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


                                   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 September 30, 1999
                                               ------------------

                         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  preceding 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
                                       --     ---

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


The number of shares of common stock, $.01 par value, outstanding as of November
22, 1999 was 1,435,336.





================================================================================
<PAGE>

                             SmartServ Online, Inc.

                                   Form 10-QSB

                                      Index




<TABLE>
<CAPTION>



PART 1.       FINANCIAL INFORMATION

Item 1.       Financial Statements

<S>                                 <C>                                                                           <C>
              Balance Sheets - June 30, 1999 and September 30, 1999 (unaudited)...................................2

              Statements of Operations - three months ended September 30, 1999
              and 1998 (unaudited)................................................................................4

              Statement of Changes in Stockholders' Deficiency - three months
              ended September 30, 1999 (unaudited)................................................................5

              Statements of Cash Flows - three months ended September 30, 1999 and
              1998 (unaudited)....................................................................................6

              Notes to Unaudited Financial Statements.............................................................7

Item 2.       Management's Discussion and Analysis or Plan of Operation..........................................12


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings..................................................................................16

Item 2.       Changes in Securities and Use of Proceeds..........................................................17

Item 6.       Exhibits and Reports on Form 8-K...................................................................17

              Signatures.........................................................................................18



</TABLE>
                                       1

<PAGE>


                             SmartServ Online, Inc.

                                 Balance Sheets

<TABLE>
<CAPTION>



                                                                             September 30,              June 30,
                                                                                 1999                     1999
                                                                          --------------------     -------------------
                                                                              (Unaudited)
Assets
Current assets
<S>                                                                         <C>                    <C>
   Cash and cash equivalents                                                $    1,103,443         $       2,165,551
   Accounts receivable                                                             268,851                   348,278
   Prepaid expenses                                                                 40,665                    50,150
                                                                          --------------------     -------------------
Total current assets                                                             1,412,959                 2,563,979
                                                                          --------------------     -------------------

Property and equipment, net                                                        473,412                   498,448

Other assets
   Capitalized software development costs,
      net of accumulated amortization of $128,953 at
      September 30, 1999 and $82,108 at June 30, 1999                              880,717                   683,337
   Security deposits                                                                73,374                    74,834
                                                                          --------------------     -------------------
                                                                                   954,091                   758,171
                                                                          --------------------     -------------------

Total Assets                                                                $    2,840,462         $       3,820,598
                                                                          ====================     ===================

</TABLE>


                                       2


<PAGE>


                             SmartServ Online, Inc.

                                 Balance Sheets


<TABLE>
<CAPTION>


                                                                             September 30,              June 30,
                                                                                 1999                     1999
                                                                          --------------------     -------------------
                                                                              (Unaudited)
Liabilities and Stockholders' Deficiency
Current liabilities
<S>                                                                          <C>                     <C>
   Accounts payable                                                          $      622,788          $       780,543
   Accrued liabilities                                                              480,786                  474,189
   Accrued liabilities to warrant holders                                           717,670                1,311,365
   Salaries payable                                                                  69,047                   93,443
   Capital lease obligation - current portion                                        47,437                   70,147
   Deferred revenues - current portion                                            1,656,632                1,656,632
                                                                          --------------------     -------------------
Total current liabilities                                                         3,594,360                4,386,319
                                                                          --------------------     -------------------

Deferred revenues - long-term portion                                             3,727,423                4,141,579

Commitments and Contingencies - Note 6

Stockholders' 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 - 1,199,787 shares at June 30, 1999
       and 1,379,787 shares at September 30, 1999                                    13,798                   11,998
Common stock subscribed                                                           1,812,554                1,812,554
Notes receivable from officers                                                   (1,812,554)              (1,812,554)
Additional paid-in capital                                                       20,928,202               20,679,611
Unearned compensation                                                            (3,161,649)              (3,452,904)
Accumulated deficit                                                             (22,261,672)             (21,946,005)
                                                                          --------------------     -------------------
Total stockholders' deficiency                                                   (4,481,321)              (4,707,300)
                                                                          --------------------     -------------------

Total Liabilities and Stockholders' Deficiency                              $     2,840,462          $     3,820,598
                                                                          ====================     ===================

See accompanying notes.

</TABLE>




                                       3

<PAGE>


                             SmartServ Online, Inc.

                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                          Three Months
                                                                                       Ended September 30
                                                                            ------------------------------------------
                                                                                   1999                  1998
                                                                            -------------------    -------------------

Revenues                                                                      $      808,292         $      349,705
                                                                            -------------------    -------------------

Costs and expenses:
<S>                                                                                  <C>                    <C>
   Costs of services                                                                 232,866                207,084
   Product development expenses                                                       46,845                 27,046
   Selling, general and administrative
         expenses                                                                    855,265                830,858
                                                                            -------------------    -------------------
Total costs and expenses                                                           1,134,976              1,064,988
                                                                            -------------------    -------------------

Loss from operations                                                                (326,684)              (715,283)
                                                                            -------------------    -------------------

Other income (expense):
   Interest income                                                                    11,017                  2,202
   Interest expense and other financing costs                                             --               (141,096)
                                                                            -------------------    -------------------
                                                                                      11,017               (138,894)
                                                                            -------------------    -------------------

Net loss                                                                      $     (315,667)        $     (854,177)
                                                                            ===================    ===================

Comprehensive loss                                                            $     (315,667)        $     (854,177)
                                                                            ===================    ===================
Basic and diluted earnings per share                                          $        (0.23)        $        (0.92)
                                                                            ===================    ===================
Weighted average shares outstanding                                                1,368,046                931,093
                                                                            ===================    ===================

See accompanying notes.

