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

                                   FORM 10QSB

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


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002


                          COMMISSION FILE NUMBER 028008


                             SMARTSERV ONLINE, INC.
--------------------------------------------------------------------------------
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                                     133750708
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

          METRO CENTER, ONE STATION PLACE, STAMFORD, CONNECTICUT 06902
--------------------------------------------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                  (203) 3535950
--------------------------------------------------------------------------------
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)


CHECK  WHETHER THE ISSUER (1) FILED ALL REPORTS  REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE  EXCHANGE  ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),  AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X       NO ____

THE NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF JULY 31,
2002 WAS 7,092,554.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
         YES                     NO        X
              -----------             -----------


<PAGE>


                             SMARTSERV ONLINE, INC.

                                   FORM 10-QSB

                                      INDEX


PART I.   FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets - June 30, 2002 (unaudited) and
          December 31, 2001....................................................2

          Consolidated Statements of Operations - three months ended June
           30, 2002 and 2001 and six months ended June 30, 2002 and
           2001(unaudited).....................................................4

          Consolidated Statement of Changes in Stockholders' Equity
          (Deficiency) - six months ended June 30, 2002 (unaudited)............5

          Consolidated Statements of Cash Flows - three months ended June
          30, 2002 and 2001 and six months ended June 30, 2002 and
          2001(unaudited)......................................................6

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

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...........................................14


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...................................................20

Item 2.   Changes in Securities and Use of Proceeds...........................20

Item 6.   Exhibits and Reports on Form 8-K....................................21

          Signatures..........................................................22




                                       1
<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                  JUNE 30,            DECEMBER 31,
                                                                    2002                   2001
                                                           ---------------------   -----------------
                                                              (UNAUDITED)
<S>                                                             <C>                  <C>
ASSETS
Current assets
   Cash and cash equivalents                                    $   641,595          $ 6,532,323
   Accounts receivable                                              166,855               40,798
   Prepaid expenses                                                 313,704              531,028
                                                                -----------          -----------
Total current assets                                              1,122,154            7,104,149
                                                                -----------          -----------

Property and equipment, net                                       2,701,917            3,408,776

Other assets
   Capitalized software development costs, net of
       accumulated amortization of $360,160 at
       June 30, 2002 and $268,619 at December 31, 2001            1,022,288              973,594
   Security deposits                                                490,840              474,545
   Notes receivable from officer                                    500,000              500,000
                                                                -----------          -----------
                                                                  2,013,128            1,948,139
                                                                -----------          -----------

Total Assets                                                    $ 5,837,199          $12,461,064
                                                                ===========          ===========
</TABLE>


                                       2
<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                    JUNE 30,              DECEMBER 31,
                                                                                      2002                    2001
                                                                             --------------------      -----------------
                                                                                  (UNAUDITED)
<S>                                                                               <C>                    <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
   Accounts payable                                                               $  1,412,478           $  1,329,105
   Accrued liabilities                                                                 689,418                695,134
                                                                                  ------------           ------------
Total current liabilities                                                            2,101,896              2,024,239
                                                                                  ------------           ------------

Deferred revenues                                                                      168,757                     --

Note payable                                                                         6,723,156              6,723,156

COMMITMENTS AND CONTINGENCIES - NOTE 9

STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock - $0.01 par value
   Authorized - 1,000,000 shares
   Issued and outstanding - None                                                            --                     --
Common stock - $.01 par value
   Authorized - 40,000,000 shares
   Issued and outstanding - 7,092,554 shares at June 30, 2002
       and 6,263,783 shares at December 31, 2001                                        70,925                 62,638
Additional paid-in capital                                                          69,844,087             69,680,059
Notes receivable from officers                                                        (666,841)              (666,841)
Unearned compensation                                                                  (11,588)              (540,354)
Accumulated deficit                                                                (72,393,193)           (64,821,833)
                                                                                  ------------           ------------
Total stockholders' equity (deficiency)                                             (3,156,610)             3,713,669
                                                                                  ------------           ------------

Total Liabilities and Stockholders' Equity (Deficiency)                           $  5,837,199           $ 12,461,064
                                                                                  ============           ============

</TABLE>

See accompanying notes



                                       3
<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                                        THREE MONTHS                        SIX MONTHS
                                                                      ENDED JUNE 30                        ENDED JUNE 30
                                                            -------------------------------      --------------------------------
                                                                 2002               2001              2002              2001
                                                            -------------     -------------     -------------     ---------------
<S>                                                         <C>               <C>               <C>               <C>
Revenues                                                    $     35,815      $  1,222,866      $     64,636      $  2,447,837
                                                            ------------      ------------      ------------      ------------
Costs and expenses:
   Costs of services                                          (1,419,946)       (1,716,770)       (2,951,626)       (3,774,489)
   General and administrative expenses                        (1,176,235)       (1,271,559)       (2,240,140)       (2,613,115)
   Sales and marketing expenses                               (1,042,804)       (1,236,387)       (2,243,649)       (2,849,219)
   Stock-based compensation                                      325,136          (778,074)          153,121          (937,852)
                                                            ------------      ------------      ------------      ------------

   Total costs and expenses                                   (3,313,849)       (5,002,790)       (7,282,294)      (10,174,675)
                                                            ------------      ------------      ------------      ------------

Loss from operations                                          (3,278,034)       (3,779,924)       (7,217,658)       (7,726,838)
                                                            ------------      ------------      ------------      ------------

Other income (expense):
   Interest income                                                 8,815           164,361            31,499           357,724
   Interest expense and other financing costs                   (187,504)         (128,594)         (369,745)         (222,687)
   Foreign exchange losses                                        (5,290)           (4,798)          (15,456)          (20,808)
                                                            ------------      ------------      ------------      ------------
                                                                (183,979)           30,969          (353,702)          114,229
                                                            ------------      ------------      ------------      ------------

Net loss                                                    $ (3,462,013)     $ (3,748,955)     $ (7,571,360)     $ (7,612,609)
                                                            ============      ============      ============      ============

Basic and diluted loss per share                            $      (0.53)     $      (0.65)     $      (1.19)     $      (1.32)
                                                            ============      ============      ============      ============

Weighted average shares outstanding - basic and diluted        6,520,857         5,794,118         6,389,140         5,750,118
                                                            ============      ============      ============      ============

</TABLE>

See accompanying notes



                                       4
<PAGE>


                             SMARTSERV ONLINE, INC.

