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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10 - QSB



                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

                      COMMISSION FILE NUMBER    0-25159
                                                -------

                                   LION, INC.
        (Exact name of small business issuer as specified in its charter)

           WASHINGTON                                    91-2094375
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

     4700-42ND AVE. SW, SUITE 430, SEATTLE, WA                    98116
       (Address of principal executive offices)                (Zip code)

                                 (206) 577-1440
                           (Issuer's telephone number)

                                       NA
              (Former name, former address and former fiscal year,
                         if changed since last report)


         As of May 10, 2005, approximately 37,739,662 shares of the Company's
common stock were outstanding.




                                       1
<PAGE>



                                   LION, Inc.
                                  Form 10 - QSB
                      For the Quarter Ended March 31, 2005

<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                      INDEX                                           NUMBER
<S>            <C>                                                                                       <C>
PART I         FINANCIAL INFORMATION

Item 1         Financial Statements

               Balance Sheets at March 31, 2005 (unaudited) and December 31, 2004                         3

               Statements of Operations for the three months ended March 31, 2005 and 2004
               (unaudited)                                                                                4

               Statements of Cash Flows for the three months ended March 31, 2005 and 2004
               (unaudited)                                                                                5

               Notes to Financial Statements                                                              6

Item 2         Management's Discussion and Analysis of Financial Condition and Results of
               Operations                                                                                11

Item 3         Controls and Procedures                                                                   21

PART II        OTHER INFORMATION

Item 5         Other Information                                                                         22

Item 6         Exhibits                                                                                  22

               Signatures                                                                                22
</TABLE>





                                       2
<PAGE>


                            PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                            LION, Inc. and Subsidiary
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                        ASSETS

                                                                                         March 31,
                                                                                           2005             December 31,
                                                                                        (Unaudited)             2004
                                                                                     ----------------    -----------------
<S>                                                                                  <C>                 <C>
CURRENT ASSETS
    Cash and cash equivalents                                                            $ 4,218,695         $ 4,518,300
    Accounts receivable, less allowance for doubtful accounts of $47,000 and
       $58,000 in 2005 and 2004, respectively                                              1,882,947           1,841,840
    Deferred taxes                                                                           150,000             150,000
    Prepaid expenses and other                                                               356,470             436,888
                                                                                         -----------         -----------

         Total current assets                                                              6,608,112           6,947,028

PROPERTY AND EQUIPMENT - net                                                                 881,608             931,079

OTHER ASSETS
    Goodwill - net                                                                         2,590,130           2,590,130
    Other assets                                                                             324,408              76,980
                                                                                         -----------         -----------

                                                                                         $10,404,258         $10,545,217
                                                                                         ===========         ===========


                         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                                     $   361,126         $   294,235
    Accrued liabilities                                                                    1,149,037           1,334,659
    Current maturities of long-term obligations                                               57,755             255,621
    Deferred revenue                                                                       1,272,760           1,050,128
                                                                                         -----------         -----------

         Total current liabilities                                                         2,840,678           2,934,643

LONG-TERM OBLIGATIONS, less current maturities                                               985,072             995,305

COMMITMENTS AND CONTINGENCIES                                                                     --                  --

STOCKHOLDERS' EQUITY
    Common stock - authorized, 50,000,000 shares of $.001 par value                           37,667              37,431
    Additional contributed capital                                                        13,841,985          13,730,121
    Accumulated deficit                                                                   (7,301,144)         (7,152,283)
                                                                                         -----------         -----------
                                                                                           6,578,508           6,615,269
                                                                                         -----------         -----------

                                                                                         $10,404,258         $10,545,217
                                                                                         ===========         ===========
</TABLE>



The accompanying notes are an integral part of these statements.

                                       3
<PAGE>


                            LION, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three months ended March 31,
                                                                                     -------------------------------------
                                                                                           2005                2004
                                                                                     -----------------    ----------------
<S>                                                                                  <C>                  <C>
Revenues                                                                                 $ 4,040,916         $ 3,870,181

Expenses
    Direct costs                                                                           1,689,571           1,464,350
    Selling and marketing                                                                    643,792             496,579
    General and administrative                                                             1,052,292           1,165,150
    Research and development                                                                 661,846             600,250
    Depreciation and amortization                                                            130,191             134,372
                                                                                         -----------         -----------
                                                                                           4,177,692           3,860,701
                                                                                         -----------         -----------

         Operating (loss) income                                                            (136,776)              9,480

Other income (expense)
    Interest expense
                                                                                             (23,138)             (5,523)
    Interest income                                                                           14,253               2,263
                                                                                                                   2,263

         Net (loss) income before tax                                                       (145,661)              6,220

    Income tax expense
                                                                                               3,200                 509
                                                                                         -----------         -----------

         NET (LOSS) INCOME                                                               $  (148,861)        $     5,711
                                                                                         ===========         ===========

Net (loss) income per common share, basic and diluted                                    $        --         $        --
                                                                                         ===========         ===========
</TABLE>








The accompanying notes are an integral part of these statements.


                                       4
<PAGE>


                            LION, Inc. and Subsidiary

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                          Three months ended March 31,
                                                                                      -------------------------------------
                                                                                             2005                 2004
                                                                                      ----------------     ----------------
<S>                                                                                      <C>                 <C>
Cash flows from operating activities
    Net (loss) income                                                                    $  (148,861)        $     5,711
    Adjustments to reconcile net (loss) income to net cash provided by
          operating activities
           Depreciation and amortization                                                     130,191             134,372
           Stock options issued to employees and contractors                                  65,131             121,798
           Changes in assets and liabilities
              Accounts receivable                                                            (41,107)            261,385
              Other receivables                                                                   --             148,068
              Prepaid expenses and other                                                      80,418              96,636
              Accounts payable                                                                66,891             161,731
              Accrued liabilities                                                           (185,622)           (264,335)
              Deferred revenue                                                               222,632             (60,820)
              Other assets                                                                    32,572                  --
                                                                                         -----------         -----------

                  Net cash provided by operating activities                                  222,245             604,546

Cash flows from investing activities
    Capitalized software development costs                                                   (11,746)            (86,973)
    Purchase of property and equipment                                                       (68,974)            (49,208)
                                                                                         -----------         -----------

                  Net cash used in investing activities                                      (80,720)           (136,181)

Cash flows from financing activities
    Restricted cash for letter of credit                                                    (280,000)                 --
    Payments on notes payable and long-term obligations                                     (208,099)            (20,146)
    Proceeds from issuance of common stock and exercise
        of stock options and warrants                                                         46,969             141,096
                                                                                         -----------         -----------

                  Net cash (used in) provided by financing activities                       (441,130)            120,950
                                                                                         -----------         -----------

Net (decrease) increase in cash and cash equivalents                                        (299,605)            589,315

Cash and cash equivalents at beginning of period                                           4,518,300           2,883,314
                                                                                         -----------         -----------

Cash and cash equivalents at end of period                                               $ 4,218,695         $ 3,472,629
                                                                                         ===========         ===========
</TABLE>












The accompanying notes are an integral part of these statements.


