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 September 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 November 10, 2003, the issuer had outstanding 11,157,948 shares of Common
Stock, $.01 par value.

<PAGE>

                                  BLUEFLY, INC.
                                TABLE OF CONTENTS

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

Item 1.  Financial Statements

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

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

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

         Consolidated Condensed Statements of Cash Flows for the nine months ended
           September 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                      20

Item 4.  Controls and Disclosures                                                        20

Part II. Other Information                                                               21

Item 1.  Legal Proceedings                                                               21

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
</TABLE>

<PAGE>

Part I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS

                                  BLUEFLY, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   SEPTEMBER 30,   DECEMBER 31,
                                                                                       2003            2002
                                                                                   -------------   ------------
<S>                                                                                <C>             <C>
                                     ASSETS

Current assets
   Cash and cash equivalents                                                       $   2,567,000   $  1,749,000
   Inventories, net                                                                   12,464,000     10,868,000
   Accounts receivable, net                                                            1,501,000      1,147,000
   Prepaid expenses                                                                      197,000        248,000
   Other current assets                                                                  185,000         78,000
                                                                                   -------------   ------------
         Total current assets                                                         16,914,000     14,090,000

Property and equipment, net                                                            1,919,000      2,604,000
Other assets                                                                             167,000        215,000
                                                                                   -------------   ------------
         Total assets                                                              $  19,000,000   $ 16,909,000
                                                                                   =============   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                                                $   5,789,000   $  3,434,000
   Accrued expenses and other current liabilities                                      2,648,000      3,067,000
   Notes payable to shareholders                                                       2,000,000             --
   Deferred revenue                                                                    1,412,000        885,000
                                                                                   -------------   ------------
         Total current liabilities                                                    11,849,000      7,386,000

Note payable to shareholders                                                             182,000      2,182,000
Long-term capital lease liability                                                        193,000        257,000
                                                                                   -------------   ------------
         Total liabilities                                                            12,224,000      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 September 30, 2003
    and December 31, 2002, respectively (liquidation preference: $9.2
    million plus accrued dividends as of September 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 September
    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 September 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, and
    7,136.548 issued and outstanding as of September 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 September 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 September 30,
    2003 and December 31, 2002, respectively (liquidation preference:
    $2.1 million)                                                                             --             --
   Common stock - $.01 par value; 92,000,000 shares authorized and 11,107,948
    and 10,391,904 shares issued and outstanding as of September 30, 2003 and
    December 31, 2002, respectively                                                      111,000        104,000
   Additional paid-in capital                                                         99,018,000     92,628,000
   Accumulated deficit                                                               (92,447,000)   (85,742,000)
                                                                                   -------------   ------------
         Total shareholders' equity                                                    6,776,000      7,084,000
                                                                                   -------------   ------------
         Total liabilities and shareholders' equity                                $  19,000,000   $ 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>
                                                                    NINE MONTHS ENDED
                                                                       SEPTEMBER 30,
                                                              -----------------------------
                                                                  2003             2002
                                                              -------------   -------------
<S>                                                           <C>             <C>
Net sales                                                     $  23,935,000   $  20,750,000
Cost of sales                                                    18,015,000      13,770,000
                                                              -------------   -------------
   Gross profit                                                   5,920,000       6,980,000

Selling, marketing and fulfillment expenses                       8,382,000       8,047,000
General and administrative expenses                               3,778,000       3,546,000
                                                              -------------   -------------
   Total operating expenses                                      12,160,000      11,593,000

Operating loss                                                   (6,240,000)     (4,613,000)

Interest income                                                      28,000          60,000
Interest expense                                                   (268,000)       (266,000)
                                                              -------------   -------------
                                                                   (240,000)       (206,000)

Net loss                                                      $  (6,480,000)  $  (4,819,000)

Deemed dividend related to beneficial conversion feature on
 Series B and C Preferred Stock                                    (225,000)    (15,295,000)

Preferred stock dividends                                        (2,354,000)     (1,846,000)
                                                              -------------   -------------

Net loss applicable to common shareholders                    $  (9,059,000)  $ (21,960,000)
                                                              =============   =============

