United
States Securities and Exchange Commission
 Washington,
DC 20549
 
 FORM
10-QSB/A
 
 [X]
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the quarterly period ended June 30,
2007
 
 OR
 
 [  ]
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the transition period from 
to_____
 
 Commission
file number  0-19761
 
 OP-TECH
Environmental Services, Inc.
 (Exact
name of registrant as specified in its charter)
 
 Delaware                                                        
                                                                          91-1528142
 (State or other jurisdiction
of                                                     
                                      (I.R.S.
Employer Identification No.)
 incorporation or organization)
 
 6392
Deere Road, Syracuse, NY 13206
 (Address
of principal executive offices)  (Zip Code)
 
 (315)
463-1643
 (Registrant's
telephone number, including area code)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
 Yes X
or No __
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
 
 Large
Accelerated filer ____Accelerated filer  ___Non-accelerated
filer __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_
 
 APPLICABLE
ONLY TO CORPORATE ISSUERS:
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date (August 10, 2007)  11,812,038
 
 
 
 1
 
 
 EXPLANATORY
NOTE
 
 RESTATEMENT
OF FINANCIAL STATEMENTS
 
 This  Amendment  No.  1
on  Form  10-QSB/A,  which  amends  and  restates  items
identified below with respect to the Form 10-QSB, filed by Op-Tech Environmental
Services, Inc. ("we" or "the Company") with the Securities and
Exchange  Commission  (the "SEC") on August 25, 2007 (the
"Original  Filing"),  is being filed to reflect the
restatement of our financial statements for the three months ended June 30,
2007.
 
 As
previously  announced,  our management, on March 31, 2008,
concluded that the Company's  previously filed financial statements as
of December 31, 2006  should no longer be relied upon as a result of
the  Company's  determination  that the worker’s
compensation liabilities and accounts payable were understated by $205,000 and
$36,000, respectively.  It was also determined that the worker’s
compensation liability was understated by $205,000 and office expense was
overstated by $36,000 for the quarters ended March 31, 2007 and June 30,
2007.  Authorized  officers of the Company discussed this
matter with the Company's  independent public accounting firm who
agreed that the Company's previously issued financial statements described above
could not be relied upon and needed to be restated.
 
 This
Form  10-QSB/A  only  amends
and  restates  certain  information  in
Item 1 (Financial Statements and Notes to Consolidated Financial Statements),
Item 2 (Management's  Discussion  And Analysis Of Financial
Condition And Results Of Operations), and Item 4 (Controls and
Procedures).  Except for the foregoing  amended and
restated  information,  this
Form  10-QSB/A  continues to describe  conditions
as of the date of the Original Filing,  and the disclosures
contained   herein  have  not  been  updated  to  reflect  events,   results  or
developments  that have  occurred  after
the  Original  Filing,  or to modify or update
those  disclosures  affected
by  subsequent  events.  Among other things,
forward-looking  statements made in the Original Filing have not been
revised to reflect events,  results
or  developments  that have occurred or facts that have
become  known  to us after  the  date of
the  Original  Filing  (other  than the
restatement),  and  such  forward-looking  statements  should  be
read in  their historical context.  This Form 10-QSB/A
should be read in conjunction with the Company's filings made with the SEC
subsequent to the Original Filing, including any amendments to those
filings
  2
  OP-TECH
Environmental Services, Inc. and Wholly-Owned Subsidiaries
 
 INDEX
 
 
 
 
 PART
I.                      FINANCIAL
INFORMATION                                                                           Page No.
 
 
 Item
1.                      Financial
Statements
 
 Consolidated Balance
Sheets
 -June 30, 2007 (Unaudited) and December
31, 2006 (Audited)......................... 5
 
 Consolidated Statements of
Operations
 -Three months ended June 30, 2007 and
June 30, 2006 (Unaudited)
 -Six months ended June 30, 2007 and
June 30, 2006 (Unaudited)......................6
 
 Consolidated Statements of Cash
Flows
 -Six months ended June 30, 2007 and
June 30, 2006 (Unaudited).................... 7
 
 Notes to Consolidated Financial
Statements (Unaudited)...............................8
 
 
 Item
2.    Management's Discussion and Analysis of
Financial
 Condition and Results of
Operations......................................................... 9
 
 
 Item
3.    Quantitative and Qualitative Disclosure About Market
Risk ............................. 12
 
