UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(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, 2008

o 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 registrant as specified in its charter)

|Washington                               |  | 91-2094375                          
|---------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of          |  | (I.R.S. Employer Identification No.)
|incorporation or organization)           |  |                                     
|                                        
|2801 Hollycroft St., Gig Harbor, WA      |  | 98335                               
|(Address of principal executive offices) |  | (Zip code)                          

(206) 577-1440Registrants telephone number including area code

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the preceding 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.

Yesx Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

| | o                          | Large
    accelerated filer |  | o | Accelerated
      filer        
| | -------------------------- | --------------------------- |  | - | -------------------------------
| | o                          | Non-accelerated
    filer   |  | x | Smaller
      reporting company
| | (Do not check if a smaller |                             |  |  
| | reporting company)         |                             |  |  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YesoNox

As of May 5, 2008, there were 38,626,335 shares of the Companys common stock outstanding.



1

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LION, Inc.Form 10  QFor the Quarter Ended March 31, 2008

|        |  |                                                                         |  | PAGE  
|------- |  | ----------------------------------------------------------------------- |  | ------
|        |  | INDEX                                                                   |  | NUMBER
|PART I  |  | FINANCIAL INFORMATION                                                   |  |       
|        |  |                                                                         |  |       
|Item 1  |  | Financial Statements                                                    |  |       
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Balance Sheets at March 31, 2008 (unaudited) and |  |       
|        |  | December 31, 2007                                                       |  | 3     
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Statements of Operations for the three months    |  |       
|        |  | ended March 31, 2008 and 2007 (unaudited)                               |  | 4     
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Statements of Cash Flows for the three months    |  |       
|        |  | ended March 31, 2008 and 2007 (unaudited)                               |  | 5     
|        |  |                                                                         |  |       
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)        |  | 6     
|        |  |                                                                         |  |       
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results |  |       
|        |  | of Operations                                                           |  | 17    
|        |  |                                                                         |  |       
|Item 4T |  | Controls and Procedures                                                 |  | 34    
|        |  |                                                                         |  |       
|PART II |  | OTHER INFORMATION                                                       |  |       
|        |  |                                                                         |  |       
|Item 6  |  | Exhibits                                                                |  | 34    
|        |  |                                                                         |  |       
|        |  | Signatures                                                              |  | 35    

2

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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

|                                                               |  | March 31,   |        |   |              |   |       
|-------------------------------------------------------------- |  | ----------- | ------ | - | ------------ | - | ------
|                                                               |  | 2008        |        |   | December 31, |  
|                                                               |  | (unaudited) |        |   | 2007         |  
|Current assets                                                 |  |             |        |   |              |   |       
|Cash and cash equivalents                                      |  | $           | 4,400  |   |              | $ | 4,879 
|Accounts receivable, less allowance for doubtful accounts of   |  |             |        |   |              |   |       
|$55 and $120 in 2008 and 2007, respectively                    |  |             | 190    |   |              |   | 339   
|Prepaid expenses and other                                     |  |             | 349    |   |              |   | 422   
|Total current assets                                           |  |             | 4,939  |   |              |   | 5,640 
|                                                              
|Long-term investments  available for sale securities          |  |             | 1,113  |   |              |   | 1,300 
|Property and equipment, net                                    |  |             | 164    |   |              |   | 200   
|Other assets                                                   |  |             | 20     |   |              |   | 20    
|                                                               |  | $           | 6,236  |   |              | $ | 7,160 
|                                                              
|LIABILITIES AND STOCKHOLDERS EQUITY                          
|                                                              
|Current liabilities                                            |  |             |        |   |              |   |       
|Accounts payable                                               |  | $           | 197    |   |              | $ | 214   
|Accrued salaries and benefits                                  |  |             | 395    |   |              |   | 356   
|Accrued liabilities                                            |  |             | 256    |   |              |   | 319   
|Current maturities of long-term obligations                    |  |             | 5      |   |              |   | 5     
|Deferred revenue                                               |  |             | 318    |   |              |   | 357   
|Total current liabilities                                      |  |             | 1,171  |   |              |   | 1,251 
|                                                              
|Long-term obligations, less current maturities                 |  |             | 2      |   |              |   | 3     
|Total liabilities                                              |  |             | 1,173  |   |              |   | 1,254 
|                                                              
|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; 38,626,335 shares issued and outstanding               |  |             |        |   |              |   |       
|at March 31, 2008 and December 31, 2007                        |  |             | 39     |   |              |   | 39    
|Additional contributed capital                                 |  |             | 14,317 |   |              |   | 14,315
|Accumulated deficit                                            |  |             | (9,293 | ) |              |   | (8,448
|                                                               |  |             | 5,063  |   |              |   | 5,906 
|                                                               |  | $           | 6,236  |   |              | $ | 7,160 

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

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

|                                               |  | Three months ended March 31, |       
|---------------------------------------------- |  | ---------------------------- | ------
|                                               |  | 2008                         |       
|                                              
|Revenues                                       |  | $                            | 805   
|                                              
|Expenses                                       |  |                              |       
|Direct costs                                   |  |                              | 548   
|Selling and marketing                          |  |                              | 136   
|General and administrative                     |  |                              | 484   
|Research and development                       |  |                              | 302   
|Depreciation and amortization                  |  |                              | 32    
|Total operating expenses                       |  |                              | 1,502 
|                                              
|Operating loss                                 |  |                              | (697  
|                                              
|Other income (expense)                         |  |                              |       
|Interest expense                               |  |                              | -     
|Interest income and other                      |  |                              | 58    
|Impairment loss on investments                 |  |                              | (187  
|Loss from continuing operations before tax     |  |                              | (826  
|Income tax benefit (expense)                   |  |                              | (19   
|Net loss from continuing operations            |  |                              | (845  
|                                              
|Income from discontinued operations before tax |  |                              | -     
|Income tax expense                             |  |                              | -     
|Income from discontinued operations            |  |                              | -     
|Net loss                                       |  | $                            | (845  
|                                              
|Basic and diluted net loss per share:          |  |                              |       
|Loss from continuing operations                |  | $                            | (.02  
|Income from discontinued operations            |  |                              | -     
|Net loss                                       |  | $                            | (.02  
|Weighted average number of shares              |  |                              | 38,626

