FORM 10-QSB

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


[X]        QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
           EXCHANGE ACT OF 1934


           FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

                         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) (ZIP CODE)


                                 (203) 353-5950
--------------------------------------------------------------------------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECED ING 12 MONTHS (OR FOR SUCH SHORTER  PERIODS 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 [_]

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)     YES [_] NO [X]

THE NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE,  OUTSTANDING AS OF MAY 14,
1997 WAS 3,695,000.




<PAGE>




                             SMARTSERV ONLINE, INC.

                                   FORM 10-QSB

                                      INDEX





PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Balance Sheets - June 30, 1996 and March 31, 1997 (unaudited)...... 2

          Statements of Operations - three months ended 
          March 31, 1997 and 1996 and nine months ended 
          March 31, 1997 and 1996 (unaudited)................................ 3

          Statement of Changes in Stockholders' Equity - 
          nine months ended March 31, 1997 (unaudited)....................... 4

          Statements of Cash Flows - three months ended
          March 31, 1997 and 1996 and nine months ended
          March 31, 1997 and 1996 (unaudited)................................ 5

          Notes to Unaudited Financial Statements............................ 6

Item 2.   Management's Discussion and Analysis or 
          Plan of Operation..................................................10


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings..................................................14

Item 6.   Exhibits and Reports on Form 8-K...................................14

          Signatures.........................................................15



                                       1
<PAGE>


                             SMARTSERV ONLINE, INC.

                                 BALANCE SHEETS


                                                       MARCH 31,      JUNE 30,
                                                        1997           1996
                                                     -----------    -----------
ASSETS                                               (Unaudited)

Current assets
    Cash and cash equivalents                        $   227,342    $ 3,460,850
    Accounts receivable                                  175,146         57,990
    Inventory                                             30,000           --
    Prepaid expenses and other receivables               134,629         68,310
                                                     -----------    -----------
Total current assets                                     567,117      3,587,150
                                                     -----------    -----------

Property and equipment - net                             531,070        258,899
                                                     -----------    -----------

Other assets
    Deferred charges                                      36,000         63,000
    Security deposit                                      81,218         81,218
                                                     -----------    -----------
                                                         117,218        144,218
                                                     -----------    -----------

Total Assets                                         $ 1,215,405    $ 3,990,267
                                                     ===========    ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable and accrued expenses            $   961,212    $   482,851
    Payroll taxes payable                                 28,100         14,901
    Salaries payable                                      43,137         44,654
    Deferred revenues                                     20,000           --
                                                     -----------    -----------
Total current liabilities                              1,052,449        542,406
                                                     -----------    -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common stock - $.01 par value
    Authorized - 15,000,000 shares
    Issued and outstanding - 3,695,000 shares at
           June 30, 1996 and March 31, 1997               36,950         36,950
Additional paid-in capital                             8,946,592      8,758,299
Accumulated deficit                                   (8,820,586)    (5,347,388)
                                                     -----------    -----------
Total stockholders' equity                               162,956      3,447,861
                                                     -----------    -----------

Total Liabilities and Stockholders' Equity           $ 1,215,405    $ 3,990,267
                                                     ===========    ===========

See accompanying notes.




                                       2
<PAGE>



                             SMARTSERV ONLINE, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                   THREE MONTHS                 NINE MONTHS
                                                  ENDED MARCH 31               ENDED MARCH 31
                                          --------------------------    --------------------------
                                              1997           1996           1997           1996
                                          -----------    -----------    -----------    -----------
<S>                                       <C>            <C>            <C>            <C>           
Revenues                                  $   170,674    $      --      $   467,783    $      --
                                          -----------    -----------    -----------    -----------

Costs and expenses:
    Costs of revenues                         738,329           --        1,758,396           --
    Product development expenses                 --          370,014           --          652,737
    Selling, general and administrative
      expenses                                806,797        237,184      2,247,696        645,436
                                          -----------    -----------    -----------    -----------
    Total costs and expenses                1,545,126        607,198      4,006,092      1,298,173
                                          -----------    -----------    -----------    -----------

