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EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - OP TECH ENVIRONMENTAL SERVICES INCexhibit31-1.htm
EX-32.1 - SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - OP TECH ENVIRONMENTAL SERVICES INCexhibit32-1.htm
EX-32.2 - SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER AND ACTING PRINCIPAL ACCOUNTING OFFICER - OP TECH ENVIRONMENTAL SERVICES INCexhibit32-2.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER AND ACTING PRINCIPAL ACCOUNTING OFFICER - OP TECH ENVIRONMENTAL SERVICES INCexhibit31-2.htm
 
 


 
 
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 September 30, 2009

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
(State or other jurisdiction of
incorporation or organization)
 
91-1528142
(I.R.S. Employer 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 (October 27, 2009)  11,940,372

 
 

 

 

OP-TECH Environmental Services, Inc. and Wholly-Owned Subsidiaries

INDEX

PART I.
FINANCIAL INFORMATION
Page No.
     
Item 1.
Financial Statements
 
     
 
Consolidated Balance Sheets
 
 
-September 30, 2009 (Unaudited) and December 31, 2008 (Audited)
3
     
 
Consolidated Statements of Operations
 
 
-Three months ended September 30, 2009 and September 30, 2008 (Unaudited)
 
 
-Nine months ended September 30, 2009 and September 30, 2008 (Unaudited)
4
     
 
Consolidated Statements of Cash Flows
 
 
-Nine months ended September 30, 2009 and September 30, 2008 (Unaudited)
5
     
 
Notes to Consolidated Financial Statements (Unaudited)
6-7
     
Item 2.
Management's Discussion and Analysis of Financial
 
 
Condition and Results of Operations
8-10
     
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
11
     
Item 4/4T.
Controls and Procedures
12
     
PART II.
OTHER INFORMATION
13
     
 
SIGNATURES
14




 
 

 
 

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 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
 
             
             
             
   
(UNAUDITED)
       
   
September 30,
   
December 31,
 
   
2009
   
2008
 
             
ASSETS
           
             
Current Assets:
           
   Cash
  $ 130,544     $ 80,003  
   Accounts receivable (net of allowance for doubtful accounts of
               
      approximately $357,000 in 2009 and $399,000 in 2008, respectively)
    8,679,839       8,914,131  
   Costs on uncompleted projects applicable to future billings
    2,578,392       2,824,799  
   Inventory
    529,379       426,412  
   Current portion of deferred tax asset
    559,400       559,400  
   Prepaid expenses and other current assets, net
    590,879       388,654  
                 
           Total Current Assets
    13,068,433       13,193,399  
                 
Property and equipment, net
    2,791,184       3,031,899  
Deferred tax asset
    1,232,445       924,300  
Long-term receivable from customer
    362,010       -  
                 
           Total Assets
  $ 17,454,072     $ 17,149,598  
                 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
               
                 
Current Liabilities:
               
   Accounts payable
  $ 5,733,607     $ 3,543,822  
   Outstanding checks in excess of bank balance
    -       1,026,126  
   Billings in excess of costs and estimated profit
               
      on uncompleted projects
    673,120       479,237  
   Accrued expenses and other current liabilities
    804,785       1,153,383  
   Accrued litigation defense reserve
    150,000       450,000  
   Note payable to bank under line of credit
    5,278,177       -  
   Current portion of long-term debt
    908,625       800,084  
                 
           Total Current Liabilities
    13,548,314       7,452,652  
                 
Long-term debt, net of current portion
    936,654       1,384,651  
Note payable to bank under line of credit
    -       4,865,097  
                 
           Total Liabilities
    14,484,968       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 September 30, 2009 and December 31, 2008
    119,404       119,404  
   Additional paid-in capital
    7,005,891       7,005,891  
   Accumulated deficit
    (4,138,689 )     (3,649,132 )
   Accumulated other comprehensive income
    (17,502 )     (28,965 )
                 
           Total Shareholders' Equity
    2,969,104       3,447,198  
                 
           Total Liabilities and Shareholders' Equity
  $ 17,454,072     $ 17,149,598  
                 
                 
The accompanying notes are an integral part of the consolidated financial statements.
   
