UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  ____________

                                    FORM 10-K

      FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

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

                      For the year ended December 31, 2004

                                       OR

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

                         Commission file number: 0-27290

                                _________________

                                    KSW, INC.

           (Exact name of the Registrant as specified in its charter)

             Delaware                                11-3191686
             --------                                ----------
   (State or other jurisdiction                   (I.R.S. Employer
  incorporation or organization)                  Identification No.)

               37-16 23rd Street, Long Island City, New York 11101
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (718) 361-6500
                                                           --------------

        Securities registered pursuant to Section 12(b) of the Act: NONE

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

                          Common Stock, $.01 par value
                                (Title of Class)

<PAGE>
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] No [ ]



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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant on June 30, 2004 was $ 2,707,168 (based on a
price of $.70 per share).

As of March 25, 2005, there were 5,470,311 shares of Common Stock, $.01 par
value per share, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

The Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A within 120
days after the end of the Registrant's last fiscal year is incorporated by
reference into Part III of this Annual Report on Form 10-K.



<PAGE>
<TABLE>
<S>                     <C>                                                                                     <C>
FORWARD-LOOKING STATEMENTS.............................................................................................2

PART I.................................................................................................................3

         ITEM 1.          BUSINESS.....................................................................................3

         ITEM 2.          PROPERTIES...................................................................................7

         ITEM 3.          LEGAL PROCEEDINGS............................................................................7

         ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................................7

                          EXECUTIVE OFFICERS OF THE REGISTRANT.........................................................8

PART II................................................................................................................8

         ITEM 5.          MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                          MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES............................................8

         ITEM 6.          SELECTED FINANCIAL DATA......................................................................9

         ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                          AND RESULTS OF OPERATIONS...................................................................10

         ITEM 7A.         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...................................24

         ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................24

         ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                          AND FINANCIAL DISCLOSURE....................................................................24

         ITEM 9A.         CONTROLS AND PROCEDURES.....................................................................24

         ITEM 9B.      OTHER INFORMATION..............................................................................24

PART III..............................................................................................................25

         ITEM 10.         DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........................................25

         ITEM 11.         EXECUTIVE COMPENSATION......................................................................25

         ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                          MANAGEMENT AND RELATED STOCKHOLDER MATTERS..................................................26

         ITEM 13.         CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................26

         ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES......................................................26

PART IV...............................................................................................................26

         ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .................................................26

SIGNATURES............................................................................................................30

</TABLE>

<PAGE>
                           FORWARD LOOKING STATEMENTS


Certain statements contained under "Item 1. Business", "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this Form 10-K regarding matters that are not historical facts,
constitute "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995). These forward looking statements
generally can be identified as statements that include phrases such as
"believe", "expect", "anticipate", "intend", "plan", "foresee", "likely", "will"
or other similar words or phrases. Such forward-looking statements concerning
management's expectations, strategic objectives, business prospects, anticipated
economic performance and financial condition, and other similar matters involve
known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of results to differ
materially from any future results, performance or achievements discussed or
implied by such forward-looking statements. Many of the risks, uncertainties,
and other important factors that could cause actual results to differ materially
from expectations of the Company are described at the end of "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" in this Form 10-K. All written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
qualified in their entirety by such factors.









                                       2
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

         GENERAL. KSW, Inc., a Delaware corporation (the "Company" or "KSW"),
furnishes and installs heating, ventilating and air conditioning ("HVAC")
systems and process piping systems for institutional, industrial, commercial,
high-rise residential and public works projects. The Company does not actively
pursue projects under $500,000. The Company also serves as a mechanical trade
manager, performing project management services relating to the mechanical
trades. The Company conducts operations through its wholly-owned subsidiary, KSW
Mechanical Services, Inc. ("KSW Mechanical"). The Company's common stock is
traded on the Over-the-Counter Bulletin Board under the symbol "KSWW.OB."

         Some of the Company's ongoing projects include the following: Weill
Cornell "S" Building, Weill Cornell Ambulatory Care Facility, as well as the
conversions from office space to residential rental apartments in lower
Manhattan at 10 Hanover Square and 1 Wall Street Court, and new high rise luxury
buildings at 325 Fifth Avenue and at 83rd Street and York Avenue.

         The Company's primary strategic objectives are to increase its revenues
and to become more competitive in its present business. The Company has in the
past engaged consultants to determine the best methods to maximize shareholder
value, including whether the sale of the Company would be advantageous.

         The Company's primary business is providing heating, ventilation and
air conditioning ("HVAC") systems and process piping systems under direct
contracts with owners of buildings or subcontracts with general contractors or
construction managers. These contracts sometimes are awarded by competitive
bids, as many of the owners are public entities. Other contracts are obtained
through negotiation with private parties.

         The Company provides value engineering assistance, whereby the Company
uses its experienced staff to streamline HVAC systems and process piping systems
by recommending changes which reduce costs but still yield the same results as
the original plans. The Company believes that this service can provide more
bidding opportunities in the future.

         The Company's management pioneered the concept of managing the
mechanical trade portion of construction projects. On larger complex projects
(generally those having a mechanical portion valued over $10 million), such as
the Weill Cornell Ambulatory Care Facility, Morgan Stanley Children's Hospital
at New York Presbyterian and the Long Island Jewish Hospital Energy Center, it
is often beneficial for a construction manager to lock in the costs of the
mechanical portion of the contract prior to completion of the contract
documents. By engaging the services of a trade manager, the Company believes
construction managers can more accurately evaluate design alternatives so that
the completed construction documents balance costs and project objectives. As a
mechanical trade manager, the Company's subsidiary performs a construction
manager function for the mechanical trade portion of a project. The Company
divides the mechanical portion of the contract into bid packages for
subcontractors and equipment, negotiates subcontracts and coordinates the work.
The Company believes coordination provides a significant benefit in keeping a
project on schedule and within budget.


