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

                                  FORM 10 - QSB



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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

                         COMMISSION FILE NUMBER 0-25159
                                                -------

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


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


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


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


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


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






                                       1

<PAGE>


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


                                                                           PAGE
                                      INDEX                               NUMBER

PART I    FINANCIAL INFORMATION

Item 1    Financial Statements

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

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

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

          Notes to Financial Statements                                       6

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

Item 3    Controls and Procedures                                            22

PART II   OTHER INFORMATION

Item 2    Changes in Securities and Use of Proceeds                          23

Item 6    Exhibits and Reports on Form 8 - K                                 23

          Signatures                                                         23






                                       2

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                                   LION, Inc.
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                     ASSETS

                                                                            June 30,
                                                                              2003          December 31,
                                                                          (Unaudited)          2002
                                                                          ------------     ------------

<S>                                                                       <C>              <C>
CURRENT ASSETS
    Cash and cash equivalents                                             $    717,993     $    403,917
    Accounts receivable, less allowance for doubtful accounts of
       $59,000 and $62,400 in 2003 and 2002, respectively                      432,613          347,661
    Prepaid expenses and other                                                 144,127           71,388
                                                                          ------------     ------------

         Total current assets                                                1,294,733          822,966

PROPERTY AND EQUIPMENT - net                                                   963,359          940,372

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

                                                                          $  2,569,955     $  2,075,201
                                                                          ============     ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                      $    148,905     $    111,340
    Accrued liabilities                                                        426,497          329,671
    Current maturities of long-term obligations                                 51,057           35,330
    Deferred revenue                                                           324,254          295,497
                                                                          ------------     ------------

         Total current liabilities                                             950,713          771,838

LONG-TERM OBLIGATIONS, less current maturities                                  56,598           52,495

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             31,718           31,442
    Additional contributed capital                                          11,766,120       11,741,101
    Accumulated deficit                                                    (10,236,694)     (10,523,175)
                                                                          ------------     ------------
                                                                             1,562,644        1,250,868
                                                                          ------------     ------------

                                                                          $  2,569,955     $  2,075,201
                                                                          ============     ============
</TABLE>


The accompanying notes are an integral part of these statements.



                                       3
<PAGE>


                                   LION, Inc.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                      Three months ended June 30,    Six months ended June 30,
                                      --------------------------    --------------------------
                                          2003           2002           2003           2002
                                      -----------    -----------    -----------    -----------

<S>                                   <C>            <C>            <C>            <C>
Revenues                              $ 1,830,974    $ 1,606,313    $ 3,617,694    $ 3,117,276

Expenses
    Direct costs                          338,381        236,620        653,937        455,970
    Selling and marketing                 586,612        435,045      1,160,080        917,069
    General and administrative            565,399        703,345      1,105,052      1,341,982
    Research and development               91,128         81,394        178,529        171,199
    Depreciation and amortization         114,734        123,002        225,736        242,684
                                      -----------    -----------    -----------    -----------
                                        1,696,254      1,579,406      3,323,334      3,128,904
                                      -----------    -----------    -----------    -----------

         Operating income (loss)          134,720         26,907        294,360        (11,628)

Other income (expense)
    Interest expense                       (4,932)        (2,876)        (8,978)        (6,078)
    Interest income                           990            895          1,099          1,736
    Other income                               --            240             --            240
    Other expense                              --       (350,000)            --       (350,000)
                                      -----------    -----------    -----------    -----------

         NET INCOME (LOSS)            $   130,778    $  (324,834)   $   286,481    $  (365,730)
                                      ===========    ===========    ===========    ===========

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







The accompanying notes are an integral part of these statements.



                                       4
<PAGE>


                                   LION, Inc.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Six months ended June 30,
                                                               -------------------------
                                                                   2003         2002
                                                                ---------    ---------
<S>                                                             <C>          <C>
Cash flows from operating activities
    Net income (loss)                                           $ 286,481    $(365,730)
    Adjustments to reconcile net income (loss) to net cash
          provided by operating activities
          Depreciation and amortization                           225,736      242,684
          Write off of capitalized software development costs          --       10,469
          Stock options issued for services received                5,659        5,265
          Common stock issued in lieu of cash compensation         19,636       20,374
          Changes in assets and liabilities
              Accounts receivable                                 (84,952)      (9,519)
              Prepaid expenses and other                          (72,739)     (40,775)
              Accounts payable                                     37,565       66,053
              Accrued liabilities                                  96,826      431,146
              Deferred revenue                                     28,757        6,114
                                                                ---------    ---------

                  Net cash provided by operating activities       542,969      366,081

Cash flows from investing activities
    Capitalized software development costs                       (141,037)    (189,218)
    Purchase of property and equipment                            (65,942)     (89,012)
                                                                ---------    ---------

