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 September 30, 2002

                         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 November
8, 2002 was 11,148,416.

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

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

<PAGE>
                             SMARTSERV ONLINE, INC.

                                   FORM 10-QSB

                                      INDEX

PART I.   FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements

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

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

          Consolidated Statement of Changes in Stockholders' Equity -
          nine months ended September 30, 2002
          (unaudited)..........................................................6

          Consolidated Statements of Cash Flows - three months ended
          September 30, 2002 and 2001 and nine months ended June 30,
          2002 and 2001(unaudited).............................................7

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

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of
          Operations..........................................................16

Item 3.   Controls and Procedures.............................................23

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...................................................24

Item 2.   Changes in Securities and Use of Proceeds...........................24

Item 6.   Exhibits and Reports on Form 8-K....................................26

          Signatures..........................................................27


                                  1
<PAGE>

                        SMARTSERV ONLINE, INC.

                      CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                          SEPTEMBER 30,    DECEMBER 31,
                                                              2002             2001
                                                          -------------    -----------
                                                          (UNAUDITED)
<S>                                                       <C>              <C>
ASSETS
Current assets
 Cash and cash equivalents                                $ 1,810,568      $ 6,532,323
 Accounts receivable                                          141,935           40,798
 Accrued interest receivable                                    6,706               --
 Prepaid expenses                                             228,497          531,028
                                                          -----------      -----------
Total current assets                                        2,187,706        7,104,149
                                                          -----------      -----------

Property and equipment, net                                 1,954,952        3,408,776

Other assets
 Capitalized software development costs, net of
   accumulated amortization of $447,760 at
   September 30, 2002 and $268,619 at December 31, 2001       980,348          973,594
 Security deposits                                            242,960          474,545
 Notes receivable from officer, including
   accrued interest receivable                                552,467          500,000
                                                          -----------      -----------
                                                            1,775,775        1,948,139
                                                          -----------      -----------

Total Assets                                              $ 5,918,433      $12,461,064
                                                          ===========      ===========

</TABLE>


                                  2
<PAGE>

                        SMARTSERV ONLINE, INC.

                      CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                    2002             2001
                                                                -------------    -----------
                                                                (UNAUDITED)
<S>                                                             <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                              $  1,318,256    $  1,329,105
  Accrued liabilities                                                865,462         695,134
  Note payable                                                       500,000              --
                                                                ------------    ------------
Total current liabilities                                          2,683,718       2,024,239
                                                                ------------    ------------

Deferred revenues                                                    158,823              --

Note payable                                                              --       6,723,156

COMMITMENTS AND CONTINGENCIES - NOTE 9

STOCKHOLDERS' EQUITY
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 - 11,146,616 shares at September 30,
  2002 and 6,263,783 shares at December 31, 2001                     111,466          62,638
Additional paid-in capital                                        73,237,413      69,680,059
Notes receivable from officers for the purchase
  of restricted stock                                               (609,996)       (666,841)
Unearned compensation                                                 (7,725)       (540,354)
Accumulated deficit                                              (69,655,266)    (64,821,833)
                                                                ------------    ------------
Total stockholders' equity                                         3,075,892       3,713,669
                                                                ------------    ------------

Total Liabilities and Stockholders' Equity                      $  5,918,433    $ 12,461,064
                                                                ============    ============

</TABLE>

See accompanying notes.


                                  3
<PAGE>

                        SMARTSERV ONLINE, INC.

                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)

<TABLE>
<CAPTION>

                                                         THREE MONTHS                  NINE MONTHS
                                                      ENDED SEPTEMBER 30           ENDED SEPTEMBER 30
                                               ----------------------------    ----------------------------
                                                    2002           2001             2002           2001
                                               ------------    ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>
Revenues                                       $     81,847    $    824,990    $    146,483    $  3,272,827
                                               ------------    ------------    ------------    ------------
Costs and expenses:
  Costs of services                              (1,386,390)     (1,718,178)     (4,338,016)     (5,502,704)
  Sales and marketing expenses                     (454,364)       (958,092)     (2,698,013)     (3,801,287)
  General and administrative expenses            (1,087,962)     (1,004,318)     (3,328,102)     (3,613,420)
  Stock-based compensation                          (30,290)        202,837         122,831        (735,015)
                                               ------------    ------------    ------------    ------------

  Total costs and expenses                       (2,959,006)     (3,477,751)    (10,241,300)    (13,652,426)
                                               ------------    ------------    ------------    ------------

Loss from operations                             (2,877,159)     (2,652,761)    (10,094,817)    (10,379,599)
                                               ------------    ------------    ------------    ------------

Other income (expense):
  Interest income                                    74,785         101,875         106,284         459,599
  Interest expense and other financing costs       (138,439)       (188,072)       (508,184)       (410,759)
  Gain on extinguishment of debt                  5,679,261              --       5,679,261              --
  Foreign exchange losses                              (521)         (2,511)        (15,977)        (23,319)
                                               ------------    ------------    ------------    ------------
                                                  5,615,086         (88,708)      5,261,384          25,521
                                               ------------    ------------    ------------    ------------

Net income (loss)                              $  2,737,927    $ (2,741,469)   $ (4,833,433)   $(10,354,078)
                                               ============    ============    ============    ============

Basic earnings (loss) per share                $       0.34    $      (0.46)   $      (0.70)   $      (1.78)
                                               ============    ============    ============    ============

Diluted earnings (loss) per share              $       0.31    $      (0.46)   $      (0.70)   $      (1.78)
                                               ============    ============    ============    ============

Weighted average shares outstanding - basic       8,034,319       5,931,229       6,943,559       5,811,152
                                               ============    ============    ============    ============

Weighted average shares outstanding -
  diluted                                         8,965,812       5,931,229       6,943,559       5,811,152
                                               ============    ============    ============    ============

</TABLE>


                                  4
<PAGE>

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

<TABLE>
<CAPTION>

                                                               THREE MONTHS                             NINE MONTHS
                                                            ENDED SEPTEMBER 30                       ENDED SEPTEMBER 30
                                                  ---------------------------------------  ---------------------------------------
                                                         2002                2001               2002                  2001
                                                  -------------------  ------------------  ----------------     ------------------

<S>                                                 <C>                <C>                 <C>                  <C>
Costs of services                                   $      (7,895)     $     150,168       $     187,413        $        2,323

Selling, general and administrative expenses              (22,395)            52,669             (64,582)             (737,338)
                                                    -------------      -------------       -------------        --------------

                                                    $     (30,290)     $     202,837       $     122,831        $     (735,015)
                                                    =============      =============       =============        ==============

</TABLE>

See accompanying notes.


