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

                                   FORM 10-QSB


(Mark One)
|X|  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

|_|  Transition report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 For the transition period from _____ to _____

                         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)

                    Issuer's telephone number (206) 577-1440

                                       N/A
          (Former name or former address, if changed since last report)




         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
                                                                  Yes |X| No |_|


         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
                                                                  Yes |_| No |X|


         As of May 7, 2007, there were 38,624,272 shares of the Company's common
stock outstanding.

         Transitional Small Business disclosure Format (check one):
                                                                  Yes |_| No |X|


================================================================================

<PAGE>


                                   LION, Inc.
                                  Form 10 - QSB
                      For the Quarter Ended March 31, 2007


                                                                           PAGE
                                                                          NUMBER
                                     INDEX

PART I     FINANCIAL INFORMATION

Item 1     Financial Statements

           Condensed Consolidated Balance Sheets at March 31, 2007
           (unaudited) and December 31, 2006                                 3

           Condensed Consolidated Statements of Operations for the
           three months ended March 31, 2007 and 2006 (unaudited)            4

           Condensed Consolidated Statements of Cash Flows for the
           three months ended March 31, 2007 and 2006 (unaudited)            5

           Notes to Condensed Consolidated Financial Statements
           (unaudited)                                                       6

Item 2     Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                        14

Item 3     Controls and Procedures                                          29

PART II    OTHER INFORMATION

Item 6     Exhibits                                                         30

           Signatures                                                       31







                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                            LION, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                          March 31,
                                                                                             2007                  December 31,
                                                                                         (Unaudited)                  2006
                                                                                    -----------------------     -----------------
<S>                                                                                           <C>                    <C>
Current assets
    Cash and cash equivalents                                                                 $2,004                 $2,587
    Short-term investments - available for sale securities                                       900                    900
    Accounts receivable, less allowance for doubtful accounts of
       $136 and $67 in 2007 and 2006, respectively                                             1,556                  1,101
    Prepaid expenses and other                                                                   388                    530
                                                                                              ------                 ------

         Total current assets                                                                  4,848                  5,118

Property and equipment, net                                                                      907                    555
Goodwill                                                                                       2,590                  2,590
Other assets                                                                                     224                    224
                                                                                              ------                 ------

                                                                                              $8,569                 $8,487
                                                                                              ======                 ======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable                                                                          $   400                $   162
    Accrued salaries and benefits                                                                 760                    708
    Accrued liabilities                                                                           399                    267
    Current maturities of long-term obligations                                                   977                    977
    Deferred revenue                                                                              922                    631
                                                                                              -------                -------

         Total current liabilities                                                              3,458                  2,745

Long-term obligations, less current maturities                                                      7                      8
                                                                                              -------                -------
             Total liabilities                                                                  3,465                  2,753
                                                                                              -------                -------

Commitments and contingencies                                                                       -                      -

Stockholders' equity
    Preferred stock, par value $.001 per share; authorized 5,000,000 shares;
       none issued or outstanding                                                                   -                      -
    Common stock, par value $.001 per share; authorized 50,000,000 shares;
       38,624,272 and 38,614,272 issued and outstanding, respectively                              39                     39
    Additional contributed capital                                                             14,304                 14,269
    Accumulated deficit                                                                        (9,239)                (8,574)
                                                                                              -------                -------
                                                                                                5,104                  5,734
                                                                                              -------                -------

                                                                                              $ 8,569                $ 8,487
                                                                                              =======                =======
</TABLE>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       3
<PAGE>






                            LION, Inc. and Subsidiary
                 Condensed Consolidated Statements of Operations
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 Three months ended March 31,
                                                                                             --------------------------------------
                                                                                                     2007                 2006
                                                                                              -----------------     ---------------

<S>                                                                                                <C>                  <C>
Revenues                                                                                           $  3,164             $  3,533
                                                                                                   --------             --------

Expenses
    Direct costs                                                                                      1,539                1,525
    Selling and marketing                                                                               501                  565
    General and administrative                                                                        1,148                  927
    Research and development                                                                            559                  592
    Depreciation and amortization                                                                        98                  122
                                                                                                   --------             --------
                                                                                                      3,845                3,731
                                                                                                   --------             --------

         Operating loss                                                                                (681)                (198)

Other income (expense)
    Interest expense                                                                                    (19)                 (20)
    Interest income and other                                                                            39                   35
                                                                                                   --------             --------

         Loss before income tax                                                                        (661)                (183)

    Income tax expense                                                                                   (4)                  (3)
                                                                                                   --------             --------

         Net loss                                                                                  $   (665)            $   (186)
                                                                                                   ========             ========

Net loss per common share - basic and diluted                                                      $   (.02)            $      -
                                                                                                   ========             ========

Weighted average number of shares - basic and diluted                                                38,616               38,463
                                                                                                   ========             ========
</TABLE>









              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       4
<PAGE>


                            LION, Inc. and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                               Three months ended March 31,
                                                                                          ------------------------------------
                                                                                                2007                 2006
                                                                                          ----------------     ----------------

<S>                                                                                            <C>                 <C>
Cash flows from operating activities
    Net loss                                                                                   $  (665)            $  (186)
    Adjustments to reconcile net loss to net cash provided by
        (used in) operating activities
          Depreciation and amortization                                                             98                 122
          Change in allowance for doubtful accounts                                                 36                 (14)
          Stock options and restricted stock expense                                                33                  27
          Changes in assets and liabilities
              Accounts receivable                                                                 (491)               (379)
              Prepaid expenses and other                                                           142                 (79)
              Accounts payable                                                                     238                  53
              Accrued salaries and benefits                                                         52                  68
              Accrued liabilities                                                                  132                 106
              Deferred revenue                                                                     291                 291
                                                                                               -------             -------
                  Net cash provided by (used in) operating activities                             (134)                  9
                                                                                               -------             -------

Cash flows from investing activities
    Capitalized software development costs                                                        (122)                  -
    Purchases of property and equipment                                                           (328)                (32)
                                                                                               -------             -------
                  Net cash used in investing activities                                           (450)                (32)
                                                                                               -------             -------

Cash flows from financing activities
    Payments on long-term obligations                                                               (1)                (10)
    Proceeds from issuance of common stock on exercise of
        stock options                                                                                2                   -
                                                                                               -------             -------
                  Net cash provided by (used in) financing activities                                1                 (10)
                                                                                               -------             -------

Net decrease in cash and cash equivalents                                                         (583)                (33)
Cash and cash equivalents at beginning of period                                                 2,587               3,371
                                                                                               -------             -------
Cash and cash equivalents at end of period                                                     $ 2,004             $ 3,338
                                                                                               =======             =======

Supplemental cash flow information and non-cash investing and financing
activities:
          Cash paid for interest                                                               $     -             $     1
          Cash paid for income taxes                                                           $     1             $     -
</TABLE>







              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       5
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting policies

DESCRIPTION OF BUSINESS - LION, Inc. (the "Company" or "LION"), a Washington
corporation, provides online mortgage leads and advanced business solutions that
streamline the mortgage loan fulfillment process in the mortgage industry.
Through its subsidiary, Tuttle Risk Management Services LLC ("TRMS"), LION
provides hands-on mortgage pipeline risk management for financial institutions
that originate and then sell loans into the secondary market. From Leads to
Loans to Capital Markets, LION offers consistent, integrated business solutions
to consumers, mortgage 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
communications tools through its LockPoint Xtra(R), Pipeline Tools, and Risk
Management Services product lines.

A summary of significant accounting policies applied in the preparation of the
accompanying consolidated financial statements follows.