 
 Item 4.    Controls and
Procedures........................................................................... 12
 
 
 PART
II.                OTHER
INFORMATION ........................................................................ 13
 
 
 SIGNATURES
.................................................................................... 14
 
 
 CERTIFICATIONS............................................................................. Exhibits
  3
  
 
 
 
 
 
 PART
I - FINANCIAL INFORMATION
 
 SPECIAL
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
 
 The
Company is including the following cautionary statement in this Form 10-Q to
make applicable and take advantage of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statement made by, or on behalf of, the Company.  This 10-Q, press
releases issued by the Company, and certain information provided periodically in
writing and orally by the Company’s designated officers and agents contain
statements which constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  The words expect, believe, goal, plan, intend,
estimate, and similar expressions and variations thereof used are intended to
specifically identify forward-looking statements. Where any such forward-looking
statement includes a statement of the assumptions or basis underlying such
forward-looking statement, the Company cautions that, 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.
 
 4
  OP-TECH
      ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED
      SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(UNAUDITED)June
      30,
                
                
                December
      31,2007
                
                
                2006ASSETSCurrent
      Assets:Cash
                
                $
                14,087
                
                
                $
                30,981Accounts
      receivable (net of allowance for doubtful accounts
    ofapproximately
      $295,000 and $114,000, respectively)
                
                
                10,178,849
                
                
                
                10,008,186Costs
      on uncompleted projects applicable to future
    billings
                
                
                1,435,167
                
                
                
                2,984,323Inventory
                
                
                402,862
                
                
                
                378,439Current
      portion of deferred tax asset
                
                
                354,000
                
                
                
                354,000Prepaid
      expenses and other current assets, net
                
                
                821,825
                
                
                
                447,759Total
      Current Assets
                
                
                13,206,790
                
                
                
                14,203,688Property and
      equipment, net
                
                
                3,602,115
                
                
                
                3,216,781Deferred tax
      asset
                
                
                1,294,256
                
                
                
                1,004,800Other
      assets
                
                
                39,898
                
                
                
                44,898Total
      Assets
                
                $
                18,143,059
                
                
                $
                18,470,167LIABILITIES AND
      SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                
                $
                2,652,280
                
                
                $
                4,180,070Outstanding
      checks in excess of bank balance
                
                
                802,666
                
                
                
                149,741Billings
      in excess of costs and estimated profiton
      uncompleted projects
                
                
                1,351,372
                
                
                
                796,438Accrued
      expenses and other current liabilities
                
                
                848,245
                
                
                
                1,148,549Accrued
      litigation defense reserve
                
                
                391,638
                
                
                
                400,000Current
      portion of long-term debt
                
                
                1,167,404
                
                
                
                771,345Total
      Current Liabilities
                
                
                7,213,605
                
                
                
                7,446,143Long-term debt,
      net of current portion
                
                
                2,154,590
                
                
                
                2,128,193Note payable to
      bank under line of credit
                
                
                6,000,000
                
                
                
                5,731,548Total
      Liabilities
                
                
                15,368,195
                
                
                
                15,305,884Shareholders'
      Equity:Common
      stock, par value $.01 per share; authorized
    20,000,000shares;
      11,812,038 and 11,748,704 shares issued and
    outstandingas
      of June 30, 2007 and December 31, 2006,
respectively
                
                
                118,121
                
                
                
                117,487Additional
      paid-in capital
                
                
                6,961,861
                
                
                
                6,925,581Accumulated
      deficit
                
                
                (4,326,618
                )
                
                
                (3,898,485
                )Accumulated
      other comprehensive income
                
                
                21,500
                
                
                
                19,700Total
      Shareholders' Equity
                
                
                2,774,864
                
                
                
                3,164,283Total
      Liabilities and Shareholders' Equity
                
                $
                18,143,059
                
                
                $
                18,470,167The accompanying
      notes are an integral part of the consolidated financial
      statements.
  5
  OP-TECH
      ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED
      SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(UNAUDITED)THREE MONTHS
      ENDED
                
                
                SIX
      MONTHS ENDEDJune
      30,
                
                
                June
      30,
                
                
                June
      30,
                
                
                June
      30,2007
                
                
                2006
                
                
                2007
                
                
                2006Project
      revenue
                
                $
                8,994,960
                
                
                $
                7,106,271
                
                
                $
                16,450,950
                
                
                $
                14,957,511Project
      costs
                
                
                7,212,318
                
                
                
