RESEARCH TRIANGLE PARK, N.C. — Smart Online, a company that found itself tangled in a Securities and Exchange Commission investigation and on the edge of the business abyss, found reason to celebrate on Monday.

Shares in the software-as-a-service business application company returned to trading on the Over the Counter Bulletin Board. And while the price dropped 25 cents, to $1.75, as a handful (500) of shares were traded, the bigger news for Smart Online (OTCBB: SOLN) was the fact its shares traded at all.

“This is a major victory,” said James Cox, a securities law professor at Duke University for 27 years who is familiar with Smart Online. “A sizable minority of the companies that have had trading in their stock suspended never come back.

“This is a way to come back from a very dark hole. They’ve made a pretty big step up,” Cox added. “The ability to come back is a great victory for the company and for its present stockholders who can choose to hold the stock, sell it or buy more.”

Smart Online was headed for a listing on the high-profile Nasdaq exchange in January when the SEC served notice that it was investigating the company for possible stock manipulation. Trading in the stock was suspended, and the Nasdaq withdrew its listing.

Smart Online shares, which traded as high as $11.50, plummeted to as low as $1 in limited trading after an initial freeze was lifted. As a result of the SEC probe, the company launched its own internal investigation. That probe led to the naming of a new chairman — Jeff LeRose, owner of Research Triangle Software – earlier this summer, plus revisions of internal controls.

Michael Nouri stepped aside as chairman of the board but remain a board member and also as the company’s chief executive officer.

The company said it found no evidence of criminal wrongdoing. “The Audit Committee has not concluded that any of our officers or directors have engaged in fraudulent or criminal activity,” Smart Online said in a statement on July 7 “However, it did conclude that we lacked an adequate control environment, and will take action to address certain conduct of management that was revealed as a result of the investigation.”

On Friday, Smart Online learned that the NASD, a private sector provider of financial regulatory services, had approved the trading of its stock effective on Monday. The NASD decision came after a third party — investment bank Merriman Curhan Ford — petitioned the NASD, saying it wanted to trade in the stock. The filing of interest by the bank was necessary to trigger a review of the stock and its return to trading, according to Smart Online.

“The investment bank was serving as a market maker,” said Cox. “They were reflecting the fact that they were in possession of current information about the company. Before a broke can initiate bids or offers it has to have in its possession current information.”

Smart Online, which went public in 2005, has continued to file quarterly financial reports. It reported a near break-even quarter for the second three months this year. But the company acknowledged spending $300,000 on its internal investigation.

The return to trading does not necessarily mean the SEC investigation is over. The company would not comment Monday other than through a press release.

“We are very pleased to again be listed on the Bulletin Board and would like to thank our shareholders for their support through the last few quarters,” Nouri said in the statement. “We believe this step is an important accomplishment in light of the Securities and Exchange Commission’s suspension of our trading in January 2006 and our Audit Committee’s independent investigation. As we continue to focus on improving our controls and procedures and on building the leading on-demand small business applications to build a strong company, I also would like to commend our employees whose energy and dedication have been an essential part of bringing us to this point.”

Smart Online: