Securities and Exchange Commission

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2010~~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 No. 000-19761

OP-TECH Environmental Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware	91-1528142
(State or other jurisdiction of or organization)	(I.R.S. Employer incorporation Identification No.)

Delaware 91-1528142

(State or other jurisdiction ofor organization) (I.R.S. Employer incorporation Identification No.)

One Adler Drive, East Syracuse, NY 13057

(Address of principal executive office) (Zip Code)

(315) 437-2065

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title of Class)

Indicate by check mark if the registrant is a well known seasoned issuer as defined in Rule 405 of the Securities Act:

Yes [ ] or No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:

Yes [ ] or No [X]

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 [ X]

Indicate by check mark whether registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data file the required to be submitted and posted pursuant to rule 405 off Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post said files: Yes [ ] or No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act:

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] or No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was as of the last business day of the registrant’s most recently completed second fiscal quarter: ~~$4,059,726~~

~~Indicate the number of shares outstanding of each of the Company’s classes of common stock, as of March 21, 2011. Common stock,~~ $~~.01 par value: 11~~52,~~940,372~~000

Indicate the number of shares outstanding of each of the Company’s classes of common stock, as of April 30, 2013. Common stock, $.01 par value: 11,940,373.

PART I

SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS

The Company is including the following cautionary statement in this Form 10-K 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-K, press releases issued by the Company, and certain information provided periodically in writing and orally by the Company’s designated officers and agents contain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words expect, believe, goal, plan, intend, estimate, and similar expressions and variations thereof used are intended to specifically identify forward-looking statements. Where any such forward-looking statement includes a statement of the assumptions or basis underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or basis to be reasonable and makes them in good faith, assumed facts or basis almost always vary from actual results, and the differences between assumed facts or basis and actual results can be material, depending on the circumstances. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

ITEM 1. BUSINESS

General

OP-TECH Environmental Services, Inc. and Subsidiaries (the “Company” of “OP-TECH”), a Delaware corporation headquartered in East Syracuse, New York, provides comprehensive environmental and industrial cleaning and decontamination services predominately in New York, New England, Pennsylvania, New Jersey, and Ohio. The Company provides environmental remediation services for sites contaminated by hazardous and non-hazardous materials. The Company also performs industrial cleaning of hazardous and non-hazardous materials and provides varying services relating to plant facility closure, including interior and exterior demolition and asbestos removal. OP-TECH also provides 24-hour emergency spill response services. The Company’s revenues are derived from state agencies, industrial companies, engineering firms and municipalities facing complex environmental clean-up problems associated with hazardous and non-hazardous materials as required by various governmental agencies. The Company’s services include assessing the regulatory, technical, and construction aspects of the environmental issue, and performing the necessary remediation activities. The Company seeks to provide its clients with remedial solutions which integrate the various aspects of a project and are well-documented, practical, cost effective, and acceptable to regulatory agencies and the public.

Services

Excavation & Site Remediation Services

OP-TECH provides soil excavation, management, and transportation and disposal for complex projects that require handling large volumes of materials. Excavation and removal is a fundamental, remediation method involving the removal of contaminated soil, which is typically ~~are~~ transported off-site for treatment or disposal.

“Specialized Excavation”

When conventional excavation techniques are not feasible or are impractical, OP-TECH employs “specialized excavation” techniques that safely provide a non-destructive and precise excavation practice in areas such as building basements, backyards, or other confined areas. Specialized excavation techniques are used to locate/identify underground utilities, tanks, structures, or excavation near buildings, retaining walls or foundations and for excavation of buried drums, cylinders and unknown materials.

Buried Drums and Cylinders

OP-TECH has vast experience handling complex buried drum, ~~cylinders~~cylinder and unknown material excavation projects. OP-TECH applies “specialized excavation” techniques to excavate drums from the most challenging environments. We provide complete drum management services including, screening, sampling, profiling, manifesting and transportation and disposal of hazardous or non-hazardous waste. These projects require careful investigation due to a large number of anomalies and the complexity of coordinating heavy equipment operations, drum handling and final site closure.

In-Situ & Ex-Situ Treatment

OP-TECH has demonstrated experience in providing in-situ and ex-situ treatment systems. Utilizing chemical oxidation, stabilization and solidification and mobile treatment systems, we provide solutions in the most challenging environments.

Chemical Oxidation

OP-TECH provides chemical oxidation applications using peroxide (Fenton’s Reagent) and permanganate products, which cause the rapid and complete chemical destruction of many toxic organic chemicals. The Company’s experience includes direct in-situ injection application, ex-situ or off site for successful remediation of soil and groundwater.

Chemical Oxidation

OP-TECH provides chemical oxidation applications using peroxide (Fenton’s Reagent) and permanganate products, which cause the rapid and complete chemical destruction of many toxic organic chemicals. The Company’s experience includes direct in-situ injection application and ex-situ for successful remediation of soil and groundwater.

Stabilization and Solidification

OP-TECH provides soil solidification and stabilization applications, which reduce the mobility of hazardous substances and contaminants in the environment through both physical and chemical means. Solidification and stabilization techniques are used alone or combined with other treatment and disposal methods to yield a product or material suitable for land disposal or in other cases that can be applied to beneficial use. These techniques have been used as both final and interim remedial measures.

Wetlands Mitigation

OP-TECH has exceptional experience with wetlands remediation and restoration projects. Project experience has included removal of sediments from many active water courses ranging from creeks and marshes to large scale marinas.

Mobile Treatment Applications

OP-TECH provides mobile treatment systems for routine, scheduled service applications or dispatches them on an emergency basis. The Company’s capacities range from 10 to approximately 500 gallons per minute and are available in a number of sizes and configurations. All systems are pre-assembled, self-contained, ~~requiring~~require minimal setup time upon mobilization, and are available as trailer-mount, skid- mount or containerized.

Site Closure Services

OP-TECH provides complete RCRA and Non-RCRA Site Closure Services in support of property transfer, facility closure, disaster recovery, development/redevelopment, and Brownfield transactions. The Company’s services include comprehensive decontamination, decommissioning, demolition and material/soil remediation.

Decontamination

OP-TECH offers a wide range of decontamination services. In emergency and scheduled situations, we evaluate the circumstances and develop a safe, comprehensive and cost efficient plan.

OP-TECH has ~~preformed~~performed thousands of decontaminations and facility closures ~~for~~ranging from small single buildings to multi-building expansive facilities.

Decommissioning and Demolition Services

OP-TECH provides Demolition and Dismantling Services in both emergency and scheduled situations. Applications may include building demolition and dismantling of partial or total building or plant structure.

Upgrading equipment or renovating production areas may require the removal of existing process equipment. Welded piping, stainless alloys, reactors, concrete structures, structural steel, pressure vessels and limited space requires the skillful selection of demolition techniques such as cold and hot cutting including plasma arc cutting, mechanical disassembly and/or rigging.

OP-TECH provides contamination identification, sampling, segregation and disposal. The Company implements efficient methodologies to reduce site emissions during demolition activities and cost- efficient disposal technologies.

Remedial Systems

OP-TECH fabricates and constructs integrated remediation systems configured to meet site-specific cleanup criteria while satisfying air and/or water quality discharge standards. The Company’s integrated remedial systems address all aspects of surface and subsurface contamination as it exists in groundwater and soil.

Operations and Maintenance Service

OP-TECH provides operation services and routine mechanical inspection and service of remediation systems and components.

Transportation and Disposal Services

The Company provides transportation of bulk and containerized hazardous and non-hazardous wastes from customer sites to customer-designated landfills and disposal facilities. OP-TECH also provides liquid tank truck transports equipped with vacuum pumps.

Asbestos Abatement

OP-TECH provides asbestos abatement contracting services to both the public and private sectors. OP-TECH has expertise in all types of asbestos abatement including removal, disposal and enclosure, and encapsulation. Asbestos removal is performed in commercial buildings, industrial facilities, and governmental buildings.

Interior Demolition/Structural Dismantling

OP-TECH provides interior demolition services such as removing walls, ceilings, and flooring. In addition, OP-TECH offers structural dismantling services and has experience in razing concrete, wood and steel structures, concrete and brick chimneys, and concrete piers and foundations.

On-Site Industrial and Waste Management Services

OP-TECH provides on-site industrial cleaning and waste management services. Specialized services for the handling, processing and disposal of hazardous wastes are performed by vacuuming, soda blasting, hydroblasting, dredging, dewatering and sludge processing, sludge pumping, chemical cleaning, and tank cleaning.

OP-TECH provides line cleaning, installation of petroleum piping and process piping. ~~Water~~ The Company additionally provides water, storm, sewer and other product piping as well as treatment systems.

24-Hour Emergency Spill Response

Many of ~~the~~ OP-TECH’s decontamination and mitigation activities result from a response to an emergency situation by one of its response teams. These incidents can result from transportation accidents involving chemical or petroleum substances, fires at chemical facilities or hazardous waste sites, transformer fires or explosions involving PCBs, and other unanticipated events. The substances involved may pose an immediate threat to public health or the environment, such as possible groundwater contamination. The steps performed by OP-TECH include rapid response, containment and control procedures, sampling for analytical testing and assessment, neutralization and treatment, and collection and transportation of the substance to an appropriate treatment or disposal facility. OP- TECH derives a substantial portion of its revenues from an agreement with the New York State Department of Environmental Conservation (NYSDEC) to provide emergency response services in certain areas of New York State, payment of which is guaranteed by the NYSDEC.

Non-Hazardous Waste Transfer and Storage Facility

OP-TECH operates a New York State permitted non-hazardous waste treatment, storage and transfer facility in its Waverly, New York office. The Company accepts non-hazardous waste in bulk or containerized form, consolidates the waste and then transfers it to a landfill or recycling facility.

Technologies Employed

OP-TECH utilizes a wide variety of physical and chemical treatment technologies in performing its remediation activities. Physical treatment technologies generally involve filtration and aeration techniques and are used to separate contaminants from soils, slurries, or water. Chemical treatment technologies generally involve flocculation, clarification, precipitation, polymer addition, chemical oxidation, chemical absorption, and stabilization. Depending on the contaminants present and the site characteristics, these technologies are combined into integrated treatment systems which reduce contaminant concentrations to levels consistent with prescribed regulatory standards.

Regulation

The business of the Company and its clients is subject to extensive, stringent, and evolving regulation by the EPA and various other federal, state, and local environmental authorities. These regulations directly impact the demand for the services offered by the Company. In addition, the Company is subject to the Federal Occupational Safety and Health Act, which imposes requirements for employee safety and health. The Company believes it is in material compliance with all federal, state, and local regulations governing its business.

RCRA. The Resources Conservation and Recovery Act of 1976 (“RCRA”) is the principal federal statute governing hazardous waste generation, treatment, storage, and disposal. RCRA or EPA- approved state programs may govern any waste handling activities of substances classified as “hazardous.” The 1984 amendments to RCRA substantially expanded its scope by, among other things, providing for the listing of additional wastes as “hazardous” and providing for the regulation of hazardous wastes generated in lower quantities than previously had been regulated. Additionally, the amendments impose restrictions on land disposal of certain hazardous wastes, prescribe more stringent standards for hazardous waste land disposal sites, set standards for underground storage tanks and provide for “corrective” action at or near sites of waste management units. Under RCRA, liability and stringent operating requirements may be imposed on a person who is either a “generator” or a “transporter” of hazardous waste, or an “owner” or “operator” of a waste treatment, storage, or disposal facility.

Regulation of underground storage tanks legislation, in particular Subtitle I of RCRA, focuses on the regulation of underground tanks in which liquid petroleum or hazardous substances are stored and provides for the regulatory setting for a portion of the Company’s work. Subtitle I of RCRA requires owners of all existing underground tanks to list the age, size, type, location, and use of each tank with a designated state agency. The EPA has published performance standards and financial responsibility requirements for storage tanks over a five year period. These regulations also require all new tanks which are installed to have protection against spills, overflows, and corrosion. Subtitle I of RCRA provides civil penalties of up to $15,000 per violation for each day of non-compliance with tank requirements and $10,000 for each tank for which notification was not given or was falsified. RCRA also imposes substantial monitoring obligations on parties which generate, transport, treat, store, or dispose of hazardous waste.

Superfund Act. The Comprehensive Environmental Response Compensation and Liability Act of 1980 (“Superfund Act”) generally addresses clean-up of inactive sites at which hazardous waste treatment, storage, or disposal took place. The Superfund Act assigns joint and several liability for cost of clean-up and damages to natural resources to any person who, currently, or at the time of disposal of a hazardous substance who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport of hazardous substances owned or possessed by such person for disposal or treatment; and to any person who accepts hazardous substances for transport to disposal or treatment facilities or sites from which there is a release or threatened release. Among other things, the Superfund Act authorized the federal government either to clean up these sites itself or to order persons responsible for the situation to do so. The Superfund Act created a fund, financed primarily from taxes on oil and certain chemicals, to be used by the federal government to pay for the clean-up efforts. Where the federal government expends money for remedial activities, it may seek reimbursement from the potentially responsible parties.

The liabilities provided by the Superfund Act could, under certain factual circumstances, apply to a broad range of possible activities by the Company, including generation of hazardous substances, releases of hazardous substances during transportation, failure to properly design a clean-up, removal or remedial plan and failure to achieve required clean-up standards, leakage of removed wastes in transit or at the final storage site, and remedial operations on ground water. Such liabilities can be joint and several where other parties are involved.

Other. The Company’s operations are subject to other federal laws protecting the environment, including the Clean Water Act and the Toxic Substances Control Act.

Many states have also enacted statutes regulating the handling of hazardous substances, some of which are broader and more stringent than the federal laws and regulations.

Competitive Conditions

The markets for environmental remediation, as well as demolition and asbestos removal, continue to be very competitive. The Company competes with many different firms ranging from small local firms to large national firms, many of which have greater financial and marketing resources than the Company. Competition in environmental services is based largely on competitive pricing and quality of service provided. Other competitive factors include geographic location as well as reputation. Management believes the Company is one of the few firms based in its market area that offers a high quality combination of environmental services at the most competitive prices. In addition, through its wide range of environmental services, good reputation, and competitive pricing, the Company hopes to maintain a competitive edge in the environmental services business.

The Company operates field offices in Syracuse, Massena, Rochester, Albany, ~~Plattsburgh,~~ Waverly and Buffalo, New York, as well as ~~Edison,~~Philadelphia ~~New Jersey, Baltimore, Maryland~~ and ~~Cleveland, Ohio~~ Pennsylvania.

Seasonality

Typically, during the first quarter of each calendar year there is less demand for environmental remediation due to the cold weather, particularly in the Northeast and Midwest regions. In addition, factory closings for the year-end holidays reduce the volume of industrial waste generated, which results in lower volumes of waste handled by the Company during the first quarter of the following year.

Customers

The Company’s client base includes state agencies, industrial companies, railroads, real estate developers, auto parts manufacturers, aluminum producers, utility companies, waste disposal firms, municipalities, and engineering firms. During ~~2010~~2012, the Company performed services for approximately ~~900~~500 clients. These projects were substantially all short-term (six months or less) in nature. The largest business segment for the each of the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, was Environmental Remediation services. Environmental Remediation services accounted for 3918%, 3830%, and 4439% of the Company’s revenues for the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively. For the past three fiscal years, all of the Company’s revenues were generated from customers in the United States.

During ~~2010~~2012, the Company had project revenue of approximately $87,~~536~~235,~~000~~190 related to several contracts with the New York State Department of Environmental Conservation, which totaled approximately 1822% of the Company’s revenues. A portion of that revenue is related to the spill response and remediation contracts with the New York State Department of Environmental Conservation. While the Company maintains its position on the spill response contract, it relinquished its prime position in the remediation contract on October 1, 2010. This position on the remediation contract was relinquished due to a poor return on investment with significant overhead requirements and reduced overall spending by the New York State Department of Environmental Conservation.

During 2012, the Company had project revenue of approximately $3,990,000 related to many service and remediation contracts with National Grid, a large utility company, which totaled approximately 12% of the Company’s revenues.

During 2012, the Company had sales of approximately $3,381,000 to ALCOA, which totaled approximately 10% of the Company’s revenues.

Insurance and Bonding

The Company maintains commercial general liability, asbestos liability and pollution liability insurance which provides an aggregate coverage ~~limits~~limit of $15 million. In addition, the Company ~~also~~ maintains workers’ compensation, comprehensive automobile, and Directors and Officers liability insurance. ~~The~~ We believe that the Company’s insurance coverage is consistent with the insurance requirements found in the environmental remediation industry.

In connection with ~~the~~its business, the Company may be required to provide various types of surety bonds that provide an additional measure of security for the ~~Companies~~Company’s performance under certain public and private sector contracts. The Company’s ability to obtain surety bonds depends upon capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our contract backlog that we have currently bonded and their current underwriting standards, which may change from time to time. The capacity of the surety market is subject to market-based fluctuations driven primarily by the level of surety industry losses and the degree of surety market consolidation. When the surety market capacity shrinks it results in higher premiums and increased difficulty obtaining bonding, in particular for larger, more complex projects throughout the market. In addition, the Company’s negative working capital and retained deficit may impact the Company’s ability to obtain bonds. In order to help mitigate this risk, the Company employs a co-surety structure involving ~~three~~two sureties. Although the Company does not believe that fluctuations in surety market capacity have significantly affected the ability to grow the business or that the Company’s 2011 results will affect the Company’s ability to obtain bonds, there is no assurance that itthese factors will not significantly affect the ability to obtain new contracts in the future.

Employees

As of ~~March~~April 2112, ~~2011~~2013, the Company had a total of approximately ~~142~~137 full-time employees. The Company’s ability to retain and expand its staff will be an important factor in determining the Company’s future success. The Company considers its relations with its employees to be good, and the Company has never had a work stoppage or threat of a work stoppage.

Available Information

The Company’s internet address is www.op-tech.us. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are available on the Company’s website as soon as reasonably practicable after the Company electronically files such material with the Securities and Exchange Commission (SEC) ~~is available there~~. The information found on the Web site is not part of this or any other report the Company files or furnishes to the SEC.

The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room located at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of the reports on its website at www.sec.gov.

ITEM 2. PROPERTIES

The Company leases its corporate headquarters in East Syracuse, NY and its branch office locations in Syracuse, Buffalo, Rochester, Massena, Waverly, Albany, and ~~Plattsburgh~~Norristown, ~~NY, Baltimore, MD, and Edison, NJ~~PA. The Company leases an aggregate of approximately ~~114~~116,~~007~~933 square feet of office, shop and warehouse space at those locations. The leases expire at various times through ~~September~~November 30, ~~2014~~2016. The current aggregate monthly lease payment is $5257,~~496~~183 plus utilities. The Company has aprepaid ~~purchase~~rent ~~option~~ on a building ~~and made deposits~~ of approximately $4960,000 ~~toward this potential purchase~~.

Equipment

The Company’s owned equipment consists primarily of construction equipment such as vacuum trucks, dump trucks, tankers, excavation equipment, utility vehicles, pumps, generators, and compressors, some of which have been specially modified for the Company’s use. The Company also leases and rents equipment as needed.

ITEM 3. LEGAL PROCEEDINGS

In 2012, the Company settled two lawsuits for $48,000 and $1,050 respectively. The Company ~~had~~has an accrued liability of $~~450~~49,~~000~~050 recorded at December 31, ~~2008. The~~2011 ~~liability~~related ~~was~~to ~~been~~this ~~paid in 2009~~settlement.

~~ITEM~~In 42012, the Company made a settlement for $100,000 with the New York State Department of Labor related to asbestos operations. The ~~REMOVED~~Company’s ~~AND~~asbestos ~~RESERVED~~handling license is current and in compliance.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY ~~SECURTIES~~SECURITIES

(a) The shares of the Company’s common stock are listed on the ~~Over~~ over-the -Counter ~~Bulletin~~market ~~Board~~maintained by OTC Link LLC, commonly known as the Pinksheets, under the symbol OTES.