                                       5
<PAGE>


                            LION, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A.   ORGANIZATION AND DESCRIPTION OF BUSINESS

         LION, Inc. (the "Company" or "LION"), a Washington corporation, is a
technology and service provider of advanced business solutions that streamline
the mortgage loan fulfillment process in the mortgage industry. From leads to
loans to capital markets, LION offers consistent, seamless business solutions to
consumers, brokers, realtors, originators and lenders. LION provides an
integrated technology platform offering online loan productivity, mortgage
pipeline hedging and risk management, software development and data
communication tools. Through its subsidiary, Tuttle Risk Management Services
LLC, LION provides hands on mortgage pipeline risk management for financial
institutions that originate and then sell loans into the secondary market.

NOTE B.   FINANCIAL STATEMENTS

         The unaudited financial statements and related notes are presented in
accordance with the instructions for interim financial statements in Rule 310(b)
of Regulation S-B, and do not contain certain information included in the
Company's audited financial statements and notes for the fiscal year ended
December 31, 2004. The information furnished reflects, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of the results of the interim periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31, 2005.
The accompanying unaudited financial statements and related notes should be read
in conjunction with the audited financial statements and the Form 10 - KSB of
LION, Inc. and notes thereto, for its fiscal year ended December 31, 2004.

NOTE C.   SIGNIFICANT ACCOUNTING POLICIES

1.       Principles of Consolidation
         ---------------------------

         The consolidated financial statements include the accounts of LION,
Inc. and its wholly-owned subsidiary, TRMS LLC. All significant intercompany
accounts and transactions have been eliminated.

2.       Cash and Cash Equivalents
         -------------------------

         For purposes of the statement of cash flows, the Company considers all
highly-liquid instruments purchased with a remaining maturity of three months or
less to be cash equivalents.

3.       Revenue Recognition
         -------------------

         LION generates revenue throughout the mortgage loan pipeline.
Subscription revenues are generated from mortgage brokers and agents who are
provided electronic access to a database of mortgage offerings by a multitude of
lenders throughout the United States. LION also generates revenue from
advertisers who pay marketing fees for ad banners, web site promotion, and lead
generation. Additionally, fees are earned related to mortgage originator and
lender web site development and hosting. Revenues from the LockPoint Xtra(R),
Pipeline Tools, and Risk Management Services product lines are generated
primarily from transaction fees on closed and locked loan volumes and fees for
related website development and implementation.


                                       6
<PAGE>


                            LION, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE C.   SIGNIFICANT ACCOUNTING POLICIES - Continued

3.       Revenue Recognition - Continued
         -------------------------------

         Subscription and service fees are recognized as revenue over the
respective subscription periods or at the time the services are provided. The
Company accounts for its software products for external licensing in accordance
with Statement of Position 97-2, SOFTWARE REVENUE RECOGNITION, and Staff
Accounting Bulletin 104, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. Revenue
from licensing fees relating to the use of the LockPoint Xtra(R) product is
recognized when all elements of the contract have been delivered to the
customer. Revenue from monthly recurring charges from use of the Pipeline Tools
and Risk Management Services products is recognized in the period in which the
service is provided.

         Deferred revenue is recorded on prepaid subscriptions for periods
ranging from 3 to 12 months and on advance billings or cash received for
contracts that have undelivered elements.

4.       Accounts Receivable
         -------------------

         The Company's accounts receivable are due from companies in the
mortgage industry, including lenders and mortgage brokers. Credit is extended to
most customers, and generally collateral is not required. Payments for accounts
receivable are due upon receipt of the invoice, but in some cases they may be
due within 15 to 60 days depending on the products or services provided.

         Accounts receivable are stated at amounts due from customers net of an
allowance for doubtful accounts. Accounts outstanding longer than the
contractual payment terms are considered past due. The Company determines its
allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, the Company's previous loss history, the
customer's current ability to pay its obligation to the Company, and the
condition of the general economy and the industry as a whole. The Company writes
off accounts receivable when they become uncollectible, and payments
subsequently collected on such accounts are credited to the allowance for
doubtful accounts.

5.       Property and Equipment
         ----------------------
         Property and equipment are stated at cost less accumulated depreciation
and amortization. Maintenance and repairs are expensed as incurred. Depreciation
and amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, principally
on a straight-line basis. The estimated lives in determining depreciation are as
follows:

        Computer equipment             3 to 5 years
        Computer software              3 to 5 years
        Equipment                           5 years

         Leasehold improvements are amortized over the lives of the respective
leases or the service lives of the improvements, whichever is shorter.


                                       7
<PAGE>



                            LION, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C.   SIGNIFICANT ACCOUNTING POLICIES - Continued

6.       Capitalized Software Development Costs
         --------------------------------------

         The Company accounts for internally developed software costs in
accordance with SOP 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE. These costs are included in computer
software in property and equipment and are amortized over a period of three
years.

7.       Goodwill
         --------

         Statement of Financial Accounting Standards (SFAS) No. 142, GOODWILL
AND OTHER INTANGIBLE ASSETS, which became effective beginning in 2002, provides
that goodwill should not be amortized, but should rather be reviewed at least
annually to assess recoverability. Impairment is recognized in operating results
if the fair value of goodwill is less than the carrying value of the goodwill.

8.       Use of Estimates
         ----------------

         In preparing the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

9.       Income (Loss) Per Common Share
         ------------------------------

         Basic income (loss) per share is based on the weighted average number
of shares outstanding during each period. Potentially dilutive common stock
equivalents are included in determining dilutive earnings per share. Common
stock equivalents include options to purchase common stock. The weighted average
number of common shares outstanding were 37,508,044 and 31,948,207 for the three
months ended March 31, 2005 and 2004, respectively.

