UNITED STATES SECURITIES AND EXCHANGE COMMISSION ~~Washington, D.C. 20549~~

Washington, D.C. 20549

FORM 10-Q

xþ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2003~~2004


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number: 000-21407

LASON, INC. ~~(Exact name of registrant as specified in its charter)~~

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		38-3214743 (I.R.S. Employer identification number)

1305 Stephenson Highway
Troy, Michigan 48083
(Address of principal executive offices including zip code)

Telephone: (248) 837-7100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 ,or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No x

Indicate by check mark whether the registrant is an accelerated filer (as defined in ~~the~~ Rule 12b-2 of the ~~Sarbanes-Oxley~~Exchange Act ~~of 2002~~). Yes o No x

As of ~~November~~ August 129, ~~2003~~2004, 3288,~~267,656~~966 shares of Common Stock, $.01 par value ~~were~~ were reserved for issuance according to the Company’s Plan of Reorganization ~~and~~ 26and 29,~~777~~756,~~344~~034 shares were issued and outstanding.

TABLE OF CONTENTS

Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)		2
Part I. Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003		3
	Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and December 31, 2002
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)		4
	Condensed Consolidated Statements of Income, Three Months Ended September 30, 2003 and 2002 and Nine Months Ended September 30, 2003 (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)		5
	Condensed Consolidated Statement of Cash Flows, Nine Months Ended September 30, 2003 (Unaudited)
NOTE 1: NATURE OF OPERATIONS		5
	Condensed Consolidated Statement of Shareholders’ Equity, Nine Months Ended September 30, 2003 (Unaudited)
NOTE 2: BASIS OF PRESENTATION		5
	Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 3: NEW ACCOUNTING STANDARDS		5
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
NOTE 4: LONG TERM OBLIGATIONS		6
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
NOTE 5: INCOME TAXES		6
	Item 4. Controls and Procedures
NOTE 6: INCOME (LOSS) PER SHARE		7
Part II. Other Information
NOTE 7: COMMITMENTS AND CONTINGENCIES		7
	Item 1. Legal Proceedings
NOTE 8: PENDING MERGER TRANSACTION		7
	Item 6. Exhibits and Reports on Form 8-K
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		8
	Signatures
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		13
Exhibit Index
ITEM 4: CONTROLS AND PROCEDURES		13
First Amendment to the Credit Agreement
FORWARD-LOOKING STATEMENTS		13
PART II. OTHER INFORMATION		14
ITEM 2: CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES		14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K		14
SIGNATURES		15
CERTIFICATION OF CHIEF EXECUTIVE OFFICER		16
CERTIFICATION OF CHIEF FINANCIAL OFFICER		17
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002		18
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Section 906 Certification
Certification pursuant to Section 1350

TABLE OF CONTENTS

		Page No.
Table of Contents			1
Part I.	Item 1. Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and December 31, 2002		2
	Condensed Consolidated Statements of Income, Three Months Ended September 30, 2003 and 2002 and Nine Months Ended September 30, 2003 (Unaudited)		3
	Condensed Consolidated Statement of Cash Flows, Nine Months Ended September 30, 2003 (Unaudited)		4
	Condensed Consolidated Statement of Shareholders’ Equity, Nine Months Ended September 30, 2003 (Unaudited)		5
	Notes to Condensed Consolidated Financial Statements (Unaudited)		6-9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10-14
	Item 3. Quantitative and Qualitative Disclosures about Market Risk		14
	Item 4. Controls and Procedures		14
Part II.	Other Information
	Item 1. Legal Proceedings		16
	Item 6. Exhibits and Reports on Form 8-K		16
	Signatures		16
Exhibit Index			17
	First Amendment to the Credit Agreement		Exhibit 10.10
	Certification of Chief Executive Officer		Exhibit 31.1
	Certification of Chief Financial Officer		Exhibit 31.2
	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Exhibit 32.1

PART I. ITEM 1. FINANCIAL STATEMENTS

LASON, INC.

CONDENSED CONSOLIDATED ~~BALANCE~~STATEMENTS ~~SHEETS As~~OF ~~of September 30, 2003 and December 31, 2002~~OPERATIONS ~~(In thousands, except for shares)~~

		September 30,		December 31,
		2003		2002
		(Unaudited)
ASSETS
Cash and cash equivalents		$	11,631	$	25,931
Accounts receivable (net of allowance of $2,573 and $4,010, respectively)			31,431		35,962
Supplies			3,279		4,021
Prepaid expenses and other			7,022		5,440
	Total current assets		53,363		71,354
Property and equipment (net of accumulated depreciation of $3,051 and $1,199, respectively)			6,056		6,193
Other			155		—
	Total assets	$	59,574	$	77,547
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	6,911	$	7,095
Accrued expenses			10,876		14,094
Customer deposits			3,156		2,557
Deferred revenue			2,058		2,892
Current portion of long-term obligations			4,402		3,372
	Total current liabilities		27,403		30,010
Long-term obligations			29,021		45,001
	Total liabilities		56,424		75,011
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued and outstanding			—		—
Common stock, $.01 par value; 100,000,000 shares authorized, 3,267,656 shares reserved for issuance and 26,777,344 shares issued and outstanding			300		300
Additional paid-in capital			1,565		1,565
Retained earnings			1,285		671
	Total stockholders’ equity		3,150		2,536
	Total liabilities and stockholders’ equity	$	59,574	$	77,547

(In thousands, except per share amounts, Unaudited)


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2004		2003			2004			2003
Revenues	$	35,123	$	43,206		$	70,300		$	87,222
Cost of revenues		26,166		31,943			53,540			64,285

Gross profit		8,957		11,263			16,760			22,937
Selling, general and administrative expenses		8,171		10,380			16,328			21,648

Income from operations		786		883			432			1,289
Net interest expense		451		759			947			1,515

Income (loss) from operations before income taxes		335		124			(515	)		(226	)
Provision for income taxes		37		89			74			197

Net income (loss)		298		35			(589	)		(423	)

Basic and diluted income (loss) per common share	$	0.01	$	(0.00	)	$	(0.02	)	$	(0.01	)

The accompanying Notes are an integral part of the condensed consolidated financial statements.

LASON, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS~~BALANCE ~~OF INCOME~~SHEETS ~~(In thousands, except per share amounts, Unaudited)~~

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2003		2002		2003
Revenues		$	41,474	$	50,322	$	128,696
Cost of revenues			29,876		35,463		94,161
	Gross profit		11,598		14,859		34,535
Selling, general and administrative expenses			9,718		13,565		31,366
	Income from operations		1,880		1,294		3,169
Net interest expense			758		815		2,268
	Income from operations before income taxes		1,122		479		901
Provision for income taxes			90		—		287
	Net income		1,032		479	$	614
Basic and diluted income per common share			0.03		0.02	$	0.02

As of June 30, 2004 and December 31, 2003
(In thousands, except for shares)


	June 30,		December 31,
	2004		2003
	(Unaudited)
ASSETS
Cash and cash equivalents	$	13,314	$	12,153
Accounts receivable (net of allowance of $1,676 and 2,009, respectively)		26,123		25,972
Supplies		1,954		2,182
Prepaid expenses and other		5,554		7,412

Total current assets		46,945		47,719
Property and equipment (net of accumulated depreciation of $5,187 and $3,770, respectively)		6,673		5,927

Total assets	$	53,618	$	53,646

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	6,672	$	6,076
Accrued expenses		7,711		7,325
Customer deposits		3,457		2,973
Deferred revenue		2,046		1,969
Current portion of long-term obligations		4,437		4,414

Total current liabilities		24,323		22,757
Long-term obligations		26,276		27,281

Total liabilities		50,599		50,038
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.01 par value; 100,000,000 shares authorized, 288,966 shares reserved for issuance and 29,756,034 shares issued and outstanding		300		300
Additional paid-in capital		1,565		1,565
Retained earnings		1,154		1,743

Total stockholders’ equity		3,019		3,608

Total liabilities and stockholders’ equity	$	53,618	$	53,646

The accompanying Notes are an integral part of the condensed consolidated financial statements.

LASON, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CASH FLOWS ~~Nine Months Ended September 30, 2003~~ ~~(In thousands, Unaudited)~~

		Nine Months Ended
		September 30,
		2003
Cash Flows Provided by Operating Activities		$	2,754	1
Cash Flows From Investing Activities:
	Net cash used in investing activities, property and equipment		(1,926	)
Cash Flows From Financing Activities:
	Net cash used in financing activities, repayment of long-term obligations		(15,128	)
	Net decrease in cash and cash equivalents		(14,300	)
Cash and cash equivalents at beginning of period			25,931
Cash and cash equivalents at end of period		$	11,631

Six Months Ended June 30, 2004 and 2003
(In thousands, Unaudited)


	Six Months Ended
	June 30,
	2004			2003
Cash Flows Provided by Operating Activities	$	4,405		$	2,140	¹

Cash Flows From Investing Activities:
Net cash used in investing activities, property and equipment		(2,151	)		(1,296	)

Cash Flows From Financing Activities:
Repayment of long-term obligations, net		(1,084	)		(2,306	)
Repayment on capital lease liabilities and other		(9	)		(66	)

Net cash used in financing activities		(1,093	)		(2,372	)

Net increase (decrease) in cash and cash equivalents		1,161			(1,528	)
Cash and cash equivalents at beginning of period		12,153			25,931

Cash and cash equivalents at end of period	$	13,314		$	24,403

The accompanying Notes are an integral part of the condensed consolidated financial statements.

¹ During the first six months of 2003, approximately $0.6 million of cash used in operating activities related primarily to payments made with respect to the Predecessor’s bankruptcy proceedings for professional and administrative fees, cure costs and other administrative type claims which were accrued as of June 30, 2002.