 
 
3
 

 
 
  OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
    (UNAUDITED)
                         
                         
   
THREE MONTHS ENDED
   
NINE MONTHS ENDED
 
   
September 30,
   
September 30,
   
September 30,
   
September 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Project revenue
  $ 9,825,226     $ 10,606,146     $ 24,510,825     $ 25,354,684  
                                 
Project costs
    8,312,921       8,103,340       19,604,046       18,482,076  
                                 
Gross margin
    1,512,305       2,502,806       4,906,779       6,872,608  
                                 
Operating expenses:
                               
    Payroll expense and related payroll taxes and benefits
    788,661       838,795       2,348,704       2,625,364  
    Office Expense
    215,509       212,459       630,335       644,019  
    Occupancy
    215,975       182,656       660,510       608,782  
    Business Insurance
    124,555       121,362       368,205       376,085  
    Professional Services
    265,808       194,687       752,842       533,685  
    Equipment Expenses, net of usage credit
    103,398       264,045       338,243       770,935  
    Other expenses
    87,470       200,179       365,499       339,733  
      1,801,376       2,014,183       5,464,338       5,898,603  
                                 
Operating income (loss)
    (289,071 )     488,623       (557,559 )     974,005  
                                 
Other income and (expense):
                               
   Interest expense
    (80,792 )     (114,233 )     (234,865 )     (358,430 )
   Other, net
    (2,344 )     1,798       (12,133 )     12,210  
      (83,136 )     (112,435 )     (246,998 )     (346,220 )
                                 
Net income (loss) before income taxes
    (372,207 )     376,188       (804,557 )     627,785  
                                 
Income tax benefit (expense)
    146,000       (152,845 )     315,000       (256,059 )
                                 
Net income (loss)
  $ (226,207 )   $ 223,343     $ (489,557 )   $ 371,726  
                                 
                                 
Earnings per common share:
                               
    Basic
  $ (0.02 )   $ 0.02     $ (0.04 )   $ 0.03  
    Diluted
  $ (0.02 )   $ 0.02     $ (0.04 )   $ 0.03  
                                 
Weighted average shares outstanding:
                               
    Basic
    11,940,372       11,937,595       11,940,372       11,938,150  
    Diluted
    11,940,372       12,294,199       11,940,372       12,290,907  
                                 
                                 
The accompanying notes are an integral part of the consolidated financial statements.
         
 
 
4
 

 
 
OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
             
             
             
   
NINE MONTHS ENDED
 
   
September 30,
   
September 30,
 
   
2009
   
2008
 
             
Operating activities:
           
   Net income (loss)
  $ (489,557 )   $ 371,726  
   Adjustments to reconcile net loss to net cash
               
      provided by operating activities:
               
         Bad debt expense
    172,907       158,181  
         Depreciation and amortization
    448,348       531,523  
         Stock Compensation
    -       167  
         Deferred income tax (benefit) expense
    (309,745 )     249,800  
         (Increase) decrease in operating assets and
               
            increase (decrease) in operating liabilities:
               
               Accounts receivable
    (300,625 )     (2,015,365 )
               Costs on uncompleted projects applicable to
               
                   future billings
    246,407       1,273,564  
               Billings and estimated profit in excess of costs
               
                  on uncompleted contracts
    193,883       (781,544 )
               Prepaid expenses, inventory and other assets
    246,549       (107,731 )
               Accrued litigation defense reserve
    (300,000 )     (43,958 )
               Accounts payable and accrued expenses
    1,841,187       1,144,016  
                       Net cash provided by operating activities
    1,749,354       780,379  
                 
Investing activities:
               
   Purchase of property and equipment
    (207,633 )     (358,068 )
                      Net cash used in investing activities
    (207,633 )     (358,068 )
                 
Financing activities:
               
   Proceeds from issuance of common stock
    -       33  
   Decrease in outstanding checks in excess of bank balance
    (1,026,126 )     (54,457 )
   Proceeds from note payable to bank and current
               
      and long-term borrowings, net of financing costs
    11,520,195       10,327,462  
   Principal payments on current and long-term borrowings
    (11,985,249 )     (10,758,950 )
                     Net cash used in financing activities
    (1,491,180 )     (485,912 )
                 
Increase (decrease) in cash
    50,541       (63,601 )
                 
Cash at beginning of period
    80,003       93,535  
                 
Cash at end of period
  $ 130,544     $ 29,934  
                 
                 
Non-cash item
               
   Non-cash financing of insurance
  $ 538,397     $ 566,043  
                 
                 
                 
The accompanying notes are an integral part of the consolidated financial statements.
         