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

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

|                                                                    |  | Three months ended |      
|------------------------------------------------------------------- |  | ------------------ | -----
|                                                                    |  | March 31,          |      
|                                                                    |  | 2008               |      
|Cash flows from operating activities                                |  |                    |      
|Net loss                                                            |  | $                  | (845 
|Adjustments to reconcile net loss to net cash                       |  |                    |      
|used in operating activities                                        |  |                    |      
|Depreciation and amortization                                       |  |                    | 32   
|Change in allowance for doubtful accounts                           |  |                    | (65  
|Impairment loss on investments                                      |  |                    | 187  
|Stock options and restricted stock expense                          |  |                    | 2    
|Gain on disposition of property and equipment                       |  |                    | (1   
|Changes in assets and liabilities                                   |  |                    |      
|Accounts receivable                                                 |  |                    | 213  
|Accounts payable                                                    |  |                    | (17  
|Accrued salaries and benefits                                       |  |                    | 39   
|Accrued liabilities                                                 |  |                    | (63  
|Deferred revenue                                                    |  |                    | (39  
|Other assets                                                        |  |                    | 73   
|Net cash used in operating activities                               |  |                    | (484 
|Cash flows from investing activities                                |  |                    |      
|Capitalized software development costs                              |  |                    | -    
|Cash received on sale of fixed assets                               |  |                    | 7    
|Purchases of property and equipment                                 |  |                    | (1   
|Net cash provided by (used in) investing activities                 |  |                    | 6    
|Cash flows from financing activities                                |  |                    |      
|Payments on long-term obligations                                   |  |                    | (1   
|Proceeds from issuance of common stock on exercise of stock options |  |                    | -    
|Net cash provided by (used in) financing activities                 |  |                    | (1   
|Net decrease in cash and cash equivalents                           |  |                    | (479 
|Cash and cash equivalents at beginning of period                    |  |                    | 4,879
|Cash and cash equivalents at end of period                          |  | $                  | 4,400
|Supplemental cash flow information and non-cash investing and       |  |                    |      
|financing activities:                                               |  |                    |      
|Cash paid for income taxes                                          |  | $                  | 30   

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

5

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008

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

Description of business - LION, Inc. (the Company or LION),
  a Washington corporation, provides advanced business solutions that streamline
  the mortgage loan fulfillment process in the mortgage industry. LION provides
  an integrated technology platform offering online loan productivity tools featuring
  lender loan program and pricing databases, a suite of comprehensive website
  products and a pricing engine configured to serve the broker/banker, community
banks and large to medium sized lenders.

A summary of significant accounting policies applied in the preparation of the accompanying unaudited condensed 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 required by Article 8-03 of Regulation S-X, and do not contain certain information included in the Companys audited financial statements and notes for the fiscal year ended December 31, 2007. 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, 2008 or for any other future interim period. The condensed balance sheet at December 31, 2007 has been derived from the audited financial statements at that
date.The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and
notes thereto included in LIONs Form 10  KSB for its fiscal year ended December 31, 2007.

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.

Reclassifications In September 2007, we sold our Mortgage 101 website and certain related assets. In November 2007, we sold certain assets related to TRMS and Pipeline Tools.
The revenues and identifiable costs for Mortgage 101, TRMS, and Pipeline Tools have been classified as discontinued operations for all periods presented in the condensed consolidated statements of operations.

Revenue Recognition- LION generates revenue throughout the mortgage loan origination and fulfillment process. For its continuing operations, LION generates subscription revenues 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; advertising revenue from customers who pay marketing fees for ad banners
and web site promotion; development and hosting fees related to mortgage originator and lender web sites; and transaction fees based on locked loan volumes for its LockPointXtra® product. For discontinued operations, LION generates revenue from
advertisers who pay fees for ad banners and lead generation for Mortgage 101 and from transaction fees on its Pipeline Tools and Risk Management Services product lines based on closed loan volumes.

6

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

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

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®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.

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, 2008 and 2007 exclude options to purchase 2,711,917 and 6,053,917 shares, respectively, due to their anti-dilutive
effect.

Recently Issued Accounting Pronouncements- In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements.  Refer to Note 5 of the Notes to the Condensed Consolidated Financial Statements for the
Companys SFAS 157 fair value disclosures.  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP FAS 157-2) which defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. As permitted by FSP FAS 157-2, the Company has only partially applied the provisions of SFAS 157.
The Company is in the process of evaluating the inputs and techniques used in its nonrecurring, nonfinancial fair value measurements.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Liabilities(SFAS 159). SFAS 159 provides
entities with the option to report selected financial assets and liabilities at fair value.  Business entities adopting SFAS 159 will report unrealized gains and losses in earnings at each subsequent reporting date on items for which the fair value
option has been elected. In the first quarter of 2008, the Company did not elect the fair value option for any of its assets or liabilities.

7

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

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

In December 2007, the FASB issued SFAS No. 141 (revised 2007),BusinessCombinations(SFAS 141R), replacing SFAS No. 141,Business Combinations(SFAS 141). SFAS 141R retains the fundamental requirements of purchase method
accounting for acquisitions as set forth previously in SFAS 141. However, this statement defines the acquirer as the entity that obtains control of a business in the business combination, thus broadening the scope of SFAS 141 which applied only to
business combinations in which control was obtained through transfer of consideration. SFAS 141R also requires several changes in the way assets and liabilities are recognized and measured in purchase accounting including expensing
acquisition-related costs as incurred, recognizing assets and liabilities arising from contractual contingencies at the acquisition date, and capitalizing in-process research and development. SFAS 141R also requires the acquirer to recognize a gain
in earnings for bargain purchases, or the excess of the fair value of net assets over the consideration transferred plus any noncontrolling interest in the acquiree, a departure from the concept of negative goodwill previously recognized
under SFAS 141. SFAS 141R is effective for the Company beginning January 1, 2009, and will apply prospectively to business combinations completed on or after that date.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests inConsolidated Financial Statements, an
amendment of ARB 51(SFAS 160). SFAS 160 applies to all companies that prepare consolidated financial statements but will only affect companies that have a noncontrolling interest in a subsidiary or
that deconsolidate a subsidiary. SFAS 160 clarifies that noncontrolling interests be reported as a component separate from the parents equity and that changes in the parents ownership interest in a subsidiary be recorded as equity
transactions if the parent retains its controlling interest in the subsidiary. The statement also requires consolidated net income to include amounts attributable to both the parent and the noncontrolling interest on the face of the income
statement. In addition, SFAS 160 requires a parent to recognize a gain or loss in net income on the date the parent deconsolidates a subsidiary, or ceases to have a controlling financial interest in a subsidiary. SFAS 160 is effective for the
Company beginning January 1, 2009, and will apply prospectively, except for the presentation of disclosure requirements, which must be applied retrospectively. The Company does not expect the adoption of SFAS 160 will have a material impact on its
financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133(SFAS 161).SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application
encouraged. The Company does not expect the adoption of SFAS 161 will have a material impact on its financial position, results of operations and cash flows.