         Options to purchase 7,619,659 shares of common stock were included in
the computation of diluted earnings per share at March 31, 2004, however,
options to purchase 5,747,609 shares of common stock at March 31, 2005 were
anti-dilutive, and therefore, diluted loss per share is equal to basic loss per
share.

10.      Advertising Costs
         -----------------

         Advertising costs are expensed as incurred.

 11.     Research and Development Costs
         ------------------------------

         All expenditures for research and development costs are expensed in the
year incurred. These expenses consist of costs incurred for proprietary research
and include related salaries and benefits, contract and other outside service
fees, and facilities and overhead costs. In instances where we enter into
agreements with third parties for research and development, costs are expensed
upon the earlier of when non-refundable amounts are due or as services are
performed. Amounts due under such arrangements may be either fixed fee or fee
for service, and may include upfront payments, monthly payments, and payments
upon the completion of milestones or receipt of deliverables.


                                       8
<PAGE>


                            LION, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C.   SIGNIFICANT ACCOUNTING POLICIES - Continued

12.      Income Taxes
         -------------

         The Company accounts for income taxes in accordance with SFAS 109,
ACCOUNTING FOR INCOME TAXES. The Company records deferred income tax assets and
liabilities based upon the difference between the financial statement and income
tax bases of assets and liabilities using enacted income tax rates. Valuation
allowances are established when necessary to reduce deferred income tax assets
to the amount expected to be realized. Income tax expense is the taxes paid and
payable for the period and the change during the period in net deferred income
tax assets and liabilities.

13.      Stock Issued for Services
         -------------------------

         Issuances of shares of the Company's stock to employees or
third-parties for compensation or services are valued using the closing price on
the date of grant for employees and the date services are completed for
non-employees.

14.      Stock Options
         --------------

         Effective January 1, 2003, the Company adopted the fair value
recognition provision of FASB Statement No. 123, "Accounting for Stock-Based
Compensation," prospectively, to all employee awards granted on or after January
1, 2003, pursuant to FASB Statement No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." Compensation expense is based on the
fair value of the options at the respective grant dates utilizing the
Black-Scholes model for estimating fair value. The following table illustrates
the effect on net income and net income per share if the Company had applied the
fair value recognition provisions of SFAS 123 to all employee awards.

<TABLE>
<CAPTION>
                                                                       Three months ended March 31,
                                                                      ------------------------------
                                                                            2005            2004
                                                                      --------------   -------------

         <S>                                                              <C>            <C>
          Net (loss) income, as reported                                  $(148,861)     $   5,711
           Add: Stock-based employee compensation expense
              included in reported net income                                65,131        121,798
          Deduct: Total stock-based employee compensation
              expense determined under fair value based method
              for all awards*                                               (68,142)      (171,465)
                                                                          ---------      ---------
          Pro forma net (loss) income                                     $(151,872)     $ (43,956)
                                                                          =========      =========
          Income (loss) per share:

              Basic and diluted - as reported                             $      --      $      --

              Basic and diluted - pro forma                               $      --      $      --
</TABLE>

* ALL AWARDS refers to awards granted, modified, or settled in fiscal periods
beginning after December 15, 1994 - awards for which the fair value was required
to be measured under Statement 123.



                                       9
<PAGE>


                            LION, Inc. and Subsidiary

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE C.   SIGNIFICANT ACCOUNTING POLICIES - Continued

15.      Fair Value of Financial Instruments
         -----------------------------------

         The fair value of financial instruments are accounted for in accordance
with SFAS No. 107, Disclosures about Fair Value of Financial Instruments, which
requires that the Company disclose the fair value of its financial instruments
for which it is practicable to estimate fair value. The carrying amounts of cash
and cash equivalents, prepaid expenses and other current assets, accounts
receivables, accounts payable and accrued liabilities meeting the definition of
a financial instrument approximate fair value because of the short term maturity
of these instruments. The fair value of long-term debt approximates fair value
based on the incremental borrowing rate currently available to the Company for
loans with similar terms and maturities.

16.      Recently Issued Accounting Pronouncements
         -----------------------------------------

         In December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS No.
123R), SHARE-BASED PAYMENT. This Standard requires companies to measure
share-based payments at grant-date fair value and recognize the compensation
expense in their financial statements. We previously adopted the fair value
based method of accounting pursuant to SFAS No. 123, ACCOUNTING FOR STOCK BASED
COMPENSATION, prospectively. Management is in the process of evaluating the
requirements of SFAS No. 123R. The final determination of the impact of this
statement has not been completed.

         In March 2005, the Securities and Exchange Commission announced that
the compliance date for non-accelerated filers and foreign private issuers
pursuant to Section 404 of the Sarbanes-Oxley Act has been extended. Under the
latest extension, a company that is not required to file its annual and
quarterly reports on an accelerated basis and a foreign private issuer filing
its annual report on Form 20-F or 40-F, must begin to comply with the internal
control over financial reporting requirements for its first fiscal year ending
on or after July 15, 2006. This is a one-year extension from the previously
established July 15, 2005 compliance date. The Commission similarly has extended
the compliance date for these companies relating to requirements regarding
evaluation of internal control over financial reporting and management
certification requirements. LION, Inc. will, therefore, be required to comply
with Section 404 of the Sarbanes-Oxley Act as of December 31, 2006.


NOTE D.   RESTRICTED CASH FOR LETTER OF CREDIT

         At March 31, 2005, the Company has $280,000 of restricted cash which is
classified as a noncurrent asset. The restricted cash serves as collateral for
an irrevocable letter of credit that provides financial assurance that the
Company will fulfill its obligations with respect to the lease for its San
Rafael, California office space. The cash is held in custody by the issuing
bank, is restricted as to its withdrawal or use, and is currently invested in
money market funds. After eighteen months, the letter of credit may be decreased
to $180,000. After thirty six months, the letter of credit may be cancelled and
replaced by a security deposit equal to the then current monthly rent.


                                       10
<PAGE>



ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

         We have initiated a business realignment of our products and services
to effectively support our Leads to Loans to Capital Markets strategy. We are
now more focused on executing our strategy in each of these areas, structuring
products and services specifically aimed at opportunities in each market
segment. This realignment represents the culmination of our efforts over the
last year to integrate the Ignition and Tuttle acquisitions, allowing us to
offer a comprehensive suite of bundled LION-branded products and services.