INTERIM FINANCIAL STATEMENTS - The unaudited condensed consolidated 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, 2006. The
information furnished reflects, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, 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, 2007 or for any other future interim
period. The accompanying unaudited condensed consolidated financial statements
and related notes should be read in conjunction with the audited consolidated
financial statements included in LION's Form 10 - KSB and notes thereto for its
fiscal year ended December 31, 2006.

USE OF ESTIMATES - In preparing 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 reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates include allowances for doubtful
accounts, long-lived assets valuation, estimated useful lives and recoverability
and realizability of deferred tax assets.

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

CASH AND CASH EQUIVALENTS - The Company considers all highly-liquid instruments
purchased with a remaining maturity of three months or less to be cash
equivalents.

SHORT-TERM INVESTMENTS - The Company's short-term investments consist primarily
of Auction Rate Securities. These securities are variable rate securities with
underlying interest rates that reset periodically (7-28 days) based on a Dutch
auction. At the reset date, the holders can choose to hold their securities at
the rate determined by auction or opt out of the investment. These securities
are classified as available-for-sale. Available-for-sale securities with
remaining maturities of less than one year and those identified by management at
time of purchase for funding operations in less than one year are classified as
short-term.


                                       6
<PAGE>

                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting
policies - continued

REVENUE RECOGNITION - LION generates revenue throughout the mortgage loan
origination and fulfillment process. Subscription revenues are generated from
mortgage brokers and agents who are provided electronic access to a database of
mortgage offerings from LION's proprietary network 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 as well as fees for related website
development and implementation.

The Company accounts for its software products with 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.

Revenue is recognized from product sales or services provided when the following
four revenue recognition criteria are met: persuasive evidence of an arrangement
exists, delivery has occurred or services have been provided, the selling price
is fixed or determinable, and collectibility is reasonably assured. For
multiple-element arrangements, the Company applies Emerging Issues Task Force
("EITF") Issue 00-21, "Revenue Arrangements with Multiple Deliverables," that
meet the following criteria: the delivered item has value to the customer on a
standalone basis; there is objective and reliable evidence of the fair value of
undelivered items; and delivery of any undelivered item is probable.

Subscription and service fees are recognized as revenue over the respective
subscription periods or when services are provided. Revenue from services is
generally determined based on time and materials. Deferred revenue is recorded
on prepaid subscriptions and on advance billings or cash received for contracts
that have undelivered elements.

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, or in some cases
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 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.


                                       7
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting
policies - continued

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 of 3 to 5 years for computer hardware and software and 5
years for equipment on a straight-line basis. Leasehold improvements are
amortized over the lives of the respective leases or the service lives of the
improvements, whichever is shorter.

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
three years once placed in service.

GOODWILL - Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill
and Other Intangible Assets," provides that goodwill should not be amortized,
but should rather be reviewed at least annually to assess recoverability. This
statement requires that goodwill and long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net discounted cash
flows expected to be generated by the asset or other valuation methods. If such
assets are considered to be impaired, impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the asset's fair
value.

In accordance with SFAS 142, the Company tests goodwill for impairment at the
reporting unit level on an annual basis. The Company has determined that it has
two reporting units, consisting of LION and TRMS. SFAS 142 requires a two-step
goodwill impairment test whereby the first step, used to identify potential
impairment, compares the fair value of a reporting unit with its carrying amount
including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill is considered not impaired, thus the second step of the
goodwill impairment test used to quantify impairment is unnecessary. Company
management has estimated that the fair values of the Company's reporting units
to which goodwill has been allocated exceed their carrying amounts.
Circumstances have not changed since the test for impairment on June 30, 2006,
and accordingly no provision for impairment is deemed necessary.

NET LOSS PER COMMON SHARE - Basic loss per common 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. Diluted share calculations for the three months ended March 31, 2007 and
2006 exclude options to purchase 6,053,917 and 3,969,867 shares, respectively,
due to their anti-dilutive effect.



                                       8
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting
policies - continued

ADVERTISING COSTS - Advertising costs are expensed as incurred.

RESEARCH AND DEVELOPMENT COSTS - All expenditures for research and development
costs are expensed as 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.

INCOME TAXES - The Company accounts for income taxes in accordance with SFAS
109, "Accounting for Income Taxes." In accordance with SFAS No. 109, deferred
tax assets arise from the tax benefit of amounts expensed for financial
reporting purposes, but not yet deducted for tax purposes and from unutilized
tax credits and net operating loss carry forwards. The Company records deferred
income tax assets and liabilities based upon differences between financial
statement and income tax bases of assets and liabilities using enacted income
tax rates. Deferred tax assets are evaluated on a regular basis to determine if
a valuation allowance is required. To the extent it is determined the
recoverability of deferred tax assets is not considered more likely than not, a
valuation allowance against deferred tax assets is recorded. Income tax expense
is comprised of taxes paid and payable for the period and change during the
period in net deferred income tax assets and liabilities.

STOCK-BASED COMPENSATION - Effective January 1, 2006, the Company adopted the
provisions of SFAS No. 123(R), and applied the provisions of Staff Accounting
Bulletin ("SAB") No. 107, "Share-Based Payment," using the modified-prospective
transition method. Compensation expense recognized includes the estimated
expense for stock options granted on and subsequent to January 1, 2006, based on
the grant date fair value estimated in accordance with the provisions of SFAS
No. 123(R), and the estimated expense for the portion vesting in the period for
options granted prior to, but not vested as of December 31, 2005, based on the
grant date fair value estimated in accordance with the original provisions of
SFAS No. 123. Further, as required under SFAS No. 123(R), forfeitures are
estimated for share-based awards that are not expected to vest. Results for
prior periods have not been restated, as provided for under the
modified-prospective method.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of financial instruments
are determined 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, short-term investments,
accounts receivables, prepaid expenses and other current assets, accounts
payable, accrued salaries and benefits, 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 obligations,
including the current portion, approximates fair value based on the incremental
borrowing rate currently available to the Company for loans with similar terms
and maturities.


                                       9
<PAGE>



[PG NUMBER]




                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting
policies - continued

CONCENTRATION OF CREDIT RISK - Cash is held in interest bearing or demand
deposit bank accounts. Short-term investments are comprised of marketable debt
securities. The Company and its subsidiary maintain cash balances and short-term
investments at several financial institutions. Accounts at each institution are
insured by the Federal Deposit Insurance Corporation up to $100,000. Uninsured
balances aggregated approximately $2.9 million at March 31, 2007. The Company
has not experienced any losses in such accounts and believes it is not exposed
to any significant credit risk on cash and cash equivalents and short-term
investments, as these deposits and investments are held by high credit quality
financial institutions.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - Effective January 1, 2007, the
Company adopted the provisions of Financial Accounting Standards Board ("FASB")
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 prescribes a
recognition threshold and measurement process for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition of tax benefits,
classification on the balance sheet, interest and penalties, accounting in
interim periods, disclosure and transition. Based on Company management's
evaluation, it has been concluded that there are no significant uncertain tax
positions requiring recognition in the Company's financial statements. The
evaluation was performed for the tax years ended December 31, 1999 and
thereafter, the tax years which remain subject to examination by federal and
state tax jurisdictions since the Company has net operating loss carryforwards
for the tax year ended December 31, 1999. The Company may from time to time be
assessed interest or penalties by major tax jurisdictions, although such
assessments historically have been minimal and immaterial to the Company's
financial results. In the event the Company has received an assessment for
interest and/or penalties, it has been classified in the financial statements as
general and administrative expense.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which establishes guidelines for measuring fair value and expands disclosures
regarding fair value measurements. SFAS No. 157 does not require any new fair
value measurements, but rather it eliminates inconsistencies in the guidance
found in various prior accounting pronouncements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007. Earlier adoption is encouraged
provided financial statements, including for interim periods, for that fiscal
year have not been issued. Although management is still evaluating the potential
effects of SFAS No. 157, the adoption is not expected to have a material impact
on the Company's financial position, results of operations, or cash flows.