Loss from operations                       (1,374,452)      (607,198)    (3,538,309)    (1,298,173)
                                          -----------    -----------    -----------    -----------

Other income (expense):
    Interest income                             8,086            150         73,271            150
    Interest expense                           (2,452)      (281,480)        (8,160)      (499,771)
                                          -----------    -----------    -----------    -----------
                                                5,634       (281,330)        65,111       (499,621)
                                          -----------    -----------    -----------    -----------

Net loss                                  $(1,368,818)   $  (888,528)   $(3,473,198)   $(1,797,794)
                                          ===========    ===========    ===========    ===========

Net loss per share (Note 2)               $     (0.37)   $     (0.42)   $     (0.94)   $     (0.90)
                                          ===========    ===========    ===========    ===========

Weighted average shares outstanding
    (Note 2)                                3,695,000      2,118,750      3,695,000      1,990,700
                                          ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes.





                                       3
<PAGE>



                             SMARTSERV ONLINE, INC.

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                        NINE MONTHS ENDED MARCH 31, 1977
                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                        ADDITIONAL
                                   COMMON STOCK           PAID-IN     ACCUMULATED
                               SHARES      PAR VALUE      CAPITAL       DEFICIT         TOTAL
                            -----------   -----------   -----------   -----------    -----------
<S>                           <C>         <C>           <C>           <C>            <C>        
Balance at June 30, 1996      3,695,000   $    36,950   $ 8,758,299   $(5,347,388)   $ 3,447,861

Change in market value of
employee options                   --            --         188,293          --          188,293

Net loss for the period            --            --            --      (3,473,198)    (3,473,198)
                            -----------   -----------   -----------   -----------    -----------

Balance at March 31, 1997     3,695,000   $    36,950   $ 8,946,592   $(8,820,586)   $   162,956
                            ===========   ===========   ===========   ===========    ===========
</TABLE>

See accompanying notes.



                                        4
<PAGE>

                             SMARTSERV ONLINE, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS                  NINE MONTHS
                                                              ENDED MARCH 31                ENDED MARCH 31
                                                        --------------------------    --------------------------
                                                           1997           1996           1997           1996
                                                        -----------    -----------    -----------    -----------
<S>                                                     <C>            <C>            <C>            <C>         
OPERATING ACTIVITIES
Net loss                                                $(1,368,818)   $  (888,528)   $(3,473,198)   $(1,797,794)
Adjustments to reconcile net loss to net cash used 
in operating activities:
      Depreciation and amortization                          27,578         10,813         65,904         25,817
      Changes in market value of
      employee options                                         --             --          188,293           --
      Accretion and noncash charges
      for interest expense                                     --           90,126           --          158,263
      Consulting services                                      --          (10,002)          --          (10,002)
      Amortization of deferred charges                        9,000           --           27,000           --
           Other changes that provided (used) cash
           Accounts receivable                               32,188         34,115       (117,156)        (1,972)
           Inventories                                         --            9,844        (30,000)        10,440
           Prepaid expenses and other receivables           (16,135)        (5,301)       (66,319)       (11,241)
           Accounts payable and accrued liabilities         429,892        163,274        478,361        133,099
           Accrued interest                                    --         (229,435)          --         (106,595)
           Payroll taxes payable                              6,611         14,108         13,199        (71,585)
           Salaries payable                                 (11,493)       (11,173)        (1,517)        (9,942)
           Deferred revenues                                   --             --           20,000           --
                                                        -----------    -----------    -----------    -----------
      Net cash used in operating activities                (891,177)      (822,159)    (2,895,433)    (1,681,512)
                                                        -----------    -----------    -----------    -----------

INVESTING ACTIVITIES
Purchase of equipment                                      (119,332)       (84,348)      (338,075)      (121,973)
                                                        -----------    -----------    -----------    -----------
      Net cash used in investing activities                (119,332)       (84,348)      (338,075)      (121,973)
                                                        -----------    -----------    -----------    -----------