                                       5
<PAGE>

                             SMARTSERV ONLINE, INC.

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

                      NINE MONTHS ENDED SEPTEMBER 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>

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

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

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

Issuance of common stock through
   private placements of securities      4,669,923         46,699             --       4,018,365              --               --

Issuance of common stock upon
   exercise of warrants                    169,853          1,699             --         142,676              --               --

Amortization of unearned
   compensation over the terms of
   consulting agreements                        --             --             --              --         548,079               --

Warrants issued to consultants as
   compensation for services
   rendered and to be rendered                  --             --             --          41,250         (15,450)              --

Warrants to purchase common stock
   issued as a condition of debt
   extinguishment                               --             --             --          38,000              --               --

Change in market value of employee
   stock options                                --             --             --        (696,710)             --               --

Repayment of notes receivable from
officer                                         --             --         56,845              --              --               --

Net loss for the period                         --             --             --              --              --       (4,833,433)
                                        -----------------------------------------------------------------------------------------
Balances at September 30, 2002          11,146,616   $    111,466   $   (609,996)   $ 73,237,413    $     (7,725)   $ (69,655,266)
                                        =========================================================================================

</TABLE>

See accompanying notes.


                                       6
<PAGE>

                             SMARTSERV ONLINE, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                            THREE MONTHS                    NINE MONTHS
                                                         ENDED SEPTEMBER 30              ENDED SEPTEMBER 30
                                                    ---------------------------     ----------------------------
                                                         2002            2001            2002           2001
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                                   $  2,737,927    $ (2,741,469)   $ (4,833,433)   $(10,354,078)
Adjustments to reconcile net income (loss) to net
cash used for operating activities:
   Gain on debt extinguishment                        (5,679,261)             --      (5,679,261)             --
   Depreciation and amortization                         507,764         664,991       1,474,654       1,869,665
   Noncash compensation costs                             26,428        (510,892)       (696,710)       (176,150)
   Noncash consulting services                             3,863         308,055         573,879         911,165
   Deferred interest on officer's loan                   (52,467)             --         (52,467)             --
   Amortization of deferred revenues                     (15,883)       (644,243)        (21,177)     (2,576,981)
   Amortization of deferred financing costs                   --          50,000              --         150,000
   Changes in operating assets and liabilities
      Accounts receivable                                 24,920          74,927        (101,137)        122,946
      Accrued interest receivable                         (6,706)             --          (6,706)             --
      Prepaid expenses                                    85,207        (722,928)        302,531        (697,264)
      Accounts payable and accrued liabilities           403,898          22,125         481,555       1,384,426
      Deferred revenues                                    5,949              --         180,000              --
      Security deposit                                   247,880           5,323         231,585        (269,370)
                                                    ------------    ------------    ------------    ------------
   Net cash used for operating activities             (1,710,481)     (3,494,111)     (8,146,687)     (9,635,641)
                                                    ------------    ------------    ------------    ------------

INVESTING ACTIVITIES
Purchase of equipment                                     (1,170)        (15,428)       (169,660)       (152,310)
Capitalization of software development costs             (45,660)        (79,478)       (185,895)       (362,526)
Loan to officer                                               --              --              --        (500,000)
                                                    ------------    ------------    ------------    ------------
   Net cash used for investing activities                (46,830)        (94,906)       (355,555)     (1,014,836)
                                                    ------------    ------------    ------------    ------------
FINANCING ACTIVITIES
Repayment of notes receivable from officers               56,845              --          56,845              --
Repayment of note payable                               (500,000)             --        (500,000)             --
Proceeds from the issuance of notes                           --         670,381              --         862,373
Proceeds from the issuance of common stock             3,688,787         250,076       4,802,990         271,185
Costs of issuing common stock                           (319,348)             --        (579,348)             --
                                                    ------------    ------------    ------------    ------------
   Net cash provided by financing activities           2,926,284         920,457       3,780,487       1,133,558
                                                    ------------    ------------    ------------    ------------
Increase (decrease) in cash and cash equivalents       1,168,973      (2,668,560)     (4,721,755)     (9,516,919)
Cash and cash equivalents - beginning of period          641,595      12,323,759       6,532,323      19,172,118
                                                    ------------    ------------    ------------    ------------

Cash and cash equivalents - end of period           $  1,810,568    $  9,655,199    $  1,810,568    $  9,655,199
                                                    ============    ============    ============    ============

</TABLE>

See accompanying notes.


                                       7
<PAGE>

                             SMARTSERV ONLINE, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2002

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. We offer
wireless applications,  development and hosting services that allow enterprises,
wireless carriers and financial  services firms to deliver content to their work
forces and customers. Our products deliver proprietary  information,  as well as
delayed and  real-time  financial  market  data,  business and  financial  news,
national weather reports and other business and  entertainment  information in a
user-friendly manner.

We deliver  mobile  data  solutions  designed to  generate  additional  revenue,
increase operating efficiency, and extend brand awareness for wireless carriers,
enterprises  and  content   providers.   We  offer  standard  and   custom-built
applications  designed for a vast array of wireless  platforms and devices.  Our
applications  can be  delivered  via  JAVA,  BREW,  WAP and SMS,  as well as RIM
Blackberry and Pocket PC devices.

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, incurred substantial recurring operating losses, including a net loss
of $4,833,433 for the nine month period ended  September 30, 2002, a net loss of
$14,819,860  for the year ended December 31, 2001, and net losses of $30,993,559
and  $7,124,126  for the  years  ended  June 30,  2000 and  1999,  respectively.
Additionally,  it had an  accumulated  deficit of  $69,655,266  at September 30,
2002. 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, 2001.  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.

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. For wireless
carriers,  we deliver data and branded  content that can increase  wireless data
revenue and customer retention. 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.
Management  believes that SmartServ's primary source of revenues will be derived
from revenue-share  licensing  contracts with its wireless carrier and financial
services customers.