LASON, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY Nine Months Ended September 30, 2003 (In thousands, except for shares, Unaudited)

	Common Stock				Additional
					Paid-in		Retained
	Shares		Amount		Capital		Earnings		Total
Balances at January 1, 2003		30,045,000	$	300	$	1,565	$	671	$	2,536
Net income		—		—		—		614		614
Balances at September 30, 2003		30,045,000	$	300	$	1,565	$	1,285	$	3,150

The accompanying Notes are an integral part of the condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: NATURE OF OPERATIONS

Lason, Inc., a Delaware corporation, ~~together~~is ~~with~~a holding company which through its operating subsidiaries, Lason Systems, Inc. and Lason International, Inc., both Delaware companies (“Lason” or the “Company”), is a leading provider of integrated information outsourcing solutions through in excess of 60 55 locations and facilities management sites in 2622 states, India, China (service relationship), Mexico and Canada. The Company serves over 53,500 active customers primarily in the healthcare, financial services, government and manufacturing and industrial vertical markets. The Company’s core competency resides in its ability to enhance the performance of its customers’ business by outsourcing their non-core business processes and back office operations. The Company’s primary services are data, document and image capture, web-based document repository services via its Document DNA™ (digital network access) product, analog services, on-site facilities management, print and mail type services, database management and other professional services. The Company’s service capabilities across a broad range of data and media types allows its customers to fulfill their business process and information outsourcing needs with a single vendor regardless of geography.

NOTE 2: BASIS OF PRESENTATION

InThe ~~the~~unaudited ~~opinion~~condensed ofconsolidated ~~the~~financial ~~Company,~~statements ~~the~~of ~~accompanying~~Lason ~~unaudited condensed~~have ~~consolidated~~been ~~financial~~prepared ~~statements~~in ~~include~~accordance ~~all~~with ~~adjustments~~accounting principles, ofgenerally aaccepted ~~normal~~in ~~recurring~~United ~~nature,~~States ~~necessary~~of toAmerica ~~present~~for ~~fairly~~interim ~~its~~ financial ~~position~~information asand ofthe instructions ~~September 30,~~to ~~2003~~Form 10-Q and ~~the~~Rule 10-01 ~~results~~ of ~~operations~~Regulation S-X. ~~for~~Accordingly, ~~the~~they ~~three~~do ~~months ended~~not ~~September 30,~~include ~~2003~~all ~~and~~of ~~2002~~the information and ~~nine~~footnotes ~~months~~required ~~ended~~by ~~September 30,~~accounting ~~2003. Results~~principles ofgenerally ~~operations~~accepted ~~for~~in ~~interim~~the ~~periods~~United ~~may~~States ~~not~~of beAmerica ~~indicative~~for ofcomplete ~~future results~~financial statements.

~~The~~In ~~accompanying~~the ~~unaudited~~opinion ~~condensed~~of ~~consolidated~~the Company, the accompanying financial statements of ~~Lason~~include ~~have~~all ~~been~~adjustments, ~~prepared~~of ina ~~conformity~~normal, ~~with~~recurring ~~generally~~nature, ~~accepted~~necessary ~~accounting~~to present ~~principles~~fairly ~~for~~its ~~interim~~ financial ~~information,~~position ~~but~~as ~~not~~of inJune 30, ~~conformity~~2004 ~~with~~and the ~~instructions~~ results of operations for ~~Form~~the ~~10-Q~~three and ~~Rule 10-01~~six ofmonths ~~Regulation~~ended June ~~S-X~~30, as2004 ~~the~~and ~~Company~~2003. ~~has~~Results of ~~not~~operations ~~presented~~for ~~comparable~~interim ~~information~~periods ~~for~~may ~~the~~not ~~nine~~be ~~month~~indicative ~~period~~of ~~ended~~future ~~September 30, 2002~~results.

AsFor ~~previously~~further ~~disclosed~~information, inrefer ~~Lason’s~~to ~~Form 8-K filed on March 26, 2001,~~ the ~~Company~~ ~~informed~~consolidated ~~the~~financial ~~U.S. Securities~~ statements and ~~Exchange~~notes ~~Commission~~thereto ~~(“SEC”)~~included ~~and~~in ~~U.S. Attorney for~~ the ~~Eastern~~Company’s ~~District~~Annual ofReport ~~Michigan~~on ~~(“U.S.~~Form ~~Attorney”)~~10-K offor ~~accounting irregularities and system deficiencies that affected certain portions of~~ the ~~Predecessor’s~~year ~~financial~~ended ~~statements. On May~~December 1331, 2003, ~~the~~filed ~~Company announced its continued cooperation~~ with the ~~SEC~~Securities and ~~U.S.~~Exchange ~~Attorney with respect to their~~Commission ~~investigations regarding accounting irregularities potentially affecting certain portions of the Predecessor’s financial statements from 1997-1999. Based~~ on ~~the investigations~~March 29, ~~the SEC and U~~2004.~~S. Attorney respectively announced~~ ~~the filing of civil and criminal charges against former employees of Lason.~~ ~~These actions were brought solely against and relate to the former employees~~ ~~and are not against the Company itself. The SEC and U.S. Attorney are not bringing civil or criminal charges against the Company.~~

AsThe aaccompanying ~~result~~unaudited ofcondensed ~~adopting~~consolidated ~~fresh~~financial ~~start~~statements ~~reporting on July 1, 2002, the Company~~of ~~believes~~Lason ~~the ultimate effects, if any, from the alleged accounting irregularities during 1997 — 1999, as discussed above,~~ have been ~~eliminated~~prepared in ~~the~~ ~~financial~~conformity ~~statements~~with asgenerally ofaccepted ~~and for the three months ended September 30,~~accounting ~~2003~~principles ~~and 2002 and~~ for ~~the~~interim ~~nine month period ended September 30, 2003. For further information, refer to the consolidated~~ financial ~~statements and notes~~information ~~thereto included in the Company’s Annual Report on Form 10-K for the six month~~ ~~period ended December 31, 2002 filed with the Securities and Exchange Commission on March 31, 2003.~~

NOTE 3: NEW ACCOUNTING STANDARDS

In ~~June~~January ~~2002~~2003, the Financial Accounting Standards Board issued FASB Interpretation 46 (“~~FASB~~FIN 46”), ~~issued~~Consolidation of Variable Interest Entities. FIN ~~Statements~~46 clarifies the applications of Accounting Research Bulletin 51, Consolidated Financial ~~Accounting~~Statements, ~~Standards~~for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest (“~~SFAS~~variable interest entities”). NoVariable interest entities within the scope of FIN 46 will be required to be consolidated by their primary beneficiary. The primary beneficiary of a variable interest entity is determined to be the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected returns, or both. In December ~~146~~2003, “the Financial Accounting ~~for~~Standards ~~Costs~~Board ~~Associated~~issued ~~with~~FASB ~~Exit~~Interpretation or46(R), ~~Disposal~~Consolidation ~~Activities~~of Variable Interest Entities.” ~~SFAS~~FIN No46(R) replaces FIN 46 and clarifies the accounting for interests in variable interest entities. ~~146~~ ~~applies~~FIN 46(R) should be applied to entities ~~costs~~considered ~~associated~~to ~~with~~be anSpecial ~~exit~~Purpose ~~activity~~Entities (~~including~~“SPE’s”) ano ~~restructuring)~~later orthan ~~with~~the aend of ~~disposal~~the first reporting period after December 15, 2003 and by the end of ~~long-lived~~the ~~assets.~~first reporting ~~Under~~period ~~SFAS~~that ~~No.~~ends after March ~~146~~15, a2004 ~~company~~to ~~will~~entities ~~record~~other athan SPE’s. ~~liability~~The ~~for~~adoption aof ~~cost~~this ~~associated~~standard ~~with~~did annot ~~exit~~have oran ~~disposal~~impact ~~activity~~on ~~when~~the ~~that~~Company’s financial ~~liability~~position isor ~~incurred~~results ~~and~~of ~~can be~~operations.

~~measured~~ In atMay 2003, ~~fair~~the ~~value.~~Financial AAccounting ~~liability~~Standards isBoard (“FASB”) issued ~~incurred~~Statement ~~when~~of anFinancial ~~event~~Accounting ~~obligates~~Standards ~~the~~(“SFAS”) ~~entity~~No. 150, to“Accounting ~~transfer~~for Certain orFinancial ~~use~~Instruments ~~assets.~~with ~~Under current~~Characteristics ~~accounting~~of ~~guidance~~Both Liabilities and Equity,” awhich ~~liability~~provides ~~can~~standards befor ~~recorded~~how ~~when~~an ~~management~~issuer ~~has~~classifies ~~committed~~and measures tocertain anfinancial ~~exit~~instruments ~~plan.~~with ~~The~~characteristics ~~requirements~~of ~~under~~both ~~SFAS~~liabilities Noand equity. ~~146~~ ~~are~~The statement is effective ~~prospectively~~ for ~~exit~~financial instruments entered into or modified after May 31, 2003 and ~~disposal~~for ~~activities~~pre-existing ~~initiated~~instruments ~~subsequent~~as toof ~~December~~the 31beginning of the first interim period beginning after June 15, ~~2002~~2003. ~~Restatement~~In of2003, the ~~previously~~FASB ~~issued~~elected ~~financial~~to ~~statements~~indefinitely isdefer ~~not permitted.~~the ~~The~~effective ~~Company~~date ~~adopted~~for certain provisions of SFAS No. ~~146~~150 ~~during~~relating ~~the~~to ~~first~~investments ~~quarter~~in oflimited-life ~~fiscal~~entities. ~~year~~The ~~2003~~adoption ~~and~~of itthe ~~did~~provisions of SFAS No. 150 not deferred by the FASB did not have a material ~~impact~~effect on ~~our~~the Company’s financial ~~position~~condition, results of operations, or cash flows. The Company has not completed its evaluation of the ~~results~~effect of ~~operations~~those provisions for which the effective dates have been deferred.

