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

                                   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 DECEMBER 31, 1996

                         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  PERIODS THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X]   NO [_]

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


THE NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF FEBRUARY
10, 1996 WAS 3,695,000.


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

<PAGE>

                             SMARTSERV ONLINE, INC.

                                   FORM 10-QSB

                                      INDEX





PART 1.   FINANCIAL INFORMATION

Item 1.   Financial Statements

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

          Statements of Operations - three months ended December 31, 
          1996 and 1995 and six months ended December 31, 1996 and
          1995 (unaudited)....................................................3

          Statement of Changes in Stockholders' Equity - six months
          ended December 31, 1996 (unaudited).................................4

          Statements of Cash Flows - three months ended December 31, 
          1996 and 1995 and six months ended December 31, 1996 
          and 1995 (unaudited)................................................5

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

Item 2.   Management's Discussion and Analysis or Plan of Operation...........9


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings..................................................13

Item 6.   Exhibits and Reports on Form 8-K...................................13

          Signatures.........................................................14

                                       1

<PAGE>
                             SMARTSERV ONLINE, INC.

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                DECEMBER 31,     JUNE 30,
                                                                    1996           1996
                                                                -----------    -----------
                                                                (Unaudited)
<S>                                                             <C>            <C>        
ASSETS
Current assets
   Cash and cash equivalents                                    $ 1,237,851    $ 3,460,850
   Accounts receivable                                              170,392         57,990
   Inventory                                                         30,000           --
   Prepaid expenses and other receivables                           155,436         68,310
                                                                -----------    -----------
Total current assets                                              1,593,679      3,587,150
                                                                -----------    -----------

Property and equipment                                              439,316        258,899
                                                                -----------    -----------

Other assets
   Deferred charges                                                  45,000         63,000
   Security deposit                                                  81,218         81,218
                                                                -----------    -----------
                                                                    126,218        144,218
                                                                -----------    -----------

Total Assets                                                    $ 2,159,213    $ 3,990,267
                                                                ===========    ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Accounts payable and accrued expenses                        $   531,320    $   482,851
   Payroll taxes payable                                             21,489         14,901
   Salaries payable                                                  54,630         44,654
   Deferred revenues                                                 20,000           --
                                                                -----------    -----------
Total current liabilities                                           627,439        542,406
                                                                -----------    -----------

STOCKHOLDERS' EQUITY
Common stock - $.01 par value
   Authorized - 15,000,000 shares
   Issued and outstanding - 3,695,000 shares at June 30, 1996
       and December 31, 1996                                         36,950         36,950
Additional paid-in capital                                        8,946,592      8,758,299
Accumulated deficit                                              (7,451,768)    (5,347,388)
                                                                -----------    -----------
Total stockholders' equity                                        1,531,774      3,447,861
                                                                -----------    -----------

Total Liabilities and Stockholders' Equity                      $ 2,159,213    $ 3,990,267
                                                                ===========    ===========
</TABLE>

See accompanying notes.

                                       2
<PAGE>


                             SMARTSERV ONLINE, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                THREE MONTHS                   SIX MONTHS
                                              ENDED DECEMBER 31             ENDED DECEMBER 31
                                         --------------------------    --------------------------
                                             1996           1995           1996           1995
                                         -----------    -----------    -----------    -----------
<S>                                      <C>            <C>            <C>            <C>      
Revenues                                 $   283,257    $       --     $   297,109           --
                                         -----------    -----------    -----------    -----------

Costs and expenses:
   Costs of revenues                         660,116           --        1,020,067           --
   Product development expenses                 --          110,176           --          282,723
   Selling, general and administrative
      expenses                               953,835        239,595      1,440,899        408,252
                                         -----------    -----------    -----------    -----------
   Total costs and expenses                1,613,951        349,771      2,460,966        690,975
                                         -----------    -----------    -----------    -----------

Loss from operations                      (1,330,694)      (349,771)    (2,163,857)      (690,975)
                                         -----------    -----------    -----------    -----------

Other income (expense):
   Interest income                            24,846           --           65,185           --
   Interest expense                           (2,695)      (166,356)        (5,708)      (218,291)
                                         -----------    -----------    -----------    -----------
                                              22,151       (166,356)        59,477       (218,291)
                                         -----------    -----------    -----------    -----------

Net loss                                 $(1,308,543)   $  (516,127)   $(2,104,380)   $  (909,266)
                                         ===========    ===========    ===========    ===========

Net loss per share (Note 2)              $     (0.35)   $     (0.28)   $     (0.57)   $     (0.49)
                                         ===========    ===========    ===========    ===========

Weighted average shares outstanding
   (Note 2)                                3,695,000      1,840,000      3,695,000      1,840,000
                                         ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes.

                                       3
<PAGE>

                             SMARTSERV ONLINE, INC.