As an example,  the Company has launched  two  products on the Verizon  Wireless
network.  Our  financial  content  product has been  launched on Verizon's  BREW
(Binary  Runtime  Environment for Wireless)  network under the Forbes.com  brand
name,  while our SMS (Short Message  Service)  financial  alert product has been
launched on  Verizon's  Vtext  portal.  Similarly,  the Company has launched its
Forbes.com branded application on AT&T Wireless' m-Mode network. A MobileMarkets
real-time  product is also offered to wireless  subscribers on Telus  Mobility's
network in Canada, as well as on AT&T Wireless' network in the US. Additionally,
Salomon Smith Barney,  in conjunction  with  SmartServ,  has launched a wireless
version of its GEO (Global  Equities  Online)  product.  GEO combines  Salomon's
proprietary  data, such as morning call notes,  with SmartServ's  financial data
products to form a fully integrated  financial


                                       8
<PAGE>

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

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  has caused  telecommunications  service  providers  to
reduce   capital   spending,   personnel  and  debt,  as  well  as  new  service
introductions.  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 until now. 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  through the remainder of 2002.
Personnel  headcount has been reduced from 66 in May to the current level of 43.
These  efforts  have  reduced the  Company's  average  operating  expenses  from
approximately  $1,141,000  to  $675,000  per  month,  excluding  non-cash  stock
compensation  and  amortization  and  depreciation.  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 Company  has  engaged  investment  bankers to
assist it with the sale of equity  to  private  investors  that  understand  the
wireless industry and the current state of the technology; however, no assurance
can be  given  that the  Company  will be able to raise  additional  capital  on
satisfactory  terms.  Should the Company be unable to raise  additional  debt or
equity financing, it will be forced to seek a merger or cease operations.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in


                                       9
<PAGE>

the financial  statements and  accompanying  notes.  Actual results could differ
from those estimates.

Revenue Recognition
-------------------
The  Company  earns  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  Accountant   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.  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,
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  our  customers'
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 from  professional  services
contract,  if any,  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,  resulting  from  customer  prepayments,  are  recognized as
services are provided  throughout  the term of the agreement with the respective
customer.  Deferred revenues resulting from our agreement with Data Transmission
Network  Corporation  ("DTN") were amortized over the anticipated future revenue
stream, a period of 42 months, commencing June 1, 1999. We amended our agreement
with DTN such that, effective September 1, 2000, SmartServ performed maintenance
and enhancement  services through December 2000 and provided operational support
through August 2001. Therefore,  commencing September 1, 2000, deferred revenues
were amortized to income on a straight-line basis over the period through August
2001.

                                       10
<PAGE>

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

Capitalized Software Development Costs
--------------------------------------
In  connection  with certain  contracts  entered into between  SmartServ and its
customers,  as well as other  development  projects,  we have capitalized  costs
related  to  certain  product   enhancements  and  application   development  in
accordance with SFAS No. 86,  "Accounting for the Costs of Computer  Software to
be Sold, Leased or Otherwise Marketed."  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. Capitalization ceases when the product is available
for  general  release  to  customers.   Amortization  of  capitalized   software
development  costs is provided on a  product-by-product  basis over the economic
life, not to exceed three years, of the product using the straight-line  method.
Amortization  of  capitalized  software  development  costs  commences  with the
products' general release to customers.

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

Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of our financial instruments  approximate fair value due to
their terms and maturities.

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

Interest, debt origination and other financing costs paid during the three month
periods  ended   September  30,  2002  and  2001  were  $138,439  and  $138,072,
respectively,  and for the nine month periods ended  September 30, 2002 and 2001
were $508,184 and $260,759, respectively.

Concentration of Credit Risk
----------------------------

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


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

Advertising Costs
-----------------
Advertising  costs are expensed as incurred and were  approximately  $28,000 and
$18,800  during the three  month  periods  ended  September  30,  2002 and 2001,
respectively,  and  $264,900  and $47,400  during the nine month  periods  ended
September 30, 2002 and 2001, respectively.



                                       11
<PAGE>

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

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

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

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

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

In July 2002,  the  Financial  Accounting  Standards  Board 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 ("EITF") 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.  A commitment to a
plan to exit an  activity  or dispose  of  long-lived  assets  will no longer be
sufficient  to  record a  one-time  charge  for most  restructuring  activities.
Instead, companies will record exit or disposal costs when they are incurred and
can be measured at fair value. In addition,  the resultant  liabilities  will be
subsequently  adjusted  for changes in  estimated  cash  flows.  SFAS No. 146 is
effective prospectively for exit or disposal activities initiated after December
31, 2002.  Companies may not restate previously issued financial  statements for
the effect of the  provisions  of SFAS No. 146, and  liabilities  that a company
previously  recorded under EITF Issue 94-3 are  grandfathered.  The Company will
adopt SFAS No. 146 on January 1, 2003, and it 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.



                                       12
<PAGE>

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

3.   Property and Equipment

Property and equipment consist of the following:

<TABLE>
<CAPTION>

                                                                              September 30,           December 31,
                                                                                   2002                    2001
                                                                            -------------------      -----------------
   <S>                                                                      <C>                      <C>
   Data processing equipment                                                $     4,599,724          $     5,033,498
   Data processing equipment purchased under a capital lease                        246,211                  246,211
   Office furniture and equipment                                                   151,263                  151,263
   Display equipment                                                                 71,335                   71,335
   Leasehold improvements                                                            69,852                   55,570
                                                                            ---------------          ---------------

                                                                                  5,138,385                5,557,877

   Accumulated depreciation, including $246,211 at September 30,
     2002 and $229,797 at December 31, 2001 for equipment
     purchased under a capital lease                                             (3,183,433)              (2,149,101)
                                                                            ---------------          ---------------
                                                                            $     1,954,952          $     3,408,776
                                                                            ===============          ===============

</TABLE>

4.   NOTES 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,  shall  accrue and be payable at
maturity.  Commencing  July 1, 2002 until  maturity,  interest  shall be payable
semi-annually in arrears on January 1st and July 1st.

5.   NOTE PAYABLE

In May 2000, we entered into a Business Alliance Agreement with  Hewlett-Packard
Company ("HP") whereby the companies  agreed to jointly market their  respective
products and services,  and to work on the build-out of SmartServ's domestic and
international  infrastructure.  In furtherance of these objectives,  HP provided
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  obligation is evidenced by a note, bearing an
interest  rate  of  11%,  secured  by  the  Company's  assets  exclusive  of its
internally  developed software  products,  that may be converted into our common
stock at $33.56  per share and that is 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,  determined as 110% of the average closing bid price of the common stock
for the five trading days prior to September 10, 2002. 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 pricing model.


                                       13
<PAGE>

The  restructuring of the obligation  resulted in a net gain of $5,679,261 which
has been recorded as "Other Income" in the consolidated financial statements.

