================================================================================



                    U. S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

[X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
          ACT OF 1934


                  For the quarterly period ended June 30, 2003
                                                 -------------

                         Commission file number 0-28008
                                                -------

                             SmartServ Online, Inc.
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware                                                13-3750708
--------------------------------------------------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

          Metro Center, One Station Place, Stamford, Connecticut 06902
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (203) 353-5950
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


Check  whether the issuer (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
                                                              ---   ---

The number of shares of common stock, $.01 par value,  outstanding as of August
20, 2003 was 12,297,199.

Transitional Small Business Disclosure Format (check one): Yes        No  X
                                                               ----      ----

================================================================================


<PAGE>


                             SMARTSERV ONLINE, INC.

                                   FORM 10-QSB

                                      INDEX

<TABLE>
<CAPTION>

<S>           <C>                                                                                             <C>
PART I.       FINANCIAL INFORMATION

Item 1.       Consolidated Financial Statements

              Consolidated Balance Sheets - June 30, 2003 (unaudited) and December 31, 2002.......................2

              Consolidated Statements of Operations - three months ended June 30, 2003 and 2002
              and six months ended June 30, 2003 and 2002 (unaudited).............................................4

              Consolidated Statement of Changes in Stockholders' Equity (Deficiency) - six months
              ended June 30, 2003 (unaudited).....................................................................6

              Consolidated Statements of Cash Flows - three months ended June 30, 2003 and 2002
              and six months ended June 30, 2003 and 2002 (unaudited).............................................7

              Notes to Unaudited Consolidated Financial Statements................................................8

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations..........................................................................21

Item 3.       Controls and Procedures............................................................................29


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings..................................................................................30

Item 2.       Changes in Securities and Use of Proceeds..........................................................30

Item 6.       Exhibits and Reports on Form 8-K...................................................................33

              Signatures.........................................................................................34

</TABLE>




                                       1

<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                             JUNE 30,    DECEMBER 31,
                                                               2003         2002
                                                            ----------   ----------
                                                            (UNAUDITED)
<S>                                                         <C>          <C>
ASSETS
Current assets
   Cash                                                     $  410,973   $  154,759
   Accounts receivable                                          65,674       55,907
   Accrued interest receivable                                    --         50,658
   Prepaid compensation                                        428,125      117,500
   Prepaid expenses                                            186,837      164,258
   Deferred financing costs                                    962,902         --
                                                            ----------   ----------
Total current assets                                         2,054,511      543,082
                                                            ----------   ----------

Property and equipment, net                                       --      1,573,978

Other assets
   Capitalized software development costs, net of
      accumulated amortization of $1,097,148 at
      June 30, 2003 and $208,681 at December 31, 2002             --        888,467
   Security deposits                                           200,731      238,690
   Notes receivable from officer, net of an allowance for
     uncollectibility of $664,640                                 --           --
   Prepaid compensation                                         48,958      107,708
                                                            ----------   ----------
                                                               249,689    1,234,865
                                                            ----------   ----------

Total Assets                                                $2,304,200   $3,351,925
                                                            ==========   ==========
</TABLE>



                                       2
<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                           JUNE 30,      DECEMBER 31,
                                                                             2003           2002
                                                                        ------------    ------------
                                                                         (UNAUDITED)
<S>                                                                     <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
   Accounts payable                                                     $  1,649,696    $  1,307,342
   Accrued liabilities                                                       556,466         476,346
   Accrued salaries                                                          545,635         295,437
   Notes payable                                                           1,329,810         500,000
                                                                        ------------    ------------
Total current liabilities                                                  4,081,607       2,579,125
                                                                        ------------    ------------

Deferred revenues                                                             77,033         193,294
Deferred lease costs                                                         245,285         242,300
Accounts payable - noncurrent                                                   --           163,907

COMMITMENTS AND CONTINGENCIES - NOTE 9

STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock - $0.01 par value
   Authorized - 1,000,000 shares
   Issued and outstanding - None                                                --              --
Common stock - $.01 par value
   Authorized - 40,000,000 shares
   Issued and outstanding - 12,007,912 shares at June 30, 2003 and
      11,436,240 shares at December 31, 2002                                 120,078         114,362
Additional paid-in capital                                                77,619,786      73,527,939
Notes receivable from officers, net of an allowance for
   uncollectibility of $354,471 at June 30, 2003 and $-0- at December
   31, 2002                                                                 (255,525)       (609,996)
Accumulated deficit                                                      (79,584,064)    (72,859,006)
                                                                        ------------    ------------
Total stockholders' equity (deficiency)                                   (2,099,725)        173,299
                                                                        ------------    ------------

Total Liabilities and Stockholders' Equity (Deficiency)                 $  2,304,200    $  3,351,925
                                                                        ============    ============
</TABLE>

See accompanying notes.


                                       3
<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                         THREE MONTHS                      SIX MONTHS
                                                         ENDED JUNE 30                    ENDED JUNE 30
                                                  ----------------------------    ----------------------------
                                                       2003            2002           2003             2002
                                                  ------------    ------------    ------------    ------------
<S>                                               <C>             <C>             <C>             <C>
Revenues                                          $    238,028    $     35,815    $    469,015    $     64,636
                                                  ------------    ------------    ------------    ------------

Costs and expenses:
   Costs of services                                (2,574,543)     (1,419,946)     (3,791,374)     (2,951,626)
   Sales and marketing expenses                       (103,496)     (1,042,804)       (380,030)     (2,243,649)
   General and administrative expenses              (1,360,913)     (1,176,235)     (2,360,093)     (2,240,140)
   Stock-based compensation                            (73,750)        325,136        (101,944)        153,121
                                                  ------------    ------------    ------------    ------------

   Total costs and expenses                         (4,112,702)     (3,313,849)     (6,633,441)     (7,282,294)
                                                  ------------    ------------    ------------    ------------

Loss from operations                                (3,874,674)     (3,278,034)     (6,164,426)     (7,217,658)
                                                  ------------    ------------    ------------    ------------

Other income (expense):
   Interest income                                       4,360           8,815           8,892          31,499
   Interest expense and other financing costs         (873,510)       (187,504)     (1,249,396)       (369,745)

   Gain from extinguishment of debt                       --              --           305,822            --
   Insurance recovery                                  374,000            --           374,000            --
   Foreign exchange gains (losses)                         (43)         (5,290)             50         (15,456)
                                                  ------------    ------------    ------------    ------------

                                                      (495,193)       (183,979)       (560,632)       (353,702)

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

Net loss                                          $ (4,369,867)   $ (3,462,013)   $ (6,725,058)   $ (7,571,360)
                                                  ============    ============    ============    ============

Basic and diluted loss per share                  $      (0.36)   $      (0.53)   $      (0.57)   $      (1.19)
                                                  ============    ============    ============    ============

Weighted average shares outstanding - basic and
   diluted                                          12,001,457       6,520,857      11,870,858       6,389,140
                                                  ============    ============    ============    ============
</TABLE>


The following table illustrates the amount of stock-based  compensation  charges
that would have been

                                       4
<PAGE>

recorded in the  categories  of the  statement  of  operations  had  stock-based
compensation not been separately stated therein:


<TABLE>
<CAPTION>
                                           THREE MONTHS               SIX MONTHS
                                           ENDED JUNE 30             ENDED JUNE 30
                                      ----------------------    ----------------------
                                         2003        2002          2003         2002
                                      ---------    ---------    ---------    ---------
<S>                                   <C>          <C>          <C>          <C>
Costs of services                     $    --      $ 168,573    $     396    $ 195,308

Sales and marketing expenses               --        (29,663)        --        (29,663)

General and administrative expenses     (73,750)     186,226     (102,340)     (12,524)
                                      ---------    ---------    ---------    ---------

                                      $ (73,750)   $ 325,136    $(101,944)   $ 153,121
                                      =========    =========    =========    =========
</TABLE>


See accompanying notes.


                                       5
<PAGE>

                             SMARTSERV ONLINE, INC.

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                         SIX MONTHS ENDED JUNE 30, 2003
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 NOTES
                                       COMMON STOCK            RECEIVABLE      ADDITIONAL
                                                    PAR           FROM           PAID-IN      ACCUMULATED
                                    SHARES         VALUE         OFFICERS        CAPITAL         DEFICIT
                                 ------------   ------------   ------------    ------------    ------------
<S>                                <C>          <C>            <C>             <C>             <C>
Balances at December 31, 2002      11,436,240   $    114,362   $   (609,996)   $ 73,527,939    $(72,859,006)

Issuance of common stock upon
  exercise of employee stock
  options                               5,749             57           --             9,602            --

Issuance of common stock upon
  exercise of warrants                442,386          4,424           --           371,603            --

Issuance of common stock to
   vendors to satisfy debt            123,537          1,235           --           162,672            --

Change in market value of
  employee stock options                 --             --             --            (1,323)           --

Allowance for uncollectibility
  of loans to officers                   --             --          354,471            --              --

Issuance of warrants related
  to debt financing                      --             --             --         2,472,672            --

Beneficial conversion features
  of  notes                              --             --             --         1,076,621

Net loss for the period                  --             --             --              --        (6,725,058)
                                 ------------   ------------   ------------    ------------    ------------

Balances at June 30, 2003          12,007,912   $    120,078   $   (255,525)   $ 77,619,786    $(79,584,064)
                                 ============   ============   ============    ============    ============
</TABLE>


See accompanying notes.


                                       6
<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS                 SIX MONTHS
                                                         ENDED JUNE 30                ENDED JUNE 30
                                                  --------------------------    --------------------------
                                                      2003           2002           2003           2002
                                                  -----------    -----------    -----------    -----------
<S>                                               <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
Net loss                                          $(4,369,867)   $(3,462,013)   $(6,725,058)   $(7,571,360)

Adjustments to reconcile net loss to net cash
used for operating activities:
    Gain from extinguishment of debt                     --             --         (305,822)          --
    Depreciation and amortization                   1,997,858        465,140      2,462,445        966,890
    Noncash compensation costs                         73,750       (325,137)       101,944       (153,121)
    Amortization of deferred revenues                (165,567)        (5,294)      (334,261)        (5,294)
    Amortization of deferred financing costs          745,987           --        1,093,701           --
    Provision for losses on loans to officers         399,022           --          399,022           --
    Changes in operating assets and liabilities
       Accounts receivable                             74,787        (63,334)        (9,767)      (126,057)
       Accrued interest receivable                     (3,600)          --            6,107           --
       Prepaid expenses                              (114,585)        67,722        (22,579)       217,323
       Accounts payable and accrued liabilities        74,689         61,286        706,479         77,657
       Deferred revenues                               80,000         92,051        218,000        174,051
       Security deposit                                 9,243            698         37,959        (16,295)
                                                  -----------    -----------    -----------    -----------
    Net cash used for operating activities         (1,198,283)    (3,168,881)    (2,371,830)    (6,436,206)
                                                  -----------    -----------    -----------    -----------


INVESTING ACTIVITIES
Purchase of equipment                                    --             --             --         (168,490)
Capitalization of software development costs             --          (68,437)          --         (140,235)
                                                  -----------    -----------    -----------    -----------
    Net cash used for investing activities               --          (68,437)          --         (308,725)
                                                  -----------    -----------    -----------    -----------


FINANCING ACTIVITIES
Net proceeds from the issuance of notes             1,537,500           --        2,537,500           --
Proceeds from the issuance of common stock             50,007      1,102,258        385,544      1,114,203
Repayment of notes                                       --             --         (295,000)          --
Costs of issuing common stock                            --         (260,000)          --         (260,000)
                                                  -----------    -----------    -----------    -----------
    Net cash provided by financing activities       1,587,507        842,258      2,628,044        854,203
                                                  -----------    -----------    -----------    -----------


Increase (decrease) in cash                           389,224     (2,395,060)       256,214     (5,890,728)
Cash - beginning of period                             21,749      3,036,655        154,759      6,532,323
                                                  -----------    -----------    -----------    -----------

Cash - end of period                              $   410,973    $   641,595    $   410,973    $   641,595
                                                  ===========    ===========    ===========    ===========
</TABLE>


See accompanying notes.



