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

                                    FORM 10-Q

(Mark One)

[X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
          For the quarterly period ended March 31, 2008

[ ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
          For the transition period from _______ to _______

                       Commission File Number:   001-14498

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

                                  BLUEFLY, INC.
             (Exact name of registrant as specified in its charter)

                     Delaware                          13-3612110
       (State or other jurisdiction of      (I.R.S. Employer Identification No.)
        incorporation or organization)

              42 West 39th Street, New York, NY            10018
           (Address of principal executive offices)      (Zip Code)

                    Issuer's telephone number: (212) 944-8000

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

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

Indicate  by  check mark whether the registrant is a large accelerated filer, an
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. (Check one):

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 Exchange Act). Yes [ ]   No [X]

As of May 1, 2008, the issuer had outstanding 13,276,998 shares of Common Stock,
$.01 par value.

                                        1
<PAGE>

                                  BLUEFLY, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                        <C>
Part I. Financial Information

Item 1. Financial Statements

        Condensed Balance Sheets as of March 31, 2008 (unaudited)
           and December 31, 2007                                            3

        Condensed Statements of Operations for the three months ended
           March 31, 2008 and 2007 (unaudited)                              4

        Condensed Statements of Cash Flows for the three months ended
           March 31, 2008 and 2007 (unaudited)                              5

        Condensed Notes to Financial Statements (unaudited)                 6

Item 2. Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                       10

Item 3. Quantitative and Qualitative Disclosures About Market Risk         14

Item 4T. Controls and Procedures                                           14

Part II. Other Information                                                 15

Item 1. Legal Proceedings                                                  15

Item 6. Exhibits                                                           15

Signatures                                                                 16
</TABLE>

                                        2
<PAGE>

Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements

<TABLE>
<CAPTION>
                                                      BLUEFLY, INC.

CONDENSED BALANCE SHEETS (Unaudited)
                                                                                     March 31,     December 31,
                                                                                       2008            2007
                                                                                  ------------     ------------
                                                        ASSETS
<S>                                                                               <C>              <C>
Current assets
  Cash and cash equivalents                                                         $5,514,000       $6,730,000
  Inventories, net                                                                  26,680,000       28,492,000
  Accounts receivable, net of allowance for doubtful accounts                        3,252,000        2,102,000
  Prepaid inventory                                                                    140,000          294,000
  Prepaid expenses                                                                     801,000          777,000
  Other current assets                                                                 640,000          416,000
                                                                                  ------------     ------------
        Total current assets                                                        37,027,000       38,811,000

Property and equipment, net                                                          6,236,000        6,019,000

Other assets                                                                           208,000          189,000
                                                                                  ------------     ------------
     Total assets                                                                  $43,471,000      $45,019,000
                                                                                  ------------     ------------

Current liabilities
  Accounts payable                                                                  $8,206,000       $8,460,000
  Allowance for sales returns                                                        4,965,000        4,204,000
  Accrued expenses and other current liabilities                                     2,268,000        2,052,000
  Deferred revenue                                                                   2,950,000        3,206,000
                                                                                  ------------     ------------
     Total current liabilities                                                      18,389,000       17,922,000

Other long-term obligations                                                             33,000           60,000
                                                                                  ------------     ------------

     Total liabilities                                                             $18,422,000      $17,982,000
                                                                                  ------------     ------------

Commitments and contingencies

Shareholders' equity
  Series F Preferred stock - $.01 par value; 7,000 shares authorized, 571.43
     issued and outstanding as of March 31, 2008 and December 31, 2007
     (liquidation preference: $571,000 plus accrued dividends of $116,000, and              --               --
     $105,000 as of March 31, 2008 and December 31, 2007, respectively)
  Common stock - $.01 par value; 200,000,000 shares authorized as of
     March 31, 2008 and December 31, 2007, respectively, 13,433,553 and
     13,426,803 shares issued as of March 31, 2008 and December 31, 2007,
     respectively, 13,276,998 and 13,275,730 shares outstanding as of
     March 31, 2008 and December 31, 2007, respectively                              1,328,000        1,328,000
  Treasury Stock                                                                    (1,452,000)      (1,430,000)
  Additional paid-in capital                                                       159,937,000      158,965,000
  Accumulated deficit                                                             (134,764,000)    (131,826,000)
                                                                                  ------------     ------------
     Total shareholders' equity                                                     25,049,000       27,037,000
                                                                                  ------------     ------------
     Total liabilities and shareholders' equity                                   $ 43,471,000     $ 45,019,000
                                                                                  ------------     ------------
</TABLE>

    The accompanying notes are an integral part of these condensed financial
                                   statements.

                                        3
<PAGE>

                                  BLUEFLY, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                           March 31,
                                                                 ----------------------------
                                                                     2008             2007
                                                                 -----------      -----------
<S>                                                              <C>              <C>
Net sales                                                        $25,245,000      $22,108,000
Cost of sales                                                     16,309,000       13,734,000
                                                                 -----------      -----------
  Gross profit                                                     8,936,000        8,374,000

Selling and fulfillment expenses                                   5,069,000        4,399,000
Marketing expenses                                                 3,522,000        3,611,000
General and administrative expenses                                3,247,000        3,586,000
                                                                 -----------      -----------
  Total operating expenses                                        11,838,000       11,596,000

Operating loss                                                    (2,902,000)      (3,222,000)

Interest and other income                                             36,000          195,000
Interest and other expense                                           (72,000)         (76,000)
                                                                 -----------      -----------

Net loss                                                         $(2,938,000)     $(3,103,000)

Preferred stock dividends                                            (11,000)         (11,000)
                                                                 -----------      -----------

Net loss available to common shareholders                        $(2,949,000)     $(3,114,000)
                                                                 -----------      -----------

Basic and diluted loss per common share                               $(0.22)          $(0.24)
                                                                 -----------      -----------
Weighted average common shares outstanding
(basic and diluted)                                               13,251,101       12,962,949
                                                                 -----------      -----------
</TABLE>

    The accompanying notes are an integral part of these condensed financial
                                   statements.

