UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

(Mark One)



|x | Quarterly report pursuant to Section
      13 or 15(d) of the Securities Exchange Act of 1934For the Quarterly Period Ended September 30,
    2007             | 
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|  |                                                                                                                                                                | 
|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 small business issuer as specified in its charter)

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

Issuers telephone number (206) 577-1440


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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx     Noo

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

YesoNox

As of November 8, 2007, there were 38,621,960 shares of the Companys common stock outstanding.

Transitional Small Business disclosure Format (check one):

YesoNox



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LION, Inc.
Form 10  QSBFor the Quarter Ended September
30, 2007

|        |  |                                                                         |  |       
|------- |  | ----------------------------------------------------------------------- |  | ------
|        |  |                                                                         |  | PAGE  
|        |  | INDEX                                                                   |  | NUMBER
|PART I  |  | FINANCIAL INFORMATION                                                   |  |       
|Item 1  |  | Financial Statements                                                    |  |       
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Balance Sheets at September 30, 2007 (unaudited) |  |       
|        |  | and December 31, 2006                                                   |  | 3     
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Statements of Operations for the three and nine  |  |       
|        |  | months ended September 30, 2007 and 2006 (unaudited)                    |  | 4     
|        |  |                                                                         |  |       
|        |  | Condensed Consolidated Statements of Cash Flows for the nine months     |  |       
|        |  | ended September 30, 2007 and 2006 (unaudited)                           |  | 5     
|        |  |                                                                         |  |       
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)        |  | 6     
|        |  |                                                                         |  |       
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results |  |       
|        |  | of Operations                                                           |  | 16    
|        |  |                                                                         |  |       
|Item 3  |  | Controls and Procedures                                                 |  | 32    
|        |  |                                                                         |  |       
|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 SubsidiaryCondensed Consolidated Balance Sheets(In thousands, except share data)

|                                                                 |  |               |        |   |              |   |        |  
|---------------------------------------------------------------- |  | ------------- | ------ | - | ------------ | - | ------ | -
|                                                                 |  | September 30, |        |   |              |   |       
|                                                                 |  | 2007          |        |   | December 31, |  
|                                                                 |  | (Unaudited)   |        |   | 2006         |  
|Current assets                                                   |  |               |        |   |              |   |        |  
|Cash and cash equivalents                                        |  | $             | 5,661  |   |              | $ | 2,587  |  
|Short-term investments  available for sale securities           |  |               | 900    |   |              |   | 900    |  
|Accounts receivable, less allowance for doubtful accounts of     |  |               |        |   |              |   |        |  
|$181 and $67 in 2007 and 2006, respectively                      |  |               | 695    |   |              |   | 1,101  |  
|Prepaid expenses and other                                       |  |               | 310    |   |              |   | 530    |  
|TRMS assets held for sale                                        |  |               | 977    |   |              |   | 2,353  |  
|Mortgage 101 assets held for sale                                |  |               | -      |   |              |   | 20     |  
|                                                                
|Total current assets                                             |  |               | 8,543  |   |              |   | 7,491  |  
|                                                                
|Property and equipment, net                                      |  |               | 933    |   |              |   | 498    |  
|Goodwill                                                         |  |               | -      |   |              |   | 274    |  
|Other assets                                                     |  |               | 224    |   |              |   | 224    |  
|                                                                
|                                                                 |  | $             | 9,700  |   |              | $ | 8,487  |  
|                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                            
|                                                                
|Current liabilities                                              |  |               |        |   |              |   |        |  
|Accounts payable                                                 |  | $             | 483    |   |              | $ | 162    |  
|Accrued salaries and benefits                                    |  |               | 424    |   |              |   | 708    |  
|Accrued liabilities                                              |  |               | 442    |   |              |   | 267    |  
|Current maturities of long-term obligations                      |  |               | 977    |   |              |   | 977    |  
|Deferred revenue                                                 |  |               | 709    |   |              |   | 631    |  
|Total current liabilities                                        |  |               | 3,035  |   |              |   | 2,745  |  
|                                                                
|Long-term obligations, less current maturities                   |  |               | 5      |   |              |   | 8      |  
|Total liabilities                                                |  |               | 3,040  |   |              |   | 2,753  |  
|                                                                
|Commitments and contingencies                                    |  |               | -      |   |              |   | -      |  
|                                                                
|Stockholders equity                                             |  |               |        |   |              |   |        |  
|Preferred stock, par value $.001 per share; authorized 5,000,000 |  |               |        |   |              |   |        |  
|shares; none issued or outstanding                               |  |               | -      |   |              |   | -      |  
|Common stock, par value $.001 per share; authorized              |  |               |        |   |              |   |        |  
|50,000,000 shares; 38,621,960 and 38,614,272 issued and          |  |               |        |   |              |   |        |  
|outstanding, respectively                                        |  |               | 39     |   |              |   | 39     |  
|Additional contributed capital                                   |  |               | 14,311 |   |              |   | 14,269 |  
|Accumulated deficit                                              |  |               | (7,690 | ) |              |   | (8,574 | )
|                                                                 |  |               | 6,660  |   |              |   | 5,734  |  
|                                                                 |  | $             | 9,700  |   |              | $ | 8,487  |  

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

3

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

|                                               |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  | Three months ended |        |   | Nine months ended |  
|                                               |  | September 30,      |        |   | September 30,     |  
|                                               |  | 2007               |        |   | 2006              |   |        | 2007 |  |   | 2006   |  
|                                              
|Revenues                                       |  | $                  | 1,014  |   |                   | $ | 1,399  |      |  | $ | 3,543  |   |  | $ | 4,347  |  
|                                              
|Expenses                                       |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|Direct costs                                   |  |                    | 697    |   |                   |   | 874    |      |  |   | 2,432  |   |  |   | 2,622  |  
|Selling and marketing                          |  |                    | 232    |   |                   |   | 369    |      |  |   | 809    |   |  |   | 1,058  |  
|General and administrative                     |  |                    | 688    |   |                   |   | 823    |      |  |   | 2,685  |   |  |   | 2,931  |  
|Research and development                       |  |                    | 331    |   |                   |   | 394    |      |  |   | 1,098  |   |  |   | 1,266  |  
|Depreciation and amortization                  |  |                    | 105    |   |                   |   | 107    |      |  |   | 301    |   |  |   | 342    |  
|Goodwill impairment                            |  |                    | 274    |   |                   |   | -      |      |  |   | 274    |   |  |   | -      |  
|Total operating expenses                       |  |                    | 2,327  |   |                   |   | 2,567  |      |  |   | 7,599  |   |  |   | 8,219  |  
|Operating loss                                 |  |                    | (1,313 | ) |                   |   | (1,168 | )    |  |   | (4,056 | ) |  |   | (3,872 | )
|                                              
|Other income (expense)                         |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|Interest expense                               |  |                    | (20    | ) |                   |   | (20    | )    |  |   | (59    | ) |  |   | (59    | )
|Interest income and other                      |  |                    | 35     |   |                   |   | 48     |      |  |   | 101    |   |  |   | 127    |  
|Loss from continuing operations before tax     |  |                    | (1,298 | ) |                   |   | (1,140 | )    |  |   | (4,014 | ) |  |   | (3,804 | )
|Income tax expense                             |  |                    | -      |   |                   |   | -      |      |  |   | (1     | ) |  |   | -      |  
|Net loss from continuing operations            |  |                    | (1,298 | ) |                   |   | (1,140 | )    |  |   | (4,015 | ) |  |   | (3,804 | )
|                                              
|Income from discontinued operations before tax |  |                    | 3,890  |   |                   |   | 928    |      |  |   | 4,961  |   |  |   | 2,877  |  
|Income tax provision                           |  |                    | (56    | ) |                   |   | (3     | )    |  |   | (62    | ) |  |   | (9     | )
|Income from discontinued operations            |  |                    | 3,834  |   |                   |   | 925    |      |  |   | 4,899  |   |  |   | 2,868  |  
|Net income (loss)                              |  | $                  | 2,536  |   |                   | $ | (215   | )    |  | $ | 884    |   |  | $ | (936   | )
|                                              
|Basic net income (loss) per share:             |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|Loss from continuing operations                |  | $                  | (.03   | ) |                   | $ | (.03   | )    |  | $ | (.10   | ) |  | $ | (.10   | )
|Income from discontinued operations            |  |                    | .10    |   |                   |   | .02    |      |  |   | .12    |   |  |   | .08    |  
|Net income (loss)                              |  | $                  | .07    |   |                   | $ | (.01   | )    |  | $ | .02    |   |  | $ | (.02   | )
|Weighted average number of shares              |  |                    | 38,616 |   |                   |   | 38,505 |      |  |   | 38,616 |   |  |   | 38,479 |  
|                                              
|Diluted net income (loss) per share:           |  |                    |        |   |                   |   |        |      |  |   |        |   |  |   |        |  
|Loss from continuing operations                |  | $                  | (.03   | ) |                   | $ | (.03   | )    |  | $ | (.10   | ) |  | $ | (.10   | )
|Income from discontinued operations            |  |                    | .10    |   |                   |   | .02    |      |  |   | .12    |   |  |   | .08    |  
|Net income (loss)                              |  | $                  | .07    |   |                   | $ | (.01   | )    |  | $ | .02    |   |  | $ | (.02   | )
|Weighted average number of shares              |  |                    | 38,644 |   |                   |   | 38,505 |      |  |   | 38,661 |   |  |   | 38,479 |  