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                         SIX MONTHS ENDED JUNE 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                           COMMON STOCK                 NOTES
                                  --------------------------------    RECEIVABLE       ADDITIONAL
                                                        PAR             FROM           PAID-IN           UNEARNED       ACCUMULATED
                                      SHARES           VALUE           OFFICERS         CAPITAL         COMPENSATION      DEFICIT
                                  --------------------------------- --------------- ---------------  ----------------  -------------
<S>                                     <C>         <C>            <C>             <C>             <C>             <C>
Balances at December 31, 2001           6,263,783   $     62,638   $   (666,841)   $ 69,680,059    $   (540,354)      $(64,821,833)


Issuance of common stock upon
   exercise of employee stock
   options                                 15,200            152             --          14,051              --                 --

Conversion of 39 prepaid common
   stock purchase warrants into
   common stock                            27,857            278             --            (278)             --                 --

Issuance of common stock through
   private placement                      785,714          7,857             --         832,143              --                 --

Amortization of unearned
   compensation over the terms of
   consulting agreement                        --             --             --              --         544,216                 --

Warrants issued to consultants as
   compensation                                --             --             --          41,250         (15,450)                --

Change in market value of employee
   stock options                               --             --             --        (723,138)             --                 --

Net loss for the period                        --             --             --              --              --         (7,571,360)
                                     -----------------------------------------------------------------------------------------------
Balances at June 30, 2002               7,092,554   $     70,925   $   (666,841)   $ 69,844,087    $    (11,588)      $(72,393,193)
                                     ===============================================================================================


</TABLE>

See accompanying notes



                                       5
<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    THREE MONTHS                                  SIX MONTHS
                                                                   ENDED JUNE 30                                 ENDED JUNE 30
                                                        ----------------------------------        ----------------------------------
                                                            2002                 2001                  2002                 2001
                                                        ------------         ------------         ------------         ------------
<S>                                                     <C>                  <C>                  <C>                  <C>
OPERATING ACTIVITIES
Net loss                                                $ (3,462,013)        $ (3,748,955)        $ (7,571,360)        $ (7,612,609)
Adjustments to reconcile net loss to net cash
used for operating activities:
    Depreciation and amortization                            465,140              607,045              966,890            1,204,674
    Noncash compensation costs                              (603,898)             481,519             (723,138)             334,742
    Noncash consulting services                              278,761              296,555              570,016              603,110
    Amortization of deferred revenues                         (5,294)            (966,369)              (5,294)          (1,932,738)
    Amortization of deferred financing costs                      --               50,000                   --              100,000
    Changes in operating assets and liabilities
        Accounts receivable                                  (63,334)             (11,697)            (126,057)              48,019
        Prepaid expenses                                      67,722             (146,755)             217,324               25,664
        Accounts payable and accrued liabilities              61,286              616,215               77,657            1,362,301
        Deferred revenues                                     92,051                   --              174,051                   --
        Security deposit                                         698             (274,693)             (16,295)            (274,693)
                                                        ------------         ------------         ------------         ------------
    Net cash used for operating activities                (3,168,881)          (3,097,135)          (6,436,206)          (6,141,530)
                                                        ------------         ------------         ------------         ------------


INVESTING ACTIVITIES
Purchase of equipment                                             --               (9,500)            (168,490)            (136,882)
Capitalization of software development costs                 (68,437)            (129,897)            (140,235)            (283,048)
Loan to officer                                                   --                   --                   --             (500,000)
                                                        ------------         ------------         ------------         ------------
    Net cash used for investing activities                   (68,437)            (139,397)            (308,725)            (919,930)
                                                        ------------         ------------         ------------         ------------


FINANCING ACTIVITIES
Proceeds from the issuance of notes                               --                   --                   --              191,992
Proceeds from the issuance of common stock                 1,102,258                6,270            1,114,203               21,109
Costs of issuing common stock                               (260,000)                  --             (260,000)                  --
                                                        ------------         ------------         ------------         ------------
    Net cash provided by financing activities                842,258                6,270              854,203              213,101
                                                        ------------         ------------         ------------         ------------


Increase (decrease) in cash and cash equivalents          (2,395,060)          (3,230,262)          (5,890,728)          (6,848,359)
Cash and cash equivalents - beginning of period            3,036,655           15,554,021            6,532,323           19,172,118
                                                        ------------         ------------         ------------         ------------
Cash and cash equivalents - end of period               $    641,595         $ 12,323,759         $    641,595         $ 12,323,759
                                                        ============         ============         ============         ============

</TABLE>


See accompanying notes.




                                       6
<PAGE>


                             SMARTSERV ONLINE, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2002


1.      NATURE OF BUSINESS

SmartServ Online, Inc. (the "Company")  commenced operations on August 20, 1993.
We offer Web and wireless  applications content services and infrastructure that
allow financial institutions,  network service providers and other businesses to
deliver  financial  and other  content,  alerts  and  notifications,  as well as
transaction  services  to  their  work  forces  and  customers  - via  wired  or
data-enabled wireless devices. SmartServ's products include content, transaction
processing  and alert  engines,  proprietary  W2W  MiddlewareTM  that  optimizes
content  delivery  to a full  array  of  devices,  and a suite  of  applications
designed to enable  businesses  and their  customers  to exploit the benefits of
wireless data exchange and transactional capability. Our products facilitate the
delivery of customer  proprietary  data, as well as delayed and real-time market
data, business and financial news, sports information,  national weather reports
and other business and entertainment information in a user-friendly manner.

Our plan of operation focuses on the business-to-business  strategy of licensing
our  applications  and related services to those companies that have an economic
incentive  to provide  access to our content and  transaction  services to their
customers.  We continue to focus on two primary  areas:  telecommunications  and
financial  services.  For the  telecommunications  sector,  SmartServ provides a
suite of solutions  to help the wireless  carriers,  handset  manufacturers  and
Internet service  providers rapidly expand the delivery of products and services
to their customers. For the financial services sector, SmartServ seeks to expand
its  customer  base  among both  institutional  and  retail  financial  services
enterprises  by  leveraging  its  experience  with the  delivery of a customer's
internal and proprietary data, as well as its transaction routing engine and W2W
MiddlewareTM with a suite of applications  designed to meet the rigorous demands
of the financial community.  Management believes that SmartServ's primary source
of revenues  will be derived from  revenue-share  licensing  contracts  with its
telecommunications and financial services customers.