FINANCING ACTIVITIES
Proceeds from the issuance of Bridge notes                     --          190,000           --        1,170,000
Repayment of Bridge notes                                      --       (1,200,000)          --       (1,200,000)
Proceeds from the issuance of common stock                     --        8,475,000           --        8,705,000
Proceeds from the issuance of warrants                         --          182,510           --          202,510
Repayment of debt                                              --         (612,500)          --         (612,500)
Repayment of notes                                             --         (427,500)          --         (452,500)
Due from officers, net                                         --          (79,962)          --          (64,309)
Cost of issuing securities                                     --       (1,543,560)          --       (1,543,560)
Deferred financing costs                                       --          137,637           --         (134,916)
                                                        -----------    -----------    -----------    -----------
      Net cash provided by financing activities                --        5,121,625           --        6,069,725
                                                        -----------    -----------    -----------    -----------

Increase (decrease) in cash and cash equivalents         (1,010,509)     4,215,118     (3,233,508)     4,266,240
Cash and cash equivalents - beginning of period           1,237,851         51,122      3,460,850           --
                                                        -----------    -----------    -----------    -----------

Cash and cash equivalents - end of period               $   227,342    $ 4,266,240    $   227,342    $ 4,266,240
                                                        ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes.



                                       5
<PAGE>



                             SMARTSERV ONLINE, INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 MARCH 31, 1997



1.   ORGANIZATION

SmartServ Online,  Inc., formerly Smart Phone  Communications  (Delaware),  Inc.
(the  "Company"),  commenced  operations  on August 20, 1993.  The Company makes
available online information and transactional  services to subscribers  through
screen-based  telephones,  personal  computers,  the Internet,  personal digital
assistants,  alpha-numeric  pagers, and interactive voice response systems.  The
Company  also  offers a range of services  designed to meet the varied  needs of
clients  of  potential   strategic   partners,   as  well  as  potential  direct
subscribers,  including:  stock  brokerage  support  services,  business  credit
information,  investment  newsletters,  stock  research  reports,  stock quotes,
nationwide business and residential  directory services,  business and financial
news,  sports  information,  electronic  bill  payment,  research  and  analysis
reports,  trading activity  reports by insiders of corporations,  online package
tracking,  electronic  mail,  and  ordering  flowers  and gifts.  The  Company's
software  architecture  and  capabilities  format  information  for a particular
device and present the information in a user friendly manner.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information,
the instructions of Form 10-QSB and Rule 310 of Regulation SB. The balance sheet
at June 30, 1996 has been derived from the audited financial  statements at that
date,  but does not include all of the  information  and  footnotes  required by
generally accepted accounting principles for complete financial statements.  The
financial  statements  should be read in conjunction  with the Company's  Annual
Report on Form  10-KSB for the year ended June 30,  1996.  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 nine months
ended March 31, 1997 are not  necessarily  indicative of those  expected for the
year ending June 30, 1997.

The  Company  has  completed   development  of  its  information   platform  and
communications  software and has exited the developmental  stage.  However,  the
Company has incurred  recurring  operating  losses and its  operations  have not
produced a positive  cash flow.  Additionally,  there is no  assurance  that the
Company will generate future revenues or cash flow from operations.

The Company  estimates that it has sufficient  cash resources  through May 1997;
however,  the  Company  has  accepted  a  Term  Sheet  from  Coleman  &  Company
Securities,  Inc.  with respect to a private  placement of up to  $3,000,000  in
Rights.  Such  Rights are  convertible  into  Common  Stock and  Warrants of the
Company commencing six months from date of issuance.  There can be no assurance;
however, that this transaction will be consummated.

The  market  for  online  information  and  transactional   services  is  highly
competitive and subject to rapid innovation and technological  change,  shifting
consumer  preferences  and  frequent  new  service  introductions.  The  Company
believes  that  potential  new  competitors,   including  large  multimedia  and
information  systems  companies,  are  increasing  their  focus  on  transaction
processing. Increased



                                       6
<PAGE>


Basis of Presentation (continued)
---------------------------------

competition  in the market  for the  Company's  services  could  materially  and
adversely  affect the Company's  results of operations  through price reductions
and loss of potential  market  share.  The  Company's  ability to compete in the
future  depends on its ability to maintain  the  technological  and  performance
advantages   of  its  current   distribution   platform  and  to  introduce  new
applications that achieve market acceptance.

