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Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
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
incorporation or organization) Identification No.)
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 an accelerated filer (as
defined in Rule 12b-2 of the 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 October 31, 2004: 11,697,707
OP-TECH Environmental Services, Inc. and Wholly-Owned Subsidiaries
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets
-September 30, 2004 (Unaudited) and
December 31, 2003 (Audited)..................................3
Consolidated Statements of Operations
-Three months ended September 30, 2004
and September 30, 2003 (Unaudited)
-Nine months ended September 30, 2004
and September 30, 2003 (Unaudited)...........................4
Consolidated Statements of Cash Flows
-Nine months ended September 30, 2004
and September 30, 2003 (Unaudited)...........................5
Notes to Consolidated Financial Statements (Unaudited)......6-9
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....14
Item 4. Controls and Procedures......................................15
PART II. OTHER INFORMATION ...........................................16
SIGNATURES ..................................................17
CERTIFICATIONS............................................18-21
2
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Current Assets:
Cash $- $58,073
Accounts receivable (net of allowance for
doubtful accounts of approximately
$179,000 and $187,000, respectively) 4,431,281 3,386,795
Costs on uncompleted projects applicable
to future billings 1,087,877 638,513
Inventory 177,663 219,568
Current portion of deferred tax asset 45,500 45,500
Prepaid expenses and other current assets, net 521,074 281,110
----------- -----------
Total Current Assets 6,263,395 4,629,559
Property and equipment, net 3,334,862 2,989,827
Deferred tax asset 1,439,500 1,473,500
Other assets 28,849 31,419
----------- -----------
Total Assets $11,066,606 $9,124,305
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,819,916 $864,484
Billings in excess of costs and estimated
profit on uncompleted projects 829,281 716,351
Accrued expenses and other current liabilities 146,988 368,006
Current portion of long-term debt 1,305,562 901,336
----------- -----------
Total Current Liabilities 4,101,747 2,850,177
Long-term debt, net of current portion 2,118,580 1,510,547
Note payable to bank under line of credit 2,000,000 1,744,473
----------- -----------
Total Liabilities 8,220,327 6,105,197
----------- -----------
Shareholders' Equity:
Common stock, par value $.01 per share; authorized
20,000,000 shares; 11,697,707 and 12,606,045
shares issued and outstanding, respectively 116,977 126,060
Additional paid-in capital 6,818,564 7,053,848
Accumulated deficit (4,089,262) (4,160,800)
------------ ------------
Total Shareholders' Equity 2,846,279 3,019,108
------------ ------------
Total Liabilities and Shareholders' Equity $11,066,606 $9,124,305
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
3
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Project billings and services $5,008,986 $3,794,519 $12,298,977 $11,281,357
Project costs 3,537,104 2,582,291 8,529,326 7,822,356
----------- ----------- ----------- -----------
Gross margin 1,471,882 1,212,228 3,769,651 3,459,001
----------- ----------- ----------- -----------
Operating expenses:
Payroll expense and related
payroll taxes and benefits 593,188 483,369 1,817,258 1,549,923
Professional Services 83,890 103,934 292,285 297,097
Occupancy 96,858 77,734 288,330 257,412
Office Expense 88,674 92,952 293,862 290,873
Business Insurance 93,271 64,935 235,454 176,178
Telephone 46,790 35,344 129,537 110,454
Equipment Expense, net of
usage credit 71,726 40,420 161,295 87,365
Other expenses 100,957 83,641 286,411 217,524
----------- ----------- ----------- -----------
1,175,354 982,329 3,504,432 2,986,826
----------- ----------- ----------- -----------
Operating income 296,528 229,899 265,219 472,175
----------- ----------- ----------- -----------
Other income and (expense):
Interest expense (71,923) (48,286) (176,366) (144,897)
Casualty gain from insurance
proceeds, net - - - 2,052
Other, net 228 (1,716) 28,829 (4,349)
----------- ----------- ----------- -----------
(71,695) (50,002) (147,537) (147,194)
----------- ----------- ----------- -----------
Net income before income taxes 224,833 179,897 117,682 324,981
Income tax (expense) (82,144) - (46,144) -
----------- ----------- ----------- -----------
Net income $142,689 $179,897 $71,538 $324,981
=========== =========== =========== ===========
Earnings per common share:
Basic and diluted $0.012 $0.011 $0.006 $0.020
Weighted average shares outstanding:
Basic 11,686,186 15,417,115 11,904,158 15,357,326
Diluted 12,354,316 15,882,879 12,241,149 15,898,188
The accompanying notes are an integral part of the
consolidated financial statements.