</TABLE>



                                       4

<PAGE>


                             SmartServ Online, Inc.

                Statement of Changes in Stockholders' Deficiency

                      Three Months Ended September 30, 1999
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                                        Notes
                                   Common Stock           Common     Receivable    Additional
                                               Par         Stock        from         Paid-in       Unearned      Accumulated
                                 Shares       Value     Subscribed    Officers       Capital     Compensation      Deficit
                               ----------------------- ------------- ------------- ------------- -------------- --------------

<S>                           <C>          <C>          <C>         <C>           <C>           <C>           <C>
Balances at June 30, 1999      1,199,787    $11,998     $1,812,554   $(1,812,554)  $20,679,611   $(3,452,904)   $(21,946,005)

Issuance of Common Stock in
  connection with the
  settlement of obligations
  to a Prepaid Warrant holder    180,000      1,800             --           --        266,895           --               --

Amortization of unearned
   compensation over the
   term of the consulting
   agreement                          --         --             --           --             --      291,255               --

Change in market value of
  employee stock options              --         --             --           --        (18,304)          --               --

Net loss for the period               --         --             --           --             --           --         (315,667)
                               ----------- ----------- ------------- ------------- ------------- -------------- --------------

Balances at September 30,
1999                          1,379,787    $13,798     $1,812,554   $(1,812,554)   $20,928,202   $(3,161,649)   $(22,261,672)
                              =========== =========== ============= ============= ============= ============== ==============


</TABLE>

See accompanying notes.

                                       5


<PAGE>


                             SmartServ Online, Inc.

                            Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                          Three Months
                                                                                       Ended September 30
                                                                            -----------------------------------------
                                                                                   1999                  1998
                                                                            -------------------    ------------------
Operating Activities
<S>                                                                           <C>                    <C>
Net loss                                                                      $    (315,667)         $    (854,177)
Adjustments to reconcile net loss to net cash used
    for operating activities:
       Depreciation and amortization                                                 96,266                 47,703
       Noncash interest expense and other financing costs                                --                128,175
       Noncash compensation costs                                                   (18,304)                    --
       Noncash consulting costs                                                     291,255                330,421
       Amortization of unearned revenues                                           (414,156)               (15,534)
       Changes in operating assets and liabilities
          Accounts receivable                                                        79,427                 33,995
          Prepaid expenses                                                            9,485                (83,636)
          Accounts payable and accrued liabilities                                 (476,158)               161,062
          Salaries payable                                                          (24,396)                     5
          Unearned revenues                                                              --                200,000
          Security deposit                                                            1,460                     --
                                                                            -------------------    ------------------
    Net cash used for operating activities                                         (770,788)               (51,986)
                                                                            -------------------    ------------------

Investing Activities
Purchase of equipment                                                               (24,385)               (11,638)
Capitalization of software development costs                                       (244,225)              (233,005)
                                                                            -------------------    ------------------
    Net cash used for investing activities                                         (268,610)              (244,643)
                                                                            -------------------    ------------------

Financing Activities
Repayment of capital lease obligation                                               (22,710)               (19,837)
                                                                            -------------------    ------------------
    Net cash used for financing activities                                          (22,710)               (19,837)
                                                                            -------------------    ------------------

Decrease in cash and cash equivalents                                            (1,062,108)              (316,466)
Cash and cash equivalents - beginning of period                                   2,165,551                354,225
                                                                            -------------------    ------------------

Cash and cash equivalents - end of period                                     $   1,103,443          $      37,759
                                                                            ===================    ==================
</TABLE>

See accompanying notes.


                                       6
<PAGE>


                             SmartServ Online, Inc.

                     Notes to Unaudited Financial Statements

                               September 30, 1999



1.   Organization

SmartServ Online, Inc. (the "Company")  commenced operations on August 20, 1993.
The Company  offers a range of services  designed to  facilitate  e-commerce  by
providing  transactional  and  information  services  to its  alliance  partners
("Strategic  Marketing  Partners").  The Company has developed online financial,
transactional  and  media  applications  using  a  unique  "device  independent"
delivery  solution and makes these services  available  through its  application
software and  communication  architecture  to wireless  telephones  and personal
digital assistants,  personal computers and the Internet. The Company's services
include stock  trading,  real-time  stock quotes,  business and financial  news,
sports  information,  private-labeled  electronic mail, national weather reports
and other business and entertainment information.


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 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  generally
accepted  accounting  principles.  The  balance  sheet at June 30, 1999 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, 1999. 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  months ended  September  30, 1999 are not
necessarily indicative of those expected for the year ending June 30, 2000.

The Company has  completed  development  of its core  applications  software and
communications  architecture;  however,  it has yet to  generate  revenues in an
amount sufficient to support its operations.  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's  financial  statements for
the period ended  September 30, 1999 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  incurred net
losses of  $7,124,126,  $5,040,009  and  $4,434,482 for the years ended June 30,
1999,  1998  and  1997,  respectively,  and  as of  September  30,  1999  had an
accumulated deficit of $22,261,672 and a deficiency of net assets of $4,481,321.
The Company is also a defendant in several legal  proceedings (see Note 6) which
could have a material adverse effect on the Company's financial  position,  cash
flow, and results of operations.  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.

The  Company's  stockholders  approved a  one-for-six  reverse  stock split at a
Special Meeting on October 15, 1998.  Such reverse stock split became  effective
on October 26, 1998.  All  applicable  financial  statement  amounts and related
disclosures have been restated to give effect to this transaction.