In December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2
"Accounting for Registration Payment Arrangements" (FSP EITF 00-19-2"), which
addresses an issuer's accounting and disclosures relating to registration
payment arrangements. Inasmuch as the Company does not have any such
registration payment arrangements, the application of the provisions of FSP EITF
00-19-2 did not have a material impact on the Company's financial position,
results of operations, or cash flows.


                                       10
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007

Note 1 - Description of business and summary of significant accounting
policies - continued

In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("SFAS 159"). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective of the guidance
is to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 is effective as of the beginning of the first fiscal year
after November 15, 2007. Early adoption is permitted as of the beginning of the
fiscal year on or before November 15, 2007, provided the provisions of SFAS 157
are also applied. Although management is still evaluating the potential effects
of SFAS No. 157, the adoption is not expected to have a material impact on the
Company's financial position, results of operations, or cash flows.

RECLASSIFICATIONS - Certain prior year amounts on the condensed consolidated
statements of cash flows have been reclassified to conform to current year
presentation.


Note 2 - Stock-based compensation

During the quarter ended March 31, 2007, restricted stock totaling 10,000 shares
was granted at a fair value of $.28 per share on the date of grant. Stock-based
compensation expense was $33,000 and $27,000 for the three months ended March
31, 2007 and 2006, respectively.

On December 11, 2006, the Company's Board of Directors granted
performanced-based stock options to its Chief Executive Officer. The stock
options were granted in four tranches that vest only if the average closing
price of the Company's common stock over a preceding 20-day period hits the
relevant target price for that tranche within 10 years from the date of grant.
As noted in Note 4, the Chief Executive Officer resigned effective April 1,
2007. Since none of the performance-based stock options had vested nor the
requisite service period met, no expense has been recorded on these options for
first quarter 2007.


                                       11
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007


Note 3 - Segment reporting

The Company has two operating segments, TRMS and the integrated software,
services and lead generation businesses in which the Company is engaged.
Management reports on each segment based upon, among other things, TRMS being a
registered Commodity Trading Advisor and generating revenues through delivery of
Risk Management Services, while LION's other combined operations generate
revenues primarily for sales of software related products and services.
Intercompany revenues represent fees for Pipeline Tools technology and services
purchased by TRMS from its parent, LION, which are generally accounted for at
current market prices and are eliminated in consolidation. Accounting policies
for segments are the same as those described in Note 1. The following sets forth
information for reportable segments and consolidated totals (in thousands):


<TABLE>
<CAPTION>
                                                                           LION                   TRMS               Consolidated
                                                                     -----------------     ------------------     ------------------

<S>                                                                         <C>                 <C>                    <C>
        Three months ended March 31, 2007:
              Revenues from external customers                              $ 1,841             $ 1,323                $ 3,164
              Revenues from internal customers                                  820                   -                      -
              Operating loss                                                   (621)                (60)                  (681)

        Three months ended March 31, 2006:
              Revenues from external customers                              $ 2,081             $ 1,452                $ 3,533
              Revenues from internal customers                                  963                   -                      -
              Operating loss                                                   (157)                (41)                  (198)
</TABLE>


A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                                 Three months ended March 31,
                                                                                       ---------------------- --- ------------------
                                                                                               2007                       2006
                                                                                       ----------------------     ------------------

<S>                                                                                           <C>                         <C>
Operating loss                                                                                $(681)                      $(198)
Non-operating income (expense)                                                                   20                          15
                                                                                              -----                       -----

Net loss before tax                                                                           $(661)                      $(183)
                                                                                              =====                       =====
</TABLE>








                                       12
<PAGE>


                            LION, Inc. and Subsidiary
              Notes to condensed consolidated financial statements
                                 March 31, 2007


The Company's product groupings are comprised of Leads, Loans, and Capital
Markets and associated revenues are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                Three months ended March 31,
                                                                                                2007                    2006
                                                                                          -------------------     ------------------

<S>                                                                                             <C>                      <C>
Leads                                                                                           $  358                   $  501
Loans                                                                                            1,368                    1,501
Capital Markets                                                                                  1,438                    1,531
                                                                                                ------                   ------

     Total revenues                                                                             $3,164                   $3,533
                                                                                                ======                   ======
</TABLE>


The Leads product grouping consists of the Company's Mortgage 101 product, which
generates revenues from LION's subscription and pay-per-lead based lead programs
along with consumer-facing ad banner programs.

The Loans product grouping consists of LION Pro, Retail Websites, and LockPoint
Xtra(R). LION Pro revenues are comprised of LION Pro Corporate, LION Pro
Individual, and lenders who participate in the underlying loan program database.
Retail Website revenues consist of site development and hosting fees. LockPoint
Xtra(R) revenues, which include Precision MTS, are generated from implementation
fees with new customers, recurring monthly billings based on locked loan amount
volumes with monthly minimums which may vary from customer to customer, and
custom development services.

The Capital Markets product grouping consists of Pipeline Tools and Risk
Management Services. Pipeline Tools revenues are generated from implementation
fees from new customers, recurring monthly billings based on closed loan volumes
with monthly minimums which may vary from customer to customer, and custom
development services. Risk Management Services are provided by TRMS and are
generated by recurring monthly billings based on closed loan volumes with
monthly minimums which may vary from customer to customer.


Note 4 - Resignation of Chief Executive Officer

On March 26, 2007, LION accepted the resignation of Randall D. Miles, its
Chairman and Chief Executive Officer, effective as of April 1, 2007 (the
"Resignation Date"). After the Resignation Date, for a six-month term Mr. Miles
will provide certain consulting services to the Company. It is the Company's
opinion that the liability for severance was incurred at the time of the
resignation, therefore, per SFAS 146, "Accounting for Costs Associated with Exit
or Disposal Activities," an accrual for severance totaling $125,000 was recorded
for first quarter 2007.


                                       13
<PAGE>





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

         LION, Inc. is a provider of online lead generation and advanced
business solutions that streamline the mortgage loan fulfillment process. LION
offers consistent, integrated business solutions to consumers, brokers,
realtors, originators and lenders. LION also provides an integrated technology
platform offering online loan productivity, mortgage pipeline hedging and risk
management, software development and data communication tools.

         Our financial performance continues to be impacted by challenging
conditions in the mortgage lending markets. Higher interest rates, falling
refinance activity, rising home loan delinquency and foreclosure rates, and
industry pressure on sub prime lending, combined to exert pressures on the
lenders and brokers we serve. Revenue for first quarter 2007 totaled $3.2
million, a decrease of 10% from $3.5 million for the same quarter in the prior
year. With the exception of Precision MTS, all product lines declined as a
result of continued contraction in loan origination volumes for our broker and
lender customers as well as increased competition.

         In this business environment, we are continuing to promote growth by
completing the product group initiatives discussed below, as well as
consolidating our operations to reduce our underlying cost structure. Effective
as of April 1, 2007, the Board of Directors accepted the resignation of Randall
D. Miles as Chairman and Chief Executive Officer and appointed our President,
David Stedman, as Interim CEO. Mr. Jack McMillan, a long-time director of LION,
has been elected Chairman of the Board. The Board of Directors has directed
management to focus its efforts on quarter over quarter profitability and
positive cash flow from operations.

         Operating expenses for first quarter 2007 increased 3% to $3.8 million
compared to $3.7 million for first quarter 2006 due primarily to efforts on our
2007 product initiatives and severance charges totaling $125,000 related to the
resignation of our CEO. We reported a net loss for first quarter 2007 of
$665,000 or $.02 per share compared to a net loss of $186,000 for the same
quarter in the prior year.