                                        4
<PAGE>

                                  BLUEFLY, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Three Months Ended
                                                                                         March 31,
                                                                             ------------------------------
                                                                                 2008               2007
                                                                             -----------        -----------
<S>                                                                          <C>                <C>
Cash flows from operating activities
  Net loss                                                                   $(2,938,000)       $(3,103,000)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization                                                409,000            423,000
    Stock based compensation                                                     799,000          1,721,000
    Warrant issued to related party shareholders                                 173,000                 --
    Provisions for returns                                                       761,000           (663,000)
    Bad debt expense                                                             166,000            155,000
    Reserve for inventory obsolescence                                                --            302,000
  Changes in operating assets and liabilities:
    (Increase) decrease in
       Inventories                                                             1,812,000         (2,246,000)
       Accounts receivable                                                    (1,316,000)        (1,060,000)
       Prepaid expenses                                                          130,000           (387,000)
       Other current assets                                                     (224,000)           (93,000)
       Other assets                                                              (35,000)                --
    Increase (decrease) in
       Accounts payable                                                         (281,000)           509,000
       Accrued expenses and other current liabilities                            216,000           (224,000)
       Deferred revenue                                                         (256,000)          (250,000)
                                                                             -----------        -----------
Net cash used in operating activities                                           (584,000)        (4,916,000)
                                                                             -----------        -----------

Cash flows from investing activities

  Purchase of property and equipment                                            (610,000)          (850,000)
                                                                             -----------        -----------
  Net cash used in investing activities                                         (610,000)          (850,000)
                                                                             -----------        -----------

Cash flows from financing activities
  Payments of capital lease obligation                                                --            (14,000)
  Net proceeds from exercise of stock options                                         --              6,000
  Purchase of Treasury Stock                                                     (22,000)          (160,000)
                                                                             -----------        -----------
  Net cash used in financing activities                                          (22,000)          (168,000)
                                                                             -----------        -----------

Net decrease in cash and cash equivalents                                     (1,216,000)        (5,934,000)
Cash and cash equivalents - beginning of period                                6,730,000         20,188,000
                                                                             -----------        -----------
Cash and cash equivalents - end of period                                     $5,514,000        $14,254,000
                                                                             -----------        -----------

Supplemental disclosure of cash flow information:
Cash paid for interest                                                           $48,000            $23,000
                                                                             -----------        -----------
Warrant issued to related party shareholders                                    $173,000                 --
                                                                             -----------        -----------
</TABLE>

    The accompanying notes are an integral part of these condensed financial
                                   statements.

                                        5
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

NOTE 1 - BASIS OF PRESENTATION

The accompanying financial statements include the accounts of Bluefly, Inc. (the
"Company"). The financial  statements have  been  prepared  in  accordance  with
generally  accepted  accounting principles for interim financial information and
with  the  instructions  to  Form  10-Q   and  Article  10  of  Regulation  S-X.
Accordingly, they do not include all of the information and footnote disclosures
required  by  accounting  principles  generally accepted in the United States of
America for complete  financial  statements. In  the  opinion of management, all
adjustments   (consisting   mainly   of   normal  recurring accruals) considered
necessary for a fair statement have been included.  The results of operations of
any interim period are not necessarily indicative  of  the results of operations
to  be  expected   for   the  fiscal year due to seasonal and other factors. For
further  information,  refer  to  the  financial  statements  and   accompanying
footnotes  included  in  the Company's Form 10-K for the year ended December 31,
2007.

The Company  has sustained  net losses  and negative  cash flows from operations
since the launch of Bluefly.com.  The Company's ability to meet  its obligations
in the  ordinary course  of business  is dependent  on its  ability to establish
profitable operations,  or find  other sources  to fund  operations. The Company
believes  that  its  current  funds,  together  with  working  capital,  and its
availability under  its existing  Credit Facility  and the  Commitment (as  such
terms are  hereinafter defined),  will be  sufficient to  enable it  to meet its
planned expenditures through at least the next 12 months.

NOTE 2 - THE COMPANY

The  Company  is a  leading  Internet retailer  that  sells over  350  brands of
designer apparel, accessories and home products at discounts of up to 75% off of
retail value. The  Company's e-commerce Web  site ("Bluefly.com" or  "Web Site")
was launched in September 1998.

NOTE 3 - REVERSE STOCK SPLIT

On March 13, 2008, the Company's Board of Directors approved a 1-for-10  reverse
stock split of the Company's Common Stock. The record date for the reverse stock
split was April 3, 2008, and the reverse stock split was effective as of  11:59,
P.M., EST, on the same date. Retroactive restatement has been given to all share
numbers in this report, and accordingly, all amounts including per share amounts
are shown on a post-split basis.

NOTE 4 - NASDAQ COMPLIANCE

The Company  had previously  announced that  it was  not in  compliance with the
$1.00 minimum per share requirement for continued listing as set forth in Nasdaq
Marketplace Rule  4310(c)(4), and  had been  granted an  extension by the Nasdaq
Listing Qualifications Panel to regain compliance. Because the Company's  Common
Stock closed at a  price of $1.00 or  more for ten consecutive  trading days, it
regained compliance with such rule on April 17, 2008. In addition, on April  16,
2008, the Company received a letter from the Nasdaq Listing Qualifications Staff
(the "Staff")  stating that  it had  determined that  the Company  had failed to
comply with the shareholder approval rules set forth in Nasdaq Marketplace  Rule
4350(i)(1)(A)  because  certain  warrants issued  to  affiliates  of Soros  Fund
Management LLC  ("Soros") and  private funds  associated with  Maverick Capital,
Ltd. ("Maverick"),  each of  whom has  representation on  the Company's Board of
Directors, in  connection with  their debt  financing commitment  had originally
been issued  with an  exercise price  based on  the twenty-day  trailing average
trading price of  the Company's Common  Stock, which was  lower than the  market
value  of  the Company's  Common  Stock on  the  day immediately  preceding  the
issuance of the warrants The Staff advised the Company that the issuance of  the
warrants to Soros and  Maverick at a price  less than the market  value would be
treated as equity compensation  and would require shareholder  approval pursuant
to  Nasdaq Marketplace  Rule 4350(i)(1)(A),  unless the  exercise price  of the
warrants  was increased  to market  value. Thereafter,  the Company,  Soros and
Maverick agreed  to amend  the terms  of the  warrants to  increase the exercise
price of  the warrants  to a  price equal  to the  market value of the Company's
Common Stock on the day immediately preceding the issuance of the warrants. As a
result, the Staff determined that the Company had regained compliance with  such
rule by amending the warrants  to increase the exercise price.  Accordingly, the
Company  believes that  it has  now resolved  all outstanding  issues regarding
Nasdaq listing requirements.