         To support our realignment and to begin to heighten customer awareness,
we launched a marketing campaign and corporate re-branding initiative. These are
important steps in weaving together the transformation of our Leads, Loans and
Capital Markets business units into a unified company capable of delivering
value to our customers and shareholders that is greater than the sum its parts.
Our goal is to widen our sphere of influence, articulate our competitive
advantage and increase our visibility in the mortgage industry and with
investors. We plan to continue our branding and product marketing efforts in the
second quarter with an expectation that our efforts will drive revenue in the
second half of the year and beyond.

         The LION, Inc. name has long been associated with a mortgage broker
centric company that delivered mortgage leads, subscription to a powerful loan
program and information database, and custom websites for corporate customers.
As a result of our expansion, LION is today a company that offers a
comprehensive array of mortgage related solutions to a broad client base
comprised of brokers, realtors, originators and lenders. While wanting to honor
the legacy of our past, we wanted our name to reflect an expansion of the
opportunities available to the Company through our ability to offer enterprise
solutions to our large group of lender customers, as well as the advisory and
professional risk management services offered through our Tuttle Risk Management
Services subsidiary. While we have no plans presently to alter the name of the
LION, Inc. corporate entity, we will increasingly refer to ourselves as LIONMTS
or LION Mortgage Technology Solutions, a reference we believe to be more
reflective of our focus on financial technology and solutions for the mortgage
fulfillment space.

         Revenue in first quarter 2005 was $4.0 million, up 4.4% from first
quarter of 2004 and lower by 3.1% compared to fourth quarter 2004. The first
quarter typically represents our seasonal low for the year. LION's business is
primarily driven by purchase money mortgages, or those mortgages originated as
the result of home buying activity. Typically home buying activity is strongest
from April through November. In recent years, the refinance boom masked the
seasonality component of our business, but with diminished refinancing activity
due to a rise in interest rates, we expect a return to seasonal patterns. While
we anticipate revenue for the second quarter to be similar to the quarter just
ended, we expect renewed revenue growth in the last half of 2005 due to our
continued efforts to enhance the bundling of our technology and services along
with the execution of our branding and marketing initiatives.

         We reported a net loss of $149,000 for the quarter compared to net
income of $6,000 for first quarter 2004 and $113,000 for fourth quarter 2004.
The net loss was primarily attributable to lower quarter over quarter revenue,
higher planned expenses associated with our sales and marketing initiatives, and
expected legal and accounting expenses relating to audits and regulatory
compliance activities mandated by Sarbanes-Oxley. Similar to 2004, we expect the
last half of the year to be much stronger than the first half due to the
realignment of our business segments, momentum from our marketing initiatives, a
decrease in the regulatory compliance activities related to Sarbanes-Oxley, and
continued reduction in other core expenses due to further planned consolidation
and integration of the Company's operations.


                                       11
<PAGE>

         We concluded the quarter with $4.5 million in cash inclusive of
$280,000 in restricted funds classified as a noncurrent asset supporting a
letter of credit associated with the lease of new space consolidating our
California based operations. We should be in the new space by the end of second
quarter or very early in the third quarter. Cash, including the restricted cash
of $280,000, was roughly equal to the $4.5 million reported at year end 2004.
During the first quarter, the Company elected to retire the remaining $193,000
balance of the short term notes assumed in connection with the October 2004
acquisition of Tuttle Risk Management Services. At this time, we have no
intention of retiring early the 3-year notes also related to the acquisition
totaling $972,000. Our cash flow for second quarter should be similar to first
quarter and is expected to increase during the last half of 2005.

BACKGROUND ON PRODUCTS AND SERVICES

         As mentioned above, we have reorganized into three business units
focused on Leads, Loans and Capital Markets. The Leads business unit is
comprised of Mortgage 101.

         MORTGAGE 101 is an interactive service provided through LION's
www.mortgage101.com consumer portal which connects potential mortgage applicants
with a network of mortgage lenders who offer mortgage programs, rates and
services. Mortgage 101 also provides education to home buyers and owners through
informative articles, interactive calculators and real-time rate comparison
technology. This product is one of the leading sources of leads for real estate
financing by mortgage originators and is a preferred platform for them to market
to their customers. Mortgage 101 consistently places from number 1 to number 3
in search engine placement for the keyword "mortgage." Through the Mortgage 101
brand, LION has grown its co-branded real estate sites to approximately 52,000
which consist of realtors, real estate offices, relocation sites, associations,
and city portals. Traffic from these branded and co-branded sites along with
search engine activity has averaged between 600,000 and 700,000 unique visitors
each month during first quarter 2005 to this consumer portal. This compliments
the consumer traffic received by our customers through the Mortgage 101 domain
associated with the websites provided to them. Revenues are generated from
mortgage brokers or originators who participate in the pay-per-lead program or
advertise through the Mortgage 101 site.

         The Loans business unit is comprised of LION Pro, Retail Websites,
LockPoint Xtra(R), and the Precision productivity marketing suite, which
combines the best features of all three products plus Pipeline Tools for
midsized mortgage originators.

         LION PRO, used by approximately 7,600 mortgage brokers nationwide,
consists of LION Loan Search, LoanLink (subprime loan exchange platform), News
Now (high-value market data) and Ratesheets on Demand (aggregated mortgage
ratesheets). It is packaged and often private labeled for both large companies
and origination teams along with individual or small mortgage brokers. Through
this password protected product, originators can access one of the nation's
largest databases of wholesale mortgage rate, fee, and program information to
instantly price any mortgage loan. This database is updated daily for 77 regions
nationwide comprised of 96 participating lenders. Revenues from the LION Pro
product line are generated from mortgage brokers and originators subscribing to
the service, origination teams private-labeling this service for their own
companies, and from participating lenders.

         RETAIL WEB SITES are offered to mortgage companies and individual
originators to help educate consumers about mortgages, market their services to
borrowers, generate more business, efficiently connect with service providers
and better serve their borrowers. This product is intended to create and foster
relationships between consumers and mortgage originators while enabling mortgage
companies and originators to more efficiently manage their online production
channel and maximize the business value received from their online operations.
Both template and custom design solutions deliver a combination of


                                       12
<PAGE>

standard and custom content to approximately 2,800 web sites and over 5,700 user
accounts. Revenues are generated from web site set up and monthly hosting fees
along with fees for related functionality tools.