                  Net cash used in investing activities          (206,979)    (278,230)

Cash flows from financing activities
    Payments on notes payable and long-term obligations           (21,914)     (41,188)
    Proceeds from issuance of common stock and exercise of
      stock options                                                    --          900
                                                                ---------    ---------

                  Net cash used in financing activities           (21,914)     (40,288)
                                                                ---------    ---------

Net increase in cash and cash equivalents                         314,076       47,563

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

Cash and cash equivalents at end of period                      $ 717,993    $ 528,473
                                                                =========    =========


Supplemental non-cash investing and financing activities:
    Assets acquired under capital leases                        $  41,744    $      --
</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 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 financial statements and notes for the fiscal year ended
December 31, 2002. The information furnished reflects, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation of the results of the interim periods presented. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year ending December 31, 2003.
The accompanying unaudited financial statements and related notes should be read
in conjunction with the audited financial statements and the Form 10 - KSB of
LION, Inc. and notes thereto, for its fiscal year ended December 31, 2002.


NOTE 2.   NET INCOME (LOSS) PER COMMON SHARE

         Basic net income (loss) per common share is based on the weighted
average number of common shares outstanding during each period. The weighted
average number of common shares outstanding were 31,570,688 and 31,090,807 for
the six months ended June 30, 2003 and 2002, respectively, and 31,650,994 and
31,125,374 for the three months ended June 30, 2003 and 2002, respectively.

         Preferred shares outstanding were included in the computation of
diluted earnings per share for the six and three month periods ended June 30,
2003 but excluded for the six and three month periods ended June 30, 2002 as
their effect was anti-dilutive. Warrants and options to purchase 6,603,067
shares of common stock are included in the computation of diluted earnings per
share at June 30, 2003, however, warrants and options to purchase 7,043,667
shares of common stock at June 30, 2002 were excluded because their exercise
price was greater than the average market price of the common shares.


NOTE 3.   STOCK-BASED COMPENSATION

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

         During the six month period ended June 30, 2003, the Company issued
options to purchase 560,000 shares under the 1998 Stock Option Plan (the
"Plan"). Compensation expense will be based on the fair value of the options at
the respective grant dates utilizing the Black-Scholes model for estimating fair
value. The Company will recognize compensation expense of $36,360 ratably over
the vesting period for these options granted. Under the intrinsic value method
reported previously, no compensation expense had been recognized on options
granted through December 31, 2002, as the exercise price of the options granted
equaled the market price on the date of grant for all prior grants.



                                       6
<PAGE>


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

<TABLE>
<CAPTION>
                                           Three months ended June 30,    Six months ended June 30,
                                           ---------------------------    ------------------------
                                                2003         2002            2003          2002
                                             ---------    ---------       ---------    -----------

<S>                                          <C>          <C>             <C>          <C>
Net income (loss), as reported               $ 130,778    $(324,834)      $ 286,481    $  (365,730)

Add: Stock-based employee compensation
expense included in reported net income          4,442           --           4,637             --

Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards*
                                              (106,672)     (98,634)       (213,320)      (202,425)
                                             ---------    ---------       ---------    -----------

Pro forma net income (loss)                  $  28,548    $(423,468)      $  77,798    $  (568,155)
                                             =========    =========       =========    ===========

Net income (loss) per share:
Basic and diluted - as reported              $      --    $    (.01)      $     .01    $      (.01)
                                             =========    =========       =========    ===========
Basic and diluted - pro forma                $      --    $    (.01)      $      --    $      (.02)
                                             =========    =========       =========    ===========
</TABLE>

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


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

         The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the related Notes included elsewhere in this document. Any
statistical information provided in this report is as of June 30, 2003 unless
otherwise noted.

         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.



                                       7
<PAGE>


OVERVIEW

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

          LION's "business to consumer" and "business to business" portals
connect the originator to a large marketplace of customers seeking home
mortgages and to a powerful network of lenders and vendors in the mortgage
industry. The Company's "business to consumer" portal, Mortgage101.com, is one
of the nations leading consumer mortgage portals with content co-branded to over
26,000 local real estate, association, and media websites. The Company's
"business to business" portal, LionInc.com, allows members to search for the
best mortgage for their customers by checking and comparing lender products and
pricing from one of the largest wholesale lender databases in the country,
locking the rate and sending the loan application file to a number of lenders
electronically through an advanced loan origination software system. LION also
provides this complete software package to large originator companies under a
private label license allowing them to customize their own services under their
own brand.