The high and low closing bid prices for the shares of the Company’s common stock were as follows:

Quarter Ended	High		Low
31-Mar-09	$	0.55	$	0.14
March 31, 2010	$	0.45	$	0.20
30-Jun-09	$	0.50	$	0.30
June 30, 2010	$	0.50	$	0.18
30-Sep-09	$	0.50	$	0.50
September 30, 2010	$	0.15	$	0.07
31-Dec-09	$	0.50	$	0.21
December 31, 2010	$	0.09	$	0.07
31-Mar-10	$	0.45	$	0.20
March 31, 2011	$	0.15	$	0.07
30-Jun-10	$	0.50	$	0.18
June 30, 2011	$	0.15	$	0.07
30-Sep-10	$	0.15	$	0.07
September 30, 2011	$	0.07	$	0.07
31-Dec-10	$	0.09	$	0.07
December 31, 2011	$	0.07	$	0.07
First quarter through March 21, 2011	$	0.15	$	0.07
March 31, 2012	$	0.01	$	0.01
June 30, 2012	$	0.01	$	0.002
September 30, 2012	$	0.01	$	0.002
December 31, 2012	$	0.01	$	0.005
March 31, 2013	$	0.005	$	0.005

The aforementioned prices reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

~~(b) At March 21, 2011, there were approximately 135 holders of record of the Company’s common stock.~~8

(b)

At April 30, 2013, there were approximately 134 holders of record of the Company’s common stock.

(c)

The Company has never paid any dividends.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		275,340	$	0.27		292,004
Equity compensation plans not approved by security holders		-		-		-
Total		275,340	$	0.27		292,004

The information shown below is as of December 31, 2012.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		259,673	$	0.28		307,371
Equity compensation plans not approved by security holders		-		-		-
Total		259,673	$	0.28		307,371

ITEM 6. SELECTED FINANCIAL DATA

Statement of Operations Data

Year Ended December 31,

	Year Ended December 31,

	2012			2011		2010			2009		2008
Project Billings and Services	$	30,665,334		$	46,036,043	$	36,023,901		$	36,632,276	$	32,483,687
Net Income (loss)		(7,481,702	)		786,271		(1,884,890	)		654,927		(405,574	)
Net Income (loss) per Share
- Basic	$	(0.63	)	$	0.07	$	(0.16	)	$	0.05	$	(0.03	)
- Diluted	$	(0.63	)	$	0.03	$	(0.16	)	$	0.05	$	(0.03	)

	2010		2009			2008		2007			2006
Project Billings and Services	$	46,186,043	$	36,023,901		$	36,632,276	$	32,483,687		$	35,069,989
Net Income (loss)		786,271	$	(1,884,890	)	$	654,927	$	(405,574	)	$	207,973
Net Income (loss) per Share
-Basic	$	.07	$	(.16	)	$	.05	$	(.03	)	$	.02
-Diluted	$	.03	$	(.16	)	$	.05	$	(.03	)	$	.02

Balance Sheet Data

As of December 31,

	As of December 31,

	2012			2011			2010		2009		2008
Total Assets	$	12,626,715		$	15,397,086		$	17,311,318	$	18,113,208	$	17,149,598
Long-Term Obligations		-			-			2,684,500		-		6,249,748
Total Liabilities		16,371,001			20,146,577			14,651,118		16,536,095		13,702,400
Shareholders’ Equity (Deficit)		(3,744,286	)		(4,749,491	)	$	2,660,200		1,577,113		3,447,198

	2010		2009		2008		2007		2006
Total Assets	$	17,311,318	$	18,113,208	$	17,149,598	$	16,254,072	$	18,470,167
Long-Term Obligations	$	2,684,500		-	$	6,249,748	$	6,733,952	$	7,859,741
Total Liabilities	$	14,651,118	$	16,536,095	$	13,702,400	$	13,439,236	$	15,305,884
Shareholders’ Equity	$	2,660,200	$	1,577,113	$	3,447,198	$	2,814,836	$	3,164,283

9ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

~~ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL~~ CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE LEVEL OVERVIEW

The Company is a leading provider of environmental and industrial services throughout the Northeastern and Mid-Atlantic regions of the United States. The Company serves over ~~1,100~~600 customers, including a significant number of the top 500 engineering firms, hundreds of smaller private entities and numerous federal, state and local government agencies.

The Company’s strategy is to apply its expertise in the environmental remediation industry to increase market share, increase profitability and enhance shareholder value.

In ~~2010~~2012, the Company ~~experienced~~was ~~the~~able ~~excellent~~to ~~results~~be ~~that~~highly weprofitable primarily due to healthy margins on projects combined with a reduction of overhead costs. The Company was also able to successfully negotiate contracts that had ~~forecast~~favorable pay terms, ~~while~~which ~~addressing~~alleviated ~~the~~pressure ~~difficulties~~related ~~from~~to financing operations. Projects that the ~~previous~~company performed were also executed timely, so that a high productivity contributed to better margins. During the year the Company re-enforced the importance of increasing billability for operation managers and making necessary reductions in staff which resulted in lower overhead costs.

1. Regular, recurring, and legacy work returned to improved revenue levels as our industrial clients moved forward from the recession and the Company’s volume associated with this work improved as a portion of the Company’s revenue.

2. The Company continues to experience significant success in acquiring new projects and clients. This progress, however, was suppressed in 2010 by significant constraints presented by our present banking relationship. In addition to bank lending restrictions, the Company’s progress was restricted by the Company’s project surety bonding capacity.

Management believes the successes realized in 2010, while significantly improved from 2009, are still less than what can be achieved. The Company recently executed a commitment letter with a new lender to replace our existing lender. Management believes an improved financing package coupled with the Company’s surety bonding program will yield very successful results for 2011.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, ~~2010~~2012, the Company had cash and cash equivalents of $~~646~~1,~~560~~241,052 as compared to $26412,~~845~~141 at December 31, ~~2009~~2011.

At December 31, ~~2010~~2012, the Company had negative working capital of $15,~~429~~182,~~017~~135 compared to negative working capital of $26,~~642~~538,~~966~~513 at December 31, ~~2009~~2011. The Company had a current ratio of approximately 1.1268 to 1 ~~and~~at the end of 2012 compared to .8468 to 1 at the end of ~~2010~~2011. The ~~and~~improvement atin working capital is attributed to the ~~end~~Company ofhaving ~~2009,~~a ~~respectively~~profitable year in 2012.

Cash provided by operating activities during ~~2010~~2012 was $12,~~654~~610,~~988~~719 compared to cash used by operating activities of $~~594~~3,~~479~~261,534 during ~~2009~~2011. The cash provided by operating activities in ~~2010~~2012 was ~~mainly~~due ~~attributable~~ to the ~~net~~billing ~~income~~and ~~for~~improved ~~the~~collection ~~year~~of ~~and~~accounts areceivable. The ~~decrease~~cash inused ~~cost~~by onoperating ~~uncompleted~~activities ~~projects~~in ~~applicable~~2011 towas ~~future~~mainly ~~billing~~attributable ~~offset~~to ~~partially~~the bynet aloss ~~decrease~~for inthe ~~billings~~year inoffset ~~excess~~by ofthe ~~costs~~increase ~~and~~in ~~profit~~the ondeferred ~~uncompleted~~tax ~~projects~~asset valuation allowance.

The Company’s net cash used in investing activities of $~~171~~132,~~531~~341 during ~~2010~~2012 was ~~attributable~~due to the purchase of ~~various~~equipment. During ~~field~~2011 ~~and~~the ~~office~~Company ~~equipment~~had ~~and~~net acashed ~~deposit~~used ~~made~~in oninvesting ~~the~~of ~~purchase~~$54,888 ofwhich awas ~~building~~primarily ~~compared~~attributable to ~~$241,759~~the purchase of ~~equipment~~various ~~purchases~~field ~~made~~and ~~during~~office ~~2009~~equipment.

Cash used in financing activities of $~~863~~1,~~742~~649,467 in ~~2010~~2012 was related to principal payment on financing agreements for insurance and term loans. Cash provided by financing activities of $3,082,003 in 2011 was primarily due to the ~~pay~~new ~~downs of~~ debt financing. The Company also issued convertible notes of $1403,~~617,~~000 during ~~2010~~2011. The proceeds were used to reduce debt and current liabilities.

10The 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

The Company’s bank agreement expired on August 31, 2010 and was not renewed. The Company executed a commitment letter with a new lender on March 31, 2011 The new loan agreement will provide for borrowings up to $5,000,000 on a revolving basis, collateralized by all accounts receivable, inventory and equipment now owned or acquired later to be used to provide working capital. The agreement will be renewed annually with interest charged at LIBOR plus 3~~.5%. The agreement will also provide a term loan of $3~~,000,000 due in monthly principal installments of $50,000 plus interest at LIBOR plus 3.5% through

~~The working capital above is based on the expected refinancing~~2016. ~~See further discussion in Note 8 of the consolidated financial statements.~~

AsDuring 2012, all principal payments on the Company’s debt were made within payment terms. The Company was not in compliance with the financial covenants as of December 31, ~~2010~~2012 and December 31, ~~borrowing~~2011. The ~~against~~Company ~~the~~received ~~revolving~~a ~~loan~~waiver ~~aggregated~~for $4December 31,~~140,987~~ 2011. ~~During~~ Based ~~2010,~~on ~~all~~violations ~~principal~~during ~~payments~~the onfirst quarter of 2012, the Company’s ~~debt~~has ~~were~~classified ~~made~~the ~~within~~debt ~~payment~~as ~~terms~~current.

~~The~~As Company has an interest rate swap agreement that has been designated as a hedge. The swap will be evaluated for effectiveness on a quarterly basis and any ineffective portion will be charged to earnings. The effect of ~~the~~December ~~swap~~31, is2012, toborrowing ~~fix~~against the ~~rate~~revolving ~~being paid on the term~~ loan ataggregated 7$5,000,000.~~92%.~~

RESULTS OF OPERATIONS

This financial review should be read in conjunction with the accompanying Consolidated Financial Statements and accompanying notes.

FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company’s future operating results may be affected by a number of factors, including the Company’s ability to successfully increase market share in its existing service territory while expanding its services into other markets, realize benefits from cost reduction programs, and utilize its facilities and work force profitably in the face of intense price competition.

The Company’s ~~ability~~2012 tonegative ~~close~~working oncapital ~~the~~and ~~commitment~~retained ~~letter~~deficit ~~with~~at ~~the~~December ~~new~~31, ~~lender~~2012 may ~~affect~~make it difficult to finance projects in the future. This ~~operating~~factor ~~results~~is considered prior to agreeing to perform projects.

Fluctuations in surety market capacity can significantly affect the ability to grow the business and there are no assurances that it will not significantly affect the ability to obtain new contracts in the future.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In the normal course of business, Management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), American Institute of Certified Public Accountants (“AICPA”) or other authoritative accounting body to determine the potential impact they may have on our Consolidated Financial Statements. Based upon this review, Management does not expect any of the recently issued accounting pronouncements, which have not already been adopted by the Company, to have a material impact on our Consolidated Financial Statements.

OFF BALANCE SHEET ARRANGEMENTS

The Company had no off balance sheet arrangements at December 31, ~~2010~~2012 or December 31, ~~2009~~2011 that require disclosure under this item.

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, valuation allowances on deferred tax assets, revenue recognition, 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. 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. Additionally, management estimates a general allowance based on historical charge offs covering other amounts that may not be collectible.

The Company maintains a valuation allowance on its deferred tax ~~asset~~assets based on the amount of net operating losses that management believes it will not utilize prior to the expiration dates of these losses. Management determines the adequacy of this allowance by continually evaluating its ongoing profitability, and its ability to generate taxable income in the future sufficient to utilize the net operating losses. If the profitability of the Company were to change, it could affect the amount of net operating losses that could be utilized and require an adjustment to the valuation allowance.

The Company establishes accruals for loss contingencies related to litigation and claims. These estimates are prepared using information available to management at the time of the accrual and at each reporting period. Events and circumstances could change requiring management to revise or adjust amounts accrued for loss contingencies.

~~2010~~2012 COMPARED TO ~~2009~~2011

Revenues

During the year ended December 31, ~~2010~~2012, the Company’s revenues increased 275.81% to $4632,~~036~~264,~~043~~051 as compared to $3630,~~023~~665,~~901~~334 for the year ended December 31, ~~2009~~2011.

When comparing ~~2010~~2012 to ~~2009~~2011, ~~the~~project ~~increase~~revenue inremained ~~project~~consistent. Revenue ~~revenue~~in 2012 was ~~attributed~~derived tofrom ~~many~~securing ~~large~~work ~~project~~that ~~awards~~could be financed in ~~2009~~the ~~with~~company’s ~~start~~current ~~dates~~financial incondition. The ~~2010~~Company’s ~~and~~ability to increase revenue is expected to remain constrained until such time, if any, as the ~~successful~~Company ~~award~~is ofable ~~several~~to ~~larger~~improve ~~projects~~its ~~completed~~financial incondition ~~2010~~and access to working capital.

Project Costs and Gross Margin

Project costs for the year ended December 31, ~~2010 increased 29~~ 2012 decreased 17.26% to $3722,~~075~~989,~~811~~815 from $2827,~~690~~887,~~082~~648 for the year ended December 31, ~~2009~~2011. Project costs as a percentage of revenues were 8071.53% for the year ended December 31, ~~2010~~2012, compared to 7990.69% for the year ended December 31, ~~2009~~2011. The gross profit margin for the year ended December 31, ~~2010~~2012 was 1928.57% compared to 209.41% for the year ended December 31, ~~2009~~2012. Gross profit in dollars increased 22233.29% to $89,~~960~~274,~~811~~236 from $72,~~333~~777,~~819~~686 in ~~2009~~2011. The ~~decrease~~increase in gross profit margin is attributed to ~~several~~the ~~larger~~company ~~projects~~securing ~~bid~~high atmargin ~~lower~~work ~~margins~~with ~~decreasing~~recurring ~~the~~customers ~~average~~in ~~gross~~2012. Also, ~~profit~~the margin 0in 2011 was unusually low due to additional costs caused by changes in conditions, shortfalls in the bidding process and lower than anticipated production levels.~~9%.~~

Project costs from St. Lawrence Industrial Services, Inc., a related party, amounted to approximately $2,~~316~~510,000 in ~~2010~~2012 and $13,~~301~~135,000 in ~~2009~~2011.

Selling, General, and Administrative Expenses

During the year ended December 31, ~~2010~~2012, selling, general, and administrative (“SG&A”) expenses decreased 1316.04% to $86,~~110~~938,~~128~~017 compared to $98,~~311~~295,~~450~~795 for the previous year.

SG&A expenses as a percentage of revenue decreased to 1721.65% for the year ended December 31, ~~2010~~2012 from 2527.81% for the year ended December 31, ~~2009~~2011.

When comparing ~~2010~~2012 to ~~2009~~2011, the decrease in ~~2010~~2012 operating expenses is primarily attributed to the following:

~~· Payroll and related expenses decreased 7.8% to $4,406,783 from $4,779,125 in 2009. The decrease is related to reductions in staff and related employee benefit costs.~~13

· ~~Professional~~Payroll ~~services~~and related expenses decreased 1421.25% to $~~814~~3,~~689~~805,995 from $~~949~~4,~~844~~848,138 in ~~2009~~2011. The decrease is ~~primarily~~related ~~due~~ to athe ~~reduction~~improved inutilization ~~contracted~~of ~~human~~project ~~resources~~management ~~services~~labor and ~~accounts~~reduction ~~receivable~~in ~~collections~~overhead ~~services~~staff levels.

· ~~Other~~Office expense decreased 6325.1% to $~~352~~405,~~956~~162 from $~~957~~540,~~768~~890. ~~primarily~~The asdecrease ais ~~result~~due ofto ~~the~~a ~~decrease~~decline in ~~bad~~IT ~~debt~~and ~~expense~~telephone ofexpenditures. ~~approximately~~Certain ~~$546,000~~office assets also became fully amortized during 2011.

Operating Income

As a result of the factors discussed above, for the year ended December 31, ~~2010~~2012, the Company reported an operating income of $~~860~~2,~~104~~336,219 compared to operating loss of ($15,~~977~~518,~~631~~109) for the previous year.

Interest Expense

Interest expense increased 7626.37% to $~~545~~829,~~549~~347 in ~~2010~~2012 compared to $~~309~~654,~~442~~319 in ~~2009~~2011. The increase in interest expense is due to the ~~increase~~default inon ~~interest~~the ~~rates~~convertible innotes ~~2010~~at ~~related~~December ~~to the extension agreement~~31, ~~the $120~~2011,~~000~~ ~~extension~~which ~~fee~~increased ~~assessed, and~~ the interest ~~expense~~rate ~~and~~from ~~discount~~6% ~~amortization~~to ~~related~~20%. This tointerest ~~the~~is ~~convertible~~accrued ~~notes~~and ~~issued~~has ~~during~~not ~~the~~been ~~year~~paid out.

Net Income (Loss) Before Income Taxes

Net income before income taxes amounted to $~~410~~1,~~842~~621,414 in ~~2010~~2012 compared to a net loss before income taxes of ($26,~~262~~060,~~685~~102) in ~~2009~~2011.

Income Tax Expense

The Company recorded a net income tax ~~benefit~~expense of $~~375~~616,~~429~~209 in ~~2010~~2012 compared to an income tax ~~benefit~~expense of $~~377~~1,~~795~~421,600 in ~~2009~~2011. The ~~benefit~~decrease ~~in 2010~~ is due to athe ~~$550,000~~increase ~~reduction~~of in the deferred tax valuation allowance ~~for~~in ~~deferred tax assets~~2011.

Net Income (Loss)

Net income for the year ended December 31, ~~2010~~2012 was $~~786~~1,~~271~~005,205 or $0.0708 per share basic and $0.03 per share diluted compared to a net loss orof ($17,~~844~~481,~~890~~702) or ($0.1663) per share basic and diluted for the year ended December 31, ~~2009~~2011.

Key Performance Indicators

Management measures ~~equipment~~labor ~~utilization~~efficiency and ~~labor~~underbilling ~~efficiency~~ on a ~~monthly~~weekly basis in addition to project revenue and gross margin discussed above. Equipment utilization remained consistent year to year, and billable labor hours ~~remained~~increased ~~consistent~~to at68% for the year ended December 31, 2012 from 63% for the year ended December 31, 2011.

~~2009 COMPARED TO 2008~~14

2011 COMPARED TO 2010

Revenues

During the year ended December 31, ~~2009~~2011, the Company’s revenues decreased 133.74% to $3630,~~023~~665,~~901~~334 as compared to $3646,~~632~~036,~~276~~043 for the year ended December 31, ~~2008~~2010.

When comparing ~~2009~~2011 to ~~2008~~2010, the decrease in project revenue was primarily attributed to ~~the~~2010 ~~extremely~~being ~~competitive~~an ~~environment~~unusual inyear ~~2009~~with ~~and~~significant ~~many~~backlog ~~large~~carried ~~project~~over ~~awards~~from ~~start~~2009. See ~~dates~~discussion ~~were~~in ~~delayed~~2010 torevenue ~~2010~~comparison below.

Project Costs and Gross Margin

Project costs for the year ended December 31, ~~2009 increased 7~~ 2011 decreased 24.08% to $2827,~~690~~887,~~082~~648 from $2637,~~805~~075,~~462~~811 for the year ended December 31, ~~2008~~2010. Project costs as a percentage of revenues were 7990.69% for the year ended December 31, ~~2009~~2011, compared to 7380.25% for the year ended December 31, ~~2008~~2010. The gross profit margin for the year ended December 31, ~~2009~~2011 was 209.41% compared to 2619.85% for the year ended December 31, ~~2008~~2010. Gross profit in dollars decreased 2569.0% to $72,~~333~~777,~~819~~686 from $98,~~826~~960,~~814~~232 in ~~2008~~2010. ~~Project~~The ~~costs~~decrease ~~paid~~in togross ~~St.~~profit ~~Lawrence~~margin ~~Industrial~~is ~~Services,~~attributed ~~Inc.,~~to athree ~~related~~large ~~party,~~project ~~amounted~~losses due to ~~approximately~~additional $1costs caused by changes in conditions,~~301,000~~ shortfalls in ~~2009~~the bidding process and ~~$1,037,000~~lower inthan ~~2008~~anticipated production levels.