Basic and diluted loss per common share                       $       (0.82)  $       (2.25)
                                                              =============   =============

Weighted average common shares outstanding
 (basic and diluted)                                             11,021,829       9,770,366
                                                              =============   =============
</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
                                                                      SEPTEMBER 30,
                                                              -----------------------------
                                                                   2003            2002
                                                              -------------   -------------
<S>                                                           <C>             <C>
Net sales                                                     $   8,210,000   $   6,305,000
Cost of sales                                                     6,462,000       4,232,000
                                                              -------------   -------------
   Gross profit                                                   1,748,000       2,073,000

Selling, marketing and fulfillment expenses                       2,917,000       2,952,000
General and administrative expenses                               1,240,000       1,277,000
                                                              -------------   -------------
   Total operating expenses                                       4,157,000       4,229,000

Operating loss                                                   (2,409,000)     (2,156,000)

Interest income                                                       6,000          11,000
Interest expense                                                   (114,000)        (90,000)
                                                              -------------   -------------
                                                                   (108,000)        (79,000)

Net loss                                                      $  (2,517,000)  $  (2,235,000)

Deemed dividend related to beneficial conversion feature on
 Series B Preferred Stock                                                --      (5,069,000)

Preferred stock dividends                                          (871,000)       (622,000)
                                                              -------------   -------------

Net loss applicable to common shareholders                    $  (3,388,000)  $  (7,926,000)
                                                              =============   =============

Basic and diluted loss per common share                       $       (0.31)  $       (0.76)
                                                              =============   =============

Weighted average common shares outstanding
 (basic and diluted)                                             11,057,700      10,391,904
                                                              =============   =============
</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>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                     ---------------------------
                                                                         2003           2002
                                                                     ------------   ------------
<S>                                                                  <C>            <C>
Cash flows from operating activities
  Net loss                                                           $ (6,480,000)  $ (4,819,000)
  Adjustments to reconcile net loss to net cash used in operating
   activities:
    Depreciation and amortization                                       1,390,000        785,000
    Provisions for returns                                                (11,000)      (286,000)
    Allowance for doubtful accounts                                       105,000        177,000
    Write-down (recovery) of inventory                                    559,000        (93,000)
    Warrants issued for services                                               --         39,000
  Changes in operating assets and liabilities:
    (Increase) decrease in
      Inventories                                                      (2,155,000)    (4,432,000)
      Accounts receivable                                                (459,000)       435,000
      Prepaid expenses                                                     51,000       (696,000)
      Other current assets                                               (107,000)        31,000
      Other assets                                                             --             --
    Increase (decrease) in
      Accounts payable                                                  2,408,000      1,690,000
      Accrued expenses and other current liabilities                     (510,000)        46,000
      Deferred revenue                                                    527,000        (83,000)
                                                                     ------------   ------------
  Net cash used in operating activities                                (4,682,000)    (7,206,000)
                                                                     ------------   ------------

Cash flows from investing activities
  Purchase of property, equipment and capitalized software               (391,000)    (1,642,000)
                                                                     ------------   ------------
Net cash used in investing activities                                    (391,000)    (1,642,000)
                                                                     ------------   ------------

Cash flows from financing activities
  Proceeds from issuance of Notes Payable (July 2003 Financing)         2,000,000
  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             --
  Proceeds from exercise of Employee Stock Options                         77,000
  Payments of capital lease obligation                                   (186,000)      (143,000)
  Proceeds from sale of Preferred Stock                                        --      3,045,000
  Proceeds from issuance of notes payable to shareholder                       --      2,000,000
  Net proceeds from sale of Common Stock and Warrants                          --      1,899,000
                                                                     ------------   ------------
Net cash provided by financing activities                               5,891,000      6,801,000
                                                                     ------------   ------------

Net increase (decrease) in cash and cash equivalents                      818,000     (2,047,000)
Cash and cash equivalents - beginning of period                         1,749,000      5,419,000
                                                                     ------------   ------------
Cash and cash equivalents - end of period                            $  2,567,000   $  3,372,000
                                                                     ============   ============

