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

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10 - QSB


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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001


                         COMMISSION FILE NUMBER 0-25159

                                   LION, INC.
                                   ----------
                 (Name of Small Business Issuer in its charter)

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


2201 LIND AVENUE SW, SUITE 200, RENTON, WA                  98055
------------------------------------------                  -----
 (Address of principal executive offices)                 (Zip code)


                                 (425) 902-4140
                                 --------------
                           (Issuer's telephone number)


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

     As of May 7, 2001,  approximately 31,021,978 shares of the Company's common
stock were outstanding.

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<PAGE>

                                   LION, Inc.
                                  Form 10 - QSB
                      For the Quarter Ended March 31, 2001


                                                                           PAGE
                                                                          NUMBER
                                      INDEX                               ------

PART I  FINANCIAL INFORMATION

Item 1  Financial Statements

        Balance Sheets at March 31, 2001 (unaudited) and December 31, 2000    3

        Statements of Operations for the three months ended March 31, 2001
        and 2000 (unaudited)                                                  4

        Statements of Cash Flows for the three months ended March 31, 2001
        and 2000 (unaudited)                                                  5

        Notes to Consolidated Financial Statements                            6

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



PART II OTHER INFORMATION

Item 2  Changes in Securities and Use of Proceeds                            17

Item 5  Other Information                                                    18

Item 6  Exhibits and Reports on Form 8 - K                                   18

        Signatures                                                           18

















                                        2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                   LION, Inc.

                                 BALANCE SHEETS

                                     ASSETS
<TABLE><CAPTION>
                                                                       March 31,     December 31,
                                                                         2000            2001
                                                                     ------------    ------------
                                                                      (Unaudited)
<S>                                                                  <C>             <C>
CURRENT ASSETS
   Cash and cash equivalents                                         $    313,662    $    117,254
   Accounts receivable, less allowance for doubtful accounts
      of $70,000 and $82,390 in 2001 and 2000, respectively               392,992         457,705
   Prepaid expenses and other                                             134,017          92,615
                                                                     ------------    ------------
         Total current assets                                             840,671         667,574

PROPERTY AND EQUIPMENT - net                                              840,537         861,847

OTHER ASSETS
   Goodwill - net                                                         655,150         706,873
   Other assets                                                            45,377          45,377
                                                                     ------------    ------------
                                                                     $  2,381,735    $  2,281,671
                                                                     ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                  $    191,006    $    236,836
   Accrued liabilities                                                    380,865         381,087
   Deferred revenue                                                       304,513         305,100
                                                                     ------------    ------------
           Total current liabilities                                      876,384         923,023

COMMITMENTS AND CONTINGENCIES                                                --              --

STOCKHOLDERS' EQUITY
   Preferred stock - authorized, 5,000,000 shares of $.001
      par value, liquidation value $900,000                                 1,500           1,500
   Common stock - authorized, 50,000,000 shares of $.001 par value         31,022          32,665
   Additional contributed capital                                      12,275,211      12,804,073
   Notes receivable from stockholders                                    (240,625)       (969,375)
   Accumulated deficit                                                (10,561,757)    (10,510,215)
                                                                     ------------    ------------
                                                                        1,505,351       1,358,648
                                                                     ------------    ------------
                                                                     $  2,381,735    $  2,281,671
                                                                     ============    ============
</TABLE>
The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
                                   LION, Inc.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE><CAPTION>
                                                                       Three months ended March 31,
                                                                     --------------------------------
                                                                         2001                2000
                                                                     ------------        ------------
<S>                                                                  <C>                 <C>
Revenues                                                             $  1,491,135        $  1,542,082

Expenses
   Direct costs                                                           260,178             208,187
   Selling and marketing                                                  470,325             524,150
   General and administrative                                             610,456             661,449
   Compensation from stock options issued below fair market value            --               181,260
   Research and development                                                58,126             222,003
   Depreciation and amortization                                          148,112             111,788
                                                                     ------------        ------------
                                                                        1,547,197           1,908,837
                                                                     ------------        ------------

         Operating loss                                                   (56,062)           (366,755)

Other (expense) income
   Interest expense                                                          (646)            (63,242)
   Interest income                                                            144              16,142
   Other income                                                             5,022                --
                                                                     ------------        ------------
         NET LOSS                                                    $    (51,542)       $   (413,855)
                                                                     ============        ============
Loss per common share, basic and diluted                             $      (.002)       $      (.013)
                                                                     ============        ============