8

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 2  Discontinued operationsLeads Business Product Group

On September 28, 2007, we consummated an agreement with Internet Brands, Inc. (Internet Brands) for the sale to Internet Brands of the
Companys Mortgage 101 website and certain assets associated therewith. The agreement provided for payment of $5,000,000 which was received at closing and an additional payment of $350,000 of which $319,000 was received by December
31, 2007 with the remaining balance received in early January 2008. Internet Brands assumed liabilities arising from the purchased assets after closing, including all post-closing liabilities for performance under the contracts assumed by Internet
Brands in the transaction. The Company provided transition services to Internet Brands to effect the timely delivery and installation of the technology platform, databases and software comprising Mortgage 101 during the 90 days after the closing
(the transition services). At closing, the Company received $112,500 from Internet Brands as payment in advance for the estimated costs of providing the transition services (based on a detailed work plan), and paid Internet Brands
$112,500 for estimated amounts of customer deposits for assumed contracts. The prepayment of transition services was recognized as additional gain along with related expenses as services were provided during fourth quarter 2007. Accounts
receivable for services provided prior to the close date were retained by LION.

The gain on the sale approximates $5.2 million representing the initial sales price of $5 million, additional payment of $350,000 held back at closing and transition services of $112,500 less related selling
costs of $202,000, less the net book value of assets sold, which related to fixed assets and unamortized capitalized software and which together approximated $17,000.

Capital Markets Product Group

On November 15, 2007, we consummated an agreement with Compass Analytics, LLC (Compass) for the sale to Compass of the Companys TRMS
business and certain assets associated therewith. Compass paid approximately $1.3 million to the Company at closing, based on the value at closing of client revenues associated with the TRMS business. In addition, the agreement contemplates a
contingent payment to the Company of up to $500,000 based on the value of client revenues associated with the TRMS business six months after the closing date which is May 15, 2009, subject to valid claims by Compass against the Company under the
indemnification provisions of the agreement. Because of the uncertainty of collecting the $500,000, this amount was not included in the calculation of the gain. Compass also assumed liabilities arising from the purchased assets after closing,
including all post-closing liabilities for performance under the contracts assumed by Compass in the transaction.

The gain on the sale approximated $6,000 representing the sales price of approximately $1.3 million less related selling costs of $206,000 and the net book value of assets sold which related to fixed assets and
goodwill attributable to TRMS which together approximated $1.1 million.

9

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 2  Discontinued operations - continued

The following table provides additional income statement information related to the discontinued operations (in thousands):

|                                                         |  | Three months ended |  
|-------------------------------------------------------- |  | ------------------ | -
|                                                         |  | March 31,          |  
|                                                         |  | 2008               |  
|                                                        
|Revenues                                                 |  |                    |  
|Mortgage 101                                             |  | $                  | -
|TRMS Business                                            |  |                    | -
|                                                         |  | $                  | -
|                                                        
|Income from operations of Mortgage 101                   |  | $                  | -
|Income from operations of TRMS Business                  |  |                    | -
|Income from discontinued operations, before income taxes |  |                    | -
|Income tax provision                                     |  |                    | -
|Income from discontinued operations                      |  | $                  | -

Note 3  Stock-based compensation

Stock-based compensation expense was $2,000 and $33,000 for the three months ended March 31, 2008 and 2007, respectively.

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 4  Segment reporting

Throughout most of 2007, the Company had two operating segments, TRMS and the integrated software, services and lead generation businesses in which the Company was engaged which is referred to as the LION segment. On
November 15, 2007, we consummated the sale of TRMS including our Pipeline Tools technology.  In addition, the assets of Mortgage 101 were sold on September 28, 2007.  The operating results of TRMS (the TRMS segment) and Mortgage 101 and Pipeline
Tools (part of the LION segment) are included in discontinued operations in the condensed consolidated statements of operations.

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. The following sets forth information for reportable segments and consolidated totals (in thousands):

| |                                    |  | LION |        |   | TRMS |   | Consolidated | 
| | ---------------------------------- |  | ---- | ------ | - | ---- | - | ------------ | 
| | Three months ended March 31, 2008: |  |      |        |   |      |   |              | 
| | Revenues from external customers:  |  |      |        |   |      |   |              | 
| | From continuing operations         |  | $    | 805    |   |      | $ | -            | 
| | From discontinued operations       |  |      | -      |   |      |   | -            | 
| |                                    |  |      | 805    |   |      |   | -            | 
| | Revenues from TRMS                 |  |      | -      |   |      |   | -            | 
| | Operating loss:                    |  |      |        |   |      |   |              | 
| | From continuing operations         |  |      | (697   | ) |      |   | -            | 
| | From discontinued operations       |  |      | -      |   |      |   | -            | 
| |                                    |  |      | (697   | ) |      |   | -            | 
|
| | Three months ended March 31, 2007: |  |      |        |   |      |   |              | 
| | Revenues from external customers:  |  |      |        |   |      |   |              | 
| | From continuing operations         |  | $    | 1,368  |   |      | $ | -            | 
| | From discontinued operations       |  |      | 473    |   |      |   | 1,323        | 
| |                                    |  |      | 1,841  |   |      |   | 1,323        | 
| | Revenues from TRMS                 |  |      | 820    |   |      |   | -            | 
| | Operating income (loss):           |  |      |        |   |      |   |              | 
| | From continuing operations         |  |      | (1,351 | ) |      |   | -            | 
| | From discontinued operations       |  |      | (90    | ) |      |   | 760          | 
| |                                    |  |      | (1,441 | ) |      |   | 760          | 

11

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 4  Segment reporting - continued

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

| |                                  |  | Three months ended |     
| | -------------------------------- |  | ------------------ | ----
| |                                  |  | March 31,          |     
| |                                  |  | 2008               |     
|
| | Operating loss                   |  | $                  | (697
| | Impairment loss on investments   |  |                    | (187
| | Other non-operating income  net |  |                    | 58  
| | Income tax expense  net         |  |                    | (19 
|
| | Net loss                         |  | $                  | (845

The Companys product groupings for continued and discontinued operations are comprised of Leads, Loans, and Capital Markets and associated revenues are as follows (in thousands):

| |                                             |  | Three months ended
| | ------------------------------------------- |  | ------------------
| |                                             |  | March 31,         
| |                                             |  | 2008              
|
| | Revenue from continuing operations:         |  |                   
| | Loans                                       |  | $                 
| | Revenue included in discontinued operations |  |                   
| | Leads                                       |  |                   
| | Capital Markets                             |  |                   
| |                                             |  |                   
|
| | Total                                       |  | $                 

The Leads product grouping (included in discontinued operations) 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 Precision LION Broker (inclusive of LION Pro), Precision Access (formerly known as LION Pro Corporate), Retail Websites, and Precision LPX (LockPoint Xtra®). Precision LION Broker revenues include lenders who participate in the underlying loan program database. Retail Website revenues consist of site development and hosting fees. Precision LPX
and Precision Access revenues 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 (included in discontinued operations) 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 Servicesare
provided by TRMSand are generated by recurring monthly billings based on closed loan volumes with monthly minimums which may vary from customer to customer.

