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


                                  FORM 10 - QSB


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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

                         COMMISSION FILE NUMBER 0-25159

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

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

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

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

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


         As of November 7, 2003, approximately 31,717,978 shares of the
Company's common stock were outstanding.



                                       1

<PAGE>

                                   LION, Inc.
                                  Form 10 - QSB
                    For the Quarter Ended September 30, 2003

<TABLE>
<CAPTION>
                                                                                                        PAGE
                                      INDEX                                                            NUMBER

<S>            <C>                                                                                       <C>
PART I         FINANCIAL INFORMATION

Item 1         Financial Statements

               Balance Sheets at September 30, 2003 (unaudited) and December 31, 2002                     3

               Statements of Operations for the three and nine month periods ended September 30,
               2003 and 2002 (unaudited)                                                                  4

               Statements of Cash Flows for the nine months ended September 30, 2003 and 2002
               (unaudited)                                                                                5

               Notes to Financial Statements                                                              6

Item 2         Management's Discussion and Analysis of Financial Condition and Results of
               Operations                                                                                 7

Item 3         Controls and Procedures                                                                   21

PART II        OTHER INFORMATION

Item 6         Exhibits and Reports on Form 8 - K                                                        22

               Signatures                                                                                22
</TABLE>









                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                                                 LION, Inc.
                                               BALANCE SHEETS

                                                   ASSETS

<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                                        2003             December 31,
                                                                                     (Unaudited)             2002
                                                                                  ----------------    -----------------
<S>                                                                               <C>                 <C>
CURRENT ASSETS
    Cash and cash equivalents                                                     $      910,552      $      403,917
    Accounts receivable, less allowance for doubtful accounts of
          $74,000 and $62,400 in 2003 and 2002, respectively                             393,308             347,661
    Prepaid expenses and other                                                           116,833              71,388
                                                                                  ----------------    -----------------

         Total current assets                                                          1,420,693             822,966

PROPERTY AND EQUIPMENT - net                                                           1,035,711             940,372

OTHER ASSETS
    Goodwill - net                                                                       273,955             273,955
    Other assets                                                                          37,908              37,908
                                                                                  ----------------    -----------------

                                                                                  $    2,768,267      $    2,075,201
                                                                                  ================    =================


                                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                              $      123,209      $      111,340
    Accrued liabilities                                                                  433,813             329,671
    Current maturities of long-term obligations                                           82,145              35,330
    Deferred revenue                                                                     335,381             295,497
                                                                                  ----------------    -----------------

         Total current liabilities                                                       974,548             771,838

LONG-TERM OBLIGATIONS, less current maturities                                           105,548              52,495

COMMITMENTS AND CONTINGENCIES                                                               -                   -

STOCKHOLDERS' EQUITY
    Preferred stock - authorized, 5,000,000 shares, outstanding, 1,500,000
       shares of $.001 par value, liquidation value $900,000                               1,500               1,500
    Common stock - authorized, 50,000,000 shares, outstanding, 31,717,978 and
       31,441,978 shares, respectively, of $.001 par value                                31,718              31,442
    Additional contributed capital                                                    11,776,292          11,741,101
    Accumulated deficit                                                              (10,121,339)        (10,523,175)
                                                                                  ----------------    -----------------
                                                                                       1,688,171           1,250,868
                                                                                  ----------------    -----------------

                                                                                  $    2,768,267      $    2,075,201
                                                                                  ================    =================
</TABLE>


The accompanying notes are an integral part of these statements.



                                       3
<PAGE>

                                                               LION, Inc.

                                                        STATEMENTS OF OPERATIONS
                                                              (Unaudited)

<TABLE>
<CAPTION>
                                              Three Months Ended September 30,        Nine Months Ended September 30,
                                            -------------------------------------  --------------------------------------
                                                  2003                2002               2003                2002
                                            -----------------   -----------------  ------------------  ------------------
<S>                                         <C>                 <C>                <C>                 <C>
Revenues                                    $    1,869,702      $    1,628,238     $    5,487,396      $    4,745,514

Expenses
    Direct costs                                   400,697             293,392          1,054,634             749,362
    Selling and marketing                          564,463             452,907          1,724,543           1,369,976
    General and administrative                     602,752             536,048          1,707,804           1,878,030
    Research and development                        57,435              67,321            235,964             238,520
    Depreciation and amortization                  124,937             120,644            350,673             363,328
                                            -----------------   -----------------  ------------------  ------------------
                                                 1,750,284           1,470,312          5,073,618           4,599,216
                                            -----------------   -----------------  ------------------  ------------------

         Operating income                          119,418             157,926            413,778             146,298

Other income (expense)
    Interest expense                                (4,987)             (2,599)           (13,965)             (8,677)
    Interest income                                    924                 134              2,023               1,870
    Other income                                         -                   -                  -                 240
    Other expense                                        -             (40,000)                 -            (390,000)
                                            -----------------   -----------------  ------------------  ------------------

         NET INCOME (LOSS)                  $      115,355      $      115,461     $      401,836      $     (250,269)
                                            =================   =================  ==================  ==================

Net income (loss) per common share,
     basic and diluted                      $            -      $            -     $          .01      $         (.01)
                                            =================   =================  ==================  ==================
</TABLE>






The accompanying notes are an integral part of these statements.



                                       4
<PAGE>

                                                           LION, Inc.