                5,099,946
                
                
                
                13,059,548
                
                
                
                11,429,423Gross
      margin
                
                
                1,782,642
                
                
                
                2,006,325
                
                
                
                3,391,402
                
                
                
                3,528,088Operating
      expenses:Payroll
      expense and related payroll taxes and benefits
                
                
                937,993
                
                
                
                635,637
                
                
                
                1,737,925
                
                
                
                1,237,487Office
      Expense
                
                
                178,256
                
                
                
                143,510
                
                
                
                321,843
                
                
                
                279,099Occupancy
                
                
                166,311
                
                
                
                132,773
                
                
                
                353,001
                
                
                
                282,140Business
      Insurance
                
                
                186,913
                
                
                
                117,588
                
                
                
                326,374
                
                
                
                223,947Professional
      Services
                
                
                161,969
                
                
                
                126,326
                
                
                
                292,161
                
                
                
                219,243Equipment
      Expenses, net of usage credit
                
                
                174,945
                
                
                
                96,145
                
                
                
                431,293
                
                
                
                271,005Other
      expenses
                
                
                217,957
                
                
                
                181,096
                
                
                
                285,144
                
                
                
                258,3272,024,344
                
                
                
                1,433,075
                
                
                
                3,747,741
                
                
                
                2,771,248Operating income
      (loss)
                
                
                (241,702
                )
                
                
                573,250
                
                
                
                (356,339
                )
                
                
                756,840Other income and
      (expense):Interest
      expense
                
                
                (179,085
                )
                
                
                (136,928
                )
                
                
                (358,929
                )
                
                
                (259,056
                )Other,
      net
                
                
                (120
                )
                
                
                (1,255
                )
                
                
                735
                
                
                
                (1,150
                )(179,205
                )
                
                
                (138,183
                )
                
                
                (358,194
                )
                
                
                (260,206
                )Net income (loss)
      before income taxes
                
                
                (420,907
                )
                
                
                435,067
                
                
                
                (714,533
                )
                
                
                496,634Income tax
      benefit (expense)
                
                
                168,400
                
                
                
                (172,800
                )
                
                
                286,400
                
                
                
                (197,800
                )Net income
      (loss)
                
                $
                (252,507
                )
                
                $
                262,267
                
                
                $
                (428,133
                )
                
                $
                298,834Earnings per
      common share:Basic
                
                $
                (0.02
                )
                
                $
                0.02
                
                
                $
                (0.04
                )
                
                $
                0.03Diluted
                
                $
                (0.02
                )
                
                $
                0.02
                
                
                $
                (0.03
                )
                
                $
                0.02Weighted average
      shares outstanding:Basic
                
                
                11,799,372
                
                
                
                11,745,371
                
                
                
                11,774,039
                
                
                
                11,745,371Diluted
                
                
                12,385,364
                
                
                
                12,278,792
                
                
                
                12,391,697
                
                
                
                12,290,743The accompanying
      notes are an integral part of the consolidated financial
      statements.
   6
 OP-TECH
      ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED
      SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(UNAUDITED)SIX MONTHS
      ENDEDJune
      30,
                
                
                June
      30,2007
                
                
                2006Operating
      activities:Net
      income (loss)
                
                $
                (428,133
                )
                
                $
                298,834Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Bad
      Debt expense
                
                
                191,778
                
                
                
                49,700Depreciation
      and amortization
                
                
                340,443
                
                
                
                295,708Stock
      Compensation
                
                
                28,614
                
                
                
                35,469Provision
      for deferred income taxes
                
                
                (289,456
                )
                
                
                197,800(Increase)
      decrease in operating assets andincrease
      (decrease) in operating liabilities:Accounts
      receivable
                
                
                (362,441
                )
                
                
                246,943Costs
      on uncompleted projects applicable tofuture
      billings
                
                
                1,549,156
                
                
                
                (616,788
                )Billings
      and estimated profit in excess of costson
      uncompleted contracts
                
                
                554,934
                
                
                
                176,664Prepaid
      expenses, inventory and other assets
                
                
                (393,489
                )
                
                
                85,435Accounts
      payable and accrued expenses
                
                
                (1,836,456
                )
                
                
                (532,899
                )Net
      cash provided by (used in) operating activities
                