~~The~~Project ~~decrease~~costs infrom ~~the~~St. ~~gross~~Lawrence ~~margin~~Industrial ~~percentage~~Services, ~~was~~Inc., ~~due~~a torelated ~~the~~party, ~~competitive~~amounted ~~bidding~~to ~~environment~~approximately $3,135,000 in ~~2009~~2011 and ~~the~~$2,668,000 ~~performance~~in ~~of several large projects with unanticipated costs~~2010.

Selling, General, and Administrative Expenses

During the year ended December 31, ~~2009~~2011, selling, general, and administrative (“SG&A”) expenses increased 6.2.4% to $98,~~311~~295,~~450~~795 compared to $8,~~768~~110,~~931~~128 for the previous year.

SG&A expenses as a percentage of revenue increased to 2527.81% for the year ended December 31, ~~2009~~2011 from 2317.86% for the year ended December 31, ~~2008~~2010.

When comparing ~~2009~~2011 to ~~2008~~2010, the increase in ~~2009~~2011 operating expenses is primarily attributed to the following:

· ~~Professional~~Payroll ~~services~~and related expenses increased 2210.20% to $~~949~~4,~~844~~848,138 from $~~777~~4,~~313~~406,783 in ~~2008~~2010. The increase is ~~primarily~~related ~~due~~ to ~~additional costs incurred for~~ the ~~monitoring~~underutilization ~~the~~of ~~Company’s~~project ~~solid waste~~ management ~~facility~~labor.

· ~~Equipment~~Professional ~~expenses~~services decreased 1610.39% to $~~503~~726,~~018~~162 from $~~600~~814,~~940~~689 in ~~2008~~2010. ~~primarily~~In 2010 the Company incurred consulting costs related to bank relations. During 2011 the Company refinanced and as a result ofdid ~~the~~not ~~decrease~~incur insimilar ~~fuel~~professional ~~costs~~services.

· ~~Other~~Equipment expense, net of usage credit increased 9521.8% to $~~957~~501,~~769~~429 from $~~489~~411,~~160~~628 primarily as a result of ~~the~~a ~~increase~~reduction in ~~bad~~equipment ~~debt~~utilization ~~expense~~in 2011.

Operating Income

As a result of the factors discussed above, for the year ended December 31, ~~2009~~2011, the Company reported an operating loss of ($15,~~977~~518,~~631~~109) compared to operating income of $1860,~~057,883~~104 for the previous year.

Interest Expense

Interest expense ~~decreased~~increased 3119.9% to $~~309~~654,~~442~~319 in ~~2009~~2011 compared to $~~449~~545,~~785~~546 in ~~2008~~2010. The ~~decrease~~increase in interest expense is due to the ~~reduction~~increase in ~~interest~~bank ~~rates~~debt in ~~2009~~2011 ~~coupled~~and ~~with~~the interest expense and discount amortization related to the ~~repayment~~convertible ofnotes ~~long-term~~issued ~~debt~~during the year.

Net Income (Loss) Before Income Taxes

Net loss before income taxes amounted to ($26,~~262~~060,~~685~~102) in ~~2009~~2011 compared to a net income before income taxes of $~~633~~410,~~653~~842 in ~~2008~~2010.

Income Tax Expense

The Company recorded a net income tax ~~benefit~~expense of $~~377~~1,~~795~~421,600 in ~~2009~~2011 compared to an income tax benefit of $21375,~~271~~429 in ~~2008~~2010. The decrease is due to the change in deferred tax valuation allowance.

Net Income (Loss)

Net loss for the year ended December 31, ~~2009~~2011 was ($17,~~844~~481,~~890~~702) or ($.1663) per share basic and diluted compared to net income of $~~654~~786,~~927~~271 or $.0507 per share basic and $.03 per share diluted for the year ended December 31, ~~2008~~2010.

Key Performance Indicators

Management measures ~~equipment~~labor ~~utilization~~efficiency and ~~labor~~underbilling ~~efficiency~~ on a ~~monthly~~weekly basis in addition to project revenue and gross margin discussed above. Equipment utilization ~~remained~~was ~~consistent~~lower ~~year~~during 2011 compared to ~~year,~~2010 and billable labor ~~increased~~hours ~~slightly~~remained ~~from~~consistent ~~62%~~at to 63%.

1516

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ~~ABOUT MARKET RISK~~

~~The~~ABOUT MARKET Company is exposed to market risk, including changes in interest rates because of its variable rate debt. To manage the potential exposure, the Company enters into various derivative transactions, mainly interest rate swaps. The financial impact of these hedging instruments are offset in part or in whole by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Note 8 to the consolidated financial statements includes a discussion of the Company’s accounting policies for financial instruments.RISK

~~Interest~~The ~~rate~~Company ~~swaps~~is ~~are~~exposed ~~used~~ to ~~hedge~~market arisk, ~~term~~including ~~debt~~changes ~~obligation~~in interest rates because of its variable rate debt. ~~Based~~ onTo manage the potential exposure, the Company’s ~~overall~~may enter into various derivative transactions, mainly interest rate ~~exposure~~swaps. The asfinancial impact of ~~and~~these ~~during~~hedging instruments are offset in part or in whole by corresponding changes in the ~~year~~underlying ~~ended~~exposures ~~December~~being ~~31,~~hedged. The ~~2010,~~Company ~~including~~does ~~derivative~~not ~~and~~hold ~~other~~or ~~rate~~issue ~~sensitive~~derivative financial instruments, afor ~~one~~trading ~~percent~~purposes. ~~change~~Note in8 ~~interest~~to ~~rates~~the ~~would~~consolidated ~~increase~~financial orstatements ~~decrease~~includes ~~interest~~a ~~expense~~discussion byof ~~approximately~~the ~~$50,000~~Company’s ~~annually~~accounting policies for financial instruments.

Based on the Company’s overall interest rate exposure as of and during the year ended December 31, 2012, including rate sensitive instruments, a one percent change in interest rates would increase or decrease interest expense by approximately $80,000 annually.

The Company is aware that as the economy slows down, the Company’s business could be affected by client companies closing operations or reducing production, which could reduce the amount of waste generated, industrial cleaning projects, and environmental remediation projects available. In order to try to mitigate this market risk, the Company continues to make every effort to secure more emergency spill response contracts and long-term environmental remediation and industrial cleaning projects.

For more information regarding market risk, see the audited financial statements submitted under Item 15 of this report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and related financial schedule of the Company and the report of Dannible & McKee LLP are submitted under Item 15 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

1617

ITEM 9a. CONTROLS AND PROCEDURES

Responsibility For Financial Information — We are responsible for the preparation, accuracy, integrity and objectivity of the Consolidated Financial Statements and the other financial information included in this report. Such information has been prepared in conformity with accounting principles generally accepted in the United States of America and accordingly, includes certain amounts that represent management’s best estimates and judgments. Actual amounts could differ from those estimates.

Responsibility for Internal Controls — We are also responsible for establishing and maintaining adequate internal controls over financial reporting. These internal controls consist of policies and procedures that are designed to assess and monitor the effectiveness of the control environment including: risk identification, governance structure, delegations of authority, information flow, communications and control activities. While no system of internal controls can ensure elimination of all errors and irregularities, OP-TECH’s internal controls, which are reviewed and modified in response to changing conditions, have been designed to provide reasonable assurance that assets are safeguarded, policies and procedures are followed, transactions are properly executed and reported, and appropriate disclosures are made. The concept of reasonable assurance is based on the recognition that there are limitations in all systems of internal control and that the costs of such systems should be balanced with their benefits. The Audit Committee of the Board of Directors, which is comprised solely of independent directors, meets regularly with OP-TECH’s senior financial management, and independent registered public accounting firm to review audit plans and results, as well as the actions taken by management in discharging its responsibilities for accounting, financial reporting and internal controls. The Audit Committee is responsible for the selection and compensation of the independent registered public accounting firm. OP-TECH’s financial management, internal auditors and independent registered public accounting firm have direct and confidential access to the Audit Committee at all times.

Report On Internal Control Over Financial Reporting — We have evaluated OP-TECH’s internal control over financial reporting as of December 31, ~~2010~~2012. This evaluation was based on criteria for effective internal control over financial reporting set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the evaluation performed, we ~~identified~~believe ~~the~~that ~~following material weakness in~~ our ~~internal~~system ~~control over financial reporting as~~ of ~~December 31,~~disclosure ~~2010. A~~controls ~~material~~and ~~weakness~~procedures iseffectively aachieve ~~control~~their 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 detectedobjectives.

WeManagement's ~~did~~report was not ~~maintain~~subject ~~effective~~to ~~controls~~attestation ~~over~~by ~~reconciliation~~the ofCompany's ~~costs~~registered ~~and~~public ~~standard~~accounting ~~gross~~firm ~~margins~~pursuant onto ~~uncompleted~~temporary ~~projects. Specifically,~~rules ~~several~~of ~~in-process~~the ~~projects~~Securities ~~had~~and ~~unearned~~Exchange ~~revenue~~Commission ~~recorded~~that inpermit ~~excess~~the ofcompany ~~the~~to ~~actual~~provide ~~expected~~only Management's report in this annual report.

~~This~~Report On Disclosure ~~control~~Controls And Procedures — As ~~deficiency~~of ~~could~~December ~~result~~31, in2012, awe ~~misstatement~~carried out an evaluation of the effectiveness of the design and operation of OP-TECH’s disclosure controls and procedures pursuant to ~~accounts~~Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation we concluded that OP-TECH’s disclosure controls and ~~disclosures~~procedures are effective in ensuring that ~~would~~information ~~result~~required to be disclosed in aOP-TECH’s ~~material~~periodic ~~misstatement~~filings under the Exchange Act is accumulated and communicated to us to allow timely decisions regarding required disclosures, and such information is recorded, processed, summarized and reported within the ~~annual~~time orperiods ~~interim~~specified ~~financial~~in ~~statements~~the ~~that~~Securities ~~may~~and ~~not~~Exchange beCommission’s ~~prevented~~rules orand ~~detected~~forms.

Because of the above described material weaknesses in internal control over financial reporting, management concluded that our internal control over financial reporting was not effective as of December 31, 2010 based on the criteria set forth in Internal Control — Integrated Framework issued by the COSO. This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

Report On Disclosure Controls And Procedures — As of December 31, 2010, we carried out an evaluation of the effectiveness of the design and operation of OP-TECH’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, we concluded that OP-TECH’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in OP-TECH’s periodic filings under the Exchange Act is accumulated and communicated to us to allow timely decisions regarding required disclosures, and such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

ITEM 9b. OTHER INFORMATION

None.

1718

PART III

ITEM 10. DIRECTORS, EXECUTIVES, OFFICERS AND CORPORATE GOVERNMENT

The following table sets forth certain information about the directors of the Company, all of whom were ~~unanimously~~re-appointed ~~elected~~by atunanimous ~~the~~consent ~~Annual~~in ~~Meeting~~October of2011 ~~Stockholders~~for ofa ~~the~~term ~~registrant~~until ~~on August 19, 2010 for~~ a ~~term~~subsequent election of ~~one~~directors ~~year~~occurs.

Each director has served continuously since he was first elected.

The Board of Directors held ~~three~~two meetings during the last calendar year. All of the directors attended ~~more~~50% ~~than~~or ~~75%~~more of the total number of meetings held by the Board of Directors.

Name, Age Principal Occupation	Year First Elected	Certain Other Information
Robert J. Berger (64) Director and Co-Chairman of the Board	1998	Mr. Berger has served in his present position as Director since November 1998, and as Chairman of the Board since February 2000 and as Co-Chairman of the Board since January 2007. Mr. Berger was employed in various positions for ONBANCORP, Inc. from 1978 through March 31, 1998, his last position being Senior Vice President, Treasurer, and Chief Financial Officer. Mr. Berger is also Chairman, President, and Chief Executive Officer of St. Lawrence Industrial Services, Inc. and also served as Vice Chairman of Beacon Federal Bancorp, Inc. through July 2010.
Robert J. Berger (66) Director and Co-Chairman of the Board	1998	Mr. Berger has served in his present position as Director since November 1998, and as Chairman of the Board since February 2000 and as Co-Chairman of the Board since January 2007. Mr. Berger was employed in various positions for ONBANCORP, Inc. from 1978 through March 31, 1998, his last position being Senior Vice President, Treasurer, and Chief Financial Officer. Mr. Berger is also Chairman, President, and Chief Executive Officer of St. Lawrence Industrial Services, Inc. and also served as Vice Chairman of Beacon Federal Bancorp, Inc. through July 2010.
Richard Messina (48) Director and Co-Chairman of the Board	2005	Mr. Messina was elected to the Board in November 2005 and elected Co-Chairman of the Board in January 2007. Mr. Messina founded The Benchmark Company, LLC, a securities broker-dealer, in 1988. Benchmark is primarily engaged in equity research, sales, and trading on behalf of institutional clients. Mr. Messina currently serves as Co-Chief Executive Officer of Benchmark.
Richard Messina (50) Director and Co-Chairman of the Board	2005	Mr. Messina was elected to the Board in November 2005 and elected Co-Chairman of the Board in January 2007. Mr. Messina founded The Benchmark Company, LLC, a securities broker-dealer, in 1988. Benchmark is primarily engaged in equity research, sales, and trading on behalf of institutional clients. Mr. Messina currently serves as Co-Chief Executive Officer of Benchmark.
Richard L. Elander (69) Director	1991	Mr. Elander has served in his present position as a Director since November of 1991. Mr. Elander previously served as the Commissioner of the Onondaga County Department of Water Environment Protection prior to retirement.
Richard L. Elander (71) Director	1991	Mr. Elander has served in his present position as a Director since November of 1991. Mr. Elander previously served as the Commissioner of the Onondaga County Department of Water Environment Protection prior to retirement.
Steven A. Sanders (65) Director	1991	Mr. Sanders has served in his present position as a Director since December 1991. Mr. Sanders is currently Senior Partner of Sanders Ortoli Vaughn-Flam Rosenstadt LLP. From January 1, 2004 until June 30, 2007, he was of counsel to the law firm of Rubin, Bailin, Ortoli, LLP. From January 1, 2001 to December 31, 2003, he was counsel to the law firm of Spitzer & Feldman PC. . Mr. Sanders also serves as a Director of Helijet International, Inc., and T/c Power Management, Inc. Additionally, he is a Director of the Roundabout Theatre (the largest not-for-profit theatre in North America), Town Hall New York City, and he is a director at Trustee, American Academy of Dramatic Arts.
Steven A. Sanders (67) Director	1991	Mr. Sanders has served in his present position as a Director since December 1991. Mr. Sanders is currently Senior Partner of Sanders Ortoli Vaughn-Flam Rosenstadt LLP. From January 1, 2004 until June 30, 2007, he was of counsel to the law firm of Rubin, Bailin, Ortoli, LLP. From January 1, 2001 to December 31, 2003, he was counsel to the law firm of Spitzer & Feldman PC. Mr. Sanders also serves as a Director of Helijet International, Inc. Additionally, he is a Director of the Roundabout Theatre (the largest not-for-profit theatre in North America), Town Hall New York City, and he is a director at Trustee, American Academy of Dramatic Arts.
George W. Lee, Jr. (64) Director	2002	Mr. Lee was elected to the Board in December 2002. Mr. Lee co-founded Blasland, Bouck and Lee, Inc., an Engineering News Record top 100 worldwide engineering and scientific services company in 1984. He served in various capacities in this firm, including Executive VP, Director of Marketing and Director of Health and Safety from 1984 to 1994. Mr. Lee served on the Board of Directors of Blasland, Bouck and Lee, Inc. from 1984 to 2005. Since 1984 Mr. Lee has been active as a consultant to new business ventures involved in professional development and wastewater treatment. In October 2005 Mr. Lee joined Pyramid Brokerage of Central New York as a commercial real estate sales agent.
Richard Jacobson (49) Director	2006	Mr. Jacobson was elected to the Board in February 2006. Mr. Jacobson is currently a Partner at Tricap Partners & Co., an investment banking boutique specializing in advising companies, institutions, family offices and individuals in complex financial strategies and investment decisions. From 2005 to 2009, he was a Senior Managing Director with Stern Capital. From 1999 to 2003 he was Managing Director and Co- Group Head in the merchant banking group of Indosuez Capital. From 1997 to 1999, he was a Vice President in the leveraged finance group of SG Cowen. From 1994 to 1997 he was an associate in the leveraged finance group of Chemical Securities, Inc. Mr. Jacobson began his career as an attorney for the law firm of Jacobs, Persinger and Parker.

George W. Lee, Jr. (62) Director	2002	Mr. Lee was elected to the Board in December 2002. Mr. Lee co-founded Blasland, Bouck and Lee, Inc., an Engineering News Record top 100 worldwide engineering and scientific services company in 1984. He served in various capacities in this firm, including Executive VP, Director of Marketing and Director of Health and Safety from 1984 to 1994. Mr. Lee served on the Board of Directors of Blasland, Bouck and Lee, Inc. from 1984 to 2005. Since 1984 Mr. Lee has been active as a consultant to new business ventures involved in professional development and wastewater treatment. In October 2005 Mr. Lee joined Pyramid Brokerage of Central New York as a commercial real estate sales agent.
Richard Jacobson (47) Director	2006	Mr. Jacobson was elected to the Board in February 2006. Mr. Jacobson is currently a Partner at Tricap Partners & Co., an investment banking boutique specializing in advising companies, institutions, family offices and individuals in complex financial strategies and investment decisions. From 2005 to 2009, he was a Senior Managing Director with Stern Capital. From 1999 to 2003 he was Managing Director and Co-Group Head in the merchant banking group of Indosuez Capital. From 1997 to 1999, he was a Vice President in the leveraged finance group of SG Cowen. From 1994 to 1997 he was an associate in the leveraged finance group of Chemical Securities, Inc. Mr. Jacobson began his career as an attorney for the law firm of Jacobs, Persinger and Parker.

INDEPENDENCE

The Board recognizes the importance of director independence. Under the rules of the New York Stock Exchange, to be considered independent, the Board must determine that a director does not have a direct or indirect material relationship with the Company. Moreover, a director will not be independent if, within the preceding three (3) years: (i) the director was employed by the Company or receives $25,000 per year in direct compensation from the Company, other than director and ~~committee~~Committee fees or other forms of deferred compensation for prior service, (ii) the director was partner of or employed by the Company’s independent auditor, (iii) the director is part of an interlocking directorate in which an executive officer of the Company serves on the compensation ~~committee~~Committee of another Company that employs the director, (iv) the director is an executive officer or employee of another Company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $100,000 or 2% of such other Company’s consolidated gross revenues, (v) or the immediate family member in any of the categories in (i) – (iv) above.

The Board has determined that five (5) of the Company’s six (6) directors are independent under these standards. As a result of Director Berger’s ownership of St. Lawrence Industrial Services Corp., he is not considered to have independent status. Mr. Berger does serve on the Compensation ~~committee~~Committee based upon his prior business experience and the fact that he is a holder of approximately twenty one percent (21%) of the outstanding shares of the Company’s stock.

RELATED PARTY TRANSACTION REVIEW

The Board has adopted a policy concerning the review, approval and monitoring of transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent (5%) or greater of the Company’s outstanding shares). The policy covers any transaction exceeding $1,000 in which the related person has a direct or indirect material interest. Related person transactions must be approved in advance by the Co-chairmen and reported to the Board at the next meeting following the transaction. The policy is intended to restrict transactions to only those which are in the best interests of the Company.

AUDIT COMMITTEE

The members of the Committee are Messrs. George Lee and Richard Elander. The Committee operates under a written charter adopted by the Board of Directors. The Committee held ~~three~~one ~~meetings~~meeting during the year ended December 31, ~~2010~~2012. Its duties and responsibilities include:

Oversight of the financial reporting process and management’s responsibility for the integrity, accuracy and objectivity of financial reports, and accounting and financial reporting practices.

· · Recommending to the Board the appointment of the Company’s independent registered accounting firm. Oversight of the adequacy of the Company's system of internal controls.