</TABLE>

















The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
                                   LION, Inc.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE><CAPTION>
                                                                              Three months ended March 31,
                                                                                ------------------------
                                                                                   2001          2000
                                                                                ----------    ----------
<S>                                                                             <C>           <C>
Cash flows from operating activities
   Net loss                                                                     $  (51,542)   $ (413,855)
   Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities
         Depreciation and amortization                                             148,112       111,788
         Write off of software development costs                                      --          56,200
         Interest earned on notes receivable                                          --         (15,226)
         Warrants issued for services received                                        --          10,828
         Common stock and stock options issued for services received                 7,195         2,736
         Common stock issued in lieu of cash compensation                           13,500          --
         Compensation expense on stock options issued below fair market value         --         181,260
         Changes in assets and liabilities
             Accounts receivable                                                    64,713       (32,653)
             Prepaid expenses and other                                            (41,402)      (27,809)
             Accounts payable                                                      (45,830)     (151,913)
             Accrued liabilities                                                      (222)       73,450
             Deferred revenue                                                         (587)       46,707
                                                                                ----------    ----------
                Net cash provided by (used in) operating activities                 93,937      (158,487)

Cash flows from investing activities
   Capitalized software development costs                                          (66,324)      (48,862)
   Purchase of property and equipment                                               (8,755)         (165)
                                                                                ----------    ----------
                Net cash used in investing activities                              (75,079)      (49,027)

Cash flows from financing activities
   Payments on related party payables                                                 --          (2,378)
   Payments on line of credit                                                         --        (209,531)
   Proceeds from notes receivable                                                     --          10,000
   Proceeds from issuance of common stock and exercise of stock options            177,550        20,808
   Proceeds from exercise of warrants                                                 --         472,232
                                                                                ----------    ----------
                Net cash provided by financing activities                          177,550       291,131
                                                                                ----------    ----------

Net increase in cash and cash equivalents                                          196,408        83,617

Cash and cash equivalents at beginning of period                                   117,254       368,649
                                                                                ----------    ----------
Cash and cash equivalents at end of period                                      $  313,662    $  452,266
                                                                                ==========    ==========
Supplemental non-cash investing and financing activities:
   Exercise of stock options by notes receivable                                $     --      $  309,375
   Common stock returned for cancellation of notes receivable                   $  728,750    $  156,250
   Issuance of warrants for services included in prepaid expense                $     --      $  129,940
</TABLE>
The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
                                   LION, Inc.

                                  Form 10 - QSB

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1.  FINANCIAL STATEMENTS

         The unaudited consolidated financial statements and related notes are
presented as permitted by Form 10 - QSB, and do not contain certain information
included in the Company's audited consolidated financial statements and notes
for the fiscal year ended December 31, 2000. The information furnished reflects,
in the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of the interim
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2001. The accompanying unaudited consolidated financial
statements and related notes should be read in conjunction with the audited
consolidated financial statements and the Form 10 - KSB of LION, Inc. and notes
thereto, for its fiscal year ended December 31, 2000.

NOTE 2.  LOSS PER SHARE

         Basic loss per share is based on the income available to common
stockholders compared to the average number of shares outstanding during each
period. The weighted average number of common shares outstanding were 29,895,329
and 32,192,901 for the three months ended March 31, 2001 and 2000, respectively.
The effect of potentially dilutive common stock equivalents on the computation
for loss per common share for the three months ended March 31, 2001 and 2000 was
anti-dilutive, and therefore, diluted loss per share is equal to basic loss per
share.

NOTE 3.  ISSUANCE OF COMMON STOCK

         On March 9, 2001, the Board of Directors authorized the Company to
issue up to 4,000,000 units, each unit consisting of one (1) share of common
stock and one (1) 3-year, Class A Redeemable Warrant, in a private placement to
accredited investors at a price of $.15 per unit. The exercise price of the
warrants is $.20 per share if exercised during the first eighteen months or $.40
per share if exercised during the second eighteen months of the warrant period.
The underlying shares are not registered under the Securities Act of 1933 and
are "restricted securities" as that term is defined in Rule 144 as promulgated
under the Act.

         During March 2001, the Company received $175,000 from accredited
individuals participating in the private placement through the issuance of
1,166,667 units consisting of common stock and warrants. As of May 7, 2001, no
other units had been subscribed or sold as part of the private placement.
Proceeds will be used for working capital and to strengthen the Company's
financial condition.





                                        6
<PAGE>

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

         The following discussion of our financial condition and results of
operations should be read in conjunction with the Financial Statements and the
related Notes included elsewhere in this document.

         In addition to historical information, the following discussion and
analysis of management contains forward-looking statements. All statements that
look forward in time or include anything other than statements of historical
fact are forward-looking statements. These forward-looking statements involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including but not limited to: substantial dependence on mortgage
brokers and the mortgage broker industry; mortgage market trends; interest rate
changes; housing and consumer trends effecting home purchases; the effectiveness
of our joint-marketing and sales agreements; our need for additional financing;
our ability to attract and retain high quality employees; changes in the overall
economy and in Internet technology; the number and size of our Internet
competitors, and other risks faced by us described below in the section entitled
"Risk Factors" and elsewhere in this report, and in other documents we file with
the Securities and Exchange Commission. You should not place undue reliance on
these forward-looking statements, which are based on information available to
the Company as of the date of this report and which reflect management's
opinions only. LION undertakes no obligation to revise or publicly release the
results of any revision to these forward-looking statements.

