form10-qa.htm

10-Q/A 1 form10-qa.htm FORM 10Q/A form10-qa.htm

United States Securities and Exchange Commission

Washington, DC 20549

FORM 10-Q/A

(Amendment No. 2)

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

For the quarterly period ended June 30, 2009

[ ]	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 organization)	(I.R.S. Employer incorporation Identification No.)

1 Adler Drive, E Syracuse, NY 13057

(Address of principal executive offices) (Zip Code)

(315) 437-2065

(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, a non-accelerated filer or a smaller reporting company.

Large Accelerated filer ___ Accelerated filer___ Non-accelerated filer ___ Small Reporting Company X

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files

Yes or No __

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_

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (June 15, 2010) 11,940,372

EXPLANATORY NOTE

RESTATEMENT OF FINANCIAL STATEMENTS

This Amendment No. 2 on Form 10-Q/A, which amends and restates items identified below with respect to the Form 10-Q, filed by Op-Tech Environmental Services, Inc. ("we" or the “Company") with the Securities and Exchange Commission (the "SEC") on August 14, 2009 (the "Original Filing") and the related Form 10-Q/A that the Company filed on May 17, 2010, is being filed to label the applicable financial statements and disclosure as “restated” and to address certain questions presented to us by the U.S. Securities and Exchange Commission in connection with the Company’s disclosure controls and procedures and the Company’s internal control over financial reporting.

This Form 10-Q/A only amends and restates certain information in Item 1 (Financial Statements and Notes to Consolidated Financial Statements), Item 2 (Management's Discussion And Analysis Of Financial Condition And Results Of Operations), and Item 4 (Controls and Procedures). Except for the foregoing amended and restated information, this Form 10-Q/A continues to describe conditions as of the date of the Original Filing, and the disclosures contained herein have not been updated to reflect events, results or developments that have occurred after the Original Filing, or to modify or update those disclosures affected by subsequent events. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that have occurred or facts that have become known to us after the date of the Original Filing (other than the restatement), and such forward-looking statements should be read in their historical context. This Form 10-Q/A should be read in conjunction with the Company's filings made with the SEC subsequent to the Original Filing, including any amendments to those filings.

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, 2009 (Unaudited) (Restated) and December 31, 2008 (Audited)
		5

	Consolidated Statements of Operations -Three months ended June 30, 2009 (Unaudited and restated) and June 30, 2008 (Unaudited) -Six months ended June 30, 2009 (Unaudited and restated) and June 30, 2008 (Unaudited)	6


	Consolidated Statements of Cash Flows -Six months ended June 30, 2009 (Unaudited and restated) and June 30, 2008 (Unaudited)	7

	Notes to Consolidated Financial Statements Unaudited)	8-9


Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10-12


Item 3.	Quantitative and Qualitative Disclosure About Market Risk	13


Item 4/4T.	Controls and Procedures	14


PART II.	OTHER INFORMATION	15


	SIGNATURES	16

PART I - FINANCIAL INFORMATION

SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS

The Company is including the following cautionary statement in this Form 10-Q/A 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/A, 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 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



OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


	Restated
	(UNAUDITED)
	June 30,			December 31,
	2009			2008

ASSETS

Current Assets:
Cash	$	28,432		$	80,003
Accounts receivable (net of allowance for doubtful accounts of
approximately $391,000 and $399,000 respectively)		7,891,998			8,914,131
Costs on uncompleted projects applicable to future billings		2,328,787			2,824,799
Inventory		450,050			426,412
Current portion of deferred tax asset		559,400			559,400
Prepaid expenses and other current assets, net		744,681			388,654

Total Current Assets		12,003,348			13,193,399

Property and equipment, net		2,862,521			3,031,899
Deferred tax asset		1,224,045			924,300
Long-term receivable from customer		75,000			-

Total Assets	$	16,164,914		$	17,149,598


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	3,026,446		$	3,543,822
Outstanding checks in excess of bank balance		458,668			1,026,126
Billings in excess of costs and estimated profit
on uncompleted projects		645,843			479,237
Accrued expenses and other current liabilities		948,049			1,153,383
Accrued litigation defense reserve		410,000			450,000
Note payable to bank under line of credit		5,435,425			-
Current portion of long-term debt		1,179,950			800,084

Total Current Liabilities		12,104,381			7,452,652

Long-term debt, net of current portion		1,078,783			1,384,651
Note payable to bank under line of credit		-			4,865,097

Total Liabilities		13,183,164			13,702,400

Shareholders' Equity:
Common stock, par value $.01 per share; authorized 20,000,000
shares; 11,940,372 shares issued and outstanding
as of June 30, 2009 and December 31, 2008		119,404			119,404
Additional paid-in capital		7,005,891			7,005,891
Accumulated deficit		(4,123,720	)		(3,649,132	)
Accumulated other comprehensive income		(19,825	)		(28,965	)