· Oversight of the adequacy of the Company’s system of internal controls.

Oversight of management practices relating to ethical considerations and business conduct, including compliance with laws and regulations.

The Committee has met and held discussions with the Chief Financial Officer and the Company’s independent accountants, Dannible & McKee, LLP, regarding audit activities. Management has the primary responsibility for the Company’s systems of internal controls and the overall financial reporting process. The independent accountants are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), and to issue a report thereon. The Committee’s responsibility is to monitor and oversee these processes. However, the members of the Committee are not certified public accountants, professional auditors or experts in the fields of accounting and auditing and rely, without independent verification, on the information provided to them and on the representations made by management and the independent accountants.

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The Committee recommended to the Board of Directors the appointment of Dannible & McKee, LLP as the Company’s independent accountants for the year ~~2010, as ratified by shareholders~~2012. The Company’s independent accountants provided to the Committee the written disclosure required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Committee discussed with the independent accountants that firm’s independence.

Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Committee has reviewed and discussed the consolidated financial statements with management and the independent accountants. The Committee discussed with the independent accountants matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees) as currently in effect. Based on these discussions and reviews, the Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2010~~2012 for filing with the Securities and Exchange Commission.

The Committee does not have a financial expert. Due to the small size of the Company and lack of financial complexity, the Committee does not anticipate adding a financial expert.

REPORT OF AUDIT COMMITTEE

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal financial controllership, for preparing the financial statements and for the public reporting process. Dannible & McKee, LLP, our Company’s independent auditor for ~~2010~~2011, is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles.

In this context, the ~~committee~~Committee has reviewed and discussed with management and Dannible & McKee, LLP the audited financial statements for the year ended December 31, ~~2010~~2012. The ~~committee~~Committee has discussed with Dannible & McKee, LLP the matters that are required to be discussed by Statement on auditing Standards No. 61 (Communication with Audit ~~committees~~Committees). Dannible & McKee, LLP has provided to the ~~committee~~Committee the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the ~~committee~~Committee has discussed with Dannible & McKee, LLP that firm’s independence. The ~~committee~~Committee has concluded that Dannible & McKee, LLP’s provision of audit and non-audit services to the Company is compatible with Dannible & McKee, LLP’s independence.

Based on the considerations and discussions referred to above, the ~~committee~~Committee recommended to the Board of Directors that the audited financial statements for the year ended December 31, ~~2010~~2012 be included in the Annual Report on form 10-K for ~~2010~~2012. This report is provided by the following independent directors, who comprise the ~~committee~~Committee:

George W. Lee, Jr. Chairman

Richard L. Elander

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EXECUTIVE OFFICERS OF THE COMPANY

Charles Morgan (5759) Chief Executive Officer Mr. Morgan was named Chief Executive Officer (“CEO”) in November 2006. He has been with the Company since January of 2002 and has previously served as Executive Vice President and Chief Operating Officer. Prior to joining the Company, Mr. Morgan served as a Vice President with the firm of Camp, Dresser and McKee, an Engineering News Record Top 20, Boston, MA based consulting, engineering, construction and operations firm. Mr. Morgan has 34 years of experience as a senior executive and corporate director of environmental, engineering, construction and energy companies. Mr. Morgan has experience with all aspects of senior level company management including marketing and sales, strategic planning, financial management, product and service development, project management and mergers and acquisitions. Mr. Morgan has also managed a variety of large scale projects domestically and internationally for a broad spectrum of private sector industrial clients.

~~Jon~~Mr. ~~Verbeck~~Morgan ~~(50)~~was named Chief ~~Financial~~Executive Officer &(“CEO”) ~~Treasurer~~in MrNovember 2006. He ~~Verbeck~~has ~~was~~been ~~named~~with ~~Chief~~the ~~Financial~~Company ~~Officer~~since ~~(“CFO”)~~January of 2002 and ~~Treasurer~~has inpreviously ~~May~~served ~~2007~~as Executive Vice President and Chief Operating Officer. Prior to joining the Company, Mr. ~~Verbeck~~Morgan ~~was~~served ~~the~~as ~~Managing~~a ~~Director~~Vice President with the firm of aCamp, ~~business~~Dresser and McKee, an Engineering News Record Top 20, Boston, MA based consulting, engineering, construction and operations firm. Mr. ~~From~~Morgan ~~1991~~has to35 ~~2005,~~years heof ~~was~~experience ~~the~~as ~~CFO~~a ~~for~~senior aexecutive ~~manufacturing~~and corporate director of environmental, engineering, construction and ~~distributor~~energy ~~company~~companies. ~~Prior~~Mr. toMorgan ~~1991~~has experience with all aspects of senior level company management including marketing and sales, hestrategic ~~worked~~planning, asfinancial anmanagement, ~~auditor~~product ~~for~~and aservice ~~public~~development, ~~accounting~~project ~~firm~~management ~~from~~and ~~1985~~mergers toand ~~1991~~acquisitions. Mr. ~~Verbeck~~Morgan ishas also managed a ~~Certified~~variety ~~Public~~of ~~Accountant~~large inscale ~~New~~projects ~~York~~domestically ~~State~~and internationally for a broad spectrum of private sector industrial clients.

Michael McCall (30)

Controller and Treasurer

Mr. McCall joined the Company as the Controller in June 2011 and was named Treasurer in February 2013. Prior to joining the Company, Mr. McCall previously served in the accounting department of large government manufacturer. Prior to 2009, he worked as an auditor for a public accounting firm from 2005 to 2009. Mr. McCall is a Certified Public Accountant in New York State.

CODE OF ETHICS FOR SENIOR OFFICERS

The Company has adopted a code of ethics that applies to its senior executive and financial officers. The Code of Ethics for senior officers is included in Exhibit 14.

BENEFICIAL OWNERSHIP AND REPORTING COMPANIES

Section 16(a) of the Exchange Act requires our directors, officers (including a person performing a principal policy-making function) and persons who own more than 10% of a registered class of our equity securities to file with the Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of ours. Directors, officers and 10% holders are required by Commission regulations to send us copies of all of the Section 16(a) reports they file. Based solely upon a review of the copies of the forms sent to us and the representations made by the reporting persons to us, we believe that during the fiscal year ended December 31, 2010, our directors, officers and 10% holders complied with the filing requirements under Section 16(a) of the Exchange Act.

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ITEM 11. EXECUTIVE COMPENSATION

A. Compensation Committee

The Compensation Committee of the Board of Directors reviews and administers the Company’s compensation policies and practices for the executive officers of the Company. The Compensation Committee is currently comprised of Mr. Messina and Mr. Berger, ~~all~~both of whom are nonemployee directors. The Company’s financial accounting group supports the Compensation Committee’s work by providing information reports to the Compensation Committee when requested. The Committee’s authority is not set out in a charter. The Committee has not delegated authority and has not hired compensation consultants.

B. Compensation Discussion and Analysis

Compensation Philosophy

The Compensation Committee has adopted an executive compensation policy that rewards executives if the Company achieves its operational, financial and strategic goals and for building shareholder value. The material elements of the total compensation, which is considered for executives each year under the Company’s policy are (i) base salary, (ii) annual cash bonus, (iii) stock-based awards, and (iv) retirement, health and welfare and other benefits.

The Compensation Committee intends for the compensation earned by executive officers to be commensurate with performance and competitive with the compensation paid to executives at comparable companies. The Compensation Committee has not engaged in any benchmarking of total compensation or any material element thereof. The named executive officers do not play a role in the compensation setting process other than negotiating employment agreements on their own behalf.

Base Salaries

Base salaries provide a baseline level of compensation to executive officers. Base salaries are not linked to the performance of the Company, because they are intended to compensate executives for carrying out the day-to-day duties and responsibilities of their positions.

The Compensation Committee reviews and adjusts base salary levels in January each year. During the review and adjustment process, the Compensation Committee considers:

· individual performance;

· the duties and responsibilities of each executive officer position;

· the relationship of executive officer pay to the base salaries of other employees of the Company; and

· whether the base salary levels are competitive when compared to compensation paid to executives at comparable companies.

Annual Cash Bonus Awards

The Compensation Committee also considers bonus awards to the named executives at its January meeting each year. In general, the Committee does not award bonuses to executive officers under a pre-established plan or formula. Instead, the Committee makes bonus awards based on its review of the individual performance of the executives and the financial performance of the Company during the preceding year. The Committee believes that awarding bonuses in this manner keeps executives focused on making decisions that are in the long-term best interests of the Company and its shareholders and not for the purpose of achieving a pre-established performance level over a shorter term.

2223

Stock-Based Awards

The Compensation Committee follows procedures that are substantially similar to the bonus award procedures for making stock-based awards to executive officers. The 2002 Omnibus Plan (“Omnibus Plan”) maintained by the Company is intended to promote the growth and general prosperity of the Company by offering incentives to its key employees who are primarily responsible for the growth of the Company and to attract and retain qualified employees. Awards granted under the Omnibus Plan may be (a) Stock Options which may be designated as Incentive Stock Options intended to qualify under Section 422 of the Internal Revenue Code of 1986, or Nonqualified Stock Options (“NQSO’s) not intended to so qualify; (b) stock appreciation rights; (c) restricted stock awards; (d) performance awards; or (e) other forms of stock-based incentive awards. The shares of stock with respect to which the Awards may be granted shall be the common stock, par value at $0.01, of the Company (“Common Stock").

All stock-based awards are made under the Company’s Omnibus Plan. The number of shares included in stock-based awards is not determined under a pre-established formula. Instead, as is the case with bonus awards, all stock-based awards are discretionary based on the Committee’s review of the individual performance of the executives and the financial performance of the Company during the preceding year.

Retirement and Other Benefits

The Company sponsors the OP-TECH Environmental Services 401(k) Plan (the “Plan”), a tax-qualified Code Section 401(k) retirement savings plan, for the benefit of all of its employees, including the named executives. The Plan encourages saving for retirement by enabling participants to save on a pre-tax basis and by providing Company matching contributions equal to 25% of the first 6% that each employee contributes to the Savings Plan.

None of the named executives receive perquisites whose aggregate value exceeds $10,000 annually.

Post Termination of Employment Benefits –

The Company has not entered into employment agreements with any executive officers that provide severance or other benefits following their resignation, termination, retirement, death or disability

Mr. Morgan has signed aan ~~new~~ employment agreement on March 28, 2008 that ~~runs~~expired ~~through~~ December 31, 2012.

The Company established a bonus pool in 2010 for Mr. Morgan, Mr. Piger, the Vice President and other management employees of 6.25% of the aggregate consideration if seventy-five percent (75%) of the common stock or assets of the Company is sold.

D. Conclusion

The Compensation Committee has read the compensation discussion and analysis and has reviewed all components of the named executives’ compensation, including salary, bonus, long-term incentive compensation, accumulated realized and unrealized stock option and restricted stock gains, the dollar value of all perquisites and other personal benefits. Based on this review, the Compensation Committee is of the view that the compensation payable under the new employment agreement with Mr. Morgan and the compensation of the other executives is reasonable and appropriate.

2324

E. Executive Officer Compensation Disclosure Tables

Summary Compensation Table

Name and Principal Position(s) (a)	Year (b)		Salary ($) (c)			Bonus ($) (d)			Stock Awards ($) (e)			Option Awards ($) (1) (f)			Change in Pension value and Nonqualified Deferred Compensation Earnings (h)			All Other Compensation ($) (1) (i)			Total ($) (j)
Name and Principal				Salary			Bonus			Stock Awards			Option Awards			Change in Pension value and Nonqualified Deffered Compensation			All Other Compensation			Total
Charles B. Morgan	2010		$	197,000		$	0		$	0		$	0		$	0		$	35,458		$	232,458
Position(s)		Year		($)			($)			($)			($) (1)			Earnings			($) (1)			($)
Chief Executive Officer	2009		$	197,000		$	35,000		$	0		$	0		$	0		$	41,422		$	273,422
(a)		(b)		(c)			(d)			(e)			(f)			(h)			(i)			(j)
Harold C. Piger	2010		$	112,006		$	0		$	0		$	0		$	0		$	2,154		$	114,160
Charles B. Morgan		2012		$	197,000		$	0		$	0		$	0		$	0		$	32,879		$	229,879
Senior Vice President	2009		$	112,796		$	25,000		$	0		$	0		$	0		$	0		$	137,796
Chief Executive Officer
Jon S. Verbeck	2010		$	120,000		$	0		$	0		$	0		$	0		$	0		$	120,000
		2011		$	197,000		$	0		$	0		$	0		$	0		$	24,513		$	221,513
Chief Financial Officer	2009		$	120,000		$	15,000		$	0		$	0		$	0		$	0		$	135,000

(1) Mr. Morgan was paid $21,688 and $27,911 for unused vacation in 2010 and 2009, and $13,770 and $13,511 as other compensation in 2010 and 2009, respectively. Mr. Piger was paid $2,154 for unused vacation in 2010.

Harold C. Piger	2012	$	112,006	$	0	$	0	$	0	$	0	$	0	$	112,006
Senior Vice President
	2011	$	112,006	$	0	$	0	$	0	$	0	$	0	$	112,006

Column g, Non-Equity Incentive Plan Compensation, is not applicable and is omitted.

Jon S. Verbeck (2)	2012	$	80,000	$	0	$	0	$	0	$	0	$	0	$	80,000
Chief Financial Officer
	2011	$	120,000	$	0	$	0	$	0	$	0	$	0	$	120,000

Michael D. McCall	2012	$	81,000	$	0	$	0	$	0	$	0	$	0	$	81,000
Controller (3)
	2011	$	40,000	$	0	$	0	$	0	$	0	$	0	$	40,000

(1)

Mr. Morgan was paid $18,590 and $11,002 for unused vacation in 2012 and 2011, and $14,289 and $13,551 as other compensation in 2012 and 2011, respectively.

(2)

Compensation shown for Mr. Verbeck is through October 2012. Mr. Verbeck left the company in October 2012.

(3)

Mr. McCall joined the Company in June 2011.

Column “(g)”, Non-Equity Incentive Plan Compensation, is not applicable and is omitted.

Outstanding Equity Awards at Fiscal Year-End Table

	Option Awards
Name (a)	Number of Securities Underlying Unexercised Options (#) Exercisable (b)		Number of Securities Underlying Unexercised Options (#) Unexercisable (c)		Option Exercise Price ($) (e)		Option Expiration Date (f)
Mr. Morgan		1633,~~667~~333		0	$	0.0615	0511/2119/1213
		33,333		0	$	0.15	11/19/13
		50,000		0	$	0.40	01/26/15

Columns “(d)”, “(i)”, and “(j)” related to Equity Incentive Plan Awards are not applicable and are omitted.

Director Compensation Table

The following table summarizes the compensation paid to the Chairman and each nonemployee director for his or her service to the Board and its committees during 2010:

Name (a)	Fees Earned or Paid in Cash ($) (b) (1)			Option Awards ($) (d)			All Other Compensation ($) (g)				Total ($) (h)
Robert J. Berger		$	16,500		$	0	$	0		$		16,500
Richard Messina		$	24,500		$	0	$	0		$		24,500
Richard L. Elander		$	9,000		$	0	$	0		$		9,000
Steven A. Sanders		$	8,000		$	0	$	0		$		8,000
George W. Lee, Jr.		$	9,500		$	0	$		0	$		9,500
Richard Jacobson		$	8,000		$	0	$	0		$		8,000

(1) In 2010 Directors of the Company were paid $2,000 for each Board meeting attended and $500 for each sub-committee meeting attended. In addition, Messer’s Messina and Berger were paid additional fees as chairman fees of $16,000 and $8,000, respectively.

Column c (Stock Awards), column e (Non-Equity Incentive Plan Compensation), and column f (Change in Pension Value and Nonqualified Deferred Compensation Earnings) are not applicable and are omitted.

~~ITEM~~Director ~~12.~~Compensation ~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL~~Table

~~OWNERS~~The ~~AND~~following ~~MANAGEMENT~~table ~~AND~~summarizes ~~RELATED~~the ~~STOCKHOLDER~~compensation ~~MATTERS~~paid to the Chairman and each nonemployee director for his or her service to the Board and its Committees during 2012:

The following table sets forth certain information regarding the beneficial ownership of the Company’s common stock at March 21, 2011 by persons who, to the knowledge of the Board of Directors, beneficially own more than five percent of the outstanding shares of common stock of the Corporation.

Name (a)	Fees Earned or Paid in Cash ($) (b) (1)		Option Awards ($) (d)		All Other Compensation ($) (g)		Total ($) (h)

Robert J. Berger	$	16,000	$	0	$	0	$	16,000
Richard Messina	$	30,000	$	0	$	0	$	30,000
Richard L. Elander	$	2,500	$	0	$	0	$	2,500
Steven A. Sanders	$	2,500	$	0	$	0	$	2,000
George W. Lee, Jr.	$	2,500	$	0	$	0	$	2,500
Richard Jacobson	$	2,500	$	0	$	0	$	2,000

~~All~~(1) ~~voting~~In ~~power~~2012 Directors of the ~~Corporation~~Company iswere ~~vested~~paid in$2,000 ~~its~~for ~~common~~each ~~stock. As~~Board ofmeeting ~~the~~attended ~~close~~and of$500 ~~business~~for oneach ~~March~~sub-Committee ~~21,~~meeting ~~2011,~~attended. 11In addition,~~940,372~~ ~~shares~~Messer’s ofMessina ~~common~~and ~~stock~~Berger ~~par~~were ~~value~~paid ~~$.01~~additional ~~per~~fees ~~share~~as ~~were~~chairman ~~outstanding. Each~~fees ~~share~~ of ~~common~~$26,000 ~~stock~~and is$16,000, ~~entitled to one vote~~respectively.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)(2)			Percantange of Class (1)
Richard Messina 40 Fulton Street, 19th Floor New York, NY 10038		18,772,658	(2) (3) (5)		41	%
Robert Berger 121 Shirley Rd. Syracuse, NY 13224		9,604,999	(4) (5)		21	%
Charles Morgan Manlius, NY 13104		5,220,000	(5)		11	%
Kevin Eldred 1007 Overlook Terrace Cazenovia, NY 13035		2,495,000	(5)		5	%

Column “(c)” (Stock Awards), column “(e)” (Non-Equity Incentive Plan Compensation), and column “(f)” (Change in Pension Value and Nonqualified Deferred Compensation Earnings) are not applicable and are omitted.

(1) Based upon the sum of (a) 11,940,372 shares of common stock outstanding, and (b) underlying options and warrants that have vested and not been exercised and underlying options and warrants that will vest within the next 60 days relating to a particular shareholder.

(2) All shareholders directly or beneficially own all shares except for Mr. Messina who owns 1,822,721 shares directly and 1,766,771 shares indirectly.

(3) Includes 480,000 shares issuable upon the exercise of warrants to purchase common stock issued to Summit Capital Associates, Inc., an affiliate of Mr. Messina.

(4) Includes options to purchase 13,333 shares of Common Stock.

(5) Includes shares available upon conversion of notes payable as follow:

~~The~~ITEM following table sets forth certain information furnished to the Company regarding the beneficial ownership of the Company’s common stock at March 21, 2011 by each director and nominee for election as director and each executive officer12. ~~Unless~~SECURITY ~~otherwise~~OWNERSHIP ~~indicated,~~OF ~~the~~CERTAIN ~~beneficial~~BENEFICIAL ~~owner~~OWNERS ~~has~~AND ~~sole~~MANAGEMENT ~~voting~~AND ~~and~~RELATED ~~investment~~STOCKHOLDER ~~power with respect to such shares of common stock.~~MATTERS

Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned (3) (6)			Percentage of Class (4)
Richard Messina (1)		18,772,658	(5)		41	%
Robert J. Berger (1)		9,604,999			21	%
Richard L. Elander (1)		21,624		<1%
Steven A. Sanders (1)		578,552			1	%
George W. Lee, Jr. (1)		1,903,333			4	%
Richard Jacobson (1)		-0-			0	%
Charles Morgan (2)		5,220,000			11	%
Jon S. Verbeck (2)		5,000		<1%
All Directors as a Group (6 persons)		30,881,166			67	%

The following table sets forth certain information regarding the beneficial ownership of the Company’s common stock at April 30, 2013 by persons who, to the knowledge of the Board of Directors, beneficially own more than five percent of the outstanding shares of common stock of the Corporation.