OVERVIEW

         LION has developed one of the largest online marketplaces of consumers,
realtors, mortgage originators, lenders, and vendors by providing product and
service solutions that simplify the origination process. These buyers
(consumers, realtors, and mortgage originators) and sellers (lenders and
vendors) interact to price and select mortgage products and gain approval for
the mortgage transaction.

         During the first quarter of 2001, we focused our efforts on three major
initiatives; reaching and sustaining profitability, solidifying our core
business with new product improvements and laying the ground work for future
revenue growth with improved business practices.

         First, we moved towards reaching and sustaining profitability by
reducing expenses and creating more efficiency in the Company. We merged our
subsidiary, LionInc.com, with our parent company, LION, Inc., moved our state of
domicile from Minnesota to Washington, and reorganized the senior management
team. We also consolidated originator sales into one location allowing us to
focus more closely on areas where we can begin to grow revenue. We completed the
re-organization of the engineering department to more effectively handle
internal infrastructure issues and product development. The customer service
department was also reorganized and procedures were modified to aggressively
address customer retention and collection issues.

         Our second initiative was to solidify core business with new product
improvements. In April 2001, we opened 38 new regional databases for our
business-to-business mortgage marketplace. These 38 new regions have been added
to LION Loan Search(TM), which enables mortgage originators to search and
compare interest rates from wholesale lenders. We have expanded the wholesale
rate database used for LION Loan Search(TM) from 37 regions in 22 states to 75
regions that cover all 50 states and Washington DC. In addition, a new template
system for building our web sites was developed which decreased production time,
improved functionality, and increased the value of our web site products.

                                        7
<PAGE>

         The third initiative, which is a continual process carried over from
the first quarter, is to lay the groundwork for future revenue growth with
improved business practices. LION has built one of the largest online mortgage
marketplaces where buyers and sellers of mortgage industry products and services
can interact to create commerce. Our future revenue growth will come from
creating efficiencies and improving the connectivity between the marketplace
users through integrated rate and application programs. We believe our success
will not only come from our ability to meet the needs of our customers today,
but also through our efforts to position and build the Company to respond to the
needs of the future

LION PRODUCTS AND SERVICES

         LION currently generates revenues through four distinct categories with
a majority of the underlying customer base being comprised of mortgage brokers,
lenders or a combination of both. The categories are membership fees, marketing
fees, technology fees, and transaction fees.

         Membership fees come from LION's subscription-based products and
services. They are (i) LION Pro, consisting of LION Loan Search, LoanLink, News
Now and Ratesheets on Demand, (ii) Mortgage 101, consisting of hundreds of
mortgage information pages, interactive calculators, live interest rates
displayed from LION's Multi-Lender Rate Feed, prequalification and application
tools, and back-end rate and lead management tools, and (iii) Free Mortgage Dot
Com, a template web site using Mortgage101 technology with the mortgage
originators' logo and colors delivered with no set up fees and free one-year
domain name registration.

         Marketing fees have a direct relationship to LION's marketplace
traffic. Specific products or services include ad banners, consumer lead
generation to mortgage originators and mortgage broker lead generation to
lenders.

         Technology fees are related to (i) mortgage originator and (ii)
wholesale and/or retail lender web site development and hosting. This includes
custom web site design for mortgage originators and LION's Application Service
Provider (ASP) initiative referred to as LoanCAT. As an ASP in the mortgage
business-to-business (B2B) space, LION customizes and hosts a lender's web site,
as well as provides the software applications needed to automate their loan
pipeline.

         Transaction fees are generated by providing mortgage brokers the
ability to submit electronic home loan applications for automated underwriting
and quickly delivering an underwriting decision to the customer. To date, this
revenue segment has not been a significant part of LION's revenue base but could
be in the future.

RESULTS OF OPERATIONS

         The net loss for the three months ended March 31, 2001 narrowed to
$51,542 compared to a net loss of $413,855 for the same quarter in the prior
year. Most of the improvement came from the Company's ability to reduce expenses
and improve efficiencies within the organization. While the Company anticipates
additional efficiencies to be attained throughout the year, the success or
failure to achieve sustained profitability will be driven by revenue growth.

                                        8
<PAGE>

REVENUES

         Revenues decreased to $1,491,135 from $1,542,082 for the three months
ended March 31, 2001 and 2000, respectively. This represents a decrease of
$50,947 or 3%. Total revenues of $1,491,135 for the three months ended March 31,
2001 were comprised of mortgage broker fees of $1,071,441 or 72%, lender fees of
$329,800 or 22%, ad banner revenues of $86,529 or 6%, and other fees of $3,365.
Total revenues of $1,542,082 for the three months ended March 31, 2000 were
comprised of mortgage broker fees of $1,090,764 or 71%, lender fees of $345,704
or 22%, ad banner revenues of $92,459 or 6%, and broadcast fax fees of $13,155.