The  economic  downturn  and its impact on the  telecommunications  industry has
resulted  in  delays  in the  build-out  of  high  speed  carrier  networks  and
availability of data-enabled wireless devices causing the market for SmartServ's
data and  transaction  services  to be  lackluster  until now.  Such delays have
resulted in the  Company's  inability to implement its business plan and related
marketing strategies. Consequently, the Company is in need of additional capital
to  compensate  for such delays and their impact on the  Company's  inability to
generate revenues.  The Company has engaged investment bankers to assist it with
the sale of equity to private  investors that  understand the wireless  industry
and the current state of the technology.

The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company  incurred a net
loss of  $7,571,360  for the six month period ended June 30, 2002, a net loss of
$14,819,860  for the year ended December 31, 2001, and net losses of $30,993,559
and  $7,124,126  for the  years  ended  June 30,  2000 and  1999,  respectively.
Additionally,  it had an  accumulated  deficit of  $72,393,193 at June 30, 2002.
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.



                                       7
<PAGE>

As carriers, such as Verizon Wireless, AT&T Wireless and Cingular,  complete the
build-out  of high speed data  friendly  networks (a process  that is  currently
underway),  management  believes that the demand for the Company's  products and
services  will  increase  from  enterprise  customers,  as well as the  carriers
themselves.  Notwithstanding  the  execution  of  several  contracts  during the
preceding nine months and the continual  discussions  with  potential  strategic
partners about future relationships,  the Company's ability to generate revenues
and working  capital may not be  sufficient to meet  management's  objectives as
presently structured. Additionally, increasing competition in the market for the
Company's  products and  services  could  materially  and  adversely  affect the
Company's results from operations through price reductions and loss of potential
market share.  Management  recognizes that the Company must generate  additional
revenues,  raise  additional  capital,  consider  modifications to its sales and
marketing  program  and  institute  cost  reductions  to allow it to continue to
operate with  available cash  resources.  There is no assurance that the Company
will generate future  revenues or cash flow from  operations,  raise  additional
capital,  or that the  Company's  products and services  will be accepted in the
marketplace.

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information,  the instructions of Form 10-QSB and Rule 310
of  Regulation  SB and,  therefore,  do not  include all  information  and notes
necessary for a presentation  of results of operations,  financial  position and
cash flows in conformity with accounting  principles  generally  accepted in the
United States.  The balance sheet at December 31, 2001 has been derived from the
audited  financial  statements  at that date,  but does not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United States for complete financial statements. The financial statements
should be read in  conjunction  with the Company's  Annual Report on Form 10-KSB
for the period  ended  December 31,  2001.  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 month and six
month  periods  ended  June 30,  2002 are not  necessarily  indicative  of those
expected for the year ending December 31, 2002.

PRINCIPLES OF CONSOLIDATION
---------------------------

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

USE OF ESTIMATES
----------------

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

REVENUE RECOGNITION
-------------------

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  with the  respective  customer.  Deferred  revenues
resulting from our agreement with Data Transmission  Network Corporation ("DTN")
were  amortized  over the  anticipated  future  revenue  stream,  a period of 42
months,  commencing  June 1, 1999. We amended our agreement  with DTN such that,
effective  September 1, 2000,  SmartServ  performed  maintenance and enhancement
services  through  December 2000 and  operational  support  through August 2001.
Therefore,  commencing  September 1, 2000,  deferred  revenues were amortized to
income on a straight-line basis over the period through August 2001.



                                       8
<PAGE>

EARNINGS PER SHARE
------------------

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

CAPITALIZED SOFTWARE DEVELOPMENT COSTS
--------------------------------------

In  connection  with certain  contracts  entered into between  SmartServ and its
customers,  as well as other  development  projects,  we have capitalized  costs
related  to  certain  product   enhancements  and  application   development  in
accordance with SFAS No. 86,  "Accounting for the Costs of Computer  Software to
be Sold, Leased or Otherwise Marketed."

On an  ongoing  basis,  SmartServ  reviews  the  future  recoverability  of  its
capitalized  software  development  costs for  impairment or whenever  events or
changes  in  circumstances  indicate  that  the  carrying  amounts  may  not  be
recoverable. When such events or changes in circumstances do occur, we recognize
an  impairment  loss  if the  undiscounted  future  cash  flows  expected  to be
generated by the asset are less than its carrying  value.  The  impairment  loss
reduces the asset to its fair value.

FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------

The carrying amounts of our financial instruments  approximate fair value due to
their terms and maturities.

SUPPLEMENTAL CASH FLOW DATA
---------------------------

We consider all highly liquid  investments  with a maturity date of three months
or less when purchased to be cash equivalents.

Interest, debt origination and other financing costs paid during the three month
periods  ended June 30, 2002 and 2001 were  $185,000 and $41,700,  respectively,
and for the six month  periods  ended June 30, 2002 and 2001 were  $372,000  and
$43,500, respectively.

CONCENTRATION OF CREDIT RISK
----------------------------

Financial  instruments that potentially  subject  SmartServ to concentrations of
credit risk consist  primarily of its commercial paper  investments and accounts
receivable.  It is management's  policy to invest in only those companies with a
AAA credit rating;  therefore,  our commercial paper  investments are short-term
and highly liquid. At June 30, 2002,  accounts receivable consist principally of
amounts due from a major financial services company.  We perform periodic credit
evaluations of our customers  and, if  applicable,  provide for credit losses in
the financial statements.

PROPERTY AND EQUIPMENT
----------------------

Property and equipment are stated at cost.  Equipment  purchased under a capital
lease is recorded at the present value of the future  minimum lease  payments at
the date of acquisition. Depreciation is computed using the straight-line method
over estimated useful lives of three to ten years.

ADVERTISING COSTS
-----------------

Advertising costs are expensed as incurred and were  approximately  $129,900 and
$5,200   during  the  three  month   periods  ended  June  30,  2002  and  2001,
respectively,  and $236,900 and $28,600  during the six month periods ended June
30, 2002 and 2001, respectively.



                                       9
<PAGE>

STOCK BASED COMPENSATION
------------------------

We maintain several stock option plans for employees and non-employee  directors
that provide for the granting of stock options for a fixed number of shares with
an exercise price equal to the fair value of the shares at the date of grant. We
account  for  these  stock  compensation  plans in  accordance  with  Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB No. 25").  Accordingly,  compensation  expense is recognized to the extent
that the fair value of the stock exceeds the exercise price of the option at the
measurement date. Certain options,  which have been repriced, are subject to the
variable  plan   requirements  of  APB  No.  25,  that  requires  us  to  record
compensation expense for changes in the fair value of our common stock.