                
                (645,050
                )
                
                
                236,866Investing
      activities:Purchase
      of property and equipment
                
                
                (725,778
                )
                
                
                (414,933
                )Net
      cash used in investing activities
                
                
                (725,778
                )
                
                
                (414,933
                )Financing
      activities:Proceeds from
      issuance of common stock
                
                
                8,300
                
                
                
                -Outstanding
      checks in excess of bank balance
                
                
                652,925
                
                
                
                (196,928
                )Proceeds
      from note payable to bank and currentand
      long-term borrowings, net of financing costs
                
                
                8,308,471
                
                
                
                7,998,543Principal
      payments on current and long-term borrowings
                
                
                (7,615,763
                )
                
                
                (7,683,380
                )Net
      cash provided by financing activities
                
                
                1,353,933
                
                
                
                118,236Decrease in
      cash
                
                
                (16,894
                )
                
                
                (59,832
                )Cash at beginning
      of period
                
                
                30,981
                
                
                
                90,928Cash at end of
      period
                
                $
                14,087
                
                
                $
                31,096Non-cash
      itemNon-cash
      financing of insurance
                
                $
                663,266
                
                
                $
                507,472The accompanying
      notes are an integral part of the consolidated financial
      statements.
  7
 
 OP-TECH
ENVIRONMENTAL SERVICES, INC.
 AND
WHOLLY-OWNED SUBSIDIARIES
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 1. Basis
of Presentation
 
 The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements.  In
the opinion of management, quarterly results include all adjustments (consisting
of only normal recurring adjustments) that the Company considers necessary for a
fair presentation of such information for interim periods.
 
 The
unaudited financial statements include the accounts of the Company and its two
wholly-owned subsidiaries; OP-TECH Environmental Services, Ltd, an inactive
Canadian  company, and OP-TECH AVIX, Inc.  All material
intercompany transactions and balances have been eliminated in
consolidation.
 
 The
balance sheet at December 31, 2006 has been derived from the audited balance
sheet included in the Company’s annual report on Form 10-K for the year ended
December 31, 2006.
 
 
 2.
Comprehensive Income
 
 The
components of comprehensive income (loss) were as follows:
 
 
 Six months ended
              
              
              Three months endedJune 30, 2007
              
              
              June 30, 2006
              
              
              June 30, 2007
              
              
              June 30, 2006Net
      income (loss)
              
              $
              (428,133
              )
              
              $
              298,834
              
              
              $
              (252,507
              )
              
              $
              262,267Other
      comprehensive income (loss) Change in fair value of cash flow hedge Net of
      income tax of $1,200 and $3,900 in  2007 and $11,700 and $4,580
      in 2006, respectively
              
              
              1,743
              
              
              
              17,570
              
              
              
              5,800
              
              
              
              6,870Comprehensive
      income (loss)
              
              $
              (426,390
              )
              
              $
              316,404
              
              
              $
              (246,707
              )
              
              $
              269,137
 
 
 3.
Revenue Recognition
 
 The
timing of revenues is dependent on the Company's backlog, contract awards, and
the performance requirements of each contract.  The Company's revenues
are also affected by the timing of its clients planned remediation work as well
as the timing of unplanned emergency spills.  Historically, planned
remediation work generally increases during the third and fourth
quarters.  Although the Company believes that the historical trend in
quarterly revenues for the third and fourth quarters of each year are generally
higher than the first and second quarters, there can be no assurance that this
will occur in future periods.  Accordingly, quarterly or other interim
results should not be considered indicative of results to be expected for any
quarter or for the full year.
 
 
 4.
Related Party Transactions
 
 The
Company utilizes subcontract labor purchased from St. Lawrence Industrial
Services, Inc., which is owned by a director of the Company.  The
costs for these services amounted to approximately $502,000 and $480,000 for the
six months ended June 30, 2007 and 2006, respectively, and $280,000 and $275,000
for the three months ended June 30, 2007 and 2006 respectively.
 
 
 5.  Earnings
per Share
 
 Basic
earnings per share are computed by dividing net income by the weighted average
shares outstanding.  Diluted earnings per share includes the
potentially dilutive effect of common stock equivalents, which include
outstanding options under the Company’s Stock Option Plan and warrants that were
issued to a financial advisor in May 2002 to purchase 480,000 shares of common
stock at $0.066 per share, expiring in May 2010.
 