         The overall decrease of $50,947 in revenues was primarily due to an
increase in membership based services (collectively Lion Pro, Mortgage 101 and
Free Dot Com) which were offset by decreases in marketing fees (collectively
lead generating services and ad banners) and technology fees (primarily web site
development and hosting fees for lenders and mortgage brokers).

DIRECT COSTS

         Direct costs are comprised primarily of web site development and
salaries related to the daily updates to rates, fees, and other loan program
information in the mortgage lender database. Direct costs increased to $260,178
from $208,187 for the three months ended March 31, 2001 and 2000, respectively.
This represents an increase of $51,991 or 25%. Direct costs as a percentage of
revenues were 17.5% and 13.5% for the three months ended March 31, 2001 and
2000, respectively. The increase is primarily due to the increase in costs to
maintain and improve the systems that deliver the Company's core products and
services.

SELLING AND MARKETING

         Marketing and selling expenses are comprised of marketing and
advertising costs, sales salaries and related support costs. Marketing and
selling expenses decreased to $470,325 from $524,150 for the three months ended
March 31, 2001 and 2000, respectively. This represents a decrease of $53,825 or
10%. These expenses as a percentage of revenues were 31.5% and 34.0% for the
three months ended March 31, 2001 and 2000, respectively. The decrease in
selling and marketing costs were primarily due to the closure of the Company's
Spokane sales office and the consolidation of mortgage originator sales
functions in the Denver sales office.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses are comprised of management and
administrative salaries and related costs, outside consulting services,
telecommunications expenses, occupancy costs, and other administrative related
expenses. General and administrative expenses decreased to $610,456 from
$661,449 for the three months ended March 31, 2001 and 2000, respectively. This
represents a decrease of $50,993 or 8%. General and administrative expenses as a
percentage of revenues improved to 40.9% from 42.9% for the three months ended
March 31, 2001 and 2000, respectively. The decrease in costs was due primarily
to (i) the consolidation of LION, Inc. (parent) and LionInc.com (subsidiary) and
(ii) a decrease in travel and entertainment costs which were offset by an
increase in occupancy costs.

COMPENSATION FROM STOCK OPTIONS ISSUED BELOW FAIR MARKET VALUE

         During the first quarter of 2000, certain long-time employees exercised
stock options in consideration for nonrecourse promissory notes. Under APB
Opinion No. 25, the issuance of stock options under such notes is in essence a
new granting of options. By issuing nonrecourse notes, we

                                        9
<PAGE>

extended the original terms of the fixed award, creating a new measurement date.
As such, additional compensation cost is recognized to the extent that the
intrinsic value of the new award exceeds the original intrinsic value of the
original award. For the three months ended March 31, 2000, we recorded
compensation expense of $181,260 for the difference between the original
intrinsic value and the intrinsic value of the new award. No compensation
expense related to stock options was recorded for the three months ending March
31, 2001.

RESEARCH AND DEVELOPMENT

         Research and development expenses are comprised primarily of
engineering salaries and related costs. Research and development expenses
decreased to $58,126 from $222,003 for the three months ended March 31, 2001 and
2000, respectively. This represents a decrease of $163,877 or 74%. The decrease
is primarily due to (i) the reallocation of research and development personnel
to direct costs efforts in order to maintain and improve the systems that
deliver the Company's core products and services, (ii) a reduction in other
research and development resources to match up with the current availability of
funding and (iii) a one-time write-off of a $56,200 database project during the
first quarter of 2000. As funding becomes available, we expect to spend more
time and resources in research and development.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization expense increased to $148,112 from
$111,788 for the three months ended March 31, 2001 and 2000, respectively. This
represents an increase of $36,324 or 33% and was due primarily to the (i)
capitalization of internally developed software needed to expand and improve our
telecommunications and computer systems infrastructure and (ii) the amortization
of goodwill. Goodwill totaling $940,918 related to the IMark acquisition of
assets recorded in May 1999, contributed $51,722 of amortization expense for the
three months ended March 31, 2001 compared to $28,340 in the same period in the
prior year.

INTEREST EXPENSE

         Interest expense decreased to $646 from $63,242 for the three months
ended March 31, 2001 and 2000, respectively. This represents a decrease of
$62,596 or 99%. The decrease is primarily due to the pay off of the Company's
line of credit in September of 2000. Interest expense for the three months ended
March 31, 2000 is primarily comprised of amortization of loan fees and interest
related to the Company's line of credit.

INTEREST INCOME

         Interest income decreased to $144 from $16,142 for the three months
ended March 31, 2001 and 2000, respectively. Interest earned during the first
quarter of 2000 is primarily due to nonrecourse promissory notes. No notes
earned interest during first quarter 2001.

