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



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

                                   FORM 10-QSB

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


                  For the quarterly period ended March 31, 2003
                                                 --------------

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

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

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

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


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


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.  Yes X  No
                                                              ---   ---

The number of shares of common stock, $.01 par value,  outstanding as of May 28,
2003 was 12,007,912.

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

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



<PAGE>


                             SmartServ Online, Inc.

                                   Form 10-QSB

                                      Index





<TABLE>
<CAPTION>

<S>           <C>                                                                                                <C>
PART 1.       FINANCIAL INFORMATION

Item 1.       Consolidated Financial Statements

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

              Consolidated Statements of Operations - three months ended March 31, 2003
              and 2002 (unaudited)................................................................................4

              Consolidated Statement of Changes in Stockholders' Equity (Deficiency) - three months
              ended March 31, 2003 (unaudited)....................................................................6

              Consolidated Statements of Cash Flows - three months ended March 31, 2003 and
              2002 (unaudited)....................................................................................7

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

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations..........................................................................18

Item 3.       Controls and Procedures............................................................................24

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings..................................................................................25

Item 2.       Changes in Securities and Use of Proceeds..........................................................25

Item 6.       Exhibits and Reports on Form 8-K...................................................................28

              Signatures.........................................................................................29


</TABLE>

                                       1
<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>


                                                                               MARCH 31,              DECEMBER 31,
                                                                                 2003                     2002
                                                                          --------------------     -------------------
                                                                              (UNAUDITED)
<S>                                                                         <C>                      <C>

ASSETS
Current assets
   Cash                                                                     $       21,749           $       154,759
   Accounts receivable                                                             140,461                    55,907
   Accrued interest receivable                                                      40,951                    50,658
   Prepaid compensation                                                            117,500                   117,500
   Prepaid expenses                                                                 72,252                   164,258
   Deferred financing costs                                                        136,098                        --
                                                                          --------------------     -------------------
Total current assets                                                               529,011                   543,082
                                                                          --------------------     -------------------

Property and equipment, net                                                      1,201,272                 1,573,978

Other assets
   Capitalized software development costs, net of
      accumulated amortization of $300,562 at
      March 31, 2003 and $208,681 at December 31, 2002                             796,586                   888,467
   Security deposits                                                               209,974                   238,690
   Notes receivable from officer, net of an allowance for
     uncollectibility of $664,640                                                       --                        --
   Prepaid Compensation                                                             78,333                   107,708
                                                                          --------------------     -------------------
                                                                                 1,084,893                 1,234,865
                                                                          --------------------     -------------------

Total Assets                                                                $    2,815,176           $     3,351,925
                                                                          ====================     ===================


</TABLE>



                                       2
<PAGE>


                             SMARTSERV ONLINE, INC.

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>


                                                                               MARCH 31,              DECEMBER 31,
                                                                                 2003                     2002
                                                                          --------------------     -------------------
                                                                              (UNAUDITED)
<S>                                                                          <C>                     <C>

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
   Accounts payable                                                          $    1,900,396          $     1,307,342
   Accrued liabilities                                                              347,721                  476,346
   Accrued salaries                                                                 430,782                  295,437
   Note payable                                                                     733,909                  500,000
                                                                          --------------------     -------------------
Total current liabilities                                                         3,412,808                2,579,125
                                                                          --------------------     -------------------

Deferred revenues                                                                   162,600                  193,294
Deferred lease costs                                                                243,494                  242,300
Accounts payable - noncurrent                                                            --                  163,907

Commitments and Contingencies - Note 9

Stockholders' Equity (Deficiency)
Preferred stock - $0.01 par value
   Authorized - 1,000,000 shares
   Issued and outstanding - None                                                         --                       --
Common stock - $.01 par value
   Authorized - 40,000,000 shares
   Issued and outstanding - 11,949,088 shares at March 31, 2003 and
      11,436,240 shares at December 31, 2002                                        119,490                  114,362
Additional paid-in capital                                                       74,700,977               73,527,939
Notes receivable from officers                                                     (609,996)                (609,996)
Accumulated deficit                                                             (75,214,197)             (72,859,006)
                                                                          --------------------     -------------------
Total stockholders' equity (deficiency)                                          (1,003,726)                 173,299
                                                                          --------------------     -------------------

Total Liabilities and Stockholders' Equity (Deficiency)                     $     2,815,176          $     3,351,925
                                                                          ====================     ===================

</TABLE>

See accompanying notes.

                                       3
<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                   THREE MONTHS ENDED MARCH 31
                                                                            ------------------------------------------
                                                                                   2003                  2002
                                                                            -------------------    -------------------
<S>                                                                           <C>                    <C>


Revenues                                                                      $      230,987         $       28,821
                                                                            -------------------    -------------------

Costs and expenses:
   Costs of services                                                              (1,216,831)            (1,531,526)
   Sales and marketing expenses                                                     (276,534)            (1,243,354)
   General and administrative expenses                                              (999,180)            (1,021,550)
   Stock-based compensation                                                          (28,194)              (172,015)
                                                                            -------------------    -------------------

Total costs and expenses                                                          (2,520,739)            (3,968,445)
                                                                            -------------------    -------------------

Loss from operations                                                              (2,289,752)            (3,939,624)

Other income (expense)
   Interest income                                                                     4,532                 22,684
   Interest expense and other financing costs                                       (375,886)              (182,241)
   Gain from extinguishment of debt                                                  305,822                     --
   Foreign exchange gain (loss)                                                           93                (10,166)
                                                                            -------------------    -------------------

                                                                                     (65,439)              (169,723)
                                                                            -------------------    -------------------

Net loss                                                                      $   (2,355,191)        $   (4,109,347)
                                                                            ===================    ===================

Basic and diluted loss per common share                                       $        (0.20)        $        (0.66)
                                                                            ===================    ===================

Weighted average shares outstanding - basic and diluted                           11,738,809              6,255,960
                                                                            ===================    ===================

</TABLE>


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


                                       4

<PAGE>


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

                                                            THREE MONTHS ENDED MARCH 31

                                                   ----------------------------------------------
                                                         2003                       2002
                                                   ---------------------    ---------------------
<S>                                                    <C>                  <C>
Costs of services                                      $          396       $          26,735

Sales and marketing expenses                                       --                       --

General and administrative expenses                           (28,590)                (198,750)
                                                   ---------------------    ---------------------

                                                       $      (28,194)        $       (172,015)
                                                   =====================    =====================
</TABLE>


See accompanying notes.

