-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HB1RRwhwn97Ki7vJKyDs3HkzPwyOUOHv+46+fRSaDu2XTMMLNs1D2AmbXb7V26sd KM90JnvYastKUtW9iZ88oQ== 0000858748-07-000006.txt : 20070827 0000858748-07-000006.hdr.sgml : 20070827 20070827101337 ACCESSION NUMBER: 0000858748-07-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070827 DATE AS OF CHANGE: 20070827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OP TECH ENVIRONMENTAL SERVICES INC CENTRAL INDEX KEY: 0000858748 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 911528142 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19761 FILM NUMBER: 071079776 BUSINESS ADDRESS: STREET 1: 6392 DEERE ROAD CITY: SYRACUSE STATE: NY ZIP: 13206 BUSINESS PHONE: 3154631643 MAIL ADDRESS: STREET 1: 6392 DEERE RD CITY: SYRACUSE STATE: NY ZIP: 13206 FORMER COMPANY: FORMER CONFORMED NAME: MASADA INDUSTRIAL SERVICES INC DATE OF NAME CHANGE: 19600201 FORMER COMPANY: FORMER CONFORMED NAME: MASADA CORP DATE OF NAME CHANGE: 19600201 10-Q 1 tx2q07.txt OP-TECH ENVIRONMENTAL SERVICES 6/30/07 10Q United States Securities and Exchange Commission Washington, DC 20549 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 June 30, 2007 OR [ ] 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 0-19761 OP-TECH Environmental Services, Inc. (Exact name of registrant as specified in its charter) Delaware 91-1528142 (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No.) 6392 Deere Road, Syracuse, NY 13206 (Address of principal executive offices) (Zip Code) (315) 463-1643 (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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X or No __ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large Accelerated filer ____ Accelerated filer ___ Non- accelerated filer __X__ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes _ or No _X_ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (August 10, 2007) 11,812,038 OP-TECH Environmental Services, Inc. and Wholly-Owned Subsidiaries INDEX PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Balance Sheets -June 30, 2007 (Unaudited) and December 31, 2006 (Audited).........................3 Consolidated Statements of Operations -Three months ended June 30, 2007 and June 30, 2006 (Unaudited) -Six months ended June 30, 2007 and June 30, 2006 (Unaudited)............4 Consolidated Statements of Cash Flows -Six months ended June 30, 2007 and June 30, 2006 (Unaudited).............5 Notes to Consolidated Financial Statements (Unaudited)...................6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................10-11 Item 3. Quantitative and Qualitative Disclosure About Market Risk ... 12 Item 4. Controls and Procedures.........................................13 PART II OTHER INFORMATION ................................................14 SIGNATURES ........................................15 CERTIFICATIONS. ..................................................16-18 ITEM #1 FINANCIAL STATEMENTS PART I FINANCIAL INFORMATION OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, 2007 2006 ASSETS Current Assets: Cash $14,087 $30,981 Accounts receivable (net of allowance for doubtful accounts of approximately $295,000 and $114,000, respectively) 10,178,849 10,008,186 Costs on uncompleted projects applicable to future billings 1,435,167 2,984,323 Inventory 402,862 378,439 Current portion of deferred tax asset 260,100 260,100 Prepaid expenses and other current assets, net 821,825 447,759 ---------- Total Current Assets 13,112,890 14,109,788 Property and equipment, net 3,602,115 3,216,781 Deferred tax asset 1,307,956 1,004,800 Other assets 39,898 44,898 Total Assets $18,062,859 $18,376,267 =========== ===========. LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $2,652,280 $4,144,190 Outstanding checks in excess of bank balance 802,666 149,741 Billings in excess of costs and estimated profit on uncompleted projects 1,351,372 796,438 Accrued expenses and other current liabilities 643,529 943,833 Accrued litigation defense reserve 391,638 400,000 Current portion of long-term debt 1,167,404 771,345 ----------- Total Current Liabilities 7,008,889 7,205,547 Long-term debt, net of current portion 2,154,590 2,128,193 Note payable to bank under line of credit 6,000,000 5,731,548 ----------- Total Liabilities 15,163,479 15,065,288 ----------- Shareholders' Equity: Common stock, par value $.01 per share;authorized 20,000,000 shares; 11,812,038 and 11,748,704 shares issued and outstanding as of June 30,2007 and December 31, 2006, respectively 118,121 17,487 Additional paid-in capital 6,961,861 6,925,581 Accumulated deficit (4,202,102) (3,751,789) Accumulated other comprehensive income 21,500 19,700 ----------- Total Shareholders' Equity 2,899,380 3,310,979 ---------- Total Liabilities and Shareholders' Equity $18,062,859 $18,376,267 =========== ============ The accompanying notes are an integral part of the consolidated financial statements. 