FOREIGN CURRENCY TRANSLATION
----------------------------

The financial  statements of foreign subsidiaries have been translated into U.S.
dollars  in  accordance   with  FASB   Statement  No.  52,   "Foreign   Currency
Translation." All balance sheet accounts have been translated using the exchange
rates in effect at the balance sheet date.  Income  statement  amounts have been
translated  using the average rate for the year. Gains and losses resulting from
the  changes  in  exchange  rates  from  year  to year  are  reported  in  other
comprehensive income.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------

In July 2001,  the  Financial  Accounting  Standards  Board  issued SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
SFAS No. 141 requires the use of the purchase  method of accounting for business
combinations initiated after June 30, 2001, while SFAS No. 142 requires that the
amortization  of goodwill  and certain  other  intangible  assets  cease and the
related asset values be reviewed  annually for impairment.  The Company does not
anticipate any material  impact on its  consolidated  results from operations or
financial position related to the implementation of SFAS No. 141 and No. 142.

Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which provides a single accounting
model for measuring  impairment  of  long-lived  assets and the disposal of such
assets. The adoption of SFAS No. 144 had no impact on the Company's consolidated
results of operations, financial position or cash flows.

RECLASSIFICATIONS
-----------------

Certain amounts reported in the consolidated  financial statements for the three
and six month periods ended June 30, 2001 have been  reclassified  to conform to
the 2002 presentation.

3.      PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>

                                                                       JUNE 30,             DECEMBER 31,
                                                                         2002                  2001
                                                                 -----------------       ---------------
<S>                                                                  <C>                   <C>
Data processing equipment                                            $ 5,187,705           $ 5,033,498
Data processing equipment purchased under a capital lease                246,211               246,211
Office furniture and equipment                                           151,263               151,263
Display equipment                                                         71,335                71,335
Leasehold improvements                                                    69,852                55,570
                                                                     -----------           -----------

                                                                       5,726,366             5,557,877
Accumulated depreciation, including $246,211 at June 30, 2002
   and $229,797 at December 31, 2001 for equipment purchased
   under a capital lease                                              (3,024,449)           (2,149,101)
                                                                     -----------           -----------
                                                                     $ 2,701,917           $ 3,408,776
                                                                     ===========           ===========
</TABLE>

                                       10
<PAGE>

4.      NOTE RECEIVABLE FROM OFFICER

The Company's Board of Directors  authorized the issuance of a line of credit to
Sebastian  Cassetta,  SmartServ's Chief Executive Officer,  for an amount not to
exceed  $500,000.  Such amount  bears  interest at the prime rate and matures on
March 20, 2004.  Interest for the period January 2, 2001 to June 30, 2002, which
has not been recognized as income in the consolidated  statements of operations,
shall accrue and be payable at maturity. Commencing July 1, 2002 until maturity,
interest shall be payable semi-annually in arrears on January 1st and July 1st.

5.      NOTE PAYABLE

In May 2000, we entered into a Business Alliance Agreement with  Hewlett-Packard
Company ("HP") whereby the companies  agreed to jointly market their  respective
products and services,  and to work on the build-out of SmartServ's domestic and
international infrastructure. In furtherance of these objectives, HP provided us
with a line of credit  of up to  $20,000,000  for the  acquisition  of  approved
hardware,  software and services.  As of September 28, 2001, the expiration date
of the facility,  SmartServ had borrowed $6,723,156.  The debt is evidenced by a
note,  bearing  an  interest  rate  of 11%,  secured  by the  Company's  assets,
exclusive of its internally  developed software products,  may be converted into
our common stock at $33.56 per share and matures on September 28, 2003.

6.      STOCKHOLDERS' EQUITY

During the six month period ended June 30, 2002, the Company issued  warrants to
purchase 17,000 shares of our common stock to certain  marketing  consultants as
partial compensation for services rendered and to be rendered to SmartServ.  The
warrants have exercise prices of $5.01 and $5.38,  expire on April 29, 2005, and
have been recorded in the consolidated financial statements at fair market value
using the Black-Scholes pricing model.

In June  2002,  SmartServ  issued  785,714  shares  of its  common  stock to two
accredited investors ("Investors") at a purchase price of $1.40 per share. Gross
proceeds from this transaction  amounted to $1,100,000.  First Albany Securities
Corporation,   the  placement  agent,  received  a  commission  of  $66,000  and
reimbursement of direct expenses of $2,000 in connection with this  transaction.
Additionally,  the Company issued the Investors warrants, callable under certain
conditions, for the purchase of an aggregate of 1,428,571 shares of common stock
at an exercise price of $1.40 per share through the  expiration  date on June 5,
2007,  as well as  non-callable  warrants  for the  purchase of an  aggregate of
196,429  shares of common stock at an exercise  price of $1.47 per share through
June 5, 2007. In the event the Investors  exercise the callable  warrants,  they
will receive  non-callable  warrants for the purchase of an aggregate of 357,142
shares  of  common  stock  at  an  exercise  price  of  $1.47  per  share.  Such
non-callable warrants expire three years from the date of issuance.

7.      STOCK-BASED COMPENSATION

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


                                       11
<PAGE>

The   following   table   shows   the   amount   of   stock-based   compensation
(charges)/credits  that  would  have  been  recorded  in the  categories  of the
statement of operations had stock-based  compensation not been separately stated
therein:

<TABLE>
<CAPTION>

                                                          THREE MONTHS                                       SIX MONTHS
                                                         ENDED JUNE 30                                      ENDED JUNE 30
                                            -----------------------------------------    ------------------------------------------

                                                   2002                    2001                2002                   2001
                                            --------------------     ----------------    -------------------    -------------------
<S>                                            <C>                      <C>                   <C>                   <C>
Costs of services                              $ 168,573                $(160,372)            $ 195,308             $(132,612)
Selling, general and administrative
expenses                                         156,563                 (617,702)              (42,187)             (805,240)
                                               ---------                ---------             ---------             ---------
                                               $ 325,136                $(778,074)            $ 153,121             $(937,852)
                                               =========                =========             =========             =========

</TABLE>

Stock-based compensation for the three and six month periods ended June 30, 2002
and 2001 consist of the impact of changes in the market  value of the  Company's
common  stock on the  value of  options  to  purchase  common  stock  issued  to
employees,  as well as the  amortization  of deferred costs  associated with the
issuance of warrants to purchase common stock.