         At March 31, 2007, we had approximately $3.1 million in cash, cash
equivalents, short-term investments, and restricted cash. During the three
months ended March 31, 2007, net cash of $134,000 was used in our operating
activities primarily to fund operating losses, while investing activities used
net cash of $450,000 primarily for product initiatives and related datacenter
upgrades. Product initiative expenditures are expected to diminish during the
last half of 2007, as most initiatives are scheduled to be completed during
second quarter 2007 with certain phases extending into third quarter 2007.
During the third quarter of 2007, we are scheduled to make payments on notes
totaling $972,000. Our existing cash and cash equivalents will be sufficient to
fund our operational and cash needs for the next 12 months, as we seek to
recapture positive cash flow from operations. See "Financial Position."



                                       14
<PAGE>


RESULTS OF OPERATIONS

PRODUCT GROUPS AND 2007 PLANS

         LEADS

         Revenue from our Leads product group, comprised of Mortgage 101,
decreased 28% to $358,000 in first quarter 2007 compared to $501,000 for first
quarter 2006. This was due to decreases in our pay per lead model as well as our
advertising revenues which are comprised of rate and directory listings and ad
banners. The decrease is indicative of lower loan volumes, increased competition
and industry lead quality concerns. We continue to attract steady consumer
traffic to our Mortgage101.com Internet portal due to strong search engine
placement on Google, MSN, and Yahoo for keyword searches such as "mortgage." An
internal review of our performance resulted in our concluding that a bolder
strategy is necessary if we are to optimize our level of consumer traffic,
though not to the exclusion of lead generation, as an important component of our
Mortgage 101 consumer portal.

         To better leverage the large number of consumers attracted to Mortgage
101, we have initiated a strategic shift in our business model to include more
traditional Internet advertising and other consumer finance verticals. We expect
this shift will provide us an opportunity to attract more consumers, generate
incremental mortgage leads as well as leads for our strategic partners from
which we will financially benefit. A significant redesign of our existing
Mortgage 101 portal is scheduled for release towards the end of second quarter
2007 or early third quarter, which will include strategically selected vertical
partners to extend our offerings beyond mortgage finance. We have executed two
such agreements, one with a leading auto finance company and another with a
household moving and storage company. Included among the other verticals that we
are exploring or are negotiating are real estate, including valuation tools,
realtor leads, and home listings; financial management; home services and
others. Each may have several sub components such as the opportunity to explore
a variety of insurance needs that will enrich a consumer's experience and
generate opportunities for them to pursue interests and needs that are both
linked to the mortgage process and stand apart from it.

         To benefit from increased traffic and make more effective use of
available advertising space, we are negotiating with national advertising firms
to handle our media placement. In addition, we have entered into an agreement to
leverage third party expertise to enhance our existing search engine
optimization efforts in securing high organic search engine placement.

         LOANS

         Revenue from our Loans product group decreased 9% to $1.37 million in
first quarter 2007 compared to $1.5 million for first quarter 2006. We continue
to see contraction in our mortgage broker customer base for LION Pro and Retail
Websites which we believe to be a result of higher interest rates, lower loan
origination volumes, and increased competition. Our revenues from LockPoint
Xtra(R)/Precision MTS continue to gain traction, and we have seen our fourth
consecutive quarter over quarter revenue increase in the product. However, we
are seeing signs of the sales cycle getting longer.

         We are in the process of making strategic changes to our Loans product
group. A recent redesign of our LION Pro Corporate offering, now known as
Precision Access, has extended full access to lockable loan pricing and loan
program search within our customer's own private database. Precision Access is
fully integrateable with and upgradeable to Precision MTS. During second quarter
2007, our LION Pro search engine product for mortgage brokers will be enhanced
with an improved loan search feature utilizing a new multi-lender database
containing more types of loan programs and more guideline requirements which
will help the broker find exactly the type of loan program and pricing to fit
their borrowers needs, and forward the loan information to a participating
lender to obtain commitment.


                                       15
<PAGE>

         The template version of our Retail Website product will also be
replaced during second quarter 2007 with a more price competitive product
offering greater functionality, which will integrate many of the features and
tools available through Precision MTS.

         In addition, our business-to-business Internet portal, Lioninc.com,
will be redesigned to accommodate the changes for LION Pro and Retail Websites
and also allow us to take advantage of a more traditional advertising model. We
expect to engage a national advertising firm that will assist us with media
placement for the Lioninc.com portal. The Lioninc.com redesign will include an
e-commerce application to facilitate purchase and delivery of our more
commoditized LION Pro and template Retail Website products which will allow our
customers to order, pay for and use these products immediately after point of
sale, requiring less of our resources and development time to maintain.

         CAPITAL MARKETS

         Revenue from our Capital Markets product group, comprised of our
Pipeline Tools product and TRMS risk management services, decreased 6% to $1.44
million in first quarter 2007 compared to $1.53 million for first quarter 2006.
Our risk management businesses rest on a solid foundation, but declines in
industry mortgage volume continue to impact the fees we collect in connection
with the variable pricing component of our pricing structure.

         While we don't expect the disarray in sub prime lending to have a
significant direct impact on many of our lender clients, the prospect of credit
tightening, collapsing spreads, constricted warehouse lines and other issues is
affecting the market, and it would not be a surprise to see some lenders
becoming more conservative as the effect of rising delinquency and foreclosure
rates and collapse of many subprime lenders plays itself out. This could mean
more lenders relying on best execution for delivery of their loan production for
a time rather than an interest rate risk management strategy that TRMS offers,
which could adversely affect our revenues.

         We have hired a strong senior sales executive to bolster our capital
markets sales group. We have begun to see our prospect pipeline expand, and we
expect to add to our customer base during 2007. In addition, if loan production
increases either seasonally or due to shifts in market conditions in general,
our Capital Markets product group is positioned to benefit from such an
increase.


OPERATING EXPENSES (dollars in thousands)

<TABLE>
<CAPTION>
                                                     For three months ended March 31,
                                      ---------------------------------------------------------------
                                                   2007                            2006                          Change
                                      -------------------------------  ------------------------------  ----------------------------
                                          Amount       % of Revenue        Amount      % of Revenue        Amount           %
                                      ---------------  --------------  --------------- --------------  --------------- ------------

<S>                                         <C>               <C>          <C>               <C>          <C>                 <C>
Direct costs                                $1,539            49%          $1,525            43%          $   14              1%
Selling and marketing                          501            16%             565            16%             (64)           (11)%
General and administrative                   1,148            36%             927            26%             221             24%
Research and development                       559            18%             592            17%             (33)            (6)%
Depreciation and
     amortization                               98             3%             122             4%             (24)           (20)%
                                            ------        ------           ------        ------           ------         ------

    Total operating expenses                $3,845           122%          $3,731           106%          $  114              3%
                                            ======        ======           ======        ======           ======         ======
</TABLE>


                                       16
<PAGE>


DIRECT COSTS

         Direct costs are comprised primarily of website fulfillment, technology
infrastructure support, product and contract support, product deployment, and
TRMS trading desk and support services. Direct costs for first quarter 2007
increased 1% to $1.54 million compared to $1.53 million for the same quarter in
the prior year. The increase is due to additional resources required for the
onboarding of new Precision MTS customers and for Mortgage 101 search engine
optimization and related services. This increase was offset by a reduction in
certain maintenance support services related to our production datacenters and a
decrease in trade desk staffing needs for TRMS.

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 for first quarter 2007 were down 11% to $501,000 compared to
$565,000 for the same quarter in the prior year. The decrease was due primarily
to a reduction in advertising for Mortgage 101 leads as a result of reliance on
organic generation of traffic in the Mortgage 101 portal.

