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, 2012

[ ]	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 or No _X_

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 X 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 (September 30, 2012) 11,940,373

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, 2012 (Unaudited) and December 31, 2011 (Audited)	3

	Consolidated Statements of Operations
	-Three months ended September 30, 2012 and September 30, 2011 (Unaudited)	4
	-Nine months ended September 30, 2012 and September 30, 2011 (Unaudited)

	Consolidated Statements of Comprehensive Income
	-Three months ended September 30, 2012 and September 30, 2011 (Unaudited)	5
	-Nine months ended September 30, 2012 and September 30, 2011 (Unaudited)

	Consolidated Statements of Cash Flows
	-Nine months ended September 30, 2012 and September 30, 2011 (Unaudited)	6

	Notes to Consolidated Financial Statements (Unaudited)	7

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

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	13

Item 4.	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 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,
	2012			2011

ASSETS

Current Assets:
Cash	$	896,224		$	412,141
Accounts receivable, net		7,111,224			9,556,251
Costs on uncompleted projects applicable to future billings		801,697			2,123,033
Inventory		411,971			356,243
Current portion of deferred tax asset (Note 9)		150,000			620,000
Prepaid expenses and other current assets		642,399			540,396
		-
Total Current Assets		10,013,515			13,608,064

Property and equipment, net		1,138,328			1,467,357
Deferred tax asset (Note 9)		200,000			200,000
Other long term assets		113,641			121,665

Total Assets	$	11,465,484		$	15,397,086


LIABILITIES AND STOCKHOLDERS' DEFECIT


Current Liabilities:
Accounts payable	$	3,357,198		$	6,858,504
Billings in excess of costs and estimated profit
on uncompleted projects		1,014,239			1,256,395
Accrued future losses		59,117			1,253,147
Accrued expenses and other current liabilities		1,506,970			1,080,899
Note payable to bank under line of credit		5,000,000			5,000,000
Convertible notes payable (Note 6)		1,995,334			1,870,333
Current portion of long-term debt (Note 8)		2,504,818			2,827,299

Total Liabilities		15,437,676			20,146,577

Shareholders' Defecit:
Common stock, par value $.01 per share; authorized 120,000,000
shares; 11,940,373 shares issued and outstanding		119,404			119,404
Additional paid-in capital		7,360,558			7,360,558
Accumulated deficit		(11,452,154	)		(12,229,453	)

		(3,972,192	)		(4,749,491	)

Total Liabilities and Sharehers' Equity	$	11,465,484		$	15,397,086


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						NINE MONTHS ENDED
	September 30,			September 30,			September 30,			September 30,
	2012			2011			2012			2011

Project billings and services	$	8,497,189		$	9,282,640		$	22,920,856		$	21,983,810

Project costs		5,563,052			8,458,968			16,008,606			17,748,117

Gross margin		2,934,137			823,672			6,912,250			4,235,693
		34.5	%		8.9	%		30.2	%		19.3	%
Operating expenses:
Payroll expense and related payroll taxes and benefits		901,845			1,125,082			2,858,255			3,635,051
Office Expense		92,345			168,736			272,838			487,701
Occupancy		210,598			218,634			618,734			666,580
Business Insurance		113,830			123,095			373,339			383,619
Professional Services		109,293			136,005			439,071			452,807
Equipment Expenses, net of usage credit		148,504			114,482			417,539			416,697
Other expenses		38,574			92,644			135,729			146,329
		1,614,989			1,978,678			5,115,505			6,188,784

Operating income (loss)		1,319,148			(1,155,006	)		1,796,745			(1,953,091	)

Other income and (expense):
Interest expense		(219,880	)		(147,113	)		(659,312	)		(448,197	)
Other, net		(12,938	)		44,076			115,664			125,724
		(232,818	)		(103,037	)		(543,648	)		(322,473	)

Net income (loss) before income taxes		1,086,330			(1,258,043	)		1,253,097			(2,275,564	)