NOTE 4: LONG TERM OBLIGATIONS

In September of 2003, the Company amended its Credit Agreement with the holders of its Senior Notes via the First Amendment to the Credit Agreement (the “Amendment”). Under the terms of the Amendment, the holders of the Company’s Senior Notes agreed to bifurcate such notes into a new $10 million revolving credit facility and a $32 million term loan obligation. The Amendment leaves unchanged the maturity date of the Credit Agreement, as applicable to the term loan. The revolving credit facility matures on December 31, 2005. These obligations are collateralized by a lien on all property of the Company, ~~guaranties~~guarantees of certain of the Company’s subsidiaries, as well as pledges of the capital stock of certain subsidiaries. Borrowings under the revolving credit facility and the term loan obligation bear interest at a rate of prime (floating) plus 2.5 percent (6.~~50% and 6.~~75% at ~~September~~June 30, ~~2003 and December 31, 2002, respectively~~2004). The Credit Agreement and Amendment contain restrictions on acquisitions, disposition of assets, and the incurrence of other liabilities and contain certain financial covenants related to minimum EBITDA, liquidity, ratio of earnings to fixed charges and certain restrictions on capital expenditures. At ~~September~~June 30, ~~2003~~2004, the Company had $46 million outstanding on its $10 million revolving credit facility. In addition to the quarterly principal payments, the Credit Agreement calls for principal reductions from net cash proceeds received from the sale or disposition of assets.

~~The~~Aggregate ~~Company’s~~maturities ~~long-term~~of ~~obligations~~the ~~also~~Senior ~~included~~Notes aand ~~unsecured, non-interest~~revolving ~~bearing~~credit ~~Junior~~facility ~~Note~~for the ~~issued~~four toyears ~~certain~~subsequent ~~key~~to ~~managers~~June 30, ~~(who~~2004 ~~were~~are ~~also ex-owners~~$4,000, of$10,000, ~~businesses~~$4,000, ~~acquired by Lason)~~and $10,864.

The Company’s long-term ~~loan~~obligations ~~calls~~also ~~for~~include ~~quarterly~~a ~~principal~~unsecured, ~~payments~~non-interest bearing ~~with~~Junior ~~final~~Note ~~maturity at~~issued ~~June 30,~~to ~~2007,~~certain askey ~~follows~~managers (inwho ~~thousands~~were also ex-owners of businesses acquired by Lason):.

2003	$	4,000
2004		4,000
2005		4,000
2006		4,000
2007		11,109
Total	$	27,109

The Junior Note calls for semi-annual principal payments with final maturity at December 31, 2006. Aggregate maturities for the Junior subsequent to June 30, 2004 are as follows (in thousands):

In addition to the quarterly principal payments, the Credit Agreement calls for principal reductions from net cash proceeds received from the sale or disposition of assets.


2004		624
2005		624
2006		933

Total	$	2,181
Unamortized Discount at June 30, 2004		(332	)

Junior Note Balance	$	1,849

The Junior Note ~~calls~~Indenture ~~for~~provides ~~semi-annual~~that the principal payments ~~with final~~outlined ~~maturity~~above atwill ~~December 31~~be made, ~~2006~~subject to the express condition that certain performance tests are satisfied. Based upon the Company’s current information, asit ~~follows~~believes that ~~(in~~the ~~thousands):~~performance tests will be satisfied and the payments will be made.

2003		$	312
2004			624
2005			624
2006			1,246
Total		$	2,806
	Unamortized Discount at September 30, 2003		(491	)
	Junior Note Balance	$	2,415

NOTE 5: INCOME TAXES

~~The~~In ~~Junior~~connection ~~Note~~with ~~Indenture~~the ~~provides~~Company’s ~~that~~past plan of reorganization under Chapter 11 of the ~~principal~~United ~~payments~~States ~~outlined~~Bankruptcy Code, a gain on cancellation of indebtedness ~~above~~was realized by the Company’s predecessor in the amount of approximately $236.0 million. The ultimate gain realized by the Company will bedepend ~~made,~~upon ~~subject~~the tofinal resolution of claims in the ~~express~~Bankruptcy ~~condition~~Court and could vary from that ~~certain~~currently realized. ~~performance~~This gain was not taxable since the gain resulted from ~~tests~~reorganization ~~are~~under ~~satisfied~~the Bankruptcy Code. ~~Based~~However, ~~upon~~at the ~~Company’s~~beginning ~~current~~of ~~information~~its 2003 taxable year, itthe ~~believes~~Company reduced certain attributes including net ~~that~~operating ~~the~~loss ~~performance~~carry ~~tests~~forwards ~~will~~(“NOLs”), becertain ~~satisfied~~tax credits and ~~payments~~tax ~~will~~basis bein assets ~~made.~~in an amount equal to such gain on

~~NOTE~~extinguishment. 5:At ~~INTEGRATION~~June 30, ~~ACTIVITIES~~2004, the Company estimates that its NOLs aggregated approximately $23.6 million, which will expire in 2022.

The Company’s ~~has~~management, ~~undertaken~~in ~~certain~~assessing ~~integration~~the ~~and~~realizability ~~restructuring activities~~of todeferred ~~realign organizationally~~tax assets, ~~eliminate~~must ~~excess~~consider ~~capacity~~whether ~~and streamline~~it ~~its~~is ~~operations~~more ~~and~~likely ~~further~~than ~~enhance~~not ~~its~~that ~~off-shore~~part ~~service capabilities.~~or Asall ~~such,~~ of the ~~Company~~deferred ~~has~~tax ~~been~~assets ~~and~~may isnot inbe ~~the~~realized. ~~process~~This ofassessment ~~closing~~includes ~~certain~~consideration ~~operating~~for ~~locations.~~the Asscheduled reversal of ~~September 30~~temporary taxable difference, projected ~~2003~~future ~~and~~taxable ~~December 31~~income, ~~2002, the~~and ~~Company~~tax ~~has~~planning ~~accrued $0~~strategies.~~2 million~~ ~~and~~At ~~$0.5~~June ~~million~~30, ~~respectively, related to~~2004 ~~its~~and ~~commitment to these activities. As of September~~December 3031, 2003, ~~the~~due ~~Company~~to ~~has substantially~~the ~~completed~~high ~~these~~degree ~~activities.~~of ~~The~~uncertainty ~~Company’s~~surrounding ~~remaining obligations~~their ~~related~~realizability, toa ~~these~~full ~~activities~~valuation ~~will~~allowance behas ~~paid~~been ~~through~~established ~~the~~on ~~second~~all ~~quarter~~ of ~~2004~~the deferred taxes.

~~During~~NOTE ~~the~~6: ~~second~~INCOME quarter of 2003, the Company announced and began the implementation of a plan to strategically re-brand its image and engage in marketing activities consistent with its business process outsourcing offerings. In connection therewith, the Company strategically restructured its sales force and sales activities. The Company recorded a special charge of $0.5(LOSS) ~~million~~PER ~~during the second quarter, which consisted principally of~~SHARE ~~severance costs related to its sales force restructuring. As of September 30,~~ ~~2003, the Company had accrued $0.1 million related to its remaining obligations~~ ~~for this activity, which is expected to be paid throughout the remainder of 2003.~~

~~NOTE~~ Basic 6:income ~~INCOME~~(loss) ~~TAXES~~per share has been computed in accordance with SFAS No. 128, “Earnings per Share.” The weighted average common shares used for the three and six month periods ending June 30, 2004 and 2003 were 30,045,000. This includes shares reserved for distribution under the Company’s Plan, in addition to shares issued and outstanding as of June 30, 2004 and June 30, 2003, respectively.

InNOTE ~~connection~~7: ~~with~~COMMITMENTS ~~the~~AND ~~Company’s previous Plan of Reorganization, a gain~~CONTINGENCIES ~~on cancellation of indebtedness was realized in the amount of approximately~~ ~~$272.3 million. The ultimate gain realized by the Company will depend upon the~~ final resolution of claims in the Bankruptcy Court and could vary from that currently realized. This gain was not taxable since the gain resulted from reorganization under the Bankruptcy Code. On January 1, 2003, the Company was required to reduce all of the net operating loss carry forwards (“NOLs”) and certain tax credits and tax basis in assets in an amount equal to such gain on extinguishment.

The ~~reorganization~~Company ofis ~~the~~a ~~Company~~defendant onin an adversary proceeding in the ~~Effective~~Bankruptcy Court ~~Date~~for the District of Delaware in Wilmington (the ~~Plan,~~“Court”). ~~July~~The plaintiff is Ark 2000-1 CLO, ~~2002~~Limited (“Ark”), ~~constituted~~one anof ~~ownership~~the ~~change~~Company’s ~~under~~senior ~~Section 382~~secured lenders. The nature of the ~~Internal~~dispute is over certain provisions in the Company’s ~~Revenue~~Pre-petition ~~Code.~~Credit ~~Consequently~~Agreements and Plan, which call for the ~~use~~sharing of ~~any~~net proceeds offrom certain designated asset sales between the ~~NOLs~~Company and ~~tax~~the ~~credits~~senior ~~generated~~secured ~~prior~~lenders. The net proceeds in dispute are approximately $1.7 million. On October 15, 2003, the Court ruled in favor of the Company, denying the plaintiff’s motion and any claim by the plaintiffs to the ~~ownership~~proceeds. ~~change~~On October 24, ~~which~~2003, ~~are~~Ark ~~not~~filed ~~reduced~~a ~~pursuant~~motion before the Court asking it to reconsider its ruling. The Company believes the plaintiffs’ arguments are without merit and ~~provisions~~it ~~discussed~~is ~~above~~vigorously defending itself in this matter. An unfavorable outcome or settlement, ~~will~~if beany, ~~subject~~in tothis anmatter ~~annual~~may ~~limitation~~result in a charge to current earnings.

