Ball 1 thought to be Lat OB.
Provisional (Ball 2) put into Lat Hazard.
Ball 3 dropped (with 1 stroke penalty) and played. BALLS 1 and 2 are NO LONGER IN PLAY, as you have assumed that Ball 1 is LOST in the hazard.

Ball 3 is the ball in play.

@GreeBoman: You can hit a provisional if you think your ball may be lost. Then you can use Mizuno's "trick". But there's a penalty for playing the wrong ball if you hit your provisional and your original is found further back.