6.   STOCKHOLDERS' EQUITY

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

In June  2002,  SmartServ  issued  785,714  shares  of its  common  stock to two
accredited  investors ("June Investors") at a purchase price of $1.40 per share.
Gross  proceeds  from this  transaction  amounted to  $1,100,000.  First  Albany
Securities  Corporation,  the placement agent,  received a commission of $66,000
and  reimbursement  of  direct  expenses  of  $2,000  in  connection  with  this
transaction.  Each of the June Investors received a fee of $50,000 in connection
with  the  performance  of due  diligence  related  to their  investment  in the
Company.  Additionally,  the  Company  issued  to the June  Investors  warrants,
callable under certain conditions, for the purchase of an aggregate of 1,428,571
shares of common  stock at an  exercise  price of $1.40  per share  through  the
expiration  date on June 5,  2007,  as  well as  non-callable  warrants  for the
purchase  of an  aggregate  of  196,429  shares  of  common  stock,  subject  to
antidilution  adjustments upon the occurrence of certain events,  at an exercise
price of $1.47 per share through June 5, 2007.  The callable  warrants  provided
that upon exercise the June Investors  would receive  non-callable  warrants for
the purchase of an  aggregate  of 357,142  shares of common stock at an exercise
price of $1.47 per share. In August 2002,  pursuant to the terms of the callable
warrants,  the Company  provided the June Investors with a notice,  calling such
warrants. In September 2002, the callable warrants expired unexercised.

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 paid 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. Pursuant to the terms of the Securities Purchase Agreement, the Company
has filed a registration  statement with the Securities and Exchange  Commission
requesting registration of the common stock issued in this transaction,  as well
as those shares issuable upon exercise of the warrants to purchase common stock.

In September  2002,  SmartServ  issued  169,853  shares of common stock upon the
exercise, by a June Investor, of warrants to purchase such shares at an exercise
price, after anti-dulution  adjustments,  of $0.85 per share.  Proceeds from the
issuance were $144,375.



                                       14
<PAGE>

7.   STOCK-BASED COMPENSATION

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

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


                                      THREE MONTHS             NINE MONTHS
                                   ENDED SEPTEMBER 30      ENDED SEPTEMBER 30
                                ------------------------------------------------
                                   2002         2001        2002         2001
                                ---------    ---------   ---------    ----------

Costs of services               $  (7,895)   $ 150,168   $ 187,413    $   2,323

Selling, general and
administrative expenses         $ (22,395)   $  52,669   $ (64,582)   $(737,338)
                                ---------    ---------   ---------    ---------

                                $ (30,290)   $ 202,837   $ 122,831    $(735,015)
                                =========    =========   =========    =========

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

8.   EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                         THREE MONTHS                    NINE MONTHS
                                       ENDED SEPTEMBER 30             ENDED SEPTEMBER 30
                                   ---------------------------   ---------------------------
                                        2002         2001            2002           2001
                                   ------------   -----------    -----------    ------------
<S>                                <C>            <C>            <C>            <C>
Numerator
   Net earnings (loss)             $  2,737,927   $(2,741,469)   $(4,833,433)   $(10,354,078)
                                   ============   ===========    ===========    ============
Denominator
  Denominator for basic
  earnings per share - weighted
  average shares                      8,034,319     5,931,229      6,943,559       5,811,152

  Dilutive effect of warrants to
  purchase common stock                 891,012            --             --              --

  Dilutive effect of employee
  stock options and restricted
  shares                                 40,481            --             --              --
                                   ------------   -----------    -----------    ------------



                                       15
<PAGE>

  Denominator for diluted
  earnings per share                  8,965,812     5,931,229      6,943,559       5,811,152
                                   ============   ===========    ===========    ============
Basic earnings (loss) per
  common share                     $       0.34   $     (0.46)   $     (0.70)   $      (1.78)
                                   ============   ===========    ===========    ============

Diluted earnings (loss) per
  common share                     $       0.31   $     (0.46)   $     (0.70)   $      (1.78)
                                   ============   ===========    ===========    ============

</TABLE>

Outstanding  employee  stock options and other warrants to purchase an aggregate
of 6,850,100  shares of common stock at September  30, 2002 were not included in
the  computation  of diluted  earnings per share for the nine month period ended
September  30,  2002,  because the  Company  reported a loss for the period and,
therefore their inclusion would be antidilutive.

9.   COMMITMENTS AND CONTINGENCIES

On or about June 4, 1999,  Michael Fishman,  our former Vice President of Sales,
commenced an action against us, Sebastian E. Cassetta (our Chairman of the Board
and Chief Executive  Officer),  Steven Francesco (our former President) and four
others  in  the  Connecticut   Superior  Court  for  the  Judicial  District  of
Stamford/Norwalk at Stamford alleging breach of his employment contract,  breach
of duty of good faith and fair dealing, fraudulent misrepresentation,  negligent
misrepresentation,  intentional  misrepresentation and failure to pay wages. The
defendants  have answered the complaint and filed  counterclaims  for fraudulent
inducement and breach of contract.  The fraud and misrepresentation  claims have
been dismissed. The parties have filed motions for summary judgment that will be
subject  to oral  argument  in  December  of 2002.  Although  we are  vigorously
defending this action, there can be no assurance that we will be successful. The
unfavorable  outcome of such action could have a material  adverse effect on our
consolidated results of operations, financial condition and cash flows.

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York.  The  complaint  alleges  that on or about  August 19, 1999,
Commonwealth and SmartServ  entered into an engagement  letter pursuant to which
Commonwealth was to provide financial  advisory and investment  banking services
to SmartServ in connection  with a possible  combination  between  SmartServ and
Data  Link  Systems   Corporation.   The  engagement   letter   provided  for  a
nonrefundable  fee of  $15,000  payable in cash or common  stock at  SmartServ's
option. The complaint alleges that SmartServ elected to pay the fee in stock and
seeks  13,333  shares  of  common  stock or at least  $1,770,000  together  with
interest and costs.  We have denied the material  allegations  of the complaint,
including the  allegation  that we elected to pay in stock.  A trial was held in
New York  Supreme  Court on  November  7 and 8,  2002.  The  parties  have until
December 16, 2002 to file  post-trial  pleadings and a decision is expected soon
thereafter.  Although we are vigorously  defending this action,  there can be no
assurance that we will be  successful.  The  unfavorable  outcome of such action
could have a material adverse effect on our consolidated  results of operations,
financial condition and cash flows.



                                       16
<PAGE>

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

OVERVIEW

SmartServ  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  enterprises,  wireless  carriers  and  financial
services  firms to  deliver  content to their work  forces  and  customers.  Our
products  deliver  proprietary  information,  as well as delayed  and  real-time
financial market data, business and financial news, national weather reports and
other business and entertainment information in a user-friendly manner.