                                       5
<PAGE>


                             SMARTSERV ONLINE, INC.

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                        THREE MONTHS ENDED MARCH 31, 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>



                                                                NOTES
                                        COMMON STOCK          RECEIVABLE     ADDITIONAL
                                                    PAR          FROM          PAID-IN       ACCUMULATED
                                  SHARES           VALUE       OFFICERS        CAPITAL         DEFICIT
                                 ------------- -------------- ------------- --------------- ---------------
<S>                              <C>            <C>            <C>          <C>               <C>

Balances at December 31, 2002    11,436,240     $  114,362     $(609,996)   $ 73,527,939      $(72,859,006)


Issuance of common stock upon
  exercise of employee stock
  options                            5,749              57            --           9,595                --

Issuance of common stock upon
  exercise of warrants             383,562           3,836            --         322,191                --

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

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

Issuance of warrants related
  to debt financing                     --              --            --         273,540                --

Beneficial conversion feature
  of 10% notes                          --              --            --         406,363                --

Net loss for the period                 --              --            --              --        (2,355,191)
                                 ------------- -------------- ------------- --------------- ---------------

Balances at March 31, 2003       11,949,088     $  119,490     $(609,996)   $ 74,700,977      $(75,214,197)
                                 ============= ============== ============= =============== ===============

</TABLE>

See accompanying notes.


                                       6

<PAGE>


                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                 THREE MONTHS ENDED MARCH 31
                                                                           ----------------------------------------
                                                                                  2003                 2002
                                                                           -------------------   ------------------
<S>                                                                         <C>                   <C>
OPERATING ACTIVITIES
Net loss                                                                    $    (2,355,191)      $    (4,109,347)
Adjustments to reconcile net loss to net cash
    used for operating activities:
       Gain from extinguishment of debt                                            (305,822)                   --
       Depreciation and amortization                                                464,587               501,750
       Noncash compensation costs                                                    28,194               172,015
       Amortization of deferred financing costs                                     338,964                    --
       Amortization of deferred revenues                                           (168,694)                   --
       Changes in operating assets and liabilities
          Accounts receivable                                                       (84,554)              (62,723)
          Accrued interest receivable                                                 9,707                    --
          Prepaid expenses                                                          100,756               149,602
          Accounts payable and accrued liabilities                                  631,790                16,371
          Deferred revenues                                                         138,000                82,000
          Security deposit                                                           28,716               (16,993)
                                                                           -------------------   ------------------
    Net cash used for operating activities                                       (1,173,547)           (3,267,325)
                                                                           -------------------   ------------------

INVESTING ACTIVITIES
Purchase of equipment                                                                    --              (168,490)
Capitalization of software development costs                                             --               (71,798)
                                                                           -------------------   ------------------
    Net cash used for investing activities                                               --              (240,288)
                                                                           -------------------   ------------------

FINANCING ACTIVITIES
Proceeds from the issuance of notes and warrants - net                            1,000,000                    --
Proceeds from the issuance of common stock                                          335,537                11,945
Repayment of note payable                                                          (295,000)                   --
                                                                           -------------------   ------------------
    Net cash provided by financing activities                                     1,040,537                11,945
                                                                           -------------------   ------------------

Decrease in cash and cash equivalents                                              (133,010)           (3,495,668)
Cash - beginning of period                                                          154,759             6,532,323
                                                                           -------------------   ------------------

Cash - end of period                                                        $        21,749       $    3,036,655
                                                                           ===================   ==================

</TABLE>


See accompanying notes.

                                       7
<PAGE>


                             SMARTSERV ONLINE, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 2003



1.   NATURE OF BUSINESS

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

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

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

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  have caused  telecommunications  service  providers to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  This has  resulted  in delays  in the  build-out  of high  speed
carrier data networks and availability of data-enabled wireless devices, causing
the  market  for  SmartServ's  financial  data and  transaction  services  to be
lackluster.  In addition,  many  financial  services  firms have  curtailed  new
product  development to focus on data security and recovery.  Consequently,  the
potential demand for the Company's  products and services has been significantly
delayed.  Such  delays  have  had a very  detrimental  effect  on the  Company's
operations  and have  resulted  in the  Company's  inability  to  implement  its
business plan and related marketing strategies.  Consequently,  in May 2002, the
Company commenced an effort to realign its  infrastructure  and related overhead
to  correlate  with  reductions  in projected  revenue.  As part of this effort,
management closed the Company's UK and Hong Kong sales offices and downsized its
domestic  operations  through staff  reductions to a level sufficient to support
the  Company's  projected  operations.  In both March and May 2003,  the Company
again  reduced  its  cost  structure   through  the  termination  of  additional
personnel.  Personnel  headcount  has  been  reduced  from 66 in May 2002 to the
current level of 25. These efforts have reduced the  Company's  average  monthly
operating  expenses  from  approximately  $1,090,000 in July 2002 to $712,000 in
February 2003 to approximately  $425,000 commencing June 2003, excluding noncash
stock compensation and depreciation and amortization. As a result of the factors
identified  above,  the  Company is in need of  additional  capital to enable it
continue as a going  concern.  The following  chart  provides an analysis of the
Company's  capital  requirements  for the year ending December 31, 2003 based on
projected revenues

                                       8
<PAGE>


of $3,000,000:

               % of
              Revenue           Capital
                Goal            Required
            ------------- -----------------------

               100           $    3,300,000

                50                3,900,000

                 0                4,800,000

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

The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company has,  since its
inception,  earned limited revenues and incurred substantial recurring operating
losses,  including  net losses of  $2,355,191  for the three month  period ended
March 31, 2003,  net losses of $8,037,173  and  $14,819,860  for the years ended
December  31, 2002 and 2001,  respectively,  and net losses of  $30,993,559  and
$7,124,126   for  the  years  ended  June  30,  2000  and  1999,   respectively.
Additionally,  it had an  accumulated  deficit of $75,214,197 at March 31, 2003.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  The financial  statements do not include any adjustments to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of these uncertainties.