3 ITEM #1 FINANCIAL STATEMENTS PART I FINANCIAL INFORMATION OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED June 30, June 30, June 30, June 30, 2007 2006 2007 2006 ---------- ---------- ---------- ---------- Project revenue $8,994,960 $7,106,271 $16,450,950$14,957,511 Project costs 7,212,318 5,099,946 13,059,548 11,429,423 ---------- ---------- ---------- ---------- Gross margin 1,782,642 2,006,325 3,391,402 3,528,088 ---------- ---------- ---------- ---------- Operating expenses: Payroll expense and related payroll taxes and benefits 937,993 635,637 1,737,925 1,237,487 Office Expense 178,256 143,510 357,723 279,099 Occupancy 166,311 132,773 353,001 282,140 Business Insurance 186,913 117,588 326,374 223,947 Professional Services 161,969 126,326 292,161 219,243 Equipment Expense, net of usage credit 174,945 96,145 431,293 271,005 Other expenses 217,957 181,096 285,144 258,327 --------- --------- --------- --------- 2,024,344 1,433,075 3,783,621 2,771,248 --------- --------- --------- --------- Operating income (loss) (241,702) 573,250 (392,219) 756,840 --------- --------- --------- ---------- Other income and (expense): Interest expense (179,085) (136,928) (358,929) 259,056) Other, net (120) (1,255) 735 (1,150) --------- --------- --------- --------- (179,205) (138,183) (358,194) (260,206) --------- --------- --------- --------- Net income (loss) before income taxes(420,907) 435,067 (750,413) 496,634 Income tax benefit (expense) 168,400 (172,800) 300,100 (197,800) --------- --------- --------- --------- Net income (loss) $(252,507) $262,267 $(450,313) 298,834 ========= ========= ========= ======== Earnings per common share: Basic $ (0.02) $ 0.02 $ (0.04) $0.03 Diluted $ (0.02) $ 0.02 $ (0.04) $0.02 Weighted average shares outstanding: Basic 11,799,372 11,745,371 11,745,371 11,745,371 Diluted 12,385,364 12,278,792 12,391,697 12,290,743 The accompanying notes are an integral part of the consolidated financial statements. 4 ITEM #1 FINANCIAL STATEMENTS PART I FINANCIAL INFORMATION OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED. June 30, June 30, 2007 2006 Operating activities: Net income (loss) $(450,313) $298,834 Adjustments to reconcile net loss to net cash provided by operating activities: Bad debt expense 191,778 49,700 Depreciation and amortization 340,443 295,708 Stock Compensation 28,614 35,469 Provision for deferred income taxes (303,156) 197,800 (Increase) decrease in operating assets and increase (decrease) in operating liabilities: Accounts receivable (362,441) 246,943 Costs on uncompleted projects applicable to future billings 1,549,156 (616,788) Billings and estimated profit in excess of costs on uncompleted contracts 554,934 176,664 Prepaid expenses, inventory and other assets (393,489) 85,435 Accounts payable and accrued expenses (1,799,301) (532,899) ------------ Net cash provided by (used in) operating activities (644,375) 236,866 ------------ Investing activities: Purchase of property and equipment (725,778) (414,933) ----------- Net cash used in investing activities (725,778) (414,933) ----------- Financing activities: Proceeds from issuance of common stock 8,300 Outstanding checks in excess of bank balance 652,925 (196,928) Proceeds from note payable to bank and current and long-term borrowings, net of financing costs 8,307,796 7,998,543 Principal payments on current and long-term borrowings (7,615,763) (7,683,380) ----------- Net cash provided by financing activities 1,353,258 118,235 ----------- Increase (decrease) in cash (16,894) (59,832) Cash at beginning of period 30,981 90,928 ----------- Cash at end of period $14,087 $31,096 =========== =========== Non-cash item Non-cash financing of insurance $663,226 $507,472 The accompanying notes are an integral part of the consolidated financial statements. 5 PART I - FINANCIAL INFORMATION SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS The Company is including the following cautionary statement in this Form 10-Q to make applicable and take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by, or on behalf of, the Company. This 10-Q, press releases issued by the Company, and certain information provided periodically in writing and orally by the Company's designated officers and agents contain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words expect, believe, goal, plan, intend, estimate, and similar expressions and variations thereof used are intended to specifically identify forward-looking statements. Where any such forward-looking statement includes a statement of the assumptions or basis underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or basis to be reasonable and makes them in good faith, assumed facts or basis almost always vary from actual results, and the differences between assumed facts or basis and actual results can be material, depending on the circumstances. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. 6 OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, quarterly results include all adjustments (consisting of only normal recurring adjustments) that the Company considers necessary for a fair presentation of such information for interim periods. The unaudited financial statements include the accounts of the Company and its two wholly-owned subsidiaries; OP-TECH Environmental Services, Ltd, an inactive Canadian company, and OP-TECH AVIX, Inc. All material intercompany transactions and balances have been eliminated in consolidation. The balance sheet at December 31, 2006 has been derived from the audited balance sheet included in the Company's annual report on Form 10-K for the year ended December 31, 2006. 2. Comprehensive Income The components of comprehensive income (loss) were as follows: Six months ended Three months ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 Net income (loss) $ (450,313) $ 298,834 (252,507) $ 262,267 Other comprehensive income (loss): Change in fair value of cash flow hedge Net of income tax of $1,200 and $3,900 in 2007 and $11,700 and $4,580 in 2006, respectively 1,743 17,570 5,800 6,870 Comprehensive income (loss) $ (448,570) $ 316,404 $ (246,707) $ 269,137 3. Revenue Recognition The timing of revenues is dependent on the Company's backlog, contract awards, and the performance requirements of each contract. The Company's revenues are also affected by the timing of its clients planned remediation work as well as the timing of unplanned emergency spills. Historically, planned remediation work generally increases during the third and fourth quarters. Although the Company believes that the historical trend in quarterly revenues for the third and fourth quarters of each year are generally higher than the first and second quarters, there can be no assurance that this will occur in future periods. Accordingly, quarterly or other interim results 7 should not be considered indicative of results to be expected for any quarter or for the full year. 4. Related Party Transactions The Company utilizes subcontract labor purchased from St. Lawrence Industrial Services, Inc., which is owned by a director of the Company. The costs for these services amounted to approximately $502,000 and $480,000 for the six months ended June 30, 2007 and 2006, respectively, and $280,000 and $275,000 for the three months ended June 30, 2007 and 2006 respectively. 5. Earnings per Share Basic earnings per share are computed by dividing net income by the weighted average shares outstanding. Diluted earnings per share includes the potentially dilutive effect of common stock equivalents, which include outstanding options under the Company's Stock Option Plan and warrants that were issued to a financial advisor in May 2002 to purchase 480,000 shares of common stock at $0.066 per share, expiring in May 2010. 8 PART I - FINANCIAL INFORMATION ..Item 2. Management's Discussion and Analysis of Financial Condition and ..Results of Operations. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2007 the Company had cash of $14,087 compared to $30,981 at December 31, 2006. The Company voluntarily applies all available cash in the Company's operating account to pay down the Company's note payable to bank under the line of credit. At June 30, 2007, the Company had working capital of $6,102,725 compared to $6,904,241 at December 31, 2006, with a current ratio of 1.87 to 1 at June 30, 2007 and 1.96 to 1 at December 31, 2006. For the six months ended June 30, 2007, the Company's net cash used by operations was $644,375 compared to net cash provided by operations of $236,866 during the six months ended June 30, 2006. The cash used by operations for the six months ended June 30, 2007 was primarily a result of a net loss for the period and a decrease in accounts payable. The Company's net cash used in investing activities of $725,778 during the first six months of the year was attributable to the purchase of field equipment. The Company's net cash provided by financing activities was $1,353,258, which was