All voting power of the Corporation is vested in its common stock. As of the close of business on April 30, 2013, 11,940,373 shares of common stock par value $.01 per share were outstanding. Each share of common stock is entitled to one vote.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)(2)		Percentage of Class (1)
Richard Messina 40 Fulton Street, 19th Floor		24,589,190 (2) (3) (5)		75	%
New York, NY 10038
Robert Berger		12,738,454 (4) (5)		54	%
121 Shirley Rd.
Syracuse, NY 13224
Charles Morgan		7,141,185 (5)		38	%
8450 Number 2 Road East
Manlius, NY 13104

Kevin Eldred 1007 Overlook Terrace Cazenovia, NY 13035		3,037,267 (5)		22	%
George Lee 204 Barnstable Court Camillus, NY 13031		3,108,774 (5)		21	%
Steven Sanders Sanders Ortoli Vaughn-Flam Rosenstadt LLP 501 Madison Ave, 14th Floor New York, NY 10022		867,273 (5)		7	%

(1)		Based upon the sum of (a) 11,940,373 shares of common stock outstanding, and (b) underlying options and warrants that have vested and not been exercised and underlying options and warrants that will vest within the next 60 days relating to a particular shareholder.
(2)		All shareholders directly or beneficially own all shares except for Mr. Messina who owns 1,822,721 shares directly and 1,766,771 shares indirectly.
(3)		Includes 480,000 shares issuable upon the exercise of warrants to purchase common stock issued to Summit Capital Associates, Inc., an affiliate of Mr. Messina.
(4)		Includes options to purchase 13,333 shares of Common Stock.
(5)		Includes shares available upon conversion of notes payable as follows:

Mr. Messina			20,519,698
Mr. Berger			11,466,788
Mr. Morgan			6,937,854
Mr. Eldred			2,202,267
Mr. Lee			2,872,108
Mr. Sanders			802,055

The following table sets forth certain information furnished to the Company regarding the beneficial ownership of the Company’s common stock at April 30, 2013 by each director and nominee for election as director, each executive officer and each other person owning more than 5% of our common stock. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock.

Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned (3) (6)			Percentage of Class (4)
Richard Messina (1)		24,589,190	(5)		75	%
Robert J. Berger (1)		12,738,454			54	%
Richard L. Elander (1)		21,624		<1		%
Steven A. Sanders (1)		867,273			7	%
George W. Lee, Jr. (1)		3,108,774			21	%
Richard Jacobson (1)		-0-			0	%
Charles Morgan (2)		7,141,185			38	%
All Directors as a Group (6 persons)		41,325,116			88	%

(1)

Director

(2)

Officer

(3)

Includes unexercised options to purchase shares of common stock:

· Mr. Berger 13,333

·	Mr. Berger	13,333
·	Mr. Elander	10,000
·	Mr. Sanders	13,333
·	Mr. Lee	16,667
·	Mr. Morgan	83,333

·(4) ~~Mr.~~Based ~~Elander~~upon 10the sum of (a) 11,~~000~~940,373 shares of common stock outstanding, (b) shares underlying options and warrants that have vested and not been exercised and shares underlying options and warrants that will vest within the next 60 days relating to a particular shareholder, (c) shares available upon conversion of notes payable.

· Mr. Sanders 13,333

· Mr. Lee 16,667

· Mr. Morgan 100,000

(4) Based upon the sum of (a) 11,940,372 shares of common stock outstanding, (b) shares underlying options and warrants that have vested and not been exercised and shares underlying options and warrants that will vest within the next 60 days relating to a particular shareholder, (c) shares available upon conversion of notes payable.

(5)

Includes 480,000 shares issuable upon the exercise of warrants to purchase common stock issued to Summit Capital Associates, Inc., an affiliate of Mr. Messina.

(6)

Includes shares available upon conversion of notes payable:

·	Mr. Messina	20,519,698
·	Mr. Berger	11,466,788
·	Mr. Lee	2,872,108
·	Mr. Sanders	802,055

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Steven A. Sanders, one of our directors, is a partner at the law firm of Sanders Ortoli Vaughn-Flam Rosenstadt LLP, and formerly of counsel at the law firm of Rubin, Bailin, Ortoli, LLP which provides professional services to the Company, and it is anticipated that it will continue to do so. The cost of these services in ~~2010~~2012 was approximately $556,~~000~~700.

WeOP-TECH ~~purchase~~purchases subcontract labor services from St. Lawrence Industrial Services, Inc., which is owned by Robert J. Berger, one of our directors. Pricing for these services ~~are~~is based on cost plus an agreed upon ~~mark-up~~$2,500 ofmonthly 3%fee. The costs for these services amounted to approximately $2,~~973~~510,000 in ~~2010, which includes $120,000 paid for services of the CFO~~2012. Services are provided as needed with no long- term commitment. At December 31, ~~2010~~2012, the Company has ana ~~advance~~payable to St. Lawrence of ~~approximately~~ $~~102~~36,~~000~~379 which is recorded in ~~prepaid~~accounts ~~expenses and other current assets~~payable.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Fees billed by Dannible & McKee, LLP, the Company’s principal accountants, in the aggregate for each of the last two years were as follows:

	2010		2009
	2012		2011
Audit Fees	$	~~122~~38,~~366~~250	$	61131,~~260~~978
Audit Related Fees	$	03,367	$	0
Tax Fees	$	2016,~~609~~640	$	3318,~~202~~497

There were no other fees billed for services other than those noted above.

The fees for tax services represent fees for compliance related to Federal and state tax return preparation and filing.

The fees for audit and tax services for ~~2010~~2012 were proposed to the audit ~~committee~~Committee and approved by that ~~committee~~Committee in an engagement letter. No other services were provided by the accountants that would require approval by the audit ~~committee~~Committee. The audit ~~committee~~Committee pre-approves all audited and non-audit services in advance of service being provided.

2829

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,

(a)	Financial Statements	Page		~~Page~~
	Report of Independent Accountants		F-2	~~F-2~~
	Consolidated Balance Sheets at December 31, 2010 and 2009			F-3
	Consolidated Balance Sheets at December 31, 2012 and 2011		F-3
	Consolidated Statement of Operations for the years ended
	Consolidated Statement of Operations for the years ended December 31, 2012, 2011, and 2010		F-4
	December 31, 2010, 2009, an 2008			F-4
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011, and 2010		F-5
	Consolidated Statements of Shareholders’ Equity and Comprehensive			F-5
	Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2012, 2011, and 2010		F-6
	Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009, and 2008			F-6
	Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010		F-7
	Notes to Consolidated Financial Statements		F-8	~~F-7~~
(b)	Exhibits
10.1	Stock Option Plan - Incorporated herein by reference to the Company’s Information Statement filed November 6, 2002*
	10.1 Stock Option Plan - Incorporated herein by reference to theCompany’s Information Statement filed November 6, 2002*
14	Code of Ethics*
	14 Code of Ethics*
21	Subsidiaries of the Registrant*
	21 Subsidiaries of the Registrant*
31.1	CEO Certification
	31.1 CEO Certification
31.2	Acting PAO Certifications
	31.2 Acting PAO Certifications
32.1	Section 1350 CEO Certifications
	32.1 Section 1350 CEO Certifications
32.2	Section 1350 Acting PAO Certifications
	32.2 Section 1350 Acting PAO Certifications
* Incorporated by reference to previous filings	* Incorporated by reference to previous filings

2930

OP-TECH Environmental

Services, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, ~~2010~~2012 and ~~2009~~2011

~~Independent Registered Accounting Firm~~F-1

ToReport ~~the~~of ~~Shareholders~~Independent ~~and~~Registered ~~Board~~Accounting ~~of Directors of~~Firm

~~OP-TECH~~May ~~Environmental Services~~14, ~~Inc. and Subsidiaries~~2013

WeTo ~~have audited~~ the ~~accompanying~~Shareholders ~~consolidated~~and ~~balance~~Board ~~sheets~~of Directors of OP-TECH Environmental Services, Inc. and Subsidiaries ~~as of December~~ 31, 2010 and 2009, and the related consolidated statements of operations, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We have audited the accompanying consolidated balance sheets of OP-TECH Environmental Services, Inc. and Subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of OP-TECH Environmental Services, Inc. and Subsidiaries as of December 31, ~~2010~~2012 and ~~2009~~2011, and the consolidated results of its operations and its cash flows for each of the years in the three year period ended December 31, ~~2010~~2012, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has negative working capital and a stockholders’ deficit at December 31, 2012, and caused violations of the Company’s financing agreements. The Company has developed a business plan that considers the reduced level of available working capital, provides for reductions in operating costs and projects a level of profitability. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Dannible & McKee, LLP

~~Syracuse,~~Dannible ~~New~~& ~~York~~McKee, LLP

April 1, 2011

F-2

OP-TECH Environmental Services, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, ~~2010~~2012 and ~~2009~~2011

	2010			2009
	December 31,			December 31,
Assets
	2012			2011
Current assets:
ASSETS
Cash (Note 4)	$	646,560		$	26,845
Current Assets:
Accounts receivable, net (Notes 1 and 5)		10,292,907			10,251,155
Cash (Note 4)	$	1,241,052		$	412,141
Costs on uncompleted projects applicable to future billings (Note 1)		1,098,455			2,567,053
Accounts receivable, net (Notes 1 and 5)		8,790,610			9,556,251
Inventory (Note 1)		358,394			343,047
Costs on uncompleted projects applicable to future billings (Note 1)		334,179			2,123,033
Deferred tax asset (Note 11)		488,800			319,100
Inventory (Note 1)		440,514			356,243
Prepaid expenses and other current assets		510,519			385,929
Current portion of deferred tax asset (Note 11)		-			620,000
Total current assets		13,395,635			13,893,129
Prepaid expenses and other current assets		382,511			540,396
Property and equipment, net (Note 6)		2,047,479			2,602,007
		-
Other long-term assets (Note 1)		93,304			62,072
Total Current Assets		11,188,866			13,608,064
Deferred tax asset (Note 11)		1,774,900			1,556,000
Property and equipment, net (Note 6)		1,121,117			1,467,357
Total Assets	$	17,311,318		$	18,113,208
Deferred tax asset (Note 11)		200,000			200,000
Liabilities and Shareholders' Equity
Other long term assets (Note 1)		116,732			121,665
Current liabilities:
Total Assets	$	12,626,715		$	15,397,086
Accounts payable	$	7,172,208		$	6,461,236
LIABILITIES AND STOCKHOLDERS' DEFICIT
Outstanding checks in excess of bank balance (Note 1)		-			1,045,720
Current Liabilities:
Billings in excess of costs and estimated
Accounts payable	$	4,587,827		$	6,858,504
profit on uncompleted contracts (Note 1)		342,152			1,101,406
Billings in excess of costs and estimated profit
Accrued expenses and other current liabilities		588,314			1,319,753
on uncompleted projects		888,912			1,256,395
Income taxes payable (Note 11)		14,925			8,425
Accrued future losses (Note 7)		16,312			1,253,147
Note payable to bank (Note 8)		3,242,205			5,073,196
Accrued expenses and other current liabilities		1,752,764			1,080,899
Obligation under interest rate swap agreement (Note 8 and 13)		8,345			23,861
Note payable to bank under line of credit (Note 8)		5,000,000			5,000,000
Current portion of long-term debt (Note 8)		598,469			1,502,498
Convertible notes payable (Note 9)		2,000,000			1,870,333
Total current liabilities		11,966,618			16,536,095
Current portion of long-term debt (Note 8)		2,125,186			2,827,299
Convertible notes payable (Note 9)		1,384,500			-
Total Liabilities		16,371,001			20,146,577
Long-term debt (Note 8)		1,300,000			-
Stockholders' Deficit:
Total liabilities		14,651,118			16,536,095
Common stock, par value $.01 per share; authorized 120,000,000
Shareholders' equity:
shares; 11,940,373 shares issued and outstanding		119,404			119,404
Common stock, par value $.01 per share; authorized 50,000,000 and
Additional paid-in capital		7,360,558			7,360,558
20,000,000 shares; 11,940,372 shares issued and outstanding
Accumulated deficit		(11,224,248	)		(12,229,453	)
as of December 31, 2010 and 2009		119,404			119,404
		(3,744,286	)		(4,749,491	)
Additional paid-in capital		7,293,391			7,005,891
Total Liabilities and Stockholders' Deficit	$	12,626,715		$	15,397,086
Accumulated deficit (Note 15)		(4,747,751	)		(5,534,022	)
Accumulated other comprehensive loss		(4,844	)		(14,160	)
Shareholders' equity, net		2,660,200			1,577,113
Total Liabilities and Shareholders' Equity	$	17,311,318		$	18,113,208

* Reclassified, see Note 1

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

F-3

OP-TECH Environmental Services, Inc. and Subsidiaries

Consolidated Statements of Operations

~~Years Ended~~ December 31, ~~2010~~2012, ~~2009~~2011 and ~~2008~~2010

	2010				2009	*		2008	*
	December 31,			December 31,			December 31,
Project billings and services	$	46,036,043		$	36,023,901		$	36,632,276
	2012			2011			2010
Project costs		37,075,811			28,690,082			26,826,734
Project billings and services	$	32,264,051		$	30,665,334		$	46,036,043
Gross margin		8,960,232			7,333,819			9,805,542
Project costs		22,989,815			27,887,648			37,075,811
Payroll and related payroll taxes and benefits		4,406,783			4,779,125			4,645,164
Gross margin		9,274,236			2,777,686			8,960,232
Office expense		692,733			747,621			761,435
		28.7	%		9.1	%		19.5	%
Occupancy expense		923,826			902,857			849,499
Operating expenses:
Business insurance expense		498,577			471,217			506,123
Payroll expense and related payroll taxes and benefits		3,805,995			4,848,138			4,406,783
Professional services		814,689			949,844			777,313
Office Expense		405,162			540,890			692,733
Equipment expenses, net of usage credit		410,564			503,018			600,940
Occupancy		769,964			850,395			922,762
Other expenses		352,956			957,768			489,143
Business Insurance		485,551			510,192			498,577
Litigation reserve (Note 7)		-			-			104,355
Professional Services		669,762			726,162			814,689
		8,100,128			9,311,450			8,733,972
Equipment Expenses, net of usage credit		467,344			501,429			411,628
Operating income (loss)		860,104			(1,977,631	)		1,071,570
Other expenses		334,239			318,589			352,956
Other income (expense):
		6,938,017			8,295,795			8,100,128
Interest expense		(545,546	)		(309,442	)		(449,785	)
Operating income (loss)		2,336,219			(5,518,109	)		860,104
Other, net		96,284			24,388			11,871
Other income and (expense):
		(449,262	)		(285,054	)		(437,914	)
Interest expense		(829,347	)		(654,319	)		(545,546	)
Net income (loss) before income taxes		410,842			(2,262,685	)		633,656
Other, net		114,542			112,326			96,284
Income tax benefit (expense) (Note 11):
		(714,805	)		(541,993	)		(449,262	)
Current		(19,371	)		(23,605	)		(17,829	)
Net income (loss) before income taxes		1,621,414			(6,060,102	)		410,842
Deferred		394,800			401,400			39,100
Income tax (expense) benefit
		375,429			377,795			21,271
Current		3,791			(2,100	)		(19,371	)
Net income (loss)	$	786,271		$	(1,884,890	)	$	654,927
Deferred		(620,000	)		(1,419,500	)		394,800
		(616,209	)		(1,421,600	)		375,429
Net income (loss)	$	1,005,205		$	(7,481,702	)	$	786,271
Earnings (loss) per common share:
Basic	$	0.0708		$	(0.1663	)	$	0.0507
Diluted	$	0.03		$	(0.1663	)	$	0.0503
Weighted average shares outstanding:
Basic		11,940,~~372~~373			11,940,~~372~~373			11,~~938~~940,~~706~~373
Diluted		1948,~~734~~729,~~874~~743			11,940,~~372~~373			1219,~~292~~734,~~286~~874

*The ~~Reclassified,~~accompanying ~~see~~notes ~~Note~~are 1an integral part of the consolidated financial statements

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

F-4

OP-TECH Environmental Services, Inc. and Subsidiaries

Consolidated Statements of ~~Shareholders’ Equity and~~ Comprehensive Income

~~Years Ended~~ December 31, ~~2010~~2012, ~~2009~~2011 and ~~2008~~2010

											Accumulated
	December 31,		December 31,			December 31,
						Additional					Other
	2012		2011			2010
	Common		Common			Paid-In		Accumulated			Comprehensive
Net income (loss)	$	1,005,205	$	(7,481,702	)	$	786,271
	Shares		Stock			Capital		Deficit			Income			Total
Other comprehensive income:
Balance at December 31, 2007		11,937,038	$	119,371		$	7,005,724	$	(4,304,059	)	$	(6,200	)	$	2,814,836
Change in Fair Value of Cash Flow Hedge
Issuance of 3,334 Shares		3,334		33			167		-			-			200
net of tax effect		-		4,844			9,316
Other Comprehensive Income:
Other comprehensive income		-		4,844			9,316
Change in Fair Value of Cash Flow Hedge
Comprehensive income (loss)	$	1,005,205	$	(7,476,858	)	$	795,587
net of tax effect of $15,000		-		-			-		-			(22,765	)		(22,765	)
Net Income		-		-			-		654,927			-			654,927
Total Comprehensive Income		-		-			-		-			-			632,162
Balance at December 31, 2008		11,940,372	$	119,404		$	7,005,891	$	(3,649,132	)	$	(28,965	)	$	3,447,198
Other Comprehensive Income:
Change in Fair Value of Cash Flow Hedge
net of tax effect of $(10,000)		-		-			-		-			14,805			14,805
Net Loss		-		-			-		(1,884,890	)		-			(1,884,890	)
Total Comprehensive Loss		-		-			-		-			-			(1,870,085	)
Balance at December 31, 2009		11,940,372	$	119,404		$	7,005,891	$	(5,534,022	)	$	(14,160	)	$	1,577,113
Warrants Extension							18,000								18,000
Discount on Convertible Notes							269,500								269,500
Other Comprehensive Income:
Change in Fair Value of Cash Flow Hedge
net of tax effect of $(6,200)		-		-			-		-			9,316			9,316
Net Income		-		-			-		786,271			-			786,271
Total Comprehensive Income		-		-			-		-			-			795,587
Balance at December 31, 2010		11,940,372	$	119,404		$	7,293,391	$	(4,747,751	)	$	(4,844	)	$	2,660,200

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

F-5

OP-TECH Environmental Services, Inc. and Subsidiaries

~~Notes~~Consolidated toStatements ~~Consolidated~~of ~~Financial~~Stockholders’ ~~Statements~~Equity (Deficit)

	2010			2009			2008
Operating activities:
Net income (loss)	$	786,271		$	(1,884,890	)	$	654,927
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Bad debt expense		181,786			727,958			264,516
Depreciation and amortization		690,134			656,651			717,478
Gain on sale of equipment		(13,320	)		-			-
Warrant modification expense		18,000			-			-
Amortization of discount on convertible notes		37,000			-			-
Benefit from deferred income taxes		(394,800	)		(401,400	)		(39,100	)
(Increase) decrease in operating assets and
increase (decrease) in operating liabilities:
Accounts receivable		(223,538	)		(2,064,982	)		(823,367	)
Costs on uncompleted projects
applicable to future billings		1,468,598			257,746			(636,285	)
Prepaid expenses, inventory and other assets, net		(139,937	)		(3,147	)		107,197
Other long-term assets		18,015			42,165			(2,093	)
Billings in excess of costs and estimated profit
on uncompleted contracts		(759,254	)		622,169			(890,662	)
Accrued litigation defense reserve		-			(450,000	)		104,355
Accounts payable and other accrued expenses		(13,967	)		3,092,209			1,140,824
Net cash provided by operating activities		1,654,988			594,479			597,790
Investing activities:
Purchases of property and equipment		(139,279	)		(226,759	)		(482,404	)
Deposit on purchase of building		(49,247	)		(15,000	)		-
Proceeds from the sale of equipment		16,995			-			-
Net cash used in investing activities		(171,531	)		(241,759	)		(482,404	)
Financing activities:
Proceeds from issuance of common stock		-			-			200
Increase (decrease) in outstanding checks in excess of
bank balance		(1,045,720	)		19,594			433,369
Proeceeds from the issuance of convertible notes payable		1,617,000			-			-
Proceeds from notes payable to banks and
long-term borrowings, net of financing costs		7,195,835			16,753,768			15,500,078
Principal payments on current
and long-term borrowings		(8,630,857	)		(17,179,240	)		(16,062,565	)
Net cash used in financing activities		(863,742	)		(405,878	)		(128,918	)
Increase (decrease) in cash and cash equivalents		619,715			(53,158	)		(13,532	)
Cash and cash equivalents at beginning of year		26,845			80,003			93,535
Cash and cash equivalents at end of year	$	646,560		$	26,845		$	80,003
Non-cash items:
Non-cash financing of insurance	$	562,628		$	538,397		$	566,043