         LOCKPOINT XTRA(R) ("LPX") is a Point-of-Sale and back office suite of
products that provide rate distribution, float registration, real-time
risk-based pricing and rate locking capabilities in a customer's website, loan
center or call center environment. The LockPoint Xtra(R) service is provided to
lenders, investors and conduits that are LION licensees and delivers the ability
to maintain their product and pricing rules and expressions, and to publish
risk-based lockable loan prices to their customer base via LPX client
applications. Revenues are generated from implementation fees, recurring monthly
billings based on loan amount volumes with monthly minimums which may vary from
customer to customer, and custom development services.

         PRECISION MARKETING PRODUCTIVITY SUITE is a complete marketing, pricing
and delivery solution for retail, wholesale and correspondent mortgage
origination channels. This product suite streamlines the loan fulfillment
process and reduces the cost of originating a loan by creating a centralized
platform to manage a company's products and pricing. The product suite features
corporate wholesale and retail websites, online advertising, lead generation,
loan productivity tools, a product eligibility and pricing engine, mortgage
pipeline hedging and risk management, software development and data
communications tools. Lenders have the flexibility to acquire a powerful turnkey
mortgage marketing and price distribution system or install each component
separately to accommodate an organization's growing needs.

         The Capital Markets business unit includes our Pipeline Tools
technology and TRMS' Risk Management Services.

         PIPELINE TOOLS ("PT") is a complete risk management and pipeline
tracking system that provides financial institutions with the tools necessary to
manage interest rate risk. PT tracks and examines current loan inventory, which
allows lenders to extrapolate and manipulate data to make more informed trading
decisions. Typical users of PT include secondary marketing executives, traders,
risk managers, pricing desks and shipping managers. Revenues are generated from
implementation fees, recurring monthly billings based on loan amount volumes
with monthly minimums which may vary from customer to customer, and custom
development services.

         RISK MANAGEMENT SERVICES are provided by TRMS, a registered Commodity
Trading Advisor. The services are structured to provide mortgage pipeline risk
management for mortgage companies and savings and loan associations that seek to
originate and then sell loans into the secondary mortgage market. The solutions
are tailored to firms that lack capital market expertise and offer a wide array
of services under the managed account umbrella that include pricing, best
execution analysis, rate sheet generation, policy and procedure formulation,
trading and investor relations assistance. Clients leverage the "second set of
eyes" provided by TRMS to validate their day-to-day secondary marketing
decisions or to outsource significant aspects of the secondary marketing role to
TRMS rather than developing the primary capability to fill these roles within
their organizations.



                                       13
<PAGE>


DETAILED RESULTS OF OPERATIONS

REVENUES

<TABLE>
<CAPTION>
                                                               For Three Months Ended
                                     -------------------------------------------------------------------------------
                                          March 31, 2005            December 31, 2004            March 31, 2004
                                     ---------------------       ---------------------      ------------------------
          <S>                        <C>             <C>         <C>             <C>         <C>             <C>
          LEADS
          ------
          Mortgage 101               $  455,808         11%      $  413,298         10%      $  547,766         14%

          LOANS
          -----
          Lion Pro                      751,321         19%         799,455         19%         769,179         20%
          Retail web sites              657,119         16%         642,563         15%         598,744         15%

          LockPoint Xtra                351,460          9%         403,148         10%         764,177         20%
                                     ----------        ---       ----------        ---       ----------        ---
                                      1,759,900         44%       1,845,166         44%       2,132,100         55%
          CAPITAL MARKETS
          ---------------
          Pipeline Tools                273,897          7%         434,110         10%       1,190,315         31%

          Risk Management Services    1,551,311         38%       1,478,701         36%              --         --
                                     ----------        ---       ----------        ---       ----------        ---
                                      1,825,208         45%       1,912,811         46%       1,190,315         31%


          Total revenues             $4,040,916        100%      $4,171,275        100%      $3,870,181        100%
                                     ==========        ===       ==========        ===       ==========        ===
</TABLE>

         As summarized above, we have reorganized our product groupings to more
closely align our business objectives by product with the customers we serve.
These business units are Leads, Loans, and Capital Markets.

LEADS

         Mortgage 101 revenues, which are comprised of LION's subscription and
pay-per-lead based lead programs along with broker ad banner programs, increased
quarter over quarter and were down compared to a year ago. This is reflective of
improving mortgage origination trends compared to the fourth quarter but also of
the reduction in the refinance business from a year ago. LION continues to
refine its pay-per-lead model and business processes as volumes change and
competition for leads increases. Our Leads business unit accounted for 11% of
our quarterly revenues compared to 14% during the same quarter a year ago.

LOANS

         LION Pro revenues are comprised of LION Pro Corporate, LION Pro
Individual, and lenders who participate in the underlying database. LION Pro
revenues were slightly lower than the same quarter in the prior year due
primarily to lower monthly fees for LION Pro Individual and set up fees for LION
Pro Corporate. This was due to reductions and consolidation in the mortgage
broker industry associated with lower refinancing business and origination
volumes. There are now 101 LION Pro Corporate accounts, down from 105 accounts
at the end of 2004. We anticipate growth throughout the remainder of 2005 but
more so in the latter half primarily from the LION Pro Corporate product.

         Retail Web Site revenues increased modestly over fourth quarter 2004
and 10% over the same quarter in the prior year. This product continues to be a
strong performer for the Company. We recently announced a significant product
upgrade, adding features and capabilities designed to broaden our market
penetration and deliver additional product functionality.


                                       14
<PAGE>

         LockPoint Xtra(R) which includes the Precision MTS bundled product
decreased compared to fourth quarter 2004 and the same quarter in the prior
year. Revenues are primarily transaction based and are dependent on a limited
number of significant customers. The decline is mostly due to the combination of
an expected loss from legacy customers and lower locked loan volumes. The
technology underlying the LockPoint Xtra(R) product line is being adapted to
support other LION products including the Precision MTS bundled product. We have
retargeted our sales efforts to focus on Precision MTS and have added 6 new
Precision MTS customers with more in the sales and contract negotiation
pipeline. We anticipate the revenue from the Precision MTS bundled product to
contribute to revenue modestly throughout 2005 and more so in 2006.

         Together, our Loans business unit offerings accounted for 44% of our
quarterly revenues compared to 55% during the same quarter a year ago.