NOTE 5- 2008 COMMITMENT FROM RELATED PARTY

In March  2008, the  Company entered  into an  agreement (the "Commitment") with
affiliates of Soros Fund Management  LLC ("Soros") and private funds  associated
with  Maverick  Capital, Ltd.  ("Maverick")  pursuant to  which  they agreed  to
provide up to

                                        6
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

$3 million of debt financing to the Company, on a standby basis, available until
March 2009, provided  that the commitment  amount will be  reduced by the  gross
proceeds of any  equity financing consummated  during the year.  The Company can
draw down debt in one or more tranches, provided that its cash balances are less
than $1 million at the time of  any draw down. The draw downs will  be evidenced
by subordinated convertible  notes (the "Subordinated  Notes") that have  a term
expiring on the later of June 26, 2011 and three years from the date of issuance
of  the Subordinated  Notes and  bear interest  at the  rate of  8% per  annum,
compounded  annually.  Interest  is payable  upon  maturity  or conversion.  The
Subordinated Notes  are convertible  (subject to  stockholder approval),  at the
holder's option into (a) equity securities  that the Company might issue in  any
subsequent round of  financing at a  price equal to  the lowest price  per share
paid by any investor in such  subsequent round of financing or (b)  Common Stock
at a price per share equal to  the market price (as defined in the  Subordinated
Notes) on the  date of issuance  of the Subordinated  Note. The Company  has not
drawn on the Commitment as of the Balance Sheet date.

In connection  with the  Commitment, the  Company issued  warrants to  Soros and
Maverick  to  purchase an  aggregate  of 52,497  shares  of Common  Stock  at an
exercise  price equal  to the  trailing 20-day  average stock  price, or  $4.40.
Subsequent  to quarter  end, on  April 8,  2008, the  warrants were  amended to
increase  the  exercise price  from  $4.40 per  share  to $5.10  per  share. The
exercise price  of $5.10  per share  equals the  closing price  of the Company's
Common Stock on the day immediately preceding the issuance of the warrants.

The Company used the Black-Scholes option pricing method (assumption: volatility
79.6%, risk free rate 2.96% one and a five year expected life and zero  dividend
yield) to calculate the value of  the 52,497 warrants issued in connection  with
the Commitment. Using those assumptions,  a value of approximately $173,000  was
assigned to the warrants. This amount was credited to additional paid in capital
and is being expensed to interest expense over the life of the commitment  which
is one year. There was no accounting impact as a result of the modification.

NOTE 6 - FINANCING AGREEMENT

In March 2008, the Company amended  its credit facility with Wells Fargo  Retail
Finance,  LLC  ("Wells Fargo")  (the  credit facility  as  amended is  hereafter
referred to as the "Credit Facility") to (i) extend the term until July 26, 2011
from  July 26,  2008; (ii)  change the  rate at  which interest  accrues on  the
average daily amount under the Credit  Facility during the preceding month to  a
per annum rate equal to the prime rate plus 0.75% or LIBOR plus 3.25% on average
excess availability less than  $3.0 million and prime  rate plus 0.50% or  LIBOR
plus 3% on average excess availability greater than $3.0 million; (iii) increase
the monthly commitment fee on the unused portion of the Credit Facility to 0.50%
from 0.35%; (iv) include a servicing  fee of $3,333 per month; (v)  increase the
early termination fee to 1% of the revolving credit ceiling, from 0.50%  through
maturity; and (vi) amend  the standby and documentary  letter of credit fees  to
3.25% and  2.75%, respectively,  on average  excess availability  less than $3.0
million,  and  3.00% and  2.50%,  respectively, on  average  excess availability
greater than $3.0 million.

In addition, the  amendment provides for  no revolving credit  loans to be  made
unless the full amount available pursuant to the Commitment has been advanced to
the Company and is outstanding.  In connection with this amendment,  the Company
paid Wells Fargo a $35,000 amendment fee. Under the terms of a Subordination and
Intercreditor  Agreement,  dated  as  of  March  26,  2008  (the  "Subordination
Agreement"), Soros and Maverick have the right to purchase all of the  Company's
obligations from Wells Fargo at any time if the Company is in default under  the
Credit Facility.

Under the terms of the Credit Facility, Wells Fargo provides the Company with  a
revolving credit facility and issues letters of credit in favor of suppliers  or
factors. The Credit Facility  is secured by a  lien on substantially all  of the
Company's  assets.  Availability under  the Credit  Facility is  determined by a
formula  that  takes  into account  a certain  percentage of  the amount  of the
Company's  inventory  and  a  certain  percentage  of  the  Company's   accounts
receivable.  The  maximum  availability  is  currently  $7,500,000,  but  can be
increased  to  $12,500,000  at   the  Company's  request,  subject   to  certain
conditions. As of March 31,  2008, total availability under the  Credit Facility
was  approximately  $6,539,000,  of  which  $3,250,000  was  committed,  leaving
approximately $3,289,000 available for further borrowings.

For the three  months ended March  31, 2008, the  Company incurred approximately
$48,000 of fees under the Credit Facility.

NOTE 7 - LOSS PER SHARE

The  Company has  determined Loss  Per Share  in accordance  with Statement  of
Financial Accounting  Standards ("SFAS")  No. 128,  "Earnings Per  Share." Basic
loss per share excludes dilution and  is computed by dividing loss available  to
common shareholders by the weighted average number of common shares  outstanding
for the period.

                                        7
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

Due to the loss from continuing operations, (i) options and warrants to purchase
shares of Common Stock, (ii)  Preferred Stock convertible into shares  of Common
Stock, (iii) restricted stock awards that have not yet vested and (iv)  deferred
stock unit awards for shares that have not yet been delivered were not  included
in  the  computation  of diluted  loss  per  share because  the  result  of such
inclusion would be antidilutive:

<TABLE>
<CAPTION>
Security                March 31, 2008           Exercise Prices        March 31, 2007            Exercise Prices
--------                --------------           ---------------        --------------            ---------------
<S>                            <C>                <C>                        <C>                  <C>
Options                        372,257            $4.10 - $27.30               378,453            $8.00 - $143.80
Restricted Stock               957,625 (2)                    --             1,067,161 (2)                     --
Awards/DSUs
Warrants                       173,915            $5.10 - $39.60               151,089             $7.80 - $39.60
Preferred Stock                 69,634 (1)                    --                69,634 (1)                     --
</TABLE>

(1) At March  31, 2008 and 2007, there were 571 shares of Series F Convertible
    Preferred Stock outstanding that are convertible into approximately 69,634
    shares of Common Stock (excluding dividends).

(2) Includes Restricted Stock Awards and DSUs.