                                       7
<PAGE>

                             SMARTSERV ONLINE, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2003


1.   NATURE OF BUSINESS

SmartServ Online, Inc.  ("SmartServ" or the "Company")  commenced  operations on
August 20,  1993 and had its initial  public  offering  on March 21,  1996.  The
Company offers  wireless  applications,  development  and hosting  services that
allow  wireless  carriers,  content  providers and financial  services  firms to
deliver  content to their work forces and  customers.  SmartServ's  products can
deliver  proprietary  information,  as well as delayed and  real-time  financial
market data, business and financial news, national and local weather reports and
other business and entertainment information in a user-friendly manner.

The Company's mobile data solutions are designed to generate additional revenue,
increase operating efficiency, and extend brand awareness for wireless carriers,
enterprises and content providers and are delivered via J2ME, BREW, WAP and SMS,
as well as RIM Blackberry and Pocket PC devices.

SmartServ has established customer and distribution relationships with strategic
partners and wireless  carriers,  including  Verizon  Wireless,  AT&T  Wireless,
Nextel,  ALLTEL  Wireless,  U.S.  Cellular,  QUALCOMM and  Motorola,  as well as
content  providers,  including  BusinessWeek  Online,  S&P Comstock and The Wall
Street Journal Online (Dow Jones).

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  have caused  telecommunications  service  providers to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  This has  resulted  in delays  in the  build-out  of high  speed
carrier data networks and availability of data-enabled wireless devices, causing
the  market  for  SmartServ's  financial  data and  transaction  services  to be
lackluster.  In addition,  many  financial  services  firms have  curtailed  new
product  development to focus on data security and recovery.  Consequently,  the
potential demand for the Company's  products and services has been significantly
delayed.  Such  delays  have  had a very  detrimental  effect  on the  Company's
operations  and have  resulted  in the  Company's  inability  to  implement  its
business plan and related marketing strategies.  Consequently,  in May 2002, the
Company commenced an effort to realign its  infrastructure  and related overhead
to  correlate  with  reductions  in projected  revenue.  As part of this effort,
management closed the Company's UK and Hong Kong sales offices and downsized its
domestic  operations  through staff  reductions to a level sufficient to support
the Company's  projected  operations.  During 2003, the Company has continued to
reduce its cost  structure  through the  termination  of  additional  personnel.
Personnel headcount has been reduced from 66 in May 2002 to the current level of
10. These efforts have reduced the Company's average monthly operating  expenses
from approximately  $1,090,000 in July 2002 to approximately $230,000 commencing
September  2003,  excluding  noncash stock  compensation  and  depreciation  and
amortization.  The Company has also reviewed its revenue producing  contracts as
of June 30, 2003 and reduced its projection of near term revenues as a result of
lower than  anticipated  demand for the Company's  products and  services.  As a
result of the factors  identified  above,  the Company is in need of  additional
capital  to  enable it to  continue  as a going  concern.  The  following  table
provides an  analysis of the  Company's  capital  requirements  for the 12 month
period ending June 30, 2004 based on projected


                                       8
<PAGE>

revenues of $550,000:

                             % OF
                         REVENUE GOAL         CAPITAL
                                              REQUIRED
                         ------------- -----------------------

                             100           $    4,100,000

                               0           $    4,650,000

However,  no  assurance  can be given  that the  Company  will be able  meet its
revenue  projections,  maintain its cost structure as presently  configured,  or
raise additional capital on satisfactory  terms. Should the Company be unable to
raise additional debt or equity financing, it will be forced to seek a merger or
cease operations.

The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company has,  since its
inception,  earned limited revenues and incurred substantial recurring operating
losses,  including net losses of $6,725,058  for the six month period ended June
30, 2003, net losses of $8,037,173 and  $14,819,860 for the years ended December
31, 2002 and 2001,  respectively,  and net losses of $30,993,559  and $7,124,126
for the years ended June 30, 2000 and 1999, respectively.  Additionally,  it had
an  accumulated  deficit of  $79,584,064  at June 30, 2003 and has debt  service
requirements  of  $2,750,000  during the 12 month  period  ending June 30, 2004.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  The financial  statements do not include any adjustments to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of these uncertainties.

SmartServ's  plan of operation  to eliminate  the  uncertainty  surrounding  its
ability to continue as a going concern focuses on licensing its applications and
related services to wireless carriers and financial services firms. For wireless
carriers,  the Company  delivers  data and  branded  content  that can  increase
wireless data revenue and customer retention. For content providers, the Company
provides an added source of revenue by  distributing  their content and brand to
the wireless users.  For financial  services firms, the Company offers solutions
that can  increase  productivity  and  customer  retention  through  the  mobile
delivery of proprietary  data, as well as market data and other useful  content.
Management  believes that SmartServ's primary source of revenues will be derived
from revenue-share  licensing  contracts with its technology  partners,  content
providers and wireless carrier and financial services customers.

As an example,  SmartServ has launched  several products on the Verizon Wireless
network.  The  Company's  financial  content  products  have  been  launched  on
Verizon's BREW (Binary Runtime  Environment for Wireless) network under the Wall
Street  Journal  Online  brand  name,  while  its SMS  (Short  Message  Service)
financial   alert  product  has  been  launched  on  Verizon's   V-text  portal.
Additionally,  the Company has launched its  Lottery,  AreaWeather  and AstroCom
Horoscope lifestyle products on Verizon's BREW network. Salomon Smith Barney, in
conjunction  with SmartServ,  has launched a wireless version of its GEO (Global
Equities  Online)  product.  GEO combines  Salomon's  proprietary  data, such as
morning call notes,  with  SmartServ's  financial  data products to form a fully
integrated  financial tool. While management  believes that these  relationships
are  important to the  Company's  success,  no assurance can be given that these
customers  will be successful in their  marketing  efforts or that the Company's
products and services will be well received in the marketplace.



                                       9
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
---------------------

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information,  the instructions of Form 10-QSB and Rule 310
of  Regulation  SB and,  therefore,  do not  include all  information  and notes
necessary for a presentation  of results of operations,  financial  position and
cash flows in conformity with accounting  principles  generally  accepted in the
United States.  The balance sheet at December 31, 2002 has been derived from the
audited  financial  statements  at that date,  but does not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United States for complete financial statements. The financial statements
should be read in  conjunction  with the Company's  Annual Report on Form 10-KSB
for the period  ended  December 31,  2002.  In the opinion of the  Company,  all
adjustments  (consisting  of normal  recurring  accruals)  necessary  for a fair
presentation have been made.  Results of operations for the three and six months
ended June 30, 2003 are not  necessarily  indicative  of those  expected for the
year ending December 31, 2003.

PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated  financial  statements  include the accounts of the Company and
its  subsidiaries,  all of  which  are  wholly-owned.  Significant  intercompany
accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

REVENUE RECOGNITION
-------------------
The Company  recognizes  revenue  from the use of its  products  and services in
accordance with American  Institute of Certified Public  Accountants'  ("AICPA")
Statement of Position ("SOP") 97-2,  "Software Revenue  Recognition",  SOP 98-9,
"Modification  of SOP  97-2,  Software  Recognition,  With  Respect  to  Certain
Transactions",   and  the  SEC  Staff  Accounting  Bulletin  No.  101,  "Revenue
Recognition in Financial Statements".  Specifically,  there must be (1) evidence
of an  arrangement,  (2) delivery of our products  and  services,  (3) fixed and
determinable fees and (4) probable  collectibility  of such fees.  Revenues from
multi-element  revenue  agreements  are  recognized  based  on  vendor  specific
objective  evidence  of  individual  components  or,  if  the  elements  in  the
arrangement cannot be separated,  as has been the situation to date,  recognized
as one element ratably over the term of the agreement.

Subscription Revenue
--------------------
Subscription revenue consists of fixed and variable charges for the usage of the
Company's products and services provided through its relationships with wireless
telecommunications  carriers and a financial  services company.  Such revenue is
recognized as the services are provided on a monthly basis.

Development and Integration Revenue
-----------------------------------
Development   and   integration   fees  are  charged  for  the   development  of
private-labeled  applications for customers that incorporate  their  proprietary
data into SmartServ's  products and services.  Such fees are recognized  ratably
over the term of the agreement.

Service Revenue
---------------
Service revenue is derived from  consulting or by providing  other  professional
services  to  customers.  Revenue  from  the  performance  of such  services  is
recognized when the services are performed.  Losses,  if


                                       10
<PAGE>

any, from professional services contracts are recognized at the time such losses
are identified. Maintenance and support fees paid in advance are nonrefundable
and are recognized ratably over the term of the agreement, generally 12 months.

Hosting Services
----------------
Hosting service arrangements are based on a flat monthly fee or on the number of
users and may include a one-time setup fee. The one-time setup fee is recognized
over the term of the hosting  arrangement,  and the hosting  services revenue is
recognized monthly as earned on a fixed fee or variable rate basis.

DEFERRED REVENUES
-----------------
Deferred  revenues,  resulting  from  customer  prepayments,  are  recognized as
services are provided  throughout  the term of the agreement with the respective
customer.

EARNINGS PER SHARE
------------------
Basic  earnings per share is computed on the weighted  average  number of common
shares  outstanding;  however,  it does not  include  the  unvested  portion  of
restricted shares in accordance with Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share".  Diluted earnings per share reflects the
increase in the weighted  average  common shares  outstanding  that would result
from the assumed  exercise of  outstanding  stock options  calculated  using the
treasury stock method when dilutive.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS
--------------------------------------
In  connection  with certain  contracts  entered into between  SmartServ and its
customers,  as well as other development  projects,  the Company has capitalized
costs related to certain product  enhancements  and  application  development in
accordance with SFAS No. 86,  "Accounting for the Costs of Computer  Software to
be Sold,  Leased or  Otherwise  Marketed"  ("SFAS No.  86").  Specifically,  all
software   development   costs  are  charged  to  expense  as   incurred   until
technological  feasibility  has been  established  for the product.  Thereafter,
additional  costs incurred for development are  capitalized.  The Company ceased
capitalizing  such costs in connection with its current product  offering during
the quarter ended September 2002 when the products became  available for general
release to customers.  Amortization of capitalized  software  development  costs
commences with the products'  general  release to customers and is provided on a
product-by-product  basis over the  economic  life,  not to exceed  three years,
using the greater of the straight-line or a flow of revenue method.

On an ongoing  basis,  the  Company  reviews  the future  recoverability  of its
capitalized software development costs for impairment whenever events or changes
in circumstances indicate that the carrying amounts may not be recoverable. When
such  events or  changes  in  circumstances  do  occur,  an  impairment  loss is
recognized if the undiscounted future cash flows expected to be generated by the
asset are less than its  carrying  value.  As a result of less than  anticipated
demand for the  Company's  products and  services,  as well as its  inability to
leverage  certain  relationships  during the quarter  ended June 30,  2003,  the
Company  has  recorded in  accordance  with SFAS No. 86, an  impairment  loss of
$704,705  in such  quarter to reduce the  recorded  value of the assets to their
estimated net realizable value.

FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts of our financial instruments  approximate fair value due to
their terms and maturities.

SUPPLEMENTAL CASH FLOW DATA
---------------------------
The Company  considers  all highly  liquid  investments  with a maturity date of
three months or less when purchased to be cash equivalents.

During the six months ended June 30, 2003,  the Company issued 123,537 shares of
common  stock  to  5  vendors  in  settlement  of  the  Company's   obligations,
aggregating  $164,000,  to  such  vendors.  These


                                       11
<PAGE>


transactions are considered non-cash transactions for the purposes of the
Statement of Cash Flows.

Interest, debt origination and other financing costs paid during the three month
periods ended June 30, 2003 and 2002 were $100 and $185,000,  respectively,  and
for the six  month  periods  ended  June  30,  2003 and 2002  were  $70,100  and
$372,000, respectively.