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

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

         LION PRO, used by over 6,000 mortgage brokers nationwide, consists of
LION Loan Search, LoanLink, News Now and Ratesheets on Demand. Through this
password protected product, originators can access one of the nation's largest
databases of wholesale mortgage rate, fee, and program information to instantly
price any mortgage loan. This database is updated daily in 77 regions in the
country. There are over 125 participating lenders and nearly 100,000
regionalized wholesale and correspondent loan programs in the loan search
database. The LoanLink feature is a subprime loan exchange platform where
originators can submit hard to place loans to participating lenders. The News
Now feature of LION Pro allows originators to make informed decisions with
high-value content and market data featuring mortgage backed securities, real
time market information, financial market analysis, economic indicators,
business/service directories and calendars. Finally, the Ratesheets on Demand
service allows members to view ratesheets online from all participating lenders
and transmit them by either fax or email.

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

         FREE MORTGAGE DOT COM is a template web site using Mortgage101
technology with the mortgage originator's logo and colors delivered with no set
up fees and free one-year domain name registration. Users pay a monthly hosting
fee for this entry level service. In many cases this product becomes the first
step before moving into a series of upgrades toward larger more comprehensive
enterprise websites. There are over 2,700 mortgage brokers using this template
web site or suite of online mortgage tools for their online website.



                                       8
<PAGE>


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

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

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

         SOFTWARE FEES, in conjunction with the Company's alliance with ABC
Virtual, are generated from the sale of the ECLoanPro(R) loan origination and
processing system. See "LOAN ORIGINATION SOFTWARE" below under "PRODUCTS AND
SERVICES INITIATIVES FOR 2003."


PRODUCTS AND SERVICES INITIATIVES FOR 2003

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

         MORTGAGE 101.COM. To leverage its growing market share in online
consumer mortgage education, LION is working on improving the technology that
matches consumers and local originators together. The goals of the new
technology will be to improve the satisfaction level of the consumer, improve
the quality of the borrower profile generated for the local originator, and
introduce the new performance/transaction based business model for the Company.
The Company will continue to introduce these changes and improvements throughout
2003 and 2004.

         PRODUCTIVITY TOOLS FOR BROKERS. The Company has developed and continues
to refine an office-based version of its LION Pro product. This product, LION
Pro Corporate, offers productivity software for multi-user larger customers. The
product includes a private database that features a comprehensive searchable
database of each broker company's specific group of lenders. It also features
new loan program search parameters, management tools and an advanced version of
the News Now content. This improved high-value content and market data section
features real time



                                       9
<PAGE>


market information, financial market analysis, economic indicators combined with
the broker company's current business/service directories and calendars.
Fourteen of the nation's fastest growing mortgage companies have selected this
new product in the second quarter. In August 2003, the Company will launch a new
version of LION Pro for the single user that incorporates many of the
advancements and functionality of the LION Pro Corporate product.

         SUBPRIME DECISION ENGINE. Plans are also under way to improve LION's
LoanLink subprime exchange platform. In November 2002, LION signed a strategic
alliance agreement that will introduce a subprime decision engine to its network
of mortgage originators and lenders. When completed, this technology will enable
LION members to submit a file and receive instantly priced, conditional loan
approvals from some of the nation's top subprime lenders. In addition, LION is
planning to offer a private label version of this product engine to the nation's
wholesale and retail lending institutions.

         LOAN LOCKING WITH LENDERS. Through a strategic agreement, LION has also
introduced broker approval, online loan program and product search, real-time
pricing, lock processing and file submission between mortgage brokers and
wholesale lenders. This is mostly for conforming loans, but there is also
subprime loan functionality that is beginning to be used.

         LOAN ORIGINATION SOFTWARE. In October 2002, through a key strategic
alliance with ABC Virtual, LION introduced an advanced loan origination software
(LOS) product known as ECLoanPro(R). This new LOS offers a revolutionary
straight-through processing software system that leverages the Internet and
wireless devices to allow origination teams to easily prospect and process
mortgage loans. With this product, originators are empowered to access and share
files with others anytime, anywhere, without having to re-key data, and without
traditional hardware and software expenses. Through this alliance, LION will be
able to offer a complete "lead to loan" package that will begin to streamline
the entire loan process for its members by bundling the software with its online
advertising, lead generation, website and membership services. This software is
the vehicle that delivers the loan application to the lender and lies at the
heart of driving increased loan production to the lender. The Company has
developed an integration strategy with ABC Virtual which it will execute in the
near future.