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

4

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

|                                                               |  |                   |        |   |      |   |       |  
|-------------------------------------------------------------- |  | ----------------- | ------ | - | ---- | - | ----- | -
|                                                               |  | Nine months ended |       
|                                                               |  | September 30,     |       
|                                                               |  | 2007              |        |   | 2006 |  
|Cash flows from operating activities                           |  |                   |        |   |      |   |       |  
|Net income (loss)                                              |  | $                 | 884    |   |      | $ | (936  | )
|Adjustments to reconcile net income (loss) to net cash used in |  |                   |        |   |      |   |       |  
|operating activities                                           |  |                   |        |   |      |   |       |  
|Depreciation and amortization                                  |  |                   | 312    |   |      |   | 351   |  
|Impairment loss on TRMS business held for sale                 |  |                   | 1,366  |   |      |   | -     |  
|Goodwill impairment                                            |  |                   | 274    |   |      |   | -     |  
|Change in allowance for doubtful accounts                      |  |                   | 113    |   |      |   | (15   | )
|Stock option and restricted stock expense                      |  |                   | 40     |   |      |   | 103   |  
|Gain on disposition of property and equipment                  |  |                   | (14    | ) |      |   | -     |  
|Gain on sale of Mortgage 101                                   |  |                   | (4,802 | ) |      |   | -     |  
|Changes in assets and liabilities                              |  |                   |        |   |      |   |       |  
|Accounts receivable                                            |  |                   | 293    |   |      |   | 75    |  
|Prepaid expenses and other                                     |  |                   | 220    |   |      |   | (97   | )
|Accounts payable                                               |  |                   | 321    |   |      |   | 140   |  
|Accrued salaries and benefits                                  |  |                   | (285   | ) |      |   | 38    |  
|Accrued liabilities                                            |  |                   | 175    |   |      |   | 121   |  
|Deferred revenue                                               |  |                   | 77     |   |      |   | 181   |  
|Net cash used in operating activities                          |  |                   | (1,026 | ) |      |   | (39   | )
|Cash flows from investing activities                           |  |                   |        |   |      |   |       |  
|Purchase of available-for-sale securities                      |  |                   | -      |   |      |   | (100  | )
|Capitalized software development costs                         |  |                   | (398   | ) |      |   | -     |  
|Proceeds from sale of Mortgage 101  net of selling costs      |  |                   | 4,818  |   |      |   | -     |  
|Cash received on sale of fixed assets                          |  |                   | 14     |   |      |   | -     |  
|Purchases of property and equipment                            |  |                   | (334   | ) |      |   | (96   | )
|Net cash provided by (used in) investing activities            |  |                   | 4,100  |   |      |   | (196  | )
|Cash flows from financing activities                           |  |                   |        |   |      |   |       |  
|Payments on long-term obligations                              |  |                   | (3     | ) |      |   | (24   | )
|Proceeds from issuance of common stock and exercise of         |  |                   |        |   |      |   |       |  
|stock options                                                  |  |                   | 3      |   |      |   | 6     |  
|Net cash used in financing activities                          |  |                   | -      |   |      |   | (18   | )
|Net increase (decrease) in cash and cash equivalents           |  |                   | 3,074  |   |      |   | (253  | )
|Cash and cash equivalents at beginning of period               |  |                   | 2,587  |   |      |   | 3,371 |  
|Cash and cash equivalents at end of period                     |  | $                 | 5,661  |   |      | $ | 3,118 |  

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 statementsSeptember 30, 2007

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

Description of business - LION, Inc. (the Company or LION),
a Washington corporation, provides 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 served the broker/banker, community banks
and large to medium sized lender.

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 in Regulation
S-B, and do not contain certain information included in the Companys audited financial statements and notes for the fiscal year ended December 31, 2006. The information furnished reflects, in the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented.  The results of operations for the interim periods are not necessarily indicative of the results to be
expected for the entire fiscal year ending December 31, 2007 or for any other future interim period.  The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited
consolidated financial statements and notes thereto included in LIONs Form 10  KSB
for its fiscal year ended December 31, 2006.

Use of Estimates - In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required
to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant estimates include allowances for doubtful accounts, goodwill impairment, 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 and also entered into a definitive agreement to sell certain assets related to
our Tuttle Risk Management Services subsidiary (TRMS) and Pipeline Tools. The revenues and identifiable costs for Mortgage 101, TRMS (including impairment loss) and Pipeline Tools have been classified as discontinued operations for all
periods presented in the condensed consolidated statements of operations. Additionally, certain assets for TRMS and Mortgage 101 have been classified as assets held for sale on the condensed consolidated balance sheet (see Note 2). Certain other
prior year amounts on the condensed consolidated statements of cash flows have been reclassified to conform to current year presentations, however, there was no change to net cash provided by (used in) operating activities, investing activities or
financing activities.

Revenue Recognition- LION generates revenue throughout the mortgage loan origination and fulfillment process.  Subscription revenues are generated from mortgage brokers and agents
who are provided electronic access to a database of mortgage offerings from LIONs proprietary network of lenders throughout the United States. LION also generates revenue from advertisers who pay marketing fees for ad banners and web site
promotion. Additionally, fees are earned related to mortgage originator and lender web site development and hosting. Revenues from the Precision/LockPoint Xtra®product are generated primarily from transaction fees on locked loan volumes as well as fees for related website development and implementation.

6

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

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 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.

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

Net Loss Per Common Share - Basic income (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. The diluted share calculation for the three and nine months ended September 30, 2007 includes options to purchase 2,777,917 shares and for the three and nine months ended September
30, 2006 excludes options to purchase 4,157,417 shares due to their anti-dilutive effect.

7

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

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

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

Recently Issued Accounting Pronouncements  Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48).
FIN 48 prescribes a recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken or expected to
be taken in a tax return. FIN 48 also provides guidance on derecognition of tax
benefits, classification on the balance sheet, interest and penalties, accounting
in interim periods, disclosure and transition. Based on Company management's
evaluation, it has been concluded that there are no significant uncertain tax
positions requiring recognition in the Company's financial statements. Tax years
subsequent to 2004 remain subject to examination by federal and state tax jurisdictions.
The Company may from time to time be assessed interest or penalties by major
tax jurisdictions, although such assessments historically have been minimal and
immaterial to the Company's financial results. In the event the Company has received
an assessment for interest and/or penalties, it has been classified in the financial
statements as general and administrative expense.