CONCENTRATION OF CREDIT RISK
----------------------------
Financial  instruments that potentially  subject  SmartServ to concentrations of
credit risk consist solely of accounts receivable. At June 30, 2003 and December
31,  2002,  accounts  receivable  consisted  principally  of amounts  due from a
financial services company.  The Company performs periodic credit evaluations of
its customers  and, if  applicable,  provides for credit losses in the financial
statements.

PROPERTY AND EQUIPMENT
----------------------
Property and  equipment  are stated at cost,  net of  accumulated  depreciation.
Depreciation is computed using the  straight-line  method over estimated  useful
lives of three to ten years.

On an ongoing  basis,  the  Company  reviews  the future  recoverability  of its
property  and  equipment   for   impairment   whenever   events  or  changes  in
circumstances  indicate that the carrying  amounts may not be recoverable.  When
such  events or  changes  in  circumstances  do  occur,  an  impairment  loss is
recognized if the undiscounted future cash flows expected to be generated by the
asset are less than its  carrying  value.  As a result of less than  anticipated
demand for the  Company's  products and  services,  as well as its  inability to
leverage  certain  relationships  during the quarter  ended June 30,  2003,  the
Company has  recorded an  impairment  loss of $843,768 in such quarter to reduce
the recorded value of its assets to their estimated net realizable value.

ADVERTISING COSTS
-----------------
Advertising  costs are  expensed as incurred and were  approximately  $6,000 and
$236,900   during  the  six  month   periods  ended  June  30,  2003  and  2002,
respectively.

STOCK BASED COMPENSATION
------------------------
Employee Stock Option Plans
---------------------------
The Company  maintains  several  stock option plans for  employees and directors
that  provide  for the  granting of stock  options for a fixed  number of common
shares with an exercise  price equal to the fair value of the shares at the date
of grant.  The Company  accounts for such grants in accordance  with  Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB No. 25").  Accordingly,  compensation  expense is recognized to the extent
that the fair value of the stock exceeds the exercise price of the option at the
measurement date. Certain options,  which have been repriced, are subject to the
variable plan  requirements  of APB No. 25, which requires the Company to record
compensation expense for changes in the fair value of its common stock.

Non-Employee Compensation
-------------------------
The  Company  has issued  warrants  to  purchase  common  stock to  non-employee
consultants  as  compensation  for  services  rendered  or to be rendered to the
Company. The warrants are recorded in accordance with the provisions of SFAS No.
123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"), and are valued
in accordance with the Black-Scholes pricing methodology.

The Company adopted the disclosure  provisions of SFAS No. 148,  "Accounting for
Stock-Based  Compensation  - Transition and  Disclosure",  which amends SFAS No.
123. SFAS No. 148 provides  alternative  methods of  transition  for a voluntary
change to the fair value based method of  accounting  for  stock-based  employee
compensation,  which was  originally  provided  under SFAS No. 123. SFAS No. 148
also improves the timeliness of  disclosures by requiring the  information to be
included in interim, as well


                                       12
<PAGE>

as, annual financial statements.

SFAS No. 123 requires companies to recognize  compensation  expense based on the
respective  fair  values of the  options  at the date of grant.  Companies  that
choose not to adopt such rules will  continue to apply the  existing  accounting
rules  contained  in APB No.  25, but are  required  to  disclose  the pro forma
effects on net loss and loss per share,  as if the fair  value  based  method of
accounting had been applied.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period. As such, the pro forma
net loss and loss per share are not indicative of future years.

SmartServ's pro forma information is as follows:


<TABLE>
<CAPTION>
                                              THREE MONTHS                  SIX MONTHS
                                              ENDED JUNE 30                ENDED JUNE 30
                                       -----------    -----------    -----------    -------------
                                          2003            2002           2003            2002
                                       -----------    -----------    -----------    -------------

<S>                                    <C>            <C>            <C>          <C>
Net loss as reported                   $(4,369,867)   $(3,462,013)   $(6,725,058) $    (7,571,360)

Employee stock-based compensation
  credits included in net loss
                                              --          603,896          1,323          723,121

Employee stock-based compensation
  charges pursuant to SFAS 123
                                          (670,659)      (914,949)    (1,588,153)      (2,006,212)
                                       -----------    -----------    -----------    -------------

Pro forma net loss                     $(5,040,526)   $(3,773,066)   $(8,311,888) $    (8,854,451)
                                       ===========    ===========    ===========    =============

Basic and diluted loss per share       $     (0.36)   $     (0.53)   $     (0.57)   $       (1.19)
                                       ===========    ===========    ===========    =============

Pro forma basic and diluted loss per
  share                                $     (0.42)   $     (0.58)   $     (0.70)   $       (1.39)
                                       ===========    ===========    ===========    =============
</TABLE>


FOREIGN CURRENCY TRANSLATION
----------------------------
The financial  statements of the Company's foreign subsidiaries whose functional
currencies  are  other  than the U.S.  dollar,  have been  translated  into U.S.
dollars  in  accordance  with SFAS No. 52,  Foreign  Currency  Translation.  All
balance sheet accounts have been  translated  using the exchange rates in effect
at the balance sheet date.  Income statement  amounts have been translated using
the average rate for the year.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145,  "Rescission  of  FASB  Statements  No.  4, 44 and  64,  Amendment  of FASB
Statement No. 13, and Technical  Corrections".  The Company adopted SFAS No. 145
in 2002.  Accordingly,  the Company's  gain on  extinguishment  of debt has been
recorded in "Other income" in the consolidated financial statements.

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with an Exit or Disposal Activity". SFAS No. 146 revised the accounting for exit
and  disposal  activities  under  Emerging  Issues  Task Force  Issue No.  94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (Including Certain Costs Incurred in a Restructuring)",  by
potentially

                                       13
<PAGE>


spreading out the  reporting of expenses  related to  restructuring  activities.
SFAS  No.  146 is  effective  prospectively  for  exit  or  disposal  activities
initiated  after December 31, 2002. The Company  adopted SFAS No. 146 on January
1,  2003,  as  required,  and does not  believe  that the  adoption  of this new
standard will have a material effect on its consolidated  results of operations,
financial position or cash flows.

In 2002,  the FASB issued  Interpretation  No. 45,  "Guarantor's  Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness  of  Others"  ("Interpretation  No.  45").  Interpretation  No.  45
elaborates  on the  disclosures  to be made by a  guarantor  in its  interim and
annual financial  statements about its obligations under certain guarantees that
it has issued.  It also clarifies that a guarantor is required to recognize,  at
the inception of a guarantee,  a liability for the fair value of the  obligation
undertaken in issuing the guarantee.  Interpretation No. 45 does not prescribe a
specific  approach  for  subsequently   measuring  the  guarantor's   recognized
liability  over the term of the related  guarantee.  Interpretation  No. 45 also
incorporates,  without  change,  the  guidance  in FASB  Interpretation  No. 34,
"Disclosure of Indirect  Guarantees of Indebtedness  of Others",  which is being
superseded. Interpretation No. 45 has no effect on the Company.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities,  an Interpretation of Accounting  Research Bulletin
(ARB) No. 51,  Consolidated  Financial  Statements"  ("Interpretation  No. 46").
Interpretation  No.  46  significantly  alters  the  consolidation  requirements
governing an entity's inclusion in the consolidated  financial statements of its
sponsors,  transferors,  or  investors.  Interpretation  No. 46 introduces a new
consolidation model--the variable interests model--which determines control (and
consolidation) based on potential  variability in gains and losses of the entity
being evaluated for  consolidation.  Interpretation No. 46 provides guidance for
determining whether an entity lacks sufficient equity or its equity holders lack
adequate  decision-making  ability. These variable interest entities are covered
by the Interpretation No. 46 and are to be evaluated for consolidation  based on
their variable interests. Interpretation No. 46 has no effect on the Company.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes  standards  for  classifying  and measuring as  liabilities  certain
financial   instruments   that  embody   obligations  of  the  issuer  and  have
characteristics  of both  liabilities  and  equity.  SFAS No. 150  represents  a
significant  change in  practice  in the  accounting  for a number of  financial
instruments,  including  mandatorily  redeemable equity  instruments and certain
equity  derivatives that frequently are used in connection with share repurchase
programs. At this time SFAS No. 150 has no effect on the Company.


                                       14
<PAGE>

3.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                   JUNE 30,     DECEMBER 31,
                                    2003           2002
                                 -----------    -----------
Data processing equipment        $ 4,840,737    $ 4,842,941
Office furniture and equipment       151,263        151,263
Display equipment                     71,335         71,335
Leasehold improvements                69,852         69,852
                                 -----------    -----------

                                   5,133,187      5,135,391
Accumulated depreciation          (5,133,187)    (3,561,413)
                                 -----------    -----------
                                 $      --      $ 1,573,978
                                 ===========    ===========

On an ongoing  basis,  the  Company  reviews  the future  recoverability  of its
property  and  equipment   for   impairment   whenever   events  or  changes  in
circumstances  indicate that the carrying  amounts may not be recoverable.  When
such  events or  changes  in  circumstances  do  occur,  an  impairment  loss is
recognized if the undiscounted future cash flows expected to be generated by the
asset are less than its  carrying  value.  As a result of less than  anticipated
demand for the  Company's  products and  services,  as well as its  inability to
leverage  certain  relationships  during the quarter  ended June 30,  2003,  the
Company has  recorded an  impairment  loss of $843,768 in such quarter to reduce
the recorded value of its assets to their estimated net realizable value.


4.   NOTES RECEIVABLE FROM OFFICERS

In December 2000, the Company's Board of Directors  authorized the issuance of a
line of credit to Sebastian Cassetta,  SmartServ's Chief Executive Officer,  for
an amount not to exceed  $500,000.  Such amount bears interest at the prime rate
and matures on March 20, 2004.  Pursuant to the terms of the note,  interest for
the period  January 2, 2001 to June 30, 2002 has been  accrued and is payable at
maturity.  Commencing  July 1, 2002 until  maturity,  interest  shall be payable
semi-annually  in arrears on January 1st and July 1st. The financial  statements
at June 30, 2003 contain a valuation allowance for a potential loss of $552,467,
relating to the  collectibility  of Mr. Cassetta's note and the interest accrued
thereon through June 30, 2002.

In January 2000,  the Company issued Mr.  Cassetta  618,239 shares of restricted
common stock in exchange for Mr. Cassetta's note in the amount of $457,500. Such
note is secured  by the common  stock  issued to Mr.  Cassetta.  During the year
ended December 31, 2002, the Company  recorded a charge of $112,173  relating to
the potential  uncollectibilty of interest earned by the Company pursuant to the
note  between the Company and Mr.  Cassetta.  During the quarter  ended June 30,
2003,  the  Company  recorded a charge to  earnings  in the amount of  $270,000,
representing  the  potential  uncollectibility  of the note as a  result  of the
diminution of the value of the Company's collateral.

In January 2000, the Company issued Mr. Mario Rossi,  SmartServ's Executive Vice
President and Chief  Technology  Officer,  206,080  shares of restricted  common
stock in exchange for Mr.  Rossi's note in the amount of $152,500.  Such note is
secured by the common stock issued to Mr.  Rossi.  During the quarter ended June
30, 2003,  the Company  recorded a charge to earnings in the amount of $129,000,
representing  the potential  uncollectibility  of the note and interest  accrued
thereon as a result of the diminution of the value of the Company's collateral.


                                       15
<PAGE>

5.   NOTES PAYABLE

In May 2000,  the  Company  entered  into a  Business  Alliance  Agreement  with
Hewlett-Packard  Company ("HP")  whereby the companies  agreed to jointly market
their  respective  products  and  services,  and to  work  on the  build-out  of
SmartServ's domestic and international  infrastructure.  In furtherance of these
objectives,  HP provided the Company with a line of credit of up to  $20,000,000
for the acquisition of approved  hardware,  software and services.  On September
10, 2002, the Company and HP amended the terms of the promissory note to provide
for the (i) reduction of SmartServ's aggregate outstanding principal and accrued
interest  amount of  $7,045,000  to  $1,000,000,  (ii) return of certain  unused
hardware by SmartServ, (iii) issuance by SmartServ of a warrant for the purchase
of 50,000  shares of common stock and (iv)  repayment of $500,000 of the amended
obligation  on  September  10,  2002.  The  remaining  $500,000  obligation  was
evidenced by a note,  bearing an interest rate of 11%,  secured by the Company's
assets  exclusive  of  its  internally  developed  software  products,  and  was
satisfied  through a partial  repayment in February 2003. The Company recorded a
gain of $305,822  resulting from the Company's  partial repayment of the note in
February 2003.