SUMMARIZED RESULTS OF OPERATION


<TABLE>
<CAPTION>
                              Three Months Ended June 30,    Six Months Ended June 30,
                              --------------------------    --------------------------
                                  2003           2002           2003           2002
                              -----------    -----------    -----------    -----------

<S>                           <C>            <C>            <C>            <C>
Revenues                      $ 1,830,974    $ 1,606,313    $ 3,617,694    $ 3,117,276
Operating expenses              1,696,254      1,579,406      3,323,334      3,128,904
                              -----------    -----------    -----------    -----------
    Operating income (loss)       134,720         26,907        294,360        (11,628)
Other expense - net                (3,942)      (351,741)        (7,879)      (354,102)
                              -----------    -----------    -----------    -----------
    Net income (loss)         $   130,778    $  (324,834)   $   286,481    $  (365,730)
                              ===========    ===========    ===========    ===========
</TABLE>


         For the second quarter of 2003, revenue was $1.83 million, up 14% from
$1.61 million for the second quarter of 2002. Net income for the quarter was
approximately $131,000 compared to a net loss of approximately $325,000 for the
same quarter in the prior year. The net loss for the second quarter of 2002
included $507,000 of settlement charges and legal fees related to litigation
that was settled in July 2002.



                                       10
<PAGE>


         For the six-month period ended June 30, 2003, revenue increased to
$3.62 million, up 16% from $3.12 million for the same period in the prior year.
Net income for the six-month period in 2003 was approximately $286,000 compared
to a net loss of approximately $366,000 for the same period in the prior year.
The net loss for the prior year included $633,000 of settlement charges and
related legal fees.

         Growth in revenues came primarily from our broker customers who
comprise 86% of all revenues in the second quarter and 87% year to date with the
remainder coming from our lender customers. Most of the growth came from the
Company's marketing segment, primarily lead generation for our broker and lender
customers, besides contributions also coming from the membership, technology and
software segments.

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

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







                                       11
<PAGE>


DETAILED RESULTS OF OPERATIONS

REVENUES


                        Three Months Ended June 30,   Six Months Ended June 30,
                        ---------------------------   ------------------------
                            2003          2002           2003          2002
                         ----------    ----------     ----------    ----------

REVENUES BY CATEGORY:
   Membership fees       $  795,589    $  751,479     $1,559,899    $1,491,793
   Marketing fees           743,252       579,222      1,443,416     1,091,327
   Technology fees          248,469       272,444        520,929       530,958
   Software fees             40,123            --         87,065            --
   Other fees                 3,541         3,168          6,385         3,198
                         ----------    ----------     ----------    ----------

      Total revenues     $1,830,974    $1,606,313     $3,617,694    $3,117,276
                         ==========    ==========     ==========    ==========



SIX MONTHS ENDED JUNE 30, 2003:

         Revenues increased to $3,617,694 from $3,117,276 for the six months
ended June 30, 2003 and 2002, respectively. This represents an increase of
$500,418 or 16%. Total revenues of $3,617,694 for the six months ended June 30,
2003 were comprised of mortgage broker fees of $3,121,858 or 86% and lender fees
of $495,836 or 14%. Total revenues of $3,117,276 for the six months ended June
30, 2002 were comprised of mortgage broker fees of $2,622,389 or 84% and lender
fees of $494,887 or 16%.

         Fees from mortgage brokers increased to $3,121,858 from $2,622,389 for
the six months ended June 30, 2003 and 2002, respectively. This represents an
increase of $499,469 or 19%. The increase was due primarily to growth in
membership fees (LION Pro - Loan Search, Mortgage 101 - originator tools, and
Free Dot Com - template websites) totaling $68,106, marketing fees (lead
generation and advertising) totaling $322,976, technology fees (website
development and hosting) totaling $18,135, software fees (ECLoanPro loan
origination software setup and related fees) totaling $87,065 and other revenues
totaling $3,187.

         Fees from lenders remained basically the same with a small increase to
$495,836 from $494,887 for the six months ended June 30, 2003 and 2002,
respectively. The increase was due to an increase in marketing fees (lead
generation and advertising) totaling $29,112 which were offset by a decrease in
technology fees (website development and hosting) totaling $28,163.

THREE MONTHS ENDED JUNE 30, 2003:

         Revenues increased to $1,830,974 from $1,606,313 for the three months
ended June 30, 2003 and 2002, respectively. This represents an increase of
$224,661 or 14%. Total revenues of $1,830,974 for the three months ended June
30, 2003 were comprised of mortgage broker fees of $1,600,728 or 87% and lender
fees of $230,246 or 13%. Total revenues of $1,606,313 for the three months ended
June 30, 2002 were comprised of mortgage broker fees of $1,347,661 or 84% and
lender fees of $258,652 or 16%.