8.      EARNINGS PER SHARE

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

<TABLE>
<CAPTION>

                                                      THREE MONTHS ENDED JUNE 30                      SIX MONTHS ENDED JUNE 30
                                             -------------------------------------------    ---------------------------------------
                                                     2002                    2001                     2002            2001
                                            -------------------     -------------------     -----------------     --------------
<S>                                         <C>                     <C>                     <C>                   <C>
Numerator:
   Net loss                                 $        (3,462,013)    $        (3,748,955)    $      (7,571,360)    $(7,612,609)
                                            ===================     ===================     =================     ===========

Denominator:
   Weighted average shares - basic and
      diluted                                         6,520,857               5,794,118             6,389,140       5,750,118
                                            ===================     ===================     =================     ===========

Basic and diluted loss per common share
                                            $             (0.53)    $             (0.65)    $           (1.19)    $     (1.32)
                                            ===================     ===================     =================     ===========

</TABLE>

Outstanding  employee  stock options and other warrants to purchase an aggregate
of  6,097,000  shares of common  stock at June 30, 2002 were not included in the
computation  of diluted  earnings per share because the Company  reported a loss
for the period and, therefore their inclusion would be antidilutive.

9.      COMMITMENTS AND CONTINGENCIES

On or about June 4, 1999,  Michael Fishman,  our former Vice President of Sales,
commenced an action against us, Sebastian E. Cassetta (our Chairman of the Board
and Chief Executive  Officer),  Steven Francesco (our former President) and four
others  in  the  Connecticut   Superior  Court  for  the  Judicial  District  of
Stamford/Norwalk at Stamford alleging breach of his employment contract,  breach
of duty of good faith


                                       12
<PAGE>

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. The fraud and misrepresentation  claims have been dismissed.
Plaintiff  has  responded  to the  counterclaim  and  discovery  is  proceeding.
Although we are vigorously defending this action, there can be no assurance that
we will be successful.

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York.  The  complaint  alleges  that on or about  August 19, 1999,
Commonwealth and SmartServ  entered into an engagement  letter pursuant to which
Commonwealth was to provide financial  advisory and investment  banking services
to SmartServ in connection  with a possible  combination  between  SmartServ and
Data  Link  Systems   Corporation.   The  engagement   letter   provided  for  a
nonrefundable  fee of  $15,000  payable in cash or common  stock at  SmartServ's
option. The complaint alleges that SmartServ elected to pay the fee in stock and
seeks  13,333  shares  of  common  stock or at least  $1,770,000  together  with
interest and costs. In our answer to the complaint,  we have denied the material
allegations of the complaint, including the allegation that we elected to pay in
stock.  Discovery  has  commenced.  Although we are  vigorously  defending  this
action, there can be no assurance that we will be successful.

While we intend to vigorously defend these actions,  the unfavorable  outcome of
either  such  action  could  have a  material  adverse  effect on our  financial
condition, results of operations and cash flows.



                                       13
<PAGE>

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


OVERVIEW

SmartServ Online, Inc. (the "Company")  commenced operations on August 20, 1993.
We offer Web and wireless applications, content services and infrastructure that
allow financial institutions,  network service providers and other businesses to
deliver  financial  and other  content,  alerts  and  notifications,  as well as
transaction  services  to  their  work  forces  and  customers  - via  wired  or
data-enabled wireless devices. SmartServ's products include content, transaction
processing  and alert  engines,  proprietary  W2W  MiddlewareTM  that  optimizes
content  delivery  to a full  array  of  devices,  and a suite  of  applications
designed to enable  businesses  and their  customers  to exploit the benefits of
wireless data exchange and transactional capability. Our products facilitate the
delivery of customer  proprietary  data, as well as delayed and real-time market
data, business and financial news, sports information,  national weather reports
and other business and entertainment information in a user-friendly manner.

Our plan of operation focuses on the business-to-business  strategy of licensing
our  applications  and related services to those companies that have an economic
incentive  to provide  access to our content and  transaction  services to their
customers.  We continue to focus on two primary  areas:  telecommunications  and
financial  services.  For the  telecommunications  sector,  SmartServ provides a
suite of solutions  to help the wireless  carriers,  handset  manufacturers  and
Internet service  providers rapidly expand the delivery of products and services
to their customers. For the financial services sector, SmartServ seeks to expand
its  customer  base  among both  institutional  and  retail  financial  services
enterprises  by  leveraging  its  experience  with the  delivery of a customer's
internal and proprietary data, as well as its transaction routing engine and W2W
MiddlewareTM with a suite of applications  designed to meet the rigorous demands
of the financial community.  Management believes that SmartServ's primary source
of revenues  will be derived from  revenue-share  licensing  contracts  with its
telecommunications and financial services customers.

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

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  has caused  telecommunications  service  providers  to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  The financial services  industry,  in the wake of the tragedy of
September 11th, has curtailed new product  development to focus on data security
and recovery.  Consequently, the potential demand for the Company's products and
services has been significantly  delayed.  Such delay has had a very detrimental
effect on the Company's operations.

In May 2002, the Company commenced an effort to realign its  infrastructure  and
related overhead to correlate with reductions in projected  revenue.  As part of
this effort,  management  has closed the Company's UK sales office and downsized
both Hong Kong and  domestic  operations  through  staff  reductions  to a level
sufficient to support the Company's  projected  operations through the remainder
of 2002.  Personnel  headcount  has been reduced from 66 in May to 42 in August.
These efforts have reduced the Company's average monthly operating expenses from
approximately  $1,141,000 to $575,000 per month.  Management recognizes that the
Company must generate additional  revenues,  raise additional capital,  consider
modifications  to its sales and marketing  program and institute cost reductions
to allow it to continue to operate with  available cash  resources.  There is no
assurance  that the  Company  will  generate  future  revenues or cash flow from
operations,  raise  additional  capital,  or that  the  Company's  products  and
services will be accepted in the marketplace.




                                       14
<PAGE>

RESULTS OF OPERATIONS

QUARTER ENDED JUNE 30, 2002 VERSUS QUARTER ENDED JUNE 30, 2001

During the  quarters  ended June 30,  2002 and 2001,  we  recorded  revenues  of
$35,815 and $1,222,866,  respectively.  Revenues  generated in 2002 were derived
from the  licensing  of our  wireless  data  products  to a  financial  services
institution  while  substantially  all revenues in 2001 were earned  through our
licensing  agreement  with Data  Transmission  Network  Corporation.  During the
quarters  ended  June  30,  2002  and  2001,  we  recognized  $0  and  $966,369,
respectively, from the amortization of deferred revenues associated with the DTN
agreement.

