Item 8.01 Other Events.

Smart Online, Inc. (the "Company") previously disclosed a criminal complaint filed against its former chief executive officer, a former manager of the Company, and four brokers alleging securities fraud and conspiracy to commit securities fraud and a civil complaint filed by the Securities and Exchange Commission (the "SEC") against these individuals and the Company alleging certain securities law violations (collectively, the "Complaints"). On September 19, 2007, the Board of Directors of the Company formed a Special Committee of the Board of Directors to, among other things, (i) conduct an analysis of the Complaints and any related matters that arise, (ii) cooperate with the U.S. Government on pending matters, (iii) consider, negotiate, and settle, if appropriate, the SEC’s Complaint and any related matters, (iii) consider any claims and counterclaims of the Company, and (iv) provide a report to the full Board of Directors.

The Board of Directors appointed David E. Colburn, the Company’s Interim President and Chief Executive Officer and a member of the Board of Directors, and C. James Meese, Jr., an independent director, to the Special Committee. Mr. Meese will be compensated for his service on the Special Committee on a monthly basis, beginning with $2,500 for September 2007 and $3,000 for October 2007. Mr. Colburn will not receive compensation for service on the Special Committee.

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 hereunto duly authorized.