LIQUIDITY AND CAPITAL RESOURCES

         During March 2001, the Company received $175,000 from a limited number
of accredited individuals participating in a private placement through the
issuance of 1,166,667 units consisting of common stock and warrants. In
addition, positive cash flow from operations for the quarter was also achieved.
It is anticipated that the second quarter will trend the same way. At March 31,
2001, we had approximately $314,000 in cash and cash equivalents.

                                       10
<PAGE>

         During first quarter 2001, operating activities provided net cash of
$93,937 compared to the use of cash of $158,487 for operations during first
quarter 2000. The net cash provided in operating activities for first quarter
2001 was primarily attributable to efficiencies gained from (i) the merger of
the parent and subsidiary companies, (ii) the closure of the Spokane sales
office (iii) the consolidation of all originator sales functions in the Denver
sales office and (iv) the reorganization of the engineering department. These
cost savings were offset by payments on accounts payable. The net use of cash in
operating activities for first quarter 2000 was primarily attributable to (i)
research and development in internal software for automated underwriting and
wholesale origination and fulfillment services, (ii) a focus on delivering our
core business, and (iii) occupancy and related costs for future growth.

         During first quarter 2001, we used net cash of $75,079 for our
investing activities which was primarily for the capitalized portion of our
software development costs related to our planned migration to a new data base
platform. In the prior year, we used net cash in investing activities totaling
$49,027 which was primarily related to the capitalized portion of our LoanCAT
project (developing solutions for online wholesale origination and fulfillment
services for lenders).

         During first quarter 2001 net cash proceeds from financing activities
were $177,550. Proceeds received from financing activities were primarily the
result of the private placement of the Company's common stock totaling $175,000.
During first quarter 2000, net cash proceeds from financing activities were
$291,131. Proceeds were primarily from warrant exercises totaling $472,232. This
enabled us to pay down our line of credit by $209,531 while at the same time
reducing other current obligations throughout the quarter.

         Management believes there are adequate resources for the continuance of
operations through April 1, 2002. However, there can be no assurance that we
will be able to obtain sufficient additional financing or be successful in our
future operation.

RISK FACTORS

         Set forth below and elsewhere in this Quarterly Report and in the other
documents we file with the SEC are risks and uncertainties that could cause
actual results to differ materially from the results contemplated by the
forward-looking statements contained in this Quarterly Report.

WE HAVE NO HISTORY OF PROFITS AND OUR FUTURE PROFITABILITY REMAINS UNCERTAIN.

         We are working toward a goal of sustained profitability and have
recently taken several important steps toward that goal, including, merging our
subsidiary with LION, reorganizing our senior management team, and consolidating
our originator sales and service operations. We have not reached profitability
as of March 31, 2001. For first quarter 2001, the net loss was $51,542 compared
with a net loss of $413,855 for first quarter 2000. For the fiscal year ended
December 31, 2000, we had a net loss of $1,297,849, or $0.04 per share, compared
to a net loss of $3,997,151, or $0.15 per share in the prior fiscal year. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in new and rapidly evolving markets,
including uncertainty of revenues, markets, profitability and the need to raise
capital to fund our ongoing operations. We cannot assure you that we will be
successful in addressing these risks or that we can be operated profitably,
which depends on many factors, including the success of our marketing program,
the control of expense levels and the success of our business activities. Our
future operating results will depend on a variety of factors, including those
discussed in the other risk factors set forth below.

                                       11
<PAGE>

FINANCIAL RESULTS FOR ANY PARTICULAR PERIOD WILL NOT PREDICT RESULTS FOR FUTURE
PERIODS.

         Because of the uncertain nature of the rapidly changing market we
serve, period-to-period comparisons of operating results may not be meaningful.
You should not rely on the results for any period as an indication of future
performance. In particular, although we have historically experienced strong
revenue growth, we do not believe that this level of revenue growth will be
sustained in 2001 and in future periods, particularly on a long-term basis. For
example, over 50% of our growth in revenues for 2000 compared to 1999 is
attributable to the acquisition of the IMark assets and its mortgage industry
Internet sites on May 17, 1999. In addition, we expect that our operating
expenses will continue to increase as we expand our sales and marketing
operations, fund greater levels of product development, and acquire
complementary businesses and technologies. Furthermore, we are subject to
employer payroll taxes when our employees exercise their non-qualified stock
options. The employer payroll taxes are assessed on each employee's gain, which
is the difference between the price of our common stock on the date of exercise
and the exercise price. During a particular period, these payroll taxes could be
material. Depending on the number of shares of our common stock for which
options are exercised and the fair market value of shares of our common stock
during such period, these employer payroll taxes would be recorded as a charge
to operations in the period such options are exercised based on actual gains
realized by employees. In addition to the net proceeds we would receive upon the
exercise of stock options, we would receive tax deductions for gains realized.

WE WILL NEED ADDITIONAL FINANCING; CURRENT FUNDS ARE INSUFFICIENT TO FINANCE OUR
PLANS FOR GROWTH AND OUR OPERATIONS; WE COULD BE REQUIRED TO CUT BACK OR STOP
OPERATIONS IF WE ARE UNABLE TO RAISE OR OBTAIN NEEDED FUNDING.