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   $    662,000
                                                                     ============   ============
  Interest paid                                                      $     46,000   $     97,000
                                                                     ============   ============
  Warrants issued to shareholders                                    $     43,000   $    292,000
                                                                     ============   ============
  Deemed dividend related to beneficial conversion feature on
   Series B Preferred Stock                                          $         --   $ 15,295,000
                                                                     ============   ============
  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
                               SEPTEMBER 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 September 30, 2003 together
with the proceeds from the October 2003 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
                               SEPTEMBER 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 represented approximately 19.99% of the Company's then 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 were 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 the Company 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
                               SEPTEMBER 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 $2.0 million in the Company. Under the terms of the
transaction, the Company issued $2.0 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.

October 2003 Financing
Subsequent to quarter end, in October 2003 Soros invested an additional $2.0
million in the Company. Under the terms of the transaction, the Company issued
$2.0 million of convertible promissory notes that bear interest at a rate of 12%
per annum and have a maturity date of April 14, 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 "October 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.

                                        9
<PAGE>

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

As of September 30, 2003, after giving effect to the amendment, the maximum
availability under the Loan Facility was approximately $4.0 million of which
approximately $3.9 million was committed, leaving approximately $100,000
available against the Loan Facility. Subsequent to the quarter end, the
Financing Agreement was further amended to allow Rosenthal in its sole
discretion to increase the amount available under the Loan Facility (subject to
the existing $10 million cap) by $500,000.

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.

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             September 30, 2003   September 30, 2002
     --------             ------------------   ------------------

     Options                      10,370,912            3,878,912
     Warrants                      1,119,144            1,069,144
     Preferred Stock              43,323,434           27,769,450
     Convertible Debt                     --*           2,150,538

*Excludes debt issued in connection with the July 2003 Financing

NOTE 6 -  STOCK BASED COMPENSATION

The Company applies 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>
                                                                                September 30,   September 30,
                                                                                    2003            2002
                                                                                -------------   -------------
<S>                                                                             <C>             <C>
Basic and diluted net loss, as reported for the three months ended              $  (2,517,000)  $  (2,235,000)
Basic and diluted net loss per share, as reported for the three months ended    $       (0.31)  $       (0.76)
Basic and diluted net loss, pro forma for the three months ended                $  (3,512,000)  $  (3,148,000)
Basic and diluted net loss per share, pro forma for the three months ended      $       (0.40)  $       (0.85)

Basic and diluted net loss, as reported for the nine months ended               $  (6,480,000)  $  (4,819,000)
Basic and diluted net loss per share, as reported for the nine months ended     $       (0.82)  $       (2.25)
Basic and diluted net loss, pro forma for the nine months ended                 $  (9,866,000)  $  (7,944,000)
Basic and diluted net loss per share, pro forma for the nine months ended       $       (1.13)  $       (2.57)
</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.

                                       10
<PAGE>

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

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.

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 over 30% to $8,210,000 for the three months ended September
30, 2003 from $6,305,000 for the three months ended September 30, 2002. Our net
loss for the third quarter of 2003 totaled $2,517,000 compared to $2,235,000 in
the third quarter of 2002.

At September 30, 2003 we had an accumulated deficit of $92,447,000. 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 October
2003 Financing, the 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. However, 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, recoverability of inventories and deferred tax
asset. 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.

                                       11
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

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.

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 NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2002

The following table sets forth our statement of operations data, for the nine
months ended September 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                                     $   23,935       100.0%  $  20,750       100.0%  $  15,044       100.0%
Cost of sales                                     18,015        75.3%     13,770        66.4%     10,578        70.3%
                                              ----------               ---------               ---------
   Gross profit                                    5,920        24.7%      6,980        33.6%      4,466        29.7%

Selling, marketing and fulfillment expenses        8,382        35.0%      8,047        38.8%     10,807        71.8%
General and administrative expenses                3,778        15.8%      3,546        17.1%      4,178        27.8%
                                              ----------               ---------               ---------
   Total operating expenses                       12,160        50.8%     11,593        55.9%     14,985        99.6%