                                                    STATEMENTS OF CASH FLOWS
                                                          (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended September 30,
                                                                                   ------------------------------------
                                                                                        2003                2002
                                                                                   ----------------    ----------------
<S>                                                                                <C>                 <C>
Cash flows from operating activities
    Net income (loss)                                                              $     401,836       $    (250,269)
    Adjustments to reconcile net income (loss) to net cash provided by
          operating activities
          Depreciation and amortization                                                  350,673             363,328
          Write off of capitalized software development costs                                  -              10,436
          Stock options issued for services received                                      15,831               6,031
          Common stock issued in lieu of cash compensation                                19,636              29,162
          Changes in assets and liabilities
              Accounts receivable                                                        (45,647)              4,558
              Prepaid expenses and other                                                 (45,445)            (12,293)
              Accounts payable                                                            11,869              54,230
              Accrued liabilities                                                        104,142             118,463
              Deferred revenue                                                            39,884              (3,082)
                                                                                   ----------------    ----------------

                  Net cash provided by operating activities                              852,779             320,564

Cash flows from investing activities
    Capitalized software development costs                                              (229,615)           (286,213)
    Purchase of property and equipment                                                   (77,142)           (120,882)
                                                                                   ----------------    ----------------

                  Net cash used in investing activities                                 (306,757)           (407,095)

Cash flows from financing activities
    Payments on notes payable and long-term obligations                                  (39,387)            (47,485)
    Proceeds from issuance of common stock and exercise of stock options                       -                 900
                                                                                   ----------------    ----------------

                  Net cash used in financing activities                                  (39,387)            (46,585)
                                                                                   ----------------    ----------------

Net increase (decrease) in cash and cash equivalents                                     506,635            (133,116)

Cash and cash equivalents at beginning of period                                         403,917             480,910
                                                                                   ----------------    ----------------

Cash and cash equivalents at end of period                                         $     910,552       $     347,794
                                                                                   ================    ================


Supplemental non-cash investing and financing activities:

    Assets acquired under capital leases                                           $     139,255       $           -
</TABLE>






The accompanying notes are an integral part of these statements.




                                       5
<PAGE>

                                   LION, Inc.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1.   FINANCIAL STATEMENTS

         The unaudited financial statements and related notes are presented in
accordance with the instructions for interim financial statements in Rule 310(b)
of Regulation S-B, and do not contain certain information included in the
Company's audited financial statements and notes for the fiscal year ended
December 31, 2002. The information furnished reflects, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of the results of the interim periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31, 2003.
The accompanying unaudited financial statements and related notes should be read
in conjunction with the audited financial statements and the Form 10 - KSB of
LION, Inc. and notes thereto, for its fiscal year ended December 31, 2002.

NOTE 2.   NET INCOME (LOSS) PER COMMON SHARE

         Basic net income (loss) per common share is based on the weighted
average number of common shares outstanding during each period. The weighted
average number of common shares outstanding were 31,620,324 and 31,175,694 for
the nine months ended September 30, 2003 and 2002, respectively, and 31,717,978
and 31,342,701 for the three months ended September 30, 2003 and 2002,
respectively.

         Preferred shares outstanding were included in the computation of
diluted earnings per share for the nine and three month periods ended September
30, 2003 and for the three month period ending September 30, 2002 but excluded
for the nine month period ended September 30, 2002 as their effect was
anti-dilutive. Warrants and options to purchase 6,850,567 shares of common stock
are included in the computation of diluted earnings per share at September 30,
2003, however, warrants and options to purchase 7,210,567 shares of common stock
at September 30, 2002 were excluded because their exercise price was greater
than the average market price of the common shares.

NOTE 3.   STOCK-BASED COMPENSATION

         Effective January 1, 2003, the Company adopted the fair value
recognition provision of FASB Statement No. 123, "Accounting for Stock-Based
Compensation," prospectively, to all employee awards granted on or after January
1, 2003, pursuant to FASB Statement No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure."

         During the nine month period ended September 30, 2003, the Company
issued options to purchase 880,000 shares under the 1998 Stock Option Plan (the
"Plan"). Compensation expense will be based on the fair value of the options at
the respective grant dates utilizing the Black-Scholes model for estimating fair
value. The Company will recognize compensation expense of $97,920 ratably over
the vesting period for these options granted. Under the intrinsic value method
reported previously, no compensation expense had been recognized on options
granted through December 31, 2002, as the exercise price of the options granted
equaled the market price on the date of grant for all prior grants.


                                       6
<PAGE>

         The following table illustrates the effect on net income (loss) and on
net income (loss) per common share as if the fair value based method had been
applied to all outstanding and unvested awards in each period:

<TABLE>
<CAPTION>
                                                     Three months ended                  Nine months ended
                                                       September 30,                       September 30,
                                             ----------------------------------- -----------------------------------
                                                  2003               2002              2003              2002
                                             ----------------  ----------------- ----------------- -----------------
<S>                                          <C>               <C>               <C>               <C>
Net income (loss), as reported               $     115,355     $      115,461    $       401,836   $   (250,269)

Add: Stock-based employee compensation
expense included in reported net income
                                                    10,172                  -             14,809              -

Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards*
                                                   (79,609)          (104,830)          (292,929)      (307,255)
                                             ----------------  ----------------- ----------------- -----------------

Pro forma net income (loss)                  $      45,918     $       10,631    $       123,716   $   (557,524)
                                             ================  ================= ================= =================

Net income (loss) per share:

Basic and diluted - as reported              $           -     $            -    $           .01   $       (.01)
                                             ================  ================= ================= =================
Basic and diluted - pro forma                $           -     $            -    $             -   $       (.02)
                                             ================  ================= ================= =================
</TABLE>

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


NOTE 4.   RECENT ACCOUNTING PRONOUNCEMENTS

         In May 2003, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND Equity. SFAS
150 changes the classification in the statement of financial position of certain
common financial instruments from either equity or mezzanine presentation to
liabilities and requires an issuer of those financial statements to recognize
changes in fair value or redemption amount, as applicable, in earnings.

         SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003 and, with one exception, is effective at the
beginning of the first interim period beginning after June 15, 2003 (July 1,
2003 for calendar year companies). The effect of adopting SFAS 150 will be
recognized as a cumulative effect of an accounting change as of the beginning of
the period of adoption. The Company believes the adoption of SFAS 150 will have
no impact on its financial statements.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

         The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the related Notes included in this Report. The discussion may
contain statements that are forward-looking. These statements are based on
current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially because of factors
discussed in "Business Risks" and elsewhere in this Report, and in other


                                       7
<PAGE>

documents we file with the Securities and Exchange Commission. Any statistical
information provided in this report is as of September 30, 2003 unless otherwise
noted.