At September 30, 2003, the Company recorded a provision for income taxes of $0.3 million for foreign and state income taxes.

The Company’s management, in assessing the realizability of deferred tax assets, must consider whether it is more likely than not that part or all of the deferred tax assets may not be realized. This assessment includes consideration for the scheduled reversal of temporary taxable differences, projected future taxable income, and tax planning strategies. At September 30, 2003, due to the high degree of uncertainty surrounding their realizability, a full valuation allowance has been established on all of the deferred tax assets.

NOTE 7: EARNINGS PER SHARE

Basic earnings per share have been computed in accordance with SFAS No. 128, “Earnings per Share.” The weighted average common shares used for the three and nine month periods ending September 30, 2003 were 30,045,000 and 30,030,000 for the three month period ended September 30, 2002. This includes shares reserved for distribution under the Company’s Plan, in addition to shares issued and outstanding as of September 30, 2002 and September 30, 2003.

NOTE 8: COMMITMENTS AND CONTINGENCIES

The Company is a defendant in an adversary proceeding in the Bankruptcy Court for the District of Delaware in

Wilmington (the “Court”). The plaintiff is Ark 2000-1 CLO, Limited (“Ark”), one of the Company’s senior note holders. The nature of the dispute is over certain provisions in the Company’s Pre-petition Credit Agreements and Plan, which call for the sharing of net proceeds from certain designated asset sales between the Company and the senior note holders. The net proceeds in dispute are approximately $1.7 million, of which approximately $1.5 million is currently being held in escrow by the Pre-petition Agent. On October 15, 2003, the Court ruled in favor of the Company, denying the plaintiffs’ motion and any claim by the plaintiff’s to the escrowed proceeds. On October 24, 2003 Ark filed a motion before the Court, asking it to reconsider its ruling. The Company believes the plaintiffs’ arguments are without merit and it is vigorously defending itself in this matter. Any unfavorable outcome or settlement, if any, in this matter would result in a non-cash charge to current earnings.

In addition to the foregoing, the Company is subject to lawsuits and pending or asserted claims with respect to matters arising out of the ordinary course of business. Although the Company cannot predict the outcomes of these legal proceedings, it is not currently aware of any claim or action, in the aggregate, that would have a material adverse effect on its financial position, results of operations or liquidity.

9NOTE 8: PENDING MERGER TRANSACTION

On May 21, 2004 the Company entered into a merger agreement with a affiliate of Charterhouse Group, Inc. (“Charterhouse”), under which Charterhouse will acquire the Company in a transaction valued at approximately $30 million. Under the pending merger agreement, Charterhouse would acquire 100% of the common stock of the Company for $0.125 per share (approximately 30,045,000 shares) and replace the Company’s current senior indebtedness with substantially less indebtedness. The Company’s resulting capital structure would include significantly more equity. Existing management is expected to continue operating the Company after the transaction closes and will have an ownership interest in the Charterhouse affiliate. Completion of the transaction is subject to certain closing conditions, including the approval of holders of a majority of the Company’s outstanding common stock.

The Company mailed its definitive proxy statement regarding the pending transaction on July 16, 2004 and has scheduled a shareholder meeting for August 11, 2004, seeking approval of the transaction. If the transaction is approved by the Company’s shareholders and subsequently completed, the Company will have less than 300 shareholders and will seek to de-register its common stock and cease to be a public company. Should the pending transaction be approved, it is expected to close by mid August 2004.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Lason is a leading provider of integrated information outsourcing solutions through in excess of 6055 locations and facilities management sites in 2622 states, India, China (service relationship), Mexico and Canada. The Company serves over 53,500 active customers primarily in the healthcare, financial services, government and manufacturing and industrial vertical markets. The Company’s core competency resides in its ability to enhance the performance of its customers’ business by outsourcing their non-core business processes and back office operations. The Company’s primary services are data, document and image capture, web-based document repository services via its Document DNA™ (digital network access) product, analog services, on-site facilities management, print and mail type services, database management and other professional services. The Company’s service capabilities across a broad range of data and media types allows its customers to fulfill their business process and information outsourcing needs with a single vendor regardless of geography. Lason’s capability to capture, manage and output information includes both traditional and digital services that support customer migration to new technologies including internal-based applications.

The Company’s strategy is to be a value-added business partner to its customers by leveraging its integrated business process outsourcing (“BPO”) capabilities across a broad geographical spectrum to continually assist them in reducing their information management and back office costs and minimize their on-going technology and capital requirements. Key components to this strategy are the Company’s strategically located off-shore capabilities and solution offerings, such as Document DNA™ (its web-based document repository), which allow it to fulfill customers’ business process outsourcing needs cost effectively twenty-four hours a day, seven days a week.

~~Fresh~~Results ~~Start~~of ~~Reporting~~Operations—Three ~~and~~Months ~~Factors~~Ended ~~that~~June 30, ~~Affect~~2004 ~~Comparability~~Compared ofwith ~~Financial~~Three Months ~~Information~~Ended June 30, 2003

As Consolidated ~~previously~~net ~~disclosed~~revenues inwere ~~prior~~$35.1 million ~~SEC~~for ~~filings,~~ the ~~Debtors~~three ~~emerged~~months ~~from Chapter~~ended 11June 30, ~~bankruptcy~~2004 ~~proceedings~~as oncompared ~~July~~to $43.2 1,million ~~2002,~~for ~~which~~the ~~for~~three ~~financial~~months ~~reporting purposes~~ended June 30, 2003. ~~the~~The ~~Company~~decline ~~deemed~~in ~~the~~revenues ~~Effective~~was ~~Date~~a result of ~~the~~several ~~Plan.~~factors, ~~Fresh~~including ~~start~~an ~~reporting~~effort ~~has~~to ~~been~~focus ~~implemented~~on asmore ofcomplex ~~the~~BPO ~~Effective~~and ~~Date~~integrated ~~and~~solution ~~accordingly~~sales, atwhich ~~such~~require ~~date~~a longer sales cycle, ~~all~~a ~~assets~~cyclical ~~and~~decline ~~liabilities~~in ofvolumes ~~the~~within ~~Debtors~~certain applications, ~~were~~such ~~restated~~as mortgage loan processing, due to ~~their~~external macro-economic ~~respective~~factors, ~~fair~~continued ~~values.~~decline ~~For~~in ~~financial~~the ~~reporting~~demand ~~purposes~~for ~~references~~the toCompany’s analog services, and ~~“Predecessor”~~due ~~refer~~to customers that elected to ~~“Old~~pursue ~~Lason”~~strategic onre-sourcing ~~and~~alternatives following ~~prior~~the toCompany’s ~~June~~emergence from its previous Chapter ~~30,~~11 ~~2002~~proceedings. ~~References~~ toThe ~~“Successor”~~demand ~~refer~~for tothe ~~“New~~Company’s ~~Lason”~~BPO onservices ~~and~~remains ~~after~~high ~~July 1,~~and ~~2002,~~it ~~after~~has ~~giving~~developed a ~~effect~~substantial pipeline of opportunities as compared to the ~~implementation~~second quarter of 2003. ~~fresh~~The ~~start~~Company’s ~~reporting.~~revenues ~~Successor~~are ~~financial statements~~generally ~~are~~based ~~therefore~~upon ~~not~~transaction ~~comparable~~volumes of information and data sent to ~~Predecessor~~it ~~financial~~by ~~statements~~third parties. For the most part, these ~~The~~volumes ~~accompanying~~are ~~unaudited~~not ~~condensed~~contractually ~~consolidated~~required ~~financial~~or ~~statements~~guaranteed. ofIn ~~Lason~~addition, the mix of ~~have~~the ~~been~~Company’s ~~prepared~~revenue inis ~~conformity~~dependent ~~with~~upon ~~generally~~the ~~accepted~~application ~~accounting~~or ~~principles~~service being ~~for~~provided ~~interim~~and ~~financial~~can ~~information,~~vary ~~but~~between ~~not~~project inand ~~conformity~~recurring ~~with~~type ~~the~~work. ~~instructions~~In many cases, the work being performed by the Company for ~~Form~~an ~~10-Q~~individual ~~and~~customer ~~Rule 10-01~~contains elements of ~~Regulation S~~both project and recurring type work. Project work represents one-X,time asservices. ~~the~~Recurring ~~Company~~work ~~has~~represents ~~not~~services being provided to a ~~presented~~customer ~~comparable~~on ~~information~~a ~~for~~consistent basis that are generally under contract or have been regularly provided by the ~~nine~~Company ~~month~~to ~~period~~the ~~ending~~customer ~~September 30,~~through a long standing ~~2002~~relationship.