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. General and administrative
expenses for first quarter 2007 increased 24% to $1.15 million compared to
$927,000 for the same quarter in the prior year. This increase is primarily the
result of severance charges totaling $125,000 related to the resignation of our
chief executive officer at the end of the first quarter, an increase in bad
debts related to certain TRMS customers, and additional human resource services.

RESEARCH AND DEVELOPMENT

         Research and development expenses are comprised primarily of
engineering salaries and related costs. Research and development expenses for
first quarter 2007 declined 6% to $559,000 compared to $592,000 for the same
period in the prior year. The reduction in research and development costs is
primarily a result of certain payroll costs capitalized on our LION Pro,
Mortgage 101 and Retail Website product and website initiatives for 2007. This
reduction was offset by various vendor resources that are assisting on these
same initiatives that are not capitalizable. We expect these resource needs for
our product initiatives to continue through second quarter 2007 and be greatly
reduced during the last half of 2007.

DEPRECIATION AND AMORTIZATION

The decrease in depreciation and amortization expense for first quarter 2007
compared to the same quarter in the prior year is the result of certain
equipment, computers and software being fully depreciated after first quarter
2006.

INTEREST EXPENSE AND INTEREST INCOME

         For the three months ended March 31, 2007 and 2006, interest expense is
primarily comprised of interest on 8% promissory notes totaling $972,000 related
to the TRMS acquisition.

         For first quarter 2007, interest income and other increased to $39,000
compared to $35,000 for the same quarter in the prior year. The increase is due
to higher interest rates in first quarter 2007 compared to first quarter 2006.


                                       17
<PAGE>


OPERATING SEGMENTS

         We have two operating segments, TRMS and the integrated software,
services and lead generation businesses in which we are engaged. TRMS is a
registered Commodity Trading Advisor and generates revenues through hands-on
delivery of Risk Management Services, while LION's other combined operations
generate revenues primarily for sales of software related products and services.
Intercompany revenues represent fees for Pipeline Tools technology and services
purchased by TRMS from its parent, LION, which are generally accounted for at
current market prices and are eliminated in consolidation. Condensed operating
segment information is as follows (in thousands):

<TABLE>
<CAPTION>
                                                            For three months ended
                                                                  March 31,
                                                  -----------------------------------------
                                                        2007                     2006
                                                  ----------------         ----------------

<S>                                                     <C>                     <C>
Revenue
    LION                                                $ 1,841                 $ 2,081
    TRMS                                                  1,323                   1,452
                                                        -------                 -------
        Total revenue                                   $ 3,164                 $ 3,533
                                                        =======                 =======

Operating loss
   LION                                                 $  (621)                $  (157)
   TRMS                                                     (60)                    (41)
                                                        -------                 -------
        Operating loss                                  $  (681)                $  (198)
                                                        =======                 =======
</TABLE>



         LION revenue for first quarter 2007 declined 12% to $1.84 million
compared to $2.08 million for the same quarter in the prior year. Our financial
performance continues to be impacted by challenging conditions in the mortgage
lending markets. Higher interest rates, falling refinance activity, rising home
loan delinquency and foreclosure rates, and industry pressure on sub prime
lending, combined to exert pressures on the lenders and brokers we serve. With
the exception of Precision MTS and Pipeline Tools, LION's other products which
include LION Pro, Retail Websites and Mortgage 101 declined as a result of
continued contraction in loan origination volumes for our broker and lender
customers and increased competition. Our Precision MTS product has seen its
fourth consecutive quarter over quarter revenue increase which we believe to be
sustainable. Our product initiatives as mentioned earlier should have a positive
impact on sales in the latter half of 2007.

         LION operating expenses for first quarter 2007 increased 2.5% compared
to first quarter 2006 due primarily to efforts on our 2007 product initiatives
and severance charges related to the resignation of our chief executive officer
which, along with decreasing revenues, contributed to the operating loss for the
quarter. Throughout the remainder of 2007 and mostly during the last half of the
year, we will seek to aggressively consolidate LION's operations to reduce our
underlying cost structure, but not to the detriment of our product initiatives.

         TRMS revenue for first quarter 2007 declined 9% to $1.32 million
compared to $1.45 million for the same quarter in the prior year. While our risk
management business rests on a solid foundation, a sharp decline in industry
mortgage volume has adversely affected the fees we collect in connection with
the variable pricing component of our pricing structure. We have hired a strong
senior sales executive to bolster our capital markets sales group. We have begun
to see our prospect pipeline expand, and we expect to add to our customer base
during 2007. In addition, if loan production increases either seasonally or due
to shifts in market conditions in general, TRMS is positioned to benefit from
such an increase.



                                                 18
<PAGE>

         TRMS decreased its operating expenses for first quarter 2007 compared
to the same quarter in the prior year primarily due to lower software licensing
fees paid to LION for use of the Pipeline Tools technology and a reduction in
trade desk resources which were offset by an increase in bad debt expense and
sales costs. The operating loss for the quarter is primarily due to decreasing
revenues.


FINANCIAL POSITION

         At March 31, 2007, we had approximately $3.1 million in cash, cash
equivalents, short-term investments, and restricted cash. Historically, we have
funded our activities primarily from cash provided by operations, however our
operating activities used cash during the first quarter. Non-cash items are
comprised primarily of depreciation and amortization and stock-based
compensation expense. The change in cash and cash equivalents is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                                   Three months ended
                                                                                                        March 31,
                                                                                         -------------------------------------
                                                                                                2007                2006
                                                                                         ------------------   ----------------
<S>                                                                                         <C>                 <C>
Net loss                                                                                       $  (665)            $  (186)
Non-cash items                                                                                     167                 134
Changes in working capital                                                                         364                  61
                                                                                               -------             -------
    Net cash provided by (used in) operating activities                                           (134)
                                                                                                                         9
                                                                                               -------             -------

    Net cash used in investing activities                                                         (450)                (32)
                                                                                               -------             -------

    Net cash provided by (used in) financing activities                                              1                 (10)
                                                                                               -------             -------

Net decrease in cash and cash equivalents                                                         (583)                (33)
Cash and cash equivalents at beginning of period                                                 2,587               3,371
                                                                                               -------             -------
Cash and cash equivalents at end of period                                                     $ 2,004             $ 3,338
                                                                                               =======             =======
</TABLE>

OPERATING ACTIVITIES

         During the three months ended March 31, 2007, cash from operating
activities decreased $134,000 due to operating losses from reduced revenues,
resources used for LION's product initiatives for LION Pro, Mortgage 101 and
Retail Websites, and an increase in trade receivables. This decrease was offset
primarily by an increase in deferred revenue related to a large TRMS customer as
part of an existing contract and increases in accounts payable, accrued salaries
and benefits, and accrued liabilities due to our normal business operating
cycle.

         During the three months ended March 31, 2006, cash from operating
activities increased slightly due to an increase in deferred revenue primarily
related to a large TRMS customer as part of an existing contract and increases
in accounts payable, accrued salaries and benefits, and accrued liabilities due
to our normal business operating cycle. This increase was offset by an increase
in trade receivables and certain prepaid maintenance and service agreements.

INVESTING ACTIVITIES

         During the three months ended March 31, 2007, investing activities used
cash of $450,000 which primarily consisted of (i) hardware and software upgrades
to our datacenters in advance of implementation of our product initiatives for
LION Pro, Retail Websites and Mortgage 101 and (ii) capitalized software
development costs from vendors and LION's research and development resources
related to these product initiatives. These initiatives are scheduled to be
completed during second quarter 2007 with certain phases of the initiatives
extending into third quarter 2007.



                                       19
<PAGE>

         During the three months ended March 31, 2006, investing activities used
cash of $32,000 which primarily consisted of the acquisition of computer
equipment and software.