OVERVIEW

         LION provides marketing and website technology to help mortgage
originators attract customers and originate loans more efficiently and cost
effectively. With proven online strategies, the LION mortgage solution delivers
a competitive advantage that generates more originator business, saves time and
money, increases loan production and streamlines the approval process.

          LION's "business to consumer" and "business to business" portals
connect the originator to a large marketplace of customers seeking home
mortgages and to a powerful network of lenders and vendors in the mortgage
industry. The Company's "business to consumer" portal, Mortgage101.com, is one
of the nations leading consumer mortgage portals with content co-branded to over
30,000 local real estate, association, and media websites. The Company's
"business to business" portal, LionInc.com, allows members to search for the
best mortgage for their customers by checking and comparing lender products and
pricing from one of the largest wholesale and correspondent lender databases in
the country, locking the rate and sending the loan application file to a number
of lenders electronically through an advanced loan origination software system.
LION also provides this complete software package to large originator companies
under a private label license allowing them to customize their own services
under their own brand.

         In LION's business model, there are four distinct revenue categories
from its mortgage broker/originator and lender customers. The categories are
membership, marketing, technology and software.

         MEMBERSHIP FEES are generated from LION's subscription-based products
and services. They are LION Pro, Mortgage 101 Toolsets and Free Mortgage Dot
Com.

         LION PRO, used by over 6,700 mortgage brokers nationwide, consists of
LION Loan Search, LoanLink, News Now and Ratesheets on Demand. Through this
password protected product, originators can access one of the nation's largest
databases of wholesale mortgage rate, fee, and program information to instantly
price any mortgage loan. This database is updated daily in 77 regions in the
country. There are over 126 participating lenders and over 100,000 regionalized
wholesale and correspondent loan programs in the loan search database. The
LoanLink feature is a subprime loan exchange platform where originators can
submit hard to place loans to participating lenders. The News Now feature of
LION Pro allows originators to make informed decisions with high-value content
and market data featuring mortgage backed securities, real time market
information, financial market analysis, economic indicators, business/service
directories and calendars. Finally, the Ratesheets on Demand service allows
members to view ratesheets online from all participating lenders and transmit
them by either fax or email.

         MORTGAGE 101 TOOLSETS educates consumers about the mortgage process and
connects them to a large network of local originators that can provide a
competitive loan product. The website consists of hundreds of mortgage
information pages, home buying articles, economic and market data,
prequalification tools, interactive calculators, and live interest rates from
local mortgage lenders. Mortgage 101 also has a Spanish translation site located
at Hipoteca101.com.

         FREE MORTGAGE DOT COM is a template web site using Mortgage101
technology with the mortgage originator's logo and colors delivered with no set
up fees and free one-year domain name registration. Users pay a monthly hosting
fee for this entry level service. In many cases this product becomes the first
step before moving into a series of upgrades toward larger more comprehensive
enterprise websites.


                                       8
<PAGE>

         MARKETING FEES are generated through both of LION's portal web sites;
www.lioninc.com and www.mortgage101.com. Consumers visiting the mortgage101.com
web site, check live interest rates, use pre-qualification tools, and submit
"1003" loan applications through links connecting them to LION's network of
advertisers. Originator advertisers attract these customers by paying marketing
fees for ad banners, directory listings, interest rate display, web site
promotion, and lead generation. Originators visit the lioninc.com web site to
check daily wholesale rates, submit loans, and access mortgage specific news and
content. Wholesale lenders and industry vendors attract these customers by
paying marketing fees for ad banners, web site promotion, and lead generation.

         TECHNOLOGY FEES are generated through the sale of website development
and hosting to mortgage originators and wholesale/retail lenders. LION web sites
offer both template and custom design solutions that deliver a combination of
standard and custom content which feature calculators to deliver valuable
information to the user, integrated consumer tools, distinct user access
modules, a preferred lender selection, business document publishing and loan
file management accessible from any business location.

         For the wholesale and/or retail lender, LION has developed technology
under the LoanCAT brand. This technology allows lenders to electronically submit
rate pricing, receive rate lock requests and "1003" loan application files.

         SOFTWARE FEES, in conjunction with the Company's alliance with ABC
Virtual, are generated from the sale of the ECLoanPro(R) loan origination and
processing system. This software system offers a revolutionary straight-through
processing software system that leverages the Internet and wireless devices to
allow origination teams to easily prospect and process mortgage loans. With this
product, originators are empowered to access and share files with others
anytime, anywhere, without having to re-key data, and without traditional
hardware and software expenses.


PRODUCTS AND SERVICES INITIATIVES FOR 2003

         LION's current subscription based business model performs well in a
competitive market with higher interest rates. This more competitive market
forces mortgage brokers to compete aggressively for loan volume. They use LION's
products and services as creative ways to attract and capture more customers.
This model however, does not effectively capture larger revenue opportunities
for LION when loan volumes increase during low interest rate cycles. LION is in
the process of developing and refining a new performance/transaction based
business model that will accelerate the Company's growth potential. LION's new
model will be a blend between both the subscription based and
performance/transaction based models.

         MORTGAGE 101.COM. To leverage its growing market share in online
consumer mortgage education, LION is working on improving the technology that
matches consumers and local originators together. The goals of the new
technology will be to improve the satisfaction level of the consumer, improve
the quality of the borrower profile generated for the local originator, and
introduce the new performance/transaction based business model for the Company.
During the third quarter of 2003, the Company released new technology that
improves the routing of leads to originators. The new lead generation system,
recently converted to Microsoft .NET technology, matches consumers with up to
four originators who participate in the Mortgage 101 advertising program. The
Company will continue to introduce changes and improvements throughout the
fourth quarter and 2004.

         PRODUCTIVITY TOOLS FOR BROKERS. The Company has developed and continues
to refine an office-based version of its LION Pro product. This product, LION
Pro Corporate, offers



                                       9
<PAGE>

productivity software for multi-user larger customers. The product includes a
private database that features a comprehensive searchable database of each
broker company's specific group of lenders. It also features new loan program
search parameters, management tools and an advanced version of the News Now
content. This improved high-value content and market data section features real
time market information, financial market analysis, economic indicators combined
with the broker company's current business/service directories and calendars.
Since its launch in the second quarter of this year, twenty seven companies have
selected this product.