         Our existing working capital is not sufficient to allow us to execute
our business plan, including the further development and implementation of our
online business, or to fund our expansion and marketing plans for the year 2001.
The full development and implementation of our business will require additional
resources. If we are unable to obtain adequate capital financing through equity
or other financings, we may not be able to successfully implement our short-term
or long-term plans for expansion or to meet our working capital requirements. We
anticipate that a significant portion of our near-term capital resources will be
provided through operations. However, even if we succeed in our business plans,
we may experience rapid growth requiring additional funds to expand our
operations and organization.

         We do not have current commitments for financing sufficient to fund our
expansion and marketing plans. In order to provide adequate working capital, we
intend to explore a number of options to secure financing including the issuance
of additional equity. We might not succeed, however, in raising equity capital
or in negotiating and obtaining additional and acceptable financing when we need
it. Our ability to obtain additional capital may depend on market conditions
(including the market for Internet stocks), national and global economies and
other factors beyond our control. If adequate capital were not available or were
not available on acceptable terms at a time when we needed it, our ability to
execute our business plans, develop or enhance our services or respond to
competitive pressures would be significantly impaired.



                                       12
<PAGE>

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

         LION's most critical customer is currently the mortgage broker.
Mortgage broker fees comprised 69% of our total revenues during 2000. Customer
agreements are short-term and renewable. There can be no assurance that these
subscribers will continue to participate in the LION program, or that we will be
able to attract new mortgage brokers at rates sufficient to maintain a stable or
growing revenue base. We cannot assure you that the market for our products and
services will continue to develop as expected. If the mortgage broker market
develops more slowly than expected or becomes saturated with competitors, or if
our products and services do not continue to achieve market acceptance, our
business operating results and financial conditions may be materially adversely
affected.

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

WE WILL DEPEND ON THE CONTINUED UTILITY OF THE INTERNET AND MAY HAVE DIFFICULTY
ACCOMMODATING TECHNOLOGY ADVANCES.

         The performance of our web site will continue to be dependent on the
successful operation of the Internet and on certain third parties and services
(such as Internet service providers, Internet backbone providers and Web
browsers). Our Internet services will be designed around certain technology
standards. Current and future success of our services may become subject to
additional industry standards as Internet commerce rapidly evolves. As a result
our business may incur additional costs of unknown proportions as we are
confronted with new technology standards. In addition, we may not be successful
in our efforts to enhance existing services and to develop, introduce and market
new services. Furthermore, our enhancements and new services may not adequately
meet the requirements of the marketplace and achieve market acceptance. As the
Internet develops, it is possible that incompatibility or lack of appropriate
features could impact our business. In addition, the widespread adoption of new
Internet or telecommunications technologies or standards could require us to
make substantial expenditures to modify or adapt our services. In this case, the
new Internet or telecommunications services or enhancements that we offer could
contain design flaws or other defects. Although we expect to be responsive to
changes in the Internet and technology, we may not be successful in achieving
widespread acceptance of our services before competitors offer services with
speed and performance equal to or greater than ours.

         Much of the architecture that we employ was designed for our original
business model. In the future, we may be required to make significant changes to
our architecture, including moving to a completely new architecture. If we are
required to switch architectures, we may incur substantial costs and experience
delays or interruptions in our service. If we experience delays or interruptions
in our service due to inadequacies in our current architecture or as a result of
a change in architectures, users may become dissatisfied with our service and
move to competing providers of online services. Further, to the extent that
demand for our services increases, we will need to expand our infrastructure,
including the

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<PAGE>

capacity of our hardware servers and the sophistication of our software. This
expansion is likely to be expensive, complex, and require additional technical
expertise. Any loss of traffic, increased costs, inefficiencies or failures to
adapt to new technologies and the associated adjustments to our architecture
would have a material adverse effect on our business.

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

         We are substantially dependent on the continued services of our key
personnel, including our president, chief financial officer, chief technical
officer, our engineers and other significant employees. These individuals have
acquired specialized knowledge and skills with respect to LION and its
operations. With respect to our proprietary software, while backup has been
provided by the other full-time company engineers, currently there are portions
of the database management and development that rely solely on Sam Ringer, who
is the author of the LION software and a co-founder. We are in the process of
creating the engineering redundancy that will reduce the reliance on this
individual, but have not completed this task. Furthermore, we have not entered
into employment agreements with these officers and significant employees. If any
of these individuals were to leave LION unexpectedly, we could face substantial
difficulty in hiring qualified successors and could experience a loss in
productivity while any such successor obtains the necessary training and
experience. We provide stock options, which currently serve to retain and
motivate key employees as they become vested in their initial stock option
grants. While management personnel are typically granted additional stock
options, which will usually vest over a period of four years, subsequent to
their hire date to provide additional incentive to remain at LION, the initial
option grant is typically the largest and an employee may be more likely to
leave our employ upon completion of the vesting period for the initial option
grant. We expect that we will need to attract, train, retain and motivate
additional technical, managerial, marketing and customer support personnel.
Competition for these personnel may be intense, particularly for individuals
with suitable experience. We face the risk that we will be unable to attract and
integrate new personnel, or retain and motivate existing personnel, our business
will be adversely affected.