NOTE 8 - STOCK BASED COMPENSATION

The  Company  accounts  for  stock based  compensation  in  accordance  with the
provisions  of  Statement of  Financial  Accounting Standards  No.  123 (revised
2004), "Share-Based Payment" ("SFAS No. 123(R)"), which requires that the  costs
resulting  from  all  share-based  payment  transactions  be  recognized  in the
financial statements at their fair  values. The Company adopted SFAS  No. 123(R)
using the modified prospective application method under which the provisions  of
SFAS No.  123(R) apply  to new  awards and  to awards  modified, repurchased, or
cancelled  after  the adoption  date.  Additionally, compensation  cost  for the
portion of the awards for which the requisite service has not been rendered that
are  outstanding as  of the  adoption date  is recognized  in the  Statement of
Operations over the  remaining service period  after the adoption  date based on
the  award's original  estimate of  fair value.  Total share-based  compensation
expense recorded in the Statement of Operations for the three months ended March
31, 2008 and 2007 was $799,000 and $1,721,000, respectively.

Stock Options
The fair  value of  options granted  is estimated  on the  date of grant using a
Black-Scholes option pricing model.  Expected volatilities are calculated  based
on the historical volatility of the Company's Common Stock. Management  monitors
share option exercise and  employee termination patterns to  estimate forfeiture
rates  within  the  valuation  model. The  expected  holding  period  of options
represents  the  period  of  time  that  options  granted  are  expected  to  be
outstanding. The risk-free interest rate for periods within the expected life of
the option is based on the interest rate of U.S. Treasury notes in effect on the
date of the grant.

The following table summarizes the Company's stock option activity:

<TABLE>
<CAPTION>
                                  Number of shares        Weighted Average Exercise
                                                                   Price
<S>                                        <C>                               <C>
Balance at January 1, 2008                 342,879                           $10.51
  Options granted                           35,000                            $4.57
  Options canceled                          (5,622)                          $10.58
  Options exercised                             --
Balance at March 31, 2008                  372,257                            $9.95

Vested at December 31, 2007                287,112                           $10.37
Vested at March 31, 2008                   292,982                           $10.39
</TABLE>

During the first quarter of 2008, 10,527 options vested. The total fair value of
the options  that vested  (including those  canceled) during  the quarter  ended
March 31, 2008 was approximately $100,000. There were 35,000 stock options

                                        8
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

granted during the quarter. At March 31, 2008, the aggregate intrinsic value  of
the fully vested options was  $0 and the weighted average  remaining contractual
life  of  the  options  was  5.7 years.  The  Company  has  not  capitalized any
compensation cost, or modified any of  its stock option grants during the  first
quarter of 2008. During the first quarter of 2008, no options were exercised and
no cash was used to settle equity instruments granted under the Plans.

As of March 31,  2008, the total compensation  cost related to non-vested  stock
option  awards not  yet recognized  was $384,000.   Total compensation  cost is
expected to be recognized over one year on a weighted average basis.

Restricted Stock Awards and Deferred Stock Unit Awards
The following table is a summary of activity related to restricted stock  swards
and deferred stock unit awards for employees at March 31, 2008:

<TABLE>
<CAPTION>
                                                             Restricted     Deferred Stock
                                                           Stock Awards       Unit Awards

<S>                                                           <C>             <C>
Balance at January 1, 2008                                       39,653            714,750
Shares/Units Granted                                              7,500            250,000
Shares/Units Forfeited                                            (750)            (15,000)
Shares/Units Restriction Lapses                                (38,528)                 --
Balance at March 31, 2008                                         7,875            949,750

Weighted Average Grant Date Fair Value Per share                  $3.24              $8.32
Aggregate Grant Date Fair Value                                 $34,515         $7,901,920

Vesting Service Period of Shares Granted                      12 months       12-36 months
Number of shares/units vested at March 31, 2008                  38,528                 --
Number of shares/units unvested at March 31, 2008                 7,875            949,750
</TABLE>

For  the quarter  ended March  31, 2008  the Company  recognized an  expense of
approximately $668,000 in connection with these awards.

As  of  March  31,  2008  the  total  compensation  cost  related  to non-vested
restricted stock and deferred stock  units not yet recognized was  $3.1 million.
Total compensation cost is expected to be recognized over a one year period.

NOTE 9 - FAIR VALUE
Effective  January  1,  2008, the  Company  implemented  Statement of  Financial
Accounting Standard No. 157, Fair Value Measurement, ("SFAS 157"), which defines
fair  value,  establishes  a  framework for  measuring  fair  value  and expands
disclosure  about  fair  value  measurements.  The  fair  value  hierarchy   for
disclosure of fair value measurements under SFAS 157 is as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Quoted prices for similar assets and liabilities in active markets or
inputs that are observable

Level 3 - Inputs that are unobservable (for example cash flow modeling inputs
based on assumptions)

The adoption of FAS 157 did not have an impact on our financial position or
results of operations.

In February 2008, the FASB issued FASB Staff Position 157-2 ('FSP 175-2'), which
delayed the implementation of FAS  157 until January 1, 2009,  for non-financial
assets and liabilities that are not required  to be measured at fair value on  a
recurring basis. Pursuant to  FSP 157-2, the Company  did not adopt FAS  157 for
non-financial assets and liabilities. We  are currently assessing the impact  of
FAS 157 on our non-financial assets and liabilities.

The Company did not have  any other significant financial assets  or liabilities
not currently valued at fair value.

                                        9
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS

In  March 2008,  the FASB  issued SFAS  No. 161,  "Disclosures about  Derivative
Instruments and Hedging Activities," ("SFAS  No. 161"). SFAS No. 161  amends and
expands the disclosure requirements of SFAS No. 133, "Accounting for  Derivative
Instruments  and  Hedging  Activities."   SFAS  No.  161  requires   qualitative
disclosures about objectives and strategies for using derivatives,  quantitative
disclosures  about  fair  value  amounts  of  gains  and  losses  on  derivative
instruments  and disclosures  about credit-risk-related  contingent features  in
derivative  agreements. This  statement is  effective for  financial  statements
issued for fiscal years beginning after November 15, 2008. The adoption of  SFAS
No. 161 will not affect our  financial condition and results of operations,  but
may  require additional  disclosures if  we enter  into derivative  and hedging
activities.

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

Overview

Bluefly, Inc.  is a  leading Internet  retailer that  sells over  350 brands  of
designer apparel, accessories and home furnishings at discounts of up to 75% off
of retail value. We launched our Web site in September 1998.