Years Ended December 31, 2012, 2011 and 2010

	Common Shares		Common Stock		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income			Total

Balance at December 31, 2009		11,940,373	$	119,404	$	7,005,891	$	(5,534,022	)	$	(14,160	)	$	1,577,113

Warrants Extension						18,000								18,000
Discount on Convertible Notes						269,500								269,500

Other Comprehensive Income:
Change in Fair Value of Cash Flow Hedge
net of tax effect of $(6,200)		-		-		-		-			9,316			9,316

Net Income								786,271						786,271

Balance at December 31, 2010		11,940,373	$	119,404	$	7,293,391	$	(4,747,751	)	$	(4,844	)	$	2,660,200

Discount on Convertible Notes						67,167								67,167

Other Comprehensive Income:
Change in Fair Value of Cash Flow Hedge
net of tax effect of $(3,300)		-		-		-		-			4,844			4,844

Net Loss								(7,481,702	)					(7,481,702	)

Balance at December 31, 2011		11,940,373	$	119,404	$	7,360,558	$	(12,229,453	)	$	-		$	(4,749,491	)


Net Income								1,005,205						1,005,205

Balance at December 31, 2012		11,940,373	$	119,404	$	7,360,558	$	(11,224,248	)	$	-		$	(3,744,286	)

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

F-6

OP-TECH Environmental Services, Inc. and Subsidiaries

Consolidated Statement of Cash Flow

Years Ended December 31, 2012, 2011 and 2010

	December 31,			December 31,			December 31,
	2012			2011			2010

Operating activities:
Net income (loss)	$	1,005,205		$	(7,481,702	)	$	786,271
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Gain on sale of equipment		-			(9,151	)		(13,320	)
Bad debt expense		56,653			7,230			181,786
Depreciation and amortization		478,581			624,363			690,134
Warrant modification expense		-			-			18,000
Amortization of discount on convertible notes		129,667			166,667			37,000
Tax Expense (benefit) from deferred income taxes		620,000			1,440,199			(394,800	)
(Increase) decrease in operating assets and
increase (decrease) in operating liabilities:
Accounts receivable		708,988			729,426			(223,538	)
Costs on uncompleted projects applicable to
future billings		1,788,854			(1,024,578	)		1,468,598
Billings and estimated profit in excess of costs
on uncompleted contracts		(367,483	)		914,243			(759,254	)
Accrued litigation reserve		-			149,050			-
Prepaid expenses, inventory and other assets		1,020,968			(27,726	)		(139,937	)
Other long term assets		4,933			(17,608	)		18,015
Accounts payable and accrued expenses		(1,598,812	)		14,906			(13,967	)
Accrued future project losses		(1,236,835	)		1,253,147			-
Net cash provided by (used in) operating activities		2,610,719			(3,261,534	)		1,654,988

Investing activities:
Purchase of property and equipment		(132,341	)		(51,391	)		(139,279	)
Prepaid rent payments		-			(10,753	)		(49,247	)
Proceeds from sale of equipment		-			7,256			16,995
Net cash used in investing activities		(132,341	)		(54,888	)		(171,531	)

Financing activities:
Decrease in outstanding checks in excess of bank balance		-			-			(1,045,720	)
Proceeds from issuance of convertible notes payable		-			403,000			1,617,000
Redemption of convertible note payable		-			(20,000	)		-
Proceeds from note payable to bank and current
and long-term borrowings, net of financing costs		-			3,800,562			7,195,835
Principal payments on current and long-term borrowings		(1,649,467	)		(1,101,559	)		(8,630,857	)
Net cash provided by (used in) financing activities		(1,649,467	)		3,082,003			(863,742	)

Increase (decrease) in cash		828,911			(234,419	)		619,715

Cash at beginning of period		412,141			646,560			26,845

Cash at end of period	$	1,241,052		$	412,141		$	646,560

Non-cash items:
Non-cash debt refinancing	$	-		$	4,794,335		$	-
Non-cash refinancing of insurance	$	947,354		$	580,917		$	562,628

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

F-7

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation

OP-TECH Environmental Services, Inc. and Subsidiaries (the “Company”), a Delaware corporation headquartered in Syracuse, New York, provides comprehensive environmental and industrial services predominately in New York, New England, Pennsylvania, and New Jersey. The Company performs industrial cleaning of hazardous and non-hazardous materials and provides varying services relating to plant facility closure, including interior and exterior demolition and asbestos removal. In addition, the Company provides remediation services for sites contaminated by hazardous and non-hazardous materials and provides 24-hour emergency spill response services. The Company’s revenues are derived from state agencies, industrial companies and municipalities facing complex environmental clean-up problems associated with hazardous and non-hazardous materials as required by various governmental agencies. The Company’s services include assessing the regulatory, technical, and construction aspects of the environmental issue, and performing the necessary remediation activities. The Company seeks to provide its clients with remedial solutions which integrate the various aspects of a project and are well-documented, practical, cost effective, and acceptable to regulatory agencies and the public.

OP-TECH AVIX, Inc. (AVIX) is a subsidiary of OP-TECH Environmental Services, Inc. formed in January 2002 to pursue and engage in diversified lines of business. In the fourth quarter of 2004, this subsidiary became inactive, and the Company is no longer pursuing the lines of business that AVIX performed. Therefore, separate segment information is no longer presented in the Consolidated Financial Statements.

OP-TECH Environmental Services, Ltd. is an inactive Canadian subsidiary of OP-TECH Environmental Services, Inc.

J.O. Technologies is a partnership that is owned 50% by the Company. The partnership activities were not material to the operations of the Company. The partnership was discontinued in 2009.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of OP-TECH Environmental Services, Inc. and its two wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Project Income Recognition

Contracts are predominately short-term in nature (less than six months), and revenue is recognized as costs are incurred based on either the percentage of completion method utilizing estimated gross margins anticipated for each specific project or as incurred for time and material contracts. Project costs include all direct material, equipment, and labor costs and those indirect costs related to contract performance.

~~F-7~~Revenues recognized in excess of amounts billed are recorded as a current asset. Deferred revenue resulting from billings that exceed costs and estimated profit is reflected as a current liability.

F-8

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Revenues recognized in excess of amounts billed are recorded as a current asset. Deferred revenue resulting from billings that exceed costs and estimated profit is reflected as a current liability.

Provisions for estimated losses are made in the period in which such losses are determined. Due to the nature of the Company’s operations, the estimated revenues could change materially in the near term.

Normal delays relating to receipt of job-related vendor invoices, payroll processing, and billing compilation typically cause customer invoices relating to revenue earned in a certain month to be mailed in the first two weeks of the following month. Such invoices mailed after year-end that are included in December 31, ~~2010~~2012 and ~~2009~~2011 accounts receivable are approximately $23,~~357~~236,000 and $42,~~944~~793,000, respectively.

Certain states impose a sales tax on the Company’s sales to nonexempt customers. The Company collects the required sales tax from customers and remits the entire amount to the respective state. The Company’s policy is to exclude the tax collected and remitted from revenues and expenses.

The Company underwent a sales tax audit for the period March 1, 2005 to November 30, 2008. The Company estimated the liability at $203,000 in 2008. The audit was settled in 2009 for $128,000, and the company recorded a reduction in operating expenses of $75,000.

Concentration of Business Risk - Significant Customers

Sales to one customer amounted to approximately $87,~~536~~235,000, $62,~~552~~550,000, and $78,~~071~~536,000, in ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively. Accounts receivable at December 31, ~~2010~~2012 and ~~2009~~2011, include $~~101~~3,719,000 and $2400,~~477,~~000 respectively, from this customer. The Company relinquished its prime position on a portion of this customer’s business during 2010 due to poor return on investment ~~with~~and a significant overhead ~~requirement~~requirements.

Sales to another customer amounted to approximately $3422,~~876,~~000, $~~241~~1,196,000, and $~~467~~3,876,000 in ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively. Accounts receivable at December 31, ~~2010~~2012 and ~~2009~~2011, include $1258,~~995,~~000 and $231,318,000 respectively, from this customer.

Sales to another customer amounted to approximately $3,381,000, $1,258,000, and $2,665,000 in 2012, 2011, and 2010, respectively. Accounts receivable at December 31, 2012 and 2011, include $246,000 and $327,000 respectively, from this customer.

Sales to another customer amounted to approximately $3,990,000 and $3,319,000 in 2012 and 2011 respectively. Accounts receivable at December 31, 2012 and 2011 include $739,000 and $511,000 from this customer.

Sales to another customer amounted to approximately $1,065,000 and $3,166,000 in 2012 and 2011 and accounts receivable at December 31, 2012 and 2011 include $262,000 and $875,000 from this customer.

Receivables and Credit Policies

Accounts receivable are unsecured customer obligations due under normal trade terms requiring payment generally within 30 days from the invoice date. Larger ~~projects~~ contracts may have longer payment terms. Interest is not accrued on past-due invoices. Accounts receivable are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice.

The carrying amount of accounts receivable is reduced by a valuation allowance that represents management’s best estimate of the amounts that will not be collected. See further discussion at Note 5. The Company performs ongoing credit evaluations of customers and generally does not require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers. Management individually reviews all accounts receivable balances that exceed 90 days from invoice date and, based on assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Additionally, management estimates a general allowance based on historical ~~chargeoffs~~charge offs covering other amounts that may not be collectible.

~~Inventory~~F-9

Inventory, consisting of spill response and remediation supplies and materials, are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method.

F-8

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Inventory

Inventory, consisting of spill response and remediation supplies and materials, is stated at the lower of cost or market value. Cost is determined using the first-in, first-out method.

Property and Equipment

Property and equipment are stated at cost. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation of assets is provided for using the straight-line method over useful lives typically ranging from 3 to 15 years.

Other Long-Term Assets

The Company classifies all deposits which are not expected to be refunded within a year a long-term assets.

Financial Instruments

The Company maintains various financial instruments in the ordinary course of business, which consist of cash, accounts receivable and payable, notes payable, long-term debt, a line of credit and interest rate swap ~~transaction~~agreement. The carrying value of the Company’s financial instruments approximates their fair value at December 31, ~~2010~~2012 and ~~2009~~2011. The fair values of fixed rate notes payable and long-term debt are determined using incremental borrowing rates available to the Company for similar types of borrowings. The fair value of the interest rate swap agreement is fully discussed in Note 1213. All other financial instruments are short-term in nature and their fair values are based on the amounts that they have been or will be settled for subsequent to the balance sheet date.

Cash overdraft liability

At December 31, 2009, the Company had outstanding checks in excess of its operating bank account balance, as funds are only transferred to the operating account as necessary to cover checks that are presented for payment. The Company’s line of credit agreement expired on August 31, 2010. The Company, therefore, needed to maintain an adequate cash balance to cover ordinary business cash needs and, as a result, there is no cash overdraft liability at December 31, 2010.

Income Taxes

The Company provides for income taxes in accordance with the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that may be in effect in the years in which the differences are expected to reverse.

The Company has reviewed its operations for uncertain tax positions and believes there are no significant exposures. The Company will include interest on income tax liabilities in interest expense and penalties in operations if such amounts arise. The Company is no longer subject to Federal and New York State examinations by tax authorities for the closed tax years before ~~2007~~2009.

~~Reclassifications~~Going Concern

~~Certain~~The ~~amounts~~Company inhas substantial doubt about its ability to continue as a going concern due to the ~~2009~~working capital deficit and ~~2008~~the ~~statements~~bank offinancing ~~operations~~agreement. At ~~have~~December ~~been~~31, ~~reclassified~~2012, tothe ~~conform~~Company has negative working capital with current liabilities exceeding current assets by $5,182,135. In addition, the ~~presentation~~company ~~used~~violated ina ~~2010~~bank covenant during 2012 and did not receive a waiver from the bank.

~~Recently~~The ~~Adopted~~Company ~~Accounting~~has ~~Guidance~~made significant workforce reductions and has reduced variable monthly operating expenses. The Company believes that based on the significant project backlog, changes in the project mix, and the revisions to their business plan, they will be able to operate profitably. These financial statements do not include any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result should the company be unable to continue as a going concern.

F-9

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Subsequent events

Management has evaluated subsequent events through date that the consolidated financial statements were issued.

Common Stock

In 2012, the Company increased its authorized shares of common stock to 120,000,000.

Recently Adopted Accounting Guidance

In the normal course of business, Management evaluates all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), American Institute of Certified Public Accountants (“AICPA”) or other authoritative accounting body to determine the potential impact they may have on our Consolidated Financial Statements. Based upon this review, Management does not expect any of the recently issued accounting pronouncements which have not already been adopted by the Company to have a material impact on our Consolidated Financial Statements.

2.	Stock Based Compensation and Earnings Per Share

The Company maintains an equity incentive plan under which it may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, performance awards, or other forms of stock-based compensation to employees. Stock-based compensation is accounted for based on guidance issued by the Financial Accounting Standards Board (“FASB”) on Share-Based Payment. Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally three years) using the straight-line method. See Note 14 for additional details.

Basic earnings per share is computed by dividing net income (loss) by the weighted average shares outstanding for the period, which were 11,940,~~372,~~373 ~~11,940,372, and 11,938,706,~~ for the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively. Diluted earnings per share includes the potentially dilutive effect of common stock issuable upon conversion of stock options, convertible notes, and warrants, using the treasury stock method. For the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, ~~235~~259,~~336~~673, ~~765~~259,~~341~~673, and ~~177~~235,~~000~~336, shares of unexercised stock options and warrants, respectively, are excluded from the diluted calculation due to their anti-dilutive effect.

There are warrants outstanding to purchase 480,000 shares of the Company’s common stock at a price of $0.066 per share. The warrants are exercisable at the holder’s option at any time and from time to time, in whole or in part, until expiration in May 2013. These warrants have been excluded from the diluted calculation due to their anti-dilutive effect.

The convertible notes payable 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 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. ~~Subsequent~~The toprinciple ~~year-end~~balance of the notes are convertible into 33,333,334 ~~there~~shares of common stock plus any accrued interest at $0.06 per share. In 2012, 48,729,743 shares were ~~convertible~~included ~~notes~~in ~~issued~~the ~~that~~weighted ~~would~~average ~~materially~~shares ~~affect~~outstanding for purpose of company diluted earnings per share. In 2012, for purposes of computing diluted earnings per share, net income was increased by interest expense on the convertible notes of approximately $529,000 net of tax effect of approximately $200,000. See further discussion at Note 9.

~~3. Related Party Transactions~~F-11

The Company purchases subcontract labor services from St. Lawrence Industrial Services, Inc., which is owned by a director of the Company. The cost for these services amounted to approximately $2,668,000, $1,558,000, and $1,216,000, in 2010, 2009, and 2008, respectively. St. Lawrence charges the Company 3% above its cost for these services. The Company had a receivable from this related party of approximately $102,000 at December 31, 2010 and a payable to this related party of $292,000 at December 31, 2009 which are included in prepaid expense and other assets and other accrued expenses at December 31, 2010 and 2009, respectively in the consolidated balance sheets.

A director of the Company is a partner in or has been of counsel for law firms that provided professional services to the Company. The cost for these services amounted to approximately $55,000, $25,000, and $24,000, in 2010, 2009, and 2008, respectively. The Company has a payable due to this related party of approximately $16,000 and $7,000 recorded in accounts payable at December 31, 2010 and 2009, respectively.

During 2010, the Company utilized personal credit cards for several senior executives and board members to finance company expenses on a temporary basis. Amounts reimbursed to these individuals amounted to approximately $197,000 for the year ended December 31, 2010.

F-10

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

3.	Related Party Transactions

The Company purchases subcontract labor services from St. Lawrence Industrial Services, Inc., which is owned by a director of the Company. The cost for these services amounted to approximately $2,510,000, $3,135,000 and $2,668,000, in the years ended December 31, 2012, 2011, and 2010, respectively. St. Lawrence currently charges the Company cost for these services plus a $2,500 monthly management fee. The Company has a payable to this related party of approximately $36,000 and $152,000 at December 31, 2012 and 2011, respectively, which are included in accounts payable in the consolidated balance sheets.

A director of the Company is a partner in or has been of counsel for law firms that provided professional services to the Company. The cost for these services amounted to approximately $8,000, $30,000, and $55,000 in the years ended December 31, 2012, 2011, and 2010, respectively. The Company has a payable to this related party of approximately $11,700 and $4,900 at December 31, 2012 and 2011, respectively, which are included in accounts payable in the consolidated balance sheets.

During 2012 and 2011, the Company utilized personal credit cards for several senior executives and board members to finance company expenses on a temporary basis. Amounts reimbursed to these individuals amounted to approximately $276,000 and $272,000 for the years ended December 31, 2012 and 2011.

Cash

The Company’s line of credit agreement (Note 8) terminated on August 31, 2010 and, therefore, the Company needs to maintain adequate cash balances to cover ordinary business cash needs. Prior to the expiration of the line of credit, the Company utilized a zero balance account and voluntarily applied all available cash in the operating account to pay down the line of credit each night. From time to time cash balances held at the financial institution may exceed the Federal Deposit Insurance Corporation limits and are therefore subject to normal credit risk.

5.	Accounts Receivable

Accounts receivable at December 31, ~~2010~~2012 and ~~2009~~2011 consists of:

	2010			2009
	2012			2011
Accounts receivable, gross	$	98,~~166~~873,~~882~~559		$	108,~~134~~602,~~953~~531
Retainage receivable		1409,~~728,817~~820			~~791~~1,~~834~~353,258
Allowance for uncollectible receivables		(~~552~~442,~~792~~769	)		(~~625~~349,~~632~~538	)
Allowance for sales credits		(50,000	)		(50,000	)
Accounts receivable, net	$	108,~~292~~790,~~907~~610		$	109,~~251~~556,~~155~~251

All customer accounts receivable collateralize the Company’s outstanding loans with its primary lender (see Note 8).

6. Property and Equipment

Property and equipment at December 31, 2010 and 2009 consist of:

	2010			2009
Furniture and fixtures	$	53,386		$	53,386
Leasehold improvements		203,450			203,449
Office machines		341,698			283,419
Field equipment		7,362,709			7,323,995
		7,961,243			7,864,249
Less: Accumulated depreciation		(5,913,764	)		(5,262,242	)
	$	2,047,479		$	2,602,007

Field equipment depreciation included in equipment expenses amounted to approximately $603,000, $596,000, and $675,000, for years ended December 31, 2010, 2009, and 2008, respectively. A portion of equipment expenses are allocated to project costs based on equipment use. Depreciation expense for other property and equipment approximated $87,000, $61,000, and $42,000 for years ended December 31, 2010, 2009, and 2008, respectively and was included in operating expenses in the consolidated statement of operations.

F-11

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

7. Accrued Litigation Reserve

The Company had accrued a liability of $450,000 at December 31, 2008. The liability was 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 paid $450,000 to settle the claim in 2009.