                                       7

<PAGE>

Use of Estimates
----------------
The  preparation  of financial  statements  in conformity  with
generally accepted  accounting  principles 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
-------------------
Revenues are recognized as services are provided.  Deferred revenues,  resulting
from customer  prepayments,  are recognized as services are provided  throughout
the term of the  agreement.  Deferred  revenues  resulting  from  the  Company's
agreements with DTN are being amortized over the term of the anticipated  future
revenue stream, a period of 42 months.

Basic and Diluted Earnings per Share
------------------------------------
In 1997, the Financial  Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("Statement 128").  Statement
128 replaced the  previously  reported  primary and fully  diluted  earnings per
share with basic and diluted  earnings per share.  Unlike  primary  earnings per
share,  basic  earnings  per share  excludes  any  dilutive  effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously  reported fully diluted  earnings per share.  All earnings per
share amounts for all periods have been presented, and where necessary, restated
to conform to the  Statement  128  requirements.  The  weighted  average  shares
outstanding  are  determined as the mean average of the shares  outstanding  and
assumed to be outstanding during the period.

Comprehensive Income
--------------------
In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Comprehensive Income" ("Statement 130")
which requires  companies to report a new,  additional  measure of income on the
income  statement  in a  full  set  of  general  purpose  financial  statements.
Comprehensive  Income includes foreign currency translation gains and losses and
unrealized  gains  and  losses on equity  securities  that have been  previously
excluded from income and reflected  instead in equity.  There were no components
of  comprehensive  income  excluded  from income and reflected in equity for the
three month periods ended September 30, 1999 and 1998.

Capitalized Software Development Costs
--------------------------------------
In connection  with certain  contracts  entered into between the Company and its
Strategic Marketing Partners,  the Company has capitalized  software development
costs related to certain  product  enhancements  in accordance with Statement of
Financial  Accounting  Standards No. 86,  "Accounting  for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed", effective July 1, 1998.



                                       8


<PAGE>


3.   Property and Equipment

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                   September 30,               June 30,
                                                                                        1999                     1999
                                                                                 --------------------      -----------------
<S>                                                                              <C>                       <C>
   Data processing equipment                                                     $        724,595          $        700,210
   Data processing equipment purchased under a capital lease                              246,211                   246,211
   Office furniture and equipment                                                          71,423                    71,423
   Display equipment                                                                        9,635                     9,635
   Leasehold improvements                                                                  36,678                    36,678
                                                                                 --------------------      -----------------

                                                                                        1,088,542                 1,064,157
   Accumulated  depreciation,  including  $119,002 and $106,691 at September 30,
   1999 and June 30, 1999, respectively, for equipment purchased
   under a capital lease                                                                 (615,130)                 (565,709)
                                                                                 ====================      =================
                                                                                 $        473,412          $        498,448
                                                                                 ====================      =================
</TABLE>


4.   Equity Transactions

On July 1, 1999, the Company entered into an agreement with a holder of $325,000
of the Company's Prepaid Common Stock Purchase Warrants ("Prepaid Warrants"), to
settle  the  Company's  obligation  to  such  holder  pursuant  to  the  default
provisions of the Prepaid  Warrants.  Accordingly,  the Company paid $325,000 to
redeem the Prepaid  Warrants and issued  180,000  shares of Common Stock in full
settlement of all  obligations  to the holder.  The Company has agreed to file a
registration statement with the Securities and Exchange Commission covering such
shares.  Settlement  costs of $268,695 were recorded  during the year ended June
30, 1999.


5.   Earnings per Share

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

<TABLE>
<CAPTION>
                                                                   Three Months Ended September 30
                                                               -----------------------------------------
                                                                     1999                 1998
                                                               -----------------    -----------------

Numerator:
<S>                                                            <C>                  <C>
   Net loss                                                    $     (315,667)      $     (854,177)
                                                               =================    =================

Denominator:
   Weighted average shares                                          1,368,046              931,093
                                                               =================    =================

Basic and diluted earnings per common share                    $       (0.23)       $       (0.92)
                                                               =================    =================

</TABLE>



At September 30, 1999 there were,  exclusive of the Prepaid Warrants,  3,195,000
Common Stock Purchase Warrants  outstanding.  Such warrants have exercise prices
ranging from $.60 to $72.00 per share and expire from March 2001 through January
2004.  Based on the  closing  price  ($.75)  of the  Company's  Common  Stock at
September 30, 1999,  there were,  exclusive of the Prepaid  Warrants,  currently
exercisable in-the-money warrants outstanding for the purchase of 507,700 shares
of Common Stock.  Additionally,  the Company has  established  an employee stock
option plan for the  benefit of


                                       9

<PAGE>

directors,  employees and consultants to the Company. These options are intended
to qualify as incentive  stock options  within the meaning of Section 422 of the
Internal Revenue Code, as amended, or as nonqualified stock options. The options
are partially  exercisable  after one year from date of grant and no options may
be granted  after April 15,  2006.  At  September  30,  1999,  there are options
outstanding  for the purchase of 285,901  shares of the Company's  Common Stock.
None of the warrants or options have been included in the computation of diluted
loss per share because their inclusion would be antidilutive.