During the  quarter  ended June 30,  2002,  we  incurred  costs of  services  of
$1,419,946.  Such costs  consisted  primarily of information  and  communication
costs  ($201,900),   personnel  costs  ($752,000),   computer  hardware  leases,
depreciation and maintenance costs ($449,500) and amortization expenses relating
to capitalized software development costs ($29,900), partially offset by systems
consultant  credits  ($35,000).  During  the  quarter  ended June 30,  2001,  we
incurred  costs of services of  $1,716,770.  Such costs  consisted  primarily of
information and  communication  costs  ($209,900),  personnel costs  ($605,900),
systems  consultants  ($237,200),  computer  hardware  leases,  depreciation and
maintenance costs ($420,300),  and amortization expenses relating to capitalized
software  development costs ($230,400).  During the quarters ended June 30, 2002
and 2001, we  capitalized  $68,400 and $129,900,  respectively,  of  development
costs in accordance  with  Statement of Financial  Accounting  Standards No. 86,
"Accounting for the Costs of Computer  Software to be Sold,  Leased or Otherwise
Marketed".

During the quarter ended June 30, 2002, we incurred  general and  administrative
expenses of $1,176,235.  Such costs were incurred  primarily for personnel costs
($407,000),  professional  fees  ($294,200),  facilities  ($140,900),  insurance
($180,900),   computer  hardware  leases,  depreciation  and  maintenance  costs
($54,700), and communication costs ($25,100).  During the quarter ended June 30,
2001, we incurred general and administrative expenses of $1,271,559.  Such costs
were incurred  primarily  for  personnel  costs  ($411,000),  professional  fees
($415,300),  facilities  ($135,400),  insurance  ($137,900),  computer  hardware
leases,  depreciation and maintenance costs ($54,100),  and communication  costs
($21,000).

During the quarter ended June 30, 2002, we incurred sales and marketing expenses
of  $1,042,804.   Such  costs  were  incurred   primarily  for  personnel  costs
($583,000),  advertising  and  trade  shows  ($196,200),  facilities  ($41,000),
consulting fees ($117,800) and travel and lodging ($60,900).  During the quarter
ended June 30, 2001,  we incurred  sales and marketing  expenses of  $1,236,387.
Such costs were incurred  primarily for personnel costs  ($898,800),  consulting
fees ($60,700), travel and lodging ($164,000) and facilities ($43,000).

During the  quarter  ended June 30,  2002,  net noncash  credit for  stock-based
compensation  amounted to $325,136  compared to a net noncash charge of $778,074
during the quarter  ended June 30,  2001.  Such  noncash  amounts are  primarily
related  to  the  valuation  of  stock-based  compensation  in  accordance  with
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  ("APB No. 25").  Certain  options are subject to the  variable  plan
requirements of APB No. 25, as they were repriced,  and therefore,  compensation
expense is recognized for changes in the fair value of our common stock. Noncash
charges for  professional  fees for the  quarters  ended June 30, 2002 and 2001,
were  $278,761  and  $296,555,   respectively,   resulting  primarily  from  the
amortization  of  deferred  costs  associated  with the  issuance of warrants to
purchase common stock to various financial, marketing and technical consultants.
The value of substantially  all of such common stock purchase  warrants has been
recorded in accordance with the Black-Scholes pricing model.



                                       15
<PAGE>

Interest income for the quarters ended June 30, 2002 and 2001 amounted to $8,815
and  $164,361,  respectively.  Such  amounts  were  earned  primarily  from  our
investments in highly liquid  commercial  paper and money fund accounts.  During
the quarters ended June 30, 2002 and 2001,  interest and other  financing  costs
were $187,504 and $128,594,  respectively. Such costs were incurred primarily in
connection  with the $20 million line of credit  facility  with  Hewlett-Packard
Company.

Basic and diluted  loss per share was $0.53 for the quarter  ended June 30, 2002
compared to $0.65 per share for the quarter  ended June 30,  2001.  The weighted
average  shares  outstanding  increased  to  6,520,857  at June  30,  2002  from
5,794,118 at June 30, 2001.


SIX MONTHS ENDED JUNE 30, 2002 VERSUS SIX MONTHS ENDED JUNE 30, 2001

During the six months  ended June 30,  2002 and 2001,  we  recorded  revenues of
$64,636 and $2,447,837,  respectively.  Revenues  generated in 2002 were derived
from the  licensing  of our  wireless  data  products  to a  financial  services
institution  while  substantially  all revenues in 2001 were earned  through our
licensing agreement with Data Transmission Network  Corporation.  During the six
months  ended  June  30,  2002  and  2001,  we  recognized  $0  and  $1,932,738,
respectively, from the amortization of deferred revenues associated with the DTN
agreement.

During the six months  ended June 30,  2002,  we  incurred  costs of services of
$2,951,626.  Such costs  consisted  primarily of information  and  communication
costs  ($395,100),  personnel  costs  ($1,458,700),  computer  hardware  leases,
depreciation  and  maintenance  costs  ($959,600),   and  amortization  expenses
relating to capitalized  software  development  costs ($92,200).  During the six
months ended June 30, 2001, we incurred  costs of services of  $3,774,489.  Such
costs consisted  primarily of information and  communication  costs  ($423,000),
personnel costs ($1,173,600),  systems consultants ($823,100), computer hardware
leases, depreciation and maintenance costs ($827,000), and amortization expenses
relating to capitalized  software  development costs ($460,800).  During the six
months  ended June 30, 2002 and 2001,  we  capitalized  $140,200  and  $283,000,
respectively,  of  development  costs in accordance  with Statement of Financial
Accounting  Standards No. 86,  "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed".

During  the  six  months   ended  June  30,  2002,   we  incurred   general  and
administrative  expenses of $2,240,140.  Such costs were incurred  primarily for
personnel costs ($734,700), professional fees ($602,700), facilities ($271,600),
insurance  ($326,200),  computer  hardware leases,  depreciation and maintenance
costs  ($108,900),  and  communications  costs ($25,400).  During the six months
ended  June 30,  2001,  we  incurred  general  and  administrative  expenses  of
$2,613,115.  Such costs were incurred  primarily for personnel costs ($864,200),
professional  fees  ($877,600),  facilities  ($274,100),  insurance  ($250,600),
travel ($77,700),  computer hardware leases,  depreciation and maintenance costs
($102,400), and communications costs ($44,400).