Income tax benefit (expense)		(402,300	)		140,000			(475,799	)		537,000

Net income (loss)	$	684,030		$	(1,118,043	)	$	777,298		$	(1,738,564	)


Earnings (loss) per common share:
Basic	$	0.06		$	(0.09	)	$	0.07		$	(0.15	)
Diluted	$	0.01		$	(0.09	)	$	0.02		$	(0.15	)

Weighted average shares outstanding:
Basic		11,940,373			11,940,373			11,940,373			11,940,373
Diluted		52,543,076			11,940,373			48,729,743			11,940,373


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



OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME


	THREE MONTHS ENDED					NINE MONTHS ENDED
	September 30,		September 30,			September 30,		September 30,
	2012		2011			2012		2011

Net income (loss)	$	684,030	$	(1,118,043	)	$	777,298	$	(1,738,564	)
Other comprehensive income:

Change in Fair Value of Cash Flow Hedge
net of tax effect		-		-			-		4,844

Other comprehensive income		-		-			-		4,844

Comprehensive income (loss)	$	684,030	$	(1,118,043	)	$	777,298	$	(1,733,720	)

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)



	NINE MONTHS ENDED
	September 31,			September 31,
	2012			2011

Operating activities:
Net income (loss)	$	777,298		$	(1,738,654	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain on sale of equipment		-			-
Bad debt expense (recovery)		(27,335	)		(2,032	)
Depreciation and amortization		372,350			475,730
Amortization of discount on convertible notes		125,001			125,417
(Benefit) expense from deferred income taxes		470,000			(539,000	)
(Increase) decrease in operating assets and
increase (decrease) in operating liabilities:
Accounts receivable		2,472,362			357,904
Costs on uncompleted projects applicable to
future billings		1,321,336			(1,744,502	)
Billings and estimated profit in excess of costs
on uncompleted contracts		(242,156	)		462,004
Prepaid expenses, inventory and other assets		789,623			(336,052	)
Other long term assets		8,024			(40,381	)
Accounts payable and accrued expenses		(3,075,234	)		(315,861	)
Accrued future project losses		(1,194,030	)		-
Net cash provided by (used in) operating activities		1,797,239			(3,295,427	)

Investing activities:
Purchase of property and equipment		(43,321	)		(43,938	)
Deposit on purchase of building		-			(10,753	)
Proceeds from sale of equipment		74,000			-
Net cash provided by (used in) investing activities		30,679			(54,691	)

Financing activities:
Increase (decrease) in outstanding checks in excess of bank balance		-			49,501
Proceeds from issuance of convertible notes payable		-			403,000
Redemption of convertible note payable		-			(20,000	)
Proceeds from note payable to bank and current
and long-term borrowings, net of financing costs		-			3,147,297
Principal payments on current and long-term borrowings		(1,343,835	)		(863,061	)
Net cash provided by (used in) financing activities		(1,343,835	)		2,716,737

Increase (decrease) in cash		484,083			(633,381	)

Cash at beginning of period		412,141			646,560

Cash at end of period	$	896,224		$	13,179

Non-cash item
Non-cash debt refinancing	$	-		$	4,794,335
Non-cash refinancing of insurance	$	1,022,311		$	554,009


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 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, 2011 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, 2011.

2. 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.

3. 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 $2,067,000 and $1,760,000 for the nine months ended September 30, 2012 and 2011. At September 30, 2012, the Company had a payable to St. Lawrence of approximately $64,000 which is included in accounts payable. At September 30, 2011, the Company had a payable to St. Lawrence of approximately $49,000.

Additionally, the Company has entered into Secured Loan Agreements with members of management as discussed in Note 6 below.