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

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


                                       9
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

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

                                       10
<PAGE>

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

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

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

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

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

On an  ongoing  basis,  SmartServ  reviews  the  future  recoverability  of  its
capitalized software development costs for impairment whenever events or changes
in circumstances indicate that the carrying amounts may not be recoverable. When
such  events or  changes  in  circumstances  do  occur,  an  impairment  loss is
recognized if the undiscounted future cash flows expected to be generated by the
asset are less than its carrying value. 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
---------------------------
The Company  considers  all highly  liquid  investments  with a maturity date of
three months or less when purchased to be cash equivalents.

During the three months ended March 31, 2003,  the Company issued 123,537 shares
of  common  stock to 5  vendors  in  settlement  of the  Company's  obligations,
aggregating  $164,000,  to  such  vendors.  These  transactions  are  considered
non-cash transactions for the purposes of the Statement of Cash Flows.

                                       11
<PAGE>

Interest,  debt  origination  and other  financing  costs paid  during the three
months ended March 31, 2003 and 2002 were $70,000 and $187,000, respectively.

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

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

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

ADVERTISING COSTS
-----------------
Advertising  costs are  expensed as incurred and were  approximately  $3,561 and
$107,000  during  the  three  month  periods  ended  March  31,  2003 and  2002,
respectively.

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

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

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

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

                                       12
<PAGE>

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

SmartServ's pro forma information is as follows:

<TABLE>
<CAPTION>

                                                                         THREE MONTHS ENDED MARCH 31
                                                                  -----------------------------------------
                                                                          2003                 2002
                                                                  --------------------- -------------------
<S>                                                                <C>                   <C>
Net loss as reported                                               $     (2,355,191)     $    (4,109,347)

Employee stock-based compensation included in net loss                        1,393              119,240

Employee stock-based compensation pursuant to SFAS 123                     (917,494)          (1,091,263)
                                                                  --------------------- -------------------

Proforma net loss                                                  $     (3,274,008)     $    (5,319,850)
                                                                  ===================== ===================

Basic and diluted loss per share                                           $(0.20)             $(0.66)
                                                                  ===================== ===================

Proforma basic and diluted loss per share                                  $(0.28)             $(0.85)
                                                                  ===================== ===================

</TABLE>

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

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

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

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with an Exit or Disposal Activity". SFAS No. 146 revises the accounting for exit
and  disposal  activities  under  Emerging  Issues  Task Force  Issue No.  94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (Including Certain Costs Incurred in a Restructuring)",  by
potentially  spreading  out the reporting of expenses  related to  restructuring
activities.  SFAS  No.  146 is  effective  prospectively  for  exit or  disposal
activities  initiated  after December 31, 2002. The Company adopted SFAS No. 146
on January 1, 2003, as required,  and does not believe that the adoption of this
new  standard  will  have a  material  effect  on its  consolidated  results  of
operations, financial position or cash flows.

                                       13
<PAGE>


3.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

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

                                            5,133,187                5,135,391
   Accumulated depreciation                (3,931,915)              (3,561,413)
                                      -------------------      -----------------
                                      $     1,201,272          $     1,573,978
                                      ===================      =================


4.   NOTE RECEIVABLE FROM OFFICER

In December 2000, the Company's Board of Directors  authorized the issuance of a
line of credit to Sebastian Cassetta,  SmartServ's Chief Executive Officer,  for
an amount not to exceed  $500,000.  Such amount bears interest at the prime rate
and matures on March 20, 2004.  Pursuant to the terms of the note,  interest for
the period  January 2, 2001 to June 30, 2002 has been  accrued and is payable at
maturity.  Commencing  July 1, 2002 until  maturity,  interest  shall be payable
semi-annually  in arrears on January 1st and July 1st.  The Company has received
the semi-annual interest for the period July 1, 2002 through December 31, 2002.

The financial  statements at March 31, 2003 contain a valuation  allowance for a
potential loss of $552,467,  relating to the  collectibility  of Mr.  Cassetta's
note and the interest accrued thereon through June 30, 2002.  Additionally,  the
financial  statements  contain a valuation  allowance  for a  potential  loss of
$112,173,  relating to interest earned by the Company pursuant to the restricted
stock purchase agreement between the Company and Mr. Cassetta.


5.   NOTES PAYABLE

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

In  February  2003,  the Company  issued a  convertible  note to Global  Capital
Funding Group, LP ("Global") in consideration for the receipt of $1 million. The
note  bears  interest  at the  rate  of 10% per  annum,  and is

                                       14
<PAGE>

secured by the Company's assets,  exclusive of its internally developed software
products.  The note matures on February 14, 2004, contains certain  antidilution
provisions,  and may be converted into shares of SmartServ common stock at $1.10
per share. As additional consideration,  the Company issued Global a warrant for
the purchase of 200,000 shares of its common stock at an exercise price of $1.61
per share.  The warrants have been valued in accordance  with the  Black-Scholes
pricing  methodology  and  recorded  in the  financial  statements  as  deferred
interest costs and netted against the outstanding obligation.  Deferred interest
costs are amortized  into  operations in  accordance  with the interest  method.
Alpine Capital  Partners,  Inc.  ("Alpine")  received a finder's fee of $70,000,
representing 7% of the aggregate  purchase price of the  convertible  note and a
warrant to  purchase  91,000  shares of common  stock  exercisable  at $1.61 per
share, expiring on February 14, 2005, in connection with this transaction. These
warrants  have  been  valued  in  accordance  with  the  Black-Scholes   pricing
methodology  and recorded in the financial  statements as deferred  compensation
costs.  This amount is being amortized into operations on a straight-line  basis
over  the 12  month  life of the  obligation.  Also in  connection  with the 10%
convertible  notes,  the  Company  has  recorded  a  non-cash  charge  for other
financing costs of $304,772 representing a portion of the intrinsic value of the
beneficial  conversion feature of the notes. Emerging Issues Task Force ("EITF")
Issue  No.  98-5,   "Accounting  for  Convertible   Securities  with  Beneficial
Conversion  Features or Contingently  Adjustable  Conversion Ratios" ("Issue No.
98-5") as more fully described in EITF Issue No. 00-27 "Application of Issue No.
98-5 to Certain  Convertible  Instruments",  defines the  beneficial  conversion
feature as the  non-detachable  conversion feature that is "in-the-money" at the
date of issuance. Issue No. 98-5 requires the recognition of the intrinsic value
of the conversion feature as the difference between the conversion price and the
fair value of the common stock into which the notes are convertible.  During the
quarter  ending  June 30,  2003,  the Company  will record a non-cash  charge of
$101,600  representing  the  amortization  of the  remainder of such  beneficial
conversion  feature.  In April 2003, the Company borrowed an additional $250,000
from  Global and  amended  the  convertible  note to  include  such  amount.  As
additional  consideration,  the Company issued Global a warrant for the purchase
of 20,000  shares of its common  stock at an exercise  price of $1.20 per share.
The warrants issued to Global and Alpine contain certain antidilution provisions
and expire on February 14, 2006.