8. Line of Credit and Long-Term Debt Obligations

Line of credit obligations and long-term debt at December 31, 2010 and 2009 consist of:

	2010			2009
Note payable to bank under line of credit, to be refinanced in 2011
as explained below.	$	4,140,987		$	5,073,196
Term Loan due in monthly installment payments of $24,848
though January 2012 plus interest at prime plus .75%, hedged
by an interest rate swap, to be refinanced in 2011 as explained
below.		311,365			609,542
Term Loans due in monthly installment payments through
August 2013 aggregating $19,443 plus interest rate at
prime plus .75%, to be refinanced in 2011 as explained below.		397,935			631,255
Equipment Note, due in monthly installment payments of $1,756
through October 2013 plus interest at prime plus .75%, collateralized
by equipment with a carrying value of approximately $49,400
and $67,400 at December 31, 2010 and 2009, respectively to be
refinanced in 2011 as explained below.		59,710			80,785
Insurance Financing Notes, due in monthly installment payments
of $58,086 and $55,356 including interest at 3.47% and 6.1% at
December 31, 2010 and 2009, respectively collateralized by
assignment of unearned premiums.		230,677			164,395
Equipment Notes, due in monthly installment payments through
June 2010 aggregating $2,597 at December 31, 2009, including
interest at rates ranging from 6.5% to 8.9%, collateralized
by equipment with a carrying value of approximately
$189,000 at December 31, 2009.		-			16,521
		999,687			1,502,498
Payment currently due on above debt		(772,416	)		(1,502,498	)
	$	227,271		$	-

As discussed below, the Company is in the final stages of refinancing its existing debt with a new financial institution. Accordingly, the debt balances presented above have been reclassified to reflect the anticipated refinancing in April 2011 as permitted in accordance with Generally Accepted Accounting Principles. See below for detail of the presentation changes.

F-12

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Total existing bank debt to be refinanced:
Note payable to bank - current			4,140,987
Term debt			769,010
Balance to be refinanced			4,909,997
Expected 2011 payments on new term debt			200,000
Payments on existing debt through April 2011			167,792
Expected 2011 payments of term debt			367,792
Current note payable to bank			3,242,205
Long-term debt based on refinancing			1,300,000
			4,909,997
Expected 2011 payments of term debt			367,792
Current payments on insurance financing notes			230,667
Current portion of debt at December 31, 2010			598,459

Allowance for uncollectible receivables at December 31, 2012, 2011 and 2010 consists of the following:

The Company’s financing agreements (the “Agreements”) with a lender (“Primary Lender”) expired on August 31, 2010. The Company expects to refinance the Agreements with another lender (“New Lender”) during 2011.

	2012			2011			2010

Beginning allowance for uncollectible receivables	$	(349,538	)	$	(552,793	)	$	(625,632	)
Write off of uncollectible receivables		50,975			216,535			254,625
Allowance adjustment for uncollectible receivables		(56,653	)		(7,230	)		(181,786	)
Collection of previously written-off receivables		(87,553	)		(6,050	)		-
Ending allowance for uncollectible receivables	$	(442,769	)	$	(349,538	)	$	(552,793	)

~~The expired agreement included a Line of Credit note that provided for borrowings up to $~~6~~,500,000 to be used to provide working capital~~. ~~Interest~~ ~~was~~Property ~~charged at LIBOR plus 7.0%. The line available decreased to $6,000,000 at January 1, 2010~~ and decreased to $4,140,987 in September 2010. The average borrowings under the Line of Credit calculated using month-end balances were $4,636,133 and $5,248,733 for 2010 and 2000, respectively. The weighted average interest rate was approximately 6.52% and 3.87% during 2010 and 2009, respectively.Equipment

~~The~~Property ~~Company was not in compliance with the financial covenants as of December 31, 2009~~ and ~~received~~equipment a waiver. The Company renegotiated the terms of its credit agreement with the bank. The line expiration was changed from July 1, 2011 to August 31, 2010, and the interest rate was increased from LIBOR plus 4% to LIBOR plus 7%. Additionally, the bank assessed a $120,000 fee, is requiring the use of a consultant to monitor cash flow, and required $500,000 equity infusion by August 20, 2010. The Company raised $1,617,000 as more fully explained in Note 9. The extension fee is included in accrued expenses at December 31, ~~2010. The~~2012 ~~bank established new covenants for March 2010~~ and ~~June~~2011 ~~2010,~~consist ~~and required the Company seek replacement financing.~~ of:

The expired agreements were collateralized by all present and future right, title and interest in all of the personal property of the Company including, but not limited to, all accounts receivable, inventory and equipment. This collateral had a carrying value at December 31, 2010 as follows:

	2012			2011

Furniture and fixtures	$	60,900		$	53,386
Leasehold improvements		203,450			203,450
Office machines		341,698			341,698
Field equipment		7,493,531			7,368,704
		8,099,579			7,967,238
Less: Accumulated depreciation		(6,978,462	)		(6,499,881	)
	$	1,121,117		$	1,467,357

Accounts Receivable, net of Allowance for Doubtful Accounts			10,292,907
Inventory			358,394
Equipment, net of Accumulated Depreciation			2,047,479
			12,698,780

Field equipment depreciation included in equipment expenses amounted to approximately $433,000, $556,000, and $603,000, for years ended December 31, 2012, 2011, and 2010, respectively. A portion of equipment expenses are allocated to project costs based on equipment use. Depreciation expense for other property and equipment approximated $45,000, $69,000, and $87,000 for years ended December 31, 2012, 2011, and 2010, respectively and was included in operating expenses in the consolidated statement of operations.

7.	Accrued Future Loss Contracts

In accordance with the Company’s revenue recognition policy, certain contracts are accounted for using the percentage of completion accounting method. Revenue is recognized based on a measurement of completion comparing the ratio of costs incurred to date with total estimated costs multiplied by the contract value. Inherent in these estimates are uncertainties about the total cost to complete the project. If the estimate to complete results in a loss on the contract, the Company will record the amount of the estimated loss in the period the determination is made. Changes to the estimate may result in a charge or benefit to operations. As of December 31, 2012 and 2011, the Company estimated and recorded a future loss of $16,312 and $1,253,147, respectively.

F-13

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~The~~8. ~~Agreements~~Line ~~also include a Term Loan agreement which is due in monthly principal installment payments~~ of ~~$24,848~~Credit ~~plus~~and ~~interest~~Debt ~~at a rate of prime plus .75%, hedged by an Interest Rate Swap Transaction.~~Obligations

InLine ~~January~~of ~~2005,~~credit ~~the~~obligations ~~Company~~and ~~entered into the Interest Rate Swap with its Primary Lender to hedge against rising interest rates on the floating rate Term Loan~~ debt~~. The~~ ~~liability~~at ~~being~~December 31, ~~hedged~~2012 isand ~~the~~2011 ~~variability~~consist ~~in cash flows related to fluctuations in interest payments made. The fluctuation in interest rates exposes the Company to the risk~~ of higher interest expense. The purpose of the Swap Agreement is to limit the Company’s exposure to rising interest rates during the term of the floating rate Term Loan noted above. The swap has been designated as a cash flow hedge. See Note 13 for further disclosure pertaining to this Swap Agreement.:

Interest paid amounted to approximately $335,000, $309,000, and $450,000, in the years ended December 31, 2010, 2009, and 2008, respectively.

	2012			2011

Note payable to bank under line of credit	$	5,000,000		$	5,000,000

Term Loan due in monthly installment payments of $50,000
through May 2016 plus interest at LIBOR plus 3.5% collateralized
substantially all assets	$	1,964,260		$	2,564,260

Term Loan due in monthly installment payments of $606 through
September 2013 plus interest at 3.71% collateralized by equipment
with a carrying value of approximately $12,833 at December 31, 2011		5,927			12,870

Insurance Financing Notes, due in monthly installment payments
of $51,756 and $62,932 including interest at 3.08% and 2.99% at
December 31, 2012 and 2011, respectively collateralized by
assignment of unearned premiums		154,999			250,169

		2,125,186			2,827,299
Payment currently due on above debt		(2,125,186	)		(2,827,299	)
	$	-		$	-

AtThe ~~December 31, 2010, the~~ Company ~~has~~entered ~~outstanding~~into ~~commitments~~financing inagreements (the ~~form~~“Agreements”) ofwith ~~standby~~a ~~letters~~lender of(“Primary ~~credit~~Lender”) inon ~~the~~April ~~amount of approximately $50~~22,~~000~~ ~~securing various agreements~~2011.

~~The~~As ~~Company~~of ~~executed~~December a31, ~~commitment~~2012 ~~letter~~and ~~with New Lender on March 31~~2011, ~~2011. The~~the ~~terms~~Agreements include a Line of Credit note which ~~will~~provides ~~provide~~ for borrowings up to $5,000,000 based on eligible collateral to be used to provide working capital and is ~~expected to be~~ payable on demand. Interest iswas ~~expected~~charged toat be LIBOR plus 3.5%.

The ~~new~~average ~~terms~~borrowings ~~also~~under ~~include~~the aLine ~~$3,000,000 term loan due in monthly installment payments~~ of ~~$50,000~~Credit ~~plus~~calculated ~~interest~~using atmonth-end ~~LIBOR~~balances ~~plus~~were ~~3.5%. Of the total~~ $35,000,000 ~~term~~and ~~loan, only~~ $13,~~500~~628,~~000~~697 ~~has~~for ~~been~~2012 ~~considered~~and ~~in the debt presentation explained above as there will be participation from another bank from the remaining $1~~2011,~~500,000~~ respectively. The ~~terms~~weighted ofaverage ~~this~~interest ~~participation~~rate ~~are~~was ~~currently~~approximately ~~being~~3.80% ~~negotiated~~ and ~~no commitment has been made~~4. ~~Accordingly,~~68% ~~the~~during ~~Company~~2012 ~~has reflected the long-term portion of the $1,500,000 committed term debt. The Company fully expects to comply with all the requirements of the commitment~~ and ~~anticipates that the refinancing to close by April 15~~2011, ~~2010~~respectively.

The ~~commitment~~Agreements ~~terms~~also include ~~certain financial covenants including~~ a minimum fixed charge coverage ratio to be measured beginning in the fourth quarter 2011; subordination of the convertible notes payable; and a material adverse change clause which permits the financial institution to call its obligation if the Company fails to comply with covenants$3, ~~as defined~~000,000 orterm inloan ~~the~~due ~~event of a material adverse change~~ in ~~the~~monthly ~~Company’s~~principal ~~business. Management~~installment ~~does~~payments ~~not~~of ~~anticipate any adverse changes in the next twelve months~~$50,000 ~~however,~~plus ~~there~~interest ~~can~~at beLIBOR noplus ~~assurances~~3.5%.

9. Convertible Notes Payable

During the year, the Company entered into a series of Secured Loan Agreements with several individuals for the sale of secured convertible notes (the “Convertible Notes”) for an aggregate of $1,617,000 for proceeds of this amount. 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 Convertible Notes may be converted into 26,950,000 shares of common stock, or approximately 226% of current outstanding shares of common stock. The issuance of the Convertible Notes does not represent a change of control as approximately 70% of the Convertible Notes were issued to shareholders of the Company that currently own approximately 46% of the Company’s outstanding share capital.

Additionally, the Company amended the Articles of Incorporation to increase the authorized common shares from 20,000,000 to 50,000,000 shares to allow for the conversion of these securities.

F-14

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The ~~Company~~Agreements ~~also~~include ~~entered~~certain ~~into~~financial acovenants ~~Security~~measured ~~Agreement~~at toDecember ~~secure~~31, ~~payment~~2012 and ~~performance~~2011, ofincluding ~~its~~a ~~obligations~~minimum ~~under~~fixed ~~the~~charge ~~Convertible~~coverage ~~Notes~~ratio ~~pursuant~~and toa ~~which~~material itadverse ~~granted~~change ~~the~~clause ~~holders~~which ofpermits the ~~Convertible~~financial ~~Notes~~institution ato ~~security~~call ~~interest in all of~~ its ~~assets. The~~obligation ~~security~~if ~~granted~~the ~~will~~Company befails ~~subordinated~~ to acomply ~~security~~with ~~interest~~covenants, ~~granted~~as todefined, ~~the~~or ~~New Lender~~ in ~~connection with~~ the ~~loan~~event ~~commitment~~of ~~described~~a inmaterial ~~Note~~adverse 8change ~~(including any security interest that may be granted~~ in ~~connection with funds borrowed to pay amounts due under such loan) and any obligations to repay surety bonds issued in connection with services provided in~~ the Company’s ~~core~~ business ~~where the Company is the principal under the surety bond~~. ~~The Company’s sole active subsidiary also guaranteed all amounts owed by the Company under the Convertible Notes.~~

The Company ~~recorded~~was ~~$269,500~~not in ~~debt~~compliance ~~discount~~with ~~related~~the tofinancial ~~the~~covenants ~~issuance~~as of ~~these~~December ~~convertible notes due to the beneficial conversion feature~~31, ~~which~~2012 ~~is shown as Additional Paid in Capital~~ and ~~reduction in the convertible notes payable~~2011. The ~~discount~~Company isreceived ~~based~~a onwaiver ~~the market value of the stock at the date of the note agreements which was $.07 per share. Amortization expense related to these discounts was $37,000~~ for ~~the year ended~~ December 31, ~~2010 and is included in interest expense~~2011. ~~The~~Based ~~remaining~~on ~~amortization~~violations ~~period~~during ~~for~~ the ~~discount is 20 months for the~~ first ~~tranche~~quarter of $12012,~~332,000~~ ~~and~~the 24Company ~~months~~has ~~for~~classified ~~second~~the ~~tranche~~debt ofas ~~$285,000~~current. ~~Interest~~The ~~expense~~Company ~~recorded~~has onnot ~~these~~received ~~notes~~a ~~amounted~~waiver ~~to $63,640~~ for ~~2010~~the ~~yielding~~violations anin ~~effective interest rate of 14~~2012.~~3%. The unamortized discount was $232,500 at December 31, 2010.~~

In January ~~2011~~2005, the Company ~~redeemed~~entered ~~$20,000~~into ofthe ~~Convertible~~Interest ~~Notes~~Rate ~~and~~Swap ~~issued~~to ~~additional~~hedge ~~Convertible~~against ~~Notes~~rising ofinterest ~~$403,000. These~~rates ~~additional~~on ~~Convertible~~the ~~Notes~~floating ~~may~~rate beTerm ~~converted~~Loan ~~into~~debt. The ~~6,716,667~~Swap ~~shares~~agreement ofwas ~~common~~terminated ~~stock~~April 22, 2011. The ~~Company~~swap ~~recorded~~had ~~$67,167~~been indesignated ~~debt~~as ~~discounts~~a incash ~~2011~~flow ~~that~~hedge. See ~~will~~Note be13 ~~amortized~~for ~~over~~further ~~two~~disclosure ~~years~~pertaining to this Swap Agreement.

Interest paid amounted to approximately $304,000, $306,000 and $335,000, in the years ended December 31, 2012, 2011, and 2010.

9.	Convertible Notes Payable

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 balance 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. 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 Lender in connection with the loans described in Note 8 (including any security interest that may be granted in connection with funds borrowed to pay amounts due under such loan) and any obligations to repay surety bonds issued in connection with services provided in the Company’s core business where the Company is the principal under the surety bond. The Company’s sole subsidiary also guaranteed all amounts owed by the Company under the Convertible Notes.

The Company recorded $336,667 in debt discount 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. The discount is based on the market value of the stock at the date of the note agreements which was $.07 per share. Amortization expense related to these discounts was $129,667 and $166,667 for the years ended December 31, 2012 and 2011, respectively, and is included in interest expense. Interest expense recorded on these notes amounted to $400,000 and $120,000 in 2012 and 2011 yielding an effective interest rate of 20.0%. The unamortized discount was fully amortized as of December 31, 2012 and was $129,667 at December 31, 2011.

The Company was not in compliance with the default conditions as of December 31, 2012 and December 31, 2011. The annual interest rate is to increase to 20% for any period of default. As of December 31, 2011, the interest began to accrue at 20%. The redemption of shares is available to the lenders through the maturity dates set in the agreements.

As of April 22, 2013, the Convertible Notes were amended to provide the Lenders with the option to call a portion or all of the Principal Sum and/or Interest for payment at any time while the Convertible Notes remain outstanding. The maturity date has been extended to August 30, 2013. The annual interest will continue to accrue on each Note at the rate of 6% per annum through and including the applicable Original Designated Date, and at the rate of 20% per annum thereafter.

Due to the default on the Convertible Notes and the Lender’s option to call Convertible Notes these are classified as current as of December 31, 2012 and December 31, 2011.

10.	Operating Lease Obligations

Office facilities and various pieces of field equipment are leased under noncancelable operating leases expiring at various dates through ~~2014~~2019. These leases do not include any contingent lease provision, concessions or other restrictions. Rent expense incurred under these operating leases as well as other month to month rentals amounted to approximately $~~762~~1,002,000, $1809,~~033,~~000, and $1762,~~056,~~000 in ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively.

The Company entered into a sublease agreement in 2009 for one of their facilities on a month to month basis at $1,437 per month. The total amount received under the sublease agreement was approximately $276,~~000~~900 in ~~2010~~2011 and $427,~~500~~000 inand ~~2009~~2010, including utility charges.

Future minimum lease payments under noncancelable operating leases are as follows:

The Company is currently evaluating purchasing a building to replace a rented facility and has made approximately $49,000 in deposits toward this potential purchase which are included as other long-term assets.

2013	$	547,689
2014		467,421
2015		354,360
2016		321,009
2017		218,184
2018 and thereafter		377,184
	$	2,285,847

2011	$	568,775
2012		385,497
2013		230,175
2014		121,900
	$	1,306,347

The Company has made $60,000 in prepaid rent payments which are included as other long-term assets.

F-15

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

11. Income Taxes

The following summarizes the income tax (benefit) expense atfor the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010:

	2010			2009			2008
	2012			2011			2010
Current:
Federal	$	~~6,500~~-		$	~~11,605~~-		$	16,~~210~~500
State		12(3,~~871~~791	)		122,~~000~~100			1612,~~619~~871
		19,371			23,605			17,829
		(3,791	)		2,100			19,371
Deferred		~~(394~~620,~~800~~000	)		~~(401~~1,~~400~~419,500	)		(39394,~~100~~800	)
	$	~~(375~~616,~~429~~209	)	$	~~(377~~1,~~795~~421,600	)	$	(21375,~~271~~429	)

The deferred tax expense (benefit) recognized infor ~~2010~~the years ended December 31, ~~2009~~2012, 2011 and ~~2008~~2010 represents the effect of changes in temporary differences and net operating loss carryforwards, along with related changes in the valuation allowance for deferred tax assets.

The deferred tax expense (benefit) resulting from the utilization of net operating loss carryfowards was $~~222~~620,~~400~~000, $(~~993~~4,~~100~~157,419), and $~~558~~222,~~249~~400 for the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively.