6.   Commitments and Contingencies

By letter dated April 10, 1998,  Michael  Fishman,  then Vice President of Sales
for the Company,  resigned his position. On or about April 24, 1998, Mr. Fishman
filed a complaint  against the  Company,  Sebastian  E.  Cassetta and four other
defendants in the United States  District Court for the District of Connecticut.
The complaint  asserted  claims under  Sections  10(b) and 18 of the  Securities
Exchange Act of 1934, as well as several state law claims,  including  breach of
contract, fraud and misrepresentation.  Mr. Fishman alleged that the Company (1)
failed to pay him the benefits and compensation to which he was entitled and (2)
made material misrepresentations in its filings with the Securities and Exchange
Commission.  On December 11, 1998,  the Court  granted the  Company's  motion to
dismiss Mr. Fishman's action without prejudice to the plaintiff to seek leave to
file an amended  complaint within 30 days. On May 12, 1999, the Court denied the
plaintiff's  subsequent motion for leave to file a substituted  complaint on the
basis that the federal  securities law claim,  the only federal claim alleged by
the plaintiff,  was still deficient.  Accordingly,  the federal securities claim
was dismissed with prejudice. On or about June 4, 1999, Mr. Fishman commenced an
action  against  the same  defendants  and  added as a  seventh  defendant,  the
Company's former President,  Steven Francesco, in the Connecticut Superior Court
for the Judicial  District of  Stamford/Norwalk  at Stamford  alleging breach of
contract,   breach  of  duty  of  good  faith  and  fair   dealing,   fraudulent
misrepresentation,  negligent misrepresentation,  intentional  misrepresentation
and failure to pay wages.  The defendants  have answered the complaint and filed
counterclaims  for fraudulent  inducement and breach of contract.  Plaintiff has
responded to the counterclaims and discovery is proceeding. Although the Company
is vigorously  defending this action,  there can be no assurance that it will be
successful.

By memorandum dated April 10, 1998,  Jonathan  Paschkes,  then Vice President of
Marketing for the Company, resigned his position. On or about November 17, 1998,
Mr. Paschkes filed a complaint  against the Company and Sebastian E. Cassetta in
the United States District Court, District of Connecticut. In the complaint, Mr.
Paschkes  alleges (i)  fraudulent  inducement to him to accept his position with
the Company;  (ii) breach of various terms of the Company's  employment contract
with him;  and (iii)  failure by the  Company to pay him wages and  bonuses  and
issue  options to him pursuant to the terms of his  employment  contract.  On or
about February 18, 1999, Mr.  Paschkes filed an amended  complaint.  The Company
answered the amended complaint and asserted  counterclaims  against Mr. Paschkes
for fraudulent inducement,  breach of contract,  conversion and statutory theft.
On October 5, 1999,  an agreement in principle  was reached  between the Company
and Mr. Paschkes in full settlement of these claims.  The Company has executed a
settlement  agreement with Mr. Paschkes and anticipates  filing a Stipulation of
Dismissal with prejudice before November 30, 1999. The Company recorded a charge
for the  settlement  of such  claims in the results of  operations  for the year
ended June 30, 1999.

On or about May 11, 1998, Ronald G. Weiner filed a complaint against the Company
and Mr.  Francesco in the Supreme Court of the State of New York,  County of New
York.  The complaint  alleges,  among other things,  that in May 1993, by letter
from Mr.  Francesco,  Mr.  Weiner was offered a 10% equity  stake in Smart Phone
Services,  Inc. ("SPS"), a Subchapter S company of which Mr. Francesco allegedly
was the President and sole shareholder,  in exchange for his active  involvement
in, among other things,  raising  capital and managing the financial  aspects of
SPS. The complaint  alleges that, in November 1993, Mr.  Francesco sent a letter
to Mr.  Weiner in which he (i)  represented  that SPS had  failed  to  attract a
single




                                       10

<PAGE>


investor and (ii) withdrew his offer to Mr.  Weiner of a 10% equity  position in
SPS. The  complaint  further  alleges  that,  in  conversations  with Mr. Weiner
beginning in November 1993, Mr.  Francesco  represented  that he was ceasing all
efforts to capitalize SPS. The complaint alleges,  among other things,  that Mr.
Francesco and SPS breached their agreement with Mr. Weiner by withdrawing  their
offer to him of a 10% equity stake in SPS, and that,  at the time Mr.  Francesco
represented  that he was ceasing  efforts to  capitalize  SPS,  he had  actually
formed the Company and was  actively  seeking  investors  for it. The  complaint
further  alleges  that  the  Company  is a  successor  entity  to SPS and  that,
therefore, the Company is liable for SPS' and Mr. Francesco's alleged conduct in
derogation of their alleged  agreement  with Mr.  Weiner.  The complaint  seeks,
among other things, (i) a declaratory judgment declaring Mr. Weiner a 10% equity
shareholder of the Company,  (ii) a constructive trust in Mr. Weiner's favor for
10% of the Company's equity shares and (iii)  restitution  against Mr. Francesco
and the Company  for unjust  enrichment.  On his unjust  enrichment  claim,  Mr.
Weiner seeks unspecified damages that he alleges to be at least $250,000. In its
answer to the complaint,  the Company has denied the material allegations of the
complaint and asserted affirmative defenses. No discovery in this action has yet
been taken.  Although the Company is vigorously defending this action, there can
be no assurance that it will be successful.


7.       Subsequent Events

On October 13, 1999, the Board of Directors  authorized the establishment of the
Company's 1999 Employee Stock Option Plan ("1999 Plan").  The 1999 Plan provides
for the issuance of options to  employees  and  directors  for the purchase of a
maximum of 400,000  shares of Common  Stock of the  Company at not less than the
fair value of the Common Stock on the date of grant.  The Board  authorized  the
issuance of 300,000 of such options to employees at the fair value of the Common
Stock on that date.

Also on October 13, 1999, the Board of Directors authorized the Company to enter
into a  restricted  stock  agreement  with  Robert  Pearl,  Director of Business
Development, pursuant to which Mr. Pearl will be awarded 1% of the fully diluted
shares of Common Stock of the Company as of that date at the  purchase  price of
$.75 per share.  Additionally,  the Board of  Directors  agreed to  reprice  the
restricted  shares granted to Messrs.  Cassetta and Rossi to $.75 per share, the
fair value of the shares at that date.