6.   EQUITY TRANSACTIONS

During the three months ended March 31, 2003,  the Company issued 383,562 shares
of common  stock to  investors  upon the  exercise of warrants to purchase  such
shares. Proceeds from the exercise of these warrants were $326,000.

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

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

Obligations to Maintain Effective Registration Statements:
----------------------------------------------------------
Vertical  Ventures  Investments,  LLC holds a warrant to  purchase up to 134,853
shares of common stock that have registration rights. The Registration Statement
covering the shares underlying this warrant is no longer effective.  The Company
is required to pay a fee of $8,250 for the first month of the  deficiency  and a
fee of $16,500 for each month thereafter until the shares underlying the warrant
are registered.



                                       15
<PAGE>

Investors  in the  Company's  September  2002  Equity  Placement  hold  up to an
aggregate of 3,701,943 shares of common stock, and warrants to purchase up to an
aggregate of 1,499,723  shares of common  stock,  all with  registration  rights
requiring  the  Company  to use its  commercially  reasonable  best  efforts  to
maintain the effectiveness of the Registration  Statement covering the shares of
common stock and the shares underlying the warrants.  The Registration Statement
is no longer effective.

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


7.   STOCK-BASED COMPENSATION

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

Stock-based  compensation  for the three  months  ended  March 31, 2003 and 2002
consisted  primarily  of the  impact  of  changes  in the  market  value  of the
Company's  common stock on the value of options to purchase  common stock issued
to employees and the  amortization  of deferred costs  associated with the prior
issuance of warrants to purchase common stock to various consultants.


8.   EARNINGS PER SHARE

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

<TABLE>
<CAPTION>

                                                                          Three Months Ended March 31
                                                                  --------------------------------------------
                                                                          2003                    2002
                                                                  ---------------------  ---------------------
<S>                                                               <C>                     <C>

Numerator:
   Net loss                                                       $      (2,355,191)      $     (4,109,347)
                                                                  =====================  =====================

Denominator:
   Weighted average shares - basic and diluted                            11,738,809              6,255,960
                                                                  =====================  =====================

Basic and diluted loss per common share                           $           (0.20)      $          (0.66)
                                                                  =====================  =====================

</TABLE>

Outstanding  employee  stock options and other warrants to purchase an aggregate
of 6,296,000  and  4,032,000  shares of common stock at March 31, 2003 and 2002,
respectively,  were not  included in the  computations  of diluted  earnings per
share because the Company reported a losses for the periods and, therefore their
inclusion would be antidilutive.




                                       16
<PAGE>

9.   COMMITMENTS AND CONTINGENCIES

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


10.  SUBSEQUENT EVENT

In April 2003,  the Company  issued  58,824 shares of common stock to accredited
investors  upon the exercise of warrants to purchase such shares.  Proceeds from
the exercise of these warrants were $50,000.

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting of convertible  notes and warrants to purchase common stock ("Units")
to 8 accredited investors. Each Unit consists of a $100,000 convertible note and
a  warrant  to  purchase  200,000  shares of the  Company's  common  stock.  The
convertible  notes bear  interest  at 8% per  annum,  are  convertible  into the
Company's  common  stock at $0.744 (the average of the closing bid prices of the
Company's  common stock for the 5 days prior to the closing of the  transaction)
per share and mature on the  earlier of  November  19,  2003 or the closing of a
subsequent  equity  placement  of not less than $3  million.  The  warrants  are
exercisable  at $0.744 per share and expire on May 19,  2006.  This  transaction
represents the initial sale of a maximum of 15 Units  contemplated to be sold by
the Company ("Bridge Offering").  Spencer Trask Ventures, Inc. ("Spencer Trask")
acted as a finder for this transaction. As consideration therefor, Spencer Trask
will receive a cash fee equal to 10% of the aggregate  purchase  price of all of
the Units sold and upon receipt of approval from the NASDAQ Stock Market for the
sale of the  remaining  Units will receive (i) a warrant to purchase a number of
Units equal to 20% of the Units sold ("Finder's Warrant") and (ii) 33,333 shares
of  restricted  common  stock  per  Unit  sold.  The  Finder's  Warrant  will be
exercisable  through May 19, 2008.  Such fees are payable to Spencer  Trask upon
the closing of an aggregate of $1.2 million in the Bridge Offering. In addition,
Spencer Trask will receive a  non-accountable  expense  allowance equal to 3% of
the aggregate proceeds of all Units sold in the Bridge Offering.



                                       17
<PAGE>


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

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

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

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

Due to the substantial  expenses and negative cash flows from operations that we
have incurred,  our auditors, in their report contained in our December 31, 2002
financial  statements,  have indicated that there is substantial doubt about our
ability to continue as a going concern.  The Company has earned limited revenues
and has incurred net losses of $2,355,191 for the three month period ended March
31, 2003, net losses of $8,037,173 and  $14,819,860 for the years ended December
31, 2002 and 2001,  respectively,  and net losses of $30,993,559  and $7,124,126
for the years  ended June 30,  2000 and 1999,  respectively.  Additionally,  the
Company had an accumulated  deficit of  $75,214,197 at March 31, 2003.  Although
the Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and commitments in the normal course of business, unless we are able to increase
revenue and raise  additional  capital  from  investors,  we will not be able to
support our operations.