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

8

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 2  Discontinued operationsLeads Business Product Group

On September 28, 2007, we entered into and 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 provides for payment of $5,000,000 which was received at closing and an additional payment of up to $350,000 by December 31, 2007,
subject to a subsequent adjustment to reconcile certain revenues and customer deposits related to Mortgage 101 and to satisfy valid claims by Internet Brands against the Company under the indemnification provisions of the agreement. Internet Brands
also will assume 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 will provide 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 has been recorded as deferred income at September 30, 2007, to be recognized as income along with related expenses as services are provided. Subsequent to closing, the actual amount of customer
deposits will be reconciled with cash being paid by the Company to Internet Brands if actual deposits are found to be in excess of estimated amounts (and vice versa if less).  Accounts receivable for services provided prior to the close date have
been retained by LION.

The gain on the sale approximates $4.8 million, representing the sales price of $5 million less related selling costs of $182,000, less the net book value of assets sold, which related to fixed assets and
unamortized capitalized software and which together approximated $17,000, and has been recorded in the quarter ended September 30, 2007. Receipt of the additional $350,000 will be recognized as additional gain on sale upon receipt and
related satisfactory completion of the transition services.

Mortgage 101, which is part of the LION segment, represents a component of an entity as set forth in Statement of Financial Accounting Standards No. 144 Accounting for the
impairment of disposal of long-lived assets(SFAS No. 144).Accordingly, the results of operations relating to this
component, including related gain on sale, are reported as discontinued operations in accordance with SFAS No. 144. Revenues relating to this discontinued component were $316,000 and $453,000 for the three months ended September 30, 2007 and
2006, respectively, and $1.1 million and $1.5 million for the nine month periods then ended.

Capital Markets Product Group

On October 11, 2007, we entered into an Asset Purchase Agreement (the Agreement) with Compass Analytics, LLC (Compass). Under the Agreement, Compass will acquire the assets of TRMS, the
Companys capital markets product group, and LIONs Pipeline Tools software and related intellectual property (together, the TRMS Business), and will pay the Company $1.2 million to $1.3 million 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. The calculation of the value of client revenues will be based on a risk-sharing formula that discounts client revenues from month-to-month clients, late paying clients, clients that are encountering liquidity issues,
and clients that

9

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 2  Discontinued operations - continued

have given termination notices to the Company. The transaction is expected to close during fourth quarter 2007.

The assets and liabilities of the TRMS Business to be sold have been classified as held for sale in our financial statements in accordance with SFAS No. 144. SFAS No. 144 requires an asset group that is held for
sale to be recorded at the lower of its carrying amount or fair value less costs to sell. The Company took an impairment loss of $1.4 million for the TRMS segment at September 30, 2007.  The results of operations relating to this component are
reported as discontinued operations in accordance with SFAS No. 144. Revenues relating to this discontinued component were $1.3 million and $1.9 million for the three months ended September 30, 2007 and 2006, respectively, and $4.8
million and $6.0 million for the nine month periods then ended.

Income from discontinued operations is comprised of the following (in thousands):

| |                                          |  |                    |        |   |                   |   |     |      |  |   |       |   |  |   |       |  
| | ---------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | --- | ---- |  | - | ----- | - |  | - | ----- | -
| |                                          |  | Three months ended |        |   | Nine months ended |  
| |                                          |  | September 30,      |        |   | September 30,     |  
| |                                          |  | 2007               |        |   | 2006              |   |     | 2007 |  |   | 2006  |  
|
| | Income from operations of Mortgage 101,  |  |                    |        |   |                   |   |     |      |  |   |       |   |  |   |       |  
| | including gain of $4,802 in 2007         |  | $                  | 4,934  |   |                   | $ | 208 |      |  | $ | 5,149 |   |  | $ | 657   |  
| | Income (loss) from operations of TRMS    |  |                    |        |   |                   |   |     |      |  |   |       |   |  |   |       |  
| | Business, including impairment provision |  |                    |        |   |                   |   |     |      |  |   |       |   |  |   |       |  
| | of $1,366 in 2007                        |  |                    | (1,044 | ) |                   |   | 720 |      |  |   | (188  | ) |  |   | 2,220 |  
| | Income from discontinued operations,     |  |                    |        |   |                   |   |     |      |  |   |       |   |  |   |       |  
| | before income taxes                      |  |                    | 3,890  |   |                   |   | 928 |      |  |   | 4,961 |   |  |   | 2,877 |  
| | Income tax provision                     |  |                    | (56    | ) |                   |   | (3  | )    |  |   | (62   | ) |  |   | (9    | )
| | Income from discontinued operations      |  | $                  | 3,834  |   |                   | $ | 925 |      |  | $ | 4,899 |   |  | $ | 2,868 |  

Assets held for sale are as follows (in thousands):

| |                                    |  |               |     |              |   |      
| | ---------------------------------- |  | ------------- | --- | ------------ | - | -----
| |                                    |  | At            |     | At          
| |                                    |  | September 30, |     | December 31,
| |                                    |  | 2007          |     | 2006        
| | TRMS assets held for sale:         |  |               |     |              |   |      
| | Goodwill                           |  | $             | 950 |              | $ | 2,316
| | Property and Equipment, net        |  |               | 27  |              |   | 37   
| |                                    |  | $             | 977 |              | $ | 2,353
| | Mortgage 101 assets held for sale: |  |               |     |              |   |      
| | Property and Equipment, net        |  | $             | -   |              | $ | 20   

10

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 3  Goodwill

Goodwill by reporting segment is as follows (in thousands):

| |                                                |  |      |      |   |      |   |        |              |  |   |        |  
| | ---------------------------------------------- |  | ---- | ---- | - | ---- | - | ------ | ------------ |  | - | ------ | -
| |                                                |  | LION |      |   | TRMS |   |        | Consolidated | 
| | Balance as of December 31, 2006                |  | $    | 274  |   |      | $ | 2,316  |              |  | $ | 2,590  |  
| | Impairment loss on TRMS Business held for sale |  |      | -    |   |      |   | (1,366 | )            |  |   | (1,366 | )
| | Reclassification to assets held for sale       |  |      |      |   |      |   | (950   | )            |  |   | (950   | )
| | Impairment loss                                |  |      | (274 | ) |      |   | -      |              |  |   | (274   | )
| | Balance at September 30, 2007                  |  | $    | -    |   |      | $ | -      |              |  | $ | -      |  

Due to the significant decline in the mortgage industry during the third quarter of 2007, the Company viewed this as a trigger event and tested the goodwill for impairment at September 30, 2007 in accordance with SFAS No.
142 Goodwill and Other Intangible Assets. As a result of the impairment test, a goodwill impairment loss of $274,000 was recognized for the LION segment during the third quarter of 2007. The fair value of the LION segment was
estimated using the quoted market price of the Company at September 30, 2007 less the estimated fair value for the TRMS Business.

The adjustment to the TRMS segment totaling $1.4 million was the result of the impairment loss on the potential sale of the TRMS Business which is considered part of discontinued operations.  The assets inclusive of the
remaining goodwill totaling $950,000 have been reclassified to assets held for sale in our financial statements in accordance with SFAS No. 144.

Note 4  Stock-based compensation

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the three months ended September 30, 2007 and 2006 was $3,000 and $38,000, respectively, and for the nine
months ended September 30, 2007 and 2006 was $40,000 and $103,000, respectively.