During the six months  ended June 30,  2002,  we  incurred  sales and  marketing
expenses of $2,243,649.  Such costs were incurred  primarily for personnel costs
($1,179,100),  advertising  and trade shows  ($563,000),  facilities  ($80,900),
consulting  fees  ($157,900) and travel and lodging  ($182,500).  During the six
months  ended  June 30,  2001,  we  incurred  sales and  marketing  expenses  of
$2,849,219. Such costs were incurred primarily for personnel costs ($1,468,100),
consulting fees ($619,300), travel and lodging ($287,800), advertising and trade
shows ($312,200) and facilities ($66,400).

During the six months ended June 30, 2002,  net noncash  credit for  stock-based
compensation  amounted to $153,121  compared to net noncash  charges of $937,852
during the six months ended June 30, 2001.  Such noncash  amounts are  primarily
related  to  the  valuation  of  stock-based  compensation  in  accordance  with


                                       16
<PAGE>

Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  ("APB No. 25").  Certain  options are subject to the  variable  plan
requirements of APB No. 25, as they were repriced,  and therefore,  compensation
expense is recognized for changes in the fair value of our common stock. Noncash
charges for  professional  fees for the six months ended June 30, 2002 and 2001,
were  $570,016  and  $603,110,   respectively,   resulting  primarily  from  the
amortization  of  deferred  costs  associated  with the  issuance of warrants to
purchase common stock to various financial, marketing and technical consultants.
The value of substantially  all of such common stock purchase  warrants has been
recorded in accordance with the Black-Scholes pricing methodology.

Interest  income for the six months  ended June 30,  2002 and 2001  amounted  to
$31,499 and $357,724,  respectively. Such amounts were earned primarily from our
investments in highly liquid  commercial  paper and money fund accounts.  During
the six months ended June 30, 2002 and 2001,  interest and other financing costs
were $369,745 and $222,687,  respectively. Such costs were incurred primarily in
connection  with the $20 million line of credit  facility  with  Hewlett-Packard
Company.

Basic and  diluted  loss per share was $1.19 for the six  months  ended June 30,
2002  compared to $1.32 per share for the six months  ended June 30,  2001.  The
weighted average shares outstanding increased to 6,389,140 at June 30, 2002 from
5,750,118 at June 30, 2001.

CAPITAL RESOURCES AND LIQUIDITY

In May 2000,  Chase  Securities  Inc.,  acting as placement agent for SmartServ,
completed  a private  placement  of 353,535  shares of common  stock at $49.50 a
share.  The net proceeds of the placement of  $16,750,000  were used for general
working capital requirements.

In May 2000, we entered into a Business Alliance Agreement with  Hewlett-Packard
Company whereby the companies agreed to jointly market their respective products
and  services  and  to  work  on  the  build-out  of  SmartServ's  domestic  and
international infrastructure. In furtherance of these objectives Hewlett-Packard
provided us with a line of credit of up to  $20,000,000  for the  acquisition of
approved  hardware,  software  and  services.  As of  September  28,  2001,  the
expiration  date  of the  facility,  Hewlett-Packard  Company  had  advanced  us
$6,723,156  thereunder.  The debt is  evidenced  by a secured  note,  bearing an
interest rate of 11%, may be converted into our common stock at $33.56 per share
and matures on September 28, 2003.

During the period  January 1, 2000 through June 30,  2002,  we issued  1,687,580
shares of common  stock to  investors  upon the exercise of warrants to purchase
such shares. Proceeds from the exercise of these warrants were $3,257,700.

In June 2002, First Albany Corporation, acting as placement agent for SmartServ,
completed  a private  placement  of  785,714  shares of common  stock at $1.40 a
share.  The net  proceeds of the  placement  of  $840,000  were used for general
working capital requirements.  Additionally, the Company issued to the investors
warrants, callable under certain conditions, for the purchase of an aggregate of
1,428,571 shares of common stock at an exercise price of $1.40 per share through
the expiration  date on June 5, 2007, as well as  non-callable  warrants for the
purchase of an aggregate of 196,429  shares of common stock at an exercise price
of $1.47 per share through June 5, 2007. In the event the Investors exercise the
callable warrants,  they will receive non-callable  warrants for the purchase of
an aggregate of 357,142 shares of common stock at an exercise price of $1.47 per
share. Such non-callable warrants expire three years from the date of issuance.

The  economic  downturn  and its impact on the  telecommunications  industry has
resulted in delays in the build-out of high speed data friendly carrier networks
and  availability  of  data-enabled  wireless  devices  causing  the  market for
SmartServ's  financial data and transaction services to be lackluster until now.
Such delays have resulted in the  Company's  inability to implement its business
plan and related marketing


                                       17
<PAGE>

strategies.  Consequently,  the  Company  is in need of  additional  capital  to
compensate  for such  delays  and their  impact on the  Company's  inability  to
generate revenues.  The Company has engaged investment bankers to assist it with
the sale of equity to private  investors that  understand the wireless  industry
and the current state of the technology; however, no assurance can be given that
the Company  will be able to raise  additional  capital on  satisfactory  terms.
Should the Company be unable to raise  additional  equity,  it will be forced to
seek a merger or cease operations.

The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company  incurred a net
loss of  $7,571,360  for the six  months  ended  June  30,  2002,  a net loss of
$14,819,860  for the year ended December 31, 2001, and net losses of $30,993,559
and  $7,124,126  for the  years  ended  June 30,  2000 and  1999,  respectively.
Additionally,  it had an  accumulated  deficit of  $72,393,193 at June 30, 2002.
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.

As carriers, such as Verizon Wireless, AT&T Wireless and Cingular,  complete the
build-out  of high speed data  friendly  networks (a process  that is  currently
underway),  management  believes that the demand for the Company's products will
increase  from the  enterprise  customer,  as well as the  carriers  themselves.
Management  also believes  that the  combination  of additional  capital and the
successful  execution of its business plan will generate sufficient revenues and
cash  flow  from  operations  to  enable  the  Company  to  meet  its  operating
requirements. No assurance can be given that such goals will be obtained or that
any expected revenues or cash flows will be achieved.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

The preparation of the  consolidated  financial  statements,  in conformity with
accounting  principles  generally  accepted in the United States,  requires that
management make critical decisions  regarding  accounting policies and judgments
concerning their  application.  Materially  different  amounts could be reported
under different circumstances and conditions.

