##### Table of Contents



UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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FORM 10-Q

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


For the quarterly period ended September 30, 2003

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)

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)



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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 Act of 2002. Yes o No x

As of
November 12, 2003, 3,267,656 shares of Common Stock, $.01 par value
were reserved for issuance according to the Companys Plan of Reorganization
and 26,777,344 shares were issued and outstanding.





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TABLE OF CONTENTS



|                                         |                                                                                                                                                  |  |  |  |  |  |  | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|Table of Contents                       
|Part I. Item 1. Financial Statements    
|                                         | Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and December 31, 2002                                                
|                                         | Condensed Consolidated Statements of Income, Three Months Ended September 30, 2003 and 2002 and Nine Months Ended September 30, 2003 (Unaudited)
|                                         | Condensed Consolidated Statement of Cash Flows, Nine Months Ended September 30, 2003 (Unaudited)                                                
|                                         | Condensed Consolidated Statement of Shareholders Equity, Nine Months Ended September 30, 2003 (Unaudited)                                      
|                                         | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                                
|                                         | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                                   
|                                         | Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                              
|                                         | Item 4. Controls and Procedures                                                                                                                 
|Part II. Other Information              
|                                         | Item 1. Legal Proceedings                                                                                                                       
|                                         | Item 6. Exhibits and Reports on Form 8-K                                                                                                        
|                                         | Signatures                                                                                                                                      
|Exhibit Index                           
|First Amendment to the Credit Agreement 
|Certification of Chief Executive Officer
|Certification of Chief Financial Officer
|Section 906 Certification               



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TABLE OF CONTENTS

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


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PART I.    ITEM 1.    FINANCIAL STATEMENTS

LASON, INC.




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

September 30,
    
    
    December 31,2003
    
    
    2002(Unaudited)ASSETSCash and cash equivalents
    
    $
    11,631
    
    
    $
    25,931Accounts receivable (net of allowance of $2,573 and $4,010, respectively)
    
    
    31,431
    
    
    
    35,962Supplies
    
    
    3,279
    
    
    
    4,021Prepaid expenses and other
    
    
    7,022
    
    
    
    5,440Total current assets
    
    
    53,363
    
    
    
    71,354Property and equipment (net of accumulated depreciation of $3,051
and $1,199, respectively)
    
    
    6,056
    
    
    
    6,193Other
    
    
    155
    
    
    
    Total assets
    
    $
    59,574
    
    
    $
    77,547LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    6,911
    
    
    $
    7,095Accrued expenses
    
    
    10,876
    
    
    
    14,094Customer deposits
    
    
    3,156
    
    
    
    2,557Deferred revenue
    
    
    2,058
    
    
    
    2,892Current portion of long-term obligations
    
    
    4,402
    
    
    
    3,372Total current liabilities
    
    
    27,403
    
    
    
    30,010Long-term obligations
    
    
    29,021
    
    
    
    45,001Total liabilities
    
    
    56,424
    
    
    
    75,011STOCKHOLDERS EQUITYPreferred 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
    
    
    
    300Additional paid-in capital
    
    
    1,565
    
    
    
    1,565Retained earnings
    
    
    1,285
    
    
    
    671Total stockholders equity
    
    
    3,150
    
    
    
    2,536Total liabilities and stockholders equity
    
    $
    59,574
    
    
    $
    77,547


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

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LASON, INC.

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

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


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

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LASON, INC.

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

Nine Months EndedSeptember 30,2003Cash Flows Provided by Operating Activities
    
    
    
    
    $
    2,754
    1Cash 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
    
    
    
    
    
    25,931Cash and cash equivalents at end of period
    
    
    
    
    $
    11,631


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

1 During the first nine months of 2003, approximately $0.8 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.

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LASON, INC.

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

Common Stock
    
    
    AdditionalPaid-in
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalances at January 1, 2003
    
    
    30,045,000
    
    
    $
    300
    
    
    $
    1,565
    
    
    $
    671
    
    
    $
    2,536Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614
    
    
    
    614Balances 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: NATURE OF OPERATIONS

Lason, Inc., a Delaware corporation, together with its subsidiaries
(Lason or the Company) is a leading provider of integrated information
outsourcing solutions through in excess of 60 locations and facilities
management sites in 26 states, India, China (service relationship), Mexico and
Canada. The Company serves over 5,500 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

In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments, of a normal
recurring nature, necessary to present fairly its financial position as of
September 30, 2003 and the results of operations for the three months ended
September 30, 2003 and 2002 and nine months ended September 30, 2003. Results
of operations for interim periods may not be indicative of future results.