Operating loss                                    (6,240)      (26.1)%    (4,613)      (22.3)%   (10,519)      (69.9)%
Interest expense and other income                   (240)       (1.0)%      (206)       (1.0)%   (13,108)      (87.1)%
                                              ----------               ---------               ---------
   Net loss                                       (6,480)      (27.1)%    (4,819)      (23.3)%   (23,627)     (157.0)%
</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 nine months ended September 30th, as indicated below:

                                       12
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                                                  2003       2002       2001
                                                                                --------   --------   --------
<S>                                                                             <C>        <C>        <C>
Gross Average Order Size (including shipping & handling)                        $ 168.03   $ 162.32   $ 137.91
Gross Average Order Size Per New Customer (including shipping & handling)       $ 153.37   $ 145.82   $ 122.38
Gross Average Order Size Per Repeat Customer (including shipping & handling)    $ 176.10   $ 171.23   $ 151.33

New Customers Added during the Period                                             79,134     68,323     71,358
Revenue from Repeat Customers as a % of total Revenue                                 68%        69%        59%
Customer Acquisition Costs                                                      $  10.05   $  16.20   $  48.36
</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 nine months ended September 30, 2003 increased by
over 18% to $38,612,000, from $32,630,000 for the nine months ended September
30, 2002. For the nine months ended September 30, 2003, we recorded a provision
for returns and credit card chargebacks and other discounts of $14,677,000, or
approximately 38% of gross sales. For the nine months ended September 30, 2002,
the provision for returns and credit card chargebacks and other discounts was
$11,880,000, or 36.4% 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 nine months ended
September 30, 2003 were $23,935,000. This represents an increase of over 15%
compared to the nine months ended September 30, 2002, in which net sales totaled
$20,750,000. The growth in net sales was largely driven by the increase in the
number of new customers acquired (approximately 16% higher than in the first
nine months of 2002) and the increase in gross average order size (approximately
3.5% higher than in the first nine months of 2002). In addition, our shipping
and handling revenue increased as we raised our ground shipping rate from $5.95
per order to $7.95 per order in the first quarter of 2003.

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 nine months ended September 30, 2003
totaled $18,015,000, resulting in gross margin of 24.7%. Cost of sales for the
nine months ended September 30, 2002 totaled $13,770,000, resulting in gross
margin of 33.6%. Gross profit decreased by 15%, to $5,920,000 for the nine
months ended September 30, 2003 compared to $6,980,000 for the nine months ended
September 30, 2002. The decrease in gross margin resulted primarily from our
decision to reduce our product margin on certain merchandise in an effort to
reduce prior season inventory levels.

Selling, marketing and fulfillment expenses: Selling, marketing and fulfillment
expenses increased by approximately 4% in the first nine months of 2003 compared
to the first nine months of 2002. As a percentage of net sales, our selling,
marketing and fulfillment expenses decreased to 35% in the first nine months of
2003 from approximately 39% in the first nine months of 2002. Selling, marketing
and fulfillment expenses were comprised of the following:

<TABLE>
<CAPTION>
                     Nine Months Ended    Nine Months Ended   Percentage Difference
                    September 30, 2003   September 30, 2002     increase (decrease)
                    ------------------   ------------------   ---------------------
    <S>               <C>                  <C>                       <C>
    Marketing         $      1,227,000     $      1,485,000          (17.4)%
    Operations               3,547,000            3,177,000           11.6%
    Technology               2,588,000            2,535,000            2.1%
    E-Commerce               1,020,000              850,000           20.0%
                    ------------------   ------------------
                      $      8,382,000     $      8,047,000            4.2%
</TABLE>

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 17% 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.

                                       13
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

Primarily as a result of this shift, we were able to decrease our customer
acquisition costs for the nine months ended September 30, 2003 by approximately
38% to $10.05 per customer from $16.20 per customer for the nine months ended
September 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 nine months of 2003 by approximately 12% compared to the
first nine months of 2002 as a result of increased headcount in the operations
and customer service teams, as well as an increase in the variable costs
associated with the increased sales volume.

