U.S. 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 June 30, 2003

[ ]       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.
                (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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes [ ]  No [X]

As of August 8, 2003, the issuer had outstanding 11,024,568 shares of Common
Stock, $.01 par value.

<PAGE>

                                  BLUEFLY, INC.
                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
Part I.  Financial Information

Item 1.  Financial Statements

         Consolidated Condensed Balance Sheets as of June 30, 2003
             and December 31, 2002 (unaudited)                                3

         Consolidated Condensed Statements of Operations for the six months
             ended June 30, 2003 and 2002 (unaudited)                         4

         Consolidated Condensed Statements of Operations for the three
             months ended June 30, 2003 and 2002 (unaudited)                  5

         Consolidated Condensed Statements of Cash Flows for the six months
             ended June 30, 2003 and 2002 (unaudited)                         6

         Notes to Consolidated Condensed Financial Statements                 7

Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       11

Item 3.  Quantitative and Qualitative Disclosures About Market Risk          19

Item 4.  Controls and Disclosures                                            20

Part II. Other Information                                                   20

Item 1.  Legal Proceedings                                                   20

Item 2.  Changes in Securities and Use Of Proceeds                           21

Item 4.  Submission of Matters to a Vote of Security Holders                 21

Item 6.  Exhibits and Reports on Form 8-K                                    22

Signature                                                                    23

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS

                                  BLUEFLY, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                         JUNE 30,      DECEMBER 31,
                                                                                                           2003           2002
                                                                                                     ---------------  -------------
<S>                                                                                                  <C>              <C>
                                                     ASSETS
Current assets
    Cash and cash equivalents                                                                        $     1,170,000  $   1,749,000
    Inventories, net                                                                                      11,355,000     10,868,000
    Accounts receivable, net                                                                               1,151,000      1,147,000
    Prepaid expenses                                                                                         145,000        248,000
    Other current assets                                                                                     115,000         78,000
                                                                                                     ---------------  -------------
       Total current assets                                                                               13,936,000     14,090,000

Property and equipment, net                                                                                2,137,000      2,604,000
Other assets                                                                                                 179,000        215,000
                                                                                                     ---------------  -------------
       Total assets                                                                                  $    16,252,000  $  16,909,000
                                                                                                     ===============  =============
                                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                                                                 $     3,454,000  $   3,434,000
    Accrued expenses and other current liabilities                                                         2,121,000      3,067,000
    Deferred revenue                                                                                       1,016,000        885,000
                                                                                                     ---------------  -------------
       Total current liabilities                                                                           6,591,000      7,386,000

Note payable to shareholders                                                                                 182,000      2,182,000
Long-term capital lease liability                                                                            263,000        257,000
                                                                                                     ---------------  -------------
       Total liabilities                                                                                   7,036,000      9,825,000
                                                                                                     ---------------  -------------

Commitments and contingencies

Shareholders' equity
    Series A Preferred stock - $.01 par value; 500,000 shares authorized, 460,000 and 500,000
     issued and outstanding as of June 30, 2003 and December 31, 2002, respectively (liquidation
     preference: $9.2 million plus accrued dividends as of June 30, 2003 and $10.0 million plus
     accrued dividends as of December 31, 2002)                                                                5,000          5,000
    Series B Preferred stock - $.01 par value; 9,000,000 shares authorized 8,889,414 and 8,910,782
     shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively
     (liquidation preference: $30 million plus accrued dividends)                                             89,000         89,000
    Series C Preferred stock - $.01 par value; 3,500 shares authorized and 1,000 shares issued and
     outstanding as of June 30, 2003 and December 31, 2002, respectively (liquidation preference:
     $1 million plus accrued dividends)                                                                           --             --
    Series D Preferred stock - $.01 par value; 7,150 shares authorized, issued and outstanding
     as of June 30, 2003 (liquidation preference: $7.1 million plus accrued dividends); no shares
     authorized, issued and outstanding as of December 31, 2002                                                   --             --
    Series E Preferred stock - $.01 par value; 1,000 shares authorized, issued and outstanding
     as of June 30, 2003 (liquidation preference: $1 million plus accrued dividends); no shares
     authorized, issued and outstanding as of December 31, 2002                                                   --             --
    Series 2002 Convertible Preferred stock - $.01 par value; 2,100 shares authorized and 0 and
     2,100 shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively
     (liquidation preference: $2.1 million)                                                                       --             --
    Common stock - $.01 par value; 92,000,000 shares authorized and 11,024,568 and 10,391,904
     shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively                   110,000        104,000
    Additional paid-in capital                                                                            98,942,000     92,628,000
    Accumulated deficit                                                                                  (89,930,000)   (85,742,000)
                                                                                                     ---------------  -------------
       Total shareholders' equity                                                                          9,216,000      7,084,000
                                                                                                     ---------------  -------------
       Total liabilities and shareholders' equity                                                    $    16,252,000  $  16,909,000
                                                                                                     ===============  =============
</TABLE>

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

                                        3
<PAGE>

                                  BLUEFLY, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED
                                                                                    JUNE 30,
                                                                         -------------------------------
                                                                              2003             2002
                                                                         --------------   --------------
<S>                                                                      <C>              <C>
Net sales                                                                $   15,725,000   $   14,445,000
Cost of sales                                                                11,553,000        9,538,000
                                                                         --------------   --------------
    Gross profit                                                              4,172,000        4,907,000

Selling, marketing and fulfillment expenses                                   5,465,000        5,095,000
General and administrative expenses                                           2,538,000        2,269,000
                                                                         --------------   --------------
    Total operating expenses                                                  8,003,000        7,364,000

Operating loss                                                               (3,831,000)      (2,457,000)

Interest income                                                                  22,000           49,000
Interest expense                                                               (154,000)        (176,000)
                                                                         --------------   --------------

Net loss                                                                 $   (3,963,000)  $   (2,584,000)

Deemed dividend related to beneficial conversion feature on
 Series B and C Preferred Stock                                                (225,000)     (10,226,000)

Preferred stock dividends                                                    (1,483,000)      (1,224,000)
                                                                         --------------   --------------

Net loss applicable to common shareholders                               $   (5,671,000)  $  (14,034,000)
                                                                         ==============   ==============

Basic and diluted loss per common share                                  $        (0.52)  $        (1.48)
                                                                         ==============   ==============

Weighted average common shares outstanding (basic and diluted)               11,003,596        9,454,446
                                                                         ==============   ==============
</TABLE>

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

                                        4
<PAGE>

                                  BLUEFLY, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                                                                     JUNE 30,
                                                                         -------------------------------
                                                                              2003             2002
                                                                         --------------   --------------
<S>                                                                      <C>              <C>
Net sales                                                                $    7,468,000   $    6,799,000
Cost of sales                                                                 5,153,000        4,392,000
                                                                         --------------   --------------
    Gross profit                                                              2,315,000        2,407,000

Selling, marketing and fulfillment expenses                                   3,012,000        2,659,000
General and administrative expenses                                           1,376,000        1,207,000
                                                                         --------------   --------------
    Total operating expenses                                                  4,388,000        3,866,000

Operating loss                                                               (2,073,000)      (1,459,000)

Interest income                                                                  16,000           17,000
Interest expense                                                                (66,000)         (77,000)
                                                                         --------------   --------------

Net loss                                                                 $   (2,123,000)  $   (1,519,000)

Deemed dividend related to beneficial conversion feature on
 Series B Preferred Stock                                                            --      (10,226,000)

Preferred stock dividends                                                      (845,000)        (615,000)
                                                                         --------------   --------------

Net loss applicable to common shareholders                               $   (2,968,000)  $  (12,360,000)
                                                                         ==============   ==============

Basic and diluted loss per common share                                  $        (0.27)  $        (1.27)
                                                                         ==============   ==============

Weighted average common shares outstanding (basic and diluted)               11,024,568        9,700,823
                                                                         ==============   ==============
</TABLE>