Total Shareholders' Equity		2,981,750			3,447,198

Total Liabilities and Shareholders' Equity	$	16,164,914		$	17,149,598


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



OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	Restated						Restated
	2009			2008			2009			2008

Project revenue	$	8,887,741		$	7,422,275		$	14,625,371		$	14,748,538

Project costs		6,788,253			5,158,568			11,291,125			10,378,736

Gross margin		2,099,488			2,263,707			3,334,246			4,369,802

Operating expenses:
Payroll expense and related payroll taxes and benefits		814,277			763,429			1,560,043			1,786,569
Office Expense		224,937			193,353			414,826			431,560
Occupancy		214,322			195,908			444,535			426,126
Business Insurance		109,165			133,498			243,650			254,723
Professional Services		305,121			185,129			487,034			338,998
Equipment Expenses, net of usage credit		100,998			252,369			234,845			506,890
Other expenses		382,472			101,404			565,039			139,554
		2,151,292			1,825,090			3,949,972			3,884,420

Operating income (loss)		(51,804	)		438,617			(615,726	)		485,382

Other income and (expense):
Interest expense		(75,997	)		(112,312	)		(154,073	)		(244,197	)
Other, net		(6,342	)		11,950			(9,789	)		10,412
		(82,339	)		(100,362	)		(163,862	)		(233,785	)

Net income (loss) before income taxes		(134,143	)		338,255			(779,588	)		251,597

Income tax benefit (expense)		53,000			(137,802	)		305,000			(103,214	)

Net income (loss)	$	(81,143	)	$	200,453		$	(474,588	)	$	148,383


Earnings per common share:
Basic	$	(0.01	)	$	0.02		$	(0.04	)	$	0.01
Diluted	$	(0.01	)	$	0.02		$	(0.04	)	$	0.01

Weighted average shares outstanding:
Basic		11,940,372			11,937,038			11,940,372			11,937,038
Diluted		11,940,372			12,281,808			11,940,372			12,288,150


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



OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



	SIX MONTHS ENDED JUNE 30,
	Restated
	2009			2008

Operating activities:
Net income (loss)	$	(474,588	)	$	148,383
Adjustments to reconcile net loss to net cash
provided by operating activities:
Bad debt expense		460,293			7,411
Depreciation and amortization		327,930			344,387
Deferred income tax (benefit) expense		(303,745	)		102,726
(Increase) decrease in operating assets and
increase (decrease) in operating liabilities:
Accounts receivable		486,840			1,536,893
Costs on uncompleted projects applicable to
future billings		496,012			1,070,342
Billings and estimated profit in excess of costs
on uncompleted contracts		166,606			(904,429	)
Prepaid expenses, inventory and other assets		(379,665	)		(281,622	)
Accounts payable and accrued expenses		(762,710	)		(1,193,061	)
Net cash provided by operating activities		16,973			831,030

Investing activities:
Purchase of property and equipment		(158,552	)		(132,845	)
Net cash used in investing activities		(158,552	)		(132,845	)

Financing activities:
Decrease in outstanding checks in excess of bank balance		(567,458	)		(592,757	)
Proceeds from note payable to bank and current
and long-term borrowings, net of financing costs		8,794,788			7,129,111
Principal payments on current and long-term borrowings		(8,137,322	)		(7,074,276	)
Net cash provided by (used in) financing activities		90,008			(537,922	)

Increase (decrease) in cash		(51,571	)		160,263

Cash at beginning of period		80,003			93,535

Cash at end of period	$	28,432		$	253,798


Non-cash item
Non-cash financing of insurance	$	538,397		$	566,043



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

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/A 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, 2008 has been derived from the audited balance sheet included in the Company’s annual report on Form 10-K/A for the year ended December 31, 2008.

2. Comprehensive Income (Loss)

The components of comprehensive income (loss) were as follows:

	Six months ended						Three months ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Net income (loss)	$	(474,588	)	$	148,383		$	(81,143	)	$	200,453
Other comprehensive income (loss): Change in fair value of cash flow hedge Net of income tax of $6,100 and $4,000 in 2009 and ($2,900) and $8,800 in 2008, respectively		9,140			(4,300	)		6,067			13,300
Comprehensive income (loss)	$	(465,448	)	$	144,083		$	(75,076	)	$	213,753

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 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 $623,000 and $591,000 for the six months ended June 30, 2009 and 2008, respectively, and $318,000 and $340,000 for the three months ended June 30, 2009 and 2008 respectively. Amounts owed to St. Lawrence Industrial Services, Inc. which are included in Accrued Expenses and Other Liabilities were $36,000 and $85,000 at June 30, 2009 and 2008, 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 for the three month period 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. These are excluded for the diluted share calculation for the six month period due to the net loss.