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

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

                                       18
<PAGE>

SmartServ's  financial data products to form a fully integrated  financial tool.
While  management  believes  that  these  relationships  are  important  to  the
Company's  success,  no  assurance  can be given  that these  customers  will be
successful  in their  marketing  efforts  or that  the  Company's  products  and
services will be well received in the marketplace.

As of May 28, 2003,  SmartServ  employed 25 people, all of whom were employed in
the United  States.  All but one were  full-time  employees.  SmartServ does not
anticipate that staffing requirements  associated with the implementation of its
plan of operation will require the addition of any people during the year ending
December 31, 2003.


RESULTS OF OPERATIONS

QUARTER ENDED MARCH 31, 2003 VERSUS QUARTER ENDED MARCH 31, 2002

During the quarter  ended March 31, 2003, we recorded  revenues of $230,987.  Of
such revenues, $208,100 were earned through our licensing agreement with Salomon
Smith Barney.  During the quarter ended March 31, 2002, we recorded  revenues of
$28,821.  Of such revenues,  $26,400 were earned through our licensing agreement
with Salomon Smith Barney. During the quarters ended March 31, 2003 and 2002, we
recognized  $168,700 and $-0-,  respectively,  from the amortization of deferred
revenues associated with this agreement.

During the  quarter  ended  March 31,  2003,  we  incurred  costs of services of
$1,216,831,  a decrease of 20.5% over the quarter  ended March 2002.  Such costs
decreased primarily due to reductions in US personnel, the reduction of computer
depreciation  and maintenance and the reduction of consulting  costs incurred in
connection  with the  development  of the Company's  systems'  architecture  and
application  platform.  Components  of the  costs of  service  category  consist
primarily of information and  communication  costs  ($148,900),  personnel costs
($576,500),   computer  hardware  leases,  depreciation  and  maintenance  costs
($323,100),   facilities   ($62,000)  and  amortization   expenses  relating  to
capitalized software development costs ($91,900). During the quarter ended March
31, 2002, we incurred costs of services of $1,531,526. Components of these costs
consisted primarily of information and communication costs ($193,000), personnel
costs  ($706,700),  systems  consultants  ($40,300),  computer  hardware leases,
depreciation  and  maintenance  costs  ($510,000),   and  amortization  expenses
relating to capitalized software development costs ($62,300). During the quarter
ended March 31, 2003 and 2002, we capitalized $-0- and $71,800, respectively, of
development costs in accordance with Statement of Financial Accounting Standards
("SFAS")  No. 86,  "Accounting  for the Costs of  Computer  Software to be Sold,
Leased or Otherwise Marketed" ("Statement No. 86").

During the  quarter  ended  March 31,  2003,  we  incurred  sales and  marketing
expenses of  $276,534,  a decrease  of 77.8% over the quarter  ended March 2002.
Such costs decreased primarily due to travel and personnel reductions associated
with the  closing  of the  Company's  Hong Kong and  London  sales  offices,  US
personnel  reductions,  reductions in advertising and trade shows and reductions
in professional  fees.  Components of the sales and marketing  category  consist
primarily of personnel costs ($205,100), professional fees ($17,800), and travel
and lodging  ($32,700).  During the quarter  ended March 31,  2002,  we incurred
advertising  and  marketing  expenses of  $1,243,354.  Components of these costs
consisted primarily of professional fees ($76,600), personnel ($602,100), travel
and lodging  ($121,600),  facilities  ($39,900) and  advertising and trade shows
($366,800).

During the quarter ended March 31, 2003, we incurred general and  administrative
expenses of $999,180,  a decrease of 2.2% over the quarter ended March 31, 2002.
Components  of the general and  administrative  category  consist  primarily  of
personnel costs ($319,200), professional fees ($331,100), facilities

                                       19
<PAGE>

($121,400),  insurance ($96,000) and computer hardware leases,  depreciation and
maintenance  costs  ($40,300).  During the  quarter  ended  March 31,  2002,  we
incurred general and administrative expenses of $1,021,550.  Components of these
costs consisted primarily for personnel costs ($336,800), facilities ($130,700),
insurance  ($145,300),  computer  hardware leases,  depreciation and maintenance
costs ($54,300) and professional fees ($257,100).

During the quarter ended March 31, 2003, the net noncash credit for  stock-based
compensation  amounted to $28,194  compared to a net noncash  charge of $172,015
during the quarter  ended March 31,  2002.  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  employee  stock options are subject to the
variable plan requirements of APB No. 25, as they were repriced,  and therefore,
compensation  expense is recognized  for changes in the fair value of our common
stock.  Noncash charges for consulting services for the quarters ended March 31,
2003 and 2002 were $29,375 and $291,255, respectively,  resulting primarily from
the  amortization  of  deferred  costs  associated  with the prior  issuance  of
warrants to purchase common stock to various financial,  marketing and technical
consultants.

Interest  income for the  quarters  ended  March 31,  2003 and 2002  amounted to
$4,532 and $22,684,  respectively.  Such amounts were earned  primarily from our
investments in money fund accounts and a note receivable from an officer. During
the quarters ended March 31, 2003 and 2002,  interest and other  financing costs
were $375,886 and $182,241,  respectively.  During the quarters  ended March 31,
2003 and 2002,  interest and other  financing  costs were incurred in connection
with the $20 million line of credit  facility with HP and the  convertible  note
issued to Global Capital in February 2003.

During the quarter ended March 31, 2003, the Company recorded a gain of $305,822
resulting  from  the  partial  repayment,  in full  settlement,  of the  amended
promissory note issued to Hewlett-Packard Company.

Basic and diluted loss per share was $0.20 for the quarter  ended March 31, 2003
compared to $0.66 per share for the quarter  ended March 31, 2002.  The weighted
average  shares  outstanding  increased  to  11,738,809  at March 31,  2003 from
6,255,960 at March 31, 2002.