We deliver  mobile  data  solutions  designed to  generate  additional  revenue,
increase operating efficiency, and extend brand awareness for wireless carriers,
enterprises  and  content   providers.   We  offer  standard  and   custom-built
applications  designed  for a vast  array  of Web  and  wireless  platforms  and
devices.  Our applications can be delivered via JAVA, BREW, WAP and SMS, as well
as RIM Blackberry and Pocket PC devices.

RESULTS OF OPERATIONS

QUARTER ENDED SEPTEMBER 30, 2002 VERSUS QUARTER ENDED SEPTEMBER 30, 2001

During the quarters ended  September 30, 2002 and 2001, we recorded  revenues of
$81,847 and $824,990, respectively. Revenues generated in 2002 were derived from
the licensing of our wireless data products to a financial services  institution
while  substantially  all  revenues  in 2001 were earned  through our  licensing
agreement  with  Data  Transmission  Network  Corporation  ("DTN").  During  the
quarters  ended  September  30, 2002 and 2001,  we  recognized  $0 and $644,243,
respectively, from the amortization of deferred revenues associated with the DTN
agreement.

During the quarter ended  September  30, 2002, we incurred  costs of services of
$1,386,390. Such costs decreased $331,800 or 19.3% compared to the corresponding
quarter  of  2001  due  primarily  to a  reduction  in  services  for  technical
consultants  and  the  reduction  of   amortization   of  capitalized   software
development costs.  Capitalized  software  development costs associated with the
products  licensed to DTN were amortized on a straight-line  basis over the life
of the agreement and were fully  amortized at August 31, 2001,  the  termination
date of the agreement.  Costs of services consisted primarily of information and
communication  costs ($225,900),  personnel costs ($606,300),  computer hardware
leases, depreciation and maintenance costs ($443,900), and amortization expenses
relating to capitalized software development costs ($87,600). During the quarter
ended  September 30, 2001,  we incurred  costs of services of  $1,718,178.  Such
costs consisted  primarily of information and  communication  costs  ($234,800),
personnel costs ($592,600),  systems consultants  ($148,600),  computer hardware
leases, depreciation and maintenance costs ($434,800), and amortization expenses
relating  to  capitalized  software  development  costs  ($285,200).  During the
quarters ended September 30, 2002 and 2001, we capitalized  $45,700 and $79,500,
respectively,  of  development  costs in accordance  with Statement of Financial
Accounting  Standards No. 86,  "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed".

During  the  quarter  ended   September  30,  2002,  we  incurred   general  and
administrative  expenses of  $1,087,962.  Such costs  increased  $83,700 or 8.3%
compared to the  corresponding  quarter of 2001 due  primarily to an increase in
personnel costs and professional fees. General and administrative costs were


                                       17
<PAGE>

incurred primarily for personnel costs ($385,900), travel and lodging ($24,200),
professional  fees  ($297,100),  facilities  ($127,400),  insurance  ($106,500),
computer  hardware  leases,  depreciation and maintenance  costs ($54,000),  and
communication  costs ($12,300).  During the quarter ended September 30, 2001, we
incurred  general and  administrative  expenses of  $1,004,318.  Such costs were
incurred primarily for personnel costs ($337,500), travel and lodging ($33,100),
professional  fees  ($263,700),  facilities  ($113,000),  insurance  ($134,600),
computer  hardware  leases,  depreciation and maintenance  costs ($39,500),  and
communication costs ($12,200).

During the quarter ended  September  30, 2002,  we incurred  sales and marketing
expenses of $454,364.  Such costs  decreased  $503,700 or 52.6%  compared to the
corresponding quarter of 2001 due primarily to a reduction of personnel.  During
the second  quarter of 2002,  the  Company  commenced  the  closing of its sales
offices in Hong Kong and the United  Kingdom  thereby  eliminating a substantial
portion of the costs of such sales offices from the quarter ended  September 30,
2002. Sales and marketing  expenses were incurred  primarily for personnel costs
($292,500), facilities ($32,000), consulting fees ($29,800), communication costs
($17,400),  advertising  and trade  shows  ($43,000),  and  travel  and  lodging
($32,100).  During the quarter ended  September 30, 2001, we incurred  sales and
marketing expenses of $958,092. Such costs were incurred primarily for personnel
costs  ($648,600),  advertising and trade shows ($44,500),  communication  costs
($37,500) consulting fees ($40,700), travel and lodging ($84,300) and facilities
($29,200).

During  the  quarter  ended  September  30,  2002,  a  net  noncash  charge  for
stock-based compensation amounted to $30,290 compared to a net noncash credit of
$202,837  during the quarter ended  September 30, 2001. Such noncash amounts are
primarily  related to the valuation of  stock-based  compensation  in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees"  ("APB No. 25").  Certain  options are subject to the  variable  plan
requirements of APB No. 25, as they were repriced,  and therefore,  compensation
expense is recognized for changes in the fair value of our common stock. Noncash
charges for professional fees for the quarters ended September 30, 2002 and 2001
were  $3,900  and  $308,100,   respectively,   resulting   primarily   from  the
amortization  of  deferred  costs  associated  with the  issuance of warrants to
purchase common stock to various financial, marketing and technical consultants.
The value of substantially  all of such common stock purchase  warrants has been
recorded in accordance with the Black-Scholes pricing model.

Interest  income for the quarters ended  September 30, 2002 and 2001 amounted to
$74,785 and $101,875,  respectively.  The decrease of 27,090 or 26.6% was caused
by the use of working  capital to fund the  Company's  operations.  Such amounts
were earned primarily from our investments in highly liquid commercial paper and
money fund  accounts.  During the quarters  ended  September  30, 2002 and 2001,
interest and other  financing  costs were $138,439 and  $188,072,  respectively.
Such costs were incurred  primarily in  connection  with the $20 million line of
credit  facility  with  Hewlett-Packard  Company  ("HP") and  decreased  in 2002
compared to 2001 due to the  restructuring  of such  obligation on September 10,
2002.

In September  2002, the Company and HP amended the terms of the promissory  note
between the companies 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
restructuring  of the  obligation  resulted  in a net  gain  to the  Company  of
$5,679,261,  inclusive of a charge to earnings of $38,000  representing the fair
value of the warrant as determined in accordance with the Black-Scholes  pricing
model.