4. Earnings per Share

Basic earnings per share are computed by dividing net income by the weighted average shares outstanding. There are outstanding options under the Company’s Stock Option Plan and warrants expiring May 2013 that were issued to a financial advisor in May 2002 to purchase 480,000 shares of common stock at $0.066 per share. The convertible notes payable with a face value of $2,000,000 are convertible into shares of common stock at the election of the holders of the Convertible Notes at $0.06 per share as more fully explained in Note 6. The options, warrants and shares which can be issued on conversion of these convertible notes were not included in the calculation of diluted earnings per share for 2011 as they would be anti-dilutive due to the net loss. The 2012 net income used in computing diluted earnings per share represents reported net income plus interest expense of $79,450 and $249,450 (net of tax of $52,967 and $166,300, respectively) for the three and nine months ended September 30, 2012, assuming conversion of the notes at the being of the respective periods.

5. Sale of Convertible Notes

During January 2011, the Company entered into a series of Secured Loan Agreements with several individuals for the sale of secured convertible notes (the “Convertible Notes”) totaling $403,000. These are in addition to the $1,617,000 convertible notes issued during the year ending December 31, 2010. These individuals represent members of executive management, members of the board of directors, and significant shareholders. The Convertible Notes are for a term of two years, carry interest of 6% and are convertible into shares of common stock at the election of the holders of the Convertible Notes at $0.06 per share and, as long as the average share price of the Company’s common stock on the Over-the-Counter Bulletin Board remains above $0.06, at the election of the Company at $0.06 per share. The issuance of the Convertible Notes in the first quarter of 2011 does not represent a change of control as approximately 94% of the Convertible Notes were issued to shareholders of the Company that currently own approximately 34% of the Company’s outstanding share capital.

The Company recorded $67,167 in additional debt discount in 2011 related to the issuance of these convertible notes due to the beneficial conversion feature, which is shown as Additional Paid in Capital and reduction in the convertible notes payable. These discounts will be amortized over two years. The discount is based on the market value of the stock at the date of the note agreements which was $.07 per share.

In January 2011, the Company redeemed $20,000 of Convertible Notes.

The principle amount of the Convertible Notes may be converted into 33,333,334 shares of common stock, or approximately 279% of current outstanding shares of common stock. Accrued interest is also converted at $0.06 per share.

The Company also entered into a Security Agreement to secure payment and performance of its obligations under the Convertible Notes pursuant to which it granted the holders of the Convertible Notes a security interest in all of its assets. The security granted is subordinated to a security interest granted to the Senior Debt. The Company’s sole active subsidiary also guaranteed all amounts owed by the Company under the Convertible Notes. Accrued interest is also converted at $0.06 per share.

Amortization expense related to the Convertible Note discounts was $115,750 for the nine months ending September 30, 2012 and is included in interest expense.

There is no more remaining amortization period for the discount related to the first tranche of $1,332,000, 3 months remains for second tranche of $285,000, and 3 months remains for the third tranche of $383,000, net of redemptions.

Interest expense recorded on these notes amounted to $415,000 for the nine months ended September 30, 2012 yielding an effective interest rate of 27.7%. The unamortized discount was approximately $14,000 at September 30, 2012.

6. Unapproved Change Orders

The Company enters into cost-reimbursable arrangements in which the final outcome or overall estimate at completion may be materially different than the original contract value. While the terms of such contracts indicate costs are to be reimbursed by our clients, the Company typically processes change notice requests to document agreement as to scope and price. Due to the nature of these items, we have not classified and disclosed the amounts as unapproved change orders.

While the Company is generally able to obtain the requested change orders on cost-reimbursable contracts, potential exposure exists relative to costs incurred in excess of agreed upon contract value.

The Company also has unapproved change orders on smaller projects in the ordinary course of business. These amounts are recorded at cost in cost on uncompleted contracts applicable to future billing and the applicable profit will be recorded when change orders are approved. Timing of claim collections are uncertain and depends on negotiated settlements pursuant to the contracts. As a result, the Company may not collect unapproved change orders within the next twelve months.

7. Long-Term Debt

The loan agreement requires a financial covenant to be measured at September 30, 2012. Due to the losses incurred during 2011 that debt covenant was violated at September 30, 2012. The default on the financing loan agreement also caused a default on the convertible note agreements. The Company did not receive a waiver from the bank for a violation of the debt covenants. Additionally, the Company was under-collateralized for the borrowing base calculation related to the line of credit at September 30, 2012.

