----

----

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

| [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|----------------|------------------------------------------------------------------------------------------|

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

----

----

| PART I.                   | FINANCIAL INFORMATION                                                                                                                                                                                                                    | Page          |
|---------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
| No.                       |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
| Item 1.                   | Financial Statements                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|                      | Consolidated Balance Sheets-September 30, 2009 (Unaudited) (Restated) and December 31, 2008 (Audited)                                                                                                                                    |
|  5                   |
|                      |                                                                                                                                                                                                                                     |          |
|                      | Consolidated Statements of Operations-Three months ended September 30, 2009 (Unaudited and restated) and September 30, 2008 (Unaudited)-Nine months ended September 30, 2009 (Unaudited and restated) and September 30, 2008 (Unaudited) |   6 |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|                      | Consolidated Statements of Cash Flows-Nine months ended September 30, 2009 (Unaudited and restated) and September 30, 2008 (Unaudited)                                                                                                   |  7       |
|                      |                                                                                                                                                                                                                                     |          |
|                      | Notes to Consolidated Financial Statements Unaudited)                                                                                                                                                                                    | 8-9           |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|    Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                    | 10-13         |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|    Item 3. | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                                                                                | 13            |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|   Item 4/4T.    | Controls and Procedures                                                                                                                                                                                                                  | 14            |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
| PART II.                  | OTHER INFORMATION                                                                                                                                                                                                                        | 15            |
|                      |                                                                                                                                                                                                                                     |          |
|                      |                                                                                                                                                                                                                                     |          |
|                      |  SIGNATURES                                                                                                                                                                                                                         | 16            |