11

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 5  Segment reporting

The Company has 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. We have entered into an Asset
Purchase Agreement with Compass to sell TRMS including our Pipeline Tools technology which is expected to close during fourth quarter 2007. The assets for TRMS at September 30, 2007 are held for sale as reflected in the condensed consolidated
balance sheets. 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. Accounting policies for both segments are the same. The following sets forth information for reportable segments and consolidated totals (in thousands):

| |                                        |  |      |        |   |      |   |       |              |  |   |        |  
| | -------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ------------ |  | - | ------ | -
| |                                        |  | LION |        |   | TRMS |   |       | Consolidated | 
| | Three months ended September 30, 2007: |  |      |        |   |      |   |       |              |  |   |        |  
| | Revenues from external customers:      |  |      |        |   |      |   |       |              |  |   |        |  
| | From continuing operations             |  | $    | 1,014  |   |      | $ | -     |              |  | $ | 1,014  |  
| | From discontinued operations           |  |      | 423    |   |      |   | 911   |              |  |   | 1,334  |  
| |                                        |  |      | 1,437  |   |      |   | 911   |              |  |   | 2,348  |  
| | Revenues from TRMS                     |  |      | 633    |   |      |   | -     |              |  |   | -      |  
| | Operating income (loss):               |  |      |        |   |      |   |       |              |  |   |        |  
| | From continuing operations             |  |      | (1,313 | ) |      |   | -     |              |  |   | (1,313 | )
| | From discontinued operations           |  |      | 39     |   |      |   | (951  | )            |  |   | (912   | )
| |                                        |  |      | (1,274 | ) |      |   | (951  | )            |  |   | (2,225 | )
|
| | Three months ended September 30, 2006: |  |      |        |   |      |   |       |              |  |   |        |  
| | Revenues from external customers:      |  |      |        |   |      |   |       |              |  |   |        |  
| | From continuing operations             |  | $    | 1,399  |   |      | $ | -     |              |  | $ | 1,399  |  
| | From discontinued operations           |  |      | 567    |   |      |   | 1,360 |              |  |   | 1,927  |  
| |                                        |  |      | 1,966  |   |      |   | 1,360 |              |  |   | 3,326  |  
| | Revenues from TRMS                     |  |      | 906    |   |      |   | -     |              |  |   | -      |  
| | Operating income (loss):               |  |      |        |   |      |   |       |              |  |   |        |  
| | From continuing operations             |  |      | (1,168 | ) |      |   | -     |              |  |   | (1,168 | )
| | From discontinued operations           |  |      | 70     |   |      |   | 858   |              |  |   | 928    |  
| |                                        |  |      | (1,098 | ) |      |   | 858   |              |  |   | (240   | )

12

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 5  Segment reporting - continued

| |                                       |  |      |        |   |      |   |              |  |   |        |  
| | ------------------------------------- |  | ---- | ------ | - | ---- | - | ------------ |  | - | ------ | -
| |                                       |  | LION |        |   | TRMS |   | Consolidated | 
| | Nine months ended September 30, 2007: |  |      |        |   |      |   |              |  |   |        |  
| | Revenues from external customers:     |  |      |        |   |      |   |              |  |   |        |  
| | From continuing operations            |  | $    | 3,543  |   |      | $ | -            |  | $ | 3,543  |  
| | From discontinued operations          |  |      | 1,400  |   |      |   | 3,359        |  |   | 4,759  |  
| |                                       |  |      | 4,943  |   |      |   | 3,359        |  |   | 8,302  |  
| | Revenues from TRMS                    |  |      | 2,197  |   |      |   | -            |  |   | -      |  
| | Operating income (loss):              |  |      |        |   |      |   |              |  |   |        |  
| | From continuing operations            |  |      | (4,056 | ) |      |   | -            |  |   | (4,056 | )
| | From discontinued operations          |  |      | (17    | ) |      |   | 176          |  |   | 159    |  
| |                                       |  |      | (4,073 | ) |      |   | 176          |  |   | (3,897 | )
|
| | Nine months ended September 30, 2006: |  |      |        |   |      |   |              |  |   |        |  
| | Revenues from external customers:     |  |      |        |   |      |   |              |  |   |        |  
| | From continuing operations            |  | $    | 4,347  |   |      | $ | -            |  | $ | 4,347  |  
| | From discontinued operations          |  |      | 1,779  |   |      |   | 4,271        |  |   | 6,050  |  
| |                                       |  |      | 6,126  |   |      |   | 4,271        |  |   | 10,397 |  
| | Revenues from TRMS                    |  |      | 2,803  |   |      |   | -            |  |   | -      |  
| | Operating income (loss):              |  |      |        |   |      |   |              |  |   |        |  
| | From continuing operations            |  |      | (3,872 | ) |      |   | -            |  |   | (3,872 | )
| | From discontinued operations          |  |      | 188    |   |      |   | 2,689        |  |   | 2,877  |  
| |                                       |  |      | (3,684 | ) |      |   | 2,689        |  |   | (995   | )

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

| |                                     |  |                    |        |   |                   |   |      |      |  |   |        |   |  |   |      |  
| | ----------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ---- | ---- |  | - | ------ | - |  | - | ---- | -
| |                                     |  | Three months ended |        |   | Nine months ended |  
| |                                     |  | September 30,      |        |   | September 30,     |  
| |                                     |  | 2007               |        |   | 2006              |   |      | 2007 |  |   | 2006   |  
| |                                     |  |                    |        |   |                   |   |      |      |  |   |        |   |  |   |      |  
| | Operating loss                      |  | $                  | (2,225 | ) |                   | $ | (240 | )    |  | $ | (3,897 | ) |  | $ | (995 | )
| | Gain on sale of Mortgage 101        |  |                    | 4,802  |   |                   |   | -    |      |  |   | 4,802  |   |  |   | -    |  
| | Other income  net                  |  |                    | 15     |   |                   |   | 28   |      |  |   | 42     |   |  |   | 68   |  
| | Income tax expense  net            |  |                    | (56    | ) |                   |   | (3   | )    |  |   | (63    | ) |  |   | (9   | )
| |                                     |  |                    |        |   |                   |   |      |      |  |   |        |   |  |   |      |  
| | Net income (loss) before income tax |  | $                  | 2,536  |   |                   | $ | (215 | )    |  | $ | 884    |   |  | $ | (936 | )

13

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

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

| |                                             |                    |       |                   |   |       |  |      |       |  |   |       
| | ------------------------------------------- | ------------------ | ----- | ----------------- | - | ----- |  | ---- | ----- |  | - | ------
| |                                             | Three months ended |       | Nine months ended
| |                                             | September 30,      |       | September 30,    
| |                                             | 2007               |       | 2006              |   | 2007  |  | 2006
|
| | Revenue from continuing operations:         |                    |       |                   |   |       |  |      |       |  |   |       
| | Loans                                       | $                  | 1,014 |                   | $ | 1,399 |  | $    | 3,543 |  | $ | 4,347 
| | Revenue included in discontinued operations |                    |       |                   |   |       |  |      |       |  |   |       
| | Leads                                       |                    | 316   |                   |   | 453   |  |      | 1,062 |  |   | 1,483 
| | Capital Markets                             |                    | 1,018 |                   |   | 1,474 |  |      | 3,697 |  |   | 4,567 
| |                                             |                    | 1,334 |                   |   | 1,927 |  |      | 4,759 |  |   | 6,050 
|
| | Total                                       | $                  | 2,348 |                   | $ | 3,326 |  | $    | 8,302 |  | $ | 10,397

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®). LION Pro revenues include lenders who participate in the underlying loan program database.  Retail Website revenues consist of site development and hosting fees.  Precision LPX 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.

14

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LION, Inc. and SubsidiaryNotes to condensed consolidated financial statementsSeptember 30, 2007

Note 6  Liquidity

The Company incurred a net loss of $4.0 million from continuing operations for the nine months ended September 30, 2007 and used cash from operations of approximately $1.0 Million.  Cash provided by investing
activities during the nine months ended September 30, 2007 approximated $4.1 million.  The Company had approximately $6.6 million in cash, cash equivalents and short-term investments and working capital of $5.5 at September 30, 2007.
Notes payable to former TRMS shareholders in the amount of $972,000 plus annual interest at 8% were paid in full in October 2007.

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 and short term investments. 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.