                                       3
<PAGE>
         As a mechanical trade manager, the Company may subcontract parts of a
large project to different subcontractors, thereby increasing competition on
projects and lowering bids by allowing smaller contractors to compete for the
subcontract work. The Company believes customers benefit by having a single
source responsible for the cost, coordination and progress of the mechanical
portion of the projects. Although trade management is typically available only
on large jobs, the Company believes there is opportunity for expanding this line
of business.

         The Company provides a guaranteed maximum price ("GMP") to the owners
for its scope of responsibility. The Company controls the GMP by obtaining
accurate price quotes from potential suppliers and subcontractors, requiring
payment or performance bonds from major subcontractors and adding a contingency
allowance to these price quotes before the Company submits its GMP. The Company
also works to control costs because it is a mechanical contractor and can
perform the guaranteed work on its own should bid prices exceed its estimate.
These costs are subject to certain risk factors discussed in "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

           While trade management projects provide a net profit margin similar
to that for contracting projects, the Company believes there is generally less
risk associated with trade management projects because there is a contingency
fund which can be drawn from if necessary. A contingency fund is a line item
which the Company includes in the GMP to account for any contingencies the
Company may not have anticipated in estimating the GMP. In the event the
Company's costs exceed the relevant line items quoted in the GMP, the Company
may draw from the contingency fund to cover such expenses. The Company is at
risk for any costs in excess of the GMP. There is no assurance that potential
cost overruns will not exceed this contingency.

         OPERATIONS. The Company obtains projects primarily through negotiations
with private owners, construction managers and general contractors, and by
competitive bidding and negotiations in response to advertisements by federal,
state and local government agencies. The Company submits bids after detailed
reviews of project specifications, an internal review of the Company's
capabilities, equipment, personnel availability and an assessment of whether the
project is likely to meet the targeted profit margins. After computing the
estimated costs of the project, the Company adds its desired profit margin
before submitting a bid.

         The Company believes it has been successful in the competitive bidding
process because it is selective in the projects on which it bids and has highly
skilled personnel familiar with the local market. The Company strives to avoid
costly bidding errors by becoming thoroughly familiar with all aspects of a
project and developing a comprehensive project budget using what it believes is
a proven cost estimating system. Projects are divided into phases and line items
indicating separate labor, equipment, material, subcontractor and overhead cost
estimates. As a project progresses, the Company's project managers are
responsible for planning, scheduling and overseeing operations and reviewing
project costs compared to the estimates. The Company's costs have been and may
in the future be impacted by lower than expected labor productivity and higher
than expected material costs.


                                       4
<PAGE>
         The Company has received letters of approval as an authorized bidder by
various government agencies, including the New York City Transit Authority, the
New York City Health and Hospitals Corporation, the New York City School
Construction Authority, the New York City Housing Authority and the New York
State Dormitory Authority.

         MARKETS. The Company competes for business primarily in the New York
City metropolitan area. However, the Company has performed work outside of that
area in the past.

         BACKLOG. The Company has a backlog (anticipated revenue from the
uncompleted portions of awarded projects) of orders totaling approximately $
36,000,000 as of December 31, 2004, compared to approximately $20,900,000 as of
December 31, 2003, and approximately $26,200,000 (restated) at December 31,
2002. See the discussion of the restatements in "Item 6 Selected Financial Data"
and "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company is actively seeking new contracts to add to
its backlog. Management believes that its value engineering services will lead
to a greater number of contracts to bid, since the Company is able to be part of
the initial planning of a project.

         A portion of the Company's anticipated revenue in any year is not
reflected in its backlog at the start of the year because some projects are
started and completed the same year. The Company believes that its backlog is
firm, notwithstanding provisions contained in some contracts which allow
customers to modify or cancel the contracts at any time, subject to certain
conditions, including reimbursement of costs incurred in connection with the
contracts and the possible payment of cancellation fees.

         COMPETITION. The mechanical contracting market is highly competitive.
There are many larger regional and national companies with resources greater
than those of the Company. However, some of these large competitors are
unfamiliar with the New York City metropolitan area. The Company believes it
competes favorably in New York City with respect to such companies because of
its reputation in the area and its knowledge of the local labor force. There are
many smaller contractors and subcontractors in the New York City metropolitan
area. The Company believes there are barriers to entry for smaller competitors,
including bonding requirements, relationships with subcontractors, suppliers and
union workers.

         REGULATION. The construction industry is subject to various
governmental regulations from local, state and federal authorities. The Company
is governed by state and federal requirements regarding the handling and
disposal of lead paint, but the impact cannot be predicted at this time since it
varies from project to project. The Company must also comply with regulations as
to the use and disposal of solvents and hazardous wastes, compliance with which
are a normal part of its operations. The Company does not perform asbestos
abatement, but has occasionally subcontracted that part of a contract to duly
licensed asbestos abatement companies with the Company being named as an
additional insured on the asbestos abatement company's liability insurance
policy. The Company has not incurred any liability for violations of
environmental laws. The Company must also comply with federal rules and
regulations promulgated by the Occupational Safety and Health Administration.