A reconciliation of the statutory federal income tax rate with the Company’s effective income tax rate was as follows:

	Year ended December 31,
	2010						2009						2008
	2012						2011						2010
	Amount			Percent			Amount			Percent			Amount			Percent
Taxes at Federal Statutory Rate	$	139,686			34.0	%	$	(769,313	)		34.0	%	$	215,442			34.0	%
Taxes at Federal
State Taxes Net of Federal Tax Expense		21,775			5.3	%		(119,922	)		5.3	%		33,584			5.3	%
Statutory Rate	$	551,281			34.0	%	$	(2,060,435	)		34.0	%	$	139,686			34.0	%
Increase (Decrease) in Valuation Allowance		(550,000	)		-133.9	%		500,000			-22.1	%		(350,000	)		-55.2	%
State Taxes Net of
Non-deductible Expenses		18,614			4.5	%		13,939			-0.6	%		17,892			2.8	%
Federal Tax Expense		85,935			5.3	%		(321,185	)		5.3	%		21,775			5.3	%
Other		(5,504	)		-1.3	%		(2,499	)		0.1	%		61,947			9.8	%
Increase (Decrease)
	$	(375,429	)		-91.4	%	$	(377,795	)		16.7	%	$	(21,135	)		-3.3	%
in Valuation Allowance		-			0.0	%		3,523,000			-58.1	%		(550,000	)		-133.9	%
Non-deductible
Expenses		30,000			1.9	%		20,377			-0.3	%		18,614			4.5	%
Other		(51,007	)		-3.1	%		259,843			-4.3	%		(5,504	)		-1.3	%
	$	616,209			38.0	%	$	1,421,600			-23.4	%	$	(375,429	)		-91.4	%

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F-16

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~Deferred~~Significant ~~income~~components ~~taxes reflect the net tax effect~~ of ~~temporary differences between~~ the ~~carrying~~Company’s ~~amount~~deferred oftax ~~assets~~liabilities and ~~liabilities~~assets ~~for~~as ~~financial~~of ~~reporting~~December ~~purposes~~31, 2012 and ~~the~~2011 ~~amounts~~are ~~used~~as ~~for income tax purposes.~~follows:

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2010 and 2009 are as follows:

	2012			2011
Deferred tax liabilities:
Property and equipment	$	(84,800	)	$	(179,100	)
Deferred tax assets:
Net operating loss carryforward		3,600,000			4,047,000
Accounts receivables reserves		192,180			155,800
Accrued expenses		64,800			81,400
Interest rate swap liability		-			-
Accrued future project losses		6,300			487,900
		3,863,280			4,772,100

Net deferred tax asset		3,778,480			4,593,000
Valuation allowance for deferred tax assets		(3,578,480	)		(3,773,000	)
Net deferred tax asset, net of valuation allowance	$	200,000		$	820,000

	2010			2009
Deferred tax liabilities:
Property and equipment	$	(296,800	)	$	(389,900	)
Deferred tax assets:
Net operating loss carryforward		2,494,100			2,716,400
Accounts receivable reserves		235,100			263,500
Accrued expenses		77,800			75,400
Interest rate swap liability		3,500			9,700
		2,810,500			3,065,000
Net deferred tax asset		2,513,700			2,675,100
Valuation allowance for deferred tax assets		(250,000	)		(800,000	)
Net deferred tax asset, net of valuation allowance	$	2,263,700		$	1,875,100

As of December 31, 2012, the Company has federal net operating loss (“NOL”) carryforwards of approximately $9,228,615. These expire at various times beginning in 2012 and through the year ending December 31, 2031 as follows:

As of December 31, 2010, the Company has federal net operating loss (“NOL”) carryforwards of approximately $6,986,300, of which approximately $667,000 will be used to offset 2010 taxable income. These expire at various times beginning in 2011 and through the year ending December 31, 2029 as follows:

2012		648,582
2018		1,482,900
Post 2020		7,097,133
	$	9,228,615

2011	$	1,149,400
2012		1,148,600
2018		1,482,900
Post 2020		3,205,400
	$	6,986,300

The Company will establish a valuation allowance if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessments of realizable deferred tax assets. The valuation allowance as of December 31, 2010 and December 31, 2009 is related to the portion of the net operating losses that based on taxable income projections may expire before being utilized. The net change in the total valuation allowance for the years ended December 31, 2010 and December 31, 2009, was a decrease of $550,000 and an increase of $500,000, respectively. The valuation allowance was decreased during the year ended December 31, 2010 as a result of taxable income for the year that will utilized a large portion of the NOL due to expire in upcoming years. The valuation allowance was increased during the year ended December 31, 2009 as the Company did not utilize a portion of the NOL as planned during the year and future income projections were reduced, resulting in additional projected expiration of amounts expiring through 2012. Management believes that it is more likely than not that the Company will continue profitability and make use of the net operating loss carryforwards expiring through 2018 and post 2020, however, has reserved approximately $250,000 due to amounts expiring in 2011 and 2012.

F-17

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

~~Income~~The ~~taxes~~Company ~~and~~will ~~franchise~~establish ~~taxes~~a ~~paid~~valuation ~~were~~allowance ~~approximately~~if ~~$13,000,~~it ~~$12,000,~~is ~~and~~more ~~$14,000~~likely inthan not that these items will either expire before the ~~year~~Company ~~ended~~is ~~December~~able ~~31,~~to ~~2010~~realize their benefits, ~~2009~~or that future deductibility is uncertain. Periodically, the valuation allowance is reviewed and ~~2008,~~adjusted ~~respectively. Taxes~~based ~~currently~~on ~~payable~~management’s ~~were~~assessments ~~approximately~~of ~~$15,000~~realizable atdeferred tax assets. The valuation allowance as of December 31, ~~2010. The~~2012 ~~Company~~and ~~received~~2011 ~~refunds~~is ~~for~~related ~~certain~~to ~~tax~~the ~~credits~~portion of ~~$16,790~~the innet ~~2008. Interest~~operating ~~expense~~losses ~~and~~that ~~penalties~~based on ~~tax~~taxable ~~payments~~income ~~are~~projections ~~included~~may inexpire ~~income~~before ~~tax~~being ~~expense~~utilized. The net change in the ~~period~~total ~~recognized~~valuation allowance for the years ended December 31, 2012, 2011 and 2010, was $0, an increase of $3,523,000 and a decrease of $550,000, respectively.

Management believes that it is more likely than not that the Company will not be able to use a significant portion of the net operating loss carryforwards expiring through 2018 and post 2020. As a result, the valuation allowance was maintained for the year ended December 31, 2012 to offset deferred tax assets. A current deferred tax asset has not been recorded at December 31, 2012 since management is unable to determine that the Company will have income for the year ended December 31, 2013. A long-term deferred tax asset has been recorded at December 31, 2012 based on the reasonable anticipation of income during the years 2014 through 2018.

Income taxes and franchise taxes paid were approximately $7,000, $4,400, and $13,000 in the years ended December 31, 2012, 2011, and 2010, respectively. There were no taxes currently payable at December 31, 2012.

12.	Employee Benefit Plan

The Company maintains a defined contribution employee retirement plan (“Retirement Plan”) which covers substantially all employees. The Retirement Plan is funded by voluntary employee contributions which are matched by the Company at a designated percentage, and additional contributions by the Company at the discretion of the Board of Directors. Matching contributions made by the Company to the Retirement Plan were approximately $4253,000, $3048,000, and $2842,000 in the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010, respectively. The Company did not make discretionary contributions to the Retirement Plan in the years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010.

13.	Fair Values of Assets and Liabilities

On January 1, 2009, the Company adopted authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on Fair Value Measurements which defines fair value as the exchange price that would be received for an asset or the exit price to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This guidance requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. This guidance also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.

The Company ~~has~~had recorded its interest rate swap transaction at fair value, resulting in a liability of $8,345 ~~and $23,861~~ as of December 31, 2010 ~~and December 31, 2009, respectively~~. The ~~interest~~agreement ~~rate~~was ~~swap~~terminated arrangement is not exchange traded and quoted market prices are not readily available. The fair value of the arrangement is derived by the issuing entity using pricing models that use primarily market observable inputs, such as ~~interest~~part ~~rate yield curves and credit curves. The Company classifies this within Level 3~~ of the ~~valuation~~senior ~~hierarchy. The~~debt ~~impact~~refinancing on ~~the~~April ~~derivative~~22, ~~liabilities for the Company and the counterparties’ non-performance risk to the derivative trades is considered when measuring the fair value of derivative liabilities~~2011.

The interest rate swap hedge instrument fixes the interest rate on the Term Loan at 7.8%, matures on February 1, 2012, and has a notional amount that remains equal to the principal balance on the Term Loan. The Term Loan bears interest at prime plus 0.75%, and the swap agreement trades the floating rate portion of the Term Loan for a fixed 7.05% rate. The difference between the prime rate, as periodically adjusted, and the interest rate swap rate are settled monthly as outlined in the agreement. This derivative instrument effectively changed the Company’s interest rate exposure on this variable rate debt from 4.2% to 7.8% in 2010, and 4.0% to 7.8% in 2009. The Mark to Market valuation, representing the net present value of the expected cash flow from the Interest Rate Swap, is a liability of $8,345 and $23,861 at December 31, 2010 and 2009, respectively. The Company made additional payments to settle the Interest Rate SWAP of $19,635 and $30,828 for the years ended December 31, 2010 and 2009, respectively, which were recorded as a component of interest expense. Additionally, the Company expects to reclassify approximately $8,000 of deferred net losses on the swap arrangement to interest expense in the next twelve months.

F-18

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The following table provides a summary of changes in fair value of the Company's Level 3 liability, as well as the portion of gains and losses included in income attributable to unrealized gains or losses that relate to those assets held at December 31, 2010:

	Interest Rate Swap Obligation
	2010			2009
Balance, beginning of year	$	(23,861	)	$	0
Transfer into level 3 from level 2		-			(48,665	)
Unrealized holding gain (loss) on future value of the interest
rate swap agreement, a derivative financial instrument,
arising during the period		(4,119	)		(6,024	)
Reclassification adjustment for realized (gains) losses on an
interest rate swap, included in net income during the period		19,635			30,828
Balance, end of year	$	(8,345	)	$	(23,861	)

14.	Stock Option Plan

The 2002 Omnibus Plan (“Omnibus Plan”) maintained by the Company is intended to promote the growth and general prosperity of the Company by offering incentives to its key employees who are primarily responsible for the growth of the Company and to attract and retain qualified employees. Awards granted under the Omnibus Plan may be (a) Stock Options which may be designated as Incentive Stock Options intended to qualify under Section 422 of the Internal Revenue Code of 1986, or Nonqualified Stock Options (“NQSO’s) not intended to so qualify; (b) stock appreciation rights; (c) restricted stock awards; (d) performance awards; or (e) other forms of stock-based incentive awards. The shares of stock with respect to which the Awards may be granted shall be the common stock, par value at $0.01, of the Company (“Common Stock"). Shares delivered upon exercise of the Awards, at the election of the Board of Directors of the Company, may be stock that is authorized but previously unissued or stock reacquired by the Company, or both. The maximum number of shares with respect to which the Awards may be granted under the Omnibus Plan shall not exceed 1,000,000 shares of Common Stock; provided, however, that such number of shares of Common Stock may also be subject to adjustment, from time to time, at the discretion of the Board of Directors of the Company. These Awards generally vest over a three-year period, and have contractual terms of 10 years. The Company did not issue any grants during the years ended December 31, ~~2008~~2012, ~~2009~~2011 or 2010.

Stock options are granted at the fair market value of the stock on the date of grant. The Company uses the Black-Scholes-Merton option pricing model to value its grants, which requires the input of various assumptions. These assumptions include expected term of the options, the estimated volatility of the Company’s common stock price over the expected term, and the number of options that will be forfeited prior to exercise. Compensation cost is measured based on the grant-date fair value of the award, and is recorded over the vesting period for those options expected to vest.

The Company did not issue any awards during the ~~periods~~years ended December 31, ~~2010~~2012, ~~2009~~2011, and ~~2008~~2010. All compensation cost related to vesting option awards have been recognized and no compensation cost was recorded ~~for~~in ~~2010~~the years ended December 31, ~~2009~~2012, 2011, and ~~2008~~2010. The Company extended warrants in May 2010 and recorded $18,000 of compensation expense in 2010.

The following table summarizes changes in the status of outstanding options:

	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2012		259,673	$	0.28
Forfeited		-	$	-
Outstanding at December 31, 2012		259,673	$	0.28
Exercisable at December 31, 2012		259,673	$	0.28

The remaining weighted average contractual life of options outstanding at December 31, 2012 is approximately 1.3 years, and the aggregate intrinsic value of options outstanding at December 31, 2012 is zero dollars.

F-19

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

The following table summarizes changes in the status of outstanding options:

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2010		285,341		$	0.28
Forfeited		(10,001	)	$	0.40
Outstanding at December 31, 2010		275,340		$	0.27
Exercisable at December 31, 2010		275,340		$	0.27

The remaining weighted average contractual life of options outstanding at December 31, 2010 is approximately 3.3 years, and the aggregate intrinsic value of options outstanding at December 31, 2010 is approximately $400.

15.	Commitment and Contingencies

The Company is subject to various federal, state and local regulations relating to environmental matters, including laws which require the investigation and, in some cases, remediation of environmental contamination. The Company's policy is to accrue and charge to operations environmental investigation and remediation expenses when it is probable that a liability has been incurred and an amount is reasonably estimable.

The Company settled a lawsuit for $450,000 in 2009. There are two ~~pending~~ litigations ~~arising~~that arose from that suit. The Company entered into an agreement to contribute 15% to any settlement of the actions, ~~providing~~proving the Company deems the total proposed settlement reasonable. The Company ~~has~~settled ~~not~~both ~~been~~litigations ~~notified~~in of2012 ~~any~~for ~~potential~~$1,050 ~~settlements~~and on$48,000, ~~this matter~~respectively. The Company ~~has~~had ~~not~~accrued ~~recorded~~a ~~any~~ liability of $49,050 at December 31, ~~2010~~2011 ~~and~~for ~~2009~~these ~~as the ultimate outcome is not estimable as this time~~settlements.

~~The~~In 2012, the Company ~~was~~paid ~~notified~~a bysettlement ~~the~~for ~~State~~$100,000 ofwith the New York ~~that~~State ~~the~~Department ~~Company~~of ~~may~~Labor berelated ~~responsible~~to ~~for~~asbestos ~~costs~~operations. The ~~incurred~~Company tohad ~~address~~accrued a ~~petroleum~~liability ~~spill. The~~of ~~Company~~$100,000 isat ~~rigorously~~December ~~defending~~31, ~~this~~2011 ~~matter~~for ~~and~~this ~~the~~settlement. The ~~outcome~~Company’s ~~cannot~~asbestos behandling ~~reasonably~~license ~~determined~~is atcurrent ~~this~~and ~~time~~in compliance.

The Company received a $155,000 payment from a customer who subsequently filed bankruptcy. The customer is seeking repayment claiming the payment was made during the 90 days prior to filing bankruptcy as a preferential payment. The Company maintains the payment was received in the ordinary course of business and it should not be consider a preference item. Accordingly, the Company has not recorded a liability for this matter at December 31, 2010 or 2009.

The Company is a party to various proceedings arising from the normal course of business. Based on information currently available, management believes adverse decisions relating to litigation and contingencies in the aggregate would not materially affect the Company's results of operations, cash flows or financial condition. It is reasonably possible, however, that a change in estimate could occur within one year which may affect the Company's results of operations, cash flows or financial condition.

The State of New York (NYS) began an examination of the Company’s sales and use tax returns for December 2008 through May 2011 in the third quarter of 2011 that is estimated to be completed during the second quarter of 2013. As of December 5, 2012, NYS has proposed adjustments of approximately $140,000 to the Company’s sales and use tax positions. Management is currently evaluating those proposed adjustments. During 2012, the Company applied sales tax credits with New York State of approximately $400,000 which are still under review by the state of New York. The Company has accrued an obligation sufficient enough to cover these proposed adjustments as of December 31, 2012.

F-20

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

16. Three-Year Selected Quarterly Financial Data (Unaudited)

	Year Ended December 31, 2010
	Year Ended December 31, 2012
	Quarter			Quarter		Quarter		Quarter
	Ended			Ended		Ended		Ended
	March 31			June 30		September 30		December 31
Project billings	$	13,846,687		$	12,058,774	$	10,679,502	$	9,451,080
Project Billings		5,512,591			8,911,076		8,497,189		9,343,195
Gross margin		2,294,849			2,789,901		2,391,464	$	1,484,018
Gross Margin		1,533,258			2,444,855		2,934,137		2,361,986
Net income (loss)		92(324,~~215~~048	)		~~243~~417,~~260~~316		~~558~~684,~~266~~030	$	~~(107~~227,~~470~~907	)
Net income (loss) per share
basic	$	(0.0103	)	$	0.0203	$	0.0506	$	(0.0102	)
diluted	$	(0.0103	)	$	0.0201	$	0.0201	$	(0.01	)

The Company made adjustments to several projects in the fourth quarter reducing earned revenue by approximately $268,000. This is recorded as a reduction of project billings and gross margin.

	Year Ended December 31, 2011
	Quarter			Quarter			Quarter			Quarter
	Ended			Ended			Ended			Ended
	March 31			June 30			September 30			December 31
Project Billings	$	4,907,402		$	7,793,768		$	9,282,640		$	8,681,524
Gross Margin		1,347,221			2,064,800			823,672			(1,458,007	)
Net loss		(598,520	)		(22,000	)		(1,118,043	)		(5,743,139	)
Net loss per share
basic	$	(0.05	)	$	(0.002	)	$	(0.09	)	$	(0.49	)
diluted	$	(0.05	)	$	(0.002	)	$	(0.09	)	$	(0.49	)

	Year Ended December 31, 2009
	Quarter			Quarter			Quarter			Quarter
	Ended			Ended			Ended			Ended
	March 31			June 30			September 30			December 31
Project billings	$	5,737,630		$	8,887,741		$	9,606,999		$	11,768,236
Gross margin		1,234,758			2,099,488			1,294,078		$	2,763,841
Net income (loss)		(393,445	)		(81,143	)		(360,434	)	$	(1,049,868	)
Net income (loss) per share
basic	$	(0.03	)	$	(0.01	)	$	(0.03	)	$	(0.09	)
diluted	$	(0.03	)	$	(0.01	)	$	(0.03	)	$	(0.09	)

	Year Ended December 31, 2008
	Quarter			Quarter		Quarter		Quarter
	Ended			Ended		Ended		Ended
	March 31			June 30		September 30		December 31
Project billings	$	7,326,263		$	7,422,275	$	10,606,146	$	11,277,592
Gross margin		2,106,095			2,263,707		2,502,806	$	1,700,088
Net income (loss)		(52,070	)		200,453		223,343	$	283,201
Net income (loss) per share
basic	$	-		$	0.02	$	0.02	$	0.02
diluted	$	-		$	0.02	$	0.02	$	0.02

17. Subsequent Events

Subsequent to year end, the Company redeemed $20,000 in convertible notes and issued $403,000 of convertible notes. See Note 9. Also, subsequent to year end, the Company executed a commitment letter with a new lender to refinance the outstanding debt. See Note 8.

F-21

OP-TECH Environmental Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

	Year Ended December 31, 2010
	Quarter		Quarter		Quarter		Quarter
	Ended		Ended		Ended		Ended
	March 31		June 30		September 30		December 31
Project Billings	$	13,846,687	$	12,058,774	$	10,679,502	$	9,451,080
Gross Margin		2,294,849		2,789,901		2,391,464		1,484,018
Net income (loss)		92,215		243,260		558,266		(107,470	)
Net income (loss) per share
basic	$	0.01	$	0.02	$	0.05	$	(0.01	)
diluted	$	0.01	$	0.02	$	0.02	$	(0.01	)

F-22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and 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)

(Registrant)

By:/s/ Charles B. Morgan

Charles B. Morgan

Chief Executive Officer

~~April~~May 128, ~~2011~~2013

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on ~~April~~the 1,28th ~~2011~~day of May 2013.

/s/ Robert J. Berger Director and Co-Chairman of the Board Robert J. Berger /s/ Richard Messina Director and Co-Chairman of the Board Richard Messina /s/ Richard L. Elander Director Richard L. Elander /s/ Richard Jacobson Director Richard Jacobson /s/ Steven A. Sanders Director Steven A. Sanders /s/ George W. Lee, Jr Director George W. Lee Jr. /s/ Charles B. Morgan Chief Executive Officer Charles B. Morgan /s/ Jon S. Verbeck Chief Financial Officer and Treasurer Jon S. Verbeck

30Robert J. Berger

Director and Co-Chairman of the Board

/s/ Richard Messina

Richard Messina

Director and Co-Chairman of the Board

/s/ Richard L. Elander

Richard L. Elander

Director

/s/ Richard Jacobson

Richard Jacobson

Director

/s/ Steven A. Sanders

Steven A. Sanders

Director

/s/ George W. Lee Jr.

George W. Lee Jr.

Director

/s/ Charles B. Morgan

Charles B. Morgan

Chief Executive Officer

/s/ Michael D. McCall

Michael D. McCall

Treasurer and Controller

Filing Compare · OP TECH ENVIRONMENTAL SERVICES INC