         Fees from mortgage brokers increased to $1,600,728 from $1,347,661 for
the three months ended June 30, 2003 and 2002, respectively. This represents an
increase of $253,067 or 19%. The increase was due primarily to growth in
membership fees (LION Pro - Loan Search, Mortgage 101 -



                                       12
<PAGE>


originator tools, and Free Dot Com - template websites) totaling $44,110,
marketing fees (lead generation and advertising) totaling $169,685, and software
fees (ECLoanPro loan origination software setup and related fees) totaling
$40,123 and other revenues totaling $373 which were offset by a slight decrease
in technology fees (website development and hosting) totaling $1,224.

         Fees from lenders decreased to $230,246 from $258,652 for the three
months ended June 30, 2003 and 2002, respectively. This represents a decrease of
$28,406 or 11%. The decrease was due primarily to a decrease in marketing fees
(lead generation and advertising) totaling $5,655 and technology fees (website
development and hosting) totaling $22,751.


DIRECT COSTS

SIX MONTHS ENDED JUNE 30, 2003:

         Direct costs are comprised primarily of web site fulfillment,
technology infrastructure support, project and product management, quality
control, and salaries related to the daily updates to rates, fees, and other
loan program information in the mortgage lender database. Direct costs increased
to $653,937 from $455,970 for the six months ended June 30, 2003 and 2002,
respectively. This represents an increase of $197,967 or 43%. Direct costs as a
percentage of revenues increased to 18% from 15% for the six months ended June
30, 2003 and 2002, respectively. The increase in expense is due to (i) database
support functions as LION continues to expand its database of wholesale and
correspondent loan programs, (ii) additional resources to support the
development of broker websites and (iii) expanded telecommunications
infrastructure to support new services and increased volumes through the
Company's consumer and business facing web portals.

THREE MONTHS ENDED JUNE 30, 2003:

         Direct costs increased to $338,381 from $236,620 for the three months
ended June 30, 2003 and 2002, respectively. This represents an increase of
$101,761 or 43%. Direct costs as a percentage of revenues increased to 18% from
15% for the three months ended June 30, 2003 and 2002, respectively. The
increase in expense is due to (i) database support functions as LION continues
to expand its database of wholesale and correspondent loan programs, (ii)
additional resources to support the development of broker websites and (iii)
expanded telecommunications infrastructure to support new services and increased
volumes through the Company's consumer and business facing web portals.


SELLING AND MARKETING

SIX MONTHS ENDED JUNE 30, 2003:

         Selling and marketing expenses are comprised of marketing and
advertising costs, sales salaries and related support costs. Selling and
marketing expenses increased to $1,160,080 from $917,069 for the six months
ended June 30, 2003 and 2002, respectively. This represents an increase of
$243,011 or 26%. These expenses as a percentage of revenues increased to 32%
from 29% for the six month periods ended June 30, 2003 and 2002. The increase is
due to growth in the commissioned broker sales force, customer support costs,
advertising, trade show participation, and telephone costs.




                                       13
<PAGE>


THREE MONTHS ENDED JUNE 30, 2003:

         Selling and marketing expenses increased to $586,612 from $435,045 for
the three months ended June 30, 2003 and 2002, respectively. This represents an
increase of $151,567 or 35%. These expenses as a percentage of revenues
increased to 32% from 27% for the three month periods ended June 30, 2003 and
2002, respectively. The increase is due to growth in the commissioned broker
sales force, customer support costs, advertising, trade show participation, and
telephone costs.


GENERAL AND ADMINISTRATIVE

SIX MONTHS ENDED JUNE 30, 2003:

         General and administrative expenses are comprised of management and
administrative salaries and related costs, legal and audit fees, outside
consulting services, telecommunications expenses, occupancy costs, and other
administrative related expenses. General and administrative expenses decreased
to $1,105,052 from $1,341,982 for the six months ended June 30, 2003 and 2002,
respectively. This represents a decrease of $236,930 or 18%. General and
administrative expenses as a percentage of revenues were 31% and 43% for the six
months ended June 30, 2003 and 2002, respectively. The decrease in costs was due
primarily to an improvement in the bad debt experience and lower legal fees. The
overall decrease was offset by additional telecommunications and other
administrative support expenses.

THREE MONTHS ENDED JUNE 30, 2003:

         General and administrative expenses decreased to $565,399 from $703,345
for the three months ended June 30, 2003 and 2002, respectively. This represents
a decrease of $137,946 or 20%. General and administrative expenses as a
percentage of revenues were 31% and 44% for the three months ended June 30, 2003
and 2002, respectively. The decrease in costs was due primarily to an
improvement in the bad debt experience and lower legal fees. The overall
decrease was offset by additional telecommunications and other administrative
support expenses.