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

                                        5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED
                                                                                     JUNE 30,
                                                                         -------------------------------
                                                                              2003             2002
                                                                         --------------   --------------
<S>                                                                      <C>              <C>
Cash flows from operating activities
  Net loss                                                               $   (3,963,000)  $   (2,584,000)
  Adjustments to reconcile net loss to net cash used in operating
   activities:
     Depreciation and amortization                                            1,031,000          448,000
     Provisions for returns                                                    (533,000)        (606,000)
     Allowance for doubtful accounts                                             88,000          122,000
     Write-down (recovery) of inventory                                         220,000         (145,000)
  Changes in operating assets and liabilities:
     (Increase) decrease in
        Inventories                                                            (707,000)      (1,605,000)
        Accounts receivable                                                     (92,000)          (4,000)
        Prepaid expenses                                                        103,000         (229,000)
        Other current assets                                                    (37,000)          20,000
        Other assets                                                                 --            1,000
     Increase (decrease) in
        Accounts payable                                                         73,000          827,000
        Accrued expenses and other current liabilities                         (515,000)         (51,000)
        Deferred revenue                                                        131,000         (118,000)
                                                                         --------------   --------------
  Net cash used in operating activities                                      (4,201,000)      (3,924,000)
                                                                         --------------   --------------

Cash flows from investing activities
  Purchase of property, equipment and capitalized software                     (262,000)      (1,282,000)
                                                                         --------------   --------------
Net cash used in investing activities                                          (262,000)      (1,282,000)
                                                                         --------------   --------------

Cash flows from financing activities
  Proceeds from sale of Series D Preferred Stock                              2,000,000               --
  Proceeds from issuance of  Notes Payable (January 2003 Financing)           1,000,000               --
  Proceeds from sale of Series E Preferred Stock                              1,000,000               --
  Payments of capital lease obligation                                         (116,000)         (95,000)
  Net proceeds from sale of Common Stock and Warrants                                --        1,899,000
                                                                         --------------   --------------
Net cash provided by financing activities                                     3,884,000        1,804,000
                                                                         --------------   --------------

Net decrease in cash and cash equivalents                                      (579,000)      (3,402,000)
Cash and cash equivalents - beginning of period                               1,749,000        5,419,000
                                                                         --------------   --------------
Cash and cash equivalents - end of period                                $    1,170,000   $    2,017,000
                                                                         ==============   ==============
Supplemental schedule of non-cash investing and financing activities:
  Exchange of note for equity                                            $    2,027,000   $           --
                                                                         ==============   ==============
  Conversion of debt to equity                                           $    1,009,000   $           --
                                                                         ==============   ==============
  Deemed dividend related to beneficial conversion feature on
   Series C Preferred Stock                                              $      225,000   $           --
                                                                         ==============   ==============
  Equipment acquired under capital lease                                 $      224,000   $      556,000
                                                                         ==============   ==============
  Warrants issued to shareholders                                        $       43,000   $      292,000
                                                                         ==============   ==============
  Interest paid                                                          $       43,000   $       62,000
                                                                         ==============   ==============
  Deemed dividend related to beneficial conversion feature on
   Series B Preferred Stock                                              $           --   $   10,226,000
                                                                         ==============   ==============
  Warrants issued to lender                                              $           --   $       80,000
                                                                         ==============   ==============
</TABLE>

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

                                        6
<PAGE>

                                  BLUEFLY, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE 1 - BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Bluefly, Inc. and its wholly owned subsidiary (collectively the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation. The consolidated 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 generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation 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. For further information, refer to the consolidated financial
statements and accompanying footnotes included in the Company's Form 10-K for
the year ended December 31, 2002.

The Company has sustained net losses and negative cash flows from operations
since the establishment 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 and/or raise additional financing through public
or private debt or equity financing, or other sources to fund operations. The
Company currently plans to seek additional equity or debt financing in order to
maximize the growth of its business. There can be no assurance that any
additional financing or other sources of capital will be available to the
Company on acceptable terms, or at all. The inability to obtain additional
financing, when needed, would have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. The Company
believes that cash and cash equivalents on hand at June 30, 2003 together with
the proceeds from the July Financing and the Loan Facility (both defined below)
will be sufficient to fund operations through December 31, 2003, although if the
Company is unable to obtain additional financing, and/or the Company does not
achieve its sales plan, future operations will need to be modified, scaled back
or discontinued.

NOTE 2 - THE COMPANY

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

NOTE 3 - SOROS FINANCINGS

JANUARY 2003 FINANCING
In January 2003 the Company issued to Quantum Industrial Partners LDC, a Cayman
Islands limited duration company ("QIP"), and SFM Domestic Investments LLC, a
Delaware limited liability company ("SFMDI;" QIP and SFMDI are each affiliates
of Soros Private Equity Partners LLC and are collectively and individually
sometimes referred to herein as "Soros") $1.0 million of demand convertible
promissory notes that bore interest at a rate of 8% per annum and had a maturity
date of July 28, 2003 and warrants to purchase 25,000 shares of its common
stock, exercisable at any time on or prior to January 28, 2007 at $1.12 per
share (the "January 2003 Financing"). These notes were converted into Series D
Convertible Preferred Stock ("Series D Preferred Stock") in connection with the
March 2003 Financing (defined below).

The Company valued the warrants issued in the January 2003 Financing using the
Black-Scholes option pricing model and credited additional paid in capital for
approximately $21,000. This entire amount was expensed as interest expense
during the first quarter of 2003.

MARCH 2003 FINANCING
In March 2003, the Company entered into an agreement with Soros pursuant to
which Soros: (i) provided $2.0 million of new capital by purchasing 2,000 shares
of Series D Preferred Stock, (ii) converted the promissory notes issued to it in
the January 2003 Financing and all of its Series 2002 Preferred Stock into
3,109.425 shares of Series D Preferred Stock and (iii) purchased 2,027.123
additional shares of Series D Preferred Stock for approximately $2.0 million,
with such $2.0 million in additional proceeds being retained by Soros as payment
in full of the Company's obligations under the demand promissory notes issued to
Soros in September 2002 (the "March 2003 Financing"). Additionally, as described
more fully below, (See May 2003

                                        7
<PAGE>

                                  BLUEFLY, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

Financing) Soros agreed to provide the Company with up to $1.0 million in
additional financing (the "2003 Standby Commitment Amount") on a standby basis
at any time prior to January 1, 2004, provided that the Company's cash balances
are less than $1.0 million (the "2003 Standby Commitment.").

Each share of Series D Preferred Stock has a face value of $1,000 and a
liquidation preference equal to the greater of (i) $1,000 plus accrued and
unpaid dividends or (ii) the amount the holder of such shares would receive if
it were to convert such shares into Common Stock immediately prior to the
liquidation of the Company. The Series D Preferred Stock is convertible, at any
time and from time to time at the option of the holder into Common Stock at the
rate of one to 1,315.79. The conversion price of the Series D Preferred Stock is
subject to an anti-dilution adjustment, pursuant to which, subject to certain
exceptions, to the extent that the Company issues Common Stock or securities
convertible into Common Stock at a price per share less than the Series D
Preferred Stock conversion price in the future, the conversion price of the
Series D Preferred Stock would be decreased so that it would equal the
conversion price of the new security or the price at which shares of common
stock are sold, as the case may be. The certificate of designations for the
Series D Preferred Stock provided that, to the extent required by the rules of
the Nasdaq SmallCap Market or any other national securities exchange or
quotation system upon which the Common Stock may be listed from time to time,
until such time as such conversion provisions were approved by the Company's
stockholders, the total number of shares of Common Stock issuable upon
conversion of the Series D Preferred Stock could not exceed 2,204,803 shares
(which represents approximately 19.99% of the Company's currently outstanding
Common Stock), regardless of any adjustment to the Series D Preferred Stock
conversion price. Such stockholder approval was obtained at the meeting of the
Company's stockholders held on August 1, 2003.