CAPITAL RESOURCES AND LIQUIDITY

At March 31, 2003 and  December  31,  2002,  the Company had cash of $21,700 and
$154,800,  respectively.  Net cash used in  operations  was  $1,173,500  for the
quarter  ended March 31, 2003  compared to  $3,267,300  during the quarter ended
March 31, 2002.  The primary  reasons for this  reduction in were the  Company's
initiative to close the Hong Kong and United Kingdom sales  offices,  reduce its
US  personnel  and trim its  operations.  Other uses of cash  during the quarter
ended March 31, 2003 were primarily for the partial  repayment of our obligation
to HP in the amount of $225,000  and the  repayment  of a $70,000 note issued in
January 2003.

During the quarter ended March 31, 2003, the Company  issued a convertible  note
in the  amount of $1  million  and a note in the  amount of  $70,000  to provide
liquidity.    Additionally,   warrant   holders   provided   funds   aggregating
approximately  $336,000  through the  exercise of  warrants.  During the quarter
ended  March  31,  2002,   warrant  holders  provided  the  Company  with  funds
aggregating $12,000 upon the exercise of warrants.

In January 2000,  America First Associates Corp.,  acting as placement agent for
SmartServ,  completed a private  placement of 233,000  shares of common stock at
$15.00  per  share.  The  Company  also  completed  a  private  placement  of an
additional  100,000  shares of  common  stock at $15.00  per share  without  the

                                       20
<PAGE>

services of a placement agent. 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 these  placements  of
$21,465,400 were used for general working capital requirements.

In May 2000, we entered into a Business  Alliance  Agreement with HP whereby the
companies agreed to jointly market their respective products and services and to
work on the build-out of SmartServ's domestic and international  infrastructure.
In furtherance of these objectives HP provided us with a line of credit of up to
$20,000,000 for the acquisition of approved hardware,  software and services. As
of September 28, 2001, the expiration  date of the facility,  HP had advanced us
$6,723,156  thereunder.  In September 2002, the Company and HP amended the terms
of the promissory note to provide for the (i) reduction of SmartServ's aggregate
outstanding  principal and accrued  interest amount of $7,045,000 to $1,000,000,
(ii) return of certain unused hardware by SmartServ, (iii) issuance by SmartServ
of a  warrant  for the  purchase  of  50,000  shares  of  common  stock and (iv)
repayment  of $500,000 of the amended  obligation  on September  10,  2002.  The
remaining  obligation was evidenced by a note,  bearing an interest rate of 11%,
to be repaid as follows:  $200,000 on December 31, 2002, $200,000 on January 28,
2003 and $100,000 on February 27, 2003. The warrant expires on September 9, 2005
and has an exercise  price of $1.166 per share.  In  connection  therewith,  the
Company recorded a charge to earnings of $38,000  representing the fair value of
the  warrant  as  determined  in  accordance  with  the   Black-Scholes   model.
Additionally, the Company recognized a net gain of $5,679,261 resulting from the
extinguishment of this obligation.  In February 2003, the Company and HP amended
the terms of their  amended  promissory  note to provide for the  settlement  of
SmartServ's outstanding obligation of $530,800, inclusive of accrued interest of
$30,800, in consideration of the payment by SmartServ of $225,000.  As a result,
during the quarter  ended March 31, 2003,  the Company  recognized an additional
gain of $305,800, resulting from the extinguishment of this obligation.

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

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


                                       21
<PAGE>

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

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

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

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

In  February  2003,  the Company  issued a  convertible  note to Global  Capital
Funding Group, LP ("Global") in consideration for the receipt of $1 million. The
note  bears  interest  at the  rate  of 10% per  annum,  and is  secured  by the
Company's assets,  exclusive of its internally developed software products.  The
note matures on February 14, 2004, contains certain antidilution provisions, and
may be converted  into shares of SmartServ  common stock at $1.10 per share.  As
additional  consideration,  the Company issued Global a warrant for the purchase
of 200,000  shares of its common stock at an exercise  price of $1.61 per share.
In April 2003,  the  Company  borrowed an  additional  $250,000  from Global and
amended  the   convertible   note  to  include   such  amount.   As   additional
consideration,  the Company  issued  Global a warrant for the purchase of 20,000
shares of its common stock at an exercise price of $1.20 per share.  The warrant
issued to  Global  contains  certain  antidilution  provisions  and  expires  on
February  14,  2006.  Proceeds  from the  notes  were used for  working  capital
purposes.

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

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting of convertible  notes and warrants to purchase common stock ("Units")
to 8 accredited investors. Each Unit consists of a $100,000 convertible note and
a  warrant  to  purchase  200,000  shares of the  Company's  common  stock.  The
convertible  notes bear  interest  at 8% per  annum,  are  convertible  into the
Company's  common  stock at $0.744 (the average of the closing bid prices of the
Company's  common stock for the 5 days prior to the closing of the  transaction)
per share and mature on the  earlier of  November  19,  2003 or the closing of a
subsequent  equity  placement  of not less than $3  million.  The  warrants  are
exercisable  at $0.744 per share and expire on May 19,  2006.  This  transaction
represents the initial sale of a maximum of 15 Units  contemplated to be sold by
the Company.  Proceeds from the sale of the Units were used for working  capital
purposes.


                                       22
<PAGE>



The Company's financial  statements have been prepared on a going concern basis,
which  contemplates  the realization of assets and the settlement of liabilities
and  commitments  in the normal course of business.  The Company has,  since its
inception,  earned limited revenues and incurred substantial recurring operating
losses,  including  net losses of  $2,355,191  for the three month  period ended
March 31, 2003,  net losses of $8,037,173  and  $14,819,860  for the years ended
December  31, 2002 and 2001,  respectively,  and net losses of  $30,993,559  and
$7,124,126   for  the  years  ended  June  30,  2000  and  1999,   respectively.
Additionally,  it had an  accumulated  deficit of $75,214,197 at March 31, 2003.
These conditions raise substantial doubt about the Company's ability to continue
as a going  concern.  Such concern was expressed by our auditors,  Ernst & Young
LLP, in their audit report  regarding the financial  statements  included in our
Form 10-KSB for the year ended  December 31, 2002.  The financial  statements do
not  include  any  adjustments  to reflect the  possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of these uncertainties.

