Item 1.01 Entry into a Material Definitive Agreement.

Amendment to Line of Credit with Wachovia Bank, NA

On January 24, 2007, Smart Online entered into an amendment to its revolving credit arrangement (the "Line of Credit") with Wachovia Bank, NA ("Wachovia"). The amendment resulted in an increase in the Line of Credit from $1.3 million to $2.5 million. The pay off date for the Line of Credit was also extended from August 1, 2007 to August 1, 2008. All other terms and conditions as set forth in the Current Report on Form 8-K, filed on November 14, 2006, remained.

The Line of Credit is secured by Smart Online's deposit account at Wachovia and an irrevocable standby letter of credit (the "Letter of Credit") in the amount of $2,500,000 issued by HSBC Private Bank (Suisse) S.A. with Atlas Capital, S.A., a current stockholder of Smart Online, as account party. The amendment to the Letter of Credit was previously described on a Current Report on Form 8-K filed by Smart Online on January 19, 2007.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth above in Item 1.01 is hereby incorporated by reference.

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.