In  February  2003,  the Company  issued a  convertible  note to Global  Capital
Funding Group, LP ("Global") in consideration for the receipt of $1 million. The
note  bears  interest  at the  rate  of 10% per  annum,  and is  secured  by the
Company's assets,  exclusive of its internally developed software products.  The
note matures on February 14, 2004, contains certain antidilution provisions, and
may be converted  into shares of SmartServ  common stock at $1.10 per share.  As
additional  consideration,  the Company issued Global a warrant for the purchase
of 200,000  shares of its common stock at an exercise  price of $1.61 per share.
The note and the  warrant  have been  recorded  in  accordance  with  Accounting
Principles  Board  Opinion No. 14,  "Accounting  for  Convertible  Debt and Debt
Issued with Stock  Purchase  Warrants"  ("APB No. 14").  The warrants  have been
valued in accordance with the Black-Scholes  pricing  methodology and are netted
against the outstanding  obligation in the financial statements.  Such amount is
being  amortized into  operations as interest  expense and other financing costs
over  the life of the  obligation.  Alpine  Capital  Partners,  Inc.  ("Alpine")
received a finder's fee of $70,000,  representing  7% of the aggregate  purchase
price of the convertible  note and a warrant to purchase 91,000 shares of common
stock  exercisable  at $1.61 per  share,  expiring  on  February  14,  2005,  in
connection with this transaction.  These warrants have been valued in accordance
with SFAS No. 123 and the Black-Scholes  pricing methodology and recorded in the
financial statements as deferred financing costs. This amount is being amortized
into operations on a straight-line basis as interest expense and other financing
costs  over  the  life  of the  obligation.  Also  in  connection  with  the 10%
convertible  notes,  the  Company  has  recorded  a  non-cash  charge  for other
financing  costs of $406,400,  representing a portion of the intrinsic  value of
the  beneficial  conversion  feature of the notes.  Emerging  Issues  Task Force
("EITF") Issue No. 98-5,  "Accounting for Convertible Securities with Beneficial
Conversion  Features or Contingently  Adjustable  Conversion Ratios" ("Issue No.
98-5") as more fully described in EITF Issue No. 00-27 "Application of Issue No.
98-5 to Certain  Convertible  Instruments",  defines the  beneficial  conversion
feature as the  non-detachable  conversion feature that is "in-the-money" at the
date of issuance. Issue No. 98-5 requires the recognition of the intrinsic value
of the conversion feature as the difference between the conversion price and the
fair value of the common  stock into which the notes are  convertible.  In April
2003,  the Company  borrowed an additional  $250,000 from Global and amended the
convertible  note to include  such  amount.  As  additional  consideration,  the
Company  issued Global a warrant for the purchase of 20,000 shares of its common
stock at an exercise price of $1.20 per share. The warrants issued to Global and
Alpine contain certain antidilution  provisions and expire on February 14, 2006.
The Company is in default of its quarterly interest payment  obligations,  in an
aggregate amount of approximately $43,000, to Global under the amended note. The
Company is currently negotiating with Global to settle the default. There can be
no assurance,  however,  that the Company will be able to negotiate a settlement
with Global and cure the default.  The failure to cure the default would require
the Company to repay the total principal amount of


                                       16
<PAGE>


the  amended  note and all accrued  interest,  approximately  $1,293,000  in the
aggregate.  Such  requirement  would  have  a  material  adverse  effect  on the
Company's cash flow, balance sheet and operations.

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting  of  convertible  notes and  warrants to purchase  common stock ("May
Units")  to 8  accredited  investors.  Each  May  Unit  consists  of a  $100,000
convertible  note and a warrant  to  purchase  200,000  shares of the  Company's
common  stock.  The  convertible  notes  bear  interest  at 8%  per  annum,  are
convertible  into the  Company's  common  stock at $0.744  (the  average  of the
closing  bid prices of the  Company's  common  stock for the 5 days prior to the
closing of the  transaction) per share and mature on the earlier of November 19,
2003 or the  closing of an equity  placement  of not less than $3  million.  The
warrants are exercisable at $0.744 per share and expire on May 19, 2006. In June
2003,  the Company in  consideration  of  $1,142,000  issued  11.42 units ("June
Units")  [each May or June Unit  referred  to  individually  as a "Unit"]  to 20
accredited  investors.  Each June Unit also  consists of a $100,000  convertible
note and a warrant to purchase 200,000 shares of the Company's common stock. The
convertible  notes bear  interest  at 8% per  annum,  are  convertible  into the
Company's  common  stock at $0.794 (the average of the closing bid prices of the
Company's  common stock for the 5 days prior to the closing of the  transaction)
per share and mature on the  earlier of  December  13, 2003 or the closing of an
equity  placement of not less than $3 million.  The warrants are  exercisable at
$0.794 per share and expire on June 13,  2006.  The Units have been  recorded in
accordance with APB No. 14. The warrants have been valued in accordance with the
Black-Scholes  pricing  methodology  and  are  netted  against  the  outstanding
obligation  in the financial  statements.  Such amount is being  amortized  into
operations as interest  expense and other  financing  costs over the life of the
obligation.  Also in connection with the 8% convertible  notes,  the Company has
recorded a non-cash charge for other financing costs of $81,400,  representing a
portion  of the  intrinsic  value of the  beneficial  conversion  feature of the
notes.  EITF Issue No. 98-5,  as more fully  described in EITF Issue No.  00-27,
defines  the  beneficial  conversion  feature as the  non-detachable  conversion
feature that is "in-the-money" at the date of issuance.  Issue No. 98-5 requires
the  recognition  of the  intrinsic  value  of  the  conversion  feature  as the
difference  between the conversion  price and the fair value of the common stock
into which the notes are  convertible.  At June 30, 2003, the face amount of the
debt  obligation  is  $2,750,000  and  the  unamortized   discount  amounted  to
$1,420,190.

Spencer Trask Ventures,  Inc.  ("Spencer  Trask"),  Steven B. Rosner and Richard
Berland acted as finders for this transaction.  As consideration  therefor,  the
finders  received  their  proportionate  share of a cash fee equal to 10% of the
aggregate  purchase  price of the Units sold and (i) Unit  Purchase  Warrants to
purchase an aggregate of three Units ("Unit  Purchase  Warrant") and (ii) 33,333
shares of unregistered  common stock per Unit sold.  Each Unit Purchase  Warrant
entitles  the holder to purchase  one Unit,  for the price of $100,000  per Unit
through June 13, 2008.  In addition,  Spencer Trask  received a  non-accountable
expense allowance equal to 3% of the aggregate proceeds of all Units sold in the
Bridge  Offerings.  The warrants have been valued in accordance SFAS No. 123 and
the Black-Scholes  pricing methodology and recorded in the financial  statements
as deferred financing costs. Such costs are being amortized into operations on a
straight-line  basis as interest expense and other financing costs over the life
of the obligation.


6.   EQUITY TRANSACTIONS

During the six months ended June 30, 2003,  the Company issued 442,386 shares of
common stock to investors upon the exercise of warrants to purchase such shares.
Proceeds from the exercise of these warrants were $376,000.

In February  2003,  the Company  issued an aggregate of 123,537 shares of common
stock to 5 vendors in satisfaction  of obligations for services  rendered to the
Company aggregating $164,000.

                                       17
<PAGE>


In May 2003, the Company entered into a Corporate Finance  Consulting  Agreement
("Consulting  Agreement") with Spencer Trask Ventures,  Inc.  ("Spencer  Trask")
whereby  Spencer Trask agreed to render services to the Company as its corporate
finance consultant, financial advisor and investment banker. As compensation for
such  services,  the Company has agreed to issue Spencer Trask 500,000 shares of
its  common  stock.  The value of such  compensation  has been  recorded  in the
financial statements as prepaid compensation and is being amortized over the one
year term of the Consulting Agreement.

The Company's failure to timely file its Form 10-KSB for the year ended December
31, 2002 has  affected  the  following  registration  rights held by some of its
stockholders and warrant holders. The Company has recorded various penalties for
its failure to keep the  registration  effective in the  statement of operations
and is working expeditiously to cure these deficiencies:


Obligations to Maintain Effective Registration Statements:
----------------------------------------------------------
Vertical  Ventures  Investments,  LLC holds a warrant to  purchase up to 151,245
shares of common stock that have registration rights. The Registration Statement
covering the shares underlying this warrant is no longer effective.  The Company
is required to pay a fee of $8,250 for the first month of the  deficiency  and a
fee of $16,500 for each month thereafter until the shares underlying the warrant
are registered.

Investors  in the  Company's  September  2002  Equity  Placement  hold  up to an
aggregate of 3,701,943 shares of common stock, and warrants to purchase up to an
aggregate of 1,499,723  shares of common  stock,  all with  registration  rights
requiring  the  Company  to use its  commercially  reasonable  best  efforts  to
maintain the effectiveness of the Registration  Statement covering the shares of
common stock and the shares underlying the warrants.

Obligation to File a Registration Statement:
--------------------------------------------
Global  Capital  Funding  Group,  L.P.  holds warrants to purchase up to 220,000
shares of common stock, and a convertible note convertible into 1,136,364 shares
of common  stock.  The Company was  required  to file a  Registration  Statement
covering  all such shares on April 14,  2003.  The Company has not yet filed the
Registration  Statement,  and is subject to a penalty  fee equal to $20,000  for
each month that this deficiency remains uncured.


7.   STOCK-BASED COMPENSATION

In  connection  with the grant of  certain  stock  options,  warrants  and other
compensation arrangements, the Company has recorded charges to earnings that are
noncash  in nature.  Certain of these  stock  option  grants are  subject to the
variable  plan  requirements  of APB No. 25 that  require  the Company to record
compensation expense for changes in the fair value of its common stock.

Stock-based  compensation  for the three  months  ended  June 30,  2003 and 2002
consisted of the impact of changes in the market value of the  Company's  common
stock on the value of options to purchase  common stock issued to employees  and
the  amortization  of  deferred  costs  associated  with the prior  issuance  of
warrants to purchase common stock to various consultants.


                                       18
<PAGE>


8.   EARNINGS PER SHARE

The  following  table sets forth the  computation  of basic and diluted loss per
share:

<TABLE>
<CAPTION>
                                                    THREE MONTHS                    SIX MONTHS
                                                    ENDED JUNE 30                  ENDED JUNE 30
                                          -------------------------------   -----------------------------
                                                2003             2002            2003             2002
                                          ---------------   -------------   ---------------   -----------
<S>                                       <C>               <C>             <C>               <C>
Numerator:
   Net loss                               $    (4,369,867)  $  (3,462,013)  $    (6,725,058)  $(7,571,360)
                                          ===============   =============   ===============   ===========

Denominator:
   Weighted average shares - basic and
   diluted                                     12,001,457       6,520,857        11,870,858     6,389,140
                                          ===============   =============   ===============   ===========

Basic and diluted loss per common share
                                          $         (0.36)  $       (0.53)  $         (0.57)  $     (1.19)
                                          ===============   =============   ===============   ===========
</TABLE>


Outstanding  employee  stock options and other warrants to purchase an aggregate
of 13,169,600  and  6,097,000  shares of common stock at June 30, 2003 and 2002,
respectively,  were not  included in the  computations  of diluted  earnings per
share because the Company  reported losses for the periods and,  therefore their
inclusion would be antidilutive.


9.   COMMITMENTS AND CONTINGENCIES

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York. The complaint  alleged that in August of 1999,  Commonwealth
and  SmartServ   entered  into  an   engagement   letter  that  provided  for  a
nonrefundable  fee to Commonwealth of $15,000 payable in cash or common stock at
SmartServ's  option. The complaint alleged that SmartServ elected to pay the fee
in stock and, as a result,  Commonwealth sought 13,333 shares of common stock or
at least $1,770,000  together with interest and costs. In our defense, we denied
that we  elected  to pay in  stock.  On  March 4,  2003,  SmartServ  received  a
favorable decision in this matter after a trial held in the Supreme Court of the
State of New York. The decision holds that, consistent with SmartServ's defense,
SmartServ is required to pay  Commonwealth a retainer fee of only $13,439,  plus
interest and certain costs.  Commonwealth's  time to appeal has not yet expired.
While the Company intends to vigorously  defend any appeal of the decision,  the
unfavorable  outcome of such an appeal could have a material  adverse  effect on
the Company's financial condition, results of operations and cash flows.

In August  2003,  SmartServ  entered  into a  Stipulation  of  Arbitration  with
Brauning  Inc.,  Mike Silva and Todd Peterson,  former  consultants to SmartServ
(collectively,  the  "Claimants")  pursuant to which SmartServ and the Claimants
agreed to resolve,  in a binding arbitration  proceeding,  the Claimants' demand
for damages  resulting from the alleged  failure by SmartServ to timely register
the shares of common stock  underlying  certain  consulting  warrants  issued by
SmartServ to the Claimants.  SmartServ  believes that the shares  underlying the
warrants were timely  registered  and that since the Claimants were not party to
any registration rights affecting such warrants,  their demand is without merit.
Although we will vigorously  defend this action,  there can be no assurance that
we will be  successful.  The  unfavorable  outcome of such  action  could have a
material  adverse effect on our  consolidated  results of operations,  financial
condition and cash flows.


                                       19
<PAGE>


In August 2003, the Company was informed that Oracle Corporation  ("Oracle") has
filed an action against it in Federal  District  Court in California  seeking to
terminate  its February  28, 2002 Oracle  License and  Services  Agreement  (the
"License")  due  to the  Company's  failure  to  pay  certain  license  fees  in
connection  with its  purchase  of  Oracle  products.  The  Company  has not yet
received  service of process in any such  action.  The  Company  has been in the
process of raising the funds  necessary  to cure the default  and  maintain  the
License.  There can be no assurance,  however,  that the Company will be able to
raise such funds or maintain the License.  The Company's failure to maintain the
License would require that the Company temporarily  suspend operations,  thereby
creating a material adverse effect on its cash flows and operations.



                                       20
<PAGE>


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


SmartServ  Online,  Inc.  commenced  operations  on August 20,  1993 and had its
initial  public  offering on March 21,  1996.  We offer  wireless  applications,
development and hosting services that allow wireless carriers, content providers
and  financial  services  firms to  deliver  content  to their  work  forces and
customers. Our products can deliver proprietary information,  as well as delayed
and real-time  financial market data,  business and financial news, national and
local weather  reports and other  business and  entertainment  information  in a
user-friendly manner.

Our mobile data solutions are designed to generate additional revenue,  increase
operating  efficiency,   and  extend  brand  awareness  for  wireless  carriers,
enterprises and content providers and are delivered via J2ME, BREW, WAP and SMS,
as well as RIM Blackberry and Pocket PC devices.

SmartServ has established customer and distribution relationships with strategic
partners and wireless  carriers,  including  Verizon  Wireless,  AT&T  Wireless,
Nextel,  ALLTEL  Wireless,  U.S.  Cellular,  QUALCOMM and  Motorola,  as well as
content providers,  including BusinessWeek Online,  Forbes.com, S&P Comstock and
The Wall Street Journal Online (Dow Jones).

Due to the substantial  expenses and negative cash flows from operations that we
have incurred,  our auditors, in their report contained in our December 31, 2002
financial  statements,  have indicated that there is substantial doubt about our
ability to continue as a going concern.  The Company has earned limited revenues
and has  incurred net losses of  $6,725,058  for the six month period ended June
30, 2003, net losses of $8,037,173 and  $14,819,860 for the years ended December
31, 2002 and 2001,  respectively,  and net losses of $30,993,559  and $7,124,126
for the years  ended June 30,  2000 and 1999,  respectively.  Additionally,  the
Company had an accumulated  deficit of $79,584,064 at June 30, 2003 and has debt
service  requirements  of $2,750,000  during the 12 month period ending June 30,
2004. Although the Company's financial  statements have been prepared on a going
concern basis,  which  contemplates the realization of assets and the settlement
of liabilities and  commitments in the normal course of business,  unless we are
able to increase  revenue and raise additional  capital from investors,  we will
not be able to support our operations.

Our plan of operation to eliminate  the  uncertainty  surrounding  the Company's
ability to continue as a going concern focuses on licensing our applications and
related  services to wireless  carriers and  financial  services  firms.  Such a
strategy  provides access to a large number of potential  subscribers and allows
SmartServ to leverage its market reach at minimal  operating costs. For wireless
carriers,  we deliver data and branded  content that can increase  wireless data
revenue  and  customer  retention.  For content  providers,  we provide an added
source of revenue by distributing their content and brand to the wireless users.
For financial services firms, we offer solutions that can increase  productivity
and customer  retention through the mobile delivery of proprietary data, as well
as market data and other useful content.  SmartServ has the ability to customize
the  information  package to be offered to each  customer by device.  Management
believes  that  SmartServ's  primary  source of  revenues  will be derived  from
revenue-share   licensing  contracts  with  its  technology  partners,   content
providers and wireless carrier and financial services customers.

As an example, the Company has launched several products on the Verizon Wireless
network.  Our financial  content  products have been launched on Verizon's  BREW
(Binary Runtime  Environment for Wireless) network under the Wall Street Journal
Online brand name, while our SMS (Short Message Service) financial alert product
has been  launched on Verizon's  V-text  portal.  Additionally,  the Company has
launched its Lottery,  AreaWeather and AstroCom Horoscope  lifestyle products on
Verizon's BREW network. Salomon Smith Barney, in conjunction with SmartServ, has
launched a wireless version of its



                                       21
<PAGE>

GEO (Global Equities Online) product.  GEO combines Salomon's  proprietary data,
such as morning call notes,  with SmartServ's  financial data products to form a
fully  integrated   financial  tool.   While  management   believes  that  these
relationships are important to the Company's success,  no assurance can be given
that these customers will be successful in their  marketing  efforts or that the
Company's products and services will be well received in the marketplace.

As of August 18, 2003,  SmartServ  employed 10 people, all of whom were employed
in the United States.  SmartServ does not anticipate that staffing  requirements
associated  with the  implementation  of its plan of operation  will require the
addition of any people during the year ending December 31, 2003.


RESULTS OF OPERATIONS

QUARTER ENDED JUNE 30, 2003 VERSUS QUARTER ENDED JUNE 30, 2002

During the quarter  ended June 30, 2003,  we recorded  revenues of $238,028.  Of
such 2003 revenues,  $46,000 were earned through our licensing  agreements  with
wireless telecommunications  carriers, $79,800 were earned through our licensing
agreement  with Salomon  Smith Barney and $108,000  were earned under a one-time
purchase  order from  Wireless  Retail,  Inc.  During the quarter ended June 30,
2002, we recorded  revenues of $35,815.  Of such  revenues,  $31,700 were earned
through our licensing  agreement with Salomon Smith Barney.  During the quarters
ended June 30, 2003 and 2002,  we recognized  $53,400 and $5,300,  respectively,
from the amortization of deferred revenues associated with this agreement.

During the  quarter  ended June 30,  2003,  we  incurred  costs of  services  of
$2,574,543,  an increase of 81% over the quarter ended June 30, 2002. Such costs
increased  primarily due to a charge ($129,000) in connection with the potential
uncollectibility  of a loan to an officer and an  impairment  loss  ($1,440,600)
recorded  to adjust  the  value of the  Company's  property  and  equipment  and
capitalized  software  costs  to  net  realizable  value,  offset  by  personnel
reductions  and the  reduction of computer  hardware  leases,  depreciation  and
maintenance  costs.  Other  components of the costs of service  category consist
primarily of information and  communication  costs  ($119,900),  personnel costs
($445,800),   computer  hardware  leases,  depreciation  and  maintenance  costs
($270,200),   facilities   ($62,800)  and  amortization   expenses  relating  to
capitalized software development costs ($91,900).  During the quarter ended June
30, 2002, we incurred costs of services of $1,419,946. Components of these costs
consisted primarily of information and communication costs ($119,800), personnel
costs ($752,000),  computer hardware leases,  depreciation and maintenance costs
($449,500),   facilities   ($82,400)  and  amortization   expenses  relating  to
capitalized  software  development costs ($29,900),  partially offset by systems
consultants' credit ($35,600). During the quarters ended June 30, 2003 and 2002,
we  capitalized  $-0-  and  $68,400,   respectively,  of  development  costs  in
accordance  with Statement of Financial  Accounting  Standards  ("SFAS") No. 86,
"Accounting for the Costs of Computer  Software to be Sold,  Leased or Otherwise
Marketed" ("Statement No. 86").

During the quarter ended June 30, 2003, we incurred sales and marketing expenses
of $103,496,  a decrease of 90% over the quarter ended June 30, 2002. Such costs
decreased primarily due to travel and personnel  reductions  associated with the
closing of the  Company's  Hong Kong and London sales  offices,  U.S.  personnel
reductions,  reductions  in  advertising  and  trade  shows  and  reductions  in
professional  fees.  Components  of the sales  and  marketing  category  consist
primarily of personnel costs ($96,400).  During the quarter ended June 30, 2002,
we incurred  sales and  marketing  expenses of  $1,042,804.  Components of these
costs consisted primarily of professional fees ($117,800), personnel ($583,000),
travel and lodging  ($60,900),  facilities  ($41,000) and  advertising and trade
shows ($196,200).

During the quarter ended June 30, 2003, we incurred  general and  administrative
expenses of $1,360,913, an increase of 16% over the quarter ended June 30, 2002.
Such costs increased primarily due to a charge

                                       22
<PAGE>

($270,000) in connection  with the  potential  uncollectibility  of a loan to an
officer and an impairment  loss  ($108,000)  recorded to adjust the value of the
Company's  property and equipment to net realizable  value,  offset by personnel
reductions and a reduction of insurance  costs.  Other components of the general
and  administrative  category consist  primarily of personnel costs  ($353,000),
professional fees ($302,200),  facilities  ($122,800),  insurance  ($33,000) and
computer hardware leases,  depreciation and maintenance costs ($35,900).  During
the quarter ended June 30, 2002, we incurred general and administrative expenses
of $1,176,235.  Components of these costs consisted primarily of personnel costs
($407,000),  facilities  ($140,900),  insurance  ($180,900),  computer  hardware
leases,  depreciation  and  maintenance  costs ($54,700) and  professional  fees
($294,200).

During the quarter ended June 30, 2003, the net noncash  charge for  stock-based
compensation  amounted to $73,750  compared to a net noncash  credit of $325,136
during the quarter  ended June 30, 2002. Of such  amounts,  noncash  charges for
consulting  services for the quarters  ended June 30, 2003 and 2002 were $73,750
and  $278,760,  respectively,  resulting  primarily  from  the  amortization  of
deferred costs associated with the prior issuance of warrants to purchase common
stock to various  financial,  marketing and technical  consultants.  Stock-based
compensation is valued in accordance with  Accounting  Principles  Board Opinion
No. 25,  "Accounting for Stock Issued to Employees"  ("APB No. 25") and SFAS No.
123,  "Accounting for Stock-Based  Compensation"  ("Statement No. 123"). Certain
employee stock options are subject to the variable plan  requirements of APB No.
25, as they were repriced, and therefore, compensation expense is recognized for
changes in the fair value of our common stock. The value of substantially all of
such common stock  purchase  warrants has been recorded in  accordance  with the
Black-Scholes pricing methodology.

Interest income for the quarters ended June 30, 2003 and 2002 amounted to $4,360
and  $8,815,   respectively.   Such  amounts  were  earned  primarily  from  our
investments in money fund accounts and a note receivable from an officer. During
the quarters ended June 30, 2003 and 2002,  interest and other  financing  costs
were $873,510 and  $187,504,  respectively.  During the quarters  ended June 30,
2003 and 2002,  interest and other  financing  costs were incurred in connection
with the  convertible  notes issued in  February,  May and June 2003 and the $20
million line of credit facility with HP.