CAPITAL MARKETS

         The Capital Markets business unit is comprised of Pipeline Tools and
Tuttle Risk Management Services' hedged advisory services. Revenue from Pipeline
Tools declined in the first quarter due primarily to a combination of an
expected loss of legacy customers and lower seasonal loan volumes. Revenue from
Tuttle Risk Management Services increased by 4.9% compared to fourth quarter
2004 and will continue to make advances as evidenced by the signing of six new
customers in the first quarter. While we expect to increase the number of
customers through the year, lower mortgage origination generally will result in
some customer attrition as smaller lenders are challenged to maintain their
existing origination and secondary market delivery strategies.

         The decline in Pipeline Tools revenue was offset by revenue from Tuttle
Risk Management Services which we did not have during the first quarter of 2004.
Together, our Capital Markets unit accounted for 45% of our quarterly revenues
compared to 31% during the same quarter a year ago.

OPERATING EXPENSES
<TABLE>
<CAPTION>

                                                                  For Three Months Ended
                                     --------------------------------------------------------------------------------
                                         March 31, 2005             December 31, 2004            March 31, 2004
                                     ------------------------   ------------------------   --------------------------
                                                     % of Rev                  % of Rev                    % of Rev
                                                     --------                  --------                    ---------
     <S>                             <C>               <C>      <C>               <C>      <C>               <C>
     Direct costs                    $1,689,571        42%      $1,705,590        41%      $1,464,350          38%
     Selling and marketing              643,792        16%         501,253        12%         496,579          13%
     General and administrative       1,052,292        26%       1,139,978        27%       1,165,150          30%
     Research and development           661,846        16%         591,712        14%         600,250          16%
     Depreciation and amortization      130,191         3%         144,038         4%         134,372           3%
                                     ----------       ---       ----------        --       ----------         ---
         Total operating expenses    $4,177,692       103%      $4,082,571        98%      $3,860,701         100%
                                     ==========       ===       ==========        ==       ==========         ===
</TABLE>



         Quarterly operating expenses increased to $4.2 million in first quarter
2005 from $4.1 million in fourth quarter 2004 and $3.9 million in first quarter
2004. Operating expenses in the second quarter are anticipated to be similar to
the first quarter but decrease in the latter half of the year due to a decrease
in the regulatory compliance activities related to Sarbanes-Oxley, and continued
reduction in other core expenses due to further planned consolidation and
integration of the Company's operations.



                                       15
<PAGE>


DIRECT COSTS

         Direct costs are comprised primarily of web site fulfillment,
technology infrastructure support, product and contract support, product
deployment, and TRMS trading desk and support services. Direct costs remained
relatively unchanged at $1.7 million for first quarter 2005 and fourth quarter
2004. There were additional direct costs in the first quarter due to Tuttle Risk
Management Services only being a part of the consolidated operations for two and
a half months in the fourth quarter, but these costs were offset by the
reallocation of certain software engineering resources from a technical product
support role to research and development. The increase compared to the same
quarter in the prior year is due primarily to the acquisition of TRMS whose
costs are primarily comprised of direct costs. The cost increase was offset by
the reallocation of certain engineering software resources mentioned above at
the beginning of 2005.

SELLING AND MARKETING

         Selling and marketing expenses are comprised primarily of advertising
and marketing costs, sales salaries and related support costs. Selling and
marketing expenses increased to $644,000 in first quarter 2005 from $501,000 in
fourth quarter 2004. The increase is primarily due to an increase in advertising
for leads for our Mortgage 101 product group and higher planned expenses
associated with our sales and marketing initiatives. The increase compared to
the same quarter in the prior year is due to the same reasons as compared to
fourth quarter, however, there were additional selling expenses related to the
Tuttle Risk Management Services operation.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses are comprised primarily of
management and administrative salaries and related costs, legal and audit fees,
outside consulting services, certain telecommunications expenses, occupancy
costs, and other administrative related expenses. While general and
administrative expenses approximated $1.1 million for first quarter 2005 and
fourth quarter 2004, they were down slightly by approximately $88,000 from the
fourth quarter of 2004. This was due to an improvement in bad debt experience in
the first quarter, incentive bonuses to various management personnel due to the
successful completion of the Ignition asset purchase and integration efforts
throughout 2004 expensed during the fourth quarter that did not recur in the
first quarter, and a reduction in certain investor relations and legal expenses.
These decreases were offset by year end audit work, Section 404 compliance
efforts related to Sarbanes-Oxley, and various other expenses in the first
quarter. The decrease compared to first quarter 2004 is primarily due to bonuses
paid to certain upper management personnel due to the successful acquisition of
the Ignition assets that did not recur in first quarter 2005.

RESEARCH AND DEVELOPMENT

         Research and development expenses are comprised primarily of
engineering salaries and related costs. Research and development expenses
increased to $661,000 for first quarter 2005 from $592,000 for fourth quarter
and from $600,000 for the same quarter in the prior year. The increase was due
primarily to the reallocation of certain software engineering resources from a
technical product support role to that of research and development and other net
increases in research and development resources. These increases are due to
continuing efforts to improve the underlying technology for Retail Web Sites,
Precision MTS and Pipeline Tools.



                                       16
<PAGE>


DEPRECIATION AND AMORTIZATION

         The decrease in depreciation in first quarter 2005 compared to fourth
quarter 2004 is due to certain internally developed software for internal use
being fully depreciated by the end of 2004. Compared to the same quarter in the
prior year, depreciation expense decreased slightly due to the same reason as
above offset by additional depreciation related to the purchase of equipment,
computers and software along with the addition of other internally developed
software for internal use.

INTEREST EXPENSE AND INTEREST INCOME

         Interest expense is comprised of interest on 10 percent promissory
notes which were paid off in mid-February 2005, 8 percent promissory notes
totaling $972,000 related to the Tuttle Risk Management Services acquisition,
and various debt related to capitalized leases. The promissory notes did not
exist during the first quarter of 2004.

         Interest income in first quarter 2005 compared to the same quarter in
the prior year has increased due to additional funds that can be invested along
with a rising interest rate environment. Investments have maturities of not
greater than three months so as to take advantage of the rising interest rate
environment.


FINANCIAL POSITION

         We have financed our liquidity needs over the last several years
through proceeds generated from operations. To a lesser extent, some of our cash
flow has been derived from equipment lease financing, and since the beginning of
2004, the exercise of stock warrants and stock options. As of the end of 2004,
no stock warrants exist, but stock options continue to be exercised.