OUR OPERATIONS MAY BE VULNERABLE TO DISRUPTION PROBLEMS.

         We have in place comprehensive data tape backup procedures for our
operational and administrative databases. Our replication software provides a
high level of hardware backup for the database by duplicating our database
across several powerful PCs. However, despite protective measures, our
operations could be vulnerable to damage from floods, fire, earthquakes, power
loss, telecommunications failures, break-ins and similar events. In addition,
the majority of our network infrastructure is located in Seattle, Washington, an
area susceptible to earthquakes. In recent months, the western United States
(California in particular) has experienced repeated episodes of diminished
electrical power supply. As a result of these episodes, certain of our
operations or facilities may be subject to "rolling blackouts" or other
unscheduled interruptions of electrical power. The prospect of such unscheduled
interruptions may continue for the foreseeable future and we are unable to
predict either their occurrence, duration or cessation. We do not have multiple
site capacity for all of our services in the event of any such occurrence.

         Despite the implementation of security measures, our systems may be
vulnerable to unauthorized access, computer viruses and other disruptive
problems. We could experience interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. Unauthorized access might lead to interruptions, delays or
cessation in service to subscribers or deter potential subscribers. Although we
intend to implement 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

                                       14
<PAGE>

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.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR DESIRED GROWTH, WHICH COULD
ULTIMATELY STRAIN OUR FINANCIAL, PERSONNEL AND TECHNICAL RESOURCES.

         We intend to expand our level of operations, and will need an effective
planning and management process to implement our business plan successfully.
Depending on the amount and timing of any increase in business, this expansion
could place a strain on our management, operational, software and financial
resources. Some areas that could be put under strain by growth include
marketing, customer support, customer billing and web site support and
maintenance. To accommodate growth, if any, we may be required to implement and
improve our management, operating and financial systems, procedures and controls
on a timely basis and to expand, train, motivate and manage our employees. There
is a risk, however, that our systems may be inadequate to support our existing
and future operations or that hiring, training and managing new employees will
be more difficult then we anticipate.

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

         The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During 2000, the closing sale prices of our common
stock on the OTC Bulletin Board ranged from $1.375 to $.125 per share and the
sale price of our common stock closed at $.08 per share on May 7, 2001. Our
stock price may fluctuate in response to a number of events and factors, such as
quarterly variations in operating results, announcements of technological
innovations or new products by us or our competitors, changes in financial
estimates and recommendations by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable, and
news reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of these companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our
operating performance.

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

VOLUME OF SHARES ELIGIBLE FOR SALE COULD IMPAIR OUR STOCK PRICE AND HINDER
FUTURE FINANCING EFFORTS.

         As of December 31, 2000 a substantial majority of the 32,665,311
outstanding shares of common stock and 1,500,000 shares of preferred stock held
by existing shareholders were issued and sold by the Company in private
transactions in reliance on exemptions from the registration provisions of the

                                       15
<PAGE>

Securities Act and are restricted securities within the meaning of Rule 144
under the Securities Act. Of the outstanding shares, including shares held by
affiliates, 31,415,622 were issued on or before December 31, 1999, and may be
currently eligible for resale in the open market, if any, subject to the volume
and other conditions of Rule 144. There are no contractual restrictions on the
resale of the outstanding common stock. The sale in the public market of these
shares of restricted common stock, or the perception that these sales may occur,
may depress prevailing market prices of the common stock.

OUTSTANDING OPTIONS AND WARRANTS, WHEN EXERCISED, WILL FURTHER DILUTE COMMON
SHAREHOLDERS.

         As of December 31, 2000, there were outstanding stock options to
purchase an aggregate of 3,878,250 shares of common stock at exercise prices
ranging from $.17 to $2.00 per share, and warrants to purchase 685,000 shares of
common stock at exercise prices ranging from $.60 to $1.75. Employee options are
subject to a restriction whereby option holders have agreed to not sell or
otherwise transfer or dispose of shares of the common stock issued upon exercise
of options in an amount which shall exceed 250,000 shares during any three-month
period. The exercise of these outstanding options and warrants will dilute the
percentage ownership of common stockholders, and any sales in the public market
of shares of common stock underlying such securities may adversely affect
prevailing market prices for the common stock. Furthermore, the terms upon which
we will be able to obtain additional equity capital may be adversely affected
since the holders of these outstanding securities can be expected to exercise
their respective rights therein at a time when we would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in such securities.

"PENNY STOCK" REGULATIONS IMPOSE RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON
STOCK.