We believe that there is an opportunity to accelerate the growth of our business
while continuing to provide our customers  with the great values that they  have
become accustomed to.  In an effort  to take advantage  of this opportunity,  we
began a national advertising campaign  that featured both print and  television.
Over the past  two and a  half years, we  have increased awareness  by targeting
general advertising  efforts to  a more  fashion focused  consumer. In  2007, we
further refined our marketing strategy by aligning ourselves with  entertainment
properties, such as BravoTV.com and Project Runway.

Our net sales increased by 14%  to $25,245,000 for the three months  ended March
31, 2008 from $22,108,000 for the  three months ended March 31, 2007.  Our gross
margin decreased to 35.4% for the  three months ended March 31, 2008  from 37.9%
for the  three months  ended March  31, 2007.  The decrease  in gross margin was
primarily the  result of  increased promotional  activity during  the first  two
months  of  the first  quarter  of 2008,  as  we liquidated  some  of our  older
inventory. Our gross profit increased by 6.7% to $8,936,000 for the three months
ended March 31, 2008 from $8,374,000 for the three months ended March 31,  2007.
Our operating loss decreased to $2,902,000 for the three months ended March  31,
2008 from $3,222,000 for  the three months ended  March 31, 2007. This  decrease
was  primarily  a result  of  an increase  in  net sales,  gross  margin dollars
compared to the prior year as  well as decreases in total marketing  and general
and administrative expenses and was  partially offset by an increase  in selling
and fulfillment  expenses. Marketing  expenses (excluding  staff related  costs)
increased to $3,228,000 for  the first quarter of  2008 from $3,182,000 for  the
first quarter 2007, primarily as a  result of a shift in our  marketing strategy
to more online programs compared to the first quarter of 2007.

Our reserve for returns and credit card chargebacks increased to 40.2% of  gross
sales for the first quarter of 2008  compared to 39.2% for the first quarter  of
2007. The increase was primarily caused by an increase in our return rate  which
was, in turn, caused in part, by  a shift in our merchandise mix towards  higher
end products. However, we  believe that this increase  in return rates has  been
more than offset by the higher gross margin dollars and average order sizes that
have been generated by this shift in merchandise mix.

A portion of  our inventory includes  merchandise that we  either purchased with
the intention  of holding  for the  appropriate season  or were  unable to  sell
through in its entirety  in a prior season  and have determined to  hold for the
next  selling season,  subject (in  some cases)  to appropriate  mark-downs. In
recent years, we have increased the amount of inventory purchased on a pack  and
hold basis in order to take advantage of opportunities in the market.

At March 31, 2008, we had an accumulated deficit of $134,764,000. The net losses
and  accumulated  deficit  resulted primarily  from  the  costs associated  with
developing and marketing our Web  site and building our infrastructure,  as well
as  non-cash  beneficial  conversion charges  resulting  from  decreases in  the
conversion price of our Preferred Stock and the payment of dividends to  holders
of Preferred  Stock. In  order to  expand our  business, we  intend to invest in
sales,   marketing,   merchandising,  operations,   information   systems,  site
development and additional personnel to support these activities.  Therefore, we
may continue to incur substantial operating losses. Although we have experienced
revenue growth in recent years, this growth may not be sustainable and therefore
should not be considered indicative of future performance.

Results Of Operations

                                       10
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

For The Three  Months Ended March  31, 2008 Compared  To The Three  Months Ended
March 31, 2007.

The following table sets  forth our statement of  operations data for the  three
months ended March 31st. All data is in thousands except as indicated below:

<TABLE>
<CAPTION>
                                                     2008                   2007                  2006
                                                     ----                   ----                  ----

                                                        As a % of              As a % of              As a % of
                                                        Net Sales              Net Sales              Net Sales
<S>                                          <C>         <C>        <C>         <C>        <C>         <C>
Net sales                                    $25,245      100.0%    $22,108      100.0%    $16,876      100.0%
Cost of sales                                 16,309       64.6%     13,734       62.1%     10,037       59.5%
                                             -------                -------                -------
      Gross profit                             8,936       35.4%      8,374       37.9%      6,839       40.5%

Selling and fulfillment expenses               5,069       20.1%      4,399       19.9%      3,433       20.3%
Marketing expenses                             3,522       14.0%      3,611       16.3%      4,031       23.9%
General and administrative expenses            3,247       12.9%      3,586       16.2%      2,427       14.4%
                                             -------                -------                -------
      Total operating expenses                11,838       46.9%     11,596       52.4%      9,891       58.6%

Operating loss                                (2,902)    (11.5)%     (3,222)    (14.5)%     (3,052)    (18.1)%
Interest (expense) and other income              (36)      (.1)%        119        0.5%       (212)     (1.3)%
                                             -------                -------                -------

      Net loss                                (2,938)    (11.6)%     (3,103)    (14.0)%     (3,264)    (19.4)%
</TABLE>

We also  measure and  evaluate ourselves  against certain  other key operational
metrics. The following table sets forth our actual results based on these  other
metrics for the three months ended March 31st, as indicated below:

<TABLE>
<CAPTION>
                                                                    2008             2007               2006
                                                                    ----             ----               ----
<S>                                                              <C>              <C>                <C>
Average Order Size (including shipping & handling)               $273.65          $269.21            $243.92
New Customers Added during the Period*                            56,855           49,385             38,688
</TABLE>

* Based on unique email addresses

In addition, to the financial statement items and metrics listed above, we  also
report gross sales, which is a non-GAAP financial measure. We define gross sales
as the total dollar amount  of orders received by customers  (including shipping
and handling) net  of customer credits,  but before any  reserves are taken  for
returns or bad debt. We believe  that the presentation of gross sales  is useful
to investors because (a) it provides an alternative measure of the total  demand
for the products sold by the Company and (b) it provides a basis upon with which
to measure the percentage of total demand that is reserved for both returns  and
bad debt. Management uses the gross sales measure for these same reasons.

Net sales: Gross sales  for the three months  ended March 31, 2008  increased by
approximately 16%  to $42,187,000  from $36,367,000  for the  three months ended
March  31, 2007.  For the  three months  ended March  31, 2008,  we recorded  a
provision  for  returns  and  credit card  chargebacks  and  other  discounts of
$16,942,000, or approximately 40.2% of  gross sales. For the three  months ended
March 31, 2007, the provision for returns and credit card chargebacks and  other
discounts was $14,259,000, or approximately  39.2% of gross sales. The  increase
in this provision as  a percentage of gross  sales resulted from an  increase in
the return rate. The increase was primarily caused by a shift in our merchandise
mix  towards higher  end products.  However, we  believe that  this increase  in
return rates has been  more than offset by  the higher gross margin  dollars and
average order sizes that have been generated by this shift in merchandise mix.