Management  believes  that the  Company's  primary  source of  revenues  will be
derived from consumers who purchase the services through its Strategic Partners.
The Company has also commenced development of a direct subscriber base. At March
31, 1997, the Company had a subscriber base of  approximately  2,000 users which
is projected to grow to  approximately  42,000 users by June 30, 1998;  however,
there can be no assurance that the Company's  product  offering will continue to
be accepted in the marketplace.

Stock Based Compensation
------------------------

The Company grants stock options for the purchase of a fixed number of shares to
employees  with an  exercise  price equal to the fair value of the shares at the
date of grant.  The Company accounts for these stock option grants in accordance
with APB  Opinion  No.  25,  "Accounting  for Stock  Issued to  Employees"  and,
accordingly, where terms are fixed and determinable,  recognizes no compensation
expense.

Earnings (Loss) per Share
-------------------------

On March 21, 1996, the Company completed an Initial Public Offering of 1,695,000
shares of $.01 par value  common stock at $5.00 per share and  1,725,000  common
stock purchase  warrants at $.10 per warrant.  The Company  received  $7,058,648
from the Offering,  net of the costs of issuing these  securities of $1,588,852.
In connection with the Initial Public Offering,  the Board of Directors voted to
increase the aggregate  number of shares that the Company is authorized to issue
to 15,000,000.

Net loss per share is computed  based on the weighted  average  number of common
shares and common  equivalents  outstanding during the period using the treasury
stock method.  Shares from the assumed  exercise of options and warrants granted
by the Company have been included in the  computations of loss per share for all
periods, unless their inclusion would be antidilutive.  However, for purposes of
computing net loss per share, options and warrants granted by the Company during
the 12 months  preceding the Initial Public  Offering date have been included in
the calculation of common and common  equivalent  shares  outstanding as if they
were outstanding for all periods prior to the Initial Public Offering, using the
treasury stock method and the Initial Public Offering price of $5.00 per share.

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings per Share,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock options would be excluded. The impact of Statement 128 on primary earnings
per share is not expected to be material.




                                       7
<PAGE>


3.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:


                                                    MARCH 31,         JUNE 30,
                                                         1997              1996
                                                    ---------         ---------
Data processing equipment                           $ 553,547         $ 280,814
Office furniture and equipment                         68,896            37,051
Display equipment                                       9,635             9,635
Leasehold improvements                                 33,497              --
                                                    ---------         ---------

                                                      665,575           327,500

Accumulated depreciation                             (134,505)          (68,601)
                                                    ---------         ---------
                                                    $ 531,070         $ 258,899
                                                    =========         =========


4.   COMMITMENTS

On August 21, 1995,  the Company  accepted a proposal from  Strategica,  Inc., a
financial  intermediary,  for the arrangement of a $2,500,000  secured revolving
credit  facility  ("Proposal").  As  compensation  therefor,  the Company issued
116,550  shares  of  common  stock to  Strategica.  Additionally,  the  Proposal
contemplated that the Company would enter into a consulting  agreement,  whereby
Strategica  would  provide  consulting  services  with  regard  to  operational,
management and strategic  issues.  As consideration  for these ongoing services,
the  Company  would  pay  $72,000  per  annum  over  the four  year  term of the
agreement.  The Company subsequently received a commitment letter which differed
significantly  from the  original  Proposal,  which  management  believed  to be
unacceptable.  Negotiations  between  management  and Strategica to resolve this
matter in a mutually  satisfactory  manner have been unsuccessful.  See Part II,
Item 1 for a discussion of the Company's lawsuit against Strategica.

On December 3, 1996,  the Company  entered  into an  agreement  with a financial
institution  for the  acquisition  and  financing of  approximately  $230,000 of
additional  computer  equipment.  The equipment is being acquired to enhance the
Company's ability to provide its information  service to a growing user base and
to meet continued demand for these services.