In November 1999,  $87,803 of the Company's Prepaid Warrants were converted into
an aggregate of 30,525 shares of Common Stock.

In November 1999, Zanett  Lombardier,  Ltd converted certain warrants held by it
into an aggregate of 25,042 shares of Common Stock.



                                       11

<PAGE>


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

Plan of Operation

The Company delivers  Internet-based  content and trade order routing solutions,
as  well  as  "Web-to-Wireless"  applications  that  drive  transactions  to its
strategic alliances  ("Strategic  Marketing Partners") and their customers.  The
Company has developed online  financial,  transactional  and media  applications
using a unique "device-independent" delivery solution.

The Company's plan of operation  includes programs for the sale of the Company's
information and transactional  application  services through Strategic Marketing
Partners utilizing a  "business-to-business"  strategy. Such a strategy provides
access to a large  number of  potential  subscribers  and allows the  Company to
maximize its market reach at minimal  operating  costs.  The  flexibility of the
Company's  application  software  and  communications  architecture  enables the
customization  of each information  package offered to each Strategic  Marketing
Partner, and in turn to their end users.

As an  early  entrant  in  the  dynamic  market  of  distribution  of  financial
information  and  transaction  services via wireless  telephones  and PDAs,  the
Company  is  developing  strategic  marketing  relationships  with the  wireless
equipment  manufacturers,  carriers and other value-added  service providers and
potential corporate partners. The Company continuously seeks to increase product
performance and widen its  distribution by building and maintaining this network
of Strategic Marketing Partners. Combining the Company's application development
and  data  platform  with  the  core  competencies  of its  Strategic  Marketing
Partners,  the Company is offering a packaged  turnkey  solution  for  extending
content and transactions to the wireless  environment.  Management  believes the
wireless  area  has  tremendous  potential  for  distribution  of the  Company's
information  products and as a source of revenues from "fee based"  transactions
such as routing stock order entries.

Management  believes  that most of the  Company's  revenues  will  ultimately be
derived from  consumers who purchase the Company's  services  through  Strategic
Marketing  Partners.  The Company  anticipates that Strategic Marketing Partners
will brand the Company's "bundled"  information  services with their own private
label and  promote  and  distribute  the  Company's  packaged  offering to their
clients.  The Company has the ability to customize the information package to be
offered to each Strategic  Marketing Partner,  by device.  With the licensing of
four of the  Company's  Internet  products by DTN, the Company has  discontinued
efforts to develop a direct subscriber base.

Management   anticipates   that  staffing   requirements   associated  with  the
implementation of its plan of operation will result in the addition of a minimum
of six to ten people during the period ending June 30, 2000. Such personnel will
be added to assist with the  programming  requirements  of  Strategic  Marketing
Partners' product offerings, for customer support and sales and marketing.


Results of Operations

Quarter Ended September 30, 1999 vs. Quarter Ended September 30, 1998

During the quarters ended  September 30, 1999 and 1998,  the Company's  revenues
were $808,292 and  $349,705,  respectively.  Substantially  all of such revenues
were obtained  from the Company's  licensing  agreement  with Data  Transmission
Network  Corporation  ("DTN").  At  September  30,  1999 and 1998,  the  Company
recorded  deferred  revenues of  $5,384,055  and  $960,515,  respectively.  Such
amounts resulted from the Company's  relationship with DTN and will be amortized
to revenues over the term of the anticipated revenue stream.


                                       12

<PAGE>

During the quarter  ended  September  30, 1999,  the Company  incurred  costs of
services  of  $232,866.  Such  costs  consisted  primarily  of  information  and
communication  costs ($48,400),  personnel costs ($55,800) and computer hardware
lease,  depreciation and maintenance  costs ($84,600).  During the quarter ended
September 30, 1998,  the Company  incurred  costs of services of $207,084.  Such
costs consisted  primarily of information  and  communication  costs  ($95,700),
personnel  costs  ($29,100),  and  computer  hardware  lease,  depreciation  and
maintenance costs ($80,800).  Product development costs were $46,845 and $27,046
for the quarters  ended  September 30, 1999 and 1998,  respectively.  Such costs
consisted  primarily of the  amortization  of capitalized  software  development
costs related to certain  product  enhancements  in accordance with Statement of
Financial  Accounting  Standards No. 86,  "Accounting  for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed"  ("Statement 86"). During the
quarters ended September 30, 1999 and 1998, the Company capitalized $244,225 and
$233,005, respectively, of development costs in accordance with Statement 86.

During the quarter  ended  September  30, 1999,  the Company  incurred  selling,
general and  administrative  expenses of $855,265  vs.  $830,858 for the quarter
ended September 30, 1998. Such costs were incurred primarily for personnel costs
($221,000),  marketing  and  advertising  costs  ($76,400),   professional  fees
($468,800),   facilities  ($50,000)  and  telecommunications   costs  ($17,000).
Included in professional fees are noncash charges of $291,300 resulting from the
amortization  of costs  ascribed to common stock  purchase  warrants  previously
issued to  financial  consultants.  Such common  stock  purchase  warrants  were
recorded in accordance  with the  Black-Scholes  pricing  methodology.  Selling,
general and  administrative  expenses for the quarter  ended  September 30, 1998
were  incurred   primarily  for  personnel  costs   ($185,000),   marketing  and
advertising costs ($61,800),  professional fees ($488,400), facilities ($49,000)
and  telecommunications  costs  ($14,700).  Included  in  professional  fees are
non-cash  charges of $330,400  resulting from the amortization of costs ascribed
to common stock purchase warrants previously issued to financial consultants.