Beginning on November 13, 2004, the Company is entitled to redeem all, but not
less than all, of the outstanding Series D Preferred Stock for cash at the price
of, depending upon the date of such redemption, four times, four and one-half
times or five times the market price of the Common Stock on the date of the
initial issuance of the Series D Preferred Stock. Dividends accrue on the Series
D Preferred Stock at an annual rate equal to 12% of the face value and are
payable only upon the conversion or redemption of the Series D Preferred Stock
or upon liquidation of the Company. The Series D Preferred Stock votes on an as
converted basis.

As a result of the March 2003 Financing, the conversion price of the Series B
Preferred Stock and the Series C Preferred Stock, all of which is held by Soros,
automatically decreased from $0.93 to $0.76 per share. In accordance with EITF
00-27, the reduction in the conversion price of the Series C Preferred Stock
resulted in the Company recording a beneficial conversion feature in the
approximate amount of $225,000. This non-cash charge, which is analogous to a
dividend, resulted in an adjustment to the Company's computation of Loss Per
Share, in the first quarter of 2003.

MAY 2003 FINANCING
As part of the March 2003 Financing, Soros had agreed to provide the Company
with the 2003 Standby Commitment. By its terms, fulfillment of the 2003 Standby
Commitment could be made in one or more tranches, as determined by the members
of the Company's Board of Directors who are not Soros designees, and any and all
draws against the 2003 Standby Commitment Amount were to be effected through the
purchase of newly-designated shares of Series E Preferred Stock on terms and
conditions substantially identical to the Series D Preferred Stock, except that:
(1) the conversion price of the Series E Preferred Stock was to be the lower of
(a) the average closing price of the Common Stock on the Nasdaq SmallCap Market
for the ten trading days preceding the issuance of the Series E Preferred Stock
and (b) $0.76; and (2) the Series E Preferred Stock was not to be convertible
into Common Stock (and was not to be entitled to vote with the Common Stock on
matters submitted to a vote of the holders of the Common Stock) until such time
as the Company's stockholders approved the conversion rights of the Series E
Preferred Stock to the extent required by the rules of the Nasdaq SmallCap
Market or any other national securities exchange or quotation system upon which
the Common Stock may be listed from time to time. Such stockholder approval was
obtained at the meeting of the Company's stockholders held on August 1, 2003.

In accordance with the terms of the 2003 Standby Commitment, in May 2003 Soros
invested an additional $1.0 million in Bluefly through the purchase of 1,000
shares of Series E Convertible Preferred Stock and thereby fulfilled the 2003
Standby Commitment in full (the "May 2003 Financing"). Each share of Series E
Preferred Stock has a face value of $1,000 and a liquidation preference equal to
the greater of (i) $1,000 plus accrued and unpaid dividends or (ii) the amount
the holder of such shares would receive if it were to convert such shares into
Common Stock immediately prior to the liquidation of the Company. The Series E
Preferred Stock is convertible, at any time and from time to time at the option
of the holder into Common Stock at the rate of one to 1,315.79. The conversion
price of the Series E Preferred Stock is subject to an anti-dilution adjustment,

                                        8
<PAGE>

                                  BLUEFLY, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

pursuant to which, subject to certain exceptions, to the extent that the Company
issues Common Stock or securities convertible into Common Stock at a price per
share less than the Series E Preferred Stock conversion price in the future, the
conversion price of the Series E Preferred Stock would be decreased so that it
would equal the conversion price of the new security or the price at which
shares of common stock are sold, as the case may be.

Beginning on November 13, 2004, the Company is entitled to redeem all, but not
less than all, of the outstanding Series E Preferred Stock for cash at the price
of, depending upon the date of such redemption, four times, four and one-half
times or five times the market price of the Common Stock on the date of the
initial issuance of the Series E Preferred Stock. Dividends accrue on the Series
E Preferred Stock at an annual rate equal to 12% of the face value and are
payable only upon the conversion or redemption of the Series E Preferred Stock
or upon liquidation of the Company. The Series E Preferred Stock votes on an as
converted basis.

JULY 2003 FINANCING
In July 2003 Soros invested an additional $2.0 million in the Company. Under the
terms of the transaction, the Company issued $2 million of convertible
promissory notes that bear interest at a rate of 12% per annum and have a
maturity date of January 12, 2004. The promissory notes together with any
interest that has accrued, are convertible into equity securities of the Company
sold in any subsequent round of financing, at the holder's option, at a price
that is equal to the lowest price per share accepted by any investor in such
subsequent round of financing (the "July 2003 Financing"). The conversion of the
notes is subject to certain limitations until such time as the conversion
provisions are approved by the Company's stockholders.

NOTE 4 - FINANCING AGREEMENT

The Company has a Financing Agreement (the "Financing Agreement") with Rosenthal
& Rosenthal, Inc. ("Rosenthal") pursuant to which Rosenthal provides the Company
with certain credit accommodations, including loans and advances,
factor-to-factor guarantees or letters of credit in favor of suppliers or
factors or purchases of payables owed to the Company's suppliers (the "Loan
Facility").

The Financing Agreement was amended in March 2003 to: (i) extend the term until
June 30, 2004; (ii) increase the maximum amount available under the Loan
Facility (subject to an existing $10 million cap) to an amount equal to the
Soros Guarantee ($2.0 million) plus the lower of (x) $2.0 million (instead of
the prior $1.0 million), (y) 20% of the book value of the Company's inventory or
(z) the full liquidation value of the Company's inventory; (iii) increase the
tangible net worth requirement to $5.0 million from $1.5 million; (iv) redefine
the working capital definition to exclude short-term debt held by affiliates
(effective as of December 19, 2002), (v) increase the working capital
requirement to $4.0 million from $3.5 million; (vi) increase the annual fee the
Company pays Rosenthal for the Loan Facility to $30,000 from $10,000, (vii)
require the Company to maintain a cash balance of at least $250,000 and; (viii)
require Soros to increase from $1.5 million to $2.0 million the amount of the
standby letter of credit that Soros is maintaining (the "Soros Guarantee") to
help collateralize the Loan Facility and extend the term of the Soros Guarantee
to November 15, 2004 from November 15, 2003. In consideration for Soros'
agreement to maintain the Soros Guarantee until November 15, 2004, the Company
issued to Soros a warrant to purchase 25,000 shares of its Common Stock at an
exercise price equal to $0.78 per share (the 10 day trailing average of the
closing sale price of our Common Stock on the date of issuance), exercisable at
any time prior to March 17, 2013. The Company valued the warrant using the
Black-Scholes option pricing model and credited additional paid in capital for
approximately $22,000. This amount is being amortized to interest expense over
the life of the Loan Facility.

As of June 30, 2003, after giving effect to the amendment, the maximum
availability under the Loan Facility was approximately $4.0 million of which
approximately $2.6 million was committed, leaving approximately $1.4 million
available against the Loan Facility.

NOTE 5 - 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.

                                        9
<PAGE>

                                  BLUEFLY, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

Diluted loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding for the
period, adjusted to reflect potentially dilutive securities. Due to the loss
from continuing operations, the following options and warrants to purchase
shares of Common Stock and Preferred Stock convertible into shares of Common
Stock were not included in the computation of diluted loss per share because
such inclusion would be antidilutive:

             Security                    June 30, 2003     June 30, 2002
             --------                    -------------     -------------

             Options                         9,592,912         3,863,078
             Warrants                        1,119,144         1,069,144
             Preferred Stock                43,323,434        17,554,542

NOTE 6 -  STOCK BASED COMPENSATION

The Company applies Statement of Financial Accounting Standards No. ("SFAS") No.
148 "Accounting for Stock Based Compensation - Transition and Disclosure, an
amendment of FASB Statement No. 123", SFAS No. 123 "Accounting for Stock Based
Compensation," and FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation" ("FIN 44") in accounting for its
stock based compensation plan. In accordance with SFAS No. 123, the Company
applies Accounting Principles Board ("APB") Opinion No. 25 and related
Interpretations for expense recognition. In connection with stock option grants
to employees, no compensation expense has been recorded in fiscal quarters ended
2003 and 2002, because the exercise price of employee stock options equals or
exceeds the market price of the underlying stock on the date of grant. Had
compensation expense for the Plan been determined consistent with the provisions
of SFAS No. 123, the effect on the Company's basic and diluted net loss per
share would have been as follows:

<TABLE>
<CAPTION>
                                                                                        June 30, 2003      June 30, 2002
                                                                                        -------------     --------------
<S>                                                                                     <C>               <C>
Basic and diluted net loss, as reported for the three months ended                      $  (2,123,000)    $   (1,519,000)
Basic and diluted net loss per share, as reported for the three months ended            $       (0.27)    $        (1.27)
Basic and diluted net loss, pro forma for the three months ended                        $  (3,154,000)    $   (2,475,000)
Basic and diluted net loss per share, pro forma for the three months ended              $       (0.36)    $        (1.37)

Basic and diluted net loss, as reported for the six months ended                        $  (3,963,000)    $   (2,584,000)
Basic and diluted net loss per share, as reported for the six months ended              $       (0.52)    $        (1.48)
Basic and diluted net loss, pro forma for the six months ended                          $  (6,066,000)    $   (4,489,000)
Basic and diluted net loss per share, pro forma for the six months ended                $       (0.71)    $        (1.69)
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts, as additional stock option awards are anticipated
in future years.