AsGross ~~previously~~profit ~~disclosed,~~was into ~~Old~~$9.0 million ~~Lason’s~~for ~~Form~~the ~~8-K~~three ~~filed~~months onended ~~March~~June 2630, ~~2001,~~2004 ~~the~~as ~~Company~~compared ~~informed~~to ~~the U~~$11.S.3 million ~~Securities and Exchange Commission (“SEC”) and U.S. Attorney~~ for the ~~Eastern~~three ~~District~~months ofended ~~Michigan~~June 30, ~~(“U~~2003.S. ~~Attorney”) of~~Gross ~~accounting~~profit ~~irregularities~~as ~~and~~a ~~system~~percentage ~~deficiencies that affected certain portions~~ of ~~the~~net ~~Predecessor’s~~revenues ~~financial~~was ~~statements~~25. ~~On May~~6 ~~13,~~percent ~~2003,~~for the three months ~~Company~~ended ~~announced~~June 30, ~~its~~2004 ~~continued~~versus ~~cooperation~~26.2 percent ~~with~~for the ~~SEC~~three ~~and~~months ~~U.S.~~ended ~~Attorney with~~June 30, ~~respect~~2003. toThe ~~their~~decrease ~~investigations~~in ~~regarding~~gross ~~accounting~~profit ~~irregularities~~and ~~potentially affecting~~gross ~~certain~~margin ~~portions~~percentage ofis ~~the Predecessor’s financial statements from~~due ~~1997-1999.~~principally ~~Based~~to onlower ~~the~~revenue ~~investigations,~~levels ~~the SEC~~ and ~~U.S. Attorney respectively announced~~ the ~~filing~~mix of ~~civil~~applications ~~and~~or ~~criminal~~services provided. ~~charges~~The ~~against~~Company’s ~~former~~cost ~~employees~~ of ~~Old~~ ~~Lason.~~revenues ~~These~~consist ~~actions~~primarily ~~were~~of ~~brought~~wages ~~solely against~~ and benefits ~~relate~~ to ~~the~~its ~~former~~ employees, ~~and are not against~~ the ~~Company~~cost ~~itself.~~of ~~The~~materials ~~SEC~~and equipment and ~~U.S.~~other ~~Attorney~~items ~~are~~related ~~not~~to ~~bringing~~directly ~~civil~~providing orservices ~~criminal~~and ~~charges~~products ~~against~~to ~~the~~its ~~Company~~customers.

AsSelling, ageneral ~~result~~and ofadministrative ~~adopting~~expenses ~~fresh~~decreased ~~start~~$2.2 million ~~reporting,~~to $8.2 million ~~the~~or ~~Company~~23.4 percent ~~believes~~of net revenues for the ~~ultimate~~ ~~effects,~~three ifmonths ~~any~~ended June 30, 2004 from ~~the~~$10.4 million ~~alleged~~or ~~accounting~~24.1 percent ~~irregularities~~of ~~during 1997~~net -revenues ~~1999,~~for asthe ~~discussed~~three ~~above~~months ended June 30, ~~have~~2003. ~~been~~The ~~eliminated~~reduction inof $2.2 million is due to the ~~financial~~Company’s ~~statements~~ongoing asintegration ofand restructuring activities to realign organizationally, eliminate excess capacity and ~~for~~streamline ~~the~~its ~~three~~operations and ~~nine~~further ~~month~~enhance ~~periods~~its off-shore ~~ended~~service ~~September 30~~capabilities, ~~2003~~ ~~and~~consistent ~~the~~with ~~three~~its ~~month~~strategic ~~period~~focus ~~ended~~on ~~September 30,~~more complex ~~2002~~Business Process Outsourcing and integrated solution sales.

Included in the results of operations for the three months ended June 30, 2004 and 2003 was approximately $0.7 and $0.6 million, respectively, in depreciation expense related to property and equipment.

Net interest expense was $0.5 million and $0.8 million for the three months ended June 30, 2004 and three months ended June 30, 2003, respectively, consisting principally of interest on the Company’s long term obligations which decreased significantly.

The provision for income taxes was approximately $0.04 million and $0.1 million for the three months ended June 30, 2004 and 2003, respectively. The provision is primarily related to foreign and state income taxes.

Results of Operations—Six Months Ended June 30, 2004 Compared with Six Months Ended June 30, 2003

Consolidated net revenues were $70.3 million for the six months ended June 30, 2004 as compared to $87.2 million for the six months ended June 30, 2003. The decline in revenues was a result of several factors, including an effort to focus on more complex Business Process Outsourcing and integrated solution sales, which require a longer sales cycle, a cyclical decline in volumes within certain applications, such as mortgage loan processing, due to external macro-economic factors, continued decline in the demand for the Company’s analog services, and due to customers that elected to pursue strategic re-sourcing alternatives following the Company’s emergence from its previous Chapter 11 proceedings. The demand for the Company’s BPO services remains high and it has developed a substantial pipeline of opportunities as compared to the second quarter of 2003. The Company’s revenues are generally based upon transaction volumes of information and data sent to it by third parties. For the most part, these volumes are not contractually required or guaranteed. In addition, the mix of the Company’s revenue is dependent upon the application or service being provided and can vary between project and recurring type work. In many cases, the work being performed by the Company for an individual customer contains elements of both project and recurring type work. Project work represents one-time services. Recurring work represents services being provided to a customer on a consistent basis that are generally under contract or have been regularly provided by the Company to the customer through a long standing relationship.

Gross profit was to $16.8 million for the six months ended June 30, 2004 as compared to $22.9 million for the six months ended June 30, 2003. Gross profit as a percentage of net revenues was 23.9 percent for the six months ended June 30, 2004 versus 26.3 percent for the six months ended June 30, 2003. The decrease in gross profit and gross margin percentage is due principally to lower revenue levels and the mix of applications or services provided. The Company’s cost of revenues consist primarily of wages and benefits to its employees, the cost of materials and equipment and other items related to directly providing services and products to its customers.

Selling, general and administrative expenses decreased $5.3 million to $16.3 million or 23.2 percent of net revenues for the six months ended June 30, 2004 from $21.6 million or 24.8 percent of net revenues for the six months ended June 30, 2003. The reduction of $5.3 million is due to the Company’s ongoing integration and restructuring activities to realign organizationally, eliminate excess capacity and streamline its operations and further enhance its off-shore service capabilities, consistent with its strategic focus on more complex Business Process Outsourcing and integrated solution sales.

Included in the results of operations for the six months ended June 30, 2004 and 2003 was approximately $1.7 and $1.3 million, respectively, in depreciation expense related to property and equipment.

Net interest expense was $0.9 million and $1.5 million for the six months ended June 30, 2004 and six months ended June 30, 2003, respectively, consisting principally of interest on the Company’s long term obligations. The decrease in interest expense of approximately $0.6 million is the result of the Company establishing a new revolving credit facility in September of 2003, and use of a portion of the Company’s excess cash to pay down its outstanding obligations.

The provision for income taxes was approximately $0.1 million and $0.2 million for the six months ended June 30, 2004 and 2003, respectively. The provision is primarily related to foreign and state income taxes.

Liquidity and Capital Resources

At June 30, 2004, the Company had net working capital of $22.6 million and cash and cash equivalents of $13.3 million. The Company’s net senior debt (defined as total term loan and revolving credit borrowings less cash and cash equivalents) was $15.6 million at June 30, 2004. In addition, at June 30, 2004, the Company had $4.0 million of availability on its revolving credit facility. The Company has funded its operations and integration and restructuring activities through cash from operations. Net cash provided by operating activities for the six months ended June 30, 2004 was $4.4 million.

Net cash used in investing activities totaled $2.2 million for the six months ended June 30, 2004. These funds were used for investments in capital assets.

In September of 2003, the Company amended its Credit Agreement with the holders of its Senior Notes via the First Amendment to the Credit Agreement (the “Amendment”). Under the terms of the Amendment, the holders of the Company’s Senior Notes agreed to bifurcate such notes into a new $10 million revolving credit facility and a $32 million term loan obligation. The Amendment leaves unchanged the maturity date of the Credit Agreement, as applicable to the term loan. The revolving credit facility matures on December 31, 2005. Such obligations are collateralized by a lien on all property of the Company, guaranties of certain of the Company’s subsidiaries, as well as pledges of the capital stock of certain subsidiaries. Borrowings under the revolving credit facility and term loan obligation bear interest at a rate of prime (floating) plus 2.5 percent (6.75% at June 30, 2004). The Credit Agreement and Amendment contain restrictions on acquisitions, disposition of assets, and the incurrence of other liabilities and contain certain financial covenants related to minimum EBITDA, liquidity, ratio of earnings to fixed charges, and cash-flow levels and certain restrictions on capital expenditures. At June 30, 2004, the Company had $4 million of availability on its $10 million revolving credit facility.

The Junior Note Indenture provides that the principal payments will be made, subject to the express condition that certain performance tests are satisfied. Based upon the Company’s current information, it believes that the performance tests will be satisfied and the payments will be made.

Management believes that it has sufficient liquidity through its cash from operations, cash on hand of $13.3 million and $4.0 million of revolving credit availability at June 30, 2004 to meet its on-going business needs, including satisfying its long term obligations as they become due. The Company consistently monitors and evaluates its capital structure and options for maximizing the efficiency and availability of such. Should the Company require future financing, no assurances can be given that the terms or availability of such would be favorable to the Company.

Contractual Obligations

Information regarding our contractual obligations is contained in Item 7 of our annual report on Form 10-K for the fiscal year ended December 31, 2003. No material changes to such information have occurred during the six months ended June 30, 2004.

Risk Factors

If any of the following risks actually occur, the Company’s business, financial condition or results of operations could be negatively impacted. You should also refer to the other information contained in this report and incorporated in this report by reference, including our consolidated financial statements and the related notes.

Volatility of Available Temporary Labor and Paper Prices

The Company is dependent primarily upon two basic supplies: temporary labor and paper. The Company uses and relies on temporary labor to manage fluctuations in its business. The supply and price of available and trained temporary labor is dependent upon general economic conditions that are beyond the Company’s control. There can be no assurance that the Company will continue to have access to the trained temporary labor necessary to manage its business as it would expect, nor assurance that it will be available at the prices the Company would like. Further, the price of paper can be highly volatile. There can be no assurance that the price of paper will not change in the future. Any significant price increase in either

~~Development~~temporary oflabor ~~Code~~or paper that cannot be passed on to customers or a shortage in the supply of ~~Ethics~~available ~~and~~temporary ~~Compliance~~labor ~~Program~~could have a material adverse effect on the Company’s business, financial condition or results of operations.