         In late third quarter, the Company released its new LION Pro product
for individual originators. The product provides many of the same features
introduced to the LION Pro Corporate users. During the fourth quarter, the
Company will continue to refine the new LION Pro individual product and convert
the old LION Pro users to this new technology.

SUMMARIZED RESULTS OF OPERATION

<TABLE>
<CAPTION>
                                             Three Months Ended                    Nine Months Ended
                                                September 30,                        September 30,
                                     ------------------------------------ ------------------------------------
                                           2003              2002               2003               2002
                                     ----------------- ------------------ -----------------  -----------------
<S>                                  <C>               <C>                <C>                <C>
     Revenues                        $    1,869,702    $    1,628,238     $    5,487,396     $    4,745,514
     Operating expenses                   1,750,284         1,470,312          5,073,618          4,599,216
                                     ----------------- ------------------ -----------------  -----------------
         Operating income                   119,418           157,926            413,778            146,298
     Other expense - net                     (4,063)          (42,465)           (11,942)          (396,567)
                                     ----------------- ------------------ -----------------  -----------------
         Net income (loss)           $      115,355    $      115,461     $      401,836     $     (250,269)
                                     ================= ================== =================  =================
</TABLE>

         For the third quarter of 2003, revenue was $1.87 million, up 15% from
$1.63 million for the third quarter of 2002. Net income for both the third
quarter of 2003 and the comparable quarter in the prior year was $115,000.

         For nine-month period ended September 30, 2003, revenue increased to
$5.49 million, up 16% from $4.75 million for the same period in the prior year.
Net income for the nine-month period in 2003 was approximately $402,000 compared
to a net loss of approximately $250,000 for the same period in the prior year.
The net loss for the prior year included $647,000 of settlement charges and
legal fees related to litigation that was settled in July 2002.

         Growth in revenues came primarily from our broker customers who
comprised 90% of all revenues in the third quarter and 87% year to date with the
remainder coming from our lender customers. Most of the growth came from the
Company's membership segment, primarily LION Pro and Mortgage 101 Toolsets, and
its marketing segment, primarily lead generation for our broker and lender
customers, besides contributions also coming from its software segment. The
technology segment remained consistent with the prior year periods.

         Towards the end of 2002, the Company began ramping up its resources in
order to support on-going and new initiatives along with supporting its alliance
partnerships. Cost increases during the first nine months of 2003 compared to
the same period in the prior year came primarily from expanding and supporting
the Company's large database of wholesale and correspondent loan programs,
increases in our commissioned broker sales force and related customer support
group, increases in marketing and advertising costs, and continued efforts in
on-going initiatives.


                                       10
<PAGE>

         The Company intends to continue to invest in its industry-leading LION
Pro product and take more advantage of its potential lead generating traffic in
the consumer-facing Mortgage 101 portal. As a result, it is quite possible that
profitability will decrease in the fourth quarter compared to the first three
quarters of the year. This investment and effort is a planned strategy to
achieve long term revenue growth and improve profitability for 2004 and beyond.

DETAILED RESULTS OF OPERATIONS

REVENUES

<TABLE>
<CAPTION>
                                        Three Months Ended                     Nine Months Ended
                                           September 30,                         September 30,
                                ------------------------------------  ------------------------------------
                                      2003               2002               2003              2002
                                ------------------ -----------------  ----------------- ------------------
<S>                              <C>                <C>                <C>               <C>
     REVENUES BY CATEGORY:
        Membership fees          $      840,716     $     735,230      $    2,400,614    $     2,227,023
        Marketing fees                  724,662           609,068           2,168,078          1,700,395
        Technology fees                 269,932           278,613             790,862            809,571
        Software fees                    29,802                 -             116,867
        Other fees                        4,590             5,327              10,975              8,525
                                ------------------ -----------------  ----------------- ------------------

           Total revenues        $     1,869,702    $   1,628,238      $    5,487,396    $     4,745,514
                                ================== =================  ================= ==================
</TABLE>


NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Revenues increased to $5,487,396 from $4,745,514 for the nine months
ended September 30, 2003 and 2002, respectively. This represents an increase of
$741,882 or 16%. Total revenues of $5,487,396 for the nine months ended
September 30, 2003 were comprised of mortgage broker fees of $4,801,669 or 87%
and lender fees of $685,727 or 13%. Total revenues of $4,745,514 for the nine
months ended September 30, 2002 were comprised of mortgage broker fees of
$3,967,471 or 84% and lender fees of $778,043 or 16%.

         Fees from mortgage brokers increased to $4,801,669 from $3,967,471 for
the nine months ended September 30, 2003 and 2002, respectively. This represents
an increase of $834,198 or 21%. The increase was due primarily to growth in
membership fees (LION Pro - Loan Search, Mortgage 101 Toolsets, and Free Dot
Com) totaling $173,592, marketing fees (lead generation and advertising)
totaling $476,182, technology fees (website development and hosting) totaling
$65,105, software fees (ECLoanPro loan origination software setup and related
fees) totaling $116,867 and other revenues totaling $2,452.

         Fees from lenders decreased to $685,727 from $778,043 for the nine
months ended September 30, 2003 and 2002, respectively. The decrease was due
primarily to a decrease in technology fees (website development and hosting)
totaling $83,817 and marketing fees (primarily lender ad banners) totaling
$8,499.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Revenues increased to $1,869,702 from $1,628,238 for the three months
ended September 30, 2003 and 2002, respectively. This represents an increase of
$241,464 or 15%. Total revenues of $1,869,702 for the three months ended
September 30, 2003 were comprised of mortgage broker fees of $1,679,812 or 90%



                                       11
<PAGE>

and lender fees of $189,890 or 10%. Total revenues of $1,628,238 for the three
months ended September 30, 2002 were comprised of mortgage broker fees of
$1,345,083 or 83% and lender fees of $283,155 or 17%.