primarily due to the net proceeds from the Company's long-term debt as a result of the financing of the cash used in investing activities. As of June 30, 2007, the Company has a loan agreement that provides for borrowings up to $6,000,000 on a revolving basis, collateralized by all accounts receivable, inventory and equipment now owned or acquired later. The loan is payable on July 1, 2008, bears interest at a rate of prime plus .50 percent, is subject to certain restrictive financial covenants, and is subject to default if there is a material adverse change in the financial or economic condition of the Company. The loan requires compliance with certain quarterly financial covenants. The Company obtained a covenant waiver for the period ending June 30, 2007, and the covenant structure has been modified for the upcoming quarters. As of June 30, 2007, borrowings against the revolving loan aggregated $6,000,000. During the first six months of 2007, all principal payments on the Company's debt were made within payment terms. The Company expects, based on its operating results and the continued availability of its line of credit, that it will be able to meet obligations as they come due. ......9 RESULTS OF OPERATIONS PROJECT REVENUE The Company's project billings for the second quarter of 2007 increased 27% to $8,994,960 from $7,106,271 for the second quarter of 2006. For the six-month period ended June 30, 2007 the Company's billings have increased 10% to $16,450,950 from $14,957,511 for the same period in 2006. The increase is attributed to the completion of several large disposal projects. PROJECT COSTS AND GROSS MARGIN Project costs for the second quarter of 2007 increase 41% to $7,212,318 from $5,099,946 for the same period in 2006. Project costs as a percentage of revenues were 79% and 72% for the three months ended June 30, 2007 and 2006, respectively. Gross margin for the first quarter of 2007 decreased to 21% from 28% for the same period in 2006. The gross margin decrease is attributed to several large disposal projects with lower gross margins. For the six-month period ended June 30, 2007, project costs increased 14% to $13,059,548 from $11,429,423 for the six months ended June 30, 2006. Project costs as a percentage of revenues were 79% and 76% for the six months ended June 30, 2007 and 2006, respectively. Gross margin for the six months ended June 30, 2007 decreased to 21% from 24% for the same period in 2006 as a result of two low margin projects. OPERATING EXPENSES Operating expenses for the quarter ended June 30, 2007 increased 41% to $2,024,344 from $1,433,075 for the same period in 2006. For the six- month period ended June 30, 2007, operating expenses increased 37% to $3,783,621 from $2,771,248 for the same period in 2006. Operating expenses as a percentage of revenues increased to 23% for the six months ended June 30, 2007 compared to 19% for the comparable period in 2006. When comparing the second quarter of 2007 to 2006, the increase in operating expenses is due to several items: * Payroll expense and related payroll taxes and benefits increased 48% to $937,993 from $635,637 in 2006. The Company has hired several new project managers since the second quarter of 2006, and has experienced an increase in workers compensation rates paid primarily attributed to overall rate increases and the significant amount of asbestos work during the quarter. * Office Expense increased 24% to $178,256 from $143,510 in 2006. Of this $34,746 increase, approximately $7,000 is related to an increase in telephone expense due to an increase in the number of cellular telephones and $17,000 is related to increased office supplies expense. * Occupancy Expense increased 25% to $166,311 from $132,773 in 2006. This increase is primarily due to the new lease agreement entered into in the fourth quarter of 2006 in Massena, NY. 10 * Business Insurance increased 59% to $186,913 from $117,588 in 2006. This increase in insurance expense is due to the increased size of the Company as well as additional coverage purchased to mitigate risk. * Professional Services increased 28% to $161,969 from $126,326 in 2006. This increase in professional service expense is primarily due to an increase in human resource outsourcing and placement fees. * Equipment Expenses net of usage credit increased 82% to $174,945 from $96,145 in 2006. Of this $78,800 increase, $33,472 related to higher fuel expense due primarily to higher fuel prices, and $23,259 related to higher depreciation expense due to equipment purchases made since the second quarter of 2006. INTEREST EXPENSE Interest expense for the six