5.   EMPLOYEE STOCK OPTION PLAN

In April 1996, the Board of Directors  approved the establishment of an Employee
Stock Option Plan ("Plan")  authorizing  stock option  grants to directors,  key
employees and consultants of the Company.  The exercise of options granted under
the  Plan  was  contingent  upon  the  approval  of the  Plan  by the  Company's
stockholders,  which was  obtained  at the  Annual  Meeting of  Stockholders  on
November 4, 1996. The options are intended to qualify as incentive stock options
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended, or as nonqualified stock options. The Plan provides for the exercise of
such  options at not less than the fair value of the stock on the date of grant.
The options are generally  exercisable  after one year from date of grant and no
options may be granted after April 15, 2006.  Pursuant to the terms of the Plan,
each  nonemployee  director of the Company received an initial grant to purchase
5,000 shares of common stock and will receive an  additional  option to purchase
5,000 shares of common stock immediately  following each annual meeting at which
directors are elected.  On December 6, 1996,  the  Company's  Board of Directors
approved  the increase in the number of shares  eligible for issuance  under the
Plan to 650,000.  Such 250,000 share  increase is subject to the approval of the
Company's stockholders. The Plan is administered by a committee designated by



                                       8
<PAGE>


5.   Employee Stock Option Plan (continued)

the Board of Directors of the Company.

Activity in the Company's stock option plan is as follows:

                                     OPTIONS            EXERCISE PRICE
                                     -------            --------------
               Granted               311,550            $6.44 - $7.08
               Exercised                   0             0    -  0
               Canceled                    0             0    -  0
                                   --------             -------------
Balance at June 30, 1996             311,550             6.44 -  7.08

               Granted               424,975             5.06 -  6.25
               Exercised                   0             0    -  0
               Canceled             (318,725)            5.06 -  7.08
                                   --------             -------------
Balance at March 31, 1997            417,800            $5.06 - $7.08
                                   =========            =============

At March 31, 1997,  there were  232,200  shares  available  for grant of options
under the Plan.

In the  financial  statements  for the nine  months  ended March 31,  1997,  the
Company  recorded a non-cash  charge of $188,293,  reflecting  the  compensatory
nature of the option grants in accordance  with APB Opinion No. 25,  "Accounting
for Stock Issued to Employees."




                                       9
<PAGE>



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


PLAN OF OPERATION

The Company  provides online  information  and  transactional  services  through
personal  computers  (PCs),  screen-based  telephones,  the  Internet,  personal
digital assistants (PDAs),  alpha-numeric pagers, and interactive voice response
systems to clients of potential  Strategic  Partners,  as well as to prospective
direct subscribers.  The Company has emerged from the development stage with the
completion of the SmartServ information platform and communications software and
the ability of its product offering to meet the needs of subscribers.

On March 21, 1996, the Company completed an Initial Public Offering of 1,695,000
shares of common  stock and  1,725,000  common  stock  purchase  warrants  which
provided the Company with approximately $7,059,000, net of the costs of issuance
of  approximately  $1,589,000.  The proceeds from this Offering have allowed the
Company to commence the implementation of its marketing plan.

The Company's plan of operation  includes programs for marketing  simultaneously
at two separate levels. At the first level, the Company is developing  strategic
relationships  with  key  partners  that  provide  access  to large  numbers  of
potential subscribers for its monthly services.  These partners include regional
telephone  operating  companies,  long distance  carriers,  telephone  equipment
manufacturers and others who distribute screen telephone equipment, market local
screen telephone services or otherwise benefit from the increased  acceptance of
these  devices.  To these  partners,  the Company's  services are perceived as a
means of  increasing  interest in and sales of screen  telephones,  and there is
thus a strong incentive to promote the Company's services.

The Company is working with  businesses  which  desire to provide new  services,
such as those provided by the Company, to an existing base of clients.  Examples
include  brokerage  firms,  such as Schroder  Wertheim & Co. and Herzog,  Heine,
Geduld,  Inc., and other disseminators of financial  information,  whose clients
can benefit from the  efficiency,  convenience  and  timeliness  of the services
provided by the Company.  The Company will co-brand with its Strategic  Partners
or offer its services  under its Strategic  Partners'  name.  By providing  this
branding  flexibility,  the  Company  has been  able to  expand  the  number  of
businesses  interested in forming  relationships with it, and has the ability to
market its services under far more recognizable brand names than its own.