FINANCING ACTIVITIES

         During the three months ended March 31, 2007, financing activities
primarily related to payments on capitalized lease obligations related to the
acquisition of application and database software, computers, servers, furniture
and telecommunications systems upgrades which were offset by proceeds from the
exercise of stock options.

         During the three months ended March 31, 2006, financing activities
primarily related to payments on capitalized lease obligations related to the
acquisition of application and database software, computers, servers, furniture
and telecommunications systems upgrades. The remaining capital lease obligation
was paid off during the second quarter of 2006.

OVERALL LIQUIDITY AND CAPITAL RESOURCES

         We believe that our existing cash, cash equivalents, short-term
investments and cash generated from operations will be sufficient to satisfy our
growth plans as well as our operational and capital expenditure needs for the
next 12 months. As a result of our new product plans for 2007, our capital
expenditure program and research and development efforts will be increased to
cover upgrades to our datacenters that deliver our products and services over
the Internet. In addition, we will have an expanded sales and marketing effort
that will coincide with our planned product launches throughout the year. Our
notes payable to various TRMS shareholders totaling $972,000 are also coming due
in October 2007.

         With the departure of our chief executive officer which was effective
April 1, 2007 and the level of operating losses for first quarter 2007, we will
be aggressively consolidating our operations throughout the remainder of 2007 to
reduce our underlying cost structure. This consolidation will be designed to not
adversely impact our product initiatives which we view as an important part of
our growth plans for 2007 and beyond.

         Although we are currently not a party to any agreement with respect to
investments in, or acquisitions of, other businesses, products, services or
technologies, we regularly review and evaluate strategic opportunities,
including those identified internally by us as well as unsolicited third party
proposals that we may receive from time to time, which may involve the sale of
some or all of our assets, partnering or other collaboration agreements, or a
merger or other strategic transaction. It is possible that nothing may result
from our exploration or that we may acquire, be acquired or enter into some
other strategic relationship, and that in consummating or further exploring such
avenues, we may incur additional costs. Furthermore, we may enter into letters
of intent and other non-definitive agreements that do not culminate in a
completed transaction, engage in contract negotiations, or incur due diligence
expenses which affect our quarterly earnings prior to or without entering into a
material definitive agreement required to be disclosed publicly. There can be no
assurance that the exploration of strategic alternatives will result in any
agreements or transactions, or that, if completed, any agreements or
transactions will be successful or on attractive terms. The negotiation or
consummation of any of these transactions could be material to our financial
condition and results of operations. We may need to raise additional capital
through future financing to the extent necessary to fund such activities or
simply to fund future operations if cash from operating activities is
insufficient. Additional financing may not be available at all or on terms
favorable to us.


                                       20
<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make a number of estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. Our estimates are based
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. The reporting of results of our
operations and financial condition in the preparation of our financial
statements could differ significantly from our estimates under different
assumptions and conditions. Significant estimates include allowances for
doubtful accounts, long-lived assets valuation, estimated useful lives and
recoverability, realizability of deferred tax assets, and the allocation of
purchase price.

         We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our financial condition and results of operations and require our most
difficult, subjective, and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain. For a
summary of our significant accounting policies, including the critical
accounting policies discussed below, see Note 1, Description of Business and
Summary of Significant Accounting Policies, to our condensed consolidated
financial statements.

         REVENUE RECOGNITION

         We recognize revenue from product sales or services provided when the
following four revenue recognition criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred or services have been provided, the
selling price is fixed or determinable, and collectibility is reasonably
assured. For multiple-element arrangements, the Company applies Emerging Issues
Task Force ("EITF") Issue 00-21, REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES
that meet the following criteria: the delivered item has value to the customer
on a standalone basis; there is objective and reliable evidence of the fair
value of undelivered items; and delivery of any undelivered item is probable.

          In certain hosting arrangements where the customer has the option to
take possession of the software at any time during the hosting period without
significant penalty and it is feasible for the customer to either run the
software on its own hardware or contract with another party unrelated to us to
host the software, we account for the licensing of software in accordance with
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 97-2, SOFTWARE REVENUE RECOGNITION.

         Revenue from services is generally determined based on time and
materials or monthly subscription fees. Revenue for services is recognized as
the services are performed.

         INCOME TAXES

         We account for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." In accordance with SFAS No. 109, deferred tax
assets arise from the tax benefit of amounts expensed for financial reporting
purposes but not yet deducted for tax purposes and from unutilized tax credits
and net operating loss carry forwards. We evaluate our deferred tax assets on a
regular basis to determine if a valuation allowance is required. To the extent
it is determined the recoverability of the deferred tax assets is not more
likely than not, we will record a valuation allowance against deferred tax
assets.

         Realization of the net deferred tax asset is dependent on generating
sufficient taxable income prior to expiration of net operating loss
carryforwards. At December 31, 2006, the Company had net operating loss
carryforwards for federal and state income tax purposes of approximately $4.1
million and $700,000, respectively, available to offset future income which
expire in 2018 through 2026. The Company has


                                       21
<PAGE>

established a valuation allowance of approximately $1.6 million as of December
31, 2006, the full amount of deferred tax assets. Utilization of these
carryforwards could be limited due to a change of control in the Company's
ownership as defined by the Internal Revenue Code Section 382.

         IMPAIRMENT OF GOODWILL

         We periodically assess goodwill for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, in accordance with the provisions of SFAS No. 142, "Goodwill and
Other Intangible Assets." This statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net undiscounted cash
flows expected to be generated by the asset or other valuation methods. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         Effective January 1, 2007, the Company adopted the provisions of
Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109"
("FIN 48"). FIN 48 prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition of tax benefits, classification on the balance sheet, interest and
penalties, accounting in interim periods, disclosure and transition. Based on
Company management's evaluation, it has been concluded that there are no
significant uncertain tax positions requiring recognition in the Company's
financial statements. The evaluation was performed for the tax years ended
December 31, 1999 and thereafter, the tax years which remain subject to
examination by federal and state tax jurisdictions since the Company has net
operating loss carryforwards for the tax year ended December 31, 1999. The
Company may from time to time be assessed interest or penalties by major tax
jurisdictions, although such assessments historically have been minimal and
immaterial to the Company's financial results. In the event the Company has
received an assessment for interest and/or penalties, it has been classified in
the financial statements as general and administrative expense.

         In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements," which establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements. SFAS No. 157 does not require any
new fair value measurements, but rather it eliminates inconsistencies in the
guidance found in various prior accounting pronouncements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. Earlier adoption
is encouraged provided financial statements, including for interim periods, for
that fiscal year have not been issued. Although management is still evaluating
the potential effects of SFAS No. 157, the adoption is not expected to have a
material impact on the Company's financial position, results of operations, or
cash flows.

         In December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2
"Accounting for Registration Payment Arrangements" (FSP EITF 00-19-2"), which
addresses an issuer's accounting and disclosures relating to registration
payment arrangements. Inasmuch as the Company does not have any such
registration payment arrangements, the application of the provisions of FSP EITF
00-19-2 did not have a material impact on the Company's financial position,
results of operations, or cash flows.

         In February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective of
the guidance is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in


                                       22
<PAGE>

reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. SFAS 159 is
effective as of the beginning of the first fiscal year after November 15, 2007.
Early adoption is permitted as of the beginning of the fiscal year on or before
November 15, 2007, provided the provisions of SFAS 157 are also applied.
Although management is still evaluating the potential effects of SFAS No. 157,
the adoption is not expected to have a material impact on the Company's
financial position, results of operations, or cash flows.