15

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

OVERVIEW

On September 28, 2007, we sold to Internet Brands, Inc. (Internet Brands) our Mortgage 101 website and
certain assets associated therewith. The agreement provides for payment of $5,000,000 at closing and an additional payment of up to $350,000 by December 31, 2007, subject to a subsequent adjustment to reconcile certain revenues and customer
deposits related to Mortgage 101 and to satisfy valid claims by Internet Brands against the Company under the indemnification provisions of the agreement. Internet Brands also will assume 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. Mortgage 101, which is part of the LION segment, is accounted for as a discontinued operation, and, accordingly, its results of
operations and the gain on the sale of Mortgage 101 are reported separately in our financial statements.

On October 11, 2007, we entered into an Asset Purchase Agreement (the Agreement) with Compass Analytics, LLC (Compass). Under the Agreement, Compass will acquire the
assets of the Companys Capital Markets product group, including LIONs Pipeline Tools software and related intellectual property (the TRMS Business). Under the Agreement, Compass will pay the Company between $1,200,000 and
$1,325,000 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. The calculation of the value of client revenues will be based on a risk-sharing formula that discounts client revenues from month-to-month clients, late paying clients, clients
that are encountering liquidity issues, and clients that have given termination notices to the Company. The transaction is expected to close during fourth quarter 2007. At September 30, 2007, the assets and liabilities of the TRMS Business have been
classified as held for sale in our financial statements in accordance with SFAS No. 144 and have been included in discontinued operations. SFAS No. 144 requires an asset group that is held for sale to be recorded at the lower of its
carrying amount or fair value less costs to sell. Accordingly, we recorded an impairment loss in our TRMS segment totaling $1.4 million.

Due to the significant decline in the mortgage industry during the third quarter of 2007, the Company viewed this as a trigger event and tested goodwill for impairment at September 30, 2007. As
a result of the impairment test, a goodwill impairment loss of $274,000 was recognized for the LION segment during the third quarter of 2007.

Going forward, our remaining business is comprised of our Loans product group. We provide software and services that enable mortgage loan brokers and lenders to increase their productivity in
originating single family residential mortgage loans. Our flagship product, Precision LPX is a suite of products consisting of a loan pricing engine, a database of lender loan programs and pricing information, web enabled tools and other
transactional services designed to enable large lenders to originate, price, and lock loans. Our Precision Access and Precision LION Broker product suites, which are based on the Precision LPX technology platform, are aimed at medium-sized lenders
and individual brokers, respectively. Precision Access and Precision LION Broker substitute a simplified version of the software tools and features within the Precision LPX technology platform, but are identical to the Precision LPX product in most
other respects. LION also designs, develops and hosts retail websites for mortgage lenders, origination companies, and individual mortgage brokers. Through integration with the Precision LPX technology platform, retail website customers can capture
leads online, perform product eligibility, product pricing and locking all within a unified product offering.

16

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Our financial performance continues 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 sub prime lending, continued to exert pressures on the lenders and brokers we serve. Revenue from continuing operations for third quarter 2007 totaled $1.0 million, a decrease of 28%
from $1.4 million for the same quarter in the prior year. Revenue from continuing operations for the nine months ended September 30, 2007 totaled 3.5 million, a decrease of 18% from $4.3 million for the same period in the previous
year.

We have continued to implement our cost cutting plans that have been scheduled to be phased in throughout the year. We have reduced approximately 25% of our workforce, consolidated our Seattle
and Denver operations into our Gig Harbor operations, and continue to reduce discretionary spending, occupancy costs and marketing. Reductions have been or will be made across all reporting units of the Company. The cost cuts are reflected in the
third quarter expense results but more so in the fourth quarter. Achieving cost cutting and operational realignment is just one component of our strategy to reach profitability and positive cash flow. We launched the template version of our new
retail website suite of products in early October 2007. A corporate solution for our new retail website product should launch in early 2008. We have taken a conservative approach regarding sales projections in view of the slower sales cycles that we
have experienced over the past year, anticipating more aggressive sales occurring when market conditions improve. The depth and extent of our cost cutting efforts are predicated on these assumptions. If necessary we will make additional adjustments
to achieve profitability from continuing operations.

Operating expenses from continuing operations for third quarter 2007 decreased 9% to $2.3 million compared to $2.6 million for third quarter 2006 and for the nine months ended September
30, 2007 decreased 8% to $7.6 million compared to $8.2 million for the same period in the prior year. We reported net income for third quarter 2007 of $2.5 million or $.07 per share inclusive of a gain on the sale of Mortgage 101 of
approximately $4.8 offset by an impairment of goodwill totaling $1.6 million compared to a net loss of $215,000 or $.01 per share for the same quarter in the prior year. Net income for the nine months ended September 30, 2007 was
$884,000 or $.02 per share inclusive of the gain on the sale of Mortgage 101 which was offset by the goodwill impairment compared to a net loss of $936,000 or $.02 per share for the same period in the prior year.

LIONs Strategic Review Committee continues to evaluate various strategic alternatives to further enhance shareholder value. We are currently using an investment banker to assist in the
evaluation of a full range of strategic alternatives available to the Company. Strategic alternatives may include, without limitation, continued execution of the Companys operating plan, the sale of some or all of the Companys assets,
partnering or other collaboration agreements, or a merger or other strategic transaction. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or that, if completed, any agreements
or transactions will be successful or on attractive terms. The Company does not intend to disclose developments with respect to this process unless and until the evaluation of strategic alternatives has been completed or it has entered into a
material definitive agreement.

At September 30, 2007, we had approximately $6.6 million in cash, cash equivalents, and short-term investments. During the nine months ended September 30, 2007, net cash of $1.0 million
was used in our operating activities primarily to fund operating losses and investing activities provided net cash of $4.1 million primarily as a result of the sale of Mortgage 101 which was offset by expenditures for our product initiatives and
related datacenter upgrades. Product initiative and capital equipment expenditures are expected to be minimal during the fourth quarter. On October 13, 2007, we paid in full the promissory notes totaling $972,000 plus interest. However, we may
continue to sustain significant operating losses and be unable to continue our operations without additional funding. See Overall Liquidity and Capital Resources.

17

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RESULTS OF OPERATIONSRevenues, Products and 2007 Plans

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.

We are in the process of making strategic changes to our products. A redesign of our LION Pro Corporate offering, now known as Precision Access, was launched in February 2007. Precision LION
Broker, which includes LION Pro, was launched at the end of second quarter 2007. The template version of our new Retail Website product was launched in October 2007 with a corporate version expected to be launched in early 2008. In addition, our
business-to-business Internet portal, Lioninc.com, was redesigned to accommodate the changes for Precision LION Broker and Retail Websites and also allow us to take advantage of a more traditional advertising model. The Lioninc.com redesign includes
an e-commerce application to facilitate purchase and delivery of our more commoditized Precision LION Broker and template Retail Website products which allows our customers to order, pay for and use these products immediately after point of sale,
requiring less of our resources and development time to maintain.

Revenue from continuing operations decreased 28% to $1.0 million in third quarter 2007 compared to $1.4 million for third quarter 2007 and decreased 18% to $3.5 million for the nine
months ended September 30, 2007 compared to $4.3 million for the same period in the prior year. 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. Our revenues from Precision LPX have increased $150,000 or 29% when comparing the year
over year results, however, third quarter 2007 revenue compared to third quarter 2006 are flat. We continue to see signs that the sales cycle is getting longer.