----

----

|                                                                                                         |   |          |       |   |         |   |
|--------------------------------------------------------------------------------------------------------------|--------|---------------|------------|--------|--------------|--------|
|                                                                                                         |   |          |       |   |         |   |
| OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES                                           |   |
| CONSOLIDATED BALANCE SHEETS                                                                                  |   |
|                                                                                                         |   |          |       |   |         |   |
|                                                                                                         |   |          |       |   |         |   |
|                                                                                                         |   | Restated      |       |   |         |   |
|                                                                                                         |   | (UNAUDITED)   |       |   |         |   |
|                                                                                                         |   | September 30, |       |   | December 31, |   |
|                                                                                                         |   | 2009          |       |   | 2008         |   |
|                                                                                                         |   |          |       |   |         |   |
| ASSETS                                                                                                       |   |          |       |   |         |   |
|                                                                                                         |   |          |       |   |         |   |
| Current Assets:                                                                                              |   |          |       |   |         |   |
|    Cash                                                                                       |   | $             | 130,544    |   |         | $      | 80,003 |   |
|    Accounts receivable (net of allowance for doubtful accounts of                             |   |          |       |   |         |   |   |   |
|       approximately $357,000 in 2009 and $399,000 in 2008, respectively)       |   |          | 8,754,839  |   |         |   | 8,914,131 |   |
|    Costs on uncompleted projects applicable to future billings                                |   |          | 2,333,527  |   |         |   | 2,824,799 |   |
|    Inventory                                                                                  |   |          | 529,379    |   |         |   | 426,412 |   |
|    Current portion of deferred tax asset                                                      |   |          | 559,400    |   |         |   | 559,400 |   |
|    Prepaid expenses and other current assets, net                                             |   |          | 590,879    |   |         |   | 388,654 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Current Assets                       |   |          | 12,898,568 |   |         |   | 13,193,399 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| Property and equipment, net                                                                                  |   |          | 2,791,184  |   |         |   | 3,031,899 |   |
| Deferred tax asset                                                                                           |   |          | 1,452,445  |   |         |   | 924,300 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Assets                               |   | $             | 17,142,197 |   |         | $      | 17,149,598 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                         |   |          |       |   |         |   |   |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| Current Liabilities:                                                                                         |   |          |       |   |         |   |   |   |
|    Accounts payable                                                                           |   | $             | 5,733,607  |   |         | $      | 3,543,822 |   |
|    Outstanding checks in excess of bank balance                                               |   |          | -          |   |         |   | 1,026,126 |   |
|    Billings in excess of costs and estimated profit                                           |   |          |       |   |         |   |   |   |
|       on uncompleted projects                                                  |   |          | 706,710    |   |         |   | 479,237 |   |
|    Accrued expenses and other current liabilities                                             |   |          | 804,785    |   |         |   | 1,153,383 |   |
|    Accrued litigation defense reserve                                                         |   |          | 150,000    |   |         |   | 450,000 |   |
|    Note payable to bank under line of credit                                                  |   |          | 5,278,177  |   |         |   | - |   |
|    Current portion of long-term debt                                                          |   |          | 908,625    |   |         |   | 800,084 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Current Liabilities                  |   |          | 13,581,904 |   |         |   | 7,452,652 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| Long-term debt, net of current portion                                                                       |   |          | 936,654    |   |         |   | 1,384,651 |   |
| Note payable to bank under line of credit                                                                    |   |          | -          |   |         |   | 4,865,097 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Liabilities                          |   |          | 14,518,558 |   |         |   | 13,702,400 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| Shareholders' Equity:                                                                                        |   |          |       |   |         |   |   |   |
|    Common stock, par value $.01 per share; authorized 20,000,000                              |   |          |       |   |         |   |   |   |
|       shares; 11,940,372 shares issued and outstanding                         |   |          |       |   |         |   |   |   |
|       as of September 30, 2009 and December 31, 2008                           |   |          | 119,404    |   |         |   | 119,404 |   |
|    Additional paid-in capital                                                                 |   |          | 7,005,891  |   |         |   | 7,005,891 |   |
|    Accumulated deficit                                                                        |   |          | (4,484,154 | )      |         |   | (3,649,132 | ) |
|    Accumulated other comprehensive income                                                     |   |          | (17,502    | )      |         |   | (28,965 | ) |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Shareholders' Equity                 |   |          | 2,623,639  |   |         |   | 3,447,198 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|            Total Liabilities and Shareholders' Equity |   | $             | 17,142,197 |   |         | $      | 17,149,598 |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
|                                                                                                         |   |          |       |   |         |   |   |   |
| The accompanying notes are an integral part of the consolidated financial statements.                        |   |