After  the  necessary  provisions  for  returns,  credit  card  chargebacks  and
adjustments for sales taxes, our net sales for the three months ended March  31,
2008 were $25,245,000. This represents an increase of approximately 14% compared
to  the  three  months  ended  March  31,  2007,  in  which  net  sales  totaled
$22,108,000. The  growth in  net sales  resulted from  both an  increase in  the
number of new customers  acquired (over 15% higher  compared to the first  three
months of 2007) and an increase  in average order size (approximately 2%  higher
compared to the first  three months of 2007).  For the three months  ended March
31, 2008, revenue from  shipping and handling (which  is included in net  sales)
increased approximately 20.7% to $1,451,000

                                       11
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

from $1,202,000 for the three months ended March 31, 2007. Shipping and handling
revenue increased at greater percentage than  revenue as a whole as a  result of
an increased number of customers selecting express and international shipping.

Cost of sales: Cost of sales consists of the cost of product sold to  customers,
in-bound  and  out-bound  shipping costs,  inventory  reserves,  commissions and
packing materials.  Cost of  sales for  the three  months ended  March 31,  2008
totaled $16,309,000, resulting in gross  margin of approximately 35.4%. Cost  of
sales for the three months  ended March 31, 2007 totaled  $13,734,000, resulting
in gross margin of 37.9%.The gross margin was negatively effected by a  decrease
in the  overall product  margin, as  we were  promotional during  the first  two
months of  the quarter  compared to  2007, as  we were  trying to liquidate some
older inventory. Gross profit increased by approximately 6.7%, to $8,936,000 for
the three  months ended  March 31,  2008 compared  to $8,374,000  for the  three
months ended March 31, 2007. The growth in gross profit was primarily the result
of increased average order size and growth in sales.

Marketing expenses: Marketing expenses decreased  by 2.5% to $3,522,000 for  the
three months ended  March 31, 2008  from $3,611,000 for  the three months  ended
March 31, 2007.

Marketing expenses  include expenses  related to  paid search,  online and print
advertising, television, fees to marketing affiliates, direct mail campaigns  as
well  as  staff related  costs.  As a  percentage  of net  sales,  our marketing
expenses decreased to 14.0% for the three months ended March 31, 2008 from 16.3%
for  the  three months  ended  March 31,  2007.  Total expenses  related  to the
national print and  television advertising campaign  for the three  months ended
March 31,  2008 totaled  $1.4 million  compared to  $1.9 million  for the  three
months ended March 31, 2007. This decrease was partially offset by the following
increases:  $221,000  related  to paid  search,  $97,000  related to  comparison
engines, $75,000 related to banners, $70,000 paid to consultants and $64,000  in
affiliate expenses.

Selling and fulfillment expenses: Selling and fulfillment expenses increased  by
15.2% in the first  three months of 2008  compared to the first  three months of
2007. Selling and fulfillment expenses were comprised of the following:

<TABLE>
<CAPTION>

                     Three  Months     As a % of     Three  Months     As a % of     Percentage Difference
                     --------------    ---------     -------------     ---------     ---------------------
                         Ended         Net Sales         Ended         Net Sales       increase (decrease)
                     --------------    ---------     -------------     ---------     ---------------------
                     March 31, 2008                  March 31, 2007
                     --------------                  -------------
<S>                    <C>               <C>          <C>                <C>                <C>
Operating              $2,944,000        11.7%        $ 2,266,000        10.2%               29.9%
Technology              1,282,000         5.1%          1,167,000         5.3%                9.8%
E-Commerce                843,000         3.3%            966,000         4.4%              (12.7%)
                       ----------        -----        -----------
                       $5,069,000        20.1%        $ 4,399,000        19.9%               15.2%
</TABLE>

As a percentage of net sales, our selling and fulfillment expenses increased  to
20.1% for the three months ended March 31, 2008 from 19.9% for the three  months
ended March 31, 2007.

Operating  expenses   include  all   costs  related   to  inventory  management,
fulfillment, customer service, and  credit card processing.  Operating  expenses
increased in the first three months  of 2008 by approximately 29.9% compared  to
the first three months of 2007 as a result of variable costs associated with the
increased sales volume (e.g., picking and packing orders and processing returns)
and  price per  order as  well as  an increase  in customer  service and  salary
related expenses.

Technology expenses consist  primarily of staff  related costs, amortization  of
capitalized costs and  Web site hosting.  For the three  months ended March  31,
2008, technology expenses increased by approximately 9.8% compared to the  three
months ended March 31, 2007. This increase resulted from an increase in software
support, depreciation  and web  hosting expenses,  and was  slightly offset by a
decrease in salary related expenses.  Consulting expenses incurred in the  first
quarter 2008 were related to the development of our new Web site and capitalized
accordingly. For the three months  ended March 31, 2008, approximately  $411,000
of expenses was capitalized  in connection with the  development of our new  Web
site. As  of March  31, 2008,  approximately $4,044,000  has been capitalized in
connection with the project.

E-Commerce  expenses  include  expenses  related  to  our  photo  studio,  image
processing, and  Web  site  design. For the three  months ended March 31,  2008,
e-commerce expenses  decreased by approximately 12.7%  as compared  to the three
months ended  March 31,  2007, primarily  due to  a decrease  in salary  related
expenses  as  well as  a  decrease in  expenses  associated with  photo  shoots,
supplies and research tools.

                                       12
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

General and administrative expenses: General and administrative expenses include
merchandising,  finance  and  administrative  salaries  and  related   expenses,
insurance  costs,  accounting  and legal  fees,  depreciation  and other  office
related expenses. General and administrative expenses for the three months ended
March 31,  2008 decreased  by approximately  9.5% to  $3,247,000 as  compared to
$3,586,000 for the three  months ended March 31,  2007. The decrease in  general
and administrative  expenses was  primarily the  result of  a decrease in equity
based compensation  related to  equity awards  of $775,000  and depreciation  of
$42,000.   These  amounts  were  offset  by  increased  legal  fees  of $25,000,
increased salary related  expenses of $92,000  and increased recruiting  fees of
$36,000.

As a percentage of net sales, general and administrative expenses for the  first
three months of 2008 decreased to  approximately 12.9% from 16.2% for the  first
three months of 2007.

Loss from operations: Operating loss decreased in the first three months of 2008
to $2,902,000 from $3,222,000 in the first three months of 2007.

Interest  income:  Other  income  for the  three  months  ended  March 31,  2008
decreased to $36,000 from  $195,000 for the three  months ended March 31,  2007.
These amounts related primarily to interest income earned on our cash balances.