Operating Expenses From Continuing Operations(dollars in thousands)

| |                               |  |                         |       |                         |                   |        |  |        |  |      |       |        |   |       |  |        |  | 
| | ----------------------------- |  | ----------------------- | ----- | ----------------------- | ----------------- | ------ |  | ------ |  | ---- | ----- | ------ | - | ----- |  | ------ |  | 
| |                               |  | Three months ended      |       |                         | Nine months ended
| |                               |  | September
          30, |       | September
          30,
| |                               |  | 2007                    |       | 2006                    |                   | Change |  | 2007   |  | 2006 |       | Change
|
| | Direct costs                  |  | $                       | 697   |                         | $                 | 874    |  | (20
)% |  | $    | 2,432 |        | $ | 2,622 |  | (7
)% 
| | Selling and marketing         |  |                         | 232   |                         |                   | 369    |  | (37
)% |  |      | 809   |        |   | 1,058 |  | (23
)%
| | General and administrative    |  |                         | 688   |                         |                   | 823    |  | (16
)% |  |      | 2,685 |        |   | 2,931 |  | (8
)% 
| | Research and development      |  |                         | 331   |                         |                   | 394    |  | (16
)% |  |      | 1,098 |        |   | 1,266 |  | (13
)%
| | Depreciation and amortization |  |                         | 105   |                         |                   | 107    |  | (2
)%  |  |      | 301   |        |   | 342   |  | (12
)%
| | Goodwill impairment           |  |                         | 274   |                         |                   | -      |  | -      |  |      | 274   |        |   | -     |  | -     
|
| | Total operating expenses      |  | $                       | 2,327 |                         | $                 | 2,567  |  | (9
)%  |  | $    | 7,599 |        | $ | 8,219 |  | (8
)% 

Direct costs

Direct costs are comprised primarily of website fulfillment, technology infrastructure support, product and contract support, and product deployment. Direct costs for third quarter 2007
decreased 20% to $697,000 compared to 874,000 for third quarter 2006 and for the nine months ended September 30, 2007 decreased 7% to $2.4 million compared to $2.6 million for the same period in the prior year. The decrease for the three
and nine month comparative periods is due to a reduction in certain maintenance support

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services related to our production datacenters, lower lender database support costs, and fewer retail website deployment resources due to decreased volumes in retail website sales. This decrease was offset by additional
resources required for the onboarding and support of new Precision LPX and Access customers.

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 third quarter 2007
decreased 37% to $232,000 compared to $369,000 for third quarter 2006 and for the nine month period ended September 30, 2007 decreased 23% to $809,000 compared to $1.1 million for the same period in the prior year. The decrease for
the three and nine month periods was due primarily to a reduction in sales commissions and resources due to lower sales volume 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 third quarter 2007 decreased 16% to $688,000 compared to $823,000 for the same quarter in the prior year. The
reduction was the result of lower salaries and stock option expense due to the resignation of our CEO effective April 2007 and reduced finance, accounting and administrative support costs and occupancy costs due to consolidation of offices. This
decrease was offset by an increase in our bad debt expense for the quarter.

General and administrative expenses for the nine months ended September 30, 2007 decreased 8% to $2.7 million compared to $2.9 million for the same period in the prior year. The
decrease was primarily due to lower finance, accounting and administrative support costs and occupancy costs due to consolidation of offices; lower stock option expense due to the resignation of our CEO effective April 2007; and expenses included in
2006 that did not recur during 2007 for strategic undertakings and the accrual for the settlement of an unasserted possible claim. The overall decrease was offset by increased bad debt expense during the first nine months of 2007 and proxy contest
costs and annual meeting expenses in June 2007.

Research and Development

Research and development expenses are comprised primarily of engineering salaries and related costs. Research and development expenses for third quarter 2007 decreased 16% to $331,000
compared to $394,000 for third quarter 2006 and for the nine month period ended September 30, 2007 decreased 13% to $1.1 million compared to $1.3 million for the same period in the prior year. The decrease for the three and nine month
periods is primarily a result of certain payroll costs capitalized on our LION Pro and Retail Website product initiatives and fewer resources needed as these initiatives are completed.

Depreciation and Amortization

The decrease in depreciation and amortization expense for the three and nine month periods ended September 30, 2007 compared to the same periods in the prior year is the result of certain
equipment, computers and software being fully depreciated during the first three quarters of 2006.

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Interest Expense and Interest Income

For the three and nine months ended September 30, 2007 and 2006, interest expense is primarily comprised of interest on 8% promissory notes totaling $972,000 related to the TRMS
acquisition. These notes were paid in full in October 2007.

For the three and nine months ended September 30, 2007 and 2006, interest income is comprised of interest earned on cash, cash equivalents and marketable securities. Interest earned decreased
in the three and nine months ended September 30, 2007 compared to the same periods in the prior year due to a decrease in the amounts available for investment.

Operating Segments

The Company has 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. We
have entered into an Asset Purchase Agreement with Compass to sell TRMS including our Pipeline Tools technology sometime during fourth quarter 2007. In addition, the assets of Mortgage 101 were sold on September 28, 2007. The assets for TRMS at
September 30, 2007 are held for sale as reflected in the condensed consolidated balance sheets. 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      |        |   | Nine months ended       |  
| |                                |  | September
          30, |        |   | September
          30, |  
| |                                |  | 2007                    |        |   | 2006                    |   |        | 2007 |  |   | 2006   |  
| | Revenue                        |  |                         |        |   |                         |   |        |      |  |   |        |   |  |   |        |  
| | LION  continuing operations   |  | $                       | 1,014  |   |                         | $ | 1,399  |      |  | $ | 3,543  |   |  | $ | 4,347  |  
| | LION  discontinued operations |  |                         | 423    |   |                         |   | 567    |      |  |   | 1,400  |   |  |   | 1,779  |  
| |                                |  |                         | 1,437  |   |                         |   | 1,966  |      |  |   | 4,943  |   |  |   | 6,126  |  
| | TRMS  discontinued operations |  |                         | 911    |   |                         |   | 1,360  |      |  |   | 3,359  |   |  |   | 4,271  |  
| | Total                          |  | $                       | 2,348  |   |                         | $ | 3,326  |      |  | $ | 8,302  |   |  | $ | 10,397 |  
|
| | Operating loss                 |  |                         |        |   |                         |   |        |      |  |   |        |   |  |   |        |  
| | LION  continuing operations   |  | $                       | (1,313 | ) |                         | $ | (1,168 | )    |  | $ | (4,056 | ) |  | $ | (3,872 | )
| | LION  discontinued operations |  |                         | 39     |   |                         |   | 70     |      |  |   | (17    | ) |  |   | 188    |  
| |                                |  |                         | (1,274 | ) |                         |   | (1,098 | )    |  |   | (4,073 | ) |  |   | (3,684 | )
| | TRMS  discontinued operations |  |                         | (951   | ) |                         |   | 858    |      |  |   | 176    |   |  |   | 2,689  |  
| | Total                          |  | $                       | (2,225 | ) |                         | $ | (240   | )    |  | $ | (3,897 | ) |  | $ | (995   | )

The following comments combine the results for both continuing and discontinued operations. LION revenue for third quarter 2007 declined 27% to $1.4 million compared to $2.0 million for
the same quarter in the prior year. Revenue for the nine month period ended September 30, 2007 declined 19% to $4.9 million compared to $6.1 million for the same period in the prior year. Our financial performance

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continues to be impacted by challenging conditions in the mortgage lending markets. Higher interest rates, declining refinance activity, rising home loan delinquency and foreclosure rates, lender consolidation, and industry
pressure on subprime lending, combined to exert pressures on the lenders and brokers we serve. With the exception of Precision LPX (which was flat for the comparative quarters but increased in the comparative nine month periods, LIONs other
products declined as a result of continued contraction in loan origination volumes for our broker and lender customers.

LION operating expenses for third quarter 2007 declined 9% compared to third quarter 2007 due primarily to capitalization of research and development costs related to our product initiatives,
reduction in lead advertising for Mortgage 101 as a result of reliance on organic generation of traffic, reduced sales commissions due to lower sales volume, and lower salaries and stock option expense. This decrease was offset by additional
resources required for the onboarding and support of new Precision LPX customers and bad debt expense.

LION operating expenses for the nine month period ended September 30, 2007 declined 8% compared to the same period in the prior year due the same reasons as noted above for the quarterly
period.

TRMS revenue for third quarter 2007 declined 33% to $900,000 compared to $1.4 million for the same quarter in the prior year. Revenue for the nine month period ended September 30, 2007
declined 21% to $3.4 million compared to $4.3 million for the same period in the prior year. There continues to be a sharp decline in industry mortgage volume which has adversely affected the fees we collect in connection with the variable
pricing component of our pricing structure.