At the second level,  the Company is working with  Strategic  Partners to assure
awareness of the Company's  services by consumers.  Programs  under  development
with  existing   Strategic   Partners,   such  as  Northern  Telecom  and  CIDCO
Incorporated,   include  direct   marketing,   package  inserts,   and  in-store
promotions.

Management  believes  that most of the  Company's  revenues  will  ultimately be
derived from end users who purchase the  Company's  services  through  Strategic
Partners with such mass distribution capabilities.  The Company anticipates that
Strategic Partners will brand the Company's information services,  acquired from
the Company's "information platform",  with their own private label, promote the
packaged  offering and then  distribute  the  Company's  information  package on
screen-based  phones, PCs, PDAs, and interactive voice response systems to their
clients  for use.  The  Company has the  ability to  customize  the  information
package to be offered to each Strategic Partner, and in turn to their end users.
The  Company is also in the initial  stages of  developing  a direct  subscriber
base. It is  anticipated  that the monthly base charge will vary,  between $7.00
and $49.95 per month,  depending upon the product  offering and specific  market
segment.



                                       10
<PAGE>



Management   anticipates   that  staffing   requirements   associated  with  the
implementation of its plan of operation will result in the addition of a minimum
of 3 to 6 personnel  through the period ending December 31, 1997. Such personnel
will be added to assist with the programming requirements of Strategic Partners'
product offerings and for customer support.


RESULTS OF OPERATIONS

During  the  year  ended  June 30,  1996,  the  Company  was in the  process  of
completing   its   information   platform  and   communications   software  and,
accordingly,  did not generate any  significant  revenues  from  operations.  In
September  1996,  the Company  commenced a national  advertising  campaign in an
effort to increase the number of direct subscribers to the SmartServ information
platform,  and to stimulate  awareness of the Company's name in the marketplace.
At March 31, 1997, the Company had approximately 2,000 users online.

THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996

Total revenues  during the three months ended March 1997 were $170,674  compared
to $0 during the three  months ended March 1996.  Revenues  from the sale of the
Company's  information  services  were $75,859,  while  revenues for the design,
development   and   implementation   services   associated  with  the  Company's
arrangement  with Schroder  Wertheim were $94,815.  During the  comparable  1996
period,  the Company  received design and development  fees of $14,000 that were
offset against product development expenses  because the Company was considered
a development stage enterprise.

The net loss increased to $1,368,818 compared to $888,528 in 1996 as a result of
the  Company's  efforts to build an  infrastructure  capable of  supporting  its
operations  and  the  marketing  and  advertising  of  its  information  product
offering, as well as the cash constraints  experienced by the Company during the
1996 period.

With the Company's  departure from the  development  stage, it incurred costs of
revenues  of  $738,329,   consisting   primarily  of  personnel  costs,  systems
consultants, and information and communication costs. During the period, systems
consulting  fees of  approximately  $265,000 were incurred to assist the Company
with  an  upgrade  of  the  Company's  information  and  communication  software
architecture.  During the  corresponding  period of the prior year,  the Company
incurred  product  development  expenses of  $370,014,  consisting  primarily of
personnel costs.  Such costs were incurred in connection with the development of
the Company's information platform and communications delivery system.

Selling,  general and  administrative  costs  increased to $806,797 in 1997 from
$237,184  in 1996 as a result  of the  increase  in sales and  customer  support
personnel,  rent for additional office space,  professional  fees, and marketing
and  advertising  expenditures.  Such marketing and  advertising  costs incurred
during the three  months  ended March 1997 were  approximately  $187,000,  while
legal  fees  associated  with  the  Company's  action  against  Strategica  were
approximately $90,000.