~~The~~Potential ~~Company~~Liability ~~engaged~~for ~~outside~~Unauthorized ~~corporate~~Disclosure ~~counsel to assist it in the development~~ of aConfidential ~~new~~Information ~~corporate Code of Business Conduct, Compliance~~ and ~~Ethics. The~~Intellectual ~~Company~~Property adopted such Code in late 2002, which included among other things the establishment of a corporate Compliance Officer, the basic obligations and responsibilities of all Lason employees to the Corporation, provisions regarding the accuracy and completeness of company records, and guidelines for avoiding conflicts of interest and protecting and preserving all Company assets. The Company implemented such program during the first quarter of 2003. Infringement

~~Results~~ A substantial portion of ~~Operations~~the —Company’s ~~Three~~business ~~Months~~involves ~~Ended~~the ~~September 30~~handling of documents containing confidential information. Although the Company has established procedures intended to eliminate any unauthorized disclosure of confidential information and, ~~2003~~in ~~Compared~~some ~~with~~cases, ~~Three~~has ~~Months~~contractually ~~Ended~~limited ~~September 30~~its potential liability for unauthorized disclosure of such information, ~~2002~~there can be no assurance that unauthorized disclosures will not result in liability to the Company. It is possible that such liabilities could have a material adverse effect on the Company’s business, financial condition or results of operations.

~~Consolidated~~The ~~net~~Company ~~revenues~~from ~~were~~time ~~$41.5 million for the three months ended September 30, 2003 as compared~~ to ~~$50.3 million~~time ~~for~~may ~~the~~be ~~three~~required ~~months ended September 20, 2002. The decrease is due primarily~~ to indemnify customers ~~that elected to~~for ~~pursue~~claims ~~strategic re-sourcing alternatives following the Company’s emergence from its previous Chapter 11 proceedings. The Company’s revenues are generally based upon transaction volumes~~ of ~~information~~intellectual ~~and~~property ~~data~~infringement ~~sent~~made ~~to it~~ by third parties. ~~For~~from ~~the~~using our ~~most~~products ~~part,~~and ~~these volumes are not contractually required or guaranteed~~services. InTo ~~addition,~~ the ~~mix~~extent ofthat the Company’s ~~revenue~~enters isinto ~~dependent upon~~these ~~the~~arrangements, ~~application or service being provided~~ and ~~can~~a ~~vary~~claim ~~between project and recurring type work. In many cases~~occurs, the ~~work being performed by the~~ Company ~~for~~ ancould ~~individual~~be ~~customer~~subject ~~contains~~to ~~elements~~damages, loss of ~~both~~existing ~~project~~business ~~and~~or ~~recurring~~future ~~type work.~~business, ~~Project~~or ~~work~~other ~~represents~~remedies ~~one-time~~under ~~services. Recurring work represents~~such ~~services~~agreements, ~~being~~which ~~provided~~could tohave a ~~customer~~material onadverse aeffect ~~consistent~~on ~~basis that are generally under contract or have been regularly provided by~~ the Company’s business, tofinancial ~~the~~condition ~~customer through~~or aresults ~~long~~of ~~standing relationship~~operations.

~~Gross~~Importance ~~profit was to $11.6 million for the three months ended September 30, 2003 as compared to $14.9 million for the three months ended September 30, 2002. Gross profit as a percentage~~ of ~~net~~Continued ~~revenues~~Development was 28.0 percent for the three months ended September 30, 2003 versus 29.5 percent for the three months ended September 30, 2002. The decrease in gross profit and gross margin percentage is due principally to lower revenue levels and the mix of ~~applications~~ orNew services provided. The Company’s cost of revenues consist primarily of wages and benefits to its employees, the cost of materials and equipment and other items related to directly providing services and products to its customers. Services

~~Selling,~~The ~~general~~introduction ~~and~~of ~~administrative~~competing ~~expenses~~services ~~decreased~~incorporating ~~$3.8 million~~new totechnologies and ~~$9.7 million~~the oremergence ~~23.4 percent~~ of ~~net~~new ~~revenues~~technical ~~for~~standards ~~the~~could ~~three~~render ~~months~~some ~~ended September 30, 2003 from $13.6 million~~ or ~~27 percent~~all of ~~net revenues for~~ the ~~three~~Company’s ~~months~~services ~~ended September 30, 2002~~unmarketable. The ~~reduction~~Company ofbelieves ~~$3.8 million~~that ~~and reduction~~its asfuture asuccess depends ~~percent~~upon ofits ~~revenues~~ability ~~from 27.0 percent~~ to ~~23.4 percent~~enhance ~~for~~its ~~the three~~current ~~months~~services ~~ended~~and ~~September 30,~~develop ~~2003~~new services ~~compared~~that toaddress the ~~three~~increasingly ~~months~~sophisticated ~~ended September 30,~~needs ~~2002~~of isits ~~due~~customers. The ~~principally~~failure ~~from~~of the Company’s ~~previously~~to ~~disclosed integration~~continue ~~and restructuring activities~~ to ~~eliminate~~service ~~excess~~its ~~capacity~~customers, ~~streamline~~ ~~operations~~develop and enhance ~~re-alignment of~~ its ~~sales~~existing ~~force~~services and ~~sales~~introduce ~~activities. Included~~new services in ~~the~~a ~~results~~timely ofand ~~operations~~cost effective ~~for~~manner ~~the~~in ~~three~~response ~~months~~to ~~ended~~changing ~~September 30~~technologies, ~~2003~~ competition and ~~2002~~customer requirements ~~was~~could ~~approximately~~have ~~$0.6~~a ~~and~~material ~~$0.6 million,~~adverse ~~respectively,~~effect ~~in depreciation~~on ~~expense~~the ~~related~~Company’s tobusiness, financial ~~property~~condition ~~and~~or ~~equipment~~results of operations.

~~Net interest~~Risk ~~expense~~of ~~was~~Business ~~$0.8 million~~Interruptions and ~~$0.8 million~~Dependence ~~for the three months ended September 30, 2003 and three months ended September 30, 2002, respectively, consisting principally of interest~~ on ~~the~~Single ~~Company’s~~Facilities ~~long~~for ~~term~~Certain ~~obligations.~~ Services

The ~~provision~~Company ~~for~~believes ~~income~~that ~~taxes~~its ~~increased~~ability ~~approximately~~and ~~$0.1 million~~its ~~for~~future ability to retain customers has been due to and will continued to be dependent upon the ~~three~~continued delivery ~~months~~of ~~ended~~prompt, ~~September 30~~efficient, ~~2003~~high ~~due~~value services to its customers. Certain of the ~~reduction~~Company’s inoperations ~~net~~are ~~operating loss~~performed ~~carryforwards~~at a single location and are dependent on ~~January 1~~continuous computer, ~~2003~~electrical, telephone and data communication service. ~~The~~As ~~provision~~a isresult, ~~primarily~~any ~~related~~disruption of the Company’s day-to-day operations ~~foreign~~could have a material adverse effect upon the Company. There can be no assurance that a fire, flood, earthquake, power loss, phone or data service loss or other disaster affecting one or more of the Company’s facilities would not disable these functions. Any significant damage to any such facility or other failure that causes significant interruptions in the Company’s operations may not be covered by insurance and ~~state~~could ~~income~~have ~~taxes~~a material adverse effect on the Company’s business, financial condition or results of operations.

Net income for the three months ended September 30, 2003 was $1.0 million, an increase of $0.5 million or 100% in comparison to net income of $0.5 million for the three months ended September 30, 2002.

Results of Operations — Nine Months Ended September 30, 2003

Consolidated net revenues were $128.7 million for the nine months ended September 30, 2003. The Company’s revenues are generally based upon transaction volumes of information and data sent to it by third parties. For the most part, these volumes are not contractually required or guaranteed. In addition, the mix of the Company’s revenue is dependent upon the application or service being provided and can vary between project and recurring type work. In many cases, the

~~work~~Lack ~~being performed by the Company for an individual customer contains elements~~ of ~~both~~Continued ~~project~~Growth ~~and~~in recurring type work. Project work represents one-time services. Recurring work represents services being provided to a customer on a consistent basis that are generally under contract or have been regularly provided by the ~~Company~~Business toProcess ~~the~~Outsourcing ~~customer through a long standing relationship.~~ Industry

~~Gross~~The ~~profit~~Company ~~was~~believes, ~~$34.5 million~~based ~~for~~upon ~~the~~independent ~~nine~~market ~~months~~research, ~~ended~~that ~~September 30,~~the ~~2003~~business orprocess ~~26.8 percent~~outsourcing ofmarket ~~net~~will ~~revenues~~continue to experience growth for the next several years. The ~~Company’s~~industry ~~cost~~growth ofassumptions ~~revenues~~are ~~consist~~based upon, among ~~primarily~~other things, the continued advancement of ~~wages~~technology, ~~and~~increased ~~benefits~~government regulations toregarding ~~its~~document ~~employees~~retention, ~~the~~increased customer expectations regarding low-cost ofand ~~materials~~efficient electronic access to records and a continued ~~equipment~~focus on business and profit enhancement though outsourcing of non-core activities. There can be no assurance that these factors will ultimately facilitate industry growth or that other ~~items~~foreseen ~~related~~or tounforeseen ~~directly~~changes ~~providing~~in ~~services~~the market ~~and~~dynamics ~~products~~will not negatively impact projected market growth. Any tonegative ~~its~~impact ~~customers~~upon general market trends for the business process outsourcing industry will have a material adverse effect on the Company’s business, financial condition and results of operations.