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                       SIX MONTHS ENDED DECEMBER 31, 1996
                                   (UNAUDITED)

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

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

Net loss for the period                     --            --            --      (2,104,380)    (2,104,380)
                                     -----------   -----------   -----------   -----------    -----------

Balance at December 31, 1996           3,695,000   $    36,950   $ 8,946,592   $(7,451,768)   $ 1,531,774
                                     ===========   ===========   ===========   ===========    ===========
</TABLE>

See accompanying notes.


                                       4

<PAGE>

                             SMARTSERV ONLINE, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS                   SIX MONTHS
                                                          ENDED DECEMBER 31             ENDED DECEMBER 31
                                                     --------------------------    --------------------------
                                                        1996           1995           1996           1995
                                                     -----------    -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>            <C>         
OPERATING ACTIVITIES
Net loss                                             $(1,308,543)   $  (516,127)   $(2,104,380)   $  (909,266)
Adjustments to reconcile net loss to net cash used
in operating activities:
    Depreciation and amortization                         21,425         12,383         38,326         15,004
    Changes in market value of
    employee options                                     224,555           --          188,293           --
    Accretion and noncash charges
    for interest expense                                    --           68,137           --           68,137
    Amortization of deferred charges                       9,000           --           18,000           --
       Other changes that provided (used) cash
       Accounts receivable                              (111,360)       (36,087)      (112,402)       (36,087)
       Inventories                                       (30,000)         2,572        (30,000)           596
       Prepaid expenses and other receivables            (28,545)        (9,368)       (87,126)        (5,940)
       Accounts payable and accrued liabilities          154,748       (127,416)        48,469        (30,175)
       Accrued interest                                     --           70,905           --          122,840
       Payroll taxes payable                               4,386       (113,384)         6,588        (85,693)
       Salaries payable                                   21,779         16,385          9,976          1,231
       Deferred revenues                                  20,000           --           20,000           --
                                                     -----------    -----------    -----------    -----------
    Net cash used in operating activities             (1,022,555)      (632,000)    (2,004,256)      (859,353)
                                                     -----------    -----------    -----------    -----------

INVESTING ACTIVITIES
Purchase of equipment                                   (119,570)       (19,602)      (218,743)       (32,476)
Software development costs                                  --           (2,073)          --           (5,149)
                                                     -----------    -----------    -----------    -----------
    Net cash used in investing activities               (119,570)       (21,675)      (218,743)       (37,625)
                                                     -----------    -----------    -----------    -----------

FINANCING ACTIVITIES
Due from officers, net                                      --            2,350           --           15,653
Proceeds from the issuance of notes                         --          980,000           --          980,000
Proceeds from the issuance of warrants                      --           20,000           --           20,000
Repayment of notes                                          --          (25,000)          --          (25,000)
Common stock subscribed                                     --             --             --          230,000
Deferred financing costs                                    --         (272,553)          --         (272,553)
                                                     -----------    -----------    -----------    -----------
    Net cash provided by financing activities               --          704,797           --          948,100
                                                     -----------    -----------    -----------    -----------

Increase (decrease) in cash and cash equivalents      (1,142,125)        51,122     (2,222,999)        51,122
Cash and cash equivalents - beginning of period        2,379,976           --        3,460,850           --
                                                     -----------    -----------    -----------    -----------

Cash and cash equivalents - end of period            $ 1,237,851    $    51,122    $ 1,237,851    $    51,122
                                                     ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes.


                                       5
<PAGE>

                             SMARTSERV ONLINE, INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                DECEMBER 31, 1996



1. ORGANIZATION

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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION 
--------------------- 
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information,
the instructions of Form 10-QSB and Rule 310 of Regulation SB. The balance sheet
at June 30, 1996 has been derived from the audited financial  statements at that
date,  but does not include all of the  information  and  footnotes  required by
generally accepted accounting principles for complete financial statements.  The
financial  statements  should be read in conjunction  with the Company's  Annual
Report on Form  10-KSB for the year ended June 30,  1996.  In the opinion of the
Company, all adjustments (consisting of normal recurring accruals) necessary for
a fair  presentation  have been made.  Results of operations  for the six months
ended December 31, 1996 are not necessarily indicative of those expected for the
year ending June 30, 1997.

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

The  market  for  online  information  and  transactional   services  is  highly
competitive and subject to rapid innovation and technological  change,  shifting
consumer  preferences  and  frequent  new  service  introductions.  The  Company
believes  that  potential  new  competitors,   including  large  multimedia  and
information  systems  companies,  are  increasing  their  focus  on  transaction
processing. Increased competition in the market for the Company's services could
materially  and  adversely  affect the Company's  results of operations  through
price reductions and loss of potential  market share.  The Company's  ability to
compete in the future depends on its ability to maintain the  technological  and
performance advantages of its current distribution platform and to introduce new
applications that achieve market acceptance.