In accordance with Accounting  Principles Board Opinion No. 25,  "Accounting for
Stock Issued to Employees" the Company must recognize the compensatory nature of
173,239  options  issued to employees  pursuant to the Company's  employee stock
option  plan,  as well as  892,319  shares  issued or to be  issued  to  Messrs.
Cassetta, Rossi and Pearl. Accordingly, the Company will be required to record a
noncash charge to earnings  based on the difference  between the market price of
the  Company's  Common Stock at December  31,1999 and the exercise  price of the
option or purchase price of the restricted stock.

As a result of the  volatility of the Company's  Common Stock,  the magnitude of
such a noncash charge is unknown. However, based on a closing price ($15.875) of
the Company's  Common Stock at November 22, 1999,  the Company would be required
to record a noncash  charge to earnings  of  approximately  $14,500,000.   Such
charge will have no impact on the  Company's  statement of condition at December
31, 1999 or cash flows for the period then ended.

Interest  income for the quarter  ended  September 30, 1999 and 1998 amounted to
$11,017 and $2,202,  respectively.  Such amounts were earned  primarily from the
Company's investments in short-tern commercial paper and cash balances. Interest
and financing  costs for the quarters ended  September 30, 1999 and 1998 were $0
and $141,096,  respectively.  During the quarter ended  September 30, 1998, such
costs were  primarily  attributable  to the issuance of 50,000  shares of Common
Stock  to  Zanett  Lombardier,  Ltd  ("ZLL")  and  Bruno  Guazzoni,  holders  of
$1,669,000 of Prepaid  Warrants,  in  consideration  of such holders agreeing to
restrictions  on the  exercise  of the  Prepaid  Warrants  and the resale of the
shares of Common Stock issuable upon such exercise.  The issuance of such shares
was recorded in the financial statements at fair market value.


Capital Resources and Liquidity

Since  inception of the Company on August 20, 1993 through  March 21, 1996,  the
date of the initial  public  offering  of  securities  ("IPO"),  the Company had
funded  its  operations  through  a  combination  of  private  debt  and  equity
financings totaling $4,160,000 and $12,877,500, respectively.

In May 1997, the Company  arranged a line of credit facility with ZLL. Such line
of credit was originated for a maximum borrowing amount of $550,000. In July and
September  1997, the facility was amended to allow for additional  borrowings of
up to  $222,222.  In  conjunction  with the  origination  of the line of  credit
facility,  the Company  issued  56,627  common stock  purchase  warrants to ZLL.
Similarly, the Company issued 11,438 warrants for each of the July and September
amendments. As a result of the Company's default on the note in August 1997, the
Company was required to issue 50,083  "default"  warrants to ZLL. These warrants
are  currently  exercisable  at prices  ranging from $.64 to $6.07 and expire in
September 2002.


                                       13

<PAGE>

In May 1997, the Company entered into a three year  noncancelable  capital lease
for certain computer equipment used to provide information services. The cost of
this equipment  ($246,211) is being financed through the manufacturer's  finance
division.

On September 30, 1997, Zanett Securities Corporation,  acting as placement agent
for the Company,  completed a private  placement  ("Placement") of $4 million of
the Company's prepaid common stock purchase warrants ("Prepaid  Warrants").  The
Prepaid  Warrants  expire on September 30, 2000. As part of the  Placement,  ZLL
converted  a note  payable  of  $772,222,  issued  pursuant  to a Line of Credit
Agreement  dated May 29,  1997,  as  amended,  and accrued  interest  thereon of
$63,837 into Prepaid  Warrants.  The net proceeds of the Placement of $2,643,941
were used for general working capital requirements.

On April 23,  1998,  the  Company  entered  into a Software  License and Service
Agreement  with DTN,  whereby the  Company  licensed to DTN the rights to market
three of the Company's  Internet  products.  The Company received  $850,000 upon
execution  of the contract and  received  minimum  monthly  payments of $100,000
through April 1999.

On June 24,  1999,  the Company and DTN entered  into a License  Agreement  that
amended the Software  License and Service  Agreement  dated April 23,  1998.  In
consideration  of the  receipt of $5.175  million,  the  Company  granted DTN an
exclusive  perpetual  worldwide  license  to the  Company's  Internet-based  (i)
real-time  stock quote product,  (ii) an online trading vehicle for customers of
small and medium sized brokerage  companies,  (iii) an administrative  reporting
package for brokers of small and medium sized brokerage  companies,  and (iv) an
order  entry/routing  system.  Additionally,  the Company  received  $324,000 in
exchange for an agreement to issue  warrants to purchase  300,000  shares of the
Company's  Common Stock at an exercise price of $8.60 per share. The Company has
agreed to  continue  to operate  these  products  and  provide  maintenance  and
enhancement  services in exchange for a percentage of the revenues earned by DTN
therefrom.  The cost of the Company's commitment to provide such maintenance and
enhancement  services is limited to a maximum of 20% of the  revenues  earned by
the Company.  None of the  Company's  wireless  products  were  included in this
transaction.  Although the Company  believes that DTN has the experience and the
financial ability to distribute the Company's services to thousands of potential
customers,  there can be no assurance  that the  products  and services  will be
accepted by the ultimate consumer on a widespread basis.

On August 11, 1998, the Company  entered into a letter of intent,  as amended on
November 24, 1998, with Spencer Trask Securities,  Inc.  ("Spencer Trask") which
provided for the retention of Spencer Trask to act as exclusive  placement agent
in connection with a private placement by the Company of a minimum of $5,000,000
and a maximum of $10,000,000 of securities of the Company.