4
ITEM #1 FINANCIAL STATEMENTS PART I - FINANCIAL INFORMATION
OP-TECH ENVIRONMENTAL SERVICES, INC. AND WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
September 30, September 30,
2004 2003
-------------- -------------
Operating activities:
Net income $71,538 $324,981
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Bad debt expense 14,689 69,925
Depreciation and amortization 437,910 358,491
Provision for deferred income taxes 34,000 -
Loss on disposal of equipment 9,964 23,718
(Increase) decrease in operating assets and
increase (decrease) in operating liabilities:
Accounts receivable (1,059,175) 666,217
Costs on uncompleted projects applicable to
future billings (449,364) (217,534)
Billings and estimated profit in excess of
costs on uncompleted contracts 112,930 429,035
Prepaid expenses, inventory and other assets 151,393 (266,011)
Accounts payable and accrued expenses 734,414 (1,141,293)
----------- ------------
Net cash provided by operating activities 58,299 247,529
Investing activities:
Purchase of property and equipment (488,284) (431,664)
----------- ------------
Net cash used in investing activities (488,284) (431,664)
----------- ------------
Financing activities:
Proceeds from issuance of common stock 5,633 5,900
Purchase of common stock (250,000) -
Proceeds from note payable to bank and current
and long-term borrowings, net of financing costs 5,930,589 8,638,878
Principal payments on current
and long-term borrowings (5,314,310) (8,460,643)
----------- -------------
Net cash provided by financing activities 371,912 184,135
----------- -------------
Increase (decrease) in cash (58,073) -
Cash at beginning of period 58,073 -
----------- ------------
CASH AT END OF PERIOD $- $-
=========== ============
Non-cash items
Equipment purchased through bank and
other financing sources $297,125 $173,998
Non-cash financing of insurance premiums $354,382 $-
Cash paid for interest $176,366 $144,897
The accompanying notes are an integral part of the
consolidated financial statements.
5
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.
6
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., a company formed in January
2002 for purposes of pursuing and engaging in diversified lines of business
including asset management services. All material intercompany transactions
and balances have been eliminated in consolidation.
The balance sheet at December 31, 2003 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, 2003.
2. Revenue Recognition
The timing of revenues is dependent on the Company's backlog, contract awards,
and the performance requirements of each contract. The Company's revenues are
also affected by the timing of its clients planned remediation work as well as
the timing of unplanned emergency spills. Historically, planned remediation
work generally increases during the third and fourth quarters. Although the
Company believes that the historical trend in quarterly revenues for the third
and fourth quarters of each year are generally higher than the first and
second quarters, there can be no assurance that this will occur in future
periods. Accordingly, quarterly or other interim results should not be
considered indicative of results to be expected for any quarter or for the
full year.
3. Related Party Transactions
The Company utilizes subcontract labor purchased from St. Lawrence Industrial
Services, Inc., which is owned by a director of the Company. The costs for
these services amounted to approximately $574,000 and $939,000 for the nine
months ended September 30, 2004 and 2003, respectively, and $262,000 and
$380,000 for the three months ended September 30, 2004 and 2003 respectively.
4. Earnings per Share
Basic earnings per share is 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 2007.
7
5. Stock Based Compensation
The Company applies APB Opinion 25 and related interpretations in accounting
for its stock option plan. Accordingly no compensation cost has been
recognized for non-qualified stock options issued. Had compensation cost for
these options been determined based on their fair value at the grant date
consistent with the method proscribed under Financial Accounting Standards
Board ("FASB") Statement No. 123 "Accounting For Stock-Based Compensation",
the Company's net income (loss) and per share amounts reported for the periods
ended September 30, 2004 and 2003 would not be materially different. The
Company does not intend to adopt the fair value accounting for stock based
compensation in accordance with FASB Statement No. 148 "Accounting for Stock-
Based Compensation - Transition and Disclosure, an Amendment of FASB Statement
No. 123".
In March 2004 a holder of options to purchase common stock at $.10 per share
exercised those options resulting in the issuance of 3,333 shares of common
stock.
In July 2004 holders of options to purchase common stock at $.06 per share
exercised those options resulting in the issuance of 88,329 shares of common
stock.
8
6. Financial Information Concerning Segment Reporting
The Company reports its operations principally in two business segments, as
follows:
(1) OP-TECH Environmental Services, Inc. ("OP-TECH") engages in diversified
and comprehensive environmental remediation services for customers located
primarily in the north eastern United States.
(2) OP-TECH AVIX, Inc. ("AVIX"), a subsidiary of OP-TECH, was formed in
January 2002 to pursue and engage in diversified lines of business including
asset management services.