Interest and other  expense: Interest expense  for the three  months ended March
31, 2008 totaled $72,000, compared to  $76,000 for the three months ended  March
31, 2007.  Interest expense  includes fees  paid in  connection with  our Credit
Facility.

Liquidity And Capital Resources

General

At  March  31,  2008,  we  had  approximately  $5.5  million  in  cash  and cash
equivalents. Working capital at  March 31, 2008 and  2007 was $18.6 million  and
$32.0 million,  respectively. Working  capital at  December 31,  2007 was  $21.0
million. In addition, as  of March 31, 2008,  we had approximately $3.2  million
committed  under  the Credit  Facility,  leaving approximately  $3.3  million of
availability.

Standby Financing Commitment

In March 2008,  Soros and Maverick  agreed to provide  up to $3  million of debt
financing to us, on a standby basis, available until March 2009, during the next
year, provided that the commitment amount will be reduced by the gross  proceeds
of any equity financing  consummated during the year.  We can draw down  debt in
one or more tranches, provided that  our cash balances are less than  $1 million
at  the  time  of any  draw  down.  The draw  downs  will  be evidenced  by  the
Subordinated Notes.  The Subordinated Notes have a term expiring on the later of
June 26, 2011 and three years from the date of issuance and bear interest at the
rate of 8% per annum, compounded annually. Interest is payable upon maturity  or
conversion.  The  Subordinated  Notes are  convertible  (subject  to stockholder
approval), at the  holder's option into  (a) equity securities  that the Company
might issue in any subsequent round of financing at a price equal to the  lowest
price per share paid  by any investor in  such subsequent round of  financing or
(b) Common Stock at a price per  share equal to the market price (as  defined in
the Subordinated Notes) on the date of issuance of the Subordinated Note.

We  fund  our operations  through  cash on  hand,  operating cash  flow  and the
proceeds of any  equity or debt  financing. Operating cash  flow is affected  by
revenue and gross margin levels, as well as return rates, and any  deterioration
in  our  performance with  respect  to these  financial  measures would  have  a
negative impact on our liquidity.  Total availability under the Credit  Facility
is based  primarily upon  our inventory  levels. In  addition, both availability
under the  Credit Facility  and our  operating cash  flows are  affected by  the
payment terms  that we  receive from  suppliers and  service providers,  and the
extent to which suppliers  require us to request  Wells Fargo to provide  credit
support under the  Credit Facility. In  some instances, new  vendors may require
prepayments.  We  may   make  prepayments  in   order  to  open   up  these  new
relationships,  or to  gain access  to inventory  that would  not otherwise  be
available to us. In addition,  we sometimes make prepayments in  connection with
our advertising campaign, as in some circumstances we need to pay in advance  of
production.  As of  March 31,  2008, we  had approximately  $140,000 of  prepaid
inventory and approximately $662,000 of  prepaid marketing on our balance  sheet
compared to $378,000 and $773,000 in the first quarter of 2007.

Credit Facility
                                       13
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

Pursuant to the Credit Facility, Wells  Fargo provides us with a revolving  loan
and  issues letters  of credit  in favor  of suppliers  or factors.  The Credit
Facility is  secured by  a lien  on all  of our  assets. Availability  under the
Credit Facility is  determined by a  formula that takes  into account a  certain
percentage of our inventory and a certain percentage of our accounts receivable.
The  maximum  availability is  currently  $7,500,000, but  can  be increased  to
$12,500,000 at  our request,  subject to  certain conditions.   As of  March 31,
2008, total availability under the Credit Facility was approximately  $6,539,000
of which  $3,250,000 was  committed, leaving  approximately $3,289,000 available
for further borrowings.

Interest  accrues monthly  on the  average daily  amount outstanding  under the
Credit Facility  during the  preceding month  at a  per annum  rate equal to the
prime rate plus 0.75%  or LIBOR plus 3.25%  on average excess availability  less
than $3.0 million and prime rate plus  0.50% or LIBOR plus 3% on average  excess
availability greater than $3.0 million. We also pay a monthly commitment fee  on
the unused portion of  the facility (i.e., $7,500,000  less the amount of  loans
outstanding) equal to 0.50% and a servicing fee of $3,333 per month. We also pay
Wells Fargo certain fees to open  letters of credit and guarantees in  an amount
equal to  a certain  specified percentage  of the  face amount  of the letter of
credit for each thirty  (30) days such letter  of credit, or a  portion thereof,
remains open. No revolving  credit loans may be  made under the Credit  Facility
unless the full amount available pursuant to the Commitment has been advanced to
the Company and is outstanding.

Under the  terms of  the Subordination  Agreement, Soros  and Maverick  have the
right to purchase all of our obligations from Wells Fargo at any time if we  are
then in default under the Credit Facility.

We  believe  that  our  current  funds,  together  with  operating  cash   flow,
availability under our  existing Credit Facility  and the Commitment  from Soros
and Maverick will be  sufficient to enable us  to meet our planned  expenditures
through the next 12  months. However, in order  to accelerate the growth  of our
business, we may seek to raise additional equity capital.

Commitments and Long Term Obligations

As of March 31, 2008, we had the following commitments and long term
obligations:

<TABLE>
<CAPTION>
                                           Total        Less than           1-3              3-5          More
                                                          1 year           years            years        than 5
                                                                                                          years
<S>                                    <C>              <C>              <C>               <C>              <C>
Marketing and Advertising              $  1,900,000      1,900,000                              --          --
Purchase Orders                          17,321,000     17,321,000              --              --          --
Operating Leases                          2,105,000        684,000       1,364,000          57,000          --
Employment Contracts                      5,786,000      2,266,000       3,477,000          43,000          --
                                       ------------     ----------       ---------         -------       -----
   Grand total                         $ 27,112,000     22,171,000       4,841,000         100,000          --
</TABLE>

We believe that in order to grow  the business, we will need to make  additional
marketing and advertising commitments in  the future. In addition, we  expect to
hire  and  train additional  employees  for the  operations  and development  of
Bluefly.com.   However,  our  marketing  budget and  our  ability  to  hire such
employees  is  subject  to  a  number  of  factors,  including  our  results  of
operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have assessed our vulnerability  to certain market risks, including  interest
rate  risk  associated with  financial  instruments included  in  cash and  cash
equivalents.  Due  to  the  short-term  nature  of  these  instruments  we  have
determined that the risks associated with interest rate fluctuations related  to
these financial instruments do not pose a material risk to us.