                                       5
<PAGE>
         EMPLOYEES. At December 31, 2004, the Company had approximately 31
permanent, full- time employees. The Company also employs field employees, who
are union workers. The number of union workers employed varies at any given
time, depending on the number and types of ongoing projects and the scope of
projects under contract. The Company hires union labor for specific work
assignments and can reduce the number of union workers hired at will with no
penalties.

         The Company pays benefits to union employees through payments of funds
to trusts established by the unions. The Company's obligation is to pay a
percentage of the wages of union workers to these trust funds. Thus, the Company
does not accrue liabilities for pension and medical benefits to union retirees.
The Company provides its full-time permanent employees with medical insurance
benefits and a discretionary matching 401(k) plan. Through 2004, the Company has
matched 25% of the employees' 401(k) contributions.

         DEPENDENCE UPON CUSTOMERS. At any given time, a material portion of the
Company's contracting business may be for one large contract for one customer.
The Company's customer base can vary each year based on the nature and scope of
the projects undertaken in that year.

         For the year ended December 31, 2004, work under contracts with Bovis
Lend Lease Inc., Newmark Construction Services, LLC and related entities, and
Glenwood Management Corporation, constituted 32%, 23% and 16% of the Company's
total revenues, respectively.

         For the year ended December 31, 2003, work under contracts with Bovis
Lend Lease, Inc., Glenwood Management Corporation and Newmark Construction
Services, LLC and related entities, constituted 43%, 27% and 13% of the
Company's total revenues, respectively.

         For the year ended December 31, 2002 (as restated), work under
contracts with Bovis Lend Lease, Inc., J.A. Jones Construction Group, LLC. and
Jeffrey M. Brown Associates, Inc., constituted 41%, 15% and 11% of the Company's
total revenues, respectively.

         Historically, a considerable portion of the Company's revenue has been
generated from contracts with federal, state and local governmental authorities.
The current backlog does not include any contracts directly with these
governmental authorities.

         As is customary in the industry, on most of its projects, the Company
is required to provide a surety bond. The Company's ability to obtain bonding,
and the amount of bonding required, is solely at the discretion of the surety
and is primarily based upon the Company's net worth, working capital, the number
and size of projects under construction and the surety's relationship with
management. The larger the project and/or the number of projects under contract,
the greater the requirements are for bonding, net worth and working capital. The
Company generally pays a fee to the bonding company of an amount less than 1% of
the amount of the contract to be performed. Since inception, the Company has
never been denied any request for payment or performance bonds, nor has a
bonding company been required to make a payment on any bonds issued for the
Company. At December 31, 2004, approximately $25,500,000 of the Company's
$36,000,000 backlog required bonds. In addition, during the first quarter of
2005, the Company accumulated approximately $20,000,000 of new work which is not
reflected in the backlog amount at December 31, 2004 of which $6,600,000 will
require bonding. See the discussion of the surety in "Item 7- Management's
Discussion and Analysis of Financial Condition and Results of Operations."


                                       6
<PAGE>
         OTHER MATTERS. The Company does not own any patents, patent rights or
similar intellectual property. The Company's business is not subject to large
seasonal variations. The Company did not expend funds for research and
development during 2004, 2003 and 2002, and anticipates no research and
development expenses in 2005.

ITEM 2.  PROPERTIES

         Pursuant to a Modification of Lease Agreement, dated as of May 1, 1998,
the Company leases an office and warehouse space in Long Island City consisting
of 18,433 square feet. The lease had an initial annual base rent of $173,000,
with yearly rent increases of approximately 2%. The lease is a triple net lease
and thus the Company will pay any increases on real estate taxes over the base
year taxes, maintenance, insurance and utilities. The Company has exercised the
first five-year option under the Modification of Lease Agreement, which extended
the lease term through June 2004. The Company has exercised a one year option
for the period July 2004 through June 2005 and a one year option for the period
July 2005 through June 2006. The Company also has a three-year option which can
be exercised during 2006.

         The Company also leases a building and a storage yard in Bronx, New
York, consisting of a 14,000 square foot building, including 4,000 square feet
of offices and 10,000 square feet of shop space. It also leases an adjacent
5,000 square foot storage yard. This property is jointly owned by the Company's
Chief Executive Officer and a charitable foundation he controls. This lease is a
triple net lease. The Company pays rent of approximately $8,500 per month, plus
taxes (currently approximately $2,000 per month), maintenance, insurance and
utilities. The lease expired on December 31, 2002 and is currently on a
month-to-month basis.

     The properties are well maintained, adequate and suitable for their
purposes.

ITEM 3.  LEGAL PROCEEDINGS

The following is a material pending proceeding in which the Company is a party:

KSW Mechanical Services v. NAB Construction Corp.

            In February 1999, the Company sued the general contractor on the
Co-Op City Project and its bonding company in New York State Supreme Court,
Queens County to recover its contract balance and unpaid proposals. The
Company's claim includes approximately $1,937,000, consisting of accounts
receivable applicable to the base contract of approximately $437,000, and unpaid
final retainage billings of approximately $1,500,000. The Company also seeks to
be compensated for unanticipated costs incurred through 1998, in the sum, as
presented at trial, of $2,303,727. These costs have not been reflected as a
claim receivable in the Company's financial statements because it is the policy
of the Company not to record income from claims until the claims have been
received or awarded. The defendant asserted counterclaims, as presented at
trial, totaling $1,440,905, and a claim for $3,000,000 based on the argument
that the Company's mechanic's lien was willfully overstated. The Company
believes all of the defendant's claims lack merit. While the Company and its
counsel believe its lawsuit has merit, there is no guaranty of a favorable
outcome. This case was tried for 40 days and adjourned by the court to April
2005 for further trial proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of stockholders during the fourth
quarter of 2004.