         Fees from mortgage brokers increased to $1,679,812 from $1,345,083 for
the three months ended June 30, 2003 and 2002, respectively. This represents an
increase of $334,729 or 25%. The increase was due primarily to growth in
membership fees (LION Pro - Loan Search, Mortgage 101 Toolsets, and Free Dot
Com) totaling $105,486, marketing fees (lead generation and advertising)
totaling $153,206, technology fees (website development and hosting) totaling
$46,972 and software fees (ECLoanPro loan origination software setup and related
fees) totaling $29,802, which were offset by other revenues totaling $737.

         Fees from lenders decreased to $189,890 from $283,155 for the three
months ended September 30, 2003 and 2002, respectively. This represents a
decrease of $93,265 or 33%. The decrease was due primarily to a decrease in
marketing fees (lead generation and advertising) totaling $37,613 and technology
fees (website development and hosting) totaling $55,652.


DIRECT COSTS

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Direct costs are comprised primarily of web site fulfillment,
technology infrastructure support, project and product management, quality
control, and salaries related to the daily updates to rates, fees, and other
loan program information in the mortgage lender database. Direct costs increased
to $1,054,634 from $749,362 for the nine months ended September 30, 2003 and
2002, respectively. This represents an increase of $305,272 or 41%. Direct costs
as a percentage of revenues increased to 19% from 16% for the nine months ended
September 30, 2003 and 2002, respectively. The increase in expense is due to (i)
database support functions as LION continues to expand its database of wholesale
and correspondent loan programs, (ii) additional resources to support the
development of broker websites and (iii) expanded telecommunications
infrastructure to support new services and increased volumes through the
Company's consumer and business facing web portals.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Direct costs increased to $400,697 from $293,392 for the three months
ended September 30, 2003 and 2002, respectively. This represents an increase of
$107,305 or 37%. Direct costs as a percentage of revenues increased to 21% from
18% for the three months ended September 30, 2003 and 2002, respectively. The
increase in expense is due to (i) database support functions as LION continues
to expand its database of wholesale and correspondent loan programs, (ii)
additional resources to support the development of broker websites and (iii)
expanded telecommunications infrastructure to support new services and increased
volumes through the Company's consumer and business facing web portals.


SELLING AND MARKETING

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Selling and marketing expenses are comprised of marketing and
advertising costs, sales salaries and related support costs. Selling and
marketing expenses increased to $1,724,543 from $1,369,976 for the nine months
ended September 30, 2003 and 2002, respectively. This represents an increase of
$354,567 or 26%.



                                       12
<PAGE>

These expenses as a percentage of revenues increased to 31% from 29% for the
nine month periods ended September 30, 2003 and 2002. The increase is due to
growth in the commissioned broker sales force, customer support costs,
advertising, trade show participation, and telephone costs.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Selling and marketing expenses increased to $564,463 from $452,907 for
the three months ended September 30, 2003 and 2002, respectively. This
represents an increase of $111,556 or 25%. These expenses as a percentage of
revenues increased to 30% from 28% for the three month periods ended September
30, 2003 and 2002, respectively. The increase is due to growth in the
commissioned broker sales force, customer support costs, advertising, and trade
show participation.


GENERAL AND ADMINISTRATIVE

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         General and administrative expenses are comprised of management and
administrative salaries and related costs, legal and audit fees, outside
consulting services, telecommunications expenses, occupancy costs, and other
administrative related expenses. General and administrative expenses decreased
to $1,707,804 from $1,878,030 for the nine months ended September 30, 2003 and
2002, respectively. This represents a decrease of $170,226 or 9%. General and
administrative expenses as a percentage of revenues were 31% and 40% for the
nine months ended September 30, 2003 and 2002, respectively. The decrease in
costs was due primarily to an improvement in the bad debt experience and lower
legal fees. The overall decrease was offset by additional telecommunications and
other administrative support expenses.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         General and administrative expenses increased to $602,752 from $536,048
for the three months ended September 30, 2003 and 2002, respectively. This
represents an increase of $66,704 or 12%. General and administrative expenses as
a percentage of revenues were 32% and 33% for the three months ended September
30, 2003 and 2002, respectively. The overall increase in costs was due primarily
to additional administrative support expenses offset by an improvement in the
bad debt experience.


RESEARCH AND DEVELOPMENT

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Research and development expenses are comprised primarily of
engineering salaries and related costs. Research and development expenses
decreased to $235,964 from $238,520 for the nine months ended September 30, 2003
and 2002, respectively. This represents a decrease of $2,556 or 1%. Research and
development expenses as a percentage of revenues were 4% and 5% for the nine
month periods ended September 30, 2003 and 2002, respectively. The Company
continues to focus on various key initiatives including but not limited to the
enhancement of core online services for brokers and the conversion of consumer
traffic into higher-value lead generation.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Research and development expenses decreased to $57,435 from $67,321 for
the three months ended September 30, 2003 and 2002, respectively. This
represents a decrease of $9,886 or 15%. Research and



                                       13
<PAGE>

development expenses as a percentage of revenues were 3% and 4% for the three
month periods ended September 30, 2003 and 2002, respectively. The Company
continues to focus on various key initiatives including but not limited to the
enhancement of core online services for brokers and the conversion of consumer
traffic into higher-value lead generation.


DEPRECIATION AND AMORTIZATION

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Depreciation and amortization expense decreased to $350,673 from
$363,328 for the nine months ended September 30, 2003 and 2002, respectively.
This represents a decrease of $12,655 or 3%. The decrease is due to equipment,
computers and software which became fully depreciated at the beginning of 2003.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Depreciation and amortization expense increased to $124,937 from
$120,644 for the three months ended September 30, 2003 and 2002, respectively.
This represents an increase of $4,293 or 4%. The increase is due to additional
depreciation related to the purchase of equipment, computers and software along
with the addition of internally developed software.