~~Selling,~~HIPPA general and administrative expenses were $31.3 million or 24.4 percent of net revenue for the nine months ended September 30, 2003. As previously disclosed, the Company has undertaken certain integration and restructuring activities to realign organizationally, eliminate excess capacity and streamline its operations and further enhance its off-shore service capabilities. As such, the Company has been and is in the process of closing certain operating locations. As of September 30, 2003, the Company has accrued $0.2 million related to its commitment to these activities. The Company’s remaining obligations related to these activities will be paid through the second quarter of 2004. Regulations

InAs ~~addition,~~a ~~during~~result of statutory authority granted pursuant to the ~~second~~Health Insurance ~~quarter~~Portability and Accountability Act of ~~2003~~1996 (“HIPAA”), the ~~Company~~United States ~~announced~~Department of Health and ~~began~~ Human Services has issued regulations regarding the ~~implementation~~use and disclosure of apersonal ~~plan~~health toinformation ~~strategically~~by ~~re-brand~~health ~~its~~care ~~image~~providers, health plans, and ~~marketing~~ ~~activities~~certain ~~consistent~~other ~~with~~“covered ~~its~~entities” ~~business~~operating ~~process~~in ~~outsourcing~~the health care ~~offerings~~industry. InThe ~~connection~~HIPAA ~~therewith,~~regulations ~~the~~require ~~Company~~covered ~~strategically~~entities ~~restructured~~to ~~its~~take steps to ~~sales~~maintain ~~force~~the privacy and ~~sales~~security ~~activities~~of personal health information. ~~The~~While the Company ~~recorded~~is not a ~~special~~“covered ~~charge~~entity” directly governed by these regulations, many of its customers are covered entities under the HIPAA regulations and these $0customers are required to adjust their business arrangements to comply with HIPAA.~~5 million~~ ~~during~~These ~~the~~customers ~~nine~~will ~~months~~be ~~ended~~required ~~September 30,~~to ~~2003,~~enter ~~which~~into ~~consisted~~“business associate ~~principally~~arrangements” ofwith ~~severance~~the ~~costs,~~Company ~~related~~that conform to ~~its~~the ~~sales~~requirements ~~force~~of ~~restructuring~~HIPAA. AsThe requirements of ~~September 30~~HIPAA, ~~2003,~~and the ~~Company~~costs ~~had~~of ~~accrued~~complying ~~$0.1 million~~with ~~related~~HIPAA, tomay ~~its~~adversely ~~remaining~~affect ~~obligations~~the ~~for~~business ~~this~~operations ~~activity~~of these customers, which iscould ~~expected~~have toa ~~be paid~~negative ~~throughout~~impact on the ~~remainder~~Company’s ofbusiness ~~2003~~operations. ~~Included~~Furthermore, the requirements of the “business associate arrangements,” and the changes the Company will have to make in its operations to comply with such agreements, will increase the Company’s ~~results~~costs of operations. ~~for~~To the extent the Company is unable to comply with the ~~nine~~provisions ~~months~~of ~~ended~~such ~~September 30~~agreements, ~~2003~~it ~~was~~could ~~approximately~~lose ~~$1.9 million,~~the inbusiness generated by ~~depreciation~~those ~~expense~~clients ~~related~~or could be subject to ~~property~~damages ~~and~~for ~~equipment~~violation of its business associate agreements with those clients.

~~Net~~Future ~~interest~~Financial ~~expense was $2.3 million for the nine months ended September 30, 2003, consisting principally of interest on the Company’s long-term obligations.~~ Covenants

~~The~~Under ~~provision~~the ~~for~~Company’s ~~income~~First Amendment to the Credit Agreement, it is subject to certain reporting requirements and financial covenants, including requirements that it maintain minimum levels of earnings before interest, taxes, ~~was~~depreciation ~~approximately~~and $0amortization (“EBITDA”) and cash-flow and certain other restrictions.~~3 million~~ ~~for~~Certain ~~the~~of ~~nine~~these covenants become more restrictive over time. The ~~months~~Company ~~ended~~is ~~September~~currently in compliance with such covenants as of June 30, ~~2003~~2004. While it is currently in compliance with such covenants, ~~related~~an ~~principally~~erosion toof ~~foreign~~its business could place the Company out of compliance in the future. Potential remedies for the lenders include declaring all outstanding amounts immediately payable, terminating commitments and ~~state~~enforcing any liens. In the event ~~income~~of ~~taxes~~any future noncompliance the Company would seek a waiver from such lenders related to these types of technical covenant violations, however, there is no assurance such waiver would be obtained.

~~Net income~~International ~~for the nine months ended September 30, 2003 was $0.6 million.~~ Operations

~~Liquidity~~ The Company operates in four countries outside the United States: India, China (service relationship), Mexico and ~~Capital~~Canada. ~~Resources~~Political and economic instability in these countries could have a material adverse impact on the Company’s results of operations. The Company’s future revenues, costs of operations and profits could be affected by a number of factors related to its international operations, including changes in foreign currency, exchange rates, changes in economic conditions from country to country, changes in a country’s political condition, trade protection measures, licensing and other legal requirements and local tax issues.

AtFuture September 30, 2003, the Company had net working capital of $26.0 million and cash and cash equivalents of $11.6 million. The Company’s net senior debt (defined as total term loan and revolving credit borrowings less cash and cash equivalents) was $19.5 million at September 30, 2003. In addition, at September 30, 2003, the Company has $6.0 million of availability on its revolving credit facility. At December 31, 2002, the Company had working capital of $41.3 million including cash and cash equivalents of $25.9 million. The Company has used its excess working capital, principally its excess cash as of December 31, 2002, to pay down its long-term debt, which is expected to result in savings of approximately $1.0 million in interest costs annually. The Company has funded its operations and integration and restructuring activities through a combination of cash from operations and net proceeds from sales of non-core assets. Net cash provided by operating activities for the nine months ended September 30, 2003 was $2.8 million. The net cash provided by operating activities was reduced by payments made with respect to the Company’s previous bankruptcy proceedings for professional and administrative fees, cure costs and other administrative type claims. These payments totaled approximately $0.8 million for the nine month period ended September 30, 2003. The Company expects these payments to substantially decrease over time as certain administrative claims related to Company’s cases are settled. The Company estimates that its total remaining obligation related to these types of items is approximately $0.4 million at September 30, 2003 and that these will be paid over the remainder of 2003. In addition, the net cash provided by operating activities was reduced by $0.7 million related to the payment of costs and obligations associated with the Company’s previously mentioned integration and restructuring activities. Risks

~~Net~~The ~~cash~~Company ~~used~~identifies inand ~~investing~~evaluates ~~activities~~the ~~totaled~~material $1risks potentially impacting its business on an on-going basis.~~9 million~~ ~~for~~Certain ~~the~~risks ~~nine~~which are material ~~months~~to ~~ended~~the ~~September 30~~Company’s business today may become immaterial in the future. Additionally, ~~2003~~certain risks which are immaterial to the Company’s business today may become material in the future. ~~These~~Further, ~~funds~~new ~~were~~risks ~~used~~to ~~for~~the ~~investments~~Company’s business, which it is currently unaware of today, could develop in the future ~~capital~~and ~~assets~~dramatically impact its business, operations or financial condition.

In September of 2003, the Company amended its Credit Agreement with the holders of its Senior Notes via the First Amendment to the Credit Agreement (the “Amendment”). Under the terms of the Amendment, the holders of the Company’s Senior Notes agreed to bifurcate such notes into a new $10 million revolving credit facility and a $32 million term loan obligation. The Amendment leaves unchanged the maturity date of the Credit Agreement, as applicable to the term loan. The revolving credit facility matures on December 31, 2005. Such obligations are collateralized by a lien on all property of the Company, guaranties of certain of the Company’s subsidiaries, as well as pledges of the capital stock of certain subsidiaries. Borrowings under the revolving credit facility and term loan obligation bear interest at a rate of prime (floating) plus 2.5 percent (6.50% and 6.75% at September 30, 2003 and December 31, 2002, respectively). The Credit Agreement and Amendment contain restrictions on acquisitions, disposition of assets, and the incurrence of other liabilities and contain certain financial covenants related to minimum EBITDA, liquidity, ratio of earnings to fixed charges, and cash-flow levels and certain restrictions on capital expenditures. At September 30, 2003, the Company had $6 million of availability on its $10 million revolving credit facility.

Management believes that it has sufficient liquidity through its cash from operations, cash on hand of $11.6 million and $6.0 million of revolving credit availability at September 30, 2003 to meet its on-going business needs, including satisfying its long term obligations as they become due. The Company consistently monitors and evaluates its capital structure and options for maximizing the efficiency and availability of such. Should the Company require future financing, no assurances can be given that the terms or availability of such would be favorable to the Company.

Inflation

Certain of the Company’s expenses, such as wages and benefits, occupancy costs, and equipment repair and replacement, are subject to normal inflation. Supplies, such as paper and related products, can be subject to significant price fluctuations. There can be no assurance that the Company will be able to offset any future cost increases through efficiencies or increased charges for its services and products.

Effect of Potential Fluctuations in Quarterly Operating Results; Seasonality

The Company has experienced, and in the future may experience, significant quarter to quarter fluctuations in its operating results. Quarterly operating results may fluctuate as a result of a variety of factors, including but not limited to, the size and timing of customer contracts, changes in customer budgets, variations in the cost of temporary labor and paper, the integration of acquired businesses into the Company’s operations, the demand for the Company’s services, the timing and introduction of new services, the market acceptance of new services, the introduction and timing of new services by the Company’s competitors, competitive conditions in the industry and general economic conditions. The Company’s business is also typically seasonal as sales and profitability are generally lower during the fourth quarter of the year. Negative trends or variations in these items could have a material adverse effect on the Company’s business, financial condition or results of operations.