                                       7
<PAGE>
                      EXECUTIVE OFFICERS OF THE REGISTRANT

Officers of the Company serve at the pleasure of the Board of Directors. The
name, age and offices held by each of the executive officers of the Company as
of December 31, 2004 were as follows:

<TABLE>
<C>                     <C>              <C>

NAME                          AGE               TITLE
----                          ---               -----

Floyd Warkol                  57                Chief Executive Officer, President, Secretary and
                                                Chairman of the Board of Directors

Richard W. Lucas              38                Chief Financial Officer

James F. Oliviero             58                General Counsel
</TABLE>

         Mr. Floyd Warkol has been principally employed as Chairman of the Board
since December 15, 1995 and as President, Secretary and Chief Executive Officer
of the Company and as Chairman and Chief Executive Officer of KSW Mechanical,
since January 1994.

         Mr. Richard W. Lucas has been principally employed as the Chief
Financial Officer of the Company and KSW Mechanical, since August 2002. Prior
thereto, he was employed from May 1994 through July 2002 by Marden Harrison &
Kreuter CPAs P.C., the Company's independent certified public accountants.

         Mr. James F. Oliviero has been principally employed as General Counsel
of the Company and KSW Mechanical, since February 1998. From January 1994 until
February 1998, he was employed as Director of Contract Administration of KSW
Mechanical.


                                    PART II

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

         The Company's Common Stock is quoted on the Over-the-Counter Bulletin
Board under the symbol "KSWW.OB."

         At March 25, 2005, the Company had 5,470,311 shares of KSW Common Stock
issued and outstanding held by approximately 5,000 shareholders of record, based
on shareholder lists provided by the Company's stock transfer agent and
Depository Trust Company.

         Currently, the Company intends to retain earnings, if any, for future
growth, and does not anticipate paying dividends on its Common Stock in the near
future. The Company did not pay dividends during 2004 or 2003.


                                       8
<PAGE>
         The following information on high and low bid information is provided
for 2004 and 2003 based on intraday quotation information:

<TABLE>
<CAPTION>
                                                          2004                                  2003
                                                          ----                                  ----
                Quarter                         High                Low                High             Low
                -------                         ----                ---                ----             ---
<S>                                      <C>               <C>                <C>              <C>
First...............................          $   1.01         $    .62           $   1.05         $    .70
Second..............................          $   1.05         $    .69           $   1.00         $    .70
Third...............................          $    .80         $    .62           $    .85         $    .70
Fourth..............................          $    .75         $    .40           $    .83         $    .62
</TABLE>

These prices represent bid prices, which are prices paid by broker dealers, and
do not include retail markups, markdowns or broker dealer commissions.

ITEM 6.  SELECTED FINANCIAL DATA

           The following information for the years ended December 31, 2004,
2003, 2001, and 2000 is derived from, and is qualified by reference to, the
financial statements for those years audited by Marden, Harrison & Kreuter CPAs,
P.C. The summary of certain financial information relating to the Company for
the year ended December 31, 2002 (as restated), is derived from, and is
qualified by reference to, the financial statements for the year audited by
Rosen Seymour Shapss Martin & Company, LLP. Previous year amounts have been
reclassified to conform to the presentation. Each of the previously mentioned
financial statements is included herein or in prior years annual reports on Form
10-K and Form 10-K/A, and should be read in conjunction with such financial
information.

<TABLE>
<CAPTION>
                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                           -------------------------------
                                             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

INCOME STATEMENT:                            2004            2003            2002             2001            2000
                                                                          (Restated)
<S>                                     <C>             <C>            <C>               <C>            <C>
Revenues..........................         $26,281         $35,002         $46,448 (a)      $51,012         $52,247
Costs of revenues.................          24,139          31,148          40,808 (a)       49,153          48,249
Gross profit......................           2,142           3,854           5,640            1,859 (b)       3,998 (b)
Selling, general and
   administrative expenses........           3,452           3,010           4,196            4,499           4,706
Operating income (loss)...........          (1,310)            844           1,444           (2,640)           (708)
Other income (expense)............              52             (59)           (107)             (55)            279
Income (loss) before income taxes
                                            (1,258)            785           1,337           (2,695)           (429)
Provision (benefit) for income
   taxes..........................              22             (30)          1,714 (c)       (1,218)           (163)
Income (loss) before cumulative
   effect of change in accounting
   principle......................          (1,280)            815            (377)          (1,477)           (266)
Cumulative effect of change in
   accounting principle net.......               -               -          (1,888)(d)            -               -
Net income (loss).................          (1,280)            815          (2,265)          (1,477)           (266)
Net income (loss) per share -
    Basic.........................            (.24)            .15            (.41)            (.27)           (.05)
    Diluted.......................            (.24)            .15            (.41)            (.27)           (.05)
Number of shares used in
   computation :
    Basic.........................       5,470,311       5,470,311       5,470,311        5,470,311       5,468,991
    Diluted.......................       5,470,311       5,470,311       5,470,311        5,470,311       5,641,050

BALANCE SHEET DATA:
Total assets......................          13,913          16,834          17,171           27,620          28,263
Working capital...................           3,181           4,496           3,495            5,213           6,996
Current liabilities...............           7,127           8,785          10,029           18,149          17,255
Long-term liabilities.............               -               -               -               19              51
Stockholders' equity..............           6,786           8,049           7,142            9,452          10,957
OTHER DATA:
Current ratio.....................          1.45:1          1.51:1          1.35:1           1.29:1          1.41:1
</TABLE>


                                       9
<PAGE>
(a) The Company's management identified and determined that reported revenues
and costs of revenues during the year ended December 31, 2002 were materially
overstated as a result of an accounting error attributable to the failure to
eliminate certain intra-company accounts. The Company has restated these
previously reported amounts and, with the oversight of its Audit Committee, has
corrected its financial reporting system. Gross profit for the year did not
change due to the offsetting effects of the misstatements.