Technology expenses consist primarily of staff related costs, amortization of
capitalized costs and Web Site hosting. For the nine months ended September 30,
2003 technology expenses increased by approximately 2% compared to the nine
months ended September 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 along with increased amortization expense incurred as a
result of capital costs incurred in connection with the upgraded version of the
Web Site. Depreciation and amortization for the nine months ended September 30,
2003 represented approximately 42% of the total technology expense while
depreciation and amortization for the nine months ended September 30, 2002
represented approximately 10% of the total technology expense. These amounts
were partially offset by a reduction of approximately 68% 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 nine months ended September 30, 2003,
this amount increased by approximately 20% as compared to the nine months ended
September 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. In September 2003, we launched a redesigned Web
Site. The redesigned Web Site provides a new look and, we believe, more
intuitive navigation. The costs of the new site were primarily included in
E-Commerce and expensed as incurred.

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 nine months ended
September 30, 2003 increased by approximately 7% to $3,778,000 as compared to
$3,546,000 for the nine months ended September 30, 2002. The increase in general
and administrative expenses was the result of increased professional services
and salary and benefit expenses, which was offset in part by a decrease in
depreciation.

As a percentage of net sales, general and administrative expenses for the first
nine months of 2003 decreased slightly to approximately 16% compared to
approximately 17% for the first nine months of 2002.

Loss from operations: Operating loss increased by approximately 35% in the first
nine months of 2003 to $6,240,000 from $4,613,000 in the first nine 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 nine months
ended September 30, 2003 totaled $268,000, and related to fees paid in
connection with our Loan Facility, amortization of warrants issued in connection
with the January 2003 Financing, and interest on the notes issued in connection
with the July 2003 Financing. For the nine months ended September 30, 2002,
interest expense totaled $266,000, and related primarily to fees paid in
connection with the Loan Facility.

Interest income for the nine months ended September 30, 2003 decreased to
$28,000 from $60,000 for the nine months ended September 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 SEPTEMBER 30, 2003 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2002

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

                                       14
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

<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                                     $  8,210       100.0%  $  6,305       100.0%  $  5,113       100.0%
Cost of sales                                    6,462       78.7.%     4,232        67.1%     3,654        71.5%
                                              --------               --------               --------
    Gross profit                                 1,748        21.3%     2,073        32.9%     1,459        28.5%

Selling, marketing and fulfillment expenses      2,917        35.5%     2,952        46.8%     2,731        53.4%
General and administrative expenses              1,240        15.1%     1,277        20.3%     1,140        22.3%
                                              --------               --------               --------
    Total operating expenses                     4,157        50.6%     4,229        67.1%     3,871        75.7%

Operating loss                                  (2,409)       29.3%    (2,156)      (34.2)%   (2,412)      (47.2)%
Interest expense and other income                 (108)        1.3%       (79)       (1.2)%      (16)        0.3%
                                              --------               --------               --------
    Net loss                                    (2,517)       30.6%    (2,235)      (35.4)%   (2,428)      (47.5)%
</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 September 30th, as indicated below:

<TABLE>
<CAPTION>
                                                                                  2003       2002       2001
                                                                                --------   --------   --------
<S>                                                                             <C>        <C>        <C>
Gross Average Order Size (including shipping & handling)                        $ 161.87   $ 163.64   $ 143.84
Gross Average Order Size Per New Customer (including shipping & handling)       $ 144.69   $ 144.03   $ 126.74
Gross Average Order Size Per Repeat Customer  (including shipping & handling)   $ 171.51   $ 174.61   $ 155.69

New Customers Added during the Period                                             29,522     22,393     21,113
Revenue from Repeat Customers as a % of total Revenue                                 68%        68%        64%
Customer Acquisition Costs                                                      $  10.52   $  23.07   $  23.73
</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 September 30, 2003 increased
by approximately 29% to $13,574,000, from $10,541,000 for the three months ended
September 30, 2002. For the three months ended September 30, 2003, we recorded a
provision for returns and credit card chargebacks and other discounts of
$5,364,000, or approximately 39.5% of gross sales. For the three months ended
September 30, 2002, the provision for returns and credit card chargebacks and
other discounts was $4,236,000, or approximately 40.2% of gross sales.