         At March 31, 2005, we had $4,218,695 in cash and cash equivalents after
reclassifying $280,000 to noncurrent assets as restricted cash for a letter of
credit on leased office space for our California operations and approximately
$3.8 million of working capital. The change in cash and cash equivalents is as
follows:


<TABLE>
<CAPTION>
                                                                                        Three Months Ended March 31,
                                                                                     ----------------------------------
                                                                                          2005               2004
                                                                                     --------------      --------------
    <S>                                                                              <C>                 <C>
    CASH FLOW SUMMARY
    Net (loss) income                                                                 $  (148,861)        $     5,711
    Non-cash items                                                                        195,322             256,170
    Changes in working capital                                                            175,784             342,665
    Net cash provided by operating activities                                             222,245             604,546
    Net cash used in investing activities                                                 (80,720)           (136,181)
    Net cash (used in) provided by financing activities                                  (441,130)            120,950
                                                                                      -----------         -----------
    Net (decrease) increase in cash and cash equivalents                                 (299,605)            589,315
    Cash and cash equivalents at beginning of period                                    4,518,300           2,883,314
                                                                                      -----------         -----------
    Cash and cash equivalents at end of period                                        $ 4,218,695         $ 3,472,629
                                                                                      ===========         ===========
</TABLE>

NON-CASH ITEMS

         Non-cash items are primarily depreciation and amortization and stock
option expense for both first quarter 2005 and 2004, respectively.



                                       17
<PAGE>


WORKING CAPITAL AND OPERATING ACTIVITIES

         During the three months ended March 31, 2005, our investment in working
capital increased due to increases in deferred revenue primarily related to a
large Tuttle Risk Management Services customer as part of an existing contract,
a decrease in certain prepaid assets and an increase in accounts payable due to
our normal business operating cycle. This increase was offset by payments of
incentive bonuses accrued in the fourth quarter 2004 to various personnel due to
integration efforts throughout 2004.

         During the three months ended March 31, 2004, our investment in working
capital increased due to revenue growth, primarily from the Retail Websites,
LockPoint Xtra(R) and Pipeline Tools product lines and payments on accounts
receivable, primarily from large accounts receivable balances acquired in the
Ignition asset purchase, which were offset by a pay down of accrued liabilities
related to legal, accounting and other fees associated with the acquisition of
Ignition assets.

INVESTING ACTIVITIES

         During the three months ended March 31, 2005, investing activities used
cash of $80,720 which primarily consisted of the capitalized portion of software
development costs related to the enhancement of underlying infrastructure
delivering various product lines to customers and upgrades to computer hardware
and software.

         During the three months ended March 31, 2004, investing activities used
cash of $136,181 which primarily consisted of the capitalized portion of
software development costs related to the enhancement of underlying
infrastructure delivering the LION Pro Corporate product line and upgrades to
computer hardware and software.

FINANCING ACTIVITIES

         During the three months ended March 31, 2005, financing activities
included $280,000 of cash that was restricted for a letter of credit related to
an office lease for our California operations, payoff of our 10 percent
promissory notes totaling approximately $193,000 related to the Tuttle Risk
Management Services acquisition, and payments on capitalized lease obligations
related to the acquisition of application and database software, computers,
servers, furniture and telecommunications systems upgrades over the previous two
years. This was offset by the exercise of stock options during the period
totaling $46,969.

         During the three months ended March 31, 2004, financing activities
included the exercise of warrants and stock options totaling approximately
$141,000. This was offset by payments totaling approximately $20,000 on notes
payable and capitalized lease obligations related to the acquisition of
application and database software, computers, servers, furniture and
telecommunications systems upgrades over the previous two years.

OVERALL LIQUIDITY AND CAPITAL RESOURCES

         It is management's assessment that current working capital and that
which will be created organically through operations should be adequate for our
growth plans and capital expenditure needs throughout 2005 and into 2006.


                                       18
<PAGE>

FACTORS THAT MAY AFFECT FORWARD-LOOKING STATEMENTS

         This Quarterly Report on Form 10-QSB contains statements that are
forward-looking. These statements are based on current expectations and
assumptions that are subject to risks and uncertainties. All statements that
express expectations and projections with respect to future matters may be
affected by changes in the Company's strategic direction, as well as
developments beyond the Company's control. We cannot assure you that our
expectations will necessarily come to pass. Actual results could differ
materially because of issues and uncertainties such as those listed below and
elsewhere in this report, and in the other documents we file with the SEC. These
factors, among others, may adversely impact and impair our business and should
be considered in evaluating our financial outlook.

WE HAVE A LIMITED HISTORY OF PROFITS AND OUR FUTURE PROFITABILITY REMAINS
UNCERTAIN. IN ADDITION, FINANCIAL RESULTS FOR ANY PARTICULAR PERIOD WILL NOT
PREDICT RESULTS FOR FUTURE PERIODS.

         We are working toward a goal of revenue growth and sustained
profitability. Annual revenues increased to $15.2 million in 2004 from $8.1
million in 2003 and from $6.4 million for 2002. However, during 2003 and 2004,
revenues quarter to quarter have at times remained flat and decreased in the
first quarter of 2005. Had it not been for the strategic acquisition of the
Ignition assets in December 2003 and the acquisition of Tuttle Risk Management
Services in October 2004, revenue growth targets year over year would not have
been achieved in 2004 and the likelihood of achieving targets for 2005 much more
difficult. We had ten consecutive quarters of profitability beginning with the
third quarter of 2002 through the fourth quarter of 2004, and while we do expect
a profit for 2005, we have incurred a net loss for first quarter 2005. Due to
two acquisitions in the last 15 months, the Company has incurred additional
costs which could extend through the first half of 2005 while we further
integrate, streamline and modify our operations, technology, and infrastructure
supporting our current and planned product offerings. Until these efforts are
completed, profitability could be constrained during 2005.

         Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets, including uncertainty of revenues, markets, and profitability. We
cannot assure you that we will be successful in addressing these risks or that
we can be operated profitably, which depends on many factors, including the
success of our marketing program, control of expense levels and the success of
our business activities. Our future operating results will depend on a variety
of factors, including those discussed in the other factors set forth below.

WE ARE LARGELY DEPENDENT ON KEY PERSONNEL WHO MAY NOT CONTINUE TO WORK FOR US.