Basic  earnings  were $0.34 per share for the three months ended  September  30,
2002 versus a loss of $0.46 per share for the three months ended  September  30,
2001.  Diluted earnings for the three months ended



                                       18
<PAGE>

September 30, 2002 were $0.31 per share versus a loss of $0.46 per share for the
three months ended September 30, 2001. Basic weighted average shares outstanding
increased  to 8,034,319 at  September  30,2002 from  5,931,229 at September  30,
2001.  Diluted  weighted  average shares  outstanding  increased to 8,965,812 at
September 30, 2002 from 5,931,229 at September 30, 2001.

NINE MONTHS ENDED SEPTEMBER 30, 2002 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 2001

During the nine months ended  September 30, 2002 and 2001, we recorded  revenues
of  $146,483  and  $3,272,827,  respectively.  Revenues  generated  in 2002 were
derived from the licensing of our wireless data products to a financial services
institution  while  substantially  all revenues in 2001 were earned  through our
licensing  agreement with DTN.  During the nine months ended  September 30, 2002
and 2001, we recognized $0 and $2,577,000,  respectively,  from the amortization
of deferred revenues associated with the DTN agreement.

During the nine months ended  September 30, 2002, we incurred  costs of services
of  $4,338,016.  Such  costs  decreased  $1,164,700  or  21.2%  compared  to the
corresponding  quarter of 2001 due  primarily  to a reduction  in  services  for
technical  consultants and the reduction of amortization of capitalized software
development   costs  partially   offset  by  an  increase  in  personnel  costs.
Capitalized  software development costs associated with the products licensed to
DTN were amortized on a  straight-line  basis over the life of the agreement and
were fully amortized at August 31, 2001, the termination  date of the agreement.
Costs of services  consisted  primarily of information and  communication  costs
($621,000), personnel costs ($2,065,000), computer hardware leases, depreciation
and  maintenance  costs  ($1,403,500),  and  amortization  expenses  relating to
capitalized software development costs ($179,800).  During the nine months ended
September  30, 2001,  we incurred  costs of services of  $5,502,704.  Such costs
consisted primarily of information and communication costs ($667,900), personnel
costs ($1,766,100),  systems consultants  ($971,700),  computer hardware leases,
depreciation  and maintenance  costs  ($1,277,300),  and  amortization  expenses
relating to capitalized software  development costs ($746,000).  During the nine
months ended September 30, 2002 and 2001, we capitalized  $185,900 and $362,500,
respectively,  of  development  costs in accordance  with Statement of Financial
Accounting  Standards No. 86,  "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed".

During the nine  months  ended  September  30,  2002,  we  incurred  general and
administrative  expenses of $3,328,102.  Such costs  decreased  $285,300 or 7.9%
compared to the  corresponding  quarter of 2001 due  primarily  to a decrease in
personnel costs and professional  fees.  General and  administrative  costs were
incurred   primarily  for  personnel  costs   ($1,120,600),   professional  fees
($899,800),  facilities  ($399,000),  insurance  ($432,700),  travel and lodging
($66,100),   computer  hardware  leases,   depreciation  and  maintenance  costs
($137,900),  and  communication  costs  ($53,300).  During the nine months ended
September  30,  2001,  we  incurred  general  and  administrative   expenses  of
$3,613,420. Such costs were incurred primarily for personnel costs ($1,201,700),
professional fees ($1,028,800),  facilities  ($387,100),  insurance  ($385,200),
travel and  lodging  ($110,800),  computer  hardware  leases,  depreciation  and
maintenance costs ($116,000), and communication costs ($46,600).

During the nine months ended September 30, 2002, we incurred sales and marketing
expenses of $2,698,013. Such costs decreased $1,103,300 or 29.0% compared to the
corresponding  quarter of 2001 due  primarily  to the  reduction  of  personnel,
marketing consultants and travel costs associated therewith, partially offset by
an increase in costs  incurred  for trade shows  during the period  October 2001
through April 2002. During the second quarter of 2002, the Company commenced the
closing  of its  sales  offices  in Hong  Kong and the  United  Kingdom  thereby
eliminating  a  substantial  portion of the costs of such sales offices from the
quarter  ended  September 30, 2002.  Sales and marketing  expenses were incurred
primarily  for  personnel  costs  ($1,471,600),   advertising  and  trade  shows
($606,100),  facilities ($112,900),  consulting



                                       19
<PAGE>

fees ($187,600), and travel and lodging ($214,600). During the nine months ended
September 30, 2001,we incurred sales and marketing expenses of $3,801,287.  Such
costs were incurred primarily for personnel costs ($2,116,600),  consulting fees
($528,600),   travel  and  lodging  ($372,000),   advertising  and  trade  shows
($356,800), communication costs ($79,000) and facilities ($95,600).

During the nine months  ended  September  30,  2002,  a net  noncash  credit for
stock-based  compensation  amounted  to $122,831  compared to a $735,015  charge
during the nine months  ended  September  30,  2001.  Such  noncash  amounts are
primarily  related to the valuation of  stock-based  compensation  in accordance
with APB No. 25. Certain  options are subject to the variable plan  requirements
of APB No. 25, as they were  repriced,  and therefore,  compensation  expense is
recognized  for changes in the fair value of our common stock.  Noncash  charges
for  professional  fees for the nine months ended  September  30, 2002 and 2001,
were  $573,879  and  $911,165,   respectively,   resulting  primarily  from  the
amortization  of  deferred  costs  associated  with the  issuance of warrants to
purchase common stock to various financial, marketing and technical consultants.
The value of substantially  all of such common stock purchase  warrants has been
recorded in accordance with the Black-Scholes pricing model.

Interest  income for the nine months ended  September 30, 2002 and 2001 amounted
to $106,284 and $459,599,  respectively.  The  decrease of $353,315 or 76.9% was
caused by the use of working  capital  to fund the  Company's  operations.  Such
amounts were earned  primarily from our investments in highly liquid  commercial
paper and money fund accounts.  During the nine months ended  September 30, 2002
and 2001,  interest  and other  financing  costs  were  $508,184  and  $410,759,
respectively.  Such costs were  incurred  primarily in  connection  with the $20
million line of credit facility with HP which was  restructured on September 10,
2002.

In September  2002, the Company and HP amended the terms of the promissory  note
between the companies 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
restructuring  of the  obligation  resulted  in a net  gain  to the  Company  of
$5,679,261,  inclusive of a charge to earnings of $38,000  representing the fair
value of the warrant as determined in accordance with the Black-Scholes  pricing
model.