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 our strategic direction, as well as developments beyond
our 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, in this section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and elsewhere in
this report. 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 decreased to $13.7 million in 2006 from $15.8
million in 2005. We had ten consecutive quarters of profitability beginning with
the third quarter of 2002 through the fourth quarter of 2004, but incurred a net
loss for each of the first two quarters of 2005 before returning to
profitability in the third and fourth quarters of 2005. We recorded a net loss
of $1.3 million for 2006 compared to a net loss of $102,000 in the prior year.
In first quarter 2007, revenue annualized at $12.7 million and our net loss was
$665,000.

         Our prospects must be considered in view of the risks, expenses and
difficulties frequently encountered by companies in continually 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 model and 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. Furthermore, we have not entered into employment
agreements with these significant employees except for our executive officers.
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. Our 2005 Stock Incentive Plan provides us flexiblity to attract and
retain the best available employees. 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.


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<PAGE>


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 through 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. Our larger customer contracts,
which involve our LPX/Precision, Pipeline Tools and TRMS hedging services,
typically have renewable successive one- and two-year terms. Revenue from these
contracts comprised approximately 55% of our total revenue for first quarter
2007.

         There can be no assurance that the existing 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. If we are unsuccessful in
enrolling new customers to equalize any attrition we might have with 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 have multiple site capacity for the delivery of our products and
services. 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.

OUR BUSINESS DEPENDS ON INCREASING USE OF THE INTERNET BY USERS SEARCHING FOR
INFORMATION, ADVERTISERS MARKETING PRODUCTS AND SERVICES AND WEB SITES SEEKING
TO EARN REVENUE TO SUPPORT THEIR WEB CONTENT. IF THE INTERNET INFRASTRUCTURE
DOES NOT GROW AND IS NOT MAINTAINED TO SUPPORT THESE ACTIVITIES, OUR BUSINESS
WILL BE HARMED.

         Our success will depend on the continued growth and maintenance of the
Internet infrastructure. This includes maintenance of a reliable network
backbone with the necessary speed, data capacity and security for providing
reliable Internet services. Internet infrastructure may be unable to support the
demands placed on it if the number of Internet users continues to increase, or
if existing or future Internet users access the Internet more often or increase
their bandwidth requirements. In addition, viruses, worms and similar programs
may harm the performance of the Internet. The Internet has experienced a variety
of outages and other delays as a result of damage to portions of its
infrastructure, and it could face outages and delays in the future. These
outages and delays could reduce the level of Internet usage as well as our
ability to provide our solutions.


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<PAGE>

GOVERNMENT REGULATION

         Our mortgage pipeline risk management services are provided by TRMS, a
Commodity Trading Advisor registered with the Commodity Futures Trading
Commission and the National Futures Association. Commodity Trading Advisors are
subject to detailed disclosure, reporting, and recordkeeping requirements. The
U.S. commodity markets are subject to on-going and substantial regulatory
changes, and we cannot predict what statutory, administrative or exchange
imposed restrictions may become applicable to or adversely affect TRMS in the
future.

         Our other operations are subject to general business regulations and
laws, as well as regulations and laws specifically governing the Internet and
e-commerce. Existing and future laws and regulations may impede the growth of
the Internet or other online services, which in turn could decrease the demand
for our products and services, increase the cost of doing business, or otherwise
have an adverse effect on our business, operating results or financial
condition. These regulations and laws may cover taxation, user privacy, data
protection, pricing, content, copyrights, distribution, electronic contracts and
other communications, consumer protection, the provision of online payment
services, broadband Internet access, and the characteristics and quality of
products and services not currently subject to direct regulation by any
government agency, other than regulations applicable to businesses generally.
There are currently few laws or regulations directly applicable to access or do
commerce on the Internet. However, the applicability to the Internet of existing
laws governing issues such as property ownership, sales and other taxes, libel
and personal privacy is developing. We cannot predict the impact, if any, that
future regulation or regulatory changes might have on our business. Unfavorable
resolution of these issues may harm our business, diminish the demand for our
products and services or increase our cost of doing business.

WE ARE EXPERIENCING A DOWNTURN IN REVENUE DUE TO CHALLENGING CONDITIONS IN THE
MORTGAGE INDUSTRY, AND THESE INDUSTRY TRENDS MAY CONTINUE.

         We experienced declining revenues and cash flows in 2006 and again in
first quarter 2007, which we attribute to challenging conditions in mortgage
lending markets which, in turn, exert pressure on the lenders and brokers we
serve. The mortgage lending environment is facing higher interest rates, falling
refinance activity, rising home loan delinquency and foreclosure rates, industry
pressure on sub prime lending and consolidations. Annual mortgage loan
origination fell from a peak of $3.8 trillion in 2003 to an estimated $2.7
trillion in 2006, a decline of almost 30%. On a national level, the housing
sector experienced a recession in 2006 with an 8% drop in existing-home sales
and a 17% drop in new home sales. These factors may continue to affect the
mortgage industry and adversely affect our revenues, and we cannot predict with
accuracy how our quarterly and annual financial results will be impacted.

IF WE DO NOT CONTINUE TO INNOVATE AND PROVIDE PRODUCTS AND SERVICES THAT ARE
USEFUL TO OUR USERS AND CUSTOMERS, WE MAY NOT REMAIN COMPETITIVE, AND OUR
REVENUES AND OPERATING RESULTS COULD SUFFER.

         Our success depends on providing products and services that our users
and customers use for a high quality Internet experience, and we face
substantial competitive challenges in the changing mortgage industry and in each
of our vertical markets. For the last two years, we have sought to substantially
upgrade our technology into a scalable platform to enable us to develop and link
a more robust set of products and services. Our competitors are constantly
developing innovations in web search, web functionality, and online advertising
along with providing information to people. As a result, we must continue to
invest significant resources in research and development in order to enhance our
technology and our existing products and services and introduce new high-quality
products and services that our users and customers can easily and effectively
use. If we are unable to ensure that our users and customers have a high quality
experience with our products and services, then these users and customers may
become dissatisfied and move to other competitors' products. In addition, if we
are unable to predict user and customer preferences or industry changes, or if
we are unable to modify our products and services on a timely basis, we may lose


                                       25
<PAGE>

users and customers. Our operating results would also suffer if our innovations
are not responsive to the needs of our users and customers, are not
appropriately timed with market opportunity or are not effectively brought to
market. As technology continues to develop, our competitors may be able to offer
results that are, or that are perceived to be, substantially similar or better
than those generated by our products and services. This may force us to expend
significant resources in order to remain competitive.

WE ARE REQUIRED TO EVALUATE OUR INTERNAL CONTROL OVER FINANCIAL REPORTING UNDER
SECTION 404 OF THE SARBANES OXLEY ACT OF 2002, AND ANY ADVERSE RESULTS FROM SUCH
EVALUATION COULD RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL
REPORTS AND HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

         On December 15, 2006, the U.S. Securities and Exchange Commission
("SEC") extended the date by which non-accelerated filers such as LION must
begin filing a report by management assessing the effectiveness of the Company's
internal controls in their annual reports as required by Section 404(a). The
compliance date for non-accelerated filers moved from fiscal years ending on or
after July 15, 2007 to fiscal years ending on or after December 15, 2007. The
SEC also extended the date by which non-accelerated filers must begin to comply
with the Section 404(b) requirements to include an auditor's attestation report
on internal controls in their annual reports, until the first annual report for
a fiscal year ending on or after December 15, 2008.

         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 the Section 404, which requires our management to assess the effectiveness
of our existing internal controls at December 31, 2007. 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 on-going 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.