RESEARCH AND DEVELOPMENT

SIX MONTHS ENDED JUNE 30, 2003:

         Research and development expenses are comprised primarily of
engineering salaries and related costs. Research and development expenses
increased to $178,529 from $171,199 for the six months ended June 30, 2003 and
2002, respectively. This represents an increase of $7,330 or 4%. Research and
development expenses as a percentage of revenues remained at 5% for both the six
month periods ended June 30, 2003 and 2002. The Company continues to focus on
various key initiatives including but not limited to the enhancement of core
online services for brokers and the conversion of consumer traffic into
higher-value lead generation.

THREE MONTHS ENDED JUNE 30, 2003:

         Research and development expenses increased to $91,128 from $81,394 for
the three months ended June 30, 2003 and 2002, respectively. This represents an
increase of $9,374 or 12%. Research and development expenses as a percentage of
revenues remained at 5% for both the three month periods ended June 30, 2003 and
2002. The Company increased its focus on various key initiatives



                                       14
<PAGE>


including but not limited to the enhancement of core online services for brokers
and the conversion of consumer traffic into higher-value lead generation.


DEPRECIATION AND AMORTIZATION

SIX MONTHS ENDED JUNE 30, 2003:

         Depreciation and amortization expense decreased to $225,736 from
$242,684 for the six months ended June 30, 2003 and 2002, respectively. This
represents a decrease of $16,948 or 7%. The decrease is due to equipment,
computers and software which became fully depreciated at the beginning of 2003.

THREE MONTHS ENDED JUNE 30, 2003:

         Depreciation and amortization expense decreased to $114,734 from
$123,002 for the three months ended June 30, 2003 and 2002, respectively. This
represents a decrease of $8,268 or 7%. The decrease is due to equipment,
computers and software which became fully depreciated at the beginning of 2003.


INTEREST EXPENSE

SIX MONTHS ENDED JUNE 30, 2003:

         Interest expense increased to $8,978 from $6,078 for the six months
ended June 30, 2003 and 2002, respectively. The increase in interest expense is
primarily due to an increase in capitalized lease financing on computer
hardware, software, and furniture.

THREE MONTHS ENDED JUNE 30, 2003:

         Interest expense increased to $4,932 from $2,876 for the three months
ended June 30, 2003 and 2002, respectively. The increase in interest expense is
primarily due to an increase in capitalized lease financing on computer
hardware, software, and furniture.


OTHER EXPENSE

         Other expense of $350,000 for both the six and three month periods
ended June 30, 2002 is comprised primarily of a $340,000 related to litigation
that was settled in July 2002.





                                       15
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         During the first six months of 2003, the Company primarily funded its
activities through operations and equipment lease financing. At June 30, 2003,
we had approximately $718,000 in cash and cash equivalents.

                                              Six months ended
                                                  June 30,
                                          ------------------------
                                             2003          2002
                                          ---------     ---------
        NET CASH PROVIDED BY (USED IN)
        Operating activities              $ 542,969     $ 366,081
        Investing activities               (206,979)     (278,230)
        Financing activities                (21,914)      (40,288)
                                          ---------     ---------

        Net increase                      $ 314,076     $  47,563
                                          =========     =========

OPERATING ACTIVITIES

         During the first six months of 2003, operating activities provided net
cash of $542,969 compared to $366,081 for the same period in 2002. The net cash
provided by operating activities for 2003 was primarily attributable to (i)
revenue growth, primarily from our mortgage broker customers, (ii) improved bad
debt experience, and (iii) a reduction in legal fees. The increase was offset by
additional (i) database support costs related to increased wholesale and
correspondent loan programs, (ii) telecommunications infrastructure costs to
support new services and increased volumes through the Company's consumer and
business web portals, (iii) resources to support the development of broker
websites and (iv) growth in the commissioned broker sales force and related
customer support costs.

         The net cash provided in operating activities for the six months ended
June 30, 2002 was primarily attributable to (i) revenue growth, primarily from
our mortgage broker customers, (ii) improved bad debt experience, (iii) a
reduction in occupancy costs and other related costs due to moving the company
headquarters to a smaller, more efficient location in Seattle, (iv) a reduction
in telephone costs due to beneficial contract changes and (v) an increase in
other liabilities by $340,000 related to the settlement of litigation in July
2002. The increase was offset by the funding of legal expenses related to the
settled litigation.

INVESTING ACTIVITIES

         During the first six months of 2003, we used net cash of $206,979 for
our investing activities which was primarily for (i) the capitalized portion of
software development costs related to the enhancement of core online services
for brokers and the conversion of consumer traffic into higher-value lead
generation and (ii) upgrades to computer hardware and software.

         During the first six months 2002, we used net cash of $278,230 for our
investing activities which was primarily for (i) the capitalized portion of
software development costs related to the Company's three initiatives;
enhancement of core online services for brokers, the conversion of consumer
traffic into high-value business generation, and new online management tools for
lenders and (ii) upgrades to hardware and software for the data center that
delivers the Company's products and services.