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 5  Fair value measurements

In September 2006, the FASB issued statement No. 157, Fair Value Measurements(SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. The Company has adopted the provisions of SFAS 157 as of
January 1, 2008, for financial instruments. The Company is now required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions.

As of March 31, 2008, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included the Companys auction rate securities which are classified as available for sale
securities. Due to recent events in credit markets, the auction events for these instruments held by the Company failed during first quarter 2008. Therefore, the fair values of these securities are estimated utilizing a discounted cash flow analysis
or other type of valuation model as of March 31, 2008. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the
expectation of the next time the security is expected to have a successful auction. These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by the Company.

As a result of other than temporary declines in fair value for the Companys auction rate securities, which the Company attributes to liquidity issues rather than credit issues, it has recorded an unrealized loss of
$187,000 to other expense for the three months ended March 31, 2008. The auction rate security instruments held by the Company at March 31, 2008, totaling $1.1 million net of the impairment loss, were in securities collateralized by student
loan portfolios, which are guaranteed by the United States government. Due to the Companys belief that the market for these student loan collateralized instruments may take in excess of twelve months to fully recover, the Company has
classified these investments as noncurrent and has included them in long-term investments available for sale in the condensed consolidated balance sheets at March 31, 2008. As of March 31, 2008, the Company continues to earn the contractual interest
on virtually all of its auction rate security instruments.

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 5  Fair value measurements - continued

The Companys assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 at March 31, 2008, were as follows (in thousands):

| |                                     |  |           |       |           | Fair value measurements at reporting date using
| | ----------------------------------- |  | --------- | ----- | --------- | -----------------------------------------------
| |                                     |  |           |       |           | Quoted                                         
| |                                     |  |           |       |           | prices in                                      
| |                                     |  |           |       |           | active                                         
| |                                     |  |           |       |           | markets for                                    
| |                                     |  | At        |       | identical |                                                
| |                                     |  | March 31, |       | assets    |                                                
| | Description                         |  | 2008      |       | (Level 1) |                                                
| |                                     |  |           |       |           |                                                
| | Auction rate securities             |  | $         | 1,113 |           | $                                              
|
| | Total assets measured at fair value |  | $         | 1,113 |           | $                                              

Based on market conditions, the Company changed its valuation methodology for auction rate securities to a combination of a discounted cash flow analysis and a market approach during first quarter 2008. Accordingly, these
securities changed from Level 1 to Level 3 within SFAS 157s hierarchy since the Companys initial adoption of SFAS 157 at January 1, 2008.

The following table presents the Companys assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in SFAS 157 at March 31, 2008:

| |                                                   |  | Auction    |       |   |       |   |      
| | ------------------------------------------------- |  | ---------- | ----- | - | ----- | - | -----
| |                                                   |  | rate       |       |   |       |   |      
| | Description                                       |  | securities |       |   | Total |  
|
| | Balance at December 31, 2007                      |  | $          | -     |   |       | $ | -    
| | Transfers to Level 3                              |  |            | 1,300 |   |       |   | 1,300
| | Total unrealized losses included in other expense |  |            | (187  | ) |       |   | (187 
|
| | Total assets measured at fair value               |  | $          | 1,113 |   |       | $ | 1,113

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 6  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 March 31, 2008, the Company had net
operating loss carryforwards for federal and state tax purposes of approximately $2.1 million available to offset future income which expire in 2018 through 2028. The Company has established a valuation allowance for the full amount of the net
deferred tax assets at March 31, 2008. 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.

Note 7  Vacated lease

In December 2007, the Company vacated a leased space in California. At March 31, 2008 and December 31, 2007, the Company had a liability of $113,000 and $125,000, respectively, for the contractually remaining lease
payments less estimated sublease rental income. The change in the liability relates to lease payments and amortization of $12,000 for the three months ended March 31, 2008.

Note 8  Liquidity

The Company incurred a net loss of $845,000 from continuing operations for the three months ended March 31, 2008 and used cash from operations of approximately $484,000. The Company had approximately $4.4
million in cash and cash equivalents and working capital of approximately $3.8 million at March 31, 2008.

The Company has a history of recurring losses and negative cash flows which may continue. The Company expects to meet its future cash requirements through a combination of cash generated from operations and existing cash
balances. The Company cannot assure, however, that its business will generate sufficient cash flow from operations. Additional funds may be required to fund the operations of the Company and these funds may not be available on favorable terms or at
all. If adequate funds are not available, the Company may need to curtail operations significantly.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and the amount and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsMarch 31, 2008(Unaudited)

Note 9  Subsequent events

On May 12, 2008, LION, Inc. entered into an agreement with Beanstalk Networks LLC (dba OpenClose® Solutions).  Under the terms of the agreement, OpenClose Solutions will purchase the assets of LIONs only
remaining business segment, which includes the business related to its Precision family of products and its retail websites business, for $525,000 in cash. OpenClose also will assume liabilities relating to the purchased assets after closing,
including all post-closing liabilities for performance under the contracts assumed by OpenClose in the transaction. The purchase does not include LIONs cash, cash equivalents, long-term investments or accounts receivable.  The agreement
contains a limited indemnity by the Company for breaches of representations, warranties, and covenants made by it in the agreement.  The transaction is subject to shareholder approval, and the Company intends to file a preliminary proxy statement
with the Securities and Exchange Commission.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

OVERVIEW

LION, Inc. (the Company or LION) provides advanced business solutions that streamline the mortgage loan fulfillment process in the mortgage industry. LION provides an
integrated technology platform offering online loan productivity tools featuring lender loan program and pricing databases, a suite of comprehensive website products and a pricing engine configured to serve the broker/banker, community banks and
large to medium sized lenders.

On May 12, 2008, LION, Inc. entered into an agreement with Beanstalk Networks LLC (dba OpenClose® Solutions). Under the terms of the agreement, OpenClose Solutions will purchase the assets
of LIONs only remaining business segment, which includes the business related to its Precision family of products and its retail websites business, for $525,000 in cash. OpenClose also will assume liabilities relating to the purchased
assets after closing, including all post-closing liabilities for performance under the contracts assumed by OpenClose in the transaction. The purchase does not include LIONs cash, cash equivalents, long-term investments or accounts receivable.
The agreement contains a limited indemnity by the Company for breaches of representations, warranties, and covenants made by it in the agreement. The transaction is subject to shareholder approval, and the Company intends to file a preliminary proxy
statement with the Securities and Exchange Commission.