TRMS operating expenses were relatively flat overall for third quarter 2007 compared to the same quarter in the prior year primarily due to bad debt experience and sales costs which were offset
by lower software licensing fees paid to LION for use of the Pipeline Tools technology and reduced trade desk costs. The operating loss for the quarter is primarily due to decreasing revenues and bad debt expense.

TRMS operating expenses increased for the nine month period ended September 30, 2007 compared to the same period in the prior year primarily due to increased trade errors during the first half
of the year, bad debt expense and sales costs which were offset by lower software licensing fees paid to LION for use of the Pipeline Tools technology. The decreased operating income for the nine months ended September 30, 2007 compared to the prior
year is primarily due to decreasing revenues, trade errors and bad debt expense.

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FINANCIAL POSITION

At September 30, 2007, we had approximately $5.7 million in cash and cash equivalents. Historically, we have funded our activities primarily from cash provided by operations, however our
operating activities used cash during the first nine months of 2007. Other non-cash items are primarily comprised of depreciation and amortization, stock option and restricted stock expense, and change in allowance for doubtful accounts. The change
in cash and cash equivalents is as follows (in thousands):

| |                                                      |  |                   |        |   |      |   |       |  
| | ---------------------------------------------------- |  | ----------------- | ------ | - | ---- | - | ----- | -
| |                                                      |  | Nine months ended |       
| |                                                      |  | September 30,     |       
| |                                                      |  | 2007              |        |   | 2006 |  
|
| | Net income (loss)                                    |  | $                 | 884    |   |      | $ | (936  | )
| | Non-cash items:                                      |  |                   |        |   |      |   |       |  
| | Impairment loss on TRMS Business held for sale       |  |                   | 1,366  |   |      |   | -     |  
| | Goodwill impairment                                  |  |                   | 274    |   |      |   | -     |  
| | Gain on sale of Mortgage 101                         |  |                   | (4,802 | ) |      |   | -     |  
| | Other                                                |  |                   | 451    |   |      |   | 439   |  
| |                                                      |  |                   | (2,711 | ) |      |   | 439   |  
| | Changes in working capital                           |  |                   | 801    |   |      |   | 458   |  
| | Net cash provided by (used in) operating activities  |  |                   | (1,026 | ) |      |   | (39   | )
|
| | Proceeds from sale of Mortgage 101                   |  |                   | 4,818  |   |      |   | -     |  
| | Other                                                |  |                   | (718   | ) |      |   | (196  | )
| | Net cash provided by (used) in investing activities  |  |                   | 4,100  |   |      |   | (196  | )
|
| | Net cash provided by (used in) financing activities  |  |                   | -      |   |      |   | (18   | )
|
| | Net increase (decrease) in cash and cash equivalents |  |                   | 3,074  |   |      |   | (253  | )
| | Cash and cash equivalents at beginning of period     |  |                   | 2,587  |   |      |   | 3,371 |  
| | Cash and cash equivalents at end of period           |  | $                 | 5,661  |   |      | $ | 3,118 |  

Operating Activities

During the nine months ended September 30, 2007, cash from operating activities decreased $1.0 million due to operating losses from reduced revenues, resources used for LIONs product
initiatives, and decrease in accrued salaries and benefits as a result of down-sizing the Companys organization.  This decrease was offset primarily by an increase in accounts payable and accrued liabilities and decreases in accounts
receivable and prepaids and other due to our normal business operating cycle.

During the nine months ended September 30, 2006, cash from operating activities decreased slightly due to operating losses from reduced revenues and payments on strategic undertakings and
prepaid maintenance agreements. This decrease was offset by increases in deferred revenue from TRMS and Precision MTS customer contracts and increases in accounts payable, accrued salaries and benefits, and accrued liabilities due to our normal
business operating cycle.

Investing Activities

During the nine months ended September 30, 2007, investing activities provided cash of $4.1 million which primarily consisted of proceeds from the sale of mortgage 101 totaling $4.8
million which was offset by hardware and software upgrades to our datacenters in advance of implementation of our

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product initiatives for LION Pro, Retail Websites and Mortgage 101 and capitalized software development costs from vendors and LIONs research and development resources related to these product initiatives.

During the nine months ended September 30, 2006, investing activities used cash of $196,000, which consisted of the purchase of short-term available-for-sale securities totaling
$100,000 with the remainder of the increase due to upgrades to computer hardware and software.

Financing Activities

During the nine months ended September 30, 2007, there were no significant financing activities.

During the nine months ended September 30, 2006, financing activities primarily related to payments on capitalized lease obligations related to the acquisition of application and database
software, computers, servers, furniture and telecommunications systems upgrades.

Overall Liquidity and Capital Resources

The Company incurred a net loss of $4.0 million from continuing operations for the nine months ended September 30, 2007 and used cash from operations of approximately $1.0 Million. Cash
provided by investing activities during the nine months ended September 30, 2007 approximated $4.1 million. The Company had approximately $6.6 million in cash, cash equivalents and short-term investments and working capital of $5.5 at
September 30, 2007. Notes payable to former TRMS shareholders in the amount of $972,000 plus annual interest at 8% were paid in full in October 2007.

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 and short term investments. 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.

We are aggressively consolidating our operations and will continue to do so throughout the remainder of 2007 and into 2008 to reduce our underlying cost structure. This consolidation is
designed to coincide with our product initiatives which we view as an important part of our growth plans for 2007 and beyond.

Although we are currently not a party to any agreement with respect to investments in, or acquisitions of, other businesses, products, services or technologies with the exception of the Asset
Purchase Agreement that we have signed for the sale of our TRMS Business which is expected to close during fourth quarter 2007, we regularly review and evaluate strategic opportunities, including those identified internally by us as well as
unsolicited third party proposals that we may receive from time to time, which may involve the sale of some or all of our assets, partnering or other collaboration agreements, or a merger or other strategic transaction. Our Strategic Review
Committee continues to evaluate various strategic alternatives to further enhance shareholder value. LION has retained an investment banker to assist in the evaluation of a full range of strategic alternatives available to the Company. Strategic

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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. It is possible that nothing may result from our exploration or that we may acquire, be acquired or enter into some other strategic relationship, and that in consummating or further exploring such avenues, we may incur additional costs.
Furthermore, we may enter into letters of intent and other non-definitive agreements that do not culminate in a completed transaction, engage in contract negotiations, or incur due diligence expenses which affect our quarterly earnings prior to or
without entering into a material definitive agreement required to be disclosed publicly. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or that, if completed, any agreements or
transactions will be successful, 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. We may need to raise additional
capital through future financing to the extent necessary to fund such activities or simply to fund future operations if cash from operating activities is insufficient. Additional financing may not be available at all or on terms favorable to us.

Critical Accounting Policies and Estimates

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

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

Revenue Recognition

We recognize revenue from product sales or services provided when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or
services have been provided, the selling price is fixed or determinable, and collectibility is reasonably assured. For multiple-element arrangements, the Company applies Emerging Issues Task Force (EITF) Issue 00-21,Revenue Arrangements with Multiple 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.

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

Income Taxes

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

Realization of the net deferred tax asset is dependent on generating sufficient taxable income prior to expiration of net operating loss carryforwards. At December 31, 2006, the Company had net
operating loss carryforwards for federal and state income tax purposes of approximately $4.1 million and $700,000, respectively, available to offset future income which expire in 2018 through 2026.  The Company has established a valuation
allowance of approximately $1.6 million as of December 31, 2006, the full amount of deferred tax assets. Utilization of these carryforwards could be limited due to a change of control in the Companys ownership as defined by the Internal
Revenue Code Section 382.

Impairment of Goodwill

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

Recently Issued Accounting Pronouncements

Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition. Based on Company management's evaluation, it has been
concluded that there are no significant uncertain tax positions requiring recognition in the Company's financial statements. Tax years subsequent to 2004 remain subject to examination by federal and state tax jurisdictions. The Company may from time
to time be assessed interest or penalties by major tax jurisdictions, although such assessments historically have been minimal and immaterial to the Company's financial results. In the event the Company has received an assessment for interest and/or
penalties, it has been classified in the financial statements as general and administrative expense.