(b) For the years ended December 31, 2001 and 2000, the Company experienced a
gross profit erosion primarily due to lower than anticipated productivity and
higher labor costs on several projects which commenced during the later half of
2000 and completed during 2001. As a result of these contract losses, the
Company has changed its estimating and bidding practices, as discussed in the
Management Discussions and Analysis section.

(c) During the year ended December 31, 2002, the Company recorded a valuation
allowance totaling $1,045 against its deferred tax assets, at the recommendation
of the Company's outside auditors engaged in the preparation of the 2002 audit.

(d) For the year ended December 31, 2002, the Company recorded a cumulative
effect of a change in accounting principle for the write-off of goodwill as a
result of the adoption of SFAS 142, which accounted for $1,888 of the net loss.

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

         The following discussion and analysis explains the general financial
condition and the results of operations for the Company, for the years ended
December 31, 2004, 2003 and 2002, including:

          o    factors which affect our business,

          o    our earnings and costs in the periods presented,

          o    changes in earnings and costs between periods,

          o    sources of earnings, and

          o    impacts of these factors on our overall financial condition.

         As you read this discussion and analysis, please refer to the
Consolidated Statements of Operations for the years ended 2004, 2003 and 2002
(restated) included in the Company's consolidated financial statements.

         At the end of January 2004, the Company's management identified and
determined that reported revenues and costs of revenues during the year ended
2002 and the nine months ended September 30, 2003, including their respective
interim periods, were materially overstated. This overstatement was a result of


                                       10
<PAGE>
an accounting error attributable to the failure to eliminate certain
intra-company accounts as disclosed by the Company on February 2, 2004, in a
press release, a copy of which was attached as an exhibit to the Current Report
on Form 8-K of the same date. This overstatement did not affect previously
reported gross profit, operating income, net income (loss) or earnings (loss)
per share for the affected periods. The Company's previously issued statements
of operations for the year ended 2002 and nine months ended September 30, 2003,
including for their respective interim periods, should not be relied upon as to
the revenues and costs of revenues reported in such statements as a result of
these accounting errors. The Form 10-K for 2003 and the Form 10-K/A for 2002
restated the overstated amounts to correct the accounting error. Management,
with oversight from the Audit Committee, analyzed and corrected the Company's
internal financial reporting system.

         Total revenues for 2004 were $26,281,000 as compared to $35,002,000 for
2003 and $46,448,000 (restated) for 2002.

OVERVIEW

         The Company, through its wholly-owned subsidiary, furnishes and
installs HVAC systems and process piping systems for institutional, industrial,
commercial, high-rise residential and public works projects. The Company does
not actively pursue projects under $500,000. The Company also serves as a
mechanical trade manager, performing project management services relating to the
mechanical trades.

         The Company obtains projects through both competitive bidding and
negotiated bidding processes submitted to project owners or construction
managers, with many of whom the Company has had long standing commercial
relationships.

         The Company is awarded many of its contracts by providing value
engineering assistance, whereby the Company recommends changes to project plans.
This assistance reduces costs and yields the same results as the original
designs.

         The Company's profitability is dependent on its ability to continue to
maintain its commercial relationships and provide quality services necessary to
obtain projects. The Company must also manage material costs, purchase equipment
at or below original estimated amounts and control labor costs throughout the
duration of each project.

         During the year ended December 31, 2004, the Company's experienced
losses which were primarily a result of (1) a decreased number of projects
available to bid due primarily to market conditions, which resulted in
insufficient revenue to absorb operating expenses and increased labor costs, and
(2) the effect of price increases of steel-based piping materials.

         As to labor costs, the Company has a policy of charging costs regarding
project supervision and drafting personnel directly to the projects for which
they are responsible. Reduced revenues, however, have prevented these costs from
being charged to multiple projects, which reduced the profit margins on existing
projects. Specifically, the Company needs to retain experienced field labor for
future, as well as current projects. Because the Company has had a relatively
small number of projects during the past fiscal year, the Company has employed
more highly compensated field personnel per project than it would have if there
were more projects underway. This continued employment, along with the number of
projects, has resulted in increased labor costs per project and a reduction in
profits.


                                       11
<PAGE>
         The majority of the Company's contracts are awarded on a fixed-price
basis. Subcontractor and equipment purchases are awarded on a fixed-price basis,
near the time the Company's contract is awarded. The Company purchases materials
throughout the project on a price-in-effect basis. The Company was negatively
impacted by the severe price increases of steel based piping materials during
the course of projects which reduced gross profits on these projects. Management
estimates based on its review of the Company's purchases of steel based piping
materials, that the Company's earnings have been reduced by approximately
$315,000 as a result of the price increases in these materials during the year
ended December 31, 2004. The Company now includes allowances in its estimates
for future escalations in steel prices. In order to minimize these future
escalations, on March 28, 2005, the Company entered into an agreement, not yet
reduced to writing, with a supplier of steel based piping materials whereby the
Company has committed to purchase a minimum of $ 1,400,000 of steel based
materials over a fifteen month period, at fixed unit prices.