Throughout this report, discontinued operations refers to the TRMS segment, Mortgage 101 and Pipeline Tools, collectively. In September 2007, we sold our Mortgage 101 website and
certain related assets. In November 2007, we sold certain assets related to TRMS and Pipeline Tools. The revenues and identifiable costs for Mortgage 101, TRMS, and Pipeline Tools have been classified as discontinued operations for all periods
presented in the condensed consolidated statements of operations. For further information on the discontinued operations see Note 2 to the Notes to the Condensed Consolidated Financial Statements included in this report.

For the quarter ended March 31, 2008, our financial performance continued to be adversely affected 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 subprime lending, continued to exert pressures on the lenders and brokers we serve. Revenue from continuing operations for the three months ended March
31, 2008 totaled $805,000 a decrease of 41% from $1.4 million for the same period in the prior year. Through our cost cutting efforts throughout 2007 and into first quarter 2008, we have reduced operating expenses from continuing operations
to $1.5 million for the three months ended March 31, 2008, a 45% reduction compared to $2.7 million for the same period in the prior year. This has been done through reductions in workforce, consolidating our Seattle, San Rafael and Denver
operations into our Gig Harbor operations, and continued reduction in discretionary spending, occupancy costs and marketing. The loss from continuing operations was $845,000 inclusive of an impairment loss on investments totaling $187,000
compared to $1.3 million for the same period in the prior year. The net loss for the three months ended March 31, 2008 was $845,000 inclusive of the impairment loss on investment or $.02 per share compared to a net loss of $665,000
or $.02 per share inclusive of income from discontinued operations net of tax of $667,000.

As of March 31, 2008, the Company held certain assets that are required to be measured at fair value on a recurring basis. These included the Companys auction rate securities which are
classified as available for sale securities. Due to recent events in credit markets, the auction events for these instruments held by the Company failed during first quarter 2008. Therefore, the fair values of these securities are estimated
utilizing a discounted cash flow analysis or other type of valuation model as of March 31, 2008. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the
timing of expected future cash flows, and the

17

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expectation of the next time the security is expected to have a successful auction. These securities were also compared, when possible, to other observable market data with similar characteristics to the securities held by
the Company. As a result of the other than temporary declines in fair value for the Companys auction rate securities, which the Company attributes to liquidity issues rather than credit issues, it has recorded an unrealized loss of
$187,000 to other expense for the three months ended March 31, 2008. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these investments to affect our ability to
execute our current business plan. For further information on auction rate securities, see Note 5 to the Notes to the Condensed Consolidated Financial Statements included in this report.

At March 31, 2008, we had approximately $4.4 million in cash and cash equivalents and $3.8 million in working capital. During the three months ended March 31, 2008, net cash of
$484,000 was used in our operating activities primarily to fund operating losses. We believe our current cash position is sufficient to satisfy our liabilities and maintain operations through 2008. However, if we continue to sustain significant
operating losses and negative cash flows, we will further diminish our net assets, and we may be unable to continue our operations without additional funding. Additional funds may not be available on favorable terms or at all.

RESULTS OF OPERATONS(dollars in thousands, except per share data)

|                                               |  | Three months ended |       
|---------------------------------------------- |  | ------------------ | ------
|                                               |  | March 31,          |       
|                                               |  | 2008               |       
|Revenues                                       |  | $                  | 805   
|Operating expenses                             |  |                    | (1,502
|Operating loss                                 |  |                    | (697  
|Other expense  net                            |  |                    | (129  
|Loss from continuing operations before tax     |  |                    | (826  
|Income tax benefit (expense)                   |  |                    | (19   
|Net loss from continuing operations            |  |                    | (845  
|Income from discontinued operations net of tax |  |                    | -     
|Net loss                                       |  | $                  | (845  
|Net loss per common share, basic and diluted   |  | $                  | (.02  

Revenues and products from continuing operations

Revenues from continuing operations include Precision LPX, which enables large lenders to originate, price, and lock loans; Precision Access and Precision LION Broker (including LION Pro),
which are based on the Precision LPX technology platform and are aimed at medium-sized lenders and individual brokers, respectively; and Retail Websites for mortgage lenders, origination companies and individual mortgage brokers.

Revenue from continuing operations decreased 41% to $805,000 in first quarter 2008 compared to $1.4 million for the same quarter in 2007. We continue to see contraction in our mortgage
broker and lender customer base resulting from higher interest rates, lower loan origination volumes, rising home loan delinquency and foreclosure rates, lender consolidation, mortgage brokers leaving the industry, and industry pressure on subprime
lending. This weakness covers all of LIONs product offerings. While we are starting to see the decrease slow and our core customer base stabilize, it is uncertain at this time when the mortgage industry will begin to grow
sustainably.

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Operating expenses from continuing operations(dollars in thousands)

|                              |  |      |       |      |   | Three months ended March 31, |  |       
|----------------------------- |  | ---- | ----- | ---- | - | ---------------------------- |  | ------
|                              |  |      |       |      |   |                              |  |       
|                              |  | 2008 |       | 2007 |   | Change                       |  | Change
|Direct costs                  |  | $    | 548   |      | $ | 887                          |  | $     
|Selling and marketing         |  |      | 136   |      |   | 276                          |  |       
|General and administrative    |  |      | 484   |      |   | 1,056                        |  |       
|Research and development      |  |      | 302   |      |   | 438                          |  |       
|Depreciation and amortization |  |      | 32    |      |   | 62                           |  |       
|Total operating expenses      |  | $    | 1,502 |      | $ | 2,719                        |  | $     

Direct costs

Direct costs are comprised primarily of website fulfillment, technology infrastructure support, product and contract support, and product deployment. Direct costs for first quarter 2008
decreased 38% to $548,000 compared to $887,000 for the same quarter in the prior year. The decrease is primarily due to our downsizing efforts resulting in reductions in certain maintenance support services related to our production
datacenters, lower lender database support costs, lower occupancy costs and fewer retail website deployment resources due to decreased volumes in retail website sales.

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 2008
decreased 51% to $136,000 compared to $276,000 for the same quarter in the prior year. The decrease is due primarily to a reduction in sales commissions and resources due to lower sales volume, reduction in marketing staff and fewer
tradeshows attended.

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 2008 decreased 54% to $484,000 compared to $1.1 million for the same quarter in the prior year due
to our downsizing efforts. The decrease was primarily due to lower finance, accounting, human resource and administrative support costs, lower occupancy costs due to consolidation of offices, lower stock option expense and management salaries as a
result of the resignation of our CEO effective April 2007, and lower bad debt expense.

Research and Development

Research and development expenses are comprised primarily of engineering salaries and related costs. Research and development expenses for first quarter 2008 decreased 31% to $302,000
compared to $438,000 for the same quarter in the prior year. The decrease is primarily a result of fewer resources needed as a result of completion of various product initiatives in 2007.