In anticipation of completing the private  placement,  the Company  completed an
interim  financing of $550,000 of  securities  of the Company.  The Company sold
five and one-half (5.5) units, each consisting of a secured  convertible 8% note
in the principal amount of $100,000 and warrants to purchase Common Stock of the
Company.   The  notes  and  the  warrants  are  convertible   and   exercisable,
respectively,  at $.60 per share of Common Stock. Such notes were repaid in June
1999.

On July 1,  1999,  the  Company  entered  into an  agreement  with  Arnhold & S.
Bleichroeder, Inc. ("ASB") to settle the Company's obligation to ASB pursuant to
the default  provisions of the Prepaid Warrants.  Accordingly,  the Company paid
ASB $325,000 to redeem the Prepaid  Warrants and issued 180,000 shares of Common
Stock in full  settlement of all  obligations  to ASB. The Company has agreed to
file a  registration  statement  with the  Securities  and  Exchange  Commission
covering such shares.

The Company's financial  statements for the period ended September 30, 1999 have
been prepared on a



                                       14


<PAGE>

going  concern  basis  which  contemplates  the  realization  of assets  and the
settlement of liabilities and commitments in the normal course of business.  The
Company  incurred net losses of $7,124,126,  $5,040,009,  and $4,434,482 for the
years ended June 30, 1999, 1998 and 1997, respectively,  and as of September 30,
1999 had an accumulated deficit of $22,261,672 and a deficiency of net assets of
$4,481,321.  The Company is also a defendant in several legal  proceedings  that
could have a material adverse effect on the Company's financial  position,  cash
flows, and results of operations. 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.

The Company's management believes that upon the successful implementation of its
marketing  plan,  sufficient  revenues  will  be  generated  to  meet  operating
requirements.  Management  also  believes that the  successful  execution of its
proposed plan of operations  will generate  sufficient cash flow from operations
to enable the Company to offer its services on an  economically  sound basis. No
assurance  can be given that such goals will be  obtained  or that any  expected
revenues or cash flows will be achieved.


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.

                                       15

<PAGE>


PART 2.  OTHER INFORMATION


                             SmartServ Online, Inc.



Item 1.    Legal Proceedings

By letter dated April 10, 1998,  Michael  Fishman,  then Vice President of Sales
for the Company,  resigned his position. On or about April 24, 1998, Mr. Fishman
filed a complaint  against the  Company,  Sebastian  E.  Cassetta and four other
defendants in the United States  District Court for the District of Connecticut.
The complaint  asserted  claims under  Sections  10(b) and 18 of the  Securities
Exchange Act of 1934, as well as several state law claims,  including  breach of
contract, fraud and misrepresentation.  Mr. Fishman alleged that the Company (1)
failed to pay him the benefits and compensation to which he was entitled and (2)
made material misrepresentations in its filings with the Securities and Exchange
Commission.  On December 11, 1998,  the Court  granted the  Company's  motion to
dismiss Mr. Fishman's action without prejudice to the plaintiff to seek leave to
file an amended  complaint within 30 days. On May 12, 1999, the Court denied the
plaintiff's  subsequent motion for leave to file a substituted  complaint on the
basis that the federal  securities law claim,  the only federal claim alleged by
the plaintiff,  was still deficient.  Accordingly,  the federal securities claim
was dismissed with prejudice. On or about June 4, 1999, Mr. Fishman commenced an
action  against  the same  defendants  and  added as a  seventh  defendant,  the
Company's former President,  Steven Francesco, in the Connecticut Superior Court
for the Judicial  District of  Stamford/Norwalk  at Stamford  alleging breach of
contract,   breach  of  duty  of  good  faith  and  fair   dealing,   fraudulent
misrepresentation,  negligent misrepresentation,  intentional  misrepresentation
and failure to pay wages.  The defendants  have answered the complaint and filed
counterclaims  for fraudulent  inducement and breach of contract.  Plaintiff has
responded to the counterclaims and discovery is proceeding. Although the Company
is vigorously  defending this action,  there can be no assurance that it will be
successful.

By memorandum dated April 10, 1998,  Jonathan  Paschkes,  then Vice President of
Marketing for the Company, resigned his position. On or about November 17, 1998,
Mr. Paschkes filed a complaint  against the Company and Sebastian E. Cassetta in
the United States District Court, District of Connecticut. In the complaint, Mr.
Paschkes  alleges (i)  fraudulent  inducement to him to accept his position with
the Company;  (ii) breach of various terms of the Company's  employment contract
with him;  and (iii)  failure by the  Company to pay him wages and  bonuses  and
issue  options to him pursuant to the terms of his  employment  contract.  On or
about February 18, 1999, Mr.  Paschkes filed an amended  complaint.  The Company
answered the amended complaint and asserted  counterclaims  against Mr. Paschkes
for fraudulent inducement,  breach of contract,  conversion and statutory theft.
On October 5, 1999,  an agreement in principle  was reached  between the Company
and Mr. Paschkes in full settlement of these claims.  The Company has executed a
settlement  agreement with Mr. Paschkes and anticipates  filing a Stipulation of
Dismissal with prejudice before November 30, 1999.