6. Reclassifications

Certain reclassifications have been made to the June 30, 2008 financial statements to conform with the 2009 presentation.

7. Restatement

On April 30, 2010, the Company determined that an agreement with a customer was not properly accounted for and that the long-term receivable from customer recorded at June 30, 2009 was overstated by $287,010. Additionally, an error occurred in the estimate calculating the costs on uncompleted projects applicable to future billings resulting in an overstatement of $60,228. As a result, the Company restated the quarterly financial statements.

The impact of these adjustments on the Company’s financial results as originally reported for the six months ending June 30, 2009 are summarized below:

	As Reported			As Restated

Current assets	$	12,063,576		$	12,003,348

Total assets	$	16,376,152		$	16,164,914

Current liabilities	$	12,104,381		$	12,104,381

Total liabilities	$	13,183,164		$	13,183,164

Accumulated deficit	$	(3,912,482	)	$	(4,123,720	)

Net income	$	(263,350	)	$	(474,588	)

Basic earning per share	$	(0.02	)	$	(0.04	)

Diluted earning per share	$	(0.02	)	$	(0.04	)

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, 2009, the Company had cash of $28,432 compared to $80,003 at December 31, 2008. 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, 2009, the Company had working capital of $(101,033) compared to $5,740,747 at December 31, 2008, and a current ratio of .99 to 1 at June 30, 2009 and 1.77 to 1 at December 31, 2008. The fluctuation was primarily attributed to the note payable to the bank was classified as a current liability at June 30, 2009. It was classified as a long-term liability at June 30, 2008.

For the six months ended June 30, 2009, the Company’s net cash provided by operations was $16,973 compared to net cash used in operations of $831,030 during the six months ended June 30, 2008. The cash provided by operations for the six months ended June 30, 2009 was primarily a result of a decrease in accounts receivable and a decrease in costs on uncompleted projects applicable to future billings offset by the decrease of accounts payable.

The Company’s net cash used in investing activities of $158,552 during the first six months of the year was attributable to the purchase of field equipment. The net cash used in investing activities during the six months ended June 30, 2008 was $132,845.

For the six months ended June 30, 2009, the Company’s net cash provided by financing activities was $90,008 compared to net cash used in financing activities of $537,922 during the six months ended June 30, 2008. The net cash provided by financing activities for the six months ended June 30, 2009 was primarily due to larger borrowings on the note payable.

As of June 30, 2009, the Company had 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 was payable on May 15, 2010, bears interest at a rate of prime plus .50 percent, was subject to certain restrictive financial covenants, and was subject to default if there is a material adverse change in the financial or economic condition of the Company. As of June 30, 2009, borrowings against the revolving loan aggregated $5,435,425.

During the second quarter of 2009, all principal payments on the Company’s debt were made within payment terms. As of June 30, 2009, the Company was not in compliance with a financial covenant and received a waiver at June 30, 2009. The Company is in the process of negotiating an extension to its financing agreement. The Company is dependent on obtaining continued financing from its current financial institution or from another source.

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.

RESULTS OF OPERATIONS

PROJECT REVENUE

The Company's project billings for the second quarter of 2009 increased 20% to $8,887,741 from $7,422,275 for the second quarter of 2008. For the six-month period ended June 30, 2009 the Company’s billings have decreased 2.8% to $14,625,371 from $14,748,538 for the same period in 2008.

PROJECT COSTS AND GROSS MARGIN

Project costs for the second quarter of 2009 increased 32% to $6,788,253 from $5,158,568 for the same period in 2008. Project costs as a percentage of revenues were 76% and 70% for the six months ended June 30, 2009 and 2008, respectively. Gross margin as a percentage of revenue for the second quarter of 2009 decreased to 21% from 30% for the same period in 2008. The gross margin decrease is attributed to several large projects bid with lower gross margins.

For the six-month period ended June 30, 2009, project costs increased 9% to $11,291,125 from $10,378,736 for the six months ended June 30, 2008. Project costs as a percentage of revenues were 77% and 70% for the six months ended June 30, 2009 and 2008, respectively. Gross margin for the six months ended June 30, 2009 decreased to 23% from 30% for the same period in 2008 as a result of several projects bid at lower margins.

OPERATING EXPENSES

Operating expenses for the quarter ended June 30, 2009 increased 18% to $2,151,282 from $1,825,090 for the same period in 2008. For the six-month period ended June 30, 2009, operating expenses increased 2% to $3,949,962 from $3,884,420 for the same period in 2008. Operating expenses as a percentage of revenues remained increased to 27% for the six months ended June 30, 2009 from 26% for the comparable period in 2008.