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Depreciation and Amortization

The decrease in depreciation and amortization expense for first quarter 2008 compared to the same period in the prior year is the result of certain equipment, computers and software being fully
depreciated by the beginning of the year and an impairment charge during fourth quarter 2007 that reduced the depreciable cost of our fixed assets.

Interest Expense and Interest Income

For first quarter 2007, interest expense is primarily comprised of interest on 8% promissory notes totaling $972,000 related to the TRMS acquisition in October 2004. These notes were paid
in full in October 2007.

For first quarter 2008 and 2007, interest income is comprised of interest earned on cash, cash equivalents and marketable securities. Interest earned increased in first quarter 2008 due to cash
proceeds from the sale of Mortgage 101 in late September 2007 and the sale of the TRMS business in mid-November 2007.

Impairment Loss on Investments

As a result of other than temporary declines in the fair value of the Companys auction rate securities, which the Company attributes to liquidity issues rather than credit issues, it has
recorded an unrealized loss of $187,000 to other expense. For further information, see Note 5 to the Notes to condensed consolidated financial statements in this report.

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Operating Segments

Throughout most of 2007, the Company had two operating segments, TRMS and the integrated software, services and lead generation businesses in which the Company is engaged which is referred to
as the LION segment. On November 15, 2007 we consummated the sale of TRMS including our Pipeline Tools technology. In addition, the assets of Mortgage 101 were sold on September 28, 2007. The operating results of TRMS (the TRMS segment) and Mortgage
101 and Pipeline Tools (part of the LION segment) are included in discontinued operations in the condensed consolidated statements of operations.

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):

| |                                |  | Three months ended |     
| | ------------------------------ |  | ------------------ | ----
| |                                |  | March 31,          |     
| |                                |  | 2008               |     
| | Revenue                        |  |                    |     
| | LION  continuing operations   |  | $                  | 805 
| | LION  discontinued operations |  |                    | -   
| |                                |  |                    | 805 
| | TRMS  discontinued operations |  |                    | -   
| | Total                          |  | $                  | 805 
|
| | Operating loss                 |  |                    |     
| | LION  continuing operations   |  | $                  | (697
| | LION  discontinued operations |  |                    | -   
| |                                |  |                    | (697
| | TRMS  discontinued operations |  |                    | -   
| | Total                          |  | $                  | (697

For first quarter 2008, the Company only has one operating segment. For an analysis of the change from first quarter 2008 to 2007 for the LION segment, see the discussion above for revenue and
operating expenses from continuing operations.

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FINANCIAL POSITION

At March 31, 2008, we had approximately $4.4 million in cash and cash equivalents. Our operating activities used cash during first quarter 2008 as they have since the latter half of 2006.
Other non-cash items are primarily comprised of depreciation and amortization, stock option and restricted stock expense, and the change in the allowance for doubtful accounts. The change in cash and cash equivalents is as follows (in thousands):

|                                                    |  | Three months ended |          
|--------------------------------------------------- |  | ------------------ | ---------
|                                                    |  |                    | March 31,
|                                                    |  | 2008               |          
|Net loss                                            |  | $                  | (845     
|Non-cash items                                      |  |                    |          
|Impairment loss on investments                      |  |                    | 187      
|Other                                               |  |                    | (32      
|                                                    |  |                    | (690     
|Changes in working capital                          |  |                    | 206      
|Net cash used in operating activities               |  |                    | (484     
|                                                   
|Net cash used in investing activities               |  |                    | 6        
|                                                   
|Net cash provided by (used in) financing activities |  |                    | (1       
|Net decrease in cash and cash equivalents           |  |                    | (479     
|Cash and cash equivalents at beginning of period    |  |                    | 4,879    
|Cash and cash equivalents at end of period          |  | $                  | 4,400    

Operating Activities

During the three months ended March 31, 2008, cash from operating activities decreased $484,000 primarily due to operating losses from reduced revenues offset primarily by a decrease in
accounts receivable.

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.

Investing Activities

During the three months ended March 31, 2008, there were no significant 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.

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Financing Activities

During the three months ended March 31, 2008 and 2007, there were no significant financing activities.

Overall Liquidity and Capital Resources

We incurred a net loss of $845,000 from continuing operations for first quarter 2008 and used cash from operations of approximately $484,000. LION had approximately $4.4 million in
cash and cash equivalents and working capital of $3.8 million at March 31, 2008. Cash generated by operations has not been sufficient to fund our activities since the latter half of 2006. Rather, we have relied on our existing cash balances
while we sought to develop and sustain our activities. In September 2007, we sold our Mortgage 101 website and certain related assets. In November 2007, we sold certain assets related to TRMS and Pipeline Tools.

As a result of the disposition of our discontinued operations, we have sufficient cash reserves to satisfy our liabilities and maintain operations through 2008. However, over the last two
fiscal years we have experienced declining revenues, material losses and negative cash flows which may continue. We continue to aggressively consolidate our operations and will continue to do so during 2008 to reduce our underlying cost structure.
Prior to 2007, we typically expected to meet our future cash requirements through a combination of cash generated from operations, existing cash balances and investments. We cannot assure you, however, that our business will generate sufficient cash
flow from operations. Additional funds may be required to fund our operations and these funds may not be available on favorable terms or at all. If adequate funds are not available, we may need to curtail operations significantly.

In February 2008, auctions failed for $1.3 million of our auction rate securities, and as a result, our ability to liquidate our investment and fully recover the carrying value of our
investment in the near term may be limited or not exist. An auction failure means that the parties wishing to sell securities could not do so. The fair value of our auction rate securities at March 31, 2008 is $1.1 million. See Note 5 to the
notes to condensed consolidated financial statements. All of our auction rate securities are currently rated AAA, the highest rating by a rating agency. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate
the potential lack of liquidity on these investments to affect our ability to execute our current business plan.

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and the amount and classification of liabilities that
might be necessary should LION be unable to continue as a going concern.

We regularly review and evaluate strategic opportunities, including those identified internally by us as well as unsolicited third party proposals. Our Strategic Review Committee continues to
evaluate a full range of strategic alternatives available to the Company. The Committee is currently using an investment banker to assist in this process. Strategic alternatives may include, without limitation, continued execution of our operating
plan, partnering or other collaboration agreements, a merger or other strategic transaction, the sale of some or all of our remaining assets, or discontinuing our operations and distributing our remaining available assets to shareholders. 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

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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, on attractive terms or enhance shareholder
value. The negotiation or consummation of any of these transactions could be material to our financial condition and results of operations.

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 rendered 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 Deliverablesthat 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.