 
 
5
 

 
 
 
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 8-03 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:
   
Nine months ended
   
Three months ended
 
   
Sept. 30, 2009
   
Sept. 30, 2008
   
Sept. 30, 2009
   
Sept. 30, 2008
 
Net income (loss)
  $ (489,557 )   $ 371,726     $ (226,207 )   $ 223,343  
Other comprehensive (loss):
   Change in fair value of cash flow hedge
   Net of income tax expense (benefit) of
   $7,700 and $1,600 in 2009 and ($6,300)
   and ($3,400) in 2008, respectively
           11,463       (9,425 )            2,323       (5,125 )
Comprehensive income (loss)
  $ (478,094 )   $ 362,301     $ (223,884 )   $ 218,218  
 
   
 
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.

 
6

 


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 $1,145,000 and $905,000 for the nine months ended September 30, 2009 and 2008, respectively, and $522,000 and $315,000 for the three months ended September 30, 2009 and 2008 respectively.  Amounts owed to St. Lawrence Industrial Services, Inc. which are included in Accrued Expenses and Other Liabilities were $0 and $57,790 at September 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.  In 2008, 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.  These are excluded for the diluted share calculation for the three month and the nine month periods due to the net loss.



6.  Reclassifications
 
Certain reclassifications have been made to the September 30, 2008 financials statements to conform with the 2009 presentation.
 

 
 
7

 
 

PART I – FINANCIAL INFORMATION

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


LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2009, the Company had cash of $130,544 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 September 30, 2009, the Company had working capital of ($479,881) compared to $5,740,747 at December 31, 2008, and a current ratio of .96 to 1 at September 30, 2009 and 1.77 to 1 at December 31, 2008.

For the nine months ended September 30, 2009, the Company’s net cash provided by operations was $1,749,354 compared to $780,379 during the nine months ended September 30, 2008.  The cash provided by operations for the nine months ended September 30, 2009 was primarily a result of an increase in accounts payable.

The Company’s net cash used in investing activities of $207,634 during the first nine months of the year was attributable to the purchase of field equipment.  The net cash used in investing activities during the nine months ended September 30, 2008 was $358,068.

For the nine months ended September 30, 2009, the Company’s net cash used in financing activities was $1,491,180 compared to $485,912 during the nine months ended September 30, 2008.  The net cash used in financing activities for the nine months ended September 30, 2009 was primarily due to the reduction in outstanding checks in excess of bank balance.

The Company has a loan agreement that provides for borrowings on a revolving basis, collateralized by all accounts receivable, inventory and equipment now owned or acquired later.  The Company projected a short-term additional financing need based on the size of several large projects planned in the third and fourth quarters of the year and negotiated an increase in the loan agreement from $6,000,000 to $7,500,000 as of September 30, 2009.  The loan was payable on July 1, 2011, bears interest at a rate of LIBOR plus 4.00 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.  As of September 30, 2009, borrowings against the revolving loan aggregated $5,278,177.

During the third quarter of 2009, all principal payments on the Company’s debt were made within payment terms.  As of September 30, 2009, the Company was not in compliance with financial covenants and received a waiver at September 30, 2009.  The waiver modified the agreement maturity date to December 31, 2009.  In addition, the available line was reduced to $6,000,000 as the additional amount was not necessary.  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.

 
8

 
 

RESULTS OF OPERATIONS


PROJECT REVENUE

The Company's project revenue for the third quarter of 2009 decreased 7% to $9,825,226 from $10,606,146 for the third quarter of 2008.  For the nine-month period ended September 30, 2009 the Company’s project revenue has decreased 3% to $24,510,825 from $25,354,684 for the same period in 2008.