NOTE 7 - NASDAQ COMPLIANCE

In March 2003, the Company was advised by the Nasdaq Stock Market, Inc.
("Nasdaq") that it was not in compliance with Nasdaq's continued listing
requirements (the "Listing Requirements") because shares of its common stock
have closed at a per share price of less than $1.00 for at least 30 days. On
June 6, 2003, the Company was advised by Nasdaq that, because the closing bid
price of the Company's common stock has been at $1.00 per share or greater for
at least 10 consecutive trading days, the Company has regained compliance with
the Listing Requirements.

NOTE 8 - RECLASSIFICATIONS

Certain amounts in the consolidated condensed financial statements of the prior
period have been reclassified to conform to the current period presentation for
comparative purposes.

                                       10
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

Bluefly, Inc. is a leading Internet retailer of designer fashions and home
accessories at outlet store prices. We sell over 350 brands of designer apparel,
accessories and home products at discounts up to 75% off retail value.
Bluefly.com, a Web Site that sells end-of-season and excess inventory of apparel
and accessories was launched in September 1998.

We have grown significantly since launching our Web Site in September 1998. Our
net sales increased approximately 10% to $7,468,000 for the three months ended
June 30, 2003 from $6,799,000 for the three months ended June 30, 2002. Our net
loss for the second quarter of 2003 totaled $2,123,000 compared to $1,519,000 in
the second quarter of 2002.

At June 30, 2003 we had an accumulated deficit of $89,930,000. Historical net
losses and the accumulated deficit resulted primarily from costs associated with
developing and marketing our Web Site and building our infrastructure and the
recording of beneficial conversion feature charges.

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. We therefore expect to continue to incur
substantial operating losses for the foreseeable future. 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.

Based on our current plans, we anticipate that the proceeds from the July 2003
Financing, the Rosenthal Loan Facility together with existing resources, should
be sufficient to satisfy our cash requirements through the end of fiscal 2003.
We currently plan to seek additional debt and/or equity financing in order to
maximize the growth of our business. There can be no assurance that any
additional financing or other sources of capital will be available to us upon
acceptable terms, or at all. The inability to obtain additional financing would
have a material adverse effect on our business, prospects, financial condition
and results of operations. If we are unable to obtain additional financing,
and/or we do not achieve our sales plan, future operations will need to be
modified, scaled back or discontinued.

SIGNIFICANT ACCOUNTING POLICIES

Management 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 the disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods. The
most significant estimates and assumptions relate to the adequacy of the
allowances for sales returns and recoverability of inventories and tax
allowance. Actual amounts could differ significantly from these estimates.

Revenue Recognition

Gross sales consist primarily of revenue from product sales and shipping and
handling revenue on our Web site, and are net of promotional discounts. Revenue
is recognized when goods are received by our customers, which occurs only after
credit card authorization. Net sales represent gross sales, less provisions for
returns, credit card chargebacks, and adjustments for uncollected sales taxes.

Provision for Sales Returns and Doubtful Accounts

We generally permit returns for any reason within 90 days of the sale.
Accordingly, we establish a reserve for estimated future returns and bad debt at
the time of shipment based primarily on historical data. However, our future
return and bad debt rates could differ significantly from historical patterns,
which would adversely affect our operating results.

                                       11
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

Inventory Valuation

Inventories, which consist of finished goods, are stated at the lower of cost or
market value. Cost is determined by the first-in, first-out ("FIFO") method. We
review our inventory levels periodically in order to identify slow-moving
merchandise and use markdowns to clear out merchandise. Markdowns may be used if
inventory exceeds customer demand for reasons of style, changes in customer
preference or lack of consumer acceptance of certain items, or if it is
determined that the inventory in stock will not sell at its currently marked
price. Such markdowns may have an adverse impact on earnings, depending on the
extent of the markdowns and amount of inventory affected.

Deferred Tax Valuation Allowance

We assessed the future taxable income and have determined that a 100% deferred
tax valuation allowance is deemed necessary. In the event that we were to
determine that we would be able to realize our deferred tax asset, an adjustment
to the deferred tax valuation allowance would increase income in the period such
determination is made.

RESULTS OF OPERATIONS

For The Six Months Ended June 30, 2003 Compared To The Six Months Ended June 30,
2002

The following table sets forth our statement of operations data, for the six
months ended June 30th. All data in is in thousands except as indicated below:

<TABLE>
<CAPTION>
                                                      2003                    2002                     2001
                                              ---------------------    -------------------    ---------------------
                                                          As a % of              As a % of                As a % of
                                                          Net Sales              Net Sales                Net Sales
<S>                                           <C>             <C>      <C>           <C>      <C>            <C>
Net sales                                     $  15,725       100.0%   $ 14,445      100.0%   $   9,931       100.0%
Cost of sales                                    11,553        73.5%      9,538       66.0%       6,924        69.7%
                                              ---------                --------               ---------
    Gross profit                                  4,172        26.5%      4,907       34.0%       3,007        30.3%

Selling, marketing and fulfillment expenses       5,465        34.8%      5,095       35.3%       8,076        81.3%
General and administrative expenses               2,538        16.1%      2,269       15.7%       3,038        30.6%
                                              ---------                --------               ---------
    Total operating expenses                      8,003        50.9%      7,364       51.0%      11,114       111.9%

Operating loss                                   (3,831)      (24.4)%    (2,457)     (17.0)%     (8,107)      (81.6)%
Interest (expense) and other income                (132)       (0.8)%      (127)      (0.9)%    (13,092)     (131.8)%
                                              ---------                --------               ---------

    Net loss                                     (3,963)      (25.2)%    (2,584)     (17.9)%    (21,199)     (213.4)%
</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 six months ended June 30th, as indicated below:

<TABLE>
<CAPTION>
                                                                                 2003          2002         2001
                                                                            ---------     ---------    ---------
<S>                                                                         <C>           <C>          <C>
Average Order Size (including shipping & handling)                          $  171.62     $  161.70    $  134.92
Average Order Size Per New Customer (including shipping & handling)         $  158.53     $  146.69    $  120.54
Average Order Size Per Repeat Customer  (including shipping & handling)     $  178.76     $  169.67    $  148.78

New Customers Added during the Period                                          49,612        45,930       50,245
Revenue from Repeat Customers as a % of total Revenue                              67%           69%          56%
Customer Acquisition Costs                                                  $    9.77     $   12.85    $   58.72
</TABLE>

                                       12
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

We define a "repeat customer" as a person who has bought more than
once from us during their lifetime. We calculate customer acquisition cost by
dividing total advertising expenditures (excluding staff related costs) during a
given time period by total new customers added during that period. All measures
of the number of customers are based on unique email addresses.