The basic and  diluted  loss per  share  was  $0.70  for the nine  months  ended
September  30, 2002 versus $1.78 per share for the nine months  ended  September
30, 2001.  Basic and diluted weighted  average shares  outstanding  increased to
6,943,559 at September 30, 2002 from 5,811,152 at September 30, 2001.



                                       20
<PAGE>

CAPITAL RESOURCES AND LIQUIDITY

At September  30, 2002,  the Company had $1.8 million in cash.  Net cash used in
operations was $1.7 million for the three-month  period ended September 30, 2002
compared to $3.5 million during the three-month period ended September 30, 2001.
Net cash used in operations  during the  nine-month  period ended  September 30,
2002 was $8.1 million  compared to $9.6  million  during the  nine-month  period
ended  September 30, 2001.  The Company's  initiative to close the Hong Kong and
United Kingdom sales offices and adjust its US personnel and operations to focus
its  resources  on meeting  the growing  demand for its  products  and  services
throughout North America was the primary reason for the reduction.

The other uses of cash during the  nine-month  period ended  September  30, 2002
were  primarily for the partial  repayment of our obligation to HP in the amount
of $500,000,  the  purchase of computer  equipment  and related  software in the
amount of $165,000 and the  capitalization of software  development costs in the
amount of $186,000. This compares to $152,000 for computer equipment and related
software, $363,000 for software development costs and $500,000 for a loan to the
Company's  Chairman  and Chief  Executive  Officer  during the nine month period
ended September 30, 2001.

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.  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  obligation  is evidenced by a note,  bearing an interest rate of 11%,
secured by the Company's assets,  exclusive of its internally developed software
products,  may be converted  into our common stock at $33.56 per share and is 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.  The
Company  would  receive  gross  proceeds  of $58,300  from the  exercise  of the
warrants.  The Company  recognized a net gain of $5,679,261  resulting  from the
extinguishment of this obligation.

In June 2002, First Albany Corporation, acting as placement agent for SmartServ,
completed  a private  placement  of  785,714  shares of common  stock at $1.40 a
share.  The net proceeds of $840,000 from the issuance of these shares were used
for general working capital  requirements.  Additionally,  the Company issued to
the June Investors warrants, callable under certain conditions, for the purchase
of an  aggregate of  1,428,571  shares of common  stock at an exercise  price of
$1.40  per  share  through  the  expiration  date on June  5,  2007,  as well as
non-callable  warrants for the  purchase of an  aggregate  of 196,429  shares of
common stock, 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
June  Investors  with a notice,  calling such  warrants.  In September  2002 the
callable warrants expired unexercised.

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 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



                                       21
<PAGE>

$25,000,  and 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.  While the warrants to
purchase common stock represent an additional  source of capital,  they by their
terms mature 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  should  there  be  a
significant increase in the market value of the Company's common stock or should
the  Company  amend the terms of the  warrants to provide an  inducement  to the
warrantholders to exercise such warrants.

During  the  period  January  1, 2000  through  September  30,  2002,  we issued
1,857,433  shares of common stock to investors  upon the exercise of warrants to
purchase  such  shares.  Proceeds  from  the  exercise  of these  warrants  were
$3,402,000.  Substantially  all of these warrants were  exercised  during the 18
months ended June 30, 2001 when the market value of the  Company's  common stock
was significantly greater that it is currently.

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, incurred substantial recurring operating losses, including a net loss
of  $4,892,606  for the nine months  ended  September  30,  2002,  a net loss of
$14,819,860  for the year ended December 31, 2001, and net losses of $30,993,559
and  $7,124,126  for the  years  ended  June 30,  2000 and  1999,  respectively.
Additionally,  it had an  accumulated  deficit of  $69,714,439  at September 30,
2002. 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, 2001.  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.

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. For wireless
carriers,  we deliver data and branded  content that can increase  wireless data
revenue and customer retention. 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.
Management  believes that SmartServ's primary source of revenues will be derived
from revenue-share  licensing  contracts with its wireless carrier and financial
services customers.

As an example,  the Company has launched  two  products on the Verizon  Wireless
network.  Our  financial  content  product has been  launched on Verizon's  BREW
(Binary  Runtime  Environment for Wireless)  network under the Forbes.com  brand
name,  while our SMS (Short Message  Service)  financial  alert product has been
launched on  Verizon's  Vtext  portal.  Similarly,  the Company has launched its
Forbes.com branded application on AT&T Wireless' m-Mode network. A MobileMarkets
real-time  product is also offered to wireless  subscribers on Telus  Mobility's
network in Canada, as well as on AT&T Wireless' network in the US. Additionally,
Salomon Smith Barney,  in conjunction  with  SmartServ,  has launched a wireless
version of its GEO (Global  Equities  Online)  product.  GEO combines  Salomon's
proprietary  data, such as morning call notes,  with SmartServ's  financial data
products to form a fully integrated  financial tool.  While management  believes
that these  relationships are important to the Company's  success,  no assurance
can be given that these customers will be successful in their marketing  efforts
or that  the  Company's  products  and  services  will be well  received  in the
marketplace.

The  economic  downturn  in  general,  and its impact on the  telecommunications
industry in  particular,  has caused  telecommunications  service  providers  to
reduce capital spending, personnel and debt, as well as new



                                       22
<PAGE>


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 until now. 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  through the remainder of 2002.
Personnel  headcount has been reduced from 66 in May to the current level of 43.
These  efforts  have  reduced the  Company's  average  operating  expenses  from
approximately  $1,141,000  to  $675,000  per month.  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 Company  has  engaged  investment  bankers to
assist it with the sale of equity  to  private  investors  that  understand  the
wireless industry and the current state of the technology; however, no assurance
can be  given  that the  Company  will be able to raise  additional  capital  on
satisfactory  terms.  Should the Company be unable to raise  additional  debt or
equity financing, it will be forced to seek a merger or cease operations.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

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

Capitalized Software Development Costs
--------------------------------------
In  connection  with certain  contracts  entered into between  SmartServ and its
customers,  as well as other development projects, the Company capitalizes costs
related  to  certain   product   enhancements   and   application   development.
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.
Capitalization  ceases when the  product is  available  for  general  release to
customers.  The  Company  has  entered  into  several  contracts  with  wireless
telecommunications carriers which will need to generate revenues for the Company
to support  the  carrying  amount of  capitalized  software  development  costs.
Amortization of software  development costs is provided on a  product-by-product
basis over the economic  life,  not to exceed three years,  of the product using
the straight-line method. Amortization of capitalized software development costs
commences with the products' general release to customers.  The determination of
estimated  useful  economic  lives and whether or not these  assets are impaired
involves  significant  judgments.  Changes in strategy and/or market  conditions
could  significantly  impact these judgments and require adjustments to recorded
asset balances.