 
 6.  Restatement
  On March
31, 2008, the Company determined that the worker’s compensation liability and
accounts payable recorded as of December 31, 2006 were understated by $205,000
and $36,000, respectively. As a result, the Company has restated its 2006
financial statements. Also, the worker’s compensation liability was understated
by $205,000 and office expense was overstated by $36,000 for the six months June
30, 2007. The impact of this adjustment on the Company’s financial results as
originally reported at June 30, 2007 and for the six months ended is summarized
below:
 As
      Reported
              
              
              As
      RestatedCurrent
      assets
              
              $
              13,112,890
              
              
              $
              13,206,790Total
      assets
              
              $
              18,062,859
              
              
              $
              18,143,059Current
      liabilities
              
              $
              7,800,889
              
              
              $
              7,213,605Total
      liabilities
              
              $
              15,163,479
              
              
              $
              15,368,195Accumulated
      deficit
              
              $
              (4,202,102
              )
              
              $
              (4,326,618
              )Year
      to date net income
              
              $
              (450,313
              )
              
              $
              (428,133
              )Basic
      earning per share
              
              $
              (0.04
              )
              
              $
              (0.04
              )Diluted
      earning per share
              
              $
              (0.04
              )
              
              $
              (0.03
              )
 
 
 8
 
 PART
I – FINANCIAL INFORMATION
 
 Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
 
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 At June
30, 2007 the Company had cash of $14,087 compared to $30,981 at December 31,
2006. The Company voluntarily applies all available cash in the Company’s
operating account to pay down the Company’s note payable to bank under the line
of credit.
 
 At June
30, 2007, the Company had working capital of $5,993,185 compared to $6,757,545
at December 31, 2006, with a current ratio of 1.82 to 1 at June 30, 2007 and
1.91 to 1 at December 31, 2006.
 
 For the
six months ended June 30, 2007, the Company’s net cash used by operations was
$645,050 compared to net cash provided by operations of $236,866 during the six
months ended June 30, 2006.  The cash used by operations for the six
months ended June 30, 2007 was primarily a result of a net loss for the period
and a decrease in accounts payable.
 
 The
Company’s net cash used in investing activities of $725,778 during the first six
months of the year was attributable to the purchase of field
equipment.
 
 The
Company’s net cash provided by financing activities was $1,353,933, which was
primarily due to the net proceeds from the Company’s long-term debt as a result
of the financing of the cash used in investing activities.
 
 As of
June 30, 2007, the Company has a loan agreement that provides for borrowings up
to $6,000,000 on a revolving basis, collateralized by all accounts receivable,
inventory and equipment now owned or acquired later.  The loan is
payable on July 1, 2008, bears interest at a rate of prime plus .50 percent, is
subject to certain restrictive financial covenants, and is subject to default if
there is a material adverse change in the financial or economic condition of the
Company.  The loan requires compliance with certain quarterly
financial covenants.  The Company obtained a covenant waiver for the
period ending June 30, 2007, and the covenant structure has been modified for
the upcoming quarters.
As of June 30, 2007, borrowings against the revolving loan aggregated
$6,000,000.
 
 During
the first six months of 2007, all principal payments on the Company’s debt were
made within payment terms.
 
 The
Company expects, based on its operating results and the continued availability
of its line of credit, that it will be able to meet obligations as they come
due.
 
 
 
 
 
  9
  
 
 RESULTS
OF OPERATIONS
 
 
 PROJECT
REVENUE
 
 The
Company's project billings for the second quarter of 2007 increased 27% to
$8,994,960 from $7,106,271 for the second quarter of 2006.  For the
six-month period ended June 30, 2007 the Company’s billings have increased 10%
to $16,450,950 from $14,957,511 for the same period in 2006.  The
increase is attributed to the completion of several large disposal
projects.
 
 
 PROJECT COSTS AND GROSS
MARGIN
 
 Project
costs for the second quarter of 2007 increase 41% to $7,212,318 from $5,099,946
for the same period in 2006.  Project costs as a percentage of
revenues were 79% and 72% for the three months ended June 30, 2007 and 2006,
respectively.  Gross margin for the first quarter of 2007 decreased to
21% from 28% for the same period in 2006.  The gross margin decrease
is attributed to several large disposal projects with lower gross
margins.
 