Interest  income for the three months  ended March 31, 1997  amounted to $8,086.
Such amounts were earned  primarily  from the  Company's  investments  in highly
liquid commercial  paper.  Interest expense for the three months ended March 31,
1997 was incurred in  connection  with an insurance  financing  arrangement  and
amounted to $2,452.  Interest  expense for the three months ended March 31, 1996
was  $281,480.  Such  costs  were  incurred  in  connection  with the senior and
subordinated  notes  outstanding  during the period,  as well as the issuance of
$1,200,000 of Bridge financing prior to the Company's Initial Public Offering of
securities.




                                       11

<PAGE>

NINE MONTHS ENDED MARCH 31, 1997 VS. NINE MONTHS ENDED MARCH 31, 1996

During  the nine  months  ended  March  31,  1997,  the  Company  commenced  the
implementation  of its marketing plan and recorded revenues of $228,035 from the
sale  of  its  information   services  and  related   screen-based   telephones.
Additionally,  the Company  recorded  revenues  of  $239,748  related to design,
development and  implementation  services  associated with its arrangement  with
Schroder Wertheim & Co. During the comparable 1996 period,  the Company received
design  and  development  fees of  $62,000  which were  offset  against  product
development  expenses  because the Company was  considered a  development  stage
enterprise.

Also during the nine months ended March 31, 1997, the Company incurred  selling,
general and  administrative  expenses of  $2,247,696,  primarily  for  personnel
costs,  facilities,  marketing costs and professional fees. Selling, general and
administrative  costs increased by $1,602,260 over the  corresponding  period of
the prior year as a result of the Company's  efforts to build an  infrastructure
capable of supporting its  operations  and the marketing and  advertising of its
information  product  offering.  Advertising  and  marketing  costs  amounted to
approximately  $540,000,  while  personnel  costs included a non-cash  charge of
approximately $115,000 related to the change in value of employee stock options.
The  necessary  funds to support  these  efforts were  provided by the Company's
Initial Public Offering in March 1996.

With the Company's  recent  departure from the  development  stage,  it incurred
costs of  revenues  of  $1,758,396,  consisting  primarily  of  personnel  costs
($816,900), systems consultants ($395,900),  information and communication costs
($244,000), and screenphone purchases ($95,300).  Included in personnel costs is
a non-cash  charge of  approximately  $73,000 for the change in market  value of
employee stock options.  During the corresponding  period of the prior year, the
Company incurred product development  expenses of $652,737 consisting  primarily
of personnel costs.

Interest  income for the nine months  ended March 31, 1997  amounted to $73,271.
Such amounts were earned  primarily  from the  Company's  investments  in highly
liquid  commercial  paper.  Interest expense for the nine months ended March 31,
1997 was incurred in  connection  with an insurance  financing  arrangement  and
amounted to $8,160.  Interest  expense for the nine months  ended March 31, 1996
was incurred in connection  with the senior and  subordinated  notes, as well as
the bridge financing outstanding during the period and amounted to $499,771.


LIQUIDITY AND CAPITAL RESOURCES

The Company has  commenced  its  marketing  efforts  and  generated  revenues of
approximately  $468,000  during the nine months ended March 31,  1997.  Revenues
from the Company's sales and marketing efforts are not expected to be sufficient
to support operations until the quarter ending December 1997.

The Company estimates that it has sufficient cash resources through May 1997. To
ensure the adequacy of future capital resources, the Company has accepted a Term
Sheet  from  Coleman  &  Company  Securities,  Inc.  with  respect  to a private
placement of up to $3,000,000 in Rights. Such Rights are convertible into Common
Stock and Warrants of the Company  commencing  six months from date of issuance.
There can be no assurance;  however,  that this transaction will be consummated.
The Company anticipates that these funds will be used for additional programming
personnel  necessary to integrate  the Company's  software with the  information
systems of its Strategic Partners,  for marketing support personnel necessary to
fulfill  subscriber needs and inquiries,  and for the expansion of the Company's
sales and marketing  efforts.  It is also anticipated that hardware and software
purchases of approximately $50,000 will be required through the remainder of the
year ending June 30, 1997. The Company expects to augment its capital  formation
through the realization of revenues from the sale of its information and



                                       12
<PAGE>



transactional  services;  however,  there can be no assurance that the Company's
product offering will continue to be accepted in the marketplace.