                                       6
<PAGE>
BASIS OF PRESENTATION (CONTINUED)
----------------------------------

Management  believes  that the  Company's  primary  source of  revenues  will be
derived from consumers who purchase the services through its Strategic Partners.
The Company has also  commenced  development  of a direct  subscriber  base.  At
December 31,  1996,  the Company had a subscriber  base of  approximately  1,500
users which is projected to grow to approximately 14,000 users by June 30, 1997;
however,  there can be no assurance  that the  Company's  product  offering will
continue to be accepted in the marketplace.

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

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

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


3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                         DECEMBER 31,        JUNE 30,
                                             1996              1996
                                         ------------      ------------
Data processing equipment                   $ 442,587         $ 280,814
Office furniture and equipment                 68,854            37,051
Display equipment                               9,635             9,635
Leasehold improvements                         25,167              --
                                         ------------      ------------

                                              546,243           327,500

Accumulated depreciation                     (106,927)          (68,601)
                                         ============      ============
                                            $ 439,316         $ 258,899
                                         ============      ============

                                       7
<PAGE>



4. COMMITMENTS

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

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


5. EMPLOYEE STOCK OPTION PLAN

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

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

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

         Granted                           424,975         5.06  -     6.25
         Exercised                               0         0     -     0
         Canceled                         (313,275)        5.06  -     7.08
                                          --------        ------------------
Balance at December 31, 1996               423,250       $ 5.06  - $   7.08
                                          --------        ------------------

At December 31, 1996,  there were 226,750  shares  available for grant under the
Plan.

In the  financial  statements  for the six month and three month  periods  ended
December  31,  1996,  the Company  recorded  non-cash  charges of  $188,293  and
$224,555, respectively,  reflecting the compensatory nature of the option grants
in  accordance  with APB  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
Employees."

                                       8
<PAGE>



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


PLAN OF OPERATION

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

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

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

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

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

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



                                       9
<PAGE>

Management   anticipates   that  staffing   requirements   associated  with  the
implementation of its plan of operation will result in the addition of a minimum
of 6 to 8 personnel through the fiscal year ending June 30, 1997. Such personnel
will be added to assist with the programming requirements of Strategic Partners'
product offerings and for customer support.


RESULTS OF OPERATIONS

During  the  year  ended  June 30,  1996,  the  Company  was in the  process  of
completing   its   information   platform  and   communications   software  and,
accordingly,  did not generate any  significant  revenues  from  operations.  In
September  1996,  the Company  commenced a national  advertising  campaign in an
effort to increase the number of direct subscribers to the SmartServ information
platform,  and to stimulate  awareness of the Company's name in the marketplace.
At December 31, 1996, the Company had approximately 1,500 users online.

THREE MONTHS ENDED DECEMBER 31, 1996 VS. THREE MONTHS ENDED DECEMBER 31, 1995

Total  revenues  during  the three  months  ended  December  1996 were  $283,257
compared to $0 during the three months ended  December  1995.  Revenues from the
sale of the Company's information services were $40,834, while revenues from the
sale of related  telephone  equipment  for the  delivery  of these  services  to
customers were $97,489. Design, development and implementation services revenues
associated with the Company's  arrangement with Schroder Wertheim were $144,934.
During the comparable 1995 quarter,  the Company received design and development
fees of $48,000 which were offset against product  development  expenses because
the Company was considered a development stage enterprise.

The net loss increased to $1,308,543 compared to $516,127 in 1995 as a result of
the  Company's  efforts to build an  infrastructure  capable of  supporting  its
operations  and  the  marketing  and  advertising  of  its  information  product
offering, as well as the cash constraints  experienced by the Company during the
1995 period.

With the Company's  recent  departure from the  development  stage,  it incurred
costs of  revenues  of  $660,116,  consisting  primarily  of  salaries,  systems
consultants, and information and communication costs. Included therein, however,
was a non-cash  charge of $89,000 for the change in the market value of employee
stock options.  During the  corresponding  period of the prior year, the Company
incurred  product  development  expenses of $110,176,  consisting  primarily of
salaries.  Such costs were incurred in connection  with the  development  of the
Company's information platform and communications delivery system.

Selling,  general and  administrative  costs  increased to $953,853 in 1996 from
$239,595  in 1995 as a result  of the  increase  in sales and  customer  support
personnel,  rent for  additional  office space,  and  marketing and  advertising
expenditures.  Such marketing and  advertising  costs incurred  during the three
months ended December 1996 were approximately $350,000. Additionally, a non-cash
charge of $135,000 for the change in market value of employee  stock options was
included in selling,  general and  administrative  expenses for the three months
ended December 1996.