INTEREST EXPENSE

NINE MONTHS ENDED SEPTEMBER 30, 2003:

         Interest expense increased to $13,965 from $8,677 for the nine months
ended September 30, 2003 and 2002, respectively. The increase in interest
expense is primarily due to an increase in capitalized lease financing on
computer hardware, software, and furniture.

THREE MONTHS ENDED SEPTEMBER 30, 2003:

         Interest expense increased to $4,987 from $2,599 for the three months
ended September 30, 2003 and 2002, respectively. The increase in interest
expense is primarily due to an increase in capitalized lease financing on
computer hardware, software, and furniture.


OTHER EXPENSE

         Other expense of $390,000 for the nine month period ended September 30,
2002 is comprised of $340,000 related to litigation that was settled in July
2002 and a $50,000 settlement related to past software licensing infringements
and penalties. Other expense for the three month period ended September 30, 2003
totaling $40,000 relates to the settlement of past software licensing
infringements and penalties.


                                       14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         During the first nine months of 2003, the Company primarily funded its
activities through operations and equipment lease financing. At September 30,
2003, we had approximately $911,000 in cash and cash equivalents.

                                                   Nine months ended
                                                     September 30,
                                         --------------------------------------
                                               2003               2002
                                         ----------------- --------------------
      NET CASH PROVIDED BY (USED IN)
      Operating activities                   $ 852,779          $   320,564
      Investing activities                    (306,757)            (407,095)
      Financing activities                     (39,387)             (46,585)
                                         ----------------- --------------------
      Net increase (decrease)                $ 506,635          $  (133,116)
                                         ================= ====================

OPERATING ACTIVITIES

         During the first nine months of 2003, operating activities provided net
cash of $852,779 compared to $320,564 for the same period in 2002. The net cash
provided by operating activities for 2003 was primarily attributable to (i)
revenue growth, primarily from our mortgage broker customers, (ii) improved bad
debt experience, and (iii) a reduction in legal fees. The increase was offset by
additional (i) database support costs related to increased wholesale and
correspondent loan programs, (ii) telecommunications infrastructure costs to
support new services and increased volumes through the Company's consumer and
business web portals, (iii) resources to support the development of broker
websites and (iv) growth in the commissioned broker sales force and related
customer support costs.

         The net cash provided in operating activities for the nine months ended
September 30, 2002 was primarily attributable to (i) revenue growth, primarily
from our mortgage broker customers, (ii) improved bad debt experience, (iii) a
reduction in occupancy costs and other related costs due to moving the company
headquarters to a smaller, more efficient location in Seattle, and (iv) a
reduction in telephone costs due to beneficial contract changes. The increase
was offset by the funding of legal expenses and a judgment related to litigation
that was settled in July of 2002.

INVESTING ACTIVITIES

         During the first nine months of 2003, we used net cash of $306,757 for
our investing activities which was primarily for (i) the capitalized portion of
software development costs related to the enhancement of core online services
for brokers and the conversion of consumer traffic into higher-value lead
generation and (ii) upgrades to computer hardware and software.

         During the nine months ended September 30, 2002, we used net cash of
$407,095 for our investing activities which was primarily for (i) the
capitalized portion of software development costs related to the Company's three
initiatives; enhancement of core online services for brokers, the conversion of
consumer traffic into high-value business generation, and new online management
tools for lenders and (ii) upgrades to hardware and software for the data center
that delivers the Company's products and services.

FINANCING ACTIVITIES

         During the first nine months of 2003, the net use of cash for financing
activities was $39,387. Cash used was primarily related to notes payable and
capitalized lease obligations on the acquisition of application and database
software, computers, servers, furniture and telecommunications systems upgrades.


                                       15
<PAGE>

         During the nine months ended September 30, 2002, the net use of cash
for financing activities was $46,585. Cash used was primarily related to notes
payable on the acquisition of application and database software for the
Company's data center.

2003 PLANS

         The Company is continuing to implement its business plan which includes
enhancing core products and services through internal research and development
projects and strategic alliances. In addition, the Company is in the process of
moving to a blend of its existing subscription based business model combined
with a performance/transaction based model which will allow the Company to take
advantage of cyclical swings in mortgage loan volumes. To facilitate the
operational success of our plans for 2003 and into 2004, the Company expects to
make greater investments in marketing, personnel, and professional services.
This will also include enhancements to the Company's technological
infrastructure that delivers the Company's products and services. It is
management's belief that working capital from operations along with capital
lease financing will be adequate to fund the Company's initiatives, integrate
with its strategic alliance partners, and enhance core business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         LION's financial statements and accompanying notes are prepared in
accordance with U.S. GAAP. Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses. These estimates and assumptions are
affected by management's application of accounting policies. Critical accounting
policies for LION include revenue recognition, goodwill, accounting for
internally-developed software, accounting for research and development costs,
and accounting for income taxes.

REVENUE RECOGNITION

         Subscription and service fees related to the Company's membership,
marketing, technology and software revenue categories are recognized as revenue
over the respective subscription periods or at the time the services are
provided. Deferred revenue is recorded on prepaid subscriptions for periods
ranging from 3 to 12 months and on advance billings for the subsequent months'
subscriptions and services provided. Large web development contracts expected to
span greater than 30 days are recognized over the production period, which
approximates the percentage of completion method of revenue recognition.

GOODWILL

         LION accounts for goodwill in accordance with SFAS 142, GOODWILL AND
OTHER INTANGIBLE ASSETS, which requires that goodwill be tested for impairment
at the reporting unit level on an annual basis and between annual tests in
certain circumstances. Application of the goodwill impairment test requires
judgment, including the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and
determining the fair value of each reporting unit. Significant judgments
required to estimate the fair value of reporting units include estimating future
cash flows, determining appropriate discount rates and other assumptions.
Changes in these estimates and assumptions could materially affect the
determination of fair value for each reporting unit.