During the  quarter  ended June 30,  2003,  the Company  recorded  an  insurance
recovery of $374,000  for legal costs  incurred in  connection  with a favorable
trial decision in the matter of Michael  Fishman v. SmartServ  Online,  Inc., et
al.

Basic and diluted  loss per share was $0.36 for the quarter  ended June 30, 2003
compared to $0.53 per share for the quarter  ended June 30,  2002.  The weighted
average  shares  outstanding  increased  to  12,001,457  at June 30,  2003  from
6,520,857 at June 30, 2002.


SIX MONTHS ENDED JUNE 30, 2003 VERSUS SIX MONTHS ENDED JUNE 30, 2002

During the six months  ended June 30,  2003 and 2002,  we  recorded  revenues of
$469,015 and $64,636,  respectively.  Of such 2003 revenues, $65,300 were earned
through our  licensing  agreements  with wireless  telecommunications  carriers,
$288,500 were earned  through our licensing  agreement with Salomon Smith Barney
and $108,000 were earned under a one-time  purchase order from Wireless  Retail,
Inc. During the six months ended June 30, 2002, we recorded revenues of $64,636.
Of such  revenues,  $58,100 were earned  through our  licensing  agreement  with
Salomon  Smith  Barney.  During the six months ended June 30, 2003 and 2002,  we
recognized $222,100 and $5,300, respectively,  from the amortization of deferred
revenues associated with this agreement.


                                       23
<PAGE>

During the six months  ended June 30,  2003,  we  incurred  costs of services of
$3,791,374  an increase  of 28% over the six months  ended June 30,  2002.  Such
costs  increased  primarily due to a charge  ($129,000)  in connection  with the
potential  uncollectibility  of a loan  to an  officer  and an  impairment  loss
($1,440,600)  recorded  to  adjust  the  value  of the  Company's  property  and
equipment and  capitalized  software  costs to net realizable  value,  offset by
personnel reductions and the reduction of computer hardware leases, depreciation
and maintenance costs. Other components of the costs of service category consist
primarily of information and  communication  costs  ($268,900),  personnel costs
($1,022,300),  computer  hardware  leases,  depreciation  and maintenance  costs
($593,300),   facilities   ($124,800)  and  amortization  expenses  relating  to
capitalized software  development costs ($183,800).  During the six months ended
June 30, 2002, we incurred costs of services of $2,951,626.  Components of these
costs consisted  primarily of information and  communication  costs  ($231,500),
personnel  costs  ($1,458,700),   computer  hardware  leases,  depreciation  and
maintenance costs ($959,600),  facilities  ($164,700) and amortization  expenses
relating to capitalized  software  development  costs ($92,200).  During the six
months  ended  June 30,  2003  and  2002,  we  capitalized  $-0-  and  $140,200,
respectively, of development costs in accordance with Statement No. 86.

During the six months  ended June 30,  2003,  we  incurred  sales and  marketing
expenses of $380,030, a decrease of 83% over the six months ended June 30, 2002.
Such costs decreased primarily due to travel and personnel reductions associated
with the  closing of the  Company's  Hong Kong and London  sales  offices,  U.S.
personnel  reductions,  reductions in advertising and trade shows and reductions
in  professional  fees.  Components  of the  costs of the  sales  and  marketing
category consist primarily for personnel costs ($301,600), advertising and trade
shows  ($9,200),  consulting  fees  ($17,800) and travel and lodging  ($33,300).
During the six months  ended June 30,  2002,  we  incurred  sales and  marketing
expenses  of  $2,243,649.  Components  of these  costs  consisted  primarily  of
personnel costs ($1,179,100), advertising and trade shows ($563,000), facilities
($80,900), consulting fees ($157,900) and travel and lodging ($182,500).

During  the  six  months   ended  June  30,  2003,   we  incurred   general  and
administrative  expenses  of  $2,360,093,  an increase of 5% over the six months
ended June 30, 2002. Such costs increased  primarily due to a charge  ($270,000)
in connection with the potential uncollectibility of a loan to an officer and an
impairment  loss  ($108,000)  recorded  to  adjust  the  value of the  Company's
property and equipment to net realizable value,  offset by personnel  reductions
and a reduction of insurance costs. Other components of the costs of the general
and  administrative  category consist  primarily for personnel costs ($672,200),
professional  fees  ($613,300),  facilities  ($244,200),  insurance  ($129,000),
computer  hardware  leases,  depreciation and maintenance  costs ($76,200),  and
communications  costs  ($25,900).  During the six months ended June 30, 2002, we
incurred general and administrative expenses of $2,240,140.  Components of these
costs  consisted  primarily of personnel  costs  ($734,700),  professional  fees
($602,700),  facilities  ($271,600),  insurance  ($326,200),  computer  hardware
leases,  depreciation and maintenance costs ($108,900), and communications costs
($40,900).

During the six months ended June 30, 2003,  net noncash  charge for  stock-based
compensation  amounted to $101,944  compared to net noncash  credits of $153,121
during the six months ended June 30, 2002. Of such amounts,  noncash charges for
professional  fees for the six  months  ended  June  30,  2003  and  2002,  were
approximately $103,000 and $570,000, respectively,  resulting primarily from the
amortization  of  deferred  costs  associated  with the  issuance of warrants to
purchase common stock to various financial, marketing and technical consultants.
Stock-based  compensation  is valued in accordance with APB No. 25 and Statement
No.  123.  Certain  employee  stock  options are  subject to the  variable  plan
requirements of APB No. 25, as they were repriced,  and therefore,  compensation
expense is  recognized  for changes in the fair value of our common  stock.  The
value of such common stock  purchase  warrants has been  recorded in  accordance
with the Black-Scholes pricing methodology.

                                       24
<PAGE>

Interest  income for the six months  ended June 30,  2003 and 2002  amounted  to
$8,892 and $31,499,  respectively.  Such amounts were earned  primarily from our
investments in highly liquid  commercial  paper and money fund accounts.  During
the six months ended June 30, 2003 and 2002,  interest and other financing costs
were $1,249,396 and $369,745,  respectively.  Interest and other financing costs
were incurred in connection with the convertible  notes issued in February,  May
and June 2003 and the $20 million line of credit facility with HP.

During  the six months  ended  June 30,  2003,  the  Company  recorded a gain of
$305,822  resulting  from the  partial  repayment,  in full  settlement,  of the
amended promissory note issued to Hewlett-Packard  Company.  Also during the six
months  ended June 30,  2003,  the  Company  recorded an  insurance  recovery of
$374,000 for legal costs incurred in connection  with a favorable trial decision
in the matter of Michael Fishman v. SmartServ Online, Inc., et al.

Basic and  diluted  loss per share was $0.57 for the six  months  ended June 30,
2003  compared to $1.19 per share for the six months  ended June 30,  2002.  The
weighted  average  shares  outstanding  increased to 11,870,858 at June 30, 2003
from 6,389,140 at June 30, 2002.


CAPITAL RESOURCES AND LIQUIDITY

At June 30, 2003 and  December  31,  2002,  the Company had cash of $411,000 and
$154,800,  respectively.  Net cash used in operations was $2,371,830 for the six
months ended June 30, 2003  compared to  $6,436,206  during the six months ended
June 30,  2002.  The  primary  reasons  for this  reduction  were the  Company's
initiative to close the Hong Kong and United Kingdom sales  offices,  reduce its
U.S. personnel and trim its operations. Other uses of cash during the six months
ended June 30, 2003 were  primarily for the partial  repayment of our obligation
to HP in the amount of $225,000  and the  repayment  of a $70,000 note issued in
January 2003.

During the six months ended June 30, 2003, the Company issued  convertible notes
in the  amount of  $2,750,000  and a note in the  amount of  $70,000  to provide
liquidity.    Additionally,   warrant   holders   provided   funds   aggregating
approximately  $376,000 through the exercise of warrants.  During the six months
ended June 30, 2002, warrant holders provided the Company with funds aggregating
$15,000 upon the exercise of warrants.

In May 2000, we entered into a Business  Alliance  Agreement with HP whereby the
companies agreed to jointly market their respective products and services and to
work on the build-out of SmartServ's domestic and international  infrastructure.
In furtherance of these objectives HP provided us with a line of credit of up to
$20,000,000 for the acquisition of approved hardware,  software and services. As
of September 28, 2001, the expiration  date of the facility,  HP had advanced us
$6,723,156  thereunder.  In September 2002, the Company and HP amended the terms
of the promissory note to provide for the (i) reduction of SmartServ's aggregate
outstanding  principal and accrued  interest amount of $7,045,000 to $1,000,000,
(ii) return of certain unused hardware by SmartServ, (iii) issuance by SmartServ
of a  warrant  for the  purchase  of  50,000  shares  of  common  stock and (iv)
repayment  of $500,000 of the amended  obligation  on September  10,  2002.  The
remaining  obligation was evidenced by a note,  bearing an interest rate of 11%,
to be repaid as follows:  $200,000 on December 31, 2002, $200,000 on January 28,
2003 and $100,000 on February 27, 2003. The warrant expires on September 9, 2005
and has an exercise  price of $1.166 per share.  In  connection  therewith,  the
Company recorded a charge to earnings of $38,000  representing the fair value of
the  warrant  as  determined  in  accordance  with  the   Black-Scholes   model.
Additionally, the Company recognized a net gain of $5,679,261 resulting from the
extinguishment of this obligation.  In February 2003, the Company and HP amended
the terms of their  amended  promissory  note to provide for the  settlement  of
SmartServ's outstanding obligation of $530,800, inclusive of accrued interest of
$30,800,


                                       25
<PAGE>


in  consideration of the payment by SmartServ of $225,000.  As a result,  during
the quarter ended March 31, 2003, the Company  recognized an additional  gain of
$305,800, resulting from the extinguishment of this obligation.

In June 2002, First Albany Corporation, acting as placement agent for SmartServ,
completed a private  placement of units  consisting of 785,714  shares of common
stock and warrants to purchase common stock in  consideration  of $1.40 per unit
to two accredited  investors.  The net proceeds of $823,500 from the issuance of
these units were used for general  working capital  requirements.  The investors
received  warrants,  callable under certain  conditions,  for the purchase of an
aggregate of 1,428,571  shares of common stock at an exercise price of $1.40 per
share  through  the  expiration  date on June 5, 2007,  as well as  non-callable
warrants for the purchase of an  aggregate  of 196,429  shares of common  stock,
subject to antidilution  adjustments,  upon the occurrence of certain events, at
an  exercise  price of $1.47 per share  through  June 5, 2007.  In August  2002,
pursuant  to the  terms of the  callable  warrants,  the  Company  provided  the
investors with a notice calling the callable  warrants.  In September  2002, the
callable  warrants expired  unexercised.  Subsequent to June 2002,  non-callable
warrants  for the  purchase of 204,853  shares of common  stock were  exercised.
Proceeds from such exercises were $176,500.

In September 2002,  SmartServ issued units consisting of 3,884,209 shares of its
common  stock and  warrants  to  purchase  1,942,109  shares  of  common  stock,
exercisable  at $0.85 per share  through  September  8, 2007,  to 22  accredited
investors  at a purchase  price of $0.9125 per unit.  Gross  proceeds  from this
transaction  amounted to $3,544,346.  SmartServ agreed to pay fees consisting of
$249,050,  an expense  allowance  of  $25,000,  and issued  warrants to purchase
438,046 shares of common stock at an exercise price of $0.85 per share, expiring
on September 8, 2007, as compensation  to certain  individuals and entities that
acted as finders.  Additionally,  the Company  incurred  costs and other fees of
$28,000 in  connection  with this  transaction.  While the  warrants to purchase
common stock represent an additional source of capital, they expire in September
2007 and are not callable by the Company.  Therefore, they cannot be relied upon
by the Company as a definite source of capital. The warrantholders may choose to
exercise  their  warrants  if the market  price of the  Company's  common  stock
exceeds the  exercise  price of the  warrant.  Subsequent  to December 31, 2002,
warrants  for the  purchase of 442,386  shares of common  stock were  exercised.
Proceeds from such exercises were $376,000.