----

|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |
|---------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------|--------------------------------------|--------|------------|----------|--------|--------|------------|--------|
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |
|   OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES             |   |
|   CONSOLIDATED STATEMENTS OF OPERATIONS                                          |   |
|   (UNAUDITED)                                                                    |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |
|                                                                                  |   | THREE MONTHS ENDED SEPTEMBER 30, |       |   | NINE MONTHS ENDED SEPTEMBER 30, |   |
|                                                                                  |   | Restated                         |       |   |                                 |   |       | Restated |   |   |       |   |
|                                                                                  |   | 2009                             |       |   | 2008                                 |   |       | 2009     |   |   | 2008       |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |
| Project revenue                                                                       |   | $                                | 9,606,999  |   |                                 | $      | 10,606,146 |     |   | $      | 24,232,370 |   |   | $ | 25,354,684 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Project costs                                                                         |   |                             | 8,312,921  |   |                                 |   | 8,103,340  |     |   |   | 19,604,046 |   |   |   | 18,482,076 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Gross margin                                                                          |   |                             | 1,294,078  |   |                                 |   | 2,502,806  |     |   |   | 4,628,324  |   |   |   | 6,872,608 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Operating expenses:                                                                   |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|     Payroll expense and related payroll taxes and benefits        |   |                             | 788,661    |   |                                 |   | 838,795    |     |   |   | 2,348,704  |   |   |   | 2,625,364 |   |
|     Office Expense                                                |   |                             | 215,509    |   |                                 |   | 212,459    |     |   |   | 630,335    |   |   |   | 644,019 |   |
|     Occupancy                                                     |   |                             | 215,975    |   |                                 |   | 182,656    |     |   |   | 660,510    |   |   |   | 608,782 |   |
|     Business Insurance                                            |   |                             | 124,555    |   |                                 |   | 121,362    |     |   |   | 368,205    |   |   |   | 376,085 |   |
|     Professional Services                                         |   |                             | 265,808    |   |                                 |   | 194,687    |     |   |   | 752,842    |   |   |   | 533,685 |   |
|     Equipment Expenses, net of usage credit                       |   |                             | 103,398    |   |                                 |   | 264,045    |     |   |   | 338,243    |   |   |   | 770,935 |   |
|     Other expenses                                                |   |                             | 87,470     |   |                                 |   | 200,179    |     |   |   | 652,509    |   |   |   | 339,733 |   |
|                                                                                  |   |                             | 1,801,376  |   |                                 |   | 2,014,183  |     |   |   | 5,751,348  |   |   |   | 5,898,603 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Operating income (loss)                                                               |   |                             | (507,298   | )      |                                 |   | 488,623    |     |   |   | (1,123,024 | )      |   |   | 974,005 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Other income and (expense):                                                           |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|    Interest expense                                                    |   |                             | (80,792    | )      |                                 |   | (114,233   | )        |   |   | (234,865   | )      |   |   | (358,430 | ) |
|    Other, net                                                          |   |                             | (2,344     | )      |                                 |   | 1,798      |     |   |   | (12,133    | )      |   |   | 12,210 |   |
|                                                                                  |   |                             | (83,136    | )      |                                 |   | (112,435   | )        |   |   | (246,998   | )      |   |   | (346,220 | ) |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Net income (loss) before income taxes                                                 |   |                             | (590,434   | )      |                                 |   | 376,188    |     |   |   | (1,370,022 | )      |   |   | 627,785 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Income tax benefit (expense)                                                          |   |                             | 230,000    |   |                                 |   | (152,845   | )        |   |   | 535,000    |   |   |   | (256,059 | ) |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Net income (loss)                                                                     |   | $                                | (360,434   | )      |                                 | $      | 223,343    |     |   | $      | (835,022   | )      |   | $ | 371,726 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Earnings per common share:                                                            |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|     Basic                                                         |   | $                                | (0.03      | )      |                                 | $      | 0.02       |     |   | $      | (0.07      | )      |   | $ | 0.03 |   |
|     Diluted                                                       |   | $                                | (0.03      | )      |                                 | $      | 0.02       |     |   | $      | (0.07      | )      |   | $ | 0.03 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| Weighted average shares outstanding:                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|     Basic                                                         |   |                             | 11,940,372 |   |                                 |   | 11,937,595 |     |   |   | 11,940,372 |   |   |   | 11,938,150 |   |
|     Diluted                                                       |   |                             | 11,940,372 |   |                                 |   | 12,294,199 |     |   |   | 11,940,372 |   |   |   | 12,290,907 |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
|                                                                                  |   |                             |       |   |                                 |   |       |     |   |   |       |   |   |   |   |   |
| The accompanying notes are an integral part of the consolidated financial statements. |   |                             |       |   |                                 |   |       |     |   |