After the necessary provisions for returns, credit card chargebacks and
adjustments for uncollected sales taxes, our net sales for the three months
ended September 30, 2003 were $8,210,000. This represents an increase of more
than 30% compared to the three months ended September 30, 2002, in which net
sales totaled $6,305,000. The growth in net sales was largely driven by the
increase in the number of new customers acquired (approximately 32% higher than
in the third quarter of 2002). In addition, net sales grew as a result of the
increase of our ground shipping rate from $5.95 per order to $7.95 per order in
the first quarter of 2003.

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 September 30, 2003
totaled $6,462,000, resulting in gross margin of approximately 21.3%. Cost of
sales for the three months ended September 30, 2002 totaled $4,232,000,
resulting in gross margin of 32.9%. Gross profit decreased by 15.7%, to
$1,748,000 for the three months ended September 30, 2003 compared to $2,073,000
for the three months ended September 30, 2002. The decrease in gross margin
resulted primarily from our decision to reduce our product margin on certain
merchandise in an effort to reduce prior season inventory levels.

                                       15
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

Selling, marketing and fulfillment expenses: Selling, marketing and fulfillment
expenses decreased slightly by approximately 1% for the three months ended
September 30, 2003 compared to the three months ended September 30, 2002. As a
percentage of net sales, our selling, marketing and fulfillment expenses
decreased to 35.5% in the three months ended September 30, 2003 from 46.8% in
the three months ended September 30, 2002. Selling, marketing and fulfillment
expenses were comprised of the following:

                Three Months Ended   Three Months Ended  Percentage Difference
                September 30, 2003   September 30, 2002    increase (decrease)
                ------------------   ------------------  ---------------------
    Marketing      $       451,000     $        648,000                  (30.4)%
    Operations           1,236,000            1,055,000                   17.2%
    Technology             817,000              956,000                  (14.5)%
    E-Commerce             413,000              293,000                   41.0%
                ------------------   ------------------
                   $     2,917,000     $      2,952,000                    1.2%

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 30% was largely related to a shift in our customer
acquisition strategy. During the third quarter of 2003, 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 three months ended September 30,
2003 by approximately 54% to $10.52 per customer from $23.07 per customer for
the three months ended September 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 September 30, 2003 by approximately 17%
compared to the three months ended September 30, 2002 as a result of an increase
in 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 September 30,
2003 technology expenses decreased by approximately 15% compared to the three
months ended September 30, 2002. This decrease was related to a reduction in our
Web Site hosting costs in connection with our move to a new web hosting facility
and partially offset by an increase in depreciation.

E-Commerce expenses include expenses related to our photo studio, image
processing, and Web Site design. For the three months ended September 30, 2003,
this amount increased by approximately 41% as compared to the three months ended
September 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. In September 2003, we launched a redesigned Web
Site. The redesigned Web Site provides a new look and more intuitive navigation.
The costs of the new site were primarily included in E-Commerce and expensed as
incurred.

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
September 30, 2003 decreased by approximately 3% to $1,240,000 as compared to
$1,277,000 for the three months ended September 30, 2002. The decrease in
general and administrative expenses was the result of decreased professional
services as well as a decrease in depreciation expense.

As a percentage of net sales, general and administrative expenses for the third
quarter of 2003 decreased to 15.1% from 20.3% for the third quarter of 2002.

Loss from operations: Operating loss increased by approximately 12% in the third
quarter of 2003 to $2,409,000 from $2,156,000 in the third 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 September 30, 2003 totaled $114,000, and related to fees paid in
connection with our Loan Facility, amortization of warrants issued in connection
with the January

                                       16
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

2003 Financing as well as interest on the notes issued in connection with the
July 2003 Financing. For the three months ended September 30, 2002, interest
expense totaled $90,000, and related primarily to fees paid in connection with
the Loan Facility.