When comparing the second quarter of 2009 to 2008, the increase in operating expenses were a combination of the following:

·	Payroll and payroll related expense increasing 7% to $814,277 from $763,429 primarily due to increase worker’s compensation insurance expenses based on project segments,

·	Business insurance expense decreasing 18% to $109,165 from $133,498 due to a reduction in business insurance rates reducing overall premiums in 2009 with similar coverage,

·	Professional services expense increasing 65% to $305,121 from $185,129 primarily related to legal costs incurred relative to a litigation settlement, increases in human resource costs, and increases in costs associated with waste monitoring, and

·	Equipment expenses, net of usage credit decreasing 60% to $100,998 from $252,369 primarily attributed to the reduction in fuel costs and an increase in equipment rates charged to projects.

·	Increase in other expenses of 277% to $382,462 from $101,404 as a result of an increase in bad debt expense.

INTEREST EXPENSE

Interest expense for the quarter ended June 30, 2009 decreased 32% to $75,997 from $112,312 for the same period in 2008. Interest costs for the six months ended June 30, 2009 decreased 37% to $154,073 from $244,197 for the same period in 2008. This decrease is due to both a decrease in the interest rates paid on the Company’s floating-rate debt as well as a decrease in the principal balances owed.

NET INCOME (LOSS) BEFORE INCOME TAXES

Net loss for the six months ended June 30, 2009 was $(779,588) compared to a net income of $251,597 for the six months ended June 30, 2008. The net loss before income taxes is primarily a result of the reduction in the gross margin percentage on project billings.

INCOME TAX (EXPENSE) BENEFIT

The Company recorded income tax benefit of $305,000 for the six months June 30, 2009 compared to an income tax expense of $103,214 for the same period in 2008.

NET INCOME (LOSS)

Net income (loss) for the six months ended June 30, 2009 and 2008 was $(474,588) or ($.04) per share basic and diluted, and $148,383 or $.01 per share basic and diluted, respectively.

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 six months) and revenue is recognized as costs are incurred and billed. 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 management’s expectations of future taxable income, the valuation allowance is adjusted.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

Not applicable

Item 4/4T. – Controls and Procedures

(a)	Disclosure Controls and Procedures.

As of the end of the period covering this Form 10-Q/A, 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.

(iii) Conclusions with Respect to Our Evaluation of Disclosure Controls and Procedures.

The Company's Chief Executive Officer and Chief Financial Officer determined that, as of the end of the period covered by this report, a material weakness existed over the controls to evaluate the adequacy of the allowance for doubtful accounts and the controls to evaluate revenue on uncompleted projects.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Specifically, an agreement with a customer was not properly accounted for causing an overstatement of accounts receivable. Additionally, due to an error an in-process project had unearned revenue recorded in excess of the actual expected.

The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of June 30, 2009.

The Company plans to revise controls over the evaluation of the adequacy of the allowance for doubtful accounts to include a review with sales and collection personnel to ensure all agreements with customers are considered.

The Company plans to revise controls with respect to the evaluation of unearned

revenue to include a more in-depth cost and standard gross margin analysis, review with field personnel, and a comparison to subsequent billing by job.

The Company will also monitor our disclosure controls and procedures on a continuing basis to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In the future as such controls change in relation to developments in the our business and financial reporting requirements, our evaluation and monitoring measures will also address any additional corrective actions that may be required.

(b) Changes in Internal Controls.

The Company assessed internal controls as of December 31, 2008, and concluded that they were operating effectively and no material weaknesses existed as reported in the 2008 10-K. The Company’s control procedures did not change significantly in 2009. However, these control procedures were not operating effectively in certain areas as the Company identified material weaknesses over financial reporting for the period ending June 30, 2009, related to the restatement of results for the period ending June 30, 2009.

Because of these material weaknesses in internal control over financial reporting, our management, including our CEO and CFO, concluded that our internal control over financial reporting was not effective as of June 30, 2009 based on the criteria set forth in Internal Control - Integrated Framework issued by the COSO.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company recorded an accrued liability of $410,000 at June 30, 2009. The liability has been recorded to cover management’s estimate of any potential legal indemnity settlement or other payments necessary to dispose of a particular claim against the Company.

Item 1A. Risk Factors.

No material changes

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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.

Exhibit 31.1 Certification of Chief Executive Officer

Exhibit 31.2 Certification of Chief Financial Officer and Acting Principal Accounting Officer

Exhibit 32.1 Section 1350 Certification of Chief Executive Officer

Exhibit 32.2 Section 1350 Certification of Chief Financial Officer and Acting Principal Accounting Officer

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: June 15, 2010 /s/ Charles B. Morgan

Charles B. Morgan

Chief Executive Officer

/s/ Jon S. Verbeck

Jon S. Verbeck

Chief Financial Officer and Treasurer