Net sales: Gross sales for the six months ended June 30, 2003 increased by
approximately 13% to $25,038,000, from $22,089,000 for the six months ended June
30, 2002. For the six months ended June 30, 2003, we recorded a provision for
returns and credit card chargebacks and other discounts of $9,313,000, or
approximately 37.2% of gross sales. For the six months ended June 30, 2002, the
provision for returns and credit card chargebacks and other discounts was
$7,644,000, or approximately 34.6% of gross sales. The increase in this
provision as a percentage of gross sales was related primarily to an increase in
the return rate. We believe that the increase in return rate was primarily the
result of an increase in the average price point of the products that we sell.

After the necessary provisions for returns, credit card chargebacks and
adjustments for uncollected sales taxes, our net sales for the six months ended
June 30, 2003 were $15,725,000. This represents an increase of approximately 9%
compared to the six months ended June 30, 2002, in which net sales totaled
$14,445,000. The growth in net sales was largely driven by the increase in the
number of new customers acquired (approximately 8% higher than in the first six
months of 2002) and the increase in average order size (approximately 6% higher
than in the first six months of 2002).

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 six months ended June 30, 2003 totaled
$11,553,000, resulting in gross margin of approximately 26.5%. Cost of sales for
the six months ended June 30, 2002 totaled $9,538,000, resulting in gross margin
of 34.0%. Gross profit decreased by 15%, to $4,172,000 for the six months ended
June 30, 2003 compared to $4,907,000 for the six months ended June 30, 2002. The
decrease in gross margin resulted primarily from our decision in the first
quarter of 2003 to reduce our product margin on fall and winter merchandise in
order to reduce inventory levels and the increase in the provision for returns
and credit card chargebacks.

Selling, marketing and fulfillment expenses: Selling, marketing and fulfillment
expenses increased by approximately 7% in the first six months of 2003 compared
to the first six months of 2002. As a percentage of net sales, our selling,
marketing and fulfillment expenses decreased to 34.8% in the first six months of
2003 from 35.3% in the first six months of 2002. Selling, marketing and
fulfillment expenses were comprised of the following:

                 Six Months Ended     Six Months Ended   Percentage Difference
                   June 30, 2003        June 30, 2002     increase (decrease)
                 ----------------     ----------------   ---------------------
  Marketing          $    776,000         $    837,000                    (7.3)%
  Operations            2,312,000            2,122,000                     9.0%
  Technology            1,770,000            1,580,000                    12.0%
  E-Commerce              607,000              556,000                     9.2%
                 ----------------     ----------------
                     $  5,465,000         $  5,095,000                     7.3%

Marketing expenses include expenses related to online and print advertising,
direct mail campaigns as well as staff related costs. The decrease in marketing
expenses of approximately 7.3% was largely related to a shift in our customer
acquisition strategy. We reduced our advertising expenditures and focused more
on email, affiliate programs and other performance based programs. Primarily as
a result of this shift, we were able to decrease our customer acquisition costs
for the six months ended June 30, 2003 by approximately 24% to $9.77 per
customer from $12.85 per customer for the six months ended June 30, 2002.
However, in the event that we attempt to accelerate revenue growth, it may be
necessary to utilize less cost efficient methods of customer acquisition, and
accordingly there can be no assurance that customer acquisition costs will not
increase in the future.

Operating expenses include all costs related to inventory management,
fulfillment, customer service, and credit card processing. Operating expenses
increased in the first six months of 2003 by approximately 9.0% compared to the
first six months of 2002 as a result of an increase in warehouse storage cost
(related to the increase in inventory) as well as an increased headcount in the
operations and customer service teams.

Technology expenses consist primarily of staff related costs, amortization of
capitalized costs and Web Site hosting. For the six months ended June 30, 2003
technology expenses increased by approximately 12.0% compared to the six months
ended June 30, 2002.
                                       13
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

This increase was related to accelerated depreciation of equipment acquired
under a capital lease due to a change in the estimated useful life along with
increased amortization expense incurred as a result of capital costs incurred in
connection with the upgraded version of the Web Site. These amounts were
partially offset by a reduction in our Web Site hosting costs in connection with
our move to a new web hosting facility.

E-Commerce expenses include expenses related to our photo studio, image
processing, and Web Site design. For the six months ended June 30, 2003, this
amount increased by approximately 9.2% as compared to the six months ended June
30, 2002, primarily due to the creation of an Online Retail Group within the
E-Commerce department. The Online Retail Group is, among other things,
responsible for leveraging the Web Site technology to improve the on-site
customer experience.

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 six months ended
June 30, 2003 increased by approximately 11.9% to $2,538,000 as compared to
$2,269,000 for the six months ended June 30, 2002. The increase in general and
administrative expenses was the result of increased professional services and
salary and benefit expenses.

As a percentage of net sales, general and administrative expenses for the first
six months of 2003 increased slightly to 16.1% compared to 15.7% for the first
six months of 2002.

Loss from operations: Operating loss increased by approximately 55.9% in the
first six months of 2003 to $3,831,000 from $2,457,000 in the first six months
of 2002 as a result of a decrease in gross margin and an increase in operating
expenses.

Interest expense and other income, net: Interest expense for the six months
ended June 30, 2003 totaled $154,000, and related to fees paid in connection
with our Loan Facility as well as amortization of warrants issued in connection
with the January 2003 Financing. For the six months ended June 30, 2002,
interest expense totaled $176,000, and related primarily to fees paid in
connection with the Loan Facility.

Interest income for the six months ended June 30, 2003 decreased to $22,000 from
$49,000 for the six months ended June 30, 2002. The decrease is related to the
decrease in our cash balance as interest income primarily represents interest
earned on our cash balance.

For The Three Months Ended June 30, 2003 Compared To The Three Months Ended June
30, 2002

The following table sets forth our statement of operations data, for the three
months ended June 30th. All data in is in thousands except as indicated below:

<TABLE>
<CAPTION>
                                                      2003                    2002                    2001
                                              ---------------------    -------------------    ---------------------
                                                          As a % of              As a % of                As a % of
                                                          Net Sales              Net Sales                Net Sales
<S>                                           <C>             <C>      <C>           <C>      <C>             <C>
Net sales                                     $   7,468       100.0%   $  6,799      100.0%   $   5,285       100.0%
Cost of sales                                     5,153        69.0%      4,392       64.6%       3,561        67.4%
                                              ---------                --------               ---------
    Gross profit                                  2,315        31.0%      2,407       35.4%       1,724        32.6%

Selling, marketing and fulfillment expenses       3,012        40.3%      2,659       39.1%       4,535        85.8%
General and administrative expenses               1,376        18.4%      1,207       17.8%       1,387        26.2%
                                              ---------                --------               ---------
    Total operating expenses                      4,388        58.7%      3,866       56.9%       5,922       112.0%

Operating loss                                   (2,073)      (27.7)%    (1,459)     (21.5)%     (4,198)      (79.4)%
Interest (expense) and other income                 (50)       (0.7)%       (60)      (0.9)%         30         0.6%
                                              ---------                --------               ---------
    Net loss                                     (2,123)      (28.4)%    (1,519)     (22.4)%     (4,168)      (78.8)%
</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 June 30th, as indicated below:

                                       14
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

<TABLE>
<CAPTION>
                                                                                 2003          2002         2001
                                                                            ---------     ---------    ---------
<S>                                                                         <C>           <C>          <C>
Average Order Size (including shipping & handling)                          $  176.70     $  161.65    $  140.29
Average Order Size Per New Customer (including shipping & handling)         $  165.15     $  149.01    $  125.92
Average Order Size Per Repeat Customer (including shipping & handling)      $  182.78     $  167.80    $  154.02

New Customers Added during the Period                                          22,581        21,057       25,988
Revenue from Repeat Customers as a % of total Revenue                              68%           70%          56%
Customer Acquisition Costs                                                  $   15.16     $   16.92    $   75.40
</TABLE>

We define a "repeat customer" as a person who has bought more than once from us
during their lifetime. We calculate customer acquisition cost by dividing total
advertising expenditures (excluding staff related costs) during a given time
period by total new customers added during that period. All measures of the
number of customers are based on unique email addresses.