ACCOUNTING FOR INTERNALLY DEVELOPED SOFTWARE AND RESEARCH AND DEVELOPMENT

         LION accounts for research and development costs in accordance with
several accounting pronouncements, including SFAS 2, ACCOUNTING FOR RESEARCH AND
DEVELOPMENT COSTS, and SFAS 86,



                                       16
<PAGE>

ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE
MARKETED. SFAS 86 specifies that costs incurred internally in creating a
computer software product should be charged to expense when incurred as research
and development until technological feasibility has been established for the
product. Once technological feasibility is established, all software costs
should be capitalized until the product is available for internal use by the
Company. Judgment is required in determining when the technological feasibility
of a product is established. The Company expenses all research and development
costs when incurred.

INCOME TAXES

         SFAS 109, ACCOUNTING FOR INCOME TAXES, establishes financial accounting
and reporting standards for the effect of income taxes. The objectives of
accounting for income taxes are to recognize the amount of taxes payable or
refundable for the current year and deferred tax liabilities and assets for the
future tax consequences of events that have been recognized in an entity's
financial statements or tax returns. Judgment is required in assessing the
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Fluctuations in the actual outcome of these
future tax consequences could materially impact the Company's financial position
or its results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

         In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) 148, "Accounting for
Stock-Based Compensation Transition and Disclosure." This statement amends
Statement of Financial Accounting Standards 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation," and establishes three alternative methods of
transition from the intrinsic value method to the fair value method of
accounting for stock-based employee compensation. In addition, SFAS 148 requires
prominent disclosure about the effects on reported net income and requires
disclosure of these effects in interim financial reporting. See "NOTE 3" to the
financial statements regarding the Company's adoption of the fair value
recognition provision of SFAS 123 pursuant to SFAS 148.

         In May 2003, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND Equity. SFAS
150 changes the classification in the statement of financial position of certain
common financial instruments from either equity or mezzanine presentation to
liabilities and requires an issuer of those financial statements to recognize
changes in fair value or redemption amount, as applicable, in earnings. SFAS 150
is effective for financial instruments entered into or modified after May 31,
2003 and, with one exception, is effective at the beginning of the first interim
period beginning after June 15, 2003 (July 1, 2003 for calendar year companies).
The effect of adopting SFAS 150 will be recognized as a cumulative effect of an
accounting change as of the beginning of the period of adoption. The Company
believes the adoption of SFAS 150 will have no impact on its financial
statements.

BUSINESS RISKS

         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. Actual results could
differ materially because of issues and uncertainties such as those listed below
and elsewhere in this Report, and in the other documents we file with the SEC.
These factors, among others, may adversely impact and impair our business and
should be considered in evaluating our financial outlook.


                                       17
<PAGE>

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

         We are working toward a goal of revenue growth and sustained
profitability. Annual revenues increased to $6.4 million from $6.0 million for
2002 and 2001, respectively. Revenues for the first nine months of 2003 were
$5.5 million and appear on track to easily exceed the 2002 results. While we did
achieve profitability for 2001 totaling $42,000, we sustained a loss in 2002
totaling $109,000. The Company has once again achieved profitability during the
first, second and third quarters of 2003 totaling $156,000, $131,000 and
$115,000, respectively. It's quite possible that profitability during the fourth
quarter of 2003 will decrease due to the Company's planned investments in
improving its existing products and services and efforts to improve its
competitive edge over its competitors. These planned investments are designed to
accelerate revenue growth and improve profitability in 2004 and beyond.

         Although we currently anticipate that 2003 will be a profitable year,
our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets, including uncertainty of revenues, markets, profitability and the need
to raise capital to fund our ongoing operations. 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, the control of expense levels and the success of our business
activities. Our future operating results will depend on a variety of factors,
including those discussed in the other risk factors set forth below.


WE WILL NEED ADDITIONAL FINANCING; OUR CURRENT FUNDS ARE INSUFFICIENT TO FINANCE
OUR PLANS FOR GROWTH AND OUR OPERATIONS AT THE DESIRED RAPID PACE.

         Our existing working capital is not sufficient to allow us to execute
our business plan as fast as we would like. We are planning to fund internally
the development and implementation of our initiatives and the integration of our
strategic alliances through funds generated from Company operations.

         While the Company did grow its cash reserves during the first and
second quarters of 2002, we had to pay out $340,000 in early July 2002 related
to a settlement in a lawsuit. During the fourth quarter of 2002 and again in the
first nine months of 2003, we were able to increase our cash reserves while
continuing to fund our initiatives and integration with strategic alliances. We
will continue to grow our cash reserves and fund the development and
implementation of our plans through operations, but additional resources are
needed to grow at our desired pace. If we are unable to obtain adequate capital
financing through equity or other financings, we may not be able to successfully
implement our short-term or long-term plans for expansion and marketing or to
meet our working capital requirements.


WE ARE SUBSTANTIALLY DEPENDENT ON MORTGAGE BROKERS AND THE MORTGAGE BROKER
INDUSTRY.

         LION's most critical customer continues to be the mortgage broker.
Mortgage broker fees comprised of memberships, website services, lead generation
and ad banners were 84% of our total revenues during the first nine months of
2003. Customer agreements are short-term and renewable. There can be no
assurance that these subscribers will continue to participate in the LION
marketplace, or that we will be able to attract new mortgage brokers at rates
sufficient to maintain a stable or growing revenue base. We cannot assure you
that the market for our products and services will continue to develop as
expected. If the mortgage broker market develops more slowly than expected or
becomes saturated with competitors, or if our products and services do not
continue to achieve market acceptance, our business operating results and
financial condition may be materially adversely affected.


                                       18
<PAGE>

         During the last 15 years, the mortgage brokerage industry has grown
from infancy to capturing a significant portion of the mortgage origination
market, and the current trend shows continued gains. While there are no clear
threats that would cause one to conclude today that the industry will not
continue to thrive, the health of the industry is important to LION's future,
and there are potential risks. These include potential lawsuits over broker and
wholesale lender compensation systems, increased regulation that may add costs
or limit profitability, and possible changes in how consumers obtain mortgages,
possibly driven by technology or by efforts to standardize and automate the
mortgage process. In addition, the overall volume of business is directly
related to interest rates and overall economic conditions. Recessionary economic
conditions or a rise in interest rates may adversely affect the ability of
prospective consumers to obtain financing required for construction and
refinance. Any of these may reduce the overall share of the market handled by
mortgage brokers, which could materially adversely affect our business.