On or about May 11, 1998, Ronald G. Weiner filed a complaint against the Company
and Mr.  Francesco in the Supreme Court of the State of New York,  County of New
York.  The complaint  alleges,  among other things,  that in May 1993, by letter
from Mr.  Francesco,  Mr.  Weiner was offered a 10% equity  stake in Smart Phone
Services,  Inc. ("SPS"), a Subchapter S company of which Mr. Francesco allegedly
was the President and sole shareholder,  in exchange for his active  involvement
in, among other things,  raising  capital and managing the financial  aspects of
SPS. The complaint  alleges that, in November 1993, Mr.  Francesco sent a letter
to Mr.  Weiner in which he (i)  represented  that SPS had  failed  to  attract a
single  investor  and (ii)  withdrew  his offer to Mr.  Weiner  of a 10%  equity
position in SPS. The complaint


                                       16
<PAGE>



further  alleges that, in  conversations  with Mr. Weiner  beginning in November
1993, Mr.  Francesco  represented  that he was ceasing all efforts to capitalize
SPS. The  complaint  alleges,  among other  things,  that Mr.  Francesco and SPS
breached their agreement with Mr. Weiner by withdrawing  their offer to him of a
10% equity stake in SPS, and that, at the time Mr. Francesco represented that he
was ceasing  efforts to capitalize  SPS, he had actually  formed the Company and
was actively  seeking  investors for it. The complaint  further alleges that the
Company is a successor entity to SPS and that, therefore,  the Company is liable
for SPS' and Mr.  Francesco's  alleged  conduct in  derogation  of their alleged
agreement  with Mr.  Weiner.  The complaint  seeks,  among other  things,  (i) a
declaratory  judgment  declaring  Mr.  Weiner a 10%  equity  shareholder  of the
Company,  (ii)  a  constructive  trust  in Mr.  Weiner's  favor  for  10% of the
Company's  equity  shares and (iii)  restitution  against Mr.  Francesco and the
Company for unjust enrichment.  On his unjust enrichment claim, Mr. Weiner seeks
unspecified  damages that he alleges to be at least  $250,000.  In its answer to
the complaint,  the Company has denied the material allegations of the complaint
and  asserted  affirmative  defenses.  No  discovery in this action has yet been
taken.  Although the Company is vigorously defending this action there can be no
assurance that it will be successful.


Item 2.    Changes in Securities and Use of Proceeds

On July 1,  1999,  the  Company  entered  into an  agreement  with  Arnhold & S.
Bleichroeder,  Inc.  ("ASB"),  a holder of  $325,000  of the  Company's  Prepaid
Warrants,  to settle the  Company's  obligation  to ASB  pursuant to the default
provisions of the Prepaid  Warrants.  Accordingly,  the Company paid $325,000 to
redeem the Prepaid  Warrants and issued  180,000  shares of Common Stock in full
settlement of all obligations to the ASB. No commissions were paid in connection
with such  transaction.  These shares were issued in reliance upon the exemption
from  registration  provided by Section 4 (2) of the  Securities Act of 1933, as
amended (the "Securities Act").

In November 1999,  $87,803 of Prepaid  Warrants were converted into an aggregate
of 30,525 shares of Common Stock of the Company.  No sales commissions were paid
in connection with such conversions. The shares were issued in reliance upon the
exemption from registration provided by Section 3 (a) (9) of the Securities Act.

In November 1999, Zanett  Lombardier,  Ltd converted certain warrants held by it
into an aggregate of 25,042 shares of Common Stock.  These shares were issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.


Item 6.    Exhibits and Reports on Form 8-K

(a)    The following exhibit is included herein:

           Exhibit 27 - Financial Data Schedule

(b)    Reports on Form 8-K

           The  Company  did not file any  reports  on Form 8-K during the three
months ended September 30, 1999.


                                       17


<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:  November 23, 1999                 /S/  SEBASTIAN E. CASSETTA
       -----------------                 --------------------------------------
                                         Sebastian E. Cassetta
                                         Chairman of the Board, Chief Executiv
                                         Officer




Date: November 23, 1999                  /S/  THOMAS W. HALLER
      -----------------                  --------------------------------------
                                         Thomas W. Haller
                                         Chief Financial Officer, Treasurer




<PAGE>


Exhibit 27 -   Financial Data Schedule
               Item 601(c) of Regulation S-B


This  Schedule  contains  summary  financial   information  extracted  from  the
September  30,  1999  financial  statments  of  SmartServ  Online,  Inc.  and is
qualified in its entirety by reference to such financial statements.

                                                            September 30, 1999

Cash and cash items                                            $     1,103,443
Marketable securities                                                       --
Notes and accounts receivable -trade:
     Billed                                                            268,851
     Unbilled                                                               --
Allowances for doubtful accounts                                            --
Prepaid expenses                                                        40,665
Total current assets                                                 1,412,959
Property and equipment                                               1,088,542
Accumulated depreciation                                               615,130
Total assets                                                         2,840,462
Total current liabilities                                            3,594,360
Bonds, mortgages and similar debt                                           --
Common Stock                                                            13,798
Preferred Stock - mandatory redemption                                      --
Preferred Stock - no mandatory redemption                                   --
Other stockholders' equity (deficit)                               (4,495,119)
Total liabilities and stockholders' equity (deficiency)            (4,481,321)
Net sales of information services                                      808,292
Total revenues                                                         808,292
Cost of services                                                       279,711
Total costs and expenses of sales                                      279,711
Other costs and expenses                                               855,265
Provision for doubtful accounts and notes                                   --
Interest and amortization of debt discount                                  --
Income/(loss) before taxes                                            (315,667)
Income tax expense                                                          --
Income/(loss) from continuing operations                              (315,667)
Discontinued operations                                                     --
Extraordinary items                                                         --
Cumulative effect of changes in accounting principles                       --
Net income or (loss)                                           $      (315,667)
Earnings/(loss) per share - basic                              $         (0.23)
Earnings/(loss) per share - diluted                            $         (0.23)