Net sales: Gross sales for the three months ended June 30, 2003 increased by
approximately 12% to $11,994,000, from $10,747,000 for the three months ended
June 30, 2002. For the three months ended June 30, 2003, we recorded a provision
for returns and credit card chargebacks and other discounts of $4,526,000, or
approximately 37.7% of gross sales. For the three months ended June 30, 2002,
the provision for returns and credit card chargebacks and other discounts was
$3,948,000, or approximately 36.7% of gross sales. The increase in this
provision as a percentage of gross sales was related primarily to an increase in
the return rate. We believe that the increase in return rate was primarily the
result of an increase in the average price point of the products that we sell.

After the necessary provisions for returns, credit card chargebacks and
adjustments for uncollected sales taxes, our net sales for the three months
ended June 30, 2003 were $7,468,000. This represents an increase of
approximately 10% compared to the three months ended June 30, 2002, in which net
sales totaled $6,799,000. The growth in net sales was largely driven by the
increase in the number of new customers acquired (approximately 7% higher than
in the second quarter of 2002) and the increase in average order size
(approximately 9% higher than in second quarter of 2002).

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 June 30, 2003
totaled $5,153,000, resulting in gross margin of approximately 31.0%. Cost of
sales for the three months ended June 30, 2002 totaled $4,392,000, resulting in
gross margin of 35.4%. Gross profit decreased by 4%, to $2,315,000 for the three
months ended June 30, 2003 compared to $2,407,000 for the three months ended
June 30, 2002. The decrease in gross margin resulted primarily from an increase
in the provision for returns and credit card chargebacks.

Selling, marketing and fulfillment expenses: Selling, marketing and fulfillment
expenses increased by approximately 13.3% for the three months ended June 30,
2003 compared to the three months ended June 30, 2002. As a percentage of net
sales, our selling, marketing and fulfillment expenses increased to 40.3% in the
first three months of 2003 from 39.1% in the first three months of 2002.
Selling, marketing and fulfillment expenses were comprised of the following:

               Three Months Ended   Three Months Ended  Percentage Difference
                 June 30, 2003        June 30, 2002      increase (decrease)
               ------------------   ------------------  ----------------------
  Marketing          $    515,000         $    491,000                     4.9%
  Operations            1,145,000            1,071,000                     6.9%
  Technology            1,047,000              810,000                    29.3%
  E-Commerce              305,000              287,000                     6.3%
               ------------------   ------------------
                     $  3,012,000         $  2,659,000                    13.3%

Marketing expenses include expenses related to online and print advertising,
direct mail campaigns as well as staff related costs. The increase in marketing
expenses of approximately 4.9% was largely related to an increase in the head
count of the department, offset slightly by a shift in our customer acquisition
strategy. During the second quarter of 2003, we reduced our

                                       15
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

advertising expenditures and focused more on email, affiliate programs and other
performance based programs. Primarily as a result of this shift, we were able to
decrease our customer acquisition costs for the three months ended June 30, 2003
by approximately 10% to $15.16 per customer from $16.92 per customer for the
three months ended June 30, 2002. However, in the event that we attempt to
accelerate revenue growth, it may be necessary to utilize less cost efficient
methods of customer acquisition, and accordingly there can be no assurance that
customer acquisition costs will not increase in the future.

Operating expenses include all costs related to inventory management,
fulfillment, customer service, and credit card processing. Operating expenses
increased for the three months ended June 30, 2003 by approximately 6.9%
compared to the three months ended June 30, 2002 as a result of an increase in
warehouse storage cost (related to the increase in inventory) as well as an
increased headcount in the operations and customer service teams.

Technology expenses consist primarily of staff related costs, amortization of
capitalized costs and Web Site hosting. For the three months ended June 30, 2003
technology expenses increased by approximately 29.3% compared to the three
months ended June 30, 2002. This increase was related to accelerated
depreciation of equipment acquired under a capital lease due to a change in the
estimated useful life and increased amortization expense incurred as a result of
capital costs incurred in connection with the upgraded version of the Web Site,
offset slightly by a reduction in our Web Site hosting costs in connection with
our move to a new web hosting facility.

E-Commerce expenses include expenses related to our photo studio, image
processing, and Web Site design. For the three months ended June 30, 2003, this
amount increased by approximately 6.3% as compared to the three months ended
June 30, 2002, primarily due to the creation of an Online Retail Group within
the E-Commerce department. The Online Retail Group is, among other things,
responsible for leveraging the Web Site technology to improve the on-site
customer experience. The total headcount in the E -Commerce group increased to
18 during the second quarter of 2003 compared to 13 in the second quarter of
2002.

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
June 30, 2003 increased by approximately 14.0% to $1,376,000 as compared to
$1,207,000 for the three months ended June 30, 2002. The increase in general and
administrative expenses was the result of increased professional services and
salary and benefit expenses.

As a percentage of net sales, general and administrative expenses for the second
quarter of 2003 increased slightly to 18.4% from 17.8% for the second quarter of
2002.

Loss from operations: Operating loss increased by approximately 42.1% in the
second quarter of 2003 to $2,073,000 from $1,459,000 in the second quarter of
2002 as a result of a decrease in gross margin and increased operating expenses.

Interest expense and other income, net: Interest expense for the three months
ended June 30, 2003 totaled $66,000, and related to fees paid in connection with
our Loan Facility as well as amortization of warrants issued in connection with
the January 2003 Financing. For the three months ended June 30, 2002, interest
expense totaled $77,000, and related primarily to fees paid in connection with
the Loan Facility.

Interest income for the three months ended June 30, 2003 decreased to $16,000
from $17,000 for the three months ended June 30, 2002. The decrease is related
to the decrease in our cash balance as interest income primarily represents
interest earned on our cash balance.

LIQUIDITY AND CAPITAL RESOURCES

General

At June 30, 2003, we had approximately $1.2 million of liquid assets, entirely
in the form of cash and cash equivalents and working capital of approximately
$7.3 million. In addition, as of June 30, 2003, we had approximately $2.6
million of borrowings committed under the Loan Facility, leaving approximately
$1.4 million of availability. In July 2003 Soros invested an additional $2.0
million in us in the form of promissory notes.

                                       16
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

We fund our operations through cash on hand, operating cash flow and the Loan
Facility, as well as the proceeds of any equity or debt financing. Operating
cash flow is affected by revenue and gross margin levels, and any deterioration
in our performance on these financial measures would have a negative impact on
our liquidity. Total availability under the Loan Facility is based upon our
inventory levels and is dependent, among other things, on the Company having at
least $5.0 million of tangible net worth and $4.0 million of working capital. In
addition, both availability under the Loan 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 Rosenthal to
provide credit support under the Loan Facility. We believe that our suppliers'
decision-making with respect to payment terms and/or the type of credit support
requested is largely driven by their perception of our credit rating, which is
affected by information reported in the industry and financial press and
elsewhere as to our financial strength. Accordingly, negative perceptions as to
our financial strength could have a negative impact on our liquidity.

Loan Facility

Pursuant to the Loan Facility, Rosenthal provides us with certain credit
accommodations, including loans and advances, factor-to-factor guarantees,
letters of credit in favor of suppliers or factors and purchases of payables
owed to our suppliers. The Rosenthal Financing Agreement was amended in March
2003 to: (i) extend the term until June 30, 2004; (ii) increase the maximum
amount available under the Loan Facility (subject to an existing $10 million
cap) to an amount equal to the Soros Guarantee plus the lower of (x) $2.0
million (instead of the prior $1.0 million), (y) 20% of the book value of our
inventory or (z) the full liquidation value of our inventory; (iii) increase the
tangible net worth requirement to $5.0 million from $1.5 million; (iv) redefine
the working capital definition to exclude short-term debt held by affiliates
(effective as of December 19, 2002), (v) increase the working capital
requirement to $4.0 million from $3.5 million; (vi) increase the annual fee we
pay Rosenthal for the Loan Facility to $30,000 from $10,000, (vii) require us to
maintain a cash balance of at least $250,000 and; (viii) require Soros to
increase from $1.5 million to $2.0 million the amount of the standby letter of
credit that Soros is maintaining to help secure the Loan Facility and extend the
term of the Soros Guarantee to November 15, 2004 from November 15, 2003. In
consideration for Soros' agreement to increase the amount of and to maintain the
Soros Guarantee until November 15, 2004, we issued to Soros a warrant to
purchase 25,000 shares of our Common Stock at an exercise price equal to $0.78
per share (the 10 day trailing average of the closing sale price of our Common
Stock on the date of issuance), exercisable at any time prior to March 17, 2013.