         The Committee of Sponsoring Organizations of the Treadway Commission
(COSO) provides a framework for companies to assess and improve their internal
control systems. The Public Company Accounting Oversight Board's Auditing
Standard No. 2 ("Auditing Standard No. 2") provides the professional standards
and related performance guidance for auditors to attest to, and report on,
management's assessment of the effectiveness of internal control over financial
reporting under Section 404. Management's assessment of internal controls over
financial reporting requires management to make subjective judgments and,
particularly because Standard No. 2 is newly effective, some of the judgments
will be in areas that may be open to interpretation and therefore the report may
be uniquely difficult to prepare, and our auditors may not agree with
management's assessments. We are still performing the system and process
documentation and evaluation needed to comply with Section 404, which is both
costly and challenging.

         During this process, if our management identifies one or more material
weaknesses in our internal control over financial reporting, we will be unable
to assert such internal control is effective. If we are unable to assert that
our internal control over financial reporting is effective as of December 31,
2007 (or if our auditors are unable to attest that our management's report is
fairly stated or they are unable to express an opinion on the effectiveness of
our internal controls at December 31, 2008), we could lose investor confidence
in the accuracy and completeness of our financial reports, which would have an
adverse effect on our stock price.

         We cannot be certain as to the timing of completion of our evaluation,
testing and any required remediation due in large part to the fact that there is
very little precedent available by which to measure compliance with the new
Auditing Standard No. 2. If we are not able to complete our assessment under


                                       26
<PAGE>

Section 404 in a timely manner, we would be unable to conclude that our internal
control over financial reporting is effective as of December 31, 2007.

OUR INTELLECTUAL PROPERTY RIGHTS ARE VALUABLE, AND ANY INABILITY TO PROTECT THEM
COULD REDUCE THE VALUE OF OUR PRODUCTS, SERVICES AND BRAND.

         We rely on a combination of copyright and trademark laws, trade
secrets, software security measures, license agreements and nondisclosure
agreements to protect our proprietary technology and software products. We have
a variety of registered Internet domain names. Regulations governing domain
names may not protect our trademarks and similar proprietary rights. We may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon, or diminish the value of our trademarks and other proprietary
rights. We currently have federally registered trademarks on LockPoint Xtra(R),
Lockpoint(R), and Ratesheet Plus(R) and one pending patent; "User Interface for
On-line Real Estate Service."

         Policing unauthorized use of our proprietary rights is inherently
difficult, and we may not be able to determine the existence or extent of any
such unauthorized use. The protection of our intellectual property may require
the expenditure of significant financial and managerial resources. Moreover, we
cannot be certain that the steps we take to protect our intellectual property
will adequately protect our rights or that others will not develop substantially
equivalent or superseding proprietary technology, or that equivalent products
will not be marketed in competition with our products, thereby substantially
reducing the value of our proprietary rights. Furthermore, there can be no
assurance that any confidentiality agreements between us and our employees or
any license agreements with our customers will provide meaningful protection of
our proprietary information in the event of any unauthorized use or disclosure
of such proprietary information.

         Although we believe that our trademarks and proprietary technology do
not and will not infringe patents or violate proprietary rights of others, it is
possible that our trademark and proprietary rights may not be valid or that
other parties may claim that we infringed their proprietary rights. In the event
our products infringe proprietary rights of others, we may be required to modify
the design of our products, change the name of products or obtain a license.
There can be no assurance we will be able to do so in a timely manner, upon
acceptable terms and conditions, or at all. The failure to do any of the
foregoing could have a material adverse effect upon us. In addition, there can
be no assurance that we will have the financial or other resources necessary to
enforce or defend an intellectual property infringement or proprietary rights
violation action. Moreover, if our products infringe patents, trademarks or
proprietary rights of others, we could, under certain circumstances, become
liable for damages, which could have a material adverse effect on us.

ALLIANCES, MERGERS AND ACQUISITIONS COULD RESULT IN OPERATING DIFFICULTIES,
DILUTION AND OTHER HARMFUL CONSEQUENCES.
         Our industry has experienced significant consolidation, and we
regularly review and evaluate strategic opportunities, including those
identified internally by us as well as unsolicited third party proposals that we
may receive from time to time. We may engage in discussions seeking ways to
enhance our prospects through partnerships, alliances and mergers and
acquisitions. From 2003 to 2004, for example, we consummated two acquisitions.
It is possible that nothing may result from our exploration or that we may
acquire, be acquired or enter into some other strategic relationship, and that
in consummating or further exploring such avenues, we may incur additional
costs. Furthermore, we may enter into letters of intent and other non-definitive
agreements that do not culminate in a completed transaction, engage in contract
negotiations, or incur due diligence expenses which affect our quarterly
earnings prior to or without entering into a material definitive agreement
required to be disclosed publicly. The negotiation or consummation of any of
these transactions could be material to our financial condition and results of


                                       27
<PAGE>

operations. In addition, the process of integrating an acquired company,
business or technology may create unforeseen operating difficulties and
expenditures and is risky. The areas where we may face risks include:

         o    The need to implement or remediate controls, procedures and
              policies appropriate for a public company at companies that prior
              to the acquisition lacked these controls, procedures and policies.

         o    Diversion of management time and focus from operating our business
              to alliance, merger or acquisition integration challenges.

         o    Cultural challenges associated with integrating employees from the
              acquired company into the acquiring organization.

         o    Retaining employees from the businesses acquired.

         o    The need to integrate each company's accounting, management
              information, human resource and other administrative systems to
              permit effective management.

         The anticipated benefit of many of these strategic relationships may
not materialize. Future alliances, mergers or acquisitions or dispositions could
result in potentially dilutive issuances of our equity securities, the
incurrence of debt, contingent liabilities or amortization expenses, or
write-offs of goodwill, any of which could harm our financial condition. Future
acquisitions may require us to obtain additional equity or debt financing, which
may not be available on favorable terms or at all.

THE TRADING PRICE FOR OUR COMMON STOCK IS AND MAY CONTINUE TO BE VOLATILE.

         The Company's common stock trades on the OTC Bulletin Board under the
symbol "LINN." The trading price of our common stock has been historically
volatile and will likely continue to be volatile. The trading price of our
common stock may fluctuate widely in response to various factors, some of which
are beyond our control. These factors include:

         o    Quarterly variations in our results of operations or those of our
              competitors.

         o    Announcements by us or our competitors of strategic relationships,
              alliances, mergers or acquisitions, new products, significant
              contracts, commercial relationships or capital commitments.

         o    Disruption to our operations or our data centers.

         o    The emergence of new sales channels in which we are unable to
              compete effectively.

         o    Our ability to develop and market new and enhanced products on a
              timely basis.

         o    Commencement of, or our involvement in, litigation.

         o    Any major change in our board or management.

         o    Changes in governmental regulations or in the status of our
              regulatory approvals.

         o    Recommendations by securities analysts or changes in earnings
              estimates.

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<PAGE>

         o    Announcements by our competitors of their earnings that are not in
              line with analyst expectations.

         o    The volume of shares of common stock available for public sale.

In addition, the OTC Bulletin Board, stock market in general, and the market for
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of those companies. These broad market and industry factors may
seriously harm the market price of our common stock, regardless of our actual
operating performance.


ITEM 3. CONTROLS AND PROCEDURES

(a) Disclosure 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 of the end of the period covered by this report.
Disclosure controls and procedures are defined under SEC rules as controls and
other procedures that are designed to ensure that information required to be
disclosed by a company in reports that it files under the Exchange Act are
recorded, processed, summarized and reported within the required time periods.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective.

(b) Changes in internal control over financial reporting.

         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, 2007. 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 have been no changes in our internal controls over financial
reporting during our most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.





                                       29
<PAGE>


                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

EXHIBIT
NUMBER        DESCRIPTION

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





                                       30
<PAGE>


                                   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 15, 2007                 By:  /S/ DAVID STEDMAN
               ------------                      -----------------
                                                 David Stedman
                                                 Interim Chief Executive Officer





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