For these reasons the long-term debt was reclassified to current liabilities and a reduction in working capital. Additionally, if the bank demanded repayment of the debt, the Company may not have sufficient capital to operate and there would be substantial doubt about its ability to continue as a going concern.

8. Income Taxes

For the nine months ended September 30, 2012, the Company maintained its valuation allowance for deferred tax assets. The company has approximately $9,200,000 of other net operating loss carryforwards that may be utilized when the Company generates taxable income. Management has assessed the potential utilization of other net operating loss carryforwards including those that will be generated in 2012 and determined that it is more likely than not that the Company will be able to generate taxable income to utilize a portion of the net operating losses with expiration dates of 2018 through 2031.

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, 2012, the Company had cash of $896,224 compared to $412,141 at December 31, 2011. The cash balance has increased due to improved collection of receivables and profitable operating activities.

At September 30, 2012, the Company had working capital of ($5,424,161) compared to ($6,538,513) at December 31, 2011, with a current ratio of .65 to 1 at September 30, 2012 and .68 to 1 at December 31, 2011. The current ratio remained the same for the periods stated.

For the nine months ended September 30, 2012, the Company’s net cash provided by operations was $1,797,239 compared to net cash used in operations of $3,295,427 during the nine months ended September 30, 2011. The cash provided by operating activities for the nine months ended September 30, 2012 was due to significant collections of receivable balances and the billing of previous costs that were applicable to future billings.

The Company’s net cash provided by investing activities of $30,679 during the first nine months ended September 30, 2012 compared to a net cashed used in investing activities of $54,691 during the nine months ended September 30, 2011. The cash provided by investing activities for the nine months ended September 30, 2012 of the year was due to the sale of equipment.

For the nine months ended September 30, 2012, the Company’s net cash used in financing activities was $1,343,835 compared to net cash provided by financing activities of $2,716,737 during the nine months ended September 30, 2011. The net cash used in financing activities for the nine months ended September 30, 2012 was due to payments on financing agreements.

The Company refinanced the senior debt on April 22, 2011. The new loan agreement provides for short-term borrowings up to $5,000,000 on a revolving basis at LIBOR plus 3.5%, and a term loan of $3,000,000 due in monthly principal installments of $50,000 plus interest at LIBOR plus 3.5% through 2016.

During the first quarter of 2012, all principal payments on the Company’s debt were made within payment terms.

The loan agreement requires a financial covenant to be measured at September 30, 2012. As more fully discussed in Note 7, due to the losses incurred during 2011, a violation of that debt covenant occurred.

RESULTS OF OPERATIONS

PROJECT REVENUE

The Company's project revenue for the third quarter of 2012 decreased 8% to $8,497,189 from $9,282,640 for the third quarter of 2011. For the nine month period ended September 30, 2012 the Company’s revenues have increased 4% to $22,920,856 from $21,983,810 for the nine months ended September 30, 2012. The decrease in revenue for the third quarter of 2012 is due to the company focusing on lower revenue but higher profit work for that three month period, as compared to the 2011 period which included three large projects that had low margins. For the nine months ended September 30, 2012 the company did have an increase in revenue due to both the backlog and projects that the Company was able to execute in the second quarter of 2012.

PROJECT COSTS AND GROSS MARGIN

Project costs for the third quarter of 2012 decreased 34% to $5,563,052 from $8,458,968 for the same period in 2011. Project costs as a percentage of revenues were 65.5% and 91.1% for the three months ended September 30, 2012 and 2011, respectively. Gross margin for the third quarter of 2012 increased to 34.5% of revenues from 8.9% for the same period in 2011. For the nine month period ended September 30, 2012, project costs decreased $1,739,511 to $16,008,606 from $17,748,117 for the nine months ended September 30, 2011. Gross margin as a percentage of revenues were 30.2% and 19.9% for the nine months ended September 30, 2012 and 2011, respectively. The increase in gross margin is primarily attributed to the project mix with recurring projects yielding higher blended margins. This includes work that was primarily labor intensive with higher time and material rates that accounted for additional work that the company was able to secure.