Market Risk

The Company believes one of its strategic advantages is its long-standing off-shore service capabilities, which are used to service certain of its North American customers. Operations in these countries are subject to certain economic and political risks unlike its operations in the United States. The Company does not hedge its investment in these operations or other risks arising out of operating in these foreign countries. The Company has not experienced significant economic or political difficulties in these operations to date. However, the Company cannot predict changes in the economic or political conditions in these foreign countries or the ultimate impact they may have on its business, financial condition or results of operations.

Speculative Nature of Common Stock; Lack of Trading Market; Issuance to Disbursing Agent

The Company has made distributions of its common stock in accordance with its Plan of Reorganization. 26,732,344 shares have been issued to the Senior Note holders, general unsecured creditors and management of the Company. The Company has 3,267,656 shares currently reserved for distribution pending the final resolution of claims under its Plan. The Company currently cannot speculate as to the ultimate completion date for the final issuance of the shares held in reserve, as such is dependent upon the litigation and settlement of claims in the Bankruptcy Court. The Company desires to complete this process as soon as reasonably practical.

There is currently no trading market for the Common Stock. There can be no assurance regarding the future development of a market for or as to the liquidity of the Common Stock now or when all of the shares are distributed. The Company is currently not in compliance with certain regulations of the SEC necessary for its securities to be listed and traded on a national securities exchange or on NASDAQ. The Company cannot provide any assurances as to if or when it would meet such requirements.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Lason~~The Company has exposure to interest rate risk on its term loan and ~~revolving~~ revolving credit facility, which bear interest at a variable rate. Based on the Company’s outstanding ~~obligations~~balance ~~for these items~~ on ~~September~~June 30, ~~2003~~2004 of $28.9 million, a one-percent increase or decrease in interest rates would decrease or increase, respectively, the Company’s pre-tax earnings and operating cash flows by appropriately $0.3 million on an annualized basis.

Due to the Company’s operations outside of the United States, the Company experiences foreign currency exchange gains and losses. Fluctuations between the United States dollar and other currencies may adversely affect the results of operations. As the Company does not currently engage in foreign currency hedging transactions, there is no assurance that such exchange rate fluctuations will not cause significant fluctuations in the Company’s future results of operations.

ITEM 4: CONTROLS AND PROCEDURES

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). These Rules refer to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Our Chief Executive Officer and Our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”), and have concluded that our disclosure controls and procedures are effective in providing them with material information relating to the Company known to others within the Company which is required to be included in our periodic reports filed under the Exchange Act. ~~Reference is~~ ~~made to: “Note 2: Basis of Presentation” and “Item 2: Management’s Discussion~~ ~~and Analysis of Financial Condition and Results of Operations—Fresh Start~~ Reporting and Factors that Affect Comparability of Financial Information” for a discussion of the Company’s inability to provide comparable financial information in the Form 10-Q for the nine month period ended September 30, 2002.

There ~~have~~has been no ~~changes~~change in the Company’s internal ~~controls~~control over ~~financial~~ financial reporting that occurred during the ~~period~~Company’s ~~this~~last ~~Form~~fiscal ~~10-Q~~quarter ~~was being prepared~~ that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

Lason may from time to time provide information including certain statements included in or incorporated by reference in this Form 10-Q which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those forward-looking statements include the intent, belief or current expectations of the company and its management. Without limitation, the words “believes,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Form 10-Q. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward looking statements are: (1) important information is of a preliminary basis and subject to further adjustment, (2) the assimilation of business units, (3) the economic, political and regulatory environment, (4) competitive risks and uncertainties, (5) dependence on key customers and management, (6) fluctuations in paper prices, (7) price and availability of qualified temporary labor, (8) reliability of Company data, (9) changes in the business outsourcing industry, (10) management’s ability to implement its business plan, (11) the financial and legal effect of any outstanding litigation, (12) ultimate resolution and settlement of administrative and priority claims, including priority tax claims, whether known or unknown as a result of the Company’s previous Chapter 11 filing, (13) status of the Company’s financing, (14) other important factors beyond the control of Lason and (15) other risks identified from time to time in the Company’s reports and registration statements filed with the Securities and Exchange Commission. Actual future results may vary significantly from those set forth herein. These forward-looking statements represent Lason’s judgment as of the date of this report. Lason disclaims, however, any intent or obligation to update its forward-looking statements.

1413

(11) the financial and legal effect of any outstanding litigation, (12) ultimate resolution and settlement of administrative and priority claims, including priority tax claims, whether known or unknown as a result of the Company’s previous Chapter 11 filing, (13) status of the Company’s financing, (14) other important factors beyond the control of Lason and (15) other risks identified from time to time in the Company’s reports and registration statements filed with the Securities and Exchange Commission. Actual future results may vary significantly from those set forth herein. These forward-looking statements represent Lason’s judgment as of the date of this report. Lason disclaims, however, any intent or obligation to update its forward-looking statements.

PART II. OTHER INFORMATION

~~Item 1.~~ITEM ~~Legal~~2: ~~Proceedings~~CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.

~~The~~In ~~Company~~June is2004, a2,978,690 ~~defendant~~shares ~~in an adversary proceeding in the Bankruptcy Court for the District~~ of ~~Delaware~~common instock ~~Wilmington~~were ~~(the~~issued ~~“Court”).~~to ~~The~~Senior ~~plaintiff is~~Note ~~Ark~~holders ~~2000-1~~and ~~CLO,~~general ~~Limited~~unsecured ~~(“Ark”),~~creditors ~~one~~ of the Company’s ~~senior~~pursuant ~~note~~to ~~holders. The nature of~~ the ~~dispute is over certain provisions in the~~ Company’s ~~Pre-petition~~ ~~Credit~~past ~~Agreements~~plan ~~and Plan, which call for the sharing~~ of ~~net proceeds from certain designated asset sales between the Company and the senior note holders~~reorganization. Such ~~The~~issuance ~~net~~was ~~proceeds~~exempt infrom ~~dispute~~registration ~~are~~under ~~approximately $1.7 million, of which approximately $1.5 million is currently being held in escrow by~~ the ~~Pre-petition~~ ~~Agent.~~Securities OnAct ~~October 15, 2003, the Court ruled in favor~~ of ~~the Company,~~1933 ~~denying~~pursuant ~~the plaintiffs’ motion and any claim by the plaintiff’s~~ to ~~the escrowed~~Section ~~proceeds.~~1145 Onof ~~October 24,~~Title ~~2003~~11 ~~Ark~~of ~~filed a motion before~~ the ~~Court, asking~~United itStates ~~to reconsider its ruling~~Code. The Company ~~believes~~has ~~the~~288,966 ~~plaintiffs’ arguments~~shares ~~are~~of ~~without~~common ~~merit~~stock ~~and~~reserved itfor isdistribution ~~vigorously~~pending ~~defending~~the ~~itself~~final inresolution ~~this~~of ~~matter.~~claims ~~Any~~under ~~unfavorable~~such ~~outcome or settlement, if any, in this matter would result in a non-cash charge to current earnings~~plan.

~~Various~~ITEM ~~other~~6. ~~claims~~EXHIBITS ~~have~~AND ~~been~~REPORTS ~~made~~ON ~~against~~FORM ~~the Company in the normal course of business which management believes will not have a material adverse effect on the Company’s business, financial condition or results of operations.~~ 8-K

~~Item 6~~a. Exhibits ~~and Reports on Form 8-K~~

a.		Exhibits
	31.1		Certification of Chief Executive Officer
		10.10		First Amendment to the Credit Agreement
	31.2		Certification of Chief Financial Officer
		31.1		Certification of Chief Executive Officer
	32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		31.2		Certification of Chief Financial Officer
		32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b.		Reports on Form 8-K
		On August 19, 2003, the Company filed a Form 8-K disclosing in Item 12 thereof and including as an exhibit in Item 7 thereof, the press release announcing its results of operations for the second quarter ended June 30, 2003.

~~SIGNATURES~~ b. Reports on Form 8-K

~~Pursuant~~A toReport ~~the~~on ~~requirements~~Form of8-K ~~the~~was ~~Securities~~filed ~~and~~on ~~Exchange~~May 17, ~~Act of 1934~~2004, ~~the~~ ~~registrant~~disclosing ~~has~~in ~~duly~~Items ~~caused~~7 ~~this~~and 12 ~~report~~thereof, tothe beresults ~~signed~~of onoperations ~~its~~for ~~behalf by~~ the ~~undersigned~~ ~~thereunto~~quarter ~~duly~~ended ~~authorized~~March 31, 2004.

November 12, 2003		LASON, INC.
	By:	/s/ RONALD D. RISHER
		Chief Executive Officer; President and Director
	By:	/s/ DOUGLAS S. KEARNEY
		Executive Vice President; Chief Financial Officer and Secretary

16 Table of Contents

~~Table of Contents~~SIGNATURES

~~EXHIBIT~~ Pursuant ~~INDEX~~to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Exhibit		Description
	LASON, INC.
10.10		First Amendment to the Credit Agreement
Date: August 10, 2004	By:	/s/ RONALD D. RISHER
31.1		Certification of Chief Executive Officer
		Ronald D. Risher
31.2		Certification of Chief Financial Officer
		Chief Executive Officer; President and Director
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		/s/ DOUGLAS S. KEARNEY
		Douglas. S. Kearney
		Executive Vice President; Chief Financial Officer and Secretary

1715

Exhibit Index


No.		Description

31.1		Certification of Chief Executive Officer
31.2		Certification of Chief Financial Officer
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filing Compare · LASON INC