SecProbe.io

<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>

Mail Stop 4-6

January 21, 2005

Mr. Michael Nouri
President and Chief Executive Officer
Smart Online, Inc.
2530 Meridian Parkway
Durham, North Carolina 27713

Re:	Smart Online, Inc.
	Amendment No. 2 to Registration Statement on Form SB-2
	File No. 333-119385

Dear Mr. Nouri:

      Where indicated, we think you should revise your document in
response to these comments.  If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.   Feel free to call us at the telephone numbers listed
at
the end of this letter.

Executive Compensation

1. Please update your executive compensation disclosure to include
information in respect of fiscal year 2004.  Please see See J.8B
of
the July 1997 CF Telephone Interpretations Manual for additional
guidance.

Item 27. Exhibits.

2. We note that you have filed an executed opinion of counsel.
Please revise your exhibit list to reflect that an executed
opinion
of counsel rather than a form of such opinion has been filed.

Financial Statements

Note 2.  Summary of Significant Accounting Policies

Revenue Recognition, p. F-8

3. We note your supplemental response to prior comment number 13.
Tell us why the period that revenue is recognized includes the
implementation period.  Indicate why revenue recognition does not
start when the contract term begins (i.e., the one to two-year
service period).  It appears that during the implementation period
most of the units of accounting have not been delivered or
available
until the term begins or implementation is completed.  See SAB
Topic
13(3)(A)(d).  Please advise.

4. We note your supplemental response to prior comment number 13.
We
note the SIL reseller agreement and revenue sharing agreements
expire
in March 2005 and December 2005, respectively.  However, we note
that
revenue is recognized ratably through the end of 2004 based on
your
integration obligations instead of when the agreements expire.
Tell
us why recognized revenue through 2004 instead of 2005 is proper.
In
addition, tell us how your accounting complies with SAB Topic
13(A)(3)(f) Question 1, which states that "service revenue should
be
recognized on a straight-line basis...over the contractual term of
the arrangement or the expected period during which those
specified
services will be performed, whichever is longer."  In this regard,
tell us why you use the contractual term instead of the expected
period.  Further, we note that the reseller agreement and revenue
sharing agreements automatically renew.  Tell us whether you will
receive an additional fee for the renewal period.  If so, indicate
whether the renewal is at a bargain.  In this regard, tell us
whether
the original fee received should be allocated to this extended
period
of performance (i.e., over the expected life of the customer
relationship).  See SAB 104 footnote 39.

Note 8.  Stockholders` Deficit

5. We note your supplemental response to prior comment number 13.
Your response indicates that you sold shares of common stock for
$5.00 during August and September 2004.  However, your schedule
shows
that you used a fair value of stock of $3.50 on grants to Advisory
Board Members.  In addition, explain why you are using $2.50 for
the
options reissued to consultants during those months instead of
$5.00.
It appears that $5.00 should be used as the fair value of shares
of
common stock during those months.  Please revise.

*              *              *              *

      As appropriate, please amend your registration statement in
response to these comments.  You may wish to provide us with
marked
copies of the amendment to expedite our review.  Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review.  Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.

      We will consider a written request for acceleration of the
effective date of your registration statement as a confirmation of
the fact that those requesting acceleration are aware of their
respective responsibilities under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, as
they
relate to the proposed public offering of the securities specified
in
the above registration statement.  We will act on the request and,
pursuant to delegated authority, grant acceleration of the
effective
date.

      We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement.  Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration.  Please provide this
request
at least two business days in advance of the requested effective
date.

      You may contact Christopher White at (202) 942-8645, or
Stephen
Krikorian at (202) 942-2959, if you have questions or comments on
the
financial statements and related matters.  Please contact Daniel
Lee
at (202) 942-1871 with any other questions.  If you need further
assistance, you may contact me at (202) 942-1800.

	Sincerely,

	Barbara Jacobs
	Assistant Director

cc:	Via Facsimile
	James F. Verdonik, Esq.
	Daniels Daniels & Verdonik, P.A.
	P.O. Drawer 12218
	Research Triangle Park, North Carolina 27709
	Telephone: (919) 544-5444
	Facsimile:  (919) 544-5920

</TEXT>
</DOCUMENT>