OPERATING EXPENSES

Operating expenses for the quarter ended September 30, 2012 decreased 18% to $1,614,989 from $1,978,678 for the same period in 2011. Operating expenses as a percentage of revenues decreased to 19.0% for the three months ended September 30, 2012 compared to 21.3% for the comparable period in 2011.

When comparing the third quarter of 2012 to 2011, the increase in operating expenses was a combination of the following:

Payroll and payroll related expense decreased due to decreases in staff levels and increases in project manager billability in 2012.

Office expenses decreased due a decline in IT and telephone expenditures. Certain office assets also became fully amortized during 2011.

For the nine month period ended September 30, 2012, operating expenses decreased 17% to $5,115,505 from $6,188,784. Operating expenses as a percentage of revenues decreased to 22.3% for the nine months ended September 30, 2012 compared to 28.2% for the same period in 2011.

INTEREST EXPENSE

Interest expense for the quarter ended September 30, 2012 increased 49% to $219,880 from $147,113 for the same period in 2011. Interest costs for the nine months ended September 30, 2012 increased 47.1% to $659,312 from $448,197 for the nine months ended in 2011. This increase is due to the interest related to the convertible notes payable increasing from 6% to 20% under the default rate provision.

NET INCOME (LOSS) BEFORE INCOME TAXES

Net income before income taxes for the quarter ended September 30, 2012 was $1,086,330 compared to a net loss before income taxes of ($1,258,043) for same period in 2011. Net income before income taxes for the nine months ended September 30, 2012 was $1,253,097 compared to the net loss of ($2,275,564) for the nine months ended September 30, 2011. Net income before income taxes is primarily a result of the increase in project billings and gross margin, accompanied by a decrease of overhead expenses for the 2012 periods.

INCOME TAX (EXPENSE) BENEFIT

The Company recorded income tax expense for the quarter ended September 30, 2012 of ($402,300) compared to an income tax benefit of $140,000 for same period in 2011. The Company recorded income tax expense of ($475,799) for the nine months ended September 30, 2012 compared to income tax benefit of $537,000 for the nine months September 30, 2011.

NET INCOME (LOSS)

Net income for the quarter ended September 30, 2012 was $684,030 or $.06 per share basic and $.01 per share diluted compared to net loss of ($1,118,043) or ($.09) per share basic and diluted for same period in 2011. Net income (loss) for the nine months ended September 30, 2012 and 2011 was $777,298 and ($1,738,564), 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. 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. Unapproved change orders are recorded at cost in cost on uncompleted contracts applicable to future billings.

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. – 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 Acting Principal Accounting 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 Acting Principal Accounting 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 a 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 controls and procedures are designed to provide reasonable assurance of achieving their objectives. The Company's Chief Executive Officer and Acting Principal Accounting Officer determined that, as of the end of the period covered by this report, the 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.

Due to the assessment that controls are effective, the Company did not enact changes to internal controls during the quarter ended September 30, 2012.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

During the quarter ended September 30, 2012, there were no significant items of litigation or legal proceedings.

Item 1A. Risk Factors.

None

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

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

None

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit 31.1 Certification of Chief Executive Officer

Exhibit 31.2 Certification of Acting Principal Accounting Officer

Exhibit 32.1 Section 1350 Certification of Chief Executive Officer

Exhibit 32.2 Section 1350 Certification of Acting Principal Accounting Officer

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

Exhibit 101

101.INS - XBRL Instance Document

101.SCH - XBRL Taxonomy Extension Schema Document

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

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: May 28, 2013

/s/ Charles B. Morgan

Charles B. Morgan

Chief Executive Officer

/s/ Michael D. McCall

Michael D. McCall

Controller and Treasurer

OP TECH ENVIRONMENTAL SERVICES INC 10-Q