Under Which You Can Sell Shares.

Secondary trading in our common stock may not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In April through July 2010, we entered into Securities Purchase Agreements with eleven “accredited investors” and sold such investors an aggregate of 26,323,216 shares of our restricted common stock in consideration for $2,090,000 in funding (or between $0.065 and $0.08 per share), which funds we have largely spent in connection with the Pre-Payment and Advances as described above in connection with the Distribution Agreement. Included in the purchasers were two individuals who are the children of Ronny Halperin, a shareholder of Title (as defined above) and a greater than 5% shareholder of the Company as a result of the Exchange (defined above), and who each purchased an aggregate of 5,625,000 and 4,875,000 shares of our common stock, respectively, in consideration for $450,000 and $390,000 or $0.08 per share, respectively. Additionally included in the purchasers was a nephew of our Chief Executive Officer, Allan Sepe, who purchased 6,562,500 shares for $525,000 of total consideration or $0.08 per share and Mr. Sepe’s brother-in-law, who purchased 1,875,000 shares of common stock for total consideration of $150,000 or $0.08 per share. A total of 2,000,000 of the shares sold have not been physically issued to date, but have been included in the number of issued and outstanding shares disclosed throughout this Report. The Securities Purchase Agreements also provided the investors piggy-back registration rights in connection with the shares sold.

In July 2010, we issued 1,000,000 shares of our restricted common stock to a consultant, who is also Mr. Sepe’s brother-in-law, in consideration for various managerial and advisory services rendered to the Company.

On or around August 13, 2010, we, Title and the shareholders of Title entered into the Exchange. Pursuant to the Exchange, the shareholders of Title, Allan Sepe, who is also the President of Title and our Chief Executive Officer and sole Director, who held 80,000,000 shares of common stock of Title prior to the Exchange; Robert Friedopfer, who held 10,000,000 shares of common stock of Title prior to the Exchange; and Ronny Halperin, who held 10,000,000 shares of common stock of Title prior to the Exchange (collectively the “Title Shareholders”) agreed to exchange all of their shares of Title on a one-for-one basis for shares of common stock of the Company; provided that in lieu of the shares of the Company’s common stock which would have otherwise been due to Mr. Sepe, Mr. Sepe agreed to accept 1,000 shares of the Company’s Series A Preferred Stock (as further described above). The closing of the Exchange occurred upon the completion of the audit of Title, which we finalized on September 14, 2010. As a result of the Exchange, Title became our wholly-owned subsidiary.

In August 2010, the Board of Directors of the Company approved the designation of 1,000 shares of Series A Preferred Stock, which shares of preferred stock were subsequently issued to Allan Sepe, the Company’s Chief Executive Officer, Director and largest shareholder in connection with the Company’s entry into the Exchange (as described above), which Series A Preferred Stock is described in greater detail above.

In September 2010, we entered into a Securities Purchase Agreement with an “accredited investor” and sold such investor an aggregate of 600,000 shares of our restricted common stock in consideration for $30,000 in funding ($0.05 per share), which funds we have largely spent for working capital. The Securities Purchase Agreement also provided the investor piggy-back registration rights in connection with the shares sold. The 600,000 shares have been included in the number of issued and outstanding shares disclosed throughout this report, but have not been physically issued to date.

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We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances did not involve a public offering, the recipients took the shares for investment and not resale and we took appropriate measures to restrict transfer. No underwriters or agents were involved in the foregoing issuances and we paid no underwriting discounts or commissions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit Number	Description of Exhibit

2.1(3)	Plan of Conversion
3.1(3)	Florida – Certificate of Domestication and Articles of Incorporation
3.2(3)	Florida – Certificate of Amendment to Articles of Incorporation
3.3(3)	Nevada – Articles of Conversion
3.4(3)	Designation of Series A Preferred Stock
3.5(3)	Bylaws
10.1(3)	Share Exchange Agreement Between Title Beverage Distribution, Inc., the shareholders of Title and the Company
10.2(3)	Amended and Restated Distribution Agreement
10.3(3)	Abbot Distribution Agreement
10.4(3)	Promissory Note ($30,000) – Allan Sepe
10.5(3)	Promissory Note ($30,000) – Robert Friedopfer
10.6(3)	Promissory Note ($30,000) – Ronny Halperin
10.7(3)	Promissory Note ($25,000) – Howard Ettelman
10.8(3)	Collateral Assignment of Revenues Agreement
10.9*	Promissory Note ($5,000) - Ronny Halperin
10.10*	Promissory Note ($8,000) – Hundred Acre Properties, LLC
10.11*	Promissory Note ($20,000) – Hundred Acre Properties, LLC
10.12*	Stock Loan/Option Agreement
16.1(2)	Letter from LBB & Associates Ltd., LLP
21.1(4)	Subsidiaries
31*	Certificate of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certificate of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1(3)	Audited Financial Statements of Title Beverage Distribution, Inc.
99.2(3)	Pro Forma Financial Information

* Filed herewith.

(1) Filed as an exhibit to the Company’s Form 8-K/A filing, filed with the Commission on October 23, 2009, and incorporated herein by reference.

(2) Filed as an exhibit to the Company’s Form 8-K, filed with the Commission on April 27, 2010, and incorporated herein by reference.

(3) Filed as exhibits to the Company’s Form 8-K disclosing the Exchange and other Form 10 Type information as required by Form 8-K and Rule 144, which the Company filed with the Commission on or around September 20, 2010, and incorporated herein by reference.

(4) Filed as an exhibit to the Company’s Form 10-K/A, filed with the Commission on September 22, 2010, and incorporated herein by reference.

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SIGNATURES

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

BLUE GEM ENTERPRISE, INC.

Date: October 19, 2010

/s/ Allan Sepe

By: Allan Sepe

Title: Chief Executive Officer

(Principal Executive Officer and Principal Accounting Officer/Principal Financial Officer)

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Blue Gem Enterprise - FORM 10-Q - October 19, 2010

Attached files

Blue Gem Enterprise Reports