Interest  income for the three  months  ended  December  31,  1996  amounted  to
$24,846.  Such amounts were earned  primarily from the Company's  investments in
highly  liquid  commercial  paper.  Interest  expense for the three months ended
December  31,  1996 was  incurred  in  connection  with an  insurance  financing
arrangement and amounted to $2,695.  Interest expense for the three months ended
December 31, 1995, incurred in connection with the senior and subordinated notes
outstanding during the period, was $166,356.

                                       10

<PAGE>


SIX MONTHS ENDED DECEMBER 31, 1996 VS. SIX MONTHS ENDED DECEMBER 31, 1995

During  the  six  months  ended  December   1996,  the  Company   commenced  the
implementation  of its marketing plan and recorded revenues of $152,175 from the
sale of its  information  services  and  the  related  screen-based  telephones.
Additionally,  the Company  recorded  revenues  of  $144,934  related to design,
development and  implementation  services  associated with its arrangement  with
Schroder Wertheim.

Also  during the six months  ended  December  31,  1996,  the  Company  incurred
selling,  general and  administrative  expenses  of  $1,440,899,  primarily  for
salaries,  facilities,  marketing costs and professional fees. Selling,  general
and administrative  costs increased by $1,032,647 over the corresponding  period
of  the  prior  year  as  a  result  of  the  Company's   efforts  to  build  an
infrastructure  capable of  supporting  its  operations  and the  marketing  and
advertising of its information product offering. Advertising and marketing costs
amounted to  approximately  $400,000,  while  salary  costs  included a non-cash
charge of  approximately  $115,000  related to the  change in value of  employee
stock options. The necessary funds to support these efforts were provided by the
Company's Initial Public Offering of securities in March 1996.

With the Company's  recent  departure from the  development  stage,  it incurred
costs of revenues of  $1,020,067,  consisting  primarily of  salaries,  systems'
consultants,   and  information  and   communication   costs.  Of  this  amount,
approximately 73,000 represents a non-cash charge for the change in market value
of employee stock options.  During the  corresponding  period of the prior year,
the  Company  incurred  product  development  expenses  of  $282,723  consisting
primarily of salaries.

Interest  income for the six months ended December 31, 1996 amounted to $65,185.
Such amounts were earned  primarily  from the  Company's  investments  in highly
liquid commercial paper.  Interest expense for the six months ended December 31,
1996 was incurred in  connection  with an insurance  financing  arrangement  and
amounted to $5,708. Interest expense for the six months ended December 31, 1995,
incurred in connection with the senior and subordinated notes outstanding during
the period, was $218,291.




                                       11
<PAGE>


CAPITAL RESOURCES AND LIQUIDITY

The Company has  commenced  its  marketing  efforts  and  generated  revenues of
approximately $280,000 during the quarter ended December 31, 1996. Revenues from
the Company's  sales and marketing  efforts are not expected to be sufficient to
support operations until the quarter ending September 1997.

The  Company  estimates  that it has cash  resources  and  access to  sufficient
liquidity  to  allow  it to fund  its  operations  through  September  1997.  In
connection  therewith,  the  Company  has  received a Term  Sheet from  Rickel &
Associates,  the  Company's  Investment  Advisor,  with  respect  to  a  private
placement of up to $2,000,000 in convertible  debentures.  Such  debentures bear
interest  at 10% per annum and mature  three  years  from the date of  issuance.
There can be no assurance,  however,  that this transaction will be consummated.
The Company anticipates that these funds will be used for additional programming
personnel  necessary to integrate  the Company's  software with the  information
systems of its Strategic Partners,  for marketing support personnel necessary to
fulfill  subscriber needs and inquiries,  and for the expansion of the Company's
sales and marketing  efforts.  It is also anticipated that hardware and software
purchases of  approximately  $100,000 will be required  through the remainder of
the year  ending  June 30,  1997.  The  Company  expects to augment  its capital
formation  through the  realization of revenues from the sale of its information
and  transactional  services;  however,  there  can  be no  assurance  that  the
Company's product offering will continue to be accepted in the marketplace.

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

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

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

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



                                       12
<PAGE>


PART 2.  OTHER INFORMATION


                             SMARTSERV ONLINE, INC.



ITEM 1.    LEGAL PROCEEDINGS

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

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


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)    The following exhibits are included herein:

           Exhibit 11 - Statement re: computation of earnings per share

           Exhibit 27 - Financial Data Schedule

(b) The  Company  did not file any  reports on Form 8-K during the three  months
ended December 31, 1996.


                                       13

<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:  FEBRUARY 13, 1997                    /S/  SEBASTIAN E. CASSETTA
       ------------------                   --------------------------
                                            Sebastian E. Cassetta
                                            Chairman of the Board, Chief 
                                            Executive Officer




Date:  FEBRUARY 13, 1997                    /S/  THOMAS W. HALLER
       ------------------                   ---------------------
                                            Thomas W. Haller
                                            Chief Financial Officer, Treasurer

                                       14