The accompanying unaudited condensed consolidated financial statements of
Lason have been prepared in conformity with generally accepted accounting
principles for interim financial information, but not in conformity with the
instructions for Form 10-Q and Rule 10-01 of Regulation S-X, as the Company has
not presented comparable information for the nine month period ended September
30, 2002.

As previously disclosed, in Lasons Form 8-K filed on March 26, 2001, the
Company informed the U.S. Securities and Exchange Commission (SEC) and U.S.
Attorney for the Eastern District of Michigan (U.S. Attorney) of accounting
irregularities and system deficiencies that affected certain portions of the
Predecessors financial statements. On May 13, 2003, the Company announced its
continued cooperation with the SEC and U.S. Attorney with respect to their
investigations regarding accounting irregularities potentially affecting
certain portions of the Predecessors financial statements from 1997-1999.
Based on the investigations, the SEC and U.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.

As a result of adopting fresh start reporting on July 1, 2002, the Company
believes the ultimate effects, if any, from the alleged accounting
irregularities during 1997  1999, as discussed above, have been eliminated in
the financial statements as of and for the three months ended September 30,
2003 and 2002 and for the nine month period ended September 30, 2003. For
further information, refer to the consolidated financial statements and notes
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 2002, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. SFAS No. 146 applies to
costs associated with an exit activity (including a restructuring) or with a
disposal of long-lived assets. Under SFAS No. 146, a company will record a
liability for a cost associated with an exit or disposal activity when that
liability is incurred and can be

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measured at fair value. A liability is
incurred when an event obligates the entity to transfer or use assets. Under
current accounting guidance, a liability can be recorded when management has committed
to an exit plan. The requirements under SFAS No. 146 are effective
prospectively for exit and disposal activities initiated subsequent to December
31, 2002. Restatement of previously issued financial statements is not
permitted. The Company adopted SFAS No. 146 during the first quarter of fiscal
year 2003 and it did not have a material impact on our financial position or
results of operations.

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 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 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 certain restrictions
on capital expenditures. At September 30, 2003, the Company had $4 million
outstanding on its $10 million revolving credit facility.

The Companys long-term obligations also included a unsecured,
non-interest bearing Junior Note issued to certain key managers (who were also
ex-owners of businesses acquired by Lason).

The term loan calls for quarterly principal payments with final maturity
at June 30, 2007, as follows (in thousands):

2003
    
    $
    4,0002004
    
    
    4,0002005
    
    
    4,0002006
    
    
    4,0002007
    
    
    11,109Total
    
    $
    27,109


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 Junior Note calls for semi-annual principal payments with final
maturity at December 31, 2006, as follows (in thousands):

2003
    
    $
    3122004
    
    
    6242005
    
    
    6242006
    
    
    1,246Total
    
    $
    2,806Unamortized Discount at September 30, 2003
    
    
    (491
    )Junior Note Balance
    
    $
    2,415


The Junior Note Indenture provides that the principal payments outlined
above 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 payments will be made.

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NOTE 5: INTEGRATION ACTIVITIES

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 and December 31, 2002,
the Company has accrued $0.2 million and $0.5 million, respectively, related to
its commitment to these activities. As of September 30, 2003, the Company has
substantially completed these activities. The Companys remaining obligations
related to these activities will be paid through the second quarter of 2004.

During the second 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 million during the second quarter, which consisted principally of
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 6: INCOME TAXES

In connection with the Companys previous Plan of Reorganization, a gain
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 of the Company on the Effective Date of the Plan, July
1, 2002, constituted an ownership change under Section 382 of the Internal
Revenue Code. Consequently, the use of any of the NOLs and tax credits
generated prior to the ownership change, which are not reduced pursuant to the
provisions discussed above, will be subject to an annual limitation.

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

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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.

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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 60 locations and facilities management sites in
26 states, India, China (service relationship), Mexico and Canada. The Company
serves over 5,500 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 Start Reporting and Factors that Affect Comparability of Financial Information

As previously disclosed in prior SEC filings, the Debtors emerged from Chapter
11 bankruptcy proceedings on July 1, 2002, which for financial reporting
purposes, the Company deemed the Effective Date of the Plan. Fresh start
reporting has been implemented as of the Effective Date and accordingly, at
such date, all assets and liabilities of the Debtors were restated to their
respective fair values. For financial reporting purposes references to
Predecessor refer to Old Lason on and prior to June 30, 2002. References
to Successor refer to New Lason on and after July 1, 2002, after giving
effect to the implementation of fresh start reporting. Successor financial
statements are therefore not comparable to Predecessor financial statements.
The accompanying unaudited condensed consolidated financial statements of Lason
have been prepared in conformity with generally accepted accounting principles
for interim financial information, but not in conformity with the instructions
for Form 10-Q and Rule 10-01 of Regulation S-X, as the Company has not
presented comparable information for the nine month period ending September 30,
2002.