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Deferred 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 March 31, 2008, the Company had net
operating loss carryforwards for federal and state tax purposes of approximately $2.1 million available to offset future income which expire in 2018 through 2028. The Company has established a valuation allowance for the full amount of the net
deferred tax assets at March 31, 2008. 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 Long-Lived Assets

The Company reviews long-lived assets for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the assets may not be recoverablein accordance withSFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An impairment loss may
be recognized when estimated undiscounted future cash flows expected to result from the use of the asset, including disposition, are less than the carrying value of the asset. The measurement of the impairment loss to be recognized is based on the
difference between the fair value and the carrying amounts of the assets. Fair value is generally determined based on a discounted cash flow analysis. In order to determine if an asset has been impaired, assets are grouped and tested at the lowest
level for which identifiable, independent cash flows are available.

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 Statement of Financial Accounting Standards (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

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. SFAS 157 defines fair value, establishes a
framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Refer to Note 5 of the Notes to the Condensed Consolidated Financial Statements for the Companys SFAS 157 fair value disclosures. In February
2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP FAS 157-2) which defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities that are
recognized or disclosed at fair value in the financial statements on a nonrecurring basis. As permitted by FSP FAS 157-2, the Company has only partially applied the provisions of SFAS 157. The Company is in the process of evaluating the inputs and
techniques used in its nonrecurring, nonfinancial fair value measurements.

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In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Liabilities(SFAS
159). SFAS 159 provides entities with the option to report selected financial assets and liabilities at fair value. Business entities adopting SFAS 159 will report unrealized gains and losses in earnings at each subsequent reporting date on
items for which the fair value option has been elected. In the first quarter of 2008, the Company did not elect the fair value option for any of its assets or liabilities.

In December 2007, the FASB issued SFAS No. 141 (revised 2007),BusinessCombinations(SFAS 141R), replacing SFAS No. 141,Business Combinations(SFAS 141). SFAS 141R retains the fundamental
requirements of purchase method accounting for acquisitions as set forth previously in SFAS 141. However, this statement defines the acquirer as the entity that obtains control of a business in the business combination, thus broadening the scope of
SFAS 141 which applied only to business combinations in which control was obtained through transfer of consideration. SFAS 141R also requires several changes in the way assets and liabilities are recognized and measured in purchase accounting
including expensing acquisition-related costs as incurred, recognizing assets and liabilities arising from contractual contingencies at the acquisition date, and capitalizing in-process research and development. SFAS 141R also requires the acquirer
to recognize a gain in earnings for bargain purchases, or the excess of the fair value of net assets over the consideration transferred plus any noncontrolling interest in the acquiree, a departure from the concept of negative goodwill
previously recognized under SFAS 141. SFAS 141R is effective for the Company beginning January 1, 2009, and will apply prospectively to business combinations completed on or after that date.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests inConsolidated Financial Statements, an amendment of ARB 51(SFAS 160). SFAS 160 applies to all companies that prepare consolidated financial statements but will only affect companies that
have a noncontrolling interest in a subsidiary or that deconsolidate a subsidiary. SFAS 160 clarifies that noncontrolling interests be reported as a component separate from the parents equity and that changes in the parents ownership
interest in a subsidiary be recorded as equity transactions if the parent retains its controlling interest in the subsidiary. The statement also requires consolidated net income to include amounts attributable to both the parent and the
noncontrolling interest on the face of the income statement. In addition, SFAS 160 requires a parent to recognize a gain or loss in net income on the date the parent deconsolidates a subsidiary, or ceases to have a controlling financial interest in
a subsidiary. SFAS 160 is effective for the Company beginning January 1, 2009, and will apply prospectively, except for the presentation of disclosure requirements, which must be applied retrospectively. The Company does not expect the adoption of
SFAS 160 will have a material impact on its financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133(SFAS 161).SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company does not expect the adoption of SFAS 161 will have a material impact on its financial position, results of operations and cash flows.

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FACTORS THAT MAY AFFECT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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.

The current disruption in the housing, mortgage finance and credit markets has adversely affected our business and created uncertainty. Our business is also materially affected by economic conditions generally, both
in the U.S. and elsewhere around the world.

The current global credit crisis and downturn in the mortgage industry is expected to continue to adversely affect our business and financial results. The challenging conditions in the mortgage
lending markets have exerted pressure across various mortgage sectors, including the lenders and brokers we serve. Many companies operating in the mortgage sector have failed and others are facing serious operating and financial challenges. During
2007, the mortgage industry and the residential housing market were adversely affected by higher interest rates, falling property prices and refinance activity, and a significant increase in the number of subprime mortgage delinquencies. At the same
time, many mortgage securities have been downgraded and delinquencies and credit performance of mortgage loans in the industry have deteriorated. The current disruption in the U.S. economy in general and the housing and mortgage markets in
particular is expected to continue and worsen in 2008. In particular, we expect that the onset of a recession, either in the United States as a whole or in specific regions of the country, would adversely affect our business and financial results.
We may be further adversely affected by changes in general market and economic conditions abroad. These conditions include short-term and long-term interest rates, the value of the U.S. dollar compared with the value of foreign currencies, the rate
of inflation, fluctuations in both the debt and equity capital markets, and the strength of the U.S. national economy and economies of other countries with investors that hold our debt. In addition, a variety of legislative, regulatory and other
proposals have been or may be introduced in an effort to address the disruption. Depending on the scope and nature of legislative, regulatory or other initiatives, if any, that are adopted to respond to this disruption, our earnings, liquidity,
capital position and financial condition are expected to continue to be adversely affected.

We have a recent history of operating losses and declining revenues, and our future profitability remains uncertain. In addition, financial results for any particular period will not predict results for future
periods.

Over the last couple of years, annual and quarterly revenues have been decreasing as a result of mortgage brokers leaving the industry, lender consolidation and decreased loan origination
activity. Revenue from continuing operations for the three months ended March 31, 2008 reflected a decrease of 41% from the same period in the prior year. We have not achieved consistent profitability quarter over quarter or year over year during
the same time period. While we showed net income for the year ended December 31, 2007, this was primarily due to the gain on the sale of our Mortgage 101 business during the third quarter of 2007. The net loss for first quarter 2008 was
$845,000.

Our prospects must be considered in view of the risks, expenses and difficulties frequently encountered by companies generally in continually evolving markets, including uncertainty of
revenues, markets, and profitability, and specifically in the mortgage industry. 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,

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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.

Our cash flows from operations are materially reduced due to discontinued operations; our capital resources may not be adequate to sustain operations

In September 2007, we sold our Mortgage 101 website and certain related assets. In November 2007, we sold certain assets related to TRMS and Pipeline Tools. For 2007, Mortgage 101 and TRMS
together represented approximately 55% of our consolidated revenues and provided positive cash flows. We do not have sufficient history to ascertain whether our remaining assets will generate sufficient cash flow from operations going forward. In
the first quarter of 2008, we used cash from operations of approximately $484,000. Our inability to generate adequate revenues or cash flows will have a material adverse effect on our profitability, financial condition, and results of
operations, and threatens our ability to continue as a going concern.