----

|                                                                                                                                                                                |   |                        |        |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|-------------|--------|--------|--------|
|                                                                                                                                                                                |   |                        |        |   |   |   |
| OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES                                                                                                                  |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                                               |   |
| (UNAUDITED)                                                                                                                                                                         |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |
|                                                                                                                                                                                |   | NINE MONTHS ENDED SEPTEMBER |        |
|                                                                                                                                                                                |   | Restated                    |        |   |   |   |
|                                                                                                                                                                                |   | 2009                        |        |   | 2008   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |
| Operating activities:                                                                                                                                                               |   |                        |        |   |   |   |
|    Net income (loss)                                                                                                                                                 |   | $                           | (835,022    | )      |   | $      | 371,726 |   |
|    Adjustments to reconcile net loss to net cash                                                                                                                     |   |                        |        |   |   |   |   |   |
|       provided by operating activities:                                                                                                               |   |                        |        |   |   |   |   |   |
|          Bad debt expense                                                                                                              |   |                        | 459,917     |   |   |   | 158,181 |   |
|          Depreciation and amortization                                                                                                 |   |                        | 448,348     |   |   |   | 531,523 |   |
|          Stock Compensation                                                                                                            |   |                        | -           |   |   |   | 167 |   |
|          Deferred income tax (benefit) expense                                                                                         |   |                        | (529,745    | )      |   |   | 249,800 |   |
|          (Increase) decrease in operating assets and                                                                                   |   |                        |        |   |   |   |   |   |
|             increase (decrease) in operating liabilities:                                                               |   |                        |        |   |   |   |   |   |
|                Accounts receivable                                                                       |   |                        | (300,625    | )      |   |   | (2,015,365 | ) |
|                Costs on uncompleted projects applicable to                                               |   |                        |        |   |   |   |   |   |
|                    future billings                                                   |   |                        | 491,272     |   |   |   | 1,273,564 |   |
|                Billings and estimated profit in excess of costs                                          |   |                        |        |   |   |   |   |   |
|                   on uncompleted contracts                                                |   |                        | 227,473     |   |   |   | (781,544 | ) |
|                Prepaid expenses, inventory and other assets                                              |   |                        | 246,549     |   |   |   | (107,731 | ) |
|                Accrued litigation defense reserve                                                        |   |                        | (300,000    | )      |   |   | (43,958 | ) |
|                Accounts payable and accrued expenses                                                     |   |                        | 1,841,187   |   |   |   | 1,144,016 |   |
|                        Net cash provided by operating activities |   |                        | 1,749,354   |   |   |   | 780,379 |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Investing activities:                                                                                                                                                               |   |                        |        |   |   |   |   |   |
|    Purchase of property and equipment                                                                                                                                |   |                        | (207,633    | )      |   |   | (358,068 | ) |
|                       Net cash used in investing activities           |   |                        | (207,633    | )      |   |   | (358,068 | ) |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Financing activities:                                                                                                                                                               |   |                        |        |   |   |   |   |   |
|    Proceeds from issuance of common stock                                                                                                                            |   |                        | -           |   |   |   | 33 |   |
|    Decrease in outstanding checks in excess of bank balance                                                                                                          |   |                        | (1,026,126  | )      |   |   | (54,457 | ) |
|    Proceeds from note payable to bank and current                                                                                                                    |   |                        |        |   |   |   |   |   |
|       and long-term borrowings, net of financing costs                                                                                                |   |                        | 11,520,195  |   |   |   | 10,327,462 |   |
|    Principal payments on current and long-term borrowings                                                                                                            |   |                        | (11,985,249 | )      |   |   | (10,758,950 | ) |
|                      Net cash used in financing activities                 |   |                        | (1,491,180  | )      |   |   | (485,912 | ) |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Increase (decrease) in cash                                                                                                                                                         |   |                        | 50,541      |   |   |   | (63,601 | ) |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Cash at beginning of period                                                                                                                                                         |   |                        | 80,003      |   |   |   | 93,535 |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Cash at end of period                                                                                                                                                               |   | $                           | 130,544     |   |   | $      | 29,934 |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| Non-cash item                                                                                                                                                                       |   |                        |        |   |   |   |   |   |
|    Non-cash financing of insurance                                                                                                                                   |   | $                           | 538,397     |   |   | $      | 566,043 |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
|                                                                                                                                                                                |   |                        |        |   |   |   |   |   |
| The accompanying notes are an integral part of the consolidated financial statements.                                                                                               |   |                        |        |   |   |