         During the year ended December 31, 2004, the Company has taken steps to
further control its home-office cost management. These steps included reduction
in office staff, as well as the Company's Chief Executive Officer reducing his
salary by 20%, with a proportionate reduction in his work week.

         Management believes that the future success of the Company lies in its
ability to obtain new projects, maintain proper cost controls related to this
work, pursue new trade management contracts and continue controlling home-office
expenditures. The Company is dependant on outside factors such as the general
health of the New York City metropolitan area economy and continued low interest
rates, both of which relate to the strength of the building industry and the
type of projects the Company has the ability to obtain. Increasing governmental
deficits could also affect the amount of new governmental financed projects
which the Company would pursue. The Company must also continue to obtain surety
bonds, which are required on many of its projects. The Company's management has
had experience in expanding into new geographic areas; however, to date the
Company has conducted its operations primarily in the New York City metropolitan
area.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The Company's consolidated financial statements and accompanying notes
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.


                                       12
<PAGE>
         The Company continually evaluates the accounting policies and estimates
it uses to prepare the consolidated financial statements. In general,
management's estimates are based on historical experience, on information from
third party professionals and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ
from those estimates made by management.

         The Company believes the following accounting policies represent
critical accounting policies. Critical accounting policies are those that are
both most important to the portrayal of a company's financial condition and
results and require management's most difficult, subjective, or complex
judgment, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain and may change in subsequent periods. We
discuss our significant accounting policies, including those that do not require
management to make difficult, subjective, or complex judgments or estimates, in
Note 2 to the Company's consolidated financial statements.

         Accounting for revenue recognition for construction contracts
         -------------------------------------------------------------

         The Company recognizes revenue for long-term construction contacts not
yet completed using the "percentage of completion" method, measured by the
percentage of total costs incurred to date to estimated total costs at the
completion of each contract. When the Company bids projects, a comprehensive
budget is prepared dividing the project into line items indicating separate
labor, equipment, material, subcontractor and overhead cost estimates. As
projects progress, the Company's project managers plan, schedule and oversee
operations and review project costs compared to the estimates. Management
reviews on a bi-weekly basis the progression of the contract with the project
manager. An analysis is prepared and reviewed monthly by management comparing
the costs incurred to the budgeted amounts. The results of these procedures
determine the estimated total costs at completion, based on facts and
circumstances known at the time. Any revision in cost and profit estimates are
reflected in the accounting period in which the facts, which require the
revisions, become known. These estimates are subject to revisions due to
unanticipated increases in labor, material and equipment costs as well as
project scope changes. The Company has the ability to receive a change order for
project scope changes. For some project cost overruns, the Company can make a
claim to the project owner or general contractor to seek reimbursement of these
overruns. In the past, the Company has been successful in the pursuit of such
claims. Such claims are not carried on the books until they are acknowledged by
the owner or contractor.

         Accounting for intangible assets and goodwill
         ---------------------------------------------

         During 2001, the Financial Accounting Standards Board issued SFAS 142,
Goodwill and Other Intangible Assets, which established new accounting and
reporting requirements for goodwill and other intangible assets. Under SFAS 142,
the amortization of goodwill ceased as of January 1, 2002 and a test for
impairment was established. SFAS 142 requires that goodwill be tested annually
using a two-step process. The first step is to identify a potential impairment.
The second step measures the amount of impairment loss, if any. Intangible
assets with indefinite lives will be tested for impairment using a one-step
process that compares the fair value to the carrying amount of the asset.


                                       13
<PAGE>
         The Company performed an impairment test on its goodwill during the
first quarter of 2002. Since the goodwill recorded was attributed to the entire
Company (a single reporting unit), and the fair value of the Company as
reflected in the market value of its stock was significantly below its net worth
including goodwill, the balance of goodwill was written off during the first
quarter of 2002.

         Accounting for income taxes
         ---------------------------

         Judgment is required in developing the Company's provision for income
taxes, including the determination of deferred tax assets and liabilities and
any valuation allowances that might be required against the deferred tax assets.
At December 31, 2002, the Company recorded a valuation allowance against its net
deferred tax assets totaling $1,045,000. In the event that actual results differ
from these estimates, the Company may be required to record an additional
adjustment to the valuation allowance on its deferred tax assets, which could
have a material effect on the Company's financial condition and results of
operations. These adjustments would be a result of the Company's inability to
generate enough profits to realize these assets. For the year ended December 31,
2003, the Company had net income, which utilized a portion of the deferred tax
asset and reduced the deferred tax valuation allowance by $406,000. For the year
ended December 31, 2004, the Company had a net loss, which increased the
deferred tax asset and increased the deferred tax valuation allowance by
$581,000.