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

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


                                       23
<PAGE>

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, Sebastian E. Cassetta (our Chairman of the Board
and Chief Executive  Officer),  Steven Francesco (our former President) and four
others  in  the  Connecticut   Superior  Court  for  the  Judicial  District  of
Stamford/Norwalk at Stamford alleging breach of his employment contract,  breach
of duty of good faith and fair dealing, fraudulent misrepresentation,  negligent
misrepresentation,  intentional  misrepresentation and failure to pay wages. The
defendants  have answered the complaint and filed  counterclaims  for fraudulent
inducement and breach of contract.  The fraud and misrepresentation  claims have
been dismissed. The parties have filed motions for summary judgment that will be
subject  to oral  argument  in  December  of 2002.  Although  we are  vigorously
defending this action, there can be no assurance that we will be successful. The
unfavorable  outcome of such action could have a material  adverse effect on our
results of operations, financial condition and cash flows.

On or about February 29, 2000, Commonwealth  Associates,  L.P.  ("Commonwealth")
filed a  complaint  against  us in the  Supreme  Court of the State of New York,
County of New York.  The  complaint  alleges  that on or about  August 19, 1999,
Commonwealth and SmartServ  entered into an engagement  letter pursuant to which
Commonwealth was to provide financial  advisory and investment  banking services
to SmartServ in connection  with a possible  combination  between  SmartServ and
Data  Link  Systems   Corporation.   The  engagement   letter   provided  for  a
nonrefundable  fee of  $15,000  payable in cash or common  stock at  SmartServ's
option. The complaint alleges that SmartServ elected to pay the fee in stock and
seeks  13,333  shares  of  common  stock or at least  $1,770,000  together  with
interest and costs.  We have denied the material  allegations  of the complaint,
including the  allegation  that we elected to pay in stock.  A trial was held in
New York  Supreme  Court on  November  7 and 8,  2002.  The  parties  have until
December 16, 2002 to file  post-trial  pleadings and a decision is expected soon
thereafter.  Although we are vigorously  defending this action,  there can be no
assurance that we will be  successful.  The  unfavorable  outcome of such action
could have a material  adverse  effect on our results of  operations,  financial
condition and cash flows.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

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

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



                                       25
<PAGE>

In April 2002,  SmartServ  issued a warrant to purchase an  aggregate  of 10,000
shares of common stock to Jeffrey Braile as partial consideration for consulting
services to be provided to SmartServ.  The warrant is exercisable at an exercise
price of $5.01 per share and  expires on April 29,  2005.  No sales  commissions
were paid in  connection  with such  transaction.  This  warrant  was  issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.

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

In June 2002,  SmartServ issued 785,714 shares of common stock to two accredited
investors  at a  purchase  price of $1.40 per  share.  Gross  proceeds  from the
issuance of these shares were $1,100,000.  Additionally,  the Company issued the
investors warrants,  callable under certain  conditions,  for the purchase of an
aggregate of 1,428,571  shares of common stock at an exercise price of $1.40 per
share  through  the  expiration  date on June 5, 2007,  as well as  non-callable
warrants for the purchase of an  aggregate  of 196,429  shares of common  stock,
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 June Investors
with a notice,  calling such warrants.  In September 2002 the callable  warrants
expired unexercised.  First Albany Securities Corporation,  the placement agent,
received a commission of $66,000 and  reimbursement of direct expenses of $2,000
in connection with this transaction.  The shares and the warrants were issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.

In September  2002,  SmartServ  issued  169,853  shares of common stock upon the
exercise,  by an  investor in the June 2002  financing,  of warrants to purchase
such shares at an exercise price, after antidilution  adjustments,  of $0.85 per
share.  Proceeds  from the issuance were  $144,375.  These shares were issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.

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.  Steven B.  Rosner,  a  consultant  to the
Company,  received a finder's fee of $192,500,  representing 7% of the aggregate
purchase price of the shares purchased by investors introduced to the Company by
Mr. Rosner,  an  unaccountable  expense  allowance of $25,000 in connection with
such  transaction and warrants to purchase 301,370 shares of our common stock at
an exercise price of $0.85 per share.  America First Associates Corp. received a
finder's fee of $7,550,  representing 8% of the aggregate  purchase price of the
shares  purchased  in the  offering by  investors  introduced  to the Company by
America  First  Associates  Corp.  and warrants to purchase  5,170 shares of our
common stock at an exercise price of $0.85 per share.  Alpine Capital  Partners,
Inc.  received a  finder's  fee of  $49,000,  representing  7% of the  aggregate
purchase price of the shares  purchased in the offering by investors  introduced
to the Company by Alpine Capital Partners, Inc. and warrants to purchase 131,507
shares of our common stock at an exercise price of $0.85 per share. These shares
and  warrants  were  issued in reliance  upon the  exemption  from  registration
provided by Section 4 (2) of the Securities Act.



                                       26
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

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

(b)  REPORTS ON FORM 8-K

          On September  10, 2002,  the Company  filed a report on Form 8-K under
          Item 5 thereof referencing a press release,  dated September 10, 2002,
          announcing the  completion of a $3.5 million  equity  financing from a
          group of accredited  investors,  the  restructuring  of the $7 million
          obligation to Hewlett-Packard  Company,  as well as the closing of its
          sales  offices  in Hong Kong and the  United  Kingdom  in an effort to
          focus its resources on meeting the growing demand for its products and
          services throughout North America.



                                       27
<PAGE>

                             SMARTSERV ONLINE, INC.

                                   SIGNATURES

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


                                 SmartServ Online, Inc.
                                 (Registrant)

                                 By:

Date: November 18 , 2002         /s/ SEBASTIAN E. CASSETTA
      ------------------         -----------------------------------------------
                                 Sebastian E. Cassetta
                                 Chairman of the Board & Chief Executive Officer


Date: November 18, 2002          /s/ THOMAS W. HALLER
      -----------------          -----------------------------------------------
                                 Thomas W. Haller
                                 Sr. Vice President, Chief Financial Officer &
                                 Treasurer



                                       28
<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: November 18, 2002



                                       29
<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: November 18, 2002



                                       30
<PAGE>

                                 Exhibit Index

Exhibit No.       Description
-----------       -----------

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