Capitalized Software Development Costs
--------------------------------------
In  connection  with certain  contracts  entered into between  SmartServ and its
customers,  as well as other development projects, the Company capitalizes costs
related  to  certain  product  enhancements  and  application  development.  The
determination of related  estimated useful lives and whether or not these assets
are impaired involves significant  judgments.  Changes in strategy and/or market
conditions could significantly impact these judgments and require adjustments to
recorded asset balances.

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

Forward-looking  statements in this document and those made from time-to-time by
our  employees  are  made  under  the  safe  harbor  provisions  of the  Private
Securities Litigation Reform Act of 1995.  Forward-looking statements concerning
future plans or results are necessarily  only estimates and actual results could
differ  materially  from  expectations.  Certain  factors  that  could  cause or
contribute  to such  differences  include,  and are not  limited  to,  potential
fluctuations in quarterly results, the size and timing of awards and performance
on contracts,  dependence on large  contracts and a limited number of customers,
dependence on wireless and/or  internet  networks of  third-parties  for certain
products and services, lengthy sales and implementation cycles, availability and
cost of key  components,  market  acceptance  of new or  enhanced


                                       18
<PAGE>

products  and  services,   proprietary   technology  and  changing   technology,
competitive conditions, system performance,  management of growth, the risk that
our current and future  products and services may contain  errors or be affected
by technical  problems that would be difficult and costly to detect and correct,
dependence on key personnel and general  economic and political  conditions  and
other factors affecting spending by customers, and other risks described in this
Quarterly  Report on Form 10-QSB and our other filings with the  Securities  and
Exchange Commission.











                                       19
<PAGE>


PART 2. OTHER INFORMATION

                             SMARTSERV ONLINE, INC.

ITEM 1. LEGAL PROCEEDINGS

On or about June 4, 1999,  Michael Fishman,  our former Vice President of Sales,
commenced an action against us, Sebastian E. Cassetta (our Chairman of the Board
and Chief Executive  Officer),  Steven Francesco (our former President) and four
others  in  the  Connecticut   Superior  Court  for  the  Judicial  District  of
Stamford/Norwalk at Stamford alleging breach of his employment 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.  The fraud and misrepresentation  claims have
been  dismissed.  Plaintiff has responded to the  counterclaim  and discovery is
proceeding.  Although we are vigorously  defending this action,  there can be no
assurance that we will be successful.

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York.  The  complaint  alleges  that on or about  August 19, 1999,
Commonwealth and SmartServ  entered into an engagement  letter pursuant to which
Commonwealth was to provide financial  advisory and investment  banking services
to SmartServ in connection  with a possible  combination  between  SmartServ and
Data  Link  Systems   Corporation.   The  engagement   letter   provided  for  a
nonrefundable  fee of  $15,000  payable in cash or common  stock at  SmartServ's
option. The complaint alleges that SmartServ elected to pay the fee in stock and
seeks  13,333  shares  of  common  stock or at least  $1,770,000  together  with
interest and costs. In our answer to the complaint,  we have denied the material
allegations of the complaint, including the allegation that we elected to pay in
stock.  Discovery  has  commenced.  Although we are  vigorously  defending  this
action, there can be no assurance that we will be successful.

While we intend to vigorously defend these actions,  the unfavorable  outcome of
either  such  action  could  have a  material  adverse  effect on our  financial
condition, results of operations and cash flows.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In March 2002, 39 Prepaid  Warrants were  converted  into an aggregate of 27,857
shares of common stock. No sales  commissions  were paid in connection with such
conversion.  The  shares  were  issued  in  reliance  upon  the  exemption  from
registration provided by Section 3 (a) (9) of the Securities Act.

In April 2002,  SmartServ  issued a warrant to purchase  an  aggregate  of 5,000
shares  of  common  stock to  Pertti  Johansson  as  partial  consideration  for
consulting  services to be provided to SmartServ.  The warrant is exercisable at
an  exercise  price of $5.38 per  share,  vests  equally on the first and second
anniversaries,  and expires on April 29, 2005. No sales commissions were paid in
connection with such  transaction.  This warrant was issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

In April 2002,  SmartServ  issued a warrant to purchase an  aggregate  of 10,000
shares of common stock to Jeffrey Braile as partial consideration for consulting
services to be provided to SmartServ.  The warrant is exercisable at an exercise
price of $5.01 per share and  expires on April 29,  2005.  No sales  commissions


                                       20
<PAGE>

were paid in  connection  with such  transaction.  This  warrant  was  issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.

In May 2002, SmartServ issued a warrant to purchase an aggregate of 2,000 shares
of common stock to Pertti  Johansson  as partial  consideration  for  consulting
services to be provided to  SmartServ  as a member of its  Advisory  Board.  The
warrant is  exercisable  at an exercise  price of $5.01 per share and expires on
April  29,  2005.  No  sales  commissions  were  paid in  connection  with  such
transaction.  This  warrant  was  issued in  reliance  upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

In June 2002,  SmartServ issued 785,714 shares of common stock to two accredited
investors  ("Investors") at a purchase price of $1.40 per share.  Gross proceeds
from  this  transaction   amounted  to  $1,100,000.   First  Albany   Securities
Corporation,   the  placement  agent,  received  a  commission  of  $66,000  and
reimbursement of direct expenses of $2,000 in connection with this  transaction.
Additionally,  the Company issued the Investors warrants, callable under certain
conditions, for the purchase of an aggregate of 1,428,571 shares of common stock
at an exercise price of $1.40 per share through the  expiration  date on June 5,
2007,  as well as  non-callable  warrants  for the  purchase of an  aggregate of
196,429  shares of common stock at an exercise  price of $1.47 per share through
June 5, 2007.  The shares and the  warrants  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)     Exhibits:

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

(b)     REPORTS ON FORM 8-K

        The Company did not file any reports on Form 8-K during the three months
        ended June 30, 2002.













                                       21
<PAGE>

                             SMARTSERV ONLINE, INC.

                                   SIGNATURES

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

                                        SmartServ Online, Inc.
                                        (Registrant)

                                        By:


Date: August 14, 2002                   /S/  SEBASTIAN E. CASSETTA
                                        ------------------------------------
                                             Sebastian E. Cassetta

                                             Chairman of the Board & Chief
                                             Executive Officer

Date: August 14, 2002                   /S/  THOMAS W. HALLER
                                        ------------------------------------
                                             Thomas W. Haller
                                             Sr. Vice President, Chief Financial
                                             Officer & Treasurer






                                       22


<PAGE>

                                 EXHIBIT INDEX

Exhibit         Description
-------         -----------

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