RESULTS OF OPERATIONS

         The following table, dollar amounts in thousands, sets forth, as a
percentage of net sales, certain items of the Company's statement of operations
for the periods indicated:

<TABLE>
<CAPTION>
                                                    2004                       2003                        2002
                                                    ----                       ----                        ----
                                                                                                        (RESTATED)
                                            AMOUNT       PERCENT       AMOUNT       PERCENT        AMOUNT       PERCENT
                                            ------       -------       ------       -------        ------       -------

<S>                                     <C>          <C>          <C>           <C>           <C>           <C>
REVENUES............................     $  26,281        100.0      $  35,002       100.0      $  46,448        100.0
COSTS OF REVENUES...................        24,139         91.8         31,148        89.0         40,808         87.9
                                         ----------   ----------     ----------  ----------     ----------   ----------
GROSS PROFIT........................         2,142          8.2          3,854        11.0          5,640         12.1
EXPENSES
     Selling, general and
     administrative expenses........         3,452         13.1          3,010         8.6          4,196          9.0
                                         ----------   ----------     ----------  ----------     ----------   ----------

OPERATING INCOME (LOSS).............        (1,310)        (4.9)           844         2.4          1,444          3.1
OTHER INCOME (EXPENSES).............            52           .1            (59)        (.2)          (107)         (.2)
                                         ----------   ----------     ----------  ----------     ----------   ----------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES..........        (1,258)        (4.8)           785         2.2          1,337          2.9

PROVISION (BENEFIT) FOR INCOME
TAXES...............................            22           .1            (30)        (.1)         1,714          3.7
                                         ----------   ----------     ----------  ----------     ----------   ----------
INCOME (LOSS) BEFORE CUMULATIVE
CHANGE IN ACCOUNTING PRINCIPLE......        (1,280)        (4.9)           815         2.3           (377)         (.8)

CUMULATIVE CHANGE IN ACCOUNTING FOR
GOODWILL, NET OF TAX
BENEFIT.............................             -            -              -           -         (1,888)        (4.1)
                                         ----------   ----------     ----------  ----------     ----------   ----------
NET INCOME (LOSS)...................     $  (1,280)        (4.9)     $     815         2.3      $  (2,265)        (4.9)
                                         ==========   ==========     ==========  ==========     ==========   ==========
</TABLE>


                                       14
<PAGE>
YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

Revenues
--------

       Revenues decreased by $8,721,000 or (24.9)% to $26,281,000 for the year
ended December 31, 2004, as compared to $35,002,000 for the year ended December
31, 2003. These declines were primarily a result of a decreased number of
projects available to bid due to market conditions. Revenue for the fourth
quarter of 2004 was $6,877,000, a reduction of $3,335,000, as compared to
$10,212,000 for the fourth quarter of 2003. Included in the fourth quarter of
2003 results was approximately $714,000 of reimbursements of costs incurred due
to delays on two government contracts. Costs associated with these claims were
incurred in previous quarters. At December 31, 2004, the Company had backlog of
$36,000,000. During the first quarter of 2005, the Company has accumulated
approximately $20,000,000 of new work, which is not reflected in the backlog
amount as of December 31, 2004. The Company is actively seeking new projects to
add to its backlog.


         During the year ended December 31, 2004, the Company earned 32%, 23%
and 16% of its revenue from its three largest customers. The Company bids on
large multi-year contracts which can account for more than 10% of its contract
revenue in any given year.


Costs of revenues
-----------------

          Costs of revenues decreased by $7,009,000 or (22.5%) to $24,139,000
for the year ended December 31, 2004 compared to $31,148,000 for the year ended
December 31, 2003. Costs of revenues as a percentage of revenues increased by
2.8% during the year ended December 31, 2004 as compared to the year ended
December 31, 2003. Costs of revenues for the fourth quarter 2004 was $6,339,000,
a reduction of $2,047,000 as compared to $8,386,000 for the fourth quarter of
2003. As previously mentioned, the change in costs of revenues during 2004 as
compared to 2003, is attributed partially to the increased cost of steel based
products, reduced revenues limiting project supervision and drafting salaries
from being job costed to multiple projects, as well as increased labor costs
incurred by the Company to retain experienced field labor personnel.


Gross profit
------------

         For the year ended December 31, 2004, the Company had a gross profit of
$2,142,000 or 8.2% as compared to $3,854,000 or 11.0% for the year ended
December 31, 2003. In the fourth quarter of 2004, the gross profit was $538,000
or 7.8% as compared to $1,826,000 or 17.9% for the same period in 2003. The


                                       15
<PAGE>
decline in gross profit for the year ended December 31, 2004 as compared to the
year ended December 31, 2003, was primarily a result of the overall decline in
revenues as well as the effect of price increases of steel based piping
materials and increased labor costs to retain experienced labor.

         The decline in the fourth quarter ended December 31, 2004, as compared
to the same period in 2003, was attributed to the overall decline in revenues
and the 2003 fourth quarter results included claim revenue of approximately
$714,000.



Selling, general and administrative expenses
--------------------------------------------

         For the year ended December 31, 2004, selling, general and
administrative ("S,G & A") expenses increased $442,000 or 14.7% to $3,452,000
from $3,010,000 for the year ended December 31, 2003. During the fourth quarter
ended December 31, 2004, S,G & A expenses were $566,000 as compared to $998,000
for the same period in 2003, a decrease of $432,000. For the yearly and
quarterly periods above, these changes were primarily a result of the job
costing of overhead costs to trade management contracts and the reduction in
home office overhead. A legal settlement during the first quarter of 2003
affected only the yearly comparisons.

          As previously discussed, during the year ended December 31, 2004, the
Company took additional steps to reduce its S,G & A expenses by eliminating
certain home office positions. In addition, the Company's Chief Executive
Officer reduced his salary by 20% with a proportionate reduction in his work
week. These cost savings did not become fully recognized until the fourth
quarter of 2004 due to severance costs incurred during the third quarter of
2004. During the second half of 2004, the Company started the trade management
contract at the Weill Cornell Ambulatory Care Building, a contract of
approximately $17.7 million. On trade management projects, certain
administration costs are job costed instead of being carried in S, G & A costs.
The above factors contributed to the decrease in S, G & A expenses during the
fourth quarter of 2004 as compared to the same period in 2003.