 For the
six-month period ended June 30, 2007, project costs increased 14% to $13,059,548
from $11,429,423 for the six months ended June 30, 2006.  Project
costs as a percentage of revenues were 79% and 76% for the six months ended June
30, 2007 and 2006, respectively. Gross margin for the six months ended June 30,
2007 decreased to 21% from 24% for the same period in 2006 as a result of two
low margin projects.
 
 
 
 OPERATING
EXPENSES
 
 Operating
expenses for the quarter ended June 30, 2007 increased 41% to $2,024,344 from
$1,433,075 for the same period in 2006.  For the six-month period
ended June 30, 2007, operating expenses increased 35% to $3,747,741 from
$2,771,248 for the same period in 2006. Operating expenses as a percentage of
revenues increased to 23% for the six months ended June 30, 2007 compared to 19%
for the comparable period in 2006.
 
 When
comparing the second quarter of 2007 to 2006, the increase in operating expenses
is due to several items:
 
 ·
              Payroll
      expense and related payroll taxes and benefits increased 48% to $937,993
      from $635,637 in 2006.  The Company has hired several new
      project managers since the second quarter of 2006, and has experienced an
      increase in workers compensation rates paid primarily attributed to
      overall rate increases and the significant amount of asbestos work during
      the quarter.
 ·
              Office
      Expense increased 24% to $178,256 from $143,510 in 2006.  Of
      this $34,746 increase, approximately $7,000 is related to an increase in
      telephone expense due to an increase in the number of cellular telephones
      and $17,000 is related to increased office supplies
    expense.
 ·
              Occupancy
      Expense increased 25% to $166,311 from $132,773 in 2006.  This
      increase is primarily due to the new lease agreement entered into in the
      fourth quarter of 2006 in Massena,
NY.
 ·
              Business
      Insurance increased 59% to $186,913 from $117,588 in 2006.  This
      increase in insurance expense is due to the increased size of the Company
      as well as additional coverage purchased to mitigate
  risk.
 ·
              Professional
      Services increased 28% to $161,969 from $126,326 in 2006.  This
      increase in professional service expense is primarily due to an increase
      in human resource outsourcing and placement
  fees.
 ·
              Equipment
      Expenses net of usage credit increased 82% to $174,945 from $96,145 in
      2006.  Of this $78,800 increase, $33,472 related to higher fuel
      expense due primarily to higher fuel prices, and $23,259 related to higher
      depreciation expense due to equipment purchases made since the second
      quarter of 2006.
 
 
 
 10
 
 INTEREST
EXPENSE
 
 Interest
expense for the six months ended June 30, 2007 increased 39% to $358,929 from
$259,056 for the same period in 2006.  This increase is due to both an
increase in the interest rates paid on the Company’s floating-rate debt as well
as an increase in the principal balances owed.
 
 
 
 NET INCOME (LOSS) BEFORE
INCOME TAXES
 
 Net loss
for the six months ended June 30, 2007 was ($714,533) compared to a net income
of $496,634 for the six months ended June 30, 2006.
 
 
 
 INCOME TAX (EXPENSE)
BENEFIT
 
 The
Company recorded income tax benefit of $286,400 for the six months June 30, 2007
compared to an income tax expense of $197,800 for the same period in
2006.
 
 
 
 NET INCOME
(LOSS)
 
 Net
income (loss) for the six months ended June 30, 2007 and 2006 was ($428,133) or
($.04) per share basic and ($.03) per share diluted, and $298,834, or $0.03 per
share basic and $0.02 per share diluted, respectively.
  11
 
 CRITICAL ACCOUNTING
      POLICIES AND ESTIMATES
 
 Management
has identified the following critical accounting policies that affect the
Company's more significant judgments and estimates used in the preparation of
the Company's consolidated financial statements.  The preparation of
the Company's financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company's
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities.  On an on-going basis, management
evaluates those estimates, including those related to assets held for sale,
revenue recognition, issuance of stock options and related compensation expense,
valuation allowances on deferred tax assets, allowance for doubtful accounts and
contingencies and litigation. The Company states these accounting policies in
the notes to the consolidated financial statements and in relevant sections in
this discussion and analysis. These estimates are based on the information that
is currently available to the Company and on various other assumptions that
management believes to be reasonable under the circumstances.  Actual
results could vary from those estimates.
 