                                       16
<PAGE>


FINANCING ACTIVITIES

         During the first six months of 2003, the net use of cash for financing
activities was $21,914. Cash used was primarily related to notes payable and
capitalized lease obligations on the acquisition of application and database
software, computers, servers, furniture and telecommunications systems upgrades.

         During the first six months 2002, the net use of cash for financing
activities was $40,288. Cash used was primarily related to notes payable on the
acquisition of application and database software for the Company's data center.


2003 PLANS

         The Company is continuing to implement its business plan which includes
enhancing core products and services through internal research and development
projects and strategic alliances. In addition, the Company is in the process of
moving to a blend of its existing subscription based business model combined
with a performance/transaction based model which will allow the Company to take
advantage of cyclical swings in mortgage loan volumes. See additional comments
under the heading "PRODUCTS AND SERVICES INITIATIVES FOR 2003" above.

         To facilitate the operational success of our plans for 2003 and into
2004, the Company expects to make greater investments in marketing, personnel,
and professional services during the last half of the year. This will also
include enhancements to the Company's technological infrastructure that delivers
the Company's products and services. It is management's belief that working
capital from operations along with some capital lease financing will be adequate
to fund the Company's initiatives, integrate with its strategic alliance
partners, and enhance core business.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

REVENUE RECOGNITION

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

GOODWILL

         LION accounts for goodwill in accordance with SFAS 142, GOODWILL AND
OTHER INTANGIBLE ASSETS, which requires that goodwill be tested for impairment
at the reporting unit level on an annual




                                       17
<PAGE>


basis and between annual tests in certain circumstances. Application of the
goodwill impairment test requires judgment, including the identification of
reporting units, assigning assets and liabilities to reporting units, assigning
goodwill to reporting units, and determining the fair value of each reporting
unit. Significant judgments required to estimate the fair value of reporting
units include estimating future cash flows, determining appropriate discount
rates and other assumptions. Changes in these estimates and assumptions could
materially affect the determination of fair value for each reporting unit.

ACCOUNTING FOR INTERNALLY DEVELOPED SOFTWARE AND RESEARCH AND DEVELOPMENT

         LION accounts for research and development costs in accordance with
several accounting pronouncements, including SFAS 2, ACCOUNTING FOR RESEARCH AND
DEVELOPMENT COSTS, and SFAS 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO
BE SOLD, LEASED, OR OTHERWISE MARKETED. SFAS 86 specifies that costs incurred
internally in creating a computer software product should be charged to expense
when incurred as research and development until technological feasibility has
been established for the product. Once technological feasibility is established,
all software costs should be capitalized until the product is available for
internal use by the Company. Judgment is required in determining when the
technological feasibility of a product is established. The Company expenses all
research and development costs when incurred.

INCOME TAXES

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


NEW ACCOUNTING PRONOUNCEMENTS

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


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. You should
carefully consider the risks before you decide to buy shares of our common
stock. If any of the



                                       18
<PAGE>


following risks actually occur, our business, results of operations or financial
condition would likely suffer. In such case, the trading price of our common
stock could decline, and you may lose all or part of the money you paid to buy
our stock.


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

         We are working toward a goal of revenue growth and sustained
profitability. Annual revenues increased to $6.4 million from $6.0 million for
2002 and 2001, respectively. Revenues for the first six months of 2003 were $3.6
million and appear on track to easily exceed the 2002 results. While we did
achieve profitability for 2001 totaling $42,000, we sustained a loss in 2002
totaling $109,000. The Company has once again achieved profitability during the
first and second quarters of 2003 totaling $156,000 and $131,000, respectively.
It's quite possible that profitability during the remainder of 2003 will
decrease due to the Company's planned investments in improving its existing
products and services and efforts to improve its competitive edge over its
competitors. These planned investments are designed to accelerate revenue growth
and improve profitability in 2004 and beyond.

         Although we currently anticipate that 2003 will be a profitable year,
our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets, including uncertainty of revenues, markets, profitability and the need
to raise capital to fund our ongoing operations. We cannot assure you that we
will be successful in addressing these risks or that we can be operated
profitably, which depends on many factors, including the success of our
marketing program, the control of expense levels and the success of our business
activities. Our future operating results will depend on a variety of factors,
including those discussed in the other risk factors set forth below.


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

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

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





                                       19
<PAGE>


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

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

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


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

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




                                       20
<PAGE>


OUR OPERATIONS MAY BE VULNERABLE TO DISRUPTION PROBLEMS.