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  have caused  telecommunications  service  providers to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  This has  resulted  in delays  in the  build-out  of high  speed
carrier data networks and availability of data-enabled wireless devices, causing
the  market  for  SmartServ's  financial  data and  transaction  services  to be
lackluster.  In addition,  many  financial  services  firms have  curtailed  new
product  development to focus on data security and recovery.  Consequently,  the
potential demand for the Company's  products and services has been significantly
delayed.  Such  delays  have  had a very  detrimental  effect  on the  Company's
operations  and have  resulted  in the  Company's  inability  to  implement  its
business plan and related marketing strategies.  Consequently,  in May 2002, the
Company commenced an effort to realign its  infrastructure  and related overhead
to  correlate  with  reductions  in projected  revenue.  As part of this effort,
management closed the Company's UK and Hong Kong sales offices and downsized its
domestic  operations  through staff  reductions to a level sufficient to support
the  Company's  projected  operations.  In both March and May 2003,  the Company
again  reduced  its  cost  structure   through  the  termination  of  additional
personnel.  Personnel  headcount  has  been  reduced  from 66 in May 2002 to the
current level of 25. These efforts have reduced the  Company's  average  monthly
operating  expenses  from  approximately  $1,090,000 in July 2002 to $712,000 in
February 2003 to approximately  $425,000 commencing June 2003, excluding noncash
stock compensation and depreciation and amortization. As a result of the factors
identified  above,  the  Company is in need of  additional  capital to enable it
continue as a going  concern.  The following  chart  provides an analysis of the
Company's  capital  requirements  for the year ending December 31, 2003 based on
projected revenues of $3,000,000:

                             % of
                            Revenue            Capital
                             Goal              Required
                         ------------- -----------------------

                             100           $    3,300,000

                              50                3,900,000

                               0                4,800,000

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


                                       23
<PAGE>


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

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

ITEM 3.     CONTROLS AND PROCEDURES

         (a) Within the 90-day  period  prior to the filing of this  report,  an
evaluation was carried out under the supervision and with the  participation  of
our Chief Executive Officer and our Chief Financial Officer of the effectiveness
of the design and  operation  of our  disclosure  controls  and  procedures,  as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended.
Based upon the evaluation,  the Chief Executive  Officer and the Chief Financial
Officer  have  concluded  that these  disclosure  controls  and  procedures  are
effective.

         (b) There have been no significant  changes in our internal controls or
in  other  factors  that  could  significantly   affect  the  internal  controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


                                       24
<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 and  certain  directors  and  officers,  in the
Connecticut  Superior  Court for the Judicial  District of  Stamford/Norwalk  at
Stamford  (Michael Fishman v. SmartServ  Online,  Inc., et al.). On February 11,
2003,  we received a favorable  trial  decision in this matter.  This  decision,
entered after a trial in the Superior Court of  Connecticut,  found no liability
by SmartServ or the individual  defendants on any of Mr. Fishman's  claims.  Mr.
Fishman's time to appeal has expired.

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


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

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

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


                                       25
<PAGE>


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

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

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

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

In February  2003,  the Company  issued  12,100 shares of common stock to NexVue
Information  Systems,  a  sophisticated  investor,  in satisfaction of a $15,953
obligation to NexVue  Information  Systems for services rendered to the Company.
No sales commissions were paid in connection with such  transaction.  The shares
were issued in reliance upon the exemption from registration provided by Section
4 (2) of the Securities Act.

In May 2003,  the  Company  in  consideration  of  $358,000  issued  3.58  units
consisting of convertible  notes and warrants to purchase common stock ("Units")
to 8 accredited investors. Each Unit consists of a $100,000 convertible note and
a  warrant  to  purchase  200,000  shares of the  Company's  common  stock.  The
convertible  notes bear  interest  at 8% per  annum,  are  convertible  into the
Company's  common  stock at $0.744 (the average of the closing bid prices of the
Company's  common stock for the 5 days prior to the closing of the  transaction)
per share and mature on the  earlier of  November  19,  2003 or the closing of a
subsequent  equity  placement  of not less than $3  million.  The  warrants  are
exercisable  at $0.744 per share and expire on May 19,  2006.  This  transaction
represents the initial sale of a maximum of 15 Units  contemplated to be sold by
the Company ("Bridge Offering"). Spencer Trask Ventures, Inc. ("Spencer Trask"),
an accredited investor, acted as a finder for this transaction. As consideration
therefor,  Spencer  Trask will receive a cash fee equal to 10% of the  aggregate
purchase  of all of the  Units  sold and upon  receipt  of Nasdaq  Stock  Market
approval for the sale of the remaining Units will receive (i) a warrant to


                                       26
<PAGE>

purchase a number of Units equal to 20% of the Units sold  ("Finder's  Warrant")
and (ii) 33,333  shares of restricted  common stock per Unit sold.  The Finder's
Warrant  will be  exercisable  through  May 19,  2008.  Such fees are payable to
Spencer  Trask upon the closing of an aggregate of $1.2 million under the Bridge
Offering.  In addition,  Spencer  Trask will receive a  non-accountable  expense
allowance equal to 3% of the aggregate proceeds of all Units sold in this Bridge
Offering.  These shares and warrants  were issued in reliance upon the exemption
from registration provided by Section 4 (2) of the Securities Act.



                                       27
<PAGE>


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

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

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

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

               10.2 Form of Convertible Debenture for the Investors


(b)    REPORTS ON FORM 8-K

           On March 3, 2003,  the Company filed a report on Form 8-K under Items
           2 and 5 thereof  referencing  a press  release,  dated March 3, 2003,
           announcing  the  completion of a debt  financing  with Global Capital
           Funding Group, L.P. ("Global"). The debt is evidenced by a $1,000,000
           Convertible  Note, dated February 14, 2003,  secured by substantially
           all of the  assets of the  Company  and  convertible  into  shares of
           SmartServ  common stock at a price of $1.10 per share.  Additionally,
           the Form 8-K  announced  the  favorable  trial  decision  the Company
           received in the matter of Fishman vs. SmartServ et al.