 The
Company believes that the following critical accounting policies affect
significant judgments and estimates used in the preparation of its consolidated
financial statements:
 
 Contracts
are predominately short-term in nature (less than three months) and revenue is
recognized as costs are incurred and billed.  Income on long-term
fixed-priced contracts greater than three months is recognized on the
percentage-of-completion method.  Project costs are generally billed
in the month they are incurred and are shown as current
assets.  Revenues recognized in excess of amounts billed are recorded
as an asset.  In the event interim billings exceed costs and estimated
profit, the net amount of deferred revenue is shown as a current
liability.  Estimated losses are recorded in full when
identified.
 
 The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments, which
results in bad debt expense.  Management determines the adequacy of
this allowance by continually evaluating individual customer receivables,
considering the customer's financial condition, credit history and current
economic conditions.  If the financial condition of customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
 
 The
Company maintains a valuation allowance for deferred tax assets to reduce these
assets to their realizable amounts.  Recognition of these amounts and
the adjustment of the corresponding allowance is dependent on the generation of
taxable income in current and future years.  As circumstances change
with respect to managements expectations of future taxable income, the valuation
allowance is adjusted.
 
 Item
3. Quantitative and Qualitative Disclosure About Market Risk.
 
 There
were no material changes in the Company’s market risk or market risk strategies
during the quarter ended June 30, 2007.
 
 Item 4. – Controls and
Procedures
 
 (a)
              Disclosure
      Controls and Procedures.
 As of the end of the period covering
this Form 10-Q, we evaluated the effectiveness of the design and operation of
our “disclosure controls and procedures”. OP-TECH conducted this evaluation
under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer.
 
 (i) Definition of
Disclosure Controls and Procedures.
 Disclosure controls and procedures are
controls and other procedures that are designed with the objective of ensuring
that information required to be disclosed in our periodic reports filed under
the Exchange Act, such as this report, is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms. As
defined by the SEC, such disclosure controls and procedures are also designed
with the objective of ensuring that such information is accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, in such a manner as to allow timely disclosure
decisions.
 
 (ii) Limitations on the Effectiveness of
Disclosure Controls and Procedures and Internal Controls.
 OP-TECH recognizes that a system of
disclosure controls and procedures (as well as a system of internal controls),
no matter how well conceived and operated, cannot provide absolute assurance
that the objectives of the system are met. Further, the design of such a system
must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented in a number of ways. Because of the
inherent limitations in a cost-effective control system, system failures may
occur and not be detected.
 
 (iii) Conclusions with Respect to Our
Evaluation of Disclosure Controls and Procedures.
 As indicated in the Explanatory Note
above, the Company restated its December 31, 2006 financial statements and its
quarterly financial statements as a result of the understatement of certain
liabilities.  Except for this matter,  the  Company's 
Chief  Executive  Officer and Chief Financial  Officer 
determined that, as of the end of the period covered by this report, 
these  controls and  procedures  are adequate and effective in
alerting them in a timely manner to material information relating to the Company
required to be included in the Company's periodic SEC
filings.
 
 
 (b) Changes in
Internal Controls.
 There have been no changes in OP-TECH’s
internal controls over financial reporting that could significantly affect these
controls subsequent to the date of their evaluation.
 
 
 12
 
 
 PART
II - OTHER INFORMATION
 
  Item
      1.  Legal Proceedings.
 
 The
Company recorded an accrued liability of $391,638 at June 30,
2007.  The liability has been recorded to cover potential legal costs
and fees, and also any indemnity, settlement, or other payments necessary to
dispose of a claim against the Company.
  
 
 Item
      1A. Risk Factors.
 
 No
      material changes
 
 
 Item
      2.  Changes in
Securities.
 
 None
 
 
 Item
      3.  Defaults Upon Senior
Securities.
 
 None
 
 
 Item
      4.  Submission of Matters to a Vote of Security
      Holders.
 
 None
 
 
 Item
      5.  Other Information.
  None
 
 
 Item
      6. Exhibits and Reports on Form
8-K.
 
 None
  13
   
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 OP-TECH
Environmental Services, Inc.
 (Registrant)
 
 
 
 Date:
April 12,
2008
 /s/ Charles B.
Morgan
 Charles B. Morgan
 Chief Executive
Officer
 
 /s/ Jon S.
Verbeck
 Jon S. Verbeck
 Treasurer and Chief Financial
Officer