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 and its operations. With respect to our proprietary software, while backup
has been provided by the other full-time company engineers, currently there are
portions of the database management and development that rely solely on Sam
Ringer who is a co-author of the LION Pro software. We are continuing to create
the engineering redundancy that will reduce the reliance on this individual, but
have not completed this task and will not for at least another year.
Furthermore, we have not entered into employment agreements with these
significant employees except for our CEO/President, CFO and the product manager
for our Mortgage 101 product group. If any of these individuals were to leave
LION unexpectedly, we could face substantial difficulty in hiring qualified
successors and could experience a loss in productivity while any such successor
obtains the necessary training and experience. We provide stock options, which
currently serve to retain and motivate key employees as they become vested in
their initial stock option grants. While management personnel are typically
granted additional stock options, which will usually vest over a period of four
years subsequent to their hire date to provide additional incentive to remain at
LION, the initial option grant is typically the largest and an employee may be
more likely to leave our employ upon completion of the vesting period for the
initial option grant. We 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.


OUR OPERATIONS MAY BE VULNERABLE TO DISRUPTION PROBLEMS.

         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. In
addition, the majority of our network infrastructure is located in Seattle,
Washington, in a co-location site north of the city and at our corporate
headquarters, an area susceptible to earthquakes. The prospect of such
unscheduled interruptions is quite possible in the foreseeable future, and we
are unable to predict their occurrence, duration or cessation. We do not have
multiple site capacity for all of our services in the event of any such
occurrence.


                                       19
<PAGE>

         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 STOCK TRADES ON THE OTC BULLETIN BOARD. OUR STOCK PRICE HAS BEEN VOLATILE
HISTORICALLY, WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO RESELL SHARES WHEN YOU
WANT AT PRICES YOU FIND ATTRACTIVE.

         The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During 2002, the closing sale prices of our common
stock on the OTC Bulletin Board ranged from $.03 to $.10 per share and from
January to early November 2003 ranged from $.04 to $.33 per share. The sale
price of our common stock closed at $.16 per share on November 7, 2003. Our
stock price may fluctuate in response to a number of events and factors, such as
quarterly variations in operating results, announcements of technological
innovations or new products by us or our competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable, and
news reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of these companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our
operating performance.

         The OTC Bulletin Board is an electronic quotation medium used by
subscribing broker dealers to reflect dealer quotations on a real-time basis.
This over-the-counter market provides significantly less liquidity than the
NASDAQ Stock Market. Quotes for stocks included on the OTC Bulletin Board are
not listed in the financial sections of newspapers as are those for The NASDAQ
Stock Market. Shares that are thinly traded on the Bulletin Board often trade
only infrequently and experience a significant spread between the market maker's
bid and ask prices. Therefore, prices for securities traded solely on the OTC
Bulletin Board may be difficult to obtain and holders of common stock may be
unable to resell their securities at or near their original offering price or at
any price. Furthermore, volatility or a lack of positive performance in our
stock price may adversely affect our ability to retain key employees, all of
whom have been granted stock options. In the event our securities are not
included on the OTC Bulletin Board and do not qualify for the NASDAQ, quotes for
the securities may be included in the electronic "pink sheets" for the
over-the-counter market.


VOLUME OF SHARES ELIGIBLE FOR SALE COULD IMPAIR OUR STOCK.

         As of September 30, 2003, virtually all of the 31,717,978 outstanding
shares of common stock held by existing shareholders were currently eligible for
resale in the open market, subject in certain cases to the volume and other
conditions of Rule 144. There are no contractual restrictions on the resale of
the outstanding common stock. The sale in the public market of these shares of
common stock, or the perception that these sales may occur, may depress
prevailing market prices of the common stock.


                                       20
<PAGE>

OUTSTANDING OPTIONS AND WARRANTS, WHEN EXERCISED, WILL FURTHER DILUTE COMMON
SHAREHOLDERS AND COULD HINDER FUTURE FINANCING EFFORTS.

         As of September 30, 2003, there were outstanding stock options to
purchase an aggregate of 5,683,900 shares of common stock at exercise prices
ranging from $.04 to $1.93 per share, and warrants to purchase 1,166,667 shares
of common stock at an exercise price of $.40 per share. Employee options are
subject to a restriction whereby option holders have agreed to not sell or
otherwise transfer or dispose of shares of the common stock issued upon exercise
of options in an amount which shall exceed 250,000 shares during any three-month
period. The exercise of these outstanding options and warrants will dilute the
percentage ownership of common stockholders, and any sales in the public market
of shares of common stock underlying such securities may adversely affect
prevailing market prices for the common stock. Furthermore, the terms upon which
we will be able to obtain additional equity capital may be adversely affected
since the holders of these outstanding securities can be expected to exercise
their respective rights therein at a time when we would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in such securities.


ITEM 3. CONTROLS AND PROCEDURES

         The Company's management, including the Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the effectiveness of
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this quarterly report.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this quarterly
report, the disclosure controls and procedures are effective in ensuring that
all material information required to be filed in this quarterly report has been
made known to them in a timely fashion.

         There were no changes in internal controls over financial reporting
that occurred during the period covered by this report that have materially
affected, or are likely to materially affect, the Company's internal control
over financial reporting.







                                       21
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits to Part II:

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

(b)    Reports on Form 8-K

       (1)  Report on Form 8-K dated July 30, 2003 furnished under Item 12
            (Results of Operations and Financial Condition) covering the
            Company's second quarter 2003 financial results.

       (2)  Report on Form 8-K dated October 28, 2003 furnished under Item 12
            (Results of Operations and Financial Condition) covering the
            Company's third quarter 2003 financial results.


                                   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: November 14, 2003                  By:    /s/ DAVID STEDMAN
                                                         -----------------
                                                         David Stedman
                                                         President and
                                                         Chief Executive Officer



                                       22
<PAGE>

EXHIBIT INDEX

EXHIBIT NO.   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