Nine Months Ended September 30, 2004
OP-TECH AVIX Total
Project billings and services
to external customers $12,222,365 $76,612 $12,298,977
Intersegment project billings and services - - -
----------- ------- -----------
Total Project billings and services $12,222,365 $76,612 $12,298,977
----------- ------- -----------
Operating earnings (loss) $249,044 $16,175 $265,219
Interest expense (176,366) - (176,366)
Other income, net 28,829 - 28,829
------------ ------- ------------
Earnings (loss) before income taxes $101,507 $16,175 $117,682
------------ ------- ------------
Total assets $11,036,620 $29,986 $11,066,606
Depreciation and amortization 437,704 206 437,910
Capital expenditures 785,409 - 785,409
Nine Months Ended September 30, 2003
OP-TECH AVIX Total
Project billings and services
to external customers $11,209,675 $71,682 $11,281,357
Intersegment project billings and services - - -
----------- ------- -----------
Total Project billings and services $11,209,675 $71,682 $11,281,357
----------- ------- -----------
Operating earnings (loss) $515,615 $(43,440) $472,175
Interest expense (134,394) (10,503) (144,897)
Other income, net (2,297) - (2,297)
------------ ------- ------------
Earnings (loss) before income taxes $378,924 $(53,943) $324,981
------------ ------- ------------
Total assets $8,070,149 $30,846 $8,100,995
Depreciation and amortization 357,563 928 358,491
Capital expenditures 605,662 - 605,662
9
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2004, the Company had cash of $0 as compared to $58,073 at
December 31, 2003. The Company voluntarily applies all available cash in the
Company's operating account to pay down the Company's note payable to bank
under its line of credit.
At September 30, 2004, the Company had working capital of $2,161,648 compared
to $1,779,382 at December 31, 2003, with a current ratio of 1.53 to 1 at
September 30, 2004 and 1.62 to 1 at December 31, 2003.
For the nine months ended September 30, 2004, the Company's net cash provided
by operations was $58,299 compared to net cash provided by operations of
$247,529 during the nine months ended September 30, 2003. The cash provided
by operations for the nine months ended September 30, 2004 was primarily a
result of a net increase in accounts payable partially offset by a net
increase in accounts receivable.
The Company's net cash used in investing activities of $488,284 during the
first nine months of 2004 was attributable to the purchase of various field
equipment.
Cash provided by financing activities for the nine months ended September 30,
2004 was $371,912, which was primarily due to the net proceeds from the
Company's long-term debt used to finance the Company's investing activities.
As of September 30, 2004, the Company had a loan agreement that provided for
borrowings up to $2,600,000 on a revolving basis, collateralized by all
accounts receivable, inventory and equipment now owned or acquired later. The
loan has a "step down" provision to $2,000,000 on January 31, 2005. Amounts
in excess of $2,000,000 have been included in the current portion of long-term
debt at September 30, 2004 The loan is payable on May 31, 2006, bears
interest at a rate of prime plus 1.25 percent, is subject to certain
restrictive financial covenants, and is subject to default if there is a
material adverse change in the financial or economic condition of the
Company. As of September 30, 2004, borrowing against the revolving loan
aggregated $2,175,603. At September 30, 2004 the Company was not in
compliance with certain restrictive covenants. The bank has waived the
compliance with the covenants for the quarter ended September 30, 2004.
In addition, certain directors and officers of the Company have loaned the
Company a total of $295,000. The loans are evidenced by promissory notes, are
unsecured, pay interest at 8%, and are payable on March 31, 2005. $200,000 of
the director and officer loans are subordinated to the Company's debt payable
to its primary lender.
During the first nine months of 2004, 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 and additional debt provided from certain
directors and officers, that it will be able to meet obligations as they come
due.
On July 13, 2004 options to purchase 88,329 shares of common stock were
exercised. The total proceeds received from the exercise of the options was
$5,300.
10
RESULTS OF OPERATIONS
BILLINGS
The Company's project billings for the third quarter of 2004 increased 32% to
$5,008,986 from $3,794,519 for the third quarter of 2003. For the nine-month
period ended September 30, 2004 the Company's billings have increased 9% to
$12,298,977 from $11,281,357 for the same period in 2003.
When comparing the first nine months of 2004 to the same period in 2003, the
overall increase in billings is due to several reasons:
The development of the field office in Edison, NJ has resulted in
approximately $400,000 more in project billings in the first nine months of
2004 than in the comparable period in 2003.
The creation and development of the sales department in 2004 has led to
significantly more opportunities and project billings throughout the Company.
PROJECT COSTS AND GROSS MARGIN
Project costs for the third quarter of 2004 increased 37% to $3,537,104 from
$2,582,291 for the same period in 2003. Project costs as a percentage of
revenues were 71% and 68% for the three months ended September 30, 2004 and
2003, respectively. Gross margin for the third quarter of 2004 decreased to
29% from 32% for the same period in 2003.