           On May 1, 2003, the Company filed a report on Form 8-K under Items 5,
           7 and 12 thereof  referencing a press release,  dated April 30, 2003,
           announcing  that it had  satisfied  the  requirements  for  continued
           listing on the Nasdaq SmallCap  Market set forth in Marketplace  Rule
           4310(c)(14)  by  filing  its  Form  10-KSB  with the  Securities  and
           Exchange Commission. The Company also announced in such press release
           that it had  received a Nasdaq Staff  Determination,  dated April 28,
           2003,  indicating  that,  based on a review of its Form 10-KSB  filed
           with the Securities and Exchange  Commission the preceding  week, the
           Company is not in  compliance  with the  shareholders'  equity/market
           value of  listed  securities/net  income  requirement  for  continued
           listing as set forth in Marketplace Rule 4310 (c)(2)(B). As a result,
           the  Company's  common stock is subject to delisting  from the Nasdaq
           SmallCap  Market.  The  Company  has  requested  and been  granted  a
           hearing.  Additionally, the Form 8-K announced the issuance, on April
           25, 2003,  of a press  release  announcing  the  Company's  financial
           results for the year ended December 31, 2002.



                                       28
<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: June 4, 2003                   /s/  SEBASTIAN E. CASSETTA
      ------------                   -------------------------------------------
                                     Sebastian E. Cassetta
                                     Chairman of the Board,
                                     Chief Executive Officer


Date: June 4, 2003                   /s/  THOMAS W. HALLER
      ------------                   -------------------------------------------
                                     Thomas W. Haller
                                     Sr. Vice President,
                                     Chief Financial Officer, Treasurer





                                       29
<PAGE>


Certification of Chief Executive Officer

I, Sebastian E. Cassetta, certify that:

1.            I have reviewed this quarterly  report on Form 10-QSB of SmartServ
              Online, Inc. ("Registrant");

2.            Based on my knowledge,  this quarterly report does not contain any
              untrue  statement  of a material  fact or omit to state a material
              fact  necessary  to make  the  statements  made,  in  light of the
              circumstances   under  which  such   statements   were  made,  not
              misleading  with respect to the period  covered by this  quarterly
              report;

3.            Based  on  my  knowledge,  the  financial  statements,  and  other
              financial  information  included in this quarterly report,  fairly
              present in all material respects the financial condition,  results
              of operations and cash flows of the Registrant as of, and for, the
              periods presented in this quarterly report;

4.            The Registrant's  other certifying  officers and I are responsible
              for   establishing   and  maintaining   disclosure   controls  and
              procedures  (as defined in Exchange  Act Rules  13a-14 and 15d-14)
              for the Registrant and we have:

               a.   Designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  Registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this quarterly report is being prepared;
               b.   Evaluated the  effectiveness of the Registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    filing  date  of  this  quarterly  report  (the  "Evaluation
                    Date"); and
               c.   Presented in this quarterly report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

5.            The Registrant's  other certifying  officers and I have disclosed,
              based on our most recent evaluation,  to the Registrant's auditors
              and the audit  committee of  Registrant's  board of directors  (or
              persons performing the equivalent functions);

               a.   all  significant  deficiencies in the design or operation of
                    internal   controls   which  could   adversely   affect  the
                    Registrant's  ability  to  record,  process,  summarize  and
                    report   financial   data  and  have   identified   for  the
                    Registrant's  auditors any material  weaknesses  in internal
                    controls; and
               b.   any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    Registrant's internal controls; and;

6.            The Registrant's other certifying officers and I have indicated in
              this quarterly  report  whether or not there were any  significant
              changes  in  internal  controls  or in other  factors  that  could
              significantly  affect controls  subsequent to the date of our most
              recent evaluation, including any corrective actions with regard to
              significant deficiencies and material weaknesses.

                                          /s/  SEBASTIAN E. CASSETTA
                                         ------------------------------------
                                         Sebastian E. Cassetta
                                         Chief Executive Officer
                                         Dated: June 4, 2003




                                       30
<PAGE>


Certification of Chief Financial Officer

I, Thomas Haller, certify that:

1.            I have reviewed this quarterly  report on Form 10-QSB of SmartServ
              Online, Inc. ("Registrant");

2.            Based on my knowledge,  this quarterly report does not contain any
              untrue  statement  of a material  fact or omit to state a material
              fact  necessary  to  make  the   statements   made,  in  light  of
              circumstances   under  which  such   statements   were  made,  not
              misleading  with respect to the period  covered by this  quarterly
              report;

3.            Based  on  my  knowledge,  the  financial  statements,  and  other
              financial  information  included in this quarterly report,  fairly
              present in all material respects the financial condition,  results
              of operations and cash flows of the Registrant as of, and for, the
              periods presented in this quarterly report;

4.            The Registrant's  other certifying  officers and I are responsible
              for   establishing   and  maintaining   disclosure   controls  and
              procedures  (as defined in Exchange  Act Rules  13a-14 and 15d-14)
              for the  Registrant  and we  have:

               a.   Designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  Registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this quarterly report is being prepared;
               b.   Evaluated the  effectiveness of the Registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    filing  date  of  this  quarterly  report  (the  "Evaluation
                    Date"); and
               c.   Presented in this quarterly report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

5.            The Registrant's  other certifying  officers and I have disclosed,
              based on our most recent evaluation,  to the Registrant's auditors
              and the audit  committee of  Registrant's  board of directors  (or
              persons performing the equivalent functions);

               a.   all  significant  deficiencies in the design or operation of
                    internal   controls   which  could   adversely   affect  the
                    Registrant's  ability  to  record,  process,  summarize  and
                    report   financial   data  and  have   identified   for  the
                    Registrant's  auditors any material  weaknesses  in internal
                    controls; and
               b.   any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    Registrant's internal controls; and;

6.            The Registrant's other certifying officers and I have indicated in
              this quarterly  report  whether or not there were any  significant
              changes  in  internal  controls  or in other  factors  that  could
              significantly  affect controls  subsequent to the date of our most
              recent evaluation, including any corrective actions with regard to
              significant deficiencies and material weaknesses.


                                        /s/  THOMAS W. HALLER
                                       ---------------------------------------
                                       Thomas W. Haller
                                       Senior Vice President and
                                       Chief Financial Officer
                                       Dated: June 4, 2003

                                       31