         We are substantially dependent on the continued services of our key
personnel, including our officers, engineers and other significant employees.
These individuals have acquired specialized knowledge and skills with respect to
LION. We are continuing to create the redundancies that will reduce the reliance
on these individuals, but have not completed this task and will not for at least
the remainder of 2005. Furthermore, we have not entered into employment
agreements with these significant employees except for our upper management
team. If any of these individuals were to leave LION unexpectedly, we could face
substantial difficulty in hiring qualified successors and could experience a
loss in productivity while any such successor obtains the necessary training and
experience. We provide stock options, which currently serve to retain and
motivate key employees as they become vested in their initial stock option
grants. While management personnel are typically granted additional stock
options, which will usually vest over a period of four years subsequent to their
hire date to provide additional incentive to remain at LION, the initial option
grant is typically the largest and an employee may be more likely to leave our
employ upon completion of the vesting period for the initial option grant. We
are proposing for stockholder approval at our 2005 annual meeting a stock
incentive plan which will allow a flexible stock compensation program which we
believe will be important to our ability to attract and retain the best
available employees.

                                       19
<PAGE>

We expect that we will need to attract, train, retain and motivate additional
technical, managerial, marketing and customer support personnel. Competition for
these personnel may be intense, particularly for individuals with suitable
experience. We face the risk that if we are unable to attract and integrate new
personnel, or retain and motivate existing personnel, our business will be
adversely affected.

WE ARE SUBSTANTIALLY DEPENDENT ON A LIMITED NUMBER OF SIGNIFICANT CUSTOMERS.

         Our success depends on our ability to expand, retain and enhance our
advanced business solution customers. Our expanded product line as a result of
the acquisition of Ignition assets and TRMS carries with it the risk that our
revenues may be dependent on a limited number of significant customers, rather
than a broad-based broker and customer network. As part of the acquisition, LION
became the assignee of certain customer contracts, most of which have initial
contract periods or renewals expiring 2005 and 2006 and typically have renewable
successive one-year terms and in a few cases successive two-year terms. Revenues
from these contracts comprised approximately 54% of our total revenues for first
quarter 2005. While we did have several LockPoint Xtra(R) and Pipeline Tools
customers discontinue their contracts with us during 2004, we have also had
successful new sales for our new Precision productivity marketing suite,
Pipeline Tools and Risk Management Services. While we have no reason to believe
other similar large contracts will not be renewed, there can be no assurance
that these customers will renew their contracts, or that we will be able to
attract new customers at rates sufficient to maintain a stable or growing
revenue base. We have also experienced an anticipated but significant decline in
loan volumes in the LPX, Pipeline Tools, and Risk Management Services product
lines. If we are unsuccessful in enrolling new customers to equalize the
attrition rate, if any, of existing customers, or to offset a decline in
transactional volume, our overall share of the advanced business solution market
could be reduced, and consequently our business operating results and financial
condition may be materially adversely affected.

OUR OPERATIONS MAY BE VULNERABLE TO DISRUPTION PROBLEMS.

         We do not have multiple site capacity for our LION Pro, Mortgage 101 or
Retail Web Site services, however, we do have this in place for our LockPoint
Xtra(R) and Pipeline Tools services. We are in the process of developing
multiple site capacity for all of our services, but this will not be completed
until some time late in 2005. We have in place comprehensive data tape backup
procedures for our operational and administrative databases. Our replication
software provides a high level of hardware backup for the database by
duplicating our database across several powerful servers. However, despite
protective measures, our operations could be vulnerable to damage from floods,
fire, earthquakes, power loss, telecommunications failures, break-ins,
terrorism, and similar events. The prospect of such unscheduled interruptions is
possible in the foreseeable future, and we are unable to predict their
occurrence, duration or cessation.

         Despite the implementation of security measures which are constantly
updated, our systems may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. We could experience interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. Unauthorized access might lead to interruptions,
delays or cessation in service to subscribers or deter potential subscribers.
Although we intend to constantly update industry-standard security measures,
these measures have been circumvented in the past, and there can be no assurance
that measures we adopt will not be circumvented in the future. We do not carry
sufficient business interruption insurance to compensate us for losses that may
occur as a result of any of these events. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to our subscribers, which could have a materially adverse
affect on our business, operating results and financial condition.


                                       20
<PAGE>

ITEM 3.      CONTROLS AND PROCEDURES

         Under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that these disclosure controls and procedures are effective.

         In general, we are assessing the effectiveness of our internal controls
over financial reporting on an account by account basis as a part of our
on-going accounting and financial reporting review process in order to comply
with Section 404 of the Sarbanes-Oxley Act of 2002, which requires our
management to assess the effectiveness of our existing internal controls for the
fiscal year ended December 31, 2006. This effort includes documenting,
evaluating the design of and testing the effectiveness of our internal controls
over financial reporting. We intend to continue to refine and improve our
internal controls on an ongoing basis. During this process, we may identify
items for review or deficiencies in our system of internal controls over
financial reporting that may require strengthening or remediation.

         There were no changes in our internal control over financial reporting
during the quarter ended March 31, 2005 that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.




                                       21
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 5.  OTHER INFORMATION

         Effective May 13, 2005, the employment of Mr. Timothy F. Newberry,
Co-President of Operations, was terminated. Mr. Newberry's responsibilities for
operations and development were assumed by Mr. Randall Miles, Chairman and CEO,
and David Stedman, President. Mr. Newberry's position will not be replaced.


ITEM 6.  EXHIBITS

(a)   Exhibits

10.20    Office Lease Agreement (San Rafael, California Property) dated as of
         May 1, 2005.

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

32.1     Certification by Chief Executive Officer and Chief Financial Officer
         pursuant to Section 906 of the Sarbanes - Oxley Act of 2002






                                   SIGNATURES

         In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                   LION, INC.
                                  (Registrant)

         Date: May 16, 2005                     By:      /s/ Randall D. Miles
                                                         --------------------
                                                         Randall D. Miles
                                                         Chief Executive
                                                         Officer


                                       22
<PAGE>


EXHIBIT INDEX

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


10.20    Office Lease Agreement (San Rafael, California Property) dated as of
         May 1, 2005.

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

32.1     Certification by Chief Executive Officer and Chief Financial Officer
         pursuant to Section 906 of the Sarbanes - Oxley Act of 2002


                                       23