For the nine-month period ended September 30, 2004, project costs increased 9%
to $8,529,326 from $7,822,356 for the nine months ended September 30, 2003.
Project costs as a percentage of revenues were 69% for each of the nine months
ended September 30, 2004 and 2003. Gross margin for each of the nine months
ended September 30, 2004 and 2003 was 31%.
As a result of increased billings, project costs also increased. The
maintenance of the gross margin at 31% with increased project billing volume
is due to quality project management, the Company's continued focus on
pursuing more profitable lines of work, and a vendor consolidation program
that has resulted in volume discounts on project material purchases.
11
OPERATING EXPENSES
Operating expenses for the quarter ended September 30, 2004 increased 20% to
$1,175,354 from $982,329 for the same period in 2003. For the nine-month
period ended September 30, 2004, operating expenses increased 17% to
$3,504,432 from $2,986,826 for the same period in 2003. Operating expenses as
a percentage of revenues was 28% and 27% for the nine months ended September
30, 2004 and 2003, respectively.
When comparing the first nine months of 2004 to 2003, the overall increase in
operating expenses is due to several factors:
Payroll expense and related payroll taxes and benefits increased 17% to
$1,817,258 in the first nine months of 2004 from $1,549,923 in the same period
in 2003. During the fourth quarter of 2003 and the first two quarters of 2004,
new employees were added in the Cleveland, Edison, Albany, Syracuse and
Massena branch offices. Each of these offices added new employees as a result
of anticipation of increased sales volume and long-term growth plans. In
addition, over the last 12 months four employees were added to the sales
department.
Business insurance increased 34% to $235,454 over the same period in 2003.
This increase in insurance expense is due to a single one-time loss resulting
in a significant claim being paid out of the Company's general liability
insurance policy.
Equipment expense has increased to $161,295 from $87,365 in the same period
in 2003. The increase in equipment expense is primarily attributed to the
higher fuel prices.
Occupancy expense increased 12% to $288,330 over the same period in 2003.
This increase in occupancy expense is attributable to new leases entered into
since the third quarter of 2003 for a new office in Cleveland, OH and larger
offices in Edison, NJ, Plattsburgh, NY and Rochester, NY.
INTEREST EXPENSE
Interest expense for the nine months ended September 30, 2004 increased 22% to
$176,366 from $144,897 for the same period in 2003. The increase in interest
expense was primarily due to an increase in the average outstanding balance on
the revolving loan and long-term debt when comparing the nine months ended
September 30, 2004 with the same period in 2003.
NET INCOME
The net income for the nine months ended September 30, 2004 was $71,538, or
$0.006 per share basic and diluted compared to net income of 324,981, or
$0.020 per share basic and diluted, for the nine months ended September 30,
2003.
12
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 long
lived assets, revenue recognition, valuation allowance 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.
13
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 September 30, 2004.
14.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures.
Within the 90 days before the date of 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.
Subject to the limitations described above, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to OP-TECH required to be included in OP-TECH's periodic SEC filings.
(b) Changes in Internal Controls.
There have been no significant changes in OP-TECH's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
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
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OP-TECH Environmental Services, Inc.
(Registrant)
Date: November 11, 2004 /s/ Christopher J. Polimino
Christopher J. Polimino
President and Chief Executive Officer
/s/ Douglas R. Lee
Douglas R. Lee
Treasurer and Chief Financial Officer
17
CERTIFICATIONS
Certification of Chief Executive Officer
I, Christopher J. Polimino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of OP-TECH Environmental
Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 11, 2004
/s/ Christopher J. Polimino
Christopher J. Polimino
President and Chief Executive Officer
18.
Certification of Chief Financial Officer
I, Douglas R. Lee, certify that:
1. I have reviewed this quarterly report on Form 10-Q of OP-TECH Environmental
Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 11, 2004
/s/ Douglas R. Lee
Douglas R. Lee
Treasurer and Chief Financial Officer
19.
Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
I, Christopher J. Polimino, President and Chief Executive Officer of OP-TECH
Environmental Services, Inc. (the "Company"), certify, to the best of my
knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2004 (the "Report") fully complies with the requirements of
Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C.
78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: November 11, 2004
/s/ Christopher J. Polimino
Christopher J. Polimino
President and Chief Executive Officer
20.
Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
I, Douglas R. Lee, Treasurer and Chief Financial Officer of OP-TECH
Environmental Services, Inc. (the "Company"), certify, to the best of my
knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended
September 30, 2004 (the "Report") fully complies with the requirements of
Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C.
78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: November 11, 2004
/s/ Douglas R. Lee
Douglas R. Lee
Treasurer and Chief Financial Officer
21.