         The SEC has adopted regulations which generally define "penny stock" to
be any equity security that is not traded on a national securities exchange or
NASDAQ and that has a market price of less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exceptions. The
definition excludes the securities of an issuer meeting certain minimum
financial requirements. Generally, these minimum thresholds would be met by an
issuer with, with net tangible assets in excess of $2 million or $5 million,
respectively, depending upon whether the issuer has been continuously operating
for less or more than three years, or by an issuer with "average revenue" of at
least $6 million for the last three years.

         As long as we do not meet the relevant financial requirements and our
common stock is trading at less than $5.00 per share on the OTC Bulletin Board,
our securities are subject to the penny stock rules. These rules impose
additional sales practice requirements on broker-dealers who sell our securities
to persons other than established customers and accredited investors (generally,
investors with a net worth in excess of $1,000,000 or an individual annual
income exceeding $200,000, or, together with the investor's spouse, a joint
income of $300,000). For transactions covered by the penny stock rules, the
broker-dealer must make a special suitability determination for the purchase of
such securities and have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any non-exempt transaction
involving a penny stock, the rules require, among other things, that the
broker-dealer deliver an SEC mandated risk disclosure document relating to the
penny stock market and the risks associated therewith prior to the transaction.
The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative as well as current quotations
for the securities. If the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, the broker-dealer must send monthly statements
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the penny stock
rules may restrict the ability of broker-dealers to sell our securities and may
affect the ability of our shareholders to sell their securities in the secondary
market.

                                       16
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On March 9, 2001, the Board of Directors authorized the Company to
issue up to 4,000,000 units, each unit consisting of one (1) share of common
stock and one (1) 3-year, Class A Redeemable Warrant, in a private placement to
accredited investors at a price of $.15 per unit. The exercise price of the
warrants is $.20 per share if exercised during the first eighteen months or $.40
per share if exercised during the second eighteen months of the warrant period.
The underlying shares are not registered under the Securities Act of 1933 and
are "restricted securities" as that term is defined in Rule 144 as promulgated
under the Act.

         During March 2001, the Company received $175,000 from three accredited
purchasers participating in the private placement noted above through the
issuance of 1,166,667 shares of common stock and the grant of warrants to
acquire an additional 1,166,667 shares of common stock over the next 36 months.
As of May 7, 2001, no other shares of common stock had been issued as part of
the private placement. The issuances were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. The recipients of
securities represented their intentions to acquire the securities for investment
only, and not with a view to sell, or for sale in connection with any resale or
distribution. Appropriate legends were affixed to the certificates issued in the
transactions. The offering was made without the use of any general solicitation
or advertising. The recipients had access to all material information concerning
the Company.

         In January 2001, we sold an aggregate of 15,000 shares of common stock
to 1 person at a purchase price of $.17 per share in connection with the
exercise of outstanding options. Cash consideration was received totaling
$2,550. In March 2001, 90,000 shares of common stock at $.15 per share totaling
$13,500 were issued to one employee in lieu of cash for deferred compensation.
The recipients were accredited persons, had access to all material information
concerning the Company, and acquired the securities for investment. Appropriate
legends were affixed to the certificates issued in the transactions. The
issuances were deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as transactions by an issuer not
involving any public offering.

         Pursuant to the Company's 1998 Stock Option Plan, the Board of
Directors approved a one-time grant of additional stock options to 57 employees
on February 2, 2001. These stock options were comprised of 2,685,000 shares of
common stock, expire 10 years from the date of grant, vest in quarterly
increments over a 4 year period (with vesting accelerating during any profitable
quarter) and have an exercise price of $.20 per share. The Company also granted
stock options to nine employees at various dates from January to February 2001.
These stock options were comprised of 90,000 shares of common stock, expire 5 or
10 years from the date of grant, vest in quarterly increments over a 4 year
period and have exercise prices, based on the market price at the date of grant,
ranging from $.08 to $.15 per share. The granting of stock options did not
require registration under the Securities Act, or an exemption therefrom, since
the grants did not involve a "sale" as the term is used in Section 2(3) of the
Securities Act.

                                       17
<PAGE>

ITEM 5.  OTHER INFORMATION

         On December 31, 2000, LION, Inc., a Washington corporation, became the
successor of Plenum Communications, Inc., a Minnesota corporation, pursuant to a
merger. The merger had the effect of changing LION's domicile, but did not alter
the proportionate interests of security holders. Effective January 1, 2001,
LION's wholly-owned subsidiary, which conducted business as LionInc.com, was
merged into LION.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits to Part II:

               None

         (b)   Reports on Form 8-K

         There were no reports on Form 8-K filed during the quarter ended March
31, 2001.



                                   SIGNATURES
                                   ----------

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


                                                        LION, INC.
                                                        ----------
                                                       (Registrant)


Date: May 15, 2001                               By:  /s/ John A. McMillan
                                                      --------------------
                                                      John A. McMillan
                                                      Chief Executive Officer













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