The Company may, in the future,  have access to  additional  funding  because as
part of the Initial Public  Offering,  the Company issued 1,725,000 common stock
purchase warrants  entitling the holders thereof to purchase one share of common
stock at an exercise price of $4.00 per share,  subject to certain  adjustments,
at any time  commencing on March 21, 1997 through  March 20, 2001.  The warrants
are subject to  redemption by the Company at $.10 per warrant  commencing  March
21, 1997,  on thirty  days  written  notice,  provided  the average  closing bid
quotation  for the common  stock as reported on The NASDAQ Stock Market or other
national securities  exchange,  if traded thereon, has been at least $7.50 for a
period of 20 consecutive days ending on the third day prior to the date on which
the  Company  gives  notice of  redemption.  Exercise  of these  warrants by the
holders could provide additional capital of approximately  $6,600,000;  however,
such exercise can not be assured.

The Company  intends to seek  additional  sources of capital and  liquidity  for
expansion  through  collaborative   agreements  or  through  public  or  private
financing;  however, there can be no assurance that additional financing will be
available on acceptable terms or at all.


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

From time to time,  information provided by the Company,  statements made by its
employees  or  information  included  in its  filings  with the  Securities  and
Exchange  Commission  (including this Form 10-QSB) may contain  statements which
are  not  historical  facts,  so-called  "forward  looking  statements".   These
forward-looking  statements  are made pursuant to the safe harbor  provisions of
the Private  Securities  Litigation  Reform Act of 1995.  The  Company's  actual
future results may differ significantly from those stated in any forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties,  including,  but not limited to, product demand,  pricing, market
acceptance,  litigation,  intellectual  property  rights,  risks in product  and
technology development,  product competition,  limited number of customers,  key
personnel,  and other risk  factors  detailed in this  Quarterly  Report on Form
10-QSB and in the Company's other Securities and Exchange Commission filings.





                                       13
<PAGE>



PART 2.  OTHER INFORMATION


                             SmartServ Online, Inc.



ITEM 1.  LEGAL PROCEEDINGS

There are no pending  material legal  proceedings to which the Company or any of
its properties is a defendant, except as set forth below.

In August  1996,  the Company  commenced  an action in the Supreme  Court of the
State of New York, New York County,  against  Strategica Inc. and its affiliated
entities  ("Strategica").  The  complaint  arose  out of the  proposal  made  by
Strategica and accepted in August 1995 by the Company (the  "Proposal")  whereby
Strategica agreed to act as the Company's agent for the arrangement of a secured
revolving  credit  facility  in the  amount  of  $2,500,000.  Additionally,  the
Proposal  contemplated  that the Company would retain  Strategica as a financial
consultant  to the  Company.  The  Proposal  was  subject  to the  delivery  and
execution of definitive documentation.  In January 1996, Strategica forwarded to
the Company a proposed  commitment letter which was unacceptable to the Company.
The complaint alleges breach of the Proposal, breach of the implied covenants of
good faith and fair dealing,  and fraud. The complaint seeks damages of not less
than $2,500,000,  punitive damages and the rescission of the Proposal and of the
issuance  by the  Company of 116,550  shares of its Common  Stock to  Strategica
thereunder. Strategica asserted a counterclaim against the Company for breach of
contract and seeks damages of not less than $350,000.  Discovery proceedings are
currently in process.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8 - K

           (a)        The following exhibits are included herein:

                                 Exhibit  11  -  Statement  re:  computation  of
                                 earnings per share

                                 Exhibit 27 - Financial Data Schedule

           (b)        The  Company  did not file any  reports on Form 8-K during
                      the three months ended March 31, 1997.






                                       14
<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:  May 14, 1997                     /S/  Sebastian E. Cassetta
       ------------                     ---------------------------------
                                        Sebastian E. Cassetta
                                        Chairman of the Board, Chief Executive 
                                        Officer




Date:  May 14, 1997                     /S/  Thomas W. Haller
       ------------                     ---------------------------------
                                        Thomas W. Haller
                                        Chief Financial Officer, Treasurer




                                       15