Interest income for the three months ended September 30, 2003 decreased to
$6,000 from $11,000 for the three months ended September 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 September 30, 2003, we had approximately $2.6 million of liquid assets,
entirely in the form of cash and cash equivalents and working capital of
approximately $5.1 million. In addition, as of September 30, 2003, we had
approximately $3.9 million of borrowings committed under the Loan Facility,
leaving approximately $100,000 of availability. In October 2003 Soros invested
an additional $2.0 million in us in the form of promissory notes.

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.
Subsequent to the quarter end, the Financing Agreement was further amended to
allow Rosenthal in its sole discretion to increase the amount available under
the Loan Facility (subject to the existing $10 million cap) by $500,000.

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 funded debt loaned to us
under the Loan Facility exceeds 90% of the maximum amount available under the

                                       17
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

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 three 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.

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 September 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       $  210,000           --           --          --           --           --   $   210,000
Operating Leases                   112,000      454,000      461,000     468,000      481,000      916,000   $ 2,892,000
Capital Leases                      71,000      314,000      101,000          --           --           --   $   486,000
Employment Contracts               396,000    1,685,000      846,000     450,000       75,000           --   $ 3,452,000
Notes payable to shareholders           --    2,000,000      182,000          --           --           --   $ 2,182,000
                                ----------   ----------   ----------   ---------   ----------   ----------   -----------
  Grand total                   $  789,000    4,453,000    1,590,000     918,000      556,000      916,000   $ 9,222,000
</TABLE>

In September 2003, we entered into an employment agreement with Melissa
Payner-Gregor, detailing the terms of her employment as our President. Under the
terms of the Agreement, which expires in March 2007, Ms. Payner-Gregor is
entitled to an annual salary of $450,000, and received options to purchase
1,200,000 shares of our common stock. In addition, she is entitled to an annual
bonus equal to the lesser of 3% of our net income for the fiscal year for which
the bonus is awarded or 200% of her base salary for that year. Her bonus for
2004 is subject to a minimum floor of $100,000. The agreement also provides for
her to receive an additional bonus in connection with certain change of control
transactions equal to 1% of the consideration distributed to stockholders in
connection with any such transaction. The salary commitment and minimum bonus
obligation for 2004 that is payable to Ms. Payner-Gregor under the agreement are
reflected in the table above. The other obligations (which are contingent in
nature) are not included above.

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

                                       18
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

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 October 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 currently plan to
seek additional equity or debt 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 an 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
followed by a guarantor on prior guarantees may not be changed to conform to the
guidance of FIN 45. The adoption of FIN 45 did not 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

                                       19
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

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 September 30, 2003, and for hedging
relationships designated after September 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
financial instruments we have determined that the risks associated with interest
rate fluctuations related to these financial instruments do not pose a material
risk to us.

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 customer sales,
gross 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 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

                                       20
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 30, 2003

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.
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. We are currently taking discovery and it may be necessary for us to
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 October 2003, Soros purchased 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 April 14, 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

None.

                                       21
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 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
--------------                       -----------
     10.57          Note Purchase Agreement, dated October 17, 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 October 20, 2003)

     10.58          Demand Promissory Note, dated October 17, 2003, issued to
                    SFM Domestic Investments LLC (incorporated by reference to
                    Exhibit 99.3 to the Company's 8-K filed on October 20, 2003)

     10.59          Demand Promissory Note, dated October 17, 2003, issued to
                    Quantum Industrial Partners LDC (incorporated by reference
                    to Exhibit 99.4 to the Company's 8-K filed on October 20,
                    2003)

     10.60          Employment Agreement dated as of September 22, 2003 by and
                    between Bluefly, Inc. and Melissa Payner-Gregor.

     10.61          Amendment to Financing Agreement dated October 2, 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 October 20, 2003, attaching the Press Release announcing
     that the Company issued and sold $2 million of convertible promissory notes
     to affiliates of Soros Private Equity Partners.

     Form 8-K filed on November 12, 2003, attaching the Press Release announcing
     the Company's third quarter results.

                                       22
<PAGE>

                                  BLUEFLY, INC.
                               SEPTEMBER 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
                                              Chief Executive Officer


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


November 12, 2003

                                       23