----

|                                                                                                                                                                                                                                                     |   | Nine months ended |                              |   | Three months ended |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------------------------------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                     |   | Sept. 30, 2009    |                              |   | Sept. 30, 2008     |   |   | Sept. 30, 2009 |   |   | Sept. 30, 2008 |   |
| Net income (loss)                                                                                                                                                                                                                                        |   | $                 | (835,022                          | )      |               | $      | 371,726 |   |   | $ | (360,434 | ) |   | $ | 223,343 |   |
| Other comprehensive (loss):   Change in fair value of cash flow hedge   Net of income tax expense (benefit) of   $7,700 and $1,600 in 2009 and ($6,300)   and ($3,400) in 2008, respectively |   |              |        11,463 |   |               |   | (9,425 | ) |   |   |        2,323 |   |   |   | (5,125 | ) |
| Comprehensive income (loss)                                                                                                                                                                                                                              |   | $                 | (823,559                          | )      |               | $      | 362,301 |   |   | $ | (358,111 | ) |   | $ | 218,218 |   |

----

|                      |                                                                      | As Reported |                                                                      | As Restated |
|---------------------------|---------------------------------------------------------------------------|-------------|---------------------------------------------------------------------------|-------------|
|                      |                                                                      |        |                                                                      |        |
| Current assets            |  $13,068,433                                                         |        |  $ 12,898,568                                                        |
|                      |                                                                      |        |                                                                      |        |
| Total assets              |  $17,454,072                                                         |        |  $ 17,142,197                                                        |
|                      |                                                                      |        |                                                                      |        |
| Current liabilities       |  $13,548,314                                                         |        |  $ 13,581,904                                                        |
|                      |                                                                      |        |                                                                      |        |
| Total liabilities         |  $14,484,968                                                         |        |  $ 14,518,558                                                        |
|                      |                                                                      |        |                                                                      |        |
| Accumulated deficit       |  $ (4,138,689)                                                       |        |  $ (4,484,154)                                                       |
|                      |                                                                      |        |                                                                      |        |
| Net income                |  $    (489,557)                                  |        |  $    (835,022)                                  |
|                      |                                                                      |        |                                                                      |        |
| Basic earning per share   |  $          (0.04) |        |  $          (0.07) |
|                      |                                                                      |        |                                                                      |        |
| Diluted earning per share |  $          (0.04) |        |  $          (0.07) |

----

----

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

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

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

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

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|   | CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
|--------|--------------------------------------------|

| ·   | Contracts are predominately short-term in nature (less than six months) and revenue is recognized as costs are incurred and billed.  Revenues recognized in excess of amounts billed are recorded as an asset.  In the event interim billings exceed costs and estimated profit, the net amount of deferred revenue is shown as a current liability.  Estimated losses are recorded in full when identified. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense.  Management determines the adequacy of this allowance by continually evaluating individual customer receivables, considering the customer's financial condition, credit history and current economic conditions.  If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company maintains a valuation allowance for deferred tax assets to reduce these assets to their realizable amounts.  Recognition of these amounts and the adjustment of the corresponding allowance is dependent on the generation of taxable income in current and future years.  As circumstances change with respect to management’s expectations of future taxable income, the valuation allowance is adjusted. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (a)   | Disclosure Controls and Procedures. |
|-----------------|-------------------------------------|

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|   | Item 1.  Legal Proceedings. |
|--------|---------------------------------------|

|   | Item 1A. Risk Factors. |
|--------|------------------------|

|           No material changes |
|---------------------------------------------------------------------------------|

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

|           None |
|------------------------------------------------------------------|

|   | Item 3.  Defaults Upon Senior Securities. |
|--------|-----------------------------------------------------|

|           None |
|------------------------------------------------------------------|

|   | Item 4.  Submission of Matters to a Vote of Security Holders. |
|--------|-------------------------------------------------------------------------|

|           None |
|------------------------------------------------------------------|

|   | Item 5.  Other Information. |
|--------|---------------------------------------|

|   | Item 6. Exhibits. |
|--------|-------------------|

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