During the period January 1, 2000 through  December 31, 2002, the Company issued
2,065,000  shares of common stock to investors  upon the exercise of warrants to
purchase  such  shares.  Proceeds  from  the  exercise  of these  warrants  were
$6,014,600.  Substantially  all of these warrants were  exercised  during the 12
months ended  December 31, 2000 when the market  value of the  Company's  common
stock was significantly greater than it is currently.

During the  quarter  ended  December  2002,  the  Company  recorded a  valuation
allowance of $664,640 in connection with the potential uncollectibility of loans
made to Mr.  Sebastian  Cassetta,  the  Company's  Chairman and Chief  Executive
Officer.  Additionally,  during the  quarter  ended June 30,  2003,  the Company
recorded a valuation  allowance  of $270,000 in  connection  with the  potential
uncollectibility  of a loan made to Mr.  Sebastian  Cassetta for the purchase of
SmartServ  restricted stock. While these loans do not mature until December 2003
and January  2004,  Mr.  Cassetta's  ability to repay  these loans and  interest
thereon  is highly  contingent  on the  market  value of his  investment  in the
Company.

During the  quarter  ended  June 30,  2003,  the  Company  recorded a  valuation
allowance of $129,000 in  connection  with the potential  uncollectibility  of a
loan made to Mr. Mario Rossi,  the Company's  Executive Vice President and Chief
Technology Officer,  for the purchase of SmartServ  restricted stock. While this
loan does not mature until December 2003, Mr. Rossi's ability to repay this loan
and interest thereon is highly  contingent on the market value of his investment
in the Company.


                                       26
<PAGE>

At December 31, 2002,  the Company had  outstanding  1,725,000  public  warrants
(SSOLW) and 300,000 warrants with terms identical to the public warrants.  These
warrants were convertible into our common stock at the ratio of 2.5 warrants per
share of common stock at an exercise  price of $10.50 per share.  These warrants
were  redeemable  by SmartServ  on not less than 30 days  written  notice at the
redemption  price of  $0.10  per  warrant,  provided  the  average  closing  bid
quotation of the common stock as reported on the Nasdaq Stock Market had been at
least  187.5% of the current  exercise  price of the warrants for a period of 20
consecutive  trading  days ending on the third day prior to the date on which we
give notice of redemption. These warrants expired on March 20, 2003.

In January 2003,  the Company  borrowed  $70,000 from Steven B. Rosner which was
used for working capital. The debt was evidenced by an unsecured note bearing an
interest rate of 12% per annum and was repaid in February 2003.

In  February  2003,  the Company  issued a  convertible  note to Global  Capital
Funding Group, LP ("Global") in consideration for the receipt of $1 million. The
note  bears  interest  at the  rate  of 10% per  annum,  and is  secured  by the
Company's assets,  exclusive of its internally developed software products.  The
note matures on February 14, 2004, contains certain antidilution provisions, and
may be converted  into shares of SmartServ  common stock at $1.10 per share.  As
additional  consideration,  the Company issued Global a warrant for the purchase
of 200,000  shares of its common stock at an exercise  price of $1.61 per share.
In April 2003,  the  Company  borrowed an  additional  $250,000  from Global and
amended  the   convertible   note  to  include   such  amount.   As   additional
consideration,  the Company  issued  Global a warrant for the purchase of 20,000
shares of its common stock at an exercise price of $1.20 per share.  The warrant
issued to  Global  contains  certain  antidilution  provisions  and  expires  on
February  14,  2006.  Proceeds  from the  notes  were used for  working  capital
purposes.   The  Company  is  in  default  of  its  quarterly  interest  payment
obligations,  in an aggregate amount of approximately  $43,000,  to Global under
the amended note. The Company is currently negotiating with Global to settle the
default.  There can be no assurance,  however,  that the Company will be able to
negotiate a settlement with Global and cure the default. The failure to cure the
default  would  require the Company to repay the total  principal  amount of the
amended  note  and  all  accrued  interest,   approximately  $1,293,000  in  the
aggregate.  Such  requirement  would  have  a  material  adverse  effect  on the
Company's cash flow, balance sheet and operations.

In February 2003, the Company issued 123,537 shares of common stock to 5 vendors
in  settlement  of the  Company's  obligations,  aggregating  $164,000,  to such
vendors.

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting  of  convertible  notes and  warrants to purchase  common stock ("May
Units")  to 8  accredited  investors.  Each  May  Unit  consists  of a  $100,000
convertible  note and a warrant  to  purchase  200,000  shares of the  Company's
common  stock.  The  convertible  notes  bear  interest  at 8%  per  annum,  are
convertible  into the  Company's  common  stock at $0.744  (the  average  of the
closing  bid prices of the  Company's  common  stock for the 5 days prior to the
closing of the  transaction) per share and mature on the earlier of November 19,
2003 or the  closing of an equity  placement  of not less than $3  million.  The
warrants are exercisable at $0.744 per share and expire on May 19, 2006. In June
2003,  the Company in  consideration  of  $1,142,000  issued  11.42 units ("June
Units") to 20 accredited  investors.  Each June Unit also consists of a $100,000
convertible  note and a warrant  to  purchase  200,000  shares of the  Company's
common  stock.  The  convertible  notes  bear  interest  at 8%  per  annum,  are
convertible  into the  Company's  common  stock at $0.794  (the  average  of the
closing  bid prices of the  Company's  common  stock for the 5 days prior to the
closing of the  transaction) per share and mature on the earlier of December 13,
2003 or the  closing of an equity  placement  of not less than $3  million.  The
warrants  are  exercisable  at $0.794  per share  and  expire on June 13,  2006.
Proceeds  from the sale of the Units  were used for  working  capital  purposes.
While the warrants to purchase  common stock  represent an additional  source of
capital,  they  expire  in  June  2006  and  are not  callable  by the  Company.
Therefore,  they cannot be relied  upon by the  Company as a definite  source of
capital.  The warrantholders


                                       27
<PAGE>

may choose to  exercise  their  warrants  if the market  price of the  Company's
common stock exceeds the exercise price of the warrant.

The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company has,  since its
inception,  earned limited revenues and incurred substantial recurring operating
losses,  including  net losses of  $6,725,058  for the six months ended June 30,
2003, net losses of $8,037,173 and  $14,819,860 for the years ended December 31,
2002 and 2001,  respectively,  and net losses of $30,993,559  and $7,124,126 for
the years ended June 30, 2000 and 1999,  respectively.  Additionally,  it had an
accumulated  deficit  of  $79,584,064  at June 30,  2003  and has  debt  service
requirements  of  $2,750,000  during the 12 month  period  ending June 30, 2004.
These conditions raise substantial doubt about the Company's ability to continue
as a going  concern.  Such concern was expressed by our auditors,  Ernst & Young
LLP, in their audit report  regarding the financial  statements  included in our
Form 10-KSB for the year ended  December 31, 2002.  The financial  statements do
not  include  any  adjustments  to reflect the  possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of these uncertainties.

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  have caused  telecommunications  service  providers to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  This has  resulted  in delays  in the  build-out  of high  speed
carrier data networks and availability of data-enabled wireless devices, causing
the  market  for  SmartServ's  financial  data and  transaction  services  to be
lackluster.  In addition,  many  financial  services  firms have  curtailed  new
product  development to focus on data security and recovery.  Consequently,  the
potential demand for the Company's  products and services has been significantly
delayed.  Such  delays  have  had a very  detrimental  effect  on the  Company's
operations  and have  resulted  in the  Company's  inability  to  implement  its
business plan and related marketing strategies.  Consequently,  in May 2002, the
Company commenced an effort to realign its  infrastructure  and related overhead
to  correlate  with  reductions  in projected  revenue.  As part of this effort,
management closed the Company's UK and Hong Kong sales offices and downsized its
domestic  operations  through staff  reductions to a level sufficient to support
the  Company's  projected  operations.  In both March and May 2003,  the Company
again  reduced  its  cost  structure   through  the  termination  of  additional
personnel.  Personnel  headcount  has  been  reduced  from 66 in May 2002 to the
current level of 10. These efforts have reduced the  Company's  average  monthly
operating expenses from  approximately  $1,090,000 in July 2002 to approximately
$230,000  commencing  September 2003,  excluding noncash stock  compensation and
depreciation  and  amortization.  The  Company  has also  reviewed  its  revenue
producing  contracts as of June 30, 2003 and reduced its projection of near term
revenues as a result of lower than anticipated demand for the Company's products
and services.  As a result of the factors  identified  above,  the Company is in
need of  additional  capital  to  enable it  continue  as a going  concern.  The
following chart provides an analysis of the Company's  capital  requirements for
the 12  month  period  ending  June 30,  2004  based on  projected  revenues  of
$550,000:

                             % OF
                            REVENUE          CAPITAL
                             GOAL            REQUIRED
                         --------------------------------

                             100           $ 4,100,000

                               0           $ 4,650,000

However,  no  assurance  can be given  that the  Company  will be able  meet its
revenue  projections,  maintain its cost structure as presently  configured,  or
raise additional capital on satisfactory  terms. Should the


                                       28
<PAGE>

Company  be unable to raise  additional  debt or  equity  financing,  it will be
forced to seek a merger or cease operations.


CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
----------------------------------------------

Forward-looking  statements in this document and those made from time-to-time by
our  employees  are  made  under  the  safe  harbor  provisions  of the  Private
Securities Litigation Reform Act of 1995.  Forward-looking statements concerning
future plans or results are necessarily  only estimates and actual results could
differ  materially  from  expectations.  Certain  factors  that  could  cause or
contribute  to such  differences  include,  and are not  limited  to,  potential
fluctuations in quarterly results, the size and timing of awards and performance
on contracts,  dependence on large  contracts and a limited number of customers,
dependence on wireless and/or  internet  networks of  third-parties  for certain
products and services, lengthy sales and implementation cycles, availability and
cost of key  components,  market  acceptance  of new or  enhanced  products  and
services,   proprietary   technology   and  changing   technology,   competitive
conditions, system performance,  management of growth, the risk that our current
and future  products and services may contain errors or be affected by technical
problems that would be difficult and costly to detect and correct, dependence on
key personnel and general  economic and political  conditions  and other factors
affecting  spending by customers,  and other risks  described in this  Quarterly
Report on Form 10-QSB and our other  filings  with the  Securities  and Exchange
Commission.

ITEM 3.   CONTROLS AND PROCEDURES

As of  June  30,  2003,  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 and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures pursuant to the Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's Chief Executive Officer and Chief Financial Officer concluded that
the Company's  disclosure  controls and  procedures  that are designed to ensure
that information  required to be disclosed in Company reports filed or submitted
under the Exchange Act is recorded, processed, summarized and properly reported.



                                       29
<PAGE>

PART 2.  OTHER INFORMATION


                             SMARTSERV ONLINE, INC.


ITEM 1.    LEGAL PROCEEDINGS

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York. The complaint  alleged that in August of 1999,  Commonwealth
and  SmartServ   entered  into  an   engagement   letter  that  provided  for  a
nonrefundable  fee to Commonwealth of $15,000 payable in cash or common stock at
SmartServ's  option. The complaint alleged that SmartServ elected to pay the fee
in stock and, as a result,  Commonwealth sought 13,333 shares of common stock or
at least $1,770,000  together with interest and costs. In our defense, we denied
that we  elected  to pay in  stock.  On  March 4,  2003,  SmartServ  received  a
favorable decision in this matter after a trial held in the Supreme Court of the
State of New York. The decision holds that, consistent with SmartServ's defense,
SmartServ is required to pay  Commonwealth a retainer fee of only $13,439,  plus
interest and certain costs.  Commonwealth's  time to appeal has not yet expired.
While  we  intend  to  vigorously  defend  any  appeal  of the  decision  in the
Commonwealth  matter,  the  unfavorable  outcome of such an appeal  could have a
material  adverse effect on our financial  condition,  results of operations and
cash flows.