months ended June 30, 2007 increased 39% to $358,929 from $259,056 for the same period in 2006. This increase is due to both an increase in the interest rates paid on the Company's floating-rate debt as well as an increase in the principal balances owed. NET INCOME (LOSS) BEFORE INCOME TAXES Net loss for the six months ended June 30, 2007 was ($750,413) compared to a net income of $496,634 for the six months ended June 30, 2006. INCOME TAX (EXPENSE) BENEFIT The Company recorded income tax benefit of $300,100 for the six months June 30, 2007 compared to an income tax expense of $197,800 for the same period in 2006. NET INCOME (LOSS) Net income (loss) for the six months ended June 30, 2007 and 2006 was ($450,313) or ($.04) per share basic and ($.04) per share diluted, and $298,834, or $0.03 per share basic and $0.02 per share diluted, respectively. 11 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management has identified the following critical accounting policies that affect the Company's more significant judgments and estimates used in the preparation of the Company's consolidated financial statements. The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company's management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates those estimates, including those related to assets held for sale, revenue recognition, issuance of stock options and related compensation expense, valuation allowances on deferred tax assets, allowance for doubtful accounts and contingencies and litigation. The Company states these accounting policies in the notes to the consolidated financial statements and in relevant sections in this discussion and analysis. These estimates are based on the information that is currently available to the Company and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates. The Company believes that the following critical accounting policies affect significant judgments and estimates used in the preparation of its consolidated financial statements: Contracts are predominately short-term in nature (less than three months) and revenue is recognized as costs are incurred and billed. Income on long-term fixed-priced contracts greater than three months is recognized on the percentage-of-completion method. Project costs are generally billed in the month they are incurred and are shown as current assets. Revenues recognized in excess of amounts billed are recorded as an asset. In the event interim billings exceed costs and estimated profit, the net amount of deferred revenue is shown as a current liability. Estimated losses are recorded in full when identified. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by continually evaluating individual customer receivables, considering the customer's financial condition, credit history and current economic conditions. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company maintains a valuation allowance for deferred tax assets to reduce these assets to their realizable amounts. Recognition of these amounts and the adjustment of the corresponding allowance is dependent on the generation of taxable income in current and future years. As circumstances change with respect to managements expectations of future taxable income, the valuation allowance is adjusted. Item 3. Quantitative and Qualitative Disclosure About Market Risk. There were no material changes in the Company's market risk or market risk strategies during the quarter ended June 30, 2007. 12 Item 4. - Controls and Procedures (a) Disclosure Controls and Procedures. As of the end of the period covering this Form 10-Q, we evaluated the effectiveness of the design and operation of our "disclosure controls and procedures". OP-TECH conducted this evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. (i) Definition of Disclosure Controls and Procedures. Disclosure controls and procedures are controls and other procedures that are designed with the objective of ensuring that information required to be disclosed in our periodic reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. As defined by the SEC, such disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, in such a manner as to allow timely disclosure decisions. (ii) Limitations on the Effectiveness of Disclosure Controls and Procedures and Internal Controls. OP-TECH recognizes that a system of disclosure controls and procedures (as well as a system of internal controls), no matter how well conceived and operated, cannot provide absolute assurance that the objectives of the system are met. Further, the design of such a system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues have been detected. These inherent limitations include the realities that judgments in decision- making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented in a number of ways. Because of the inherent limitations in a cost-effective control system, system failures may occur and not be detected. However, the Chief Executive Officer and Chief Financial Officer believe that our system of disclosure controls and procedures provides reasonable assurance of achieving their objectives. (iii) Conclusions with Respect to Our Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on the evaluation of these controls and procedures, that our disclosure controls and procedures are effective in timely alerting them to material information relating to OP-TECH required to be included in OP-TECH's periodic SEC filings. (b) Changes in Internal Controls. There have been no changes in OP-TECH's internal controls over financial reporting that could significantly affect these controls subsequent to the date of their evaluation. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company recorded an accrued liability of $391,638 at June 30, 2007. The liability has been recorded to cover potential legal costs and fees, and also any indemnity, settlement, or other payments necessary to dispose of a claim against the Company. Item 1A. Risk Factors. No material changes Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. None 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OP-TECH Environmental Services, Inc. (Registrant) Date: August 14, 2007 /s/ Charles B. Morgan Charles B. Morgan Chief Executive Officer /s/ Jon S. Verbeck Jon S. Verbeck Treasurer and Chief Financial Officer 15 EXHIBIT 31 - CERTIFICATIONS Certification of Chief Executive Officer I, Charles B. Morgan, certify that: 1. I have reviewed this quarterly report on Form 10-Q of OP-TECH Environmental Services, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15f and 15d - 15f) for the registrant and have: a) designed such disclosure controls and procedures, or caused such b) disclosure controls and procedures to be designed under our c) supervision, to ensure that material information relating to the d) registrant, including its consolidated subsidiaries, is made known e) to us by others within those entities, particularly during the f) period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or b) operation of internal controls over financial reporting which are c) reasonably likely to adversely affect the registrant's ability to d) record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: August 14, 2007 /s/ Charles B. Morgan Charles B. Morgan Chief Executive Officer 16 Certification of Chief Financial Officer I, Jon S. Verbeck, certify that: 1. I have reviewed this quarterly report on Form 10-Q of OP-TECH Environmental Services, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15f and 15d - 15f) for the registrant and have: a) designed such disclosure controls and procedures, or caused such b) disclosure controls and procedures to be designed under our c) supervision, to ensure that material information relating to the d) registrant, including its consolidated subsidiaries, is made known e) to us by others within those entities, particularly during the f) period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and e) disclosed in this report any change in the registrant's internal f) control over financial reporting that occurred during the g) registrant's most recent fiscal quarter that has materially h) affected, or is reasonable likely to materially affect, the i) registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or b) operation of internal controls over financial reporting which are c) reasonably likely to adversely affect the registrant's ability to d) record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: August 14, 2007 /s/ Jon S. Verbeck Jon S. Verbeck Chief Financial Officer and Treasurer 17 EXHIBIT 32 - SECTION 1350 CERTIFICATIONS Certifications Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I, Charles B. Morgan, Chief Executive Officer of OP-TECH Environmental Services, Inc. (the "Company"), certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 14, 2007 /s/ Charles B. Morgan Charles B. Morgan Chief Executive Officer I, Jon S. Verbeck, Chief Financial Officer and Treasurer of OP-TECH Environmental Services, Inc. (the "Company"), certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2007 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 14, 2007 /s/ Jon S. Verbeck Jon S. Verbeck Chief Financial Officer and Treasurer 18 -----END PRIVACY-ENHANCED MESSAGE-----