         We have in place comprehensive data tape backup procedures for our
operational and administrative databases. Our replication software provides a
high level of hardware backup for the database by duplicating our database
across several powerful servers. However, despite protective measures, our
operations could be vulnerable to damage from floods, fire, earthquakes, power
loss, telecommunications failures, break-ins, terrorism, and similar events. In
addition, the majority of our network infrastructure is located in Seattle,
Washington, in a co-location site north of the city and at our corporate
headquarters, an area susceptible to earthquakes. The prospect of such
unscheduled interruptions is quite possible in the foreseeable future, and we
are unable to predict their occurrence, duration or cessation. We do not have
multiple site capacity for all of our services in the event of any such
occurrence.

         Despite the implementation of security measures which are constantly
updated, our systems may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. We could experience interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. Unauthorized access might lead to interruptions,
delays or cessation in service to subscribers or deter potential subscribers.
Although we intend to constantly update industry-standard security measures,
these measures have been circumvented in the past, and there can be no assurance
that measures we adopt will not be circumvented in the future. We do not carry
sufficient business interruption insurance to compensate us for losses that may
occur as a result of any of these events. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to our subscribers, which could have a materially adverse
affect on our business, operating results and financial condition.


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

         The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During 2002, the closing sale prices of our common
stock on the OTC Bulletin Board ranged from $.03 to $.10 per share and from
January to early August 2003 ranged from $.04 to $.33 per share. The sale price
of our common stock closed at $.15 per share on August 7, 2003. Our stock price
may fluctuate in response to a number of events and factors, such as quarterly
variations in operating results, announcements of technological innovations or
new products by us or our competitors, changes in financial estimates and
recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable, and news
reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of these companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our
operating performance.

         The OTC Bulletin Board is an electronic quotation medium used by
subscribing broker dealers to reflect dealer quotations on a real-time basis.
This over-the-counter market provides significantly less liquidity than the
NASDAQ Stock Market. Quotes for stocks included on the OTC Bulletin Board are
not listed in the financial sections of newspapers as are those for The NASDAQ
Stock Market. Shares that are thinly traded on the Bulletin Board often trade
only infrequently and experience a significant spread between the market maker's
bid and ask prices. Therefore, prices for securities traded solely on the OTC
Bulletin Board may be difficult to obtain and holders of common stock may be
unable to resell their securities at or near their original offering price or at
any price. Furthermore,



                                       21
<PAGE>


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, 2002, a substantial majority of the 31,441,978
outstanding shares of common stock and 1,500,000 shares of convertible 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 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, 32,401,978 or 98% were issued on or before December 31, 2001, 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, 2002, there were outstanding stock options to
purchase an aggregate of 5,803,900 shares of common stock at exercise prices
ranging from $.05 to $2.00 per share, and warrants to purchase 1,471,667 shares
of common stock at exercise prices ranging from $.40 to $.78 per share. Employee
options are subject to a restriction whereby option holders have agreed to not
sell or otherwise transfer or dispose of shares of the common stock issued upon
exercise of options in an amount which shall exceed 250,000 shares during any
three-month period. The exercise of these outstanding options and warrants will
dilute the percentage ownership of common stockholders, and any sales in the
public market of shares of common stock underlying such securities may adversely
affect prevailing market prices for the common stock. Furthermore, the terms
upon which we will be able to obtain additional equity capital may be adversely
affected since the holders of these outstanding securities can be expected to
exercise their respective rights therein at a time when we would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in such securities.


ITEM 3.  CONTROLS AND PROCEDURES

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

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



                                       22
<PAGE>


                           PART II - OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         During the second quarter of 2003, common stock totaling 114,000 shares
at prices ranging from $.071 to $.128 per share totaling $9,978 were issued to
two employees in lieu of cash for deferred compensation. The recipients were
accredited, 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.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits to Part II:

31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.

32.1     Certification by Chief Executive Officer and Chief Financial Officer
         pursuant to Section 906 of the Sarbanes - Oxley Act of 2002

(b)      Reports on Form 8-K

         (1) Report on Form 8-K filed on May 1, 2003 under Item 12 (Results of
             Operations and Financial Condition) covering the Company's first
             quarter 2003 financial results.

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



                                   SIGNATURES
                                   ----------

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


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

         Date: August 14, 2003                  By:  /s/ David Stedman
                                                     -----------------
                                                     David Stedman
                                                     President and
                                                     Chief Executive Officer




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<PAGE>


EXHIBIT INDEX


Exhibit No.    Description
-----------    -----------

31.1           Certification of Chief Executive Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

31.2           Certification of Chief Financial Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

32.1           Certification by Chief Executive Officer and Chief Financial
               Officer pursuant to Section 906 of the Sarbanes - Oxley Act of
               2002










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