PROJECT COSTS AND GROSS MARGIN

Project costs for the third quarter of 2009 increased 3% to $8,312,921 from $8,103,340 for the same period in 2008.  Project costs as a percentage of revenues were84.6% and 76.4% for the three months ended September 30, 2009 and 2008, respectively.  Gross margin for the third quarter of 2009 decreased to 15.4% from 23.6% for the same period in 2008.  The decrease in gross margin is attributed to work performed in the quarter in lower margin segments.

For the nine-month period ended September 30, 2009, project costs increased 6% to $19,604,046 from $18,482,076 for the nine months ended September 30, 2008. Project costs as a percentage of revenues were 80.0% for the nine months ended September 30, 2009 and 72.9% for the same period in 2008. Gross margin for the nine months ended September 30, 2009 decreased to 20.0% from 27.1% for the same period in 2008 attributed to the economic climate, industry competiveness, and job mix.


OPERATING EXPENSES

Operating expenses for the quarter ended September 30, 2009 decreased 11% to $1,801,376 from $2,014,183 for the same period in 2008.  For the nine-month period ended September 30, 2009, operating expenses decreased 7% to $5,464,338 from $5,898,603 for the same period in 2008. Operating expenses as a percentage of revenues decreased to 22.3% for the nine months ended September 30, 2009 compared to 23.3% for the comparable period in 2008.

When comparing the third quarter of 2009 to 2008, the decrease in operating expenses is primarily due to:

·  
Payroll and payroll related expense decreasing 6% to $788,661 from $838,795 is primarily a result of reductions in variable compensation accruals for key employees which are related to profitability.

·  
Professional fees increased 37% to $265,808 from $194,687 as a result of professional fees for the settlement of the legal proceeding discussed in Part II.

·  
Equipment expenses, net of usage credit decreased 61% to $103,398 from $264,045 attributed to an improvement in equipment utilization and more equipment cost being included in project costs.

·  
Other expenses decreasing 56% to $87,470 from $200,179 attributed to the decrease in the bad debt expense.  In the third quarter of 2008, the Company increased the allowance for doubtful accounts for a specific account.

 
9

 

 
INTEREST EXPENSE

Interest expense for the quarter ended September 30, 2009 decreased 29% to $80,792 from $114,233 for the same period in 2008.  Interest expense for the nine months ended September 30, 2009 decreased 34% to $234,865 from $358,430 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 before income taxes for the quarter ended September 30, 2009 was ($372,207) compared to net income before income taxes of $376,188 for same period in 2008.  Net loss before income taxes for the nine months ended September 30, 2009 was ($804,557) compared to net income before income taxes of $627,785 for the nine months ended September 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 $146,000 for the quarter ended September 30, 2009 compared to an income tax expense of ($152,845) for same period in 2008.  The Company recorded income tax benefit of $315,000 for the nine months September 30, 2009 compared to an income tax expense of ($256,059) for the same period in 2008.



NET INCOME (LOSS)

Net loss before for the quarter ended September 30, 2009 was ($226,207) or ($.02) per share basic and diluted compared to net income before income taxes of $223,343 or $.02 per share basic and diluted for same period in 2008.  Net income (loss) for the nine months ended September 30, 2009 and 2008 was ($489,557) or $.04 per share basic and diluted, and $371,726 or $.03 per share basic and diluted, respectively.



 
10

 
 
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.

Not applicable

 
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Item 4/4T. – 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.

(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,  these  controls and  procedures  are adequate and effective in alerting them in a timely manner to material information relating to the Company required to be included in the Company'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.


 
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PART II - OTHER INFORMATION

 
Item 1.  Legal Proceedings.

The Company recorded an accrued liability of $150,000 at September 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.  The Company made payments of $250,000 during the quarter ended September 30, 2009.


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.
 
  
 
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

 
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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: November 14, 2009
         /s/ Charles B. Morgan
                        Charles B. Morgan
                        Chief Executive Officer


                         /s/ Jon S. Verbeck
                         Jon S. Verbeck
                         Chief Financial Officer and Treasurer