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

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

FACTORS THAT MAY AFFECT FORWARD-LOOKING STATEMENTS

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

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

We are working toward a goal of revenue growth and sustained profitability. However, 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. We have not achieved consistent profitability quarter over quarter or year over year during the same time period. While we show net income for the three and
nine months ended September 30, 2007, this is primarily due to the gain on the sale of our Mortgage 101 Business during the third quarter.

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

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

During the nine months ended September 30, 2007, Mortgage 101 and TRMS together represented approximately 57% of our consolidated revenues and provided positive cash flows. On September 28,
2007, Mortgage 101 was sold, and at September 30, 2007, TRMS was classified as assets held for sale due to a prospective sale with an expected closing date during fourth quarter 2007. We do not have sufficient history to ascertain whether the
remaining assets of the Loans product group will be viable going forward. We are undertaking an analysis of future cash flow streams, and cannot assure you that our business will generate sufficient cash flow from operations. Our inability to
generate adequate revenues or cash flows will have a material adverse effect on our profitability, financial condition, and results of operations.

At September 30, 2007, we had approximately $6.6 million in cash, cash equivalents, and short-term investments. On October 13, 2007, we paid in full the promissory notes
totaling $972,000 plus interest. 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

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favorable terms or at all. If adequate funds are not available, we may need to curtail operations significantly. The accompanying unaudited condensed 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. If our auditors are uncertain as to whether we have the capability to continue our operations without
additional funding, or if we determine we are unable to continue as a going concern, our financial statements would require adjustments relating to the recoverability and classification of our recorded asset amounts and the amount and classification
of our liabilities.

We are largely dependent on key personnel who may not continue to work for us.

We are substantially dependent on the continued services of our key personnel, including our officers, engineers and other significant employees. These individuals have acquired specialized
knowledge and skills with respect to LION. We are continuing to create the redundancies that will reduce the reliance on these individuals. Furthermore, we have not entered into employment agreements with these significant employees except for our
executive officers. If any of these individuals were to leave LION unexpectedly, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any such successor obtains the necessary training
and experience. Our 2005 Stock Incentive Plan provides us flexiblity to attract and retain the best available employees. We expect that we will need to attract, train, retain and motivate additional technical, managerial, marketing and customer
support personnel. Competition for these personnel may be intense, particularly for individuals with suitable experience. We face the risk that if we are unable to attract and integrate new personnel, or retain and motivate existing personnel, our
business will be adversely affected.

We are substantially dependent on a limited number of significant customers.

Our success depends on our ability to expand, retain and enhance our advanced business solution customers. Our expanded product line carries with it the risk that our revenues may be dependent
on a limited number of significant customers, rather than a broad-based broker and customer network. Our larger customer contracts, which involve our Precision LPX services, typically have renewable successive one- and two-year terms. Revenue from
these contracts comprised approximately 28% of our total revenue from continuing operations for the first nine months of 2007.

There can be no assurance that the existing customers will renew their contracts, or that we will be able to attract new customers at rates sufficient to maintain a stable or growing revenue
base. If we are unsuccessful in enrolling new customers to equalize any attrition we might have with existing customers, or to offset a decline in transactional volume, our overall share of the advanced business solution market could be reduced, and
consequently our business operating results and financial condition may be materially adversely affected.

Our operations may be vulnerable to disruption problems.

We have multiple site capacity for the delivery of our products and services. We have in place comprehensive data tape backup procedures for our operational and administrative databases. Our
replication software provides a high level of hardware backup for the database by duplicating our database across several powerful servers. However, despite protective measures, our operations could be vulnerable to damage from floods, fire,
earthquakes, power loss, telecommunications failures, break-ins, terrorism, and similar events. The prospect of such unscheduled interruptions is possible in the foreseeable future, and we are unable to predict their occurrence, duration or
cessation.

Despite the implementation of security measures which are constantly updated, our systems may be vulnerable to unauthorized access, computer viruses and other disruptive problems. We could
experience interruptions in service as a result of the accidental or intentional actions of Internet users, current and

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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.

Government Regulation

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

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

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We are experiencing a downturn in revenue due to challenging conditions in the mortgage industry, and these industry trends may continue.

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

If we do not continue to innovate and provide products and services that are useful to our users and customers, we may not remain competitive, and our revenues and operating results could suffer.

Our success depends on providing products and services that our users and customers use for a high quality Internet experience, and we face substantial competitive challenges in the changing
mortgage industry and in each of our vertical markets. For the last two years, we have sought to substantially upgrade our technology into a scalable platform to enable us to develop and link a more robust set of products and services. Our
competitors are constantly developing innovations in web search, web functionality, and online advertising along with providing information to people. As a result, we must continue to invest significant resources in research and development in order
to enhance our technology and our existing products and services and introduce new high-quality products and services that our users and customers can easily and effectively use. If we are unable to ensure that our users and customers have a high
quality experience with our products and services, then these users and customers may become dissatisfied and move to other competitors products. In addition, if we are unable to predict user and customer preferences or industry changes, or if
we are unable to modify our products and services on a timely basis, we may lose 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, under current SEC rules, we will be required to furnish a report by our management assessing the effectiveness of our internal control
over financial reporting beginning with our Annual Report on Form 10-KSB for our fiscal year ending December 31, 2007. In addition, we must comply with Section 404(b) requirements to provide an auditors attestation report on internal control
over financial reporting beginning with our Annual Report on Form 10-KSB for our fiscal year ending December 31, 2008. 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. Our assessment of internal controls over financial reporting requires us to make subjective judgments and, particularly because Standard No.
5 is newly effective, some of the judgments will be in areas that may be open to interpretation. We are currently performing the system and process documentation and evaluation needed to comply with Section 404.

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During this process, 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 as of December 31, 2007 (or if our auditors are unable to state 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.

We cannot be certain as to the timing of completion of our evaluation, testing and any required remediation due in large part to the fact that there is very little precedent available by which
to measure compliance with the new Auditing Standard No. 5. If we are not able to complete our assessment under Section 404 in a timely manner, we would be unable to conclude that our internal control over financial reporting is effective as of
December 31, 2007.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.

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

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

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

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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 various strategic alternatives to further
enhance shareholder value. We are currently utilizing an investment banker to assist in the evaluation of a full range of strategic alternatives available to us. 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. From 2003 to 2004, for example, we consummated two acquisitions. This year we sold
Mortgage 101 in third quarter 2007 and have agreed to sell our TRMS Business in fourth quarter 2007. 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 negotiation or 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 many of these strategic relationships may not materialize. Future alliances, mergers or acquisitions or dispositions could result in potentially dilutive issuances of
our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. Future acquisitions may require us to obtain additional equity or debt
financing, which may not be available on favorable terms or at all.

The trading price for our common stock is and may continue to be volatile.

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

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- Quarterly variations in our results of operations or those of our competitors.
- Announcements by us or our competitors of strategic relationships, alliances, mergers or acquisitions, 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.

ITEM 3A(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.

(b) Changes in internal control over financial reporting.

We are assessing the effectiveness of our internal controls over financial reporting on an account by account basis as a part of our on-going accounting and financial reporting review process
in order to comply with Section 404 of the Sarbanes-Oxley Act of 2002, which requires our management to assess the effectiveness of our existing internal controls for our fiscal year ended December 31, 2007. This effort includes documenting,
evaluating the design of and testing the effectiveness of our internal controls over

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financial reporting. We intend to continue to refine and improve our internal controls on an ongoing basis. During this process, we may identify items for review or deficiencies in our system of internal controls over
financial reporting that may require strengthening or remediation.

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

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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:November 14, 2007 |  |  |  | By: |  | /s/ David Stedman              
|                       |  |  |  |     |  | David Stedman                  
|                       |  |  |  |     |  | Interim Chief Executive Officer

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