Interest accrues monthly on the average daily amount outstanding under the Loan
Facility during the preceding month at a per annum rate equal to the prime rate
plus 1%. In addition to the annual facility fee of $30,000, we also pay
Rosenthal certain fees to open letters of credit and guarantees in an amount
equal to a certain 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.

In consideration for the Loan Facility, among other things, we granted to
Rosenthal a first priority lien on substantially all of our assets, including
control of all of our cash accounts upon an event of default and certain of our
cash accounts in the event that the total amount of monies loaned to us under
the Loan Facility exceeds 90% of the maximum amount available under the Loan
Facility for more than 10 days. We also issued to Rosenthal a warrant to
purchase 50,000 shares of Common Stock at an exercise price of $2.34,
exercisable, as amended, for six years from the date of issuance.

Subject to certain conditions, if we default on any of our obligations under the
Loan Facility, Rosenthal has the right to draw upon the Soros Guarantee to
satisfy any such obligations. If and when Rosenthal draws on the Soros
Guarantee, pursuant to the terms of the Reimbursement Agreement, we would have
the obligation to, among other things, reimburse Soros for any amounts drawn
under the Soros Guarantee plus interest accrued thereon. In addition, to the
extent that Rosenthal draws on the Soros Guarantee during the continuance of a
default under Loan Facility or at any time that the total amount outstanding
under the Loan Facility exceeds 90% of the Soros Guarantee, we will be required
to issue to Soros a warrant (each a "Contingent Warrant") to purchase a number
of shares of Common Stock equal to the quotient of (a) any amounts drawn under
the Soros Guarantee and (b) 75% of the average of the closing price of our
Common Stock on the ten days preceding the date of issuance of such warrant.
Each Contingent Warrant will be exercisable for ten years from the date of
issuance at an exercise price equal to 75% of the average closing price of our
Common Stock on the ten days preceding the ten days after the date of issuance.

                                       17
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

Under the terms of the Loan Facility, Soros has the right to purchase all of our
obligations from Rosenthal at any time during its term (the "Buyout Option").
With respect to such Buyout Option, Soros has the right to request that
Rosenthal make a draw under the Soros Guarantee as consideration to Soros for
the purchase of such obligations.

Commitments And Long Term Obligations

As of June 30, 2003, we had the following commitments and long term obligations:

<TABLE>
<CAPTION>
                                  2003         2004          2005        2006        2007      Thereafter      Total
<S>                            <C>            <C>          <C>          <C>          <C>          <C>      <C>
Marketing and Advertising      $   204,000           --           --          --          --           --  $   204,000
Operating Leases                   259,000      454,000      461,000     468,000     481,000      916,000  $ 3,039,000
Capital Leases                     141,000      314,000      101,000          --          --           --  $   556,000
Employment Contracts               658,000      860,000      385,000          --          --           --  $ 1,903,000
Notes payable to shareholders           --           --      182,000          --          --           --  $   182,000
                               -----------  -----------  -----------  ----------   ---------   ----------  -----------
     Grand total               $ 1,262,000    1,628,000    1,129,000    468,000      481,000      916,000  $ 5,884,000
</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
as well as the amount of additional capital that we raise.

In order to continue to expand our product offerings, we intend to expand our
relationships with suppliers of end-of-season and excess name brand apparel and
fashion accessories. We expect that our suppliers will continue to include
designers and retail stores that sell excess inventory as well as third-party
end-of-season apparel aggregators. To achieve our goal of offering a wide
selection of top name brand designer clothing and fashion accessories, we may
acquire certain goods on consignment and may explore leasing or partnering
select departments with strategic partners and distributors. Due to our limited
working capital, a number of our suppliers have limited our payment terms and,
in some cases, have required us to pay for merchandise in advance of delivery.

We anticipate that the proceeds from the July 2003 Financing, the Loan Facility,
together with existing resources should be sufficient to satisfy our cash
requirements through the end of fiscal 2003. However, we may seek additional
debt and/or equity financing in order to maximize the growth of our business.
There can be no assurance that any additional financing or other sources of
capital will be available to us upon acceptable terms, or at all. The inability
to obtain additional financing, when needed, would have a material adverse
effect on our business, financial condition and results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses the accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized at fair market value when the
liability is incurred, rather than upon an entity's commitment to an exit plan,
as prescribed by EITF No. 94-3. SFAS No. 146 is effective for exit and disposal
activities initiated after December 31, 2002. We have adopted SFAS No. 146 and
its adoption did not have a material effect on the Company's financial
statements.

In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 elaborates on the
disclosure requirements of a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires a guarantor to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing certain
guarantees. FIN 45 also incorporates, without change, the guidance in FIN 34,
"Disclosure of Indirect Guarantees of Indebtedness of Others," which it
supersedes. The incremental disclosure requirements of FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The initial recognition and initial measurement provisions are applicable
to guarantees issued or modified after December 31, 2002. The accounting

                                       18
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

followed by a guarantor on prior guarantees may not be changed to conform to the
guidance of FIN 45. We do not believe that the adoption of FIN 45 will have a
material impact on our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for fiscal years and interim periods beginning after December 15,
2002. We continue to account for stock-based employee compensation under the
intrinsic value method of APB 25, "Accounting for Stock Issued to Employees." We
adopted the disclosure provisions of SFAS No. 148 for the year ended December
31, 2002, and its adoption did not have a material effect on the Company's
financial statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51". FIN 46 requires an investor to
consolidate a variable interest entity if it is determined that the investor is
a primary beneficiary of that entity, subject to the criteria set forth in FIN
46. Assets, liabilities, and non controlling interests of newly consolidated
variable interest entities will be initially measured at fair value. After
initial measurement, the consolidated variable interest entity will be accounted
for under the guidance provided by Accounting Research Bulletin No. 51,
"Consolidated Financial Statements." FIN 46 is effective for variable interest
entities created or entered into after January 31, 2003. For variable interest
entities created or acquired before February 1, 2003, FIN 46 applies in the
first fiscal year or interim period beginning after June 15, 2003. We do not
believe that the adoption of FIN 46 will have a material impact on our
consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149
clarifies under what circumstances a contract with an initial net investment
meets the characteristics of a derivative as discussed in Statement No. 133. It
also specifies when a derivative contains a financing component that warrants
special reporting in the Consolidated Statement of Cash Flows. SFAS No. 149
amends certain other existing pronouncements in order to improve consistency in
reporting these types of transactions. The new guidance is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The Company does not expect this
standard to have a material impact on its consolidated financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS No. 150"). SFAS No. 150 established standards for
classification and measurement in the statement of financial position of certain
financial instruments with characteristics of both liabilities and equity. It
requires classification of a financials instrument that is within its scope as a
liability (or an asset in some circumstances). SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003,and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. The Company has not yet determined the impact of the adoption of SFAS
No. 150 on its financial position or 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 and our notes payable. Due to the short-term nature of these
investments we have determined that the risks associated with interest rate
fluctuations related to these financial instruments do not pose a material risk
to us.