As previously disclosed, in Old Lasons Form 8-K filed on March 26, 2001,
the Company informed the U.S. Securities and Exchange Commission (SEC) and
U.S. Attorney for the Eastern District of Michigan (U.S. Attorney) of
accounting irregularities and system deficiencies that affected certain
portions of the Predecessors financial statements. On May 13, 2003, the
Company announced its continued cooperation with the SEC and U.S. Attorney with
respect to their investigations regarding accounting irregularities potentially
affecting certain portions of the Predecessors financial statements from
1997-1999. Based on the investigations, the SEC and U.S. Attorney respectively
announced the filing of civil and criminal charges against former employees of
Old 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.

As a result of adopting fresh start reporting, the Company believes the
ultimate effects, if any, from the alleged accounting irregularities during
1997 - 1999, as discussed above, have been eliminated in the financial
statements as of and for the three and nine month periods ended September 30,
2003 and the three month period ended September 30, 2002.

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Development of Code of Ethics and Compliance Program

The Company engaged outside corporate counsel to assist it in the
development of a new corporate Code of Business Conduct, Compliance and Ethics.
The Company 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.

Results of Operations  Three Months Ended September 30, 2003 Compared with Three Months Ended September 30, 2002

Consolidated net revenues were $41.5 million for the three months ended
September 30, 2003 as compared to $50.3 million for the three months ended
September 20, 2002. The decrease is due primarily to customers that elected to
pursue 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 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 $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 revenues 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 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 $3.8 million to
$9.7 million or 23.4 percent of net revenues for the three months ended
September 30, 2003 from $13.6 million or 27 percent of net revenues for the
three months ended September 30, 2002. The reduction of $3.8 million and
reduction as a percent of revenues from 27.0 percent to 23.4 percent for the
three months ended September 30, 2003 compared to the three months ended
September 30, 2002 is due principally from the Companys previously disclosed
integration and restructuring activities to eliminate excess capacity,
streamline operations and re-alignment of its sales force and sales activities.
Included in the results of operations for the three months ended September 30,
2003 and 2002 was approximately $0.6 and $0.6 million, respectively, in
depreciation expense related to property and equipment.

Net
interest expense was $0.8 million and $0.8 million for the three months ended September
30, 2003 and three months ended September 30, 2002, respectively, consisting
principally of interest on the Companys long term obligations.

The provision for income taxes increased approximately $0.1 million for
the three months ended September 30, 2003 due to the reduction in net operating
loss carryforwards on January 1, 2003. The provision is primarily related to
foreign and state income taxes.

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

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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 $34.5 million for the nine months ended September 30,
2003 or 26.8 percent of net revenues. 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 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.

In addition, during the second quarter of 2003, the Company announced and
began the implementation of a plan to strategically re-brand its image and
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 million during the nine months ended September 30, 2003, which consisted
principally of 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. Included in the results of operations for
the nine months ended September 30, 2003 was approximately $1.9 million, in
depreciation expense related to property and equipment.

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

The provision for income taxes was approximately $0.3 million for the nine
months ended September 30, 2003, related principally to foreign and state
income taxes.

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

Liquidity and Capital Resources

At 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.

Net cash used in investing activities totaled $1.9 million for the nine
months ended September 30, 2003. These funds were used for investments in
capital assets.

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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.

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 $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.

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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 has exposure to interest rate risk on its term loan and revolving
credit facility, which bear interest at a variable rate. Based on the
Companys outstanding obligations for these items on September 30, 2003, 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.




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 been no changes in the Companys internal controls over
financial reporting that occurred during the period this Form 10-Q 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. 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,

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(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.

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PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

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.

Various other claims have been made against 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.




Item 6. Exhibits and Reports on Form 8-K

a.
    
    Exhibits10.10
    
    First Amendment to the Credit Agreement31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    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-KOn 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

Pursuant 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.

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


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EXHIBIT INDEX

Exhibit
    
    Description10.10
    
    First Amendment to the Credit Agreement31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.


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