In August of 2003,  SmartServ  entered into a Stipulation  of  Arbitration  with
Brauning  Inc.,  Mike Silva and Todd Peterson,  former  consultants to SmartServ
(collectively,  the  "Claimants")  pursuant to which SmartServ and the Claimants
agreed to resolve,  in a binding arbitration  proceeding,  the Claimants' demand
for damages  resulting from the alleged  failure by SmartServ to timely register
the shares of common stock  underlying  certain  consulting  warrants  issued by
SmartServ to the Claimants.  SmartServ  believes that the shares  underlying the
warrants were timely  registered  and that since the Claimants were not party to
any registration rights affecting such warrants,  their demand is without merit.
Although we will vigorously  defend this action,  there can be no assurance that
we will be  successful.  The  unfavorable  outcome of such  action  could have a
material  adverse effect on our  consolidated  results of operations,  financial
condition and cash flows.

In August 2003, the Company was informed that Oracle Corporation  ("Oracle") has
filed an action against it in Federal  District  Court in California  seeking to
terminate  its February  28, 2002 Oracle  License and  Services  Agreement  (the
"License") due to the Company's failure to pay certain license fees. The Company
has not yet received service of process in any such action. The Company has been
in the process of raising the funds  necessary  to cure the default and maintain
the License.  There can be no assurance,  however, that the Company will be able
to raise such funds or maintain the License.  The Company's  failure to maintain
the License  would  require  that the Company  temporarily  suspend  operations,
thereby creating a material adverse effect on its cash flows and operations.


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

At the time of issuance,  each investor or recipient of unregistered  securities
was either an accredited investor or a sophisticated investor. Each investor had
access to  SmartServ's  most recent Form  10-KSB,  all  quarterly  and  periodic
reports filed subsequent to such Form 10-KSB and the Company's most recent proxy
materials.


                                       30
<PAGE>

In January 2003,  the Company  issued  219,178  shares of common stock to Robert
Gorman,  an  accredited  investor  in the  September  2002  financing,  upon the
exercise of warrants to purchase  such  shares.  Proceeds  from the  exercise of
these warrants were $186,301. In February 2003, the Company issued 35,295 shares
of common stock to Frazier Investments,  an accredited investor in the September
2002 financing,  upon the exercise of warrants to purchase such shares. Proceeds
from the exercise of these  warrants  were $30,000.  In March 2003,  the Company
issued  129,089  shares of common stock to Frazier  Investments,  an  accredited
investor  in the  September  2002  financing,  upon the  exercise of warrants to
purchase  such  shares.  Proceeds  from  the  exercise  of these  warrants  were
$109,726.  In April 2003,  the Company  issued  58,824 shares of common stock to
Joel Rotter,  an accredited  investor in the September 2002 financing,  upon the
exercise of warrants to purchase  such  shares.  Proceeds  from the  exercise of
these warrants were $50,000.  No sales  commissions were paid in connection with
the above  transactions.  These shares and warrants were issued in reliance upon
the exemption from registration provided by Section 4 (2) of the Securities Act.

In  February  2003,  the Company  issued a  convertible  note to Global  Capital
Funding Group, LP ("Global"),  an accredited investor,  in consideration for the
receipt of $1 million.  The note bears interest at the rate of 10% per annum and
is  secured by the  Company's  assets,  exclusive  of its  internally  developed
software  products.  The note  matures on February 14,  2004,  contains  certain
antidilution  provisions,  and may be converted into shares of SmartServ  common
stock at $1.10 per share. As additional consideration, the Company issued Global
a warrant for the purchase of 200,000  shares of its common stock at an exercise
price of $1.61 per share. The warrant contains certain  antidilution  provisions
and expires on February 14, 2006. Alpine Capital  Partners,  Inc., an accredited
investor,  received a finder's fee of $70,000,  representing 7% of the aggregate
purchase price of the convertible note and warrants to purchase 91,000 shares of
common stock at $1.61 per share expiring on February 14, 2006 in connection with
this  transaction.  In April 2003, the Company  borrowed an additional  $250,000
from  Global and  amended  the  convertible  note to  include  such  amount.  As
additional  consideration,  the Company issued Global a warrant for the purchase
of 20,000  shares of its common  stock at an exercise  price of $1.20 per share.
The warrant contains certain antidilution provisions and expires on February 14,
2006.  The note,  amended note and the warrants were issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

In February  2003,  the Company  issued  25,647  shares of common stock to G. S.
Schwartz & Company, a sophisticated  investor, in full satisfaction of a $33,854
obligation to G. S. Schwartz & Company for services rendered to the Company.  No
sales commissions were paid in connection with such transaction. The shares were
issued in reliance upon the exemption  from  registration  provided by Section 4
(2) of the Securities Act.

In February 2003, the Company issued 62,500 shares of common stock to Vox, Inc.,
an accredited  investor,  in full satisfaction of an $82,500  obligation to Vox,
Inc. for services  rendered to the Company.  No sales  commissions  were paid in
connection  with such  transaction.  The shares were issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

In February  2003,  the Company issued 12,576 shares of common stock to Creative
Management Services dba MC2, an accredited  investor,  in full satisfaction of a
$16,600  obligation  to MC2 for  services  rendered  to the  Company.  No  sales
commissions  were paid in  connection  with such  transaction.  The shares  were
issued in reliance upon the exemption  from  registration  provided by Section 4
(2) of the Securities Act.

In February  2003,  the Company  issued  12,100 shares of common stock to NexVue
Information  Systems,  a  sophisticated  investor,  in satisfaction of a $15,953
obligation to NexVue  Information  Systems for services rendered to the Company.
No sales commissions were paid in connection with such  transaction.  The


                                       31
<PAGE>

shares were issued in reliance upon the exemption from registration  provided by
Section 4 (2) of the Securities Act.

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting  of  convertible  notes and  warrants to purchase  common stock ("May
Units")  to 8  accredited  investors.  Each  May  Unit  consists  of a  $100,000
convertible  note and a warrant  to  purchase  200,000  shares of the  Company's
common  stock.  The  convertible  notes  bear  interest  at 8%  per  annum,  are
convertible  into the  Company's  common  stock at $0.744  (the  average  of the
closing  bid prices of the  Company's  common  stock for the 5 days prior to the
closing of the  transaction) per share and mature on the earlier of November 19,
2003 or the  closing of an equity  placement  of not less than $3  million.  The
warrants are exercisable at $0.744 per share and expire on May 19, 2006. In June
2003,  the Company in  consideration  of  $1,142,000  issued  11.42 units ("June
Units")  [each  May or  June  Unit  referred  individually  as a  "Unit"]  to 20
accredited  investors.  Each June Unit also  consists of a $100,000  convertible
note and a warrant to purchase 200,000 shares of the Company's common stock. The
convertible  notes bear  interest  at 8% per  annum,  are  convertible  into the
Company's  common  stock at $0.794 (the average of the closing bid prices of the
Company's  common stock for the 5 days prior to the closing of the  transaction)
per share and mature on the  earlier of  December  13, 2003 or the closing of an
equity  placement of not less than $3 million.  The warrants are  exercisable at
$0.794 per share and  expire on June 13,  2006.  Spencer  Trask  Ventures,  Inc.
("Spencer  Trask"),  Steven B. Rosner and Richard  Berland,  each an  accredited
investor, acted as finders for this transaction.  As consideration therefor, the
finders  received  their  proportionate  share of a cash fee equal to 10% of the
aggregate  purchase  price of the Units sold and (i) Unit  Purchase  Warrants to
purchase an aggregate of three Units ("Unit  Purchase  Warrant") and (ii) 33,333
shares of unregistered  common stock per Unit sold.  Each Unit Purchase  Warrant
entitles  the holder to purchase  one Unit,  for the price of $100,000  per Unit
through June 13, 2008.  In addition,  Spencer Trask  received a  non-accountable
expense allowance equal to 3% of the aggregate proceeds of all Units sold in the
offerings.  These convertible notes, shares and warrants were issued in reliance
upon the exemption from registration provided by Section 4 (2) of the Securities
Act.

In May 2003, the Company entered into a consulting  agreement with Spencer Trask
whereby  Spencer  Trask will render  services  to the  Company as its  corporate
finance consultant, financial advisor and investment banker. As compensation for
such  services,  the Company  agreed to issue 500,000  shares of common stock to
Spencer  Trask.  These shares will be issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.



                                       32
<PAGE>

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

4.1      Form of Warrant for the Investors in the May 2003  Placement  (the "May
         Investors")

4.2      Form of  Registration  Rights  Agreement,  dated May 19, 2003,  between
         SmartServ and the May Investors

4.3      Form of Warrant for the Investors in the June 2003 Placement (the "June
         Investors")

4.4      Form of Registration  Rights  Agreement,  dated June 13, 2003,  between
         SmartServ and the June Investors

10.1     Form of  Securities  Purchase  Agreement,  dated May 19, 2003,  between
         SmartServ and the May Investors

10.2     Form of Convertible Debenture for the May Investors

10.3     Form of Securities  Purchase  Agreement,  dated June 13, 2003,  between
         SmartServ and the June Investors

10.4     Form of Convertible Debenture for the June Investors

10.5     Consulting  Agreement,  dated May 15,  2003,  between  the  Company and
         Spencer Trask Ventures, Inc.

10.6     Severance Agreement, dated June 20, 2003, between SmartServ and Richard
         Kerschner

10.7     Severance Agreement,  dated June 20, 2003, between SmartServ and Thomas
         Haller

10.8     Form of  Amendment  to the May 19,  2003  Security  Purchase  Agreement
         between SmartServ and the May Investors

31.1     Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1     Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(b)    REPORTS ON FORM 8-K

           On May 2, 2003, the Company filed a report on Form 8-K under Items 5,
           7 and 12 thereof  referencing a press release,  dated April 30, 2003,
           relating to its continued listing on the Nasdaq SmallCap Market and a
           press release on April 25, 2003,  announcing the Company's  financial
           results for the year ended December 31, 2002.


                                       33
<PAGE>


                             SMARTSERV ONLINE, INC.


                                   SIGNATURES



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



                                          SmartServ Online, Inc.
                                          (Registrant)

                                          By:


Date: August 26, 2003                     /S/  SEBASTIAN E. CASSETTA
                                          ---------------------------
                                          Sebastian E. Cassetta
                                          Chief Executive Officer


Date: August 26, 2003                     /S/  THOMAS W. HALLER
                                          ---------------------------
                                          Thomas W. Haller
                                          Sr. Vice  President,  Chief Financial
                                          Officer, Treasurer



                                       34
<PAGE>

                                 EXHIBIT INDEX
                                 -------------

EXHIBIT
  NO.    DESCRIPTION
-------  -----------

  4.1    Form of Warrant for the Investors in the May 2003  Placement  (the "May
         Investors")

  4.2    Form of  Registration  Rights  Agreement,  dated May 19, 2003,  between
         SmartServ and the May Investors

  4.3    Form of Warrant for the Investors in the June 2003 Placement (the "June
         Investors")

  4.4    Form of Registration  Rights  Agreement,  dated June 13, 2003,  between
         SmartServ and the June Investors

 10.1    Form of  Securities  Purchase  Agreement,  dated May 19, 2003,  between
         SmartServ and the May Investors

 10.2    Form of Convertible Debenture for the May Investors

 10.3    Form of Securities  Purchase  Agreement,  dated June 13, 2003,  between
         SmartServ and the June Investors

 10.4    Form of Convertible Debenture for the June Investors

 10.5    Consulting  Agreement,  dated May 15,  2003,  between  the  Company and
         Spencer Trask Ventures, Inc.

 10.6    Severance Agreement, dated June 20, 2003, between SmartServ and Richard
         Kerschner

 10.7    Severance Agreement,  dated June 20, 2003, between SmartServ and Thomas
         Haller

 10.8    Form of Amendment Agreement, dated June 13, 2003, to the May 19, 2003
         Securities Purchase Agreement between SmartServ and the May Investors.


                                       35