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 the company
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: the Company's limited working capital, need for additional capital
and potential inability to raise such capital; recent losses and anticipated
future losses; the risk that favorable trends in sales, repeat

                                       19
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

customer sales, average order size, and customer acquisition costs will not
continue; risks that the Company will be unable to reduce the levels of losses;
potential adverse effects on gross margin and gross profit resulting from mark
downs and allowances for returns and credit card chargebacks; potential dilution
arising from future equity financings, including potential dilution as a result
of the anti-dilution provisions contained in the Company's Series B Preferred
Stock, the Series C Preferred Stock, Series D Preferred Stock and the Series E
Preferred Stock; the competitive nature of the business and the potential for
competitors with greater resources to enter such business; adverse trends in the
retail apparel market; risks and uncertainties associated with the Company's
recent launch of a new version of its web site, including new internal
procedures that need to be developed to operate the new web site, site
instability and download performance issues; risks of litigation for sale of
unauthentic or damaged goods and litigation risks related to sales in foreign
countries; availability formulas under the Rosenthal credit facility which limit
the amount of funds available for borrowing; the Company's potential inability
to make repayments under the Rosenthal credit facility and the possible
shareholder dilution that could result if the Soros standby letter of credit is
drawn upon; the risk of default by the Company under the Rosenthal financing
agreement and the consequences that might arise from the Company having granted
a lien on substantially all of its assets under that agreement; the dependence
on third parties and certain relationships for certain services, including the
Company's dependence on U.P.S. (and the risks of a mail slowdown due to
terrorist activity) and the Company's dependence on its third-party web hosting
and fulfillment centers; risks related to consumer acceptance of the Internet as
a medium for purchasing apparel; the successful hiring and retaining of
personnel; the dependence on continued growth of online commerce; rapid
technological change; online commerce security risks; the startup nature of the
Internet business; governmental regulation and legal uncertainties; management
of potential growth; and unexpected changes in fashion trends.

ITEM 4. CONTROLS AND PROCEDURES.

As of the end of the period covered by this Form 10-Q, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Officer along
with the Company's Chief Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the
Company's President and Chief Executive Officer along with the Company's Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings. There have been no significant
changes in the Company's internal control over financial reporting that occurred
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.

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, but are not party to any lawsuit or proceeding which in
the opinion of management is likely to have a material adverse effect on us.

In October 2002, the Company commenced an action against Breider Moore & Co.,
LLC ("Breider Moore") and Joseph Breider in the Supreme Court of the State of
New York, County of New York, as a result of Breider Moore's failure to
consummate an agreed upon investment in the Company in connection with the June
2002 Soros investment. Breider Moore had committed to invest approximately $7
million on the same terms and conditions as those that applied to Soros'
investment. However, this investment was not consummated. In the action, we
asserted breach of contract claim against Breider Moore, fraud claims against
Breider Moore and Mr. Breider and a piercing the corporate veil claim against
Mr. Breider. In February 2003, we obtained summary judgment on our breach of
contract claim, and our piercing the corporate veil claim was dismissed. One of
our fraud claims is still pending and one has been dismissed. Given that we had
been granted summary judgment on the breach of contract claim, an evidentiary
hearing on our damages was held before a special referee in May 2003. In July
2003, the special referee recommended that we be awarded damages in the amount
of approximately $3.3 million for our breach of contract claim against Breider
Moore. We have made a motion to the court to modify the special referee's
recommendation and to increase the amount of the damage award to an amount in
excess of $14 million. Of course, there can be no assurance that our motion will
be successful or that the court will ultimately enter any judgment in our favor.
In addition, we do not yet know whether Breider Moore intends to appeal the
special referee's recommendation. Moreover, even if we are successful in
obtaining a judgment, we do not know what assets, if any, Breider Moore has and
whether we will be able to collect on the judgment. It may be necessary for us
to take discovery and/or

                                       20
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

commence additional collection proceedings in connection with our efforts to
collect on any such judgment, and, given the substantial costs involved with
such litigation, there can be no assurance that the amount that we would be able
to collect with respect to any such judgment would exceed the costs associated
with obtaining and executing on such judgment.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

In May 2003 Soros purchased 1,000 shares of Series E Convertible Preferred Stock
from us for an aggregate purchase price of $1.0 million. The Series E
Convertible Preferred Stock is convertible into Common Stock, at the holder's
option, at the rate of $0.76 per share, and will earn dividends at the rate of
12% per year, payable in cash or stock, at our option, upon conversion. In the
event that we issue Common Stock or securities convertible into Common Stock at
a price per share less than $0.76 in the future, the conversion price of the
Series E Convertible Preferred Stock, subject to certain limitations, would be
decreased so that it would equal such lower price.

In July 2003, Soros purchase convertible promissory notes from us in the
aggregate principal amount of $2.0 million. The purchase price for the
promissory notes was $2.0 million. The promissory notes bear interest at a rate
of 12% per annum and have a maturity date of January 12, 2004. The promissory
notes, together with any interest that has accrued, are convertible into equity
securities of the Company sold in any subsequent round of financing, at the
holder's option, at a price that is equal to the lowest price per share accepted
by any investor in such subsequent round of financing.

The above-described sales were deemed to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section
4(2) of the Securities Act.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On August 1, 2003, we held our annual meeting of stockholders. At the meeting,
our stockholders voted for five directors, electing E. Kenneth Seiff, Josephine
Esquivel, Alan Kane, Martin Miller and Robert Stevens as members of our board of
directors. In addition, our stockholders voted in favor of proposals to (i)
approve the conversion provisions of our Series D Convertible Preferred Stock,
and (ii) approve the conversion provisions of our Series E Convertible Preferred
Stock. The results of the voting were as follows:

          PROPOSAL                    VOTES FOR     VOTES WITHHELD
------------------------------       -----------    --------------
Election of E. Kenneth Seiff          44,780,931           493,567

Election of Josephine Esquivel        44,780,931           493,567

Election of Alan Kane                 44,780,931           493,567

Election of Martin Miller             44,780,931           493,567

Election of Robert Stevens            44,780,931           493,567

<TABLE>
<CAPTION>
                                                                      ABSTENTIONS AND
                                      VOTES FOR     VOTES AGAINST     BROKER NON-VOTES
                                     -----------    -------------     ----------------
<S>                                   <C>                 <C>                <C>
Approval of Conversion Provisions
 of Series D Preferred Stock          38,591,302          107,310            4,026,535

Approval of Conversion Provisions
 of Series E Preferred Stock          38,586,632          110,410            4,028,105
</TABLE>

In addition to the directors elected at the meeting, Neal Moszkowski and David
Wassong were elected to the Board of Directors as the designees of the Series A
Preferred Stock and the Series B Preferred Stock, respectively.

                                       21
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

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

  EXHIBIT NUMBER                     DESCRIPTION
----------------------------------------------------------------------------
     3.6             Certificate of Powers, Designations, Preferences and Rights
                     of Series E Preferred Stock of the Registrant

     10.53           Series E Preferred Stock Purchase Agreement, dated May 21,
                     2003, by and between the Registrant and the investors
                     listed on Schedule 1 thereto

     10.54           Note Purchase Agreement, dated July 16, 2003, by and
                     between the Registrant and the investors listed on
                     Schedule 1 thereto. (incorporated by reference to
                     Exhibit 99.2 to the Company's 8-K filed on July 17, 2003)

     10.55           Demand Promissory Note, dated July 16, 2003, issued to
                     SFM Domestic Investments LLC (incorporated by reference
                     to Exhibit 99.3 to the Company's 8-K filed on July 17,
                     2003)

     10.56           Demand Promissory Note, dated July 16, 2003, issued to
                     Quantum Industrial Partners LDC (incorporated by reference
                     to Exhibit 99.4 to the Company's 8-K filed on July 17,
                     2003)

     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.

(b)    Reports on Form 8-K:

     Form 8-K filed on July 17, 2003, attaching the Press Release announcing the
     announced that it had issued and sold $2 million of convertible promissory
     notes to affiliates of Soros Private Equity Partners.

     Form 8-K filed on August 8, 2003, attaching the Press Release announcing
     the Company's second quarter results.

                                       22
<PAGE>

                                  BLUEFLY, INC.
                                  JUNE 30, 2003

                                   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/ E. Kenneth Seiff
                                                          ---------------------
                                                      E. Kenneth Seiff
                                                      CEO and President


                                                      By: /s/ Patrick C. Barry
                                                          ---------------------
                                                      Patrick C. Barry
                                                      Chief Financial Officer

August 8, 2003

                                       23