At March 31, 2008, we had approximately $4.4 million in cash and cash equivalents which we believe is sufficient to satisfy our liabilities and maintain operations through 2008. However, if
we continue to sustain significant operating losses and negative cash flows, we may be unable to continue our operations without additional funding. Additional funds may not be available on favorable terms or at all. If adequate funds are not
available, we may need to curtail operations significantly.

We have disposed of significant assets in connection with our recent restructuring efforts and are proposing to sell our remaining assets. We may ultimately discontinue our operations.

We faced significant challenges during 2007 due to adverse conditions in the mortgage industry, and are continuing to face these challenges in 2008. We cannot assure you that these conditions
have stabilized or that they will not worsen. In connection with our restructuring efforts, we sold our Mortgage 101 website and certain associated assets in September 2007, and our TRMS business and certain associated assets, including our Pipeline
Tools technology in November 2007. We continue to evaluate a full range of strategic alternatives available to the Company. These alternatives may include continued execution of the Companys operating plan, the sale of some or all of the
Companys remaining assets, partnering or other collaboration agreements, a merger or other strategic transaction, the sale of some or all of the Companys remaining assets, or discontinuing our operations and distributing our remaining
available assets to shareholders.

Our investment portfolio includes auction rate securities. Uncertainty in the credit market may negatively affect the value of these auction rate securities and our ability to liquidate them. If we are unable to
successfully close future auctions and their credit rating deteriorates, we may be required to adjust the carrying value of our investment through an impairment charge.

Our long-term investments as of March 31, 2008 include auction rate securities with a fair value of $1.1 million. All of our auction rate securities are currently rated AAA, the highest
rating by a rating agency. Auction rate securities are variable-rate debt securities. While the underlying security has a long-term maturity, the interest rate is reset through auctions that are held at pre-determined intervals, usually every 28
days. In the past, liquidity for auction rate securities was provided by this auction process that allowed investors to roll over their holdings or obtain immediate liquidity by selling the auction rate securities at market. Recent uncertainty in
the credit market has negatively affected these auctions and certain of these auctions have not had sufficient bidders to allow investors to complete a sale of auction rate securities. In February 2008, auctions related to $1.3 million at par
value of auction rate securities owned by us failed. These are the only auction rate security investments in our portfolio. In the future, failed auctions for our auction rate securities may continue to affect our ability to liquidate these auction
rate securities until a future auction is successful or until we decide and are able to sell the auction rate securities

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in a secondary market. There is a risk that there could be a decline in value of our auction rate securities. Failed auctions may affect the fair value of these securities, and require us to adjust the carrying value of the
investment through an impairment charge.

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 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. We face the risk that if we are unable to retain and motivate existing personnel, or
attract and integrate new 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. 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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Government Regulation

Until discontinuing operations in November 2007, our mortgage pipeline risk management services were 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.

Our continuing 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.

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 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.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and SEC rules, management began reporting on the effectiveness of our internal control over financial reporting beginning on our
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. We must further comply with Section 404(b) requirements to provide an auditors attestation report on internal control over financial

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reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2009. 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 (PCOAB) Auditing Standard No. 5, adopted by the SEC on July 27, 2007, provides the professional standards and related performance guidance for
auditors to report on the effectiveness of our internal controls over financial reporting under Section 404.

Managements report is subject to inherent limitations to the effectiveness of any system of internal control over financial reporting. Accordingly, even an effective system of internal
control over financial reporting can only provide reasonable assurance with respect to financial statement preparation and presentation in accordance with accounting principles generally accepted in the United States of America. Our internal
controls over financial reporting are subject to various inherent limitations, including cost limitations, subjective judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility
of human error and the risk of fraud and, particularly because Standard No. 5 is newly effective, that some of our judgments are in areas that may be open to interpretation. Moreover, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate over time.

During the process of evaluating the effectiveness of our internal control over financial reporting, if we identify 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 for a particular year (or if our auditors are unable to attest that we have
maintained, in all material respects, effective internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports. That would likely have an adverse effect on our stock price.

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 a federally registered trademark on Lockpoint®.

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,

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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. LIONs board of directors through its Strategic Review Committee continues to evaluate a full range of strategic alternatives
available to the Company. The Committee is using an investment banker to assist in this process. Strategic alternatives may include, without limitation, continued execution of our operating plan, the sale of some or all of our continuing operations,
partnering or other collaboration agreements, or a merger or other strategic transaction. This year we sold Mortgage 101 in third quarter 2007 and our TRMS business in fourth quarter 2007. The Board is currently recommending a sale of substantially
all of our assets. The asset sale is expected to be presented to shareholders at the next shareholder meeting for approval. There can be no assurance that the exploration of strategic alternatives will result in any additional agreements or
transactions, or that, if completed, any agreements or transactions will be successful, on attractive terms or enhance shareholder value. 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. We do not intend to disclose
developments with respect to this process unless and until the evaluation of strategic alternatives has been completed or we have entered into a material definitive agreement. The mere negotiation or the consummation of any of these transactions
could be material to our financial condition and results of 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:

- 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.
- Diversion of management time and focus from operating our business to alliance, merger or acquisition integration challenges.
- Cultural challenges associated with integrating employees from the acquired company into the acquiring organization.
- Retaining employees from the businesses acquired.
- The need to integrate each companys accounting, management information, human resource and other administrative systems to permit effective management.

The expected benefit of any 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

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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:

- Quarterly variations in our results of operations or those of our competitors.
- Announcements by us or our competitors of strategic relationships, alliances, mergers, acquisitions or dispositions, new products, significant contracts, commercial
relationships or capital commitments.
- Disruption to our operations or our data centers.
- The emergence of new sales channels in which we are unable to compete effectively.
- Our ability to develop and market new and enhanced products on a timely basis.
- Commencement of, or our involvement in, litigation.
- Any major change in our board or management.
- Changes in governmental regulations or in the status of our regulatory approvals.
- Recommendations by securities analysts or changes in earnings estimates.
- Announcements by our competitors of their earnings that are not in line with analyst expectations.
- 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.

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ITEM 4(T).      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 as of the end of the period covered by this report.

(b) Changes in internal control over financial reporting.

There were no changes in the Companys internal control over financial reporting that occurred during the quarter ended March 31, 2008 that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

|ExhibitNumber | 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
|             

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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, 2008 |  |              |  | By: |  | /s/ David Stedman              
|                  |  |              |  |     |  | David Stedman                  
|                  |  |              |  |     |  | Interim Chief Executive Officer

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