Item 4T. Controls and Procedures.

As of the end of the period  covered by this Form 10-Q (the "Evaluation  Date"),
we carried out an evaluation,  under the supervision and with  the participation
of our management,  including our Chief  Executive Officer along  with our Chief
Financial  Officer, of  the effectiveness  of the  design and  operation of  our
disclosure controls and procedures (as  defined in Exchange Act Rules  13a-15(e)
and 15d-15(e)). Based  upon that evaluation,  our Chief Executive  Officer along
with our Chief Financial Officer concluded that, as of the Evaluation Date,  our
disclosure controls and procedures  were effective in ensuring  that information
required to be disclosed by us in  the reports that we file or submit  under the
Exchange Act were recorded, processed, summarized and reported, within the  time
periods  specified in  the Commission's  rules and  forms and  are effective  to
ensure that information required  to be disclosed by  us in the reports  that we
file or submit under the Exchange Act is accumulated and

                                       14
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

communicated to our management, including our principal executive and  principal
financial officers,  to allow  timely decisions  regarding required  disclosure.
There have been no changes in our internal control over financial reporting that
occurred during the  Company's most recent  fiscal quarter that  have materially
affected, or are reasonably likely to materially affect, the Company's  internal
control over financial reporting.

Special Note Regarding Forward Looking Statements

This report may include statements that constitute "forward-looking" statements,
usually  containing  the  words  "believe",  "project",  "expect",  or   similar
expressions. These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks  and uncertainties that  could cause actual  results to
differ  materially   from  the   forward-looking  statements.   The  risks   and
uncertainties are detailed  from time to  time in reports  filed by us  with the
Securities and Exchange  Commission, including Forms  8-A, 8-K, 10-Q,  and 10-K.
These risks and  uncertainties include, but  are not limited  to, the following:
our  history of  losses and  anticipated future  losses; our  ability to  raise
additional capital to  support the growth  of our business;  the success of  our
advertising campaign; risks  associated with Soros,  Maverick and private  funds
associated with and  Prentice Capital Management,  LP each owning  a significant
portion of our stock; the potential failure to forecast revenues and/or to  make
adjustments to  our operating  plans necessary  as a  result of  any failure  to
forecast accurately; our ability to raise additional capital; issues related  to
our transition to a new third party fulfillment facility; unexpected changes  in
fashion trends; cyclical variations in  the apparel and e-commerce markets;  the
risk of default by us under the Credit Facility and the consequences that  might
arise from us  having granted a  lien on substantially  all of our  assets under
that agreement; risks of litigation for sale of unauthentic or damaged goods and
litigation risks related to sales in foreign countries; the dependence on  third
parties and certain relationships for certain services, including our dependence
on  UPS, DHL  and USPS  (and the  risks of  a mail  slowdown due  to terrorist
activity) and  our dependence  on our  third-party web  hosting, fulfillment and
customer service centers; online commerce security risks; risks related to brand
owners' efforts to limit our ability to purchase products indirectly; management
of potential growth;  the competitive nature  of our business  and the potential
for competitors with greater resources  to enter the business; the  availability
of merchandise;  the need  to further  establish brand  name recognition;  risks
associated  with  our  ability  to  handle  increased  traffic  and/or continued
improvements to  our Web  site; rising  return rates;  dependence upon executive
personnel;  the  successful  hiring  and  retaining  of  new  personnel;   risks
associated  with  expanding  our  operations;  risks  associated  with potential
infringement  of  other's  intellectual  property;  the  potential  inability to
protect   our   intellectual   property;   government   regulation   and   legal
uncertainties; and  uncertainties relating  to the  imposition of  sales tax  on
Internet sales.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

We currently and from time to time are involved in litigation incidental to  the
conduct of our business. However, we are not party to any lawsuit or  proceeding
which in the opinion of management  is likely to have a material  adverse effect
on us.

Item 6. Exhibits

The following is a list of exhibits filed as part of this Report:

<TABLE>
<CAPTION>
Exhibit Number                                          Description
------------------------------------------------------------------------------------------------------------------
<S>                  <C>
3.1                  Certificate of Amendment to the Company's Certificate of Incorporation, dated April 3, 2008
                     (incorporated by reference to Exhibit  99.1 to  the Current Report on Form 8-K filed by the
                     Company with the Securities and Exchange Commission on April 4, 2008)

10.1                 Amended  and  Restated  Employment Agreement, by and between the Company and Kara B. Jenny,
                     dated March 19, 2008 (incorporated  by  reference  to Exhibit 10.1 to the Current Report on
                     Form 8-K filed by the Company and the Securities and Exchange Commission on March 19, 2008)

10.2                 Amended and Restated Employment Agreement, by and between the Company and  Bradford Matson,
                     dated April 10, 2008 (incorporated  by reference to Exhibit  10.1 to the Current  Report on
                     Form 8-K filed by the Company with the Securities and Exchange Commission on April 11,
                     2008)
</TABLE>

                                       15
<PAGE>

                                  BLUEFLY, INC.
                                 MARCH 31, 2008

<TABLE>
<S>                  <C>
10.3                 Amended and Restated Warrant No. 1, dated April 8, 2008 and effective as of March 26,
                     2008, issued to Quantum Industrial Partners LDC

10.4                 Amended and Restated Warrant No. 2, dated April 8, 2008 and effective as of March 26,
                     2008, issued to SFM Domestic Investments LLC

10.5                 Amended and Restated Warrant No. 3, dated April 8, 2008 and effective as of March 26,
                     2008, issued to Maverick Fund USA, Ltd.

10.6                 Amended and Restated Warrant No. 4, dated April 8, 2008 and effective as of March 26,
                     2008, issued to Maverick Fund LDC

10.7                 Amended and Restated Warrant No. 5, dated April 8, 2008 and effective as of March 26,
                     2008, issued to Maverick Fund II, Ltd.

31.1                 Certification Pursuant to Rule 13a-14(a)/15d-14(a)

31.2                 Certification Pursuant to Rule 13a-14(a)/15d-14(a)

32.1                 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002

32.2                 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002
</TABLE>

                                       16
<PAGE>

                                   SIGNATURES

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

                                                  BLUEFLY, INC.

                                                  By: /s/ Melissa Payner-Gregor
                                                     --------------------------
                                                  Melissa Payner-Gregor
                                                  Chief Executive Officer

                                                  By: /s/ Kara B. Jenny
                                                     ------------------
                                                  Kara B. Jenny
                                                  Chief Financial Officer

May 7, 2008

                                       17