          During 2003, legal costs were approximately $570,000, which related to
a lawsuit with Stroock & Stroock & Lavan, LLP ("Stroock"), as well as the
litigation with NAB Construction Corp. regarding the Co-Op City project as
discussed in "Item 3. - Legal Proceedings" of this Form 10-K. During the year
ended December 31, 2003, the Company reached a settlement related to its legal
action against Stroock, whereby Stroock paid the Company approximately $850,000
and dismissed its counterclaim for payment of legal fees. This settlement
reduced S, G & A expenses during the first quarter of 2003. During the fourth
quarter of 2003, S, G & A expenses were also higher due to the Company
substantially completing all of its trade management contracts.


                                       16
<PAGE>
Other income (expenses)
-----------------------

          Other income for the year ended December 31, 2004 was $52,000 as
compared to other expenses of $59,000 for the year ended December 31, 2003. For
the year ended December 31, 2004, the Company realized gains on the sale of
marketable securities totaling $48,000 as compared to realized losses on the
sale of marketable securities of $30,000 for the same period in 2003. The
remaining other expense during 2003 was attributed to the Company incurring
interest charges related to the utilization of its line of credit. During 2004,
the Company earned interest income of $4,000.



Provision (benefit) for income tax
----------------------------------

         The income tax expense for the year ended December 31, 2004 was $22,000
or 1.7 % of the net loss compared to an income tax benefit for the year ended
December 31, 2003 of $30,000 or 3.8 % of the taxable income. During 2004, net
losses during the period resulted in a $581,000 increase in the valuation
allowance against the Company's deferred tax asset. During 2003, the Company
utilized $406,000 of the deferred tax asset valuation allowance. Without these
provisions, the income tax expense as a percentage of taxable income would have
been approximately 50%.



Net income (loss)
-----------------

         As a result of all of the items mentioned above, the Company generated
a net loss of $1,280,000 in 2004 as compared to net income of $815,000 in 2003.



YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002 (RESTATED)

Revenues
--------

         Revenues decreased $11,446,000 or (24.6)% to $35,002,000 for the year
ended December 31, 2003, as compared to $46,448,000 (restated) for the year
2002. The majority of the Company's new projects in 2003, which were originally
projected to be underway during the early part of January 2003, did not commence
until the latter half of the first quarter 2003, which contributed to the
decrease in revenue. This revenue decline was a result of market conditions, as
well as the Company focusing on smaller contracts with shorter durations, which
the Company is able to monitor more closely. Revenue for the fourth quarter of
2003 was $10,212,000, a reduction of $24,000 as compared to the fourth quarter
of 2002 totaling $10,236,000 (restated). Included in the fourth quarter of 2003
results was approximately $714,000 of reimbursements of costs incurred due to
delays on two government contracts. Costs associated with these claims were
incurred in previous quarters. At December 31, 2003, the Company had backlog of
$20,900,000.

         During the year ended December 31, 2003, the Company earned 43%, 27%
and 13% of its revenue from its three largest customers. The Company bids on
large multi-year contracts which can account for more than 10% of its contract
revenue in any given year.


                                       17
<PAGE>
Costs of Revenues
-----------------

         Costs of revenues decreased by $9,660,000 or (23.7%) to $31,148,000 for
the year ended December 31, 2003 compared to $40,808,000 (restated) for the year
ended December 31, 2002. Costs of revenues for the fourth quarter of 2003 was
$8,386,000, a reduction of $331,000 as compared to the fourth quarter of 2002
totaling $8,717,000 (restated). Both of these changes can be attributed to the
decline in revenue previously discussed.


Gross Profit
------------

         For the year ended December 31, 2003, the Company had a gross profit of
$3,854,000 or 11.0% as compared to $5,640,000 or 12.1% (restated) for the year
ended December 31, 2002. In the fourth quarter of 2003, the gross profit was
$1,826,000 or 17.9% as compared to $1,519,000 or 14.8% (restated) for the same
period in 2002. During the fourth quarter 2002, the Company received $338,000
from the WTC Business Recovery Program which $176,000 was allocated to costs of
revenues in 2002. The decline in gross profit for year ended December 31, 2003
was primarily a result of the overall decline in revenues caused by the delayed
start of projects.


Selling, general and administrative expenses
--------------------------------------------

         For the year ended December 31, 2003, selling general and
administrative expenses decreased $1,186,000 or (28.3)% to $3,010,000 from
$4,196,000 for the year ended December 31, 2002. During the fourth quarter ended
December 31, 2003 selling, general and administrative expenses were $998,000 as
compared to $743,000 for the same period in 2002, an increase of $255,000.
During the three months and year ended December 31, 2003, legal costs decreased
by approximately $35,000 and $1,048,000, respectively, as compared to the same
period in the prior year. During 2003, legal costs were approximately $570,000,
which related to the Stroock & Stroock & Lavan, LLP ("Stroock") lawsuit as well
as the Co-Op City litigation. During the year ended December 31, 2003, the
Company reached a settlement related to its legal action against Stroock,
whereby Stroock paid the Company approximately $850,000 and dismissed its
counterclaim for payment of legal fees. This settlement reduced selling, general
and administrative costs during the first quarter of 2003. During the year ended
December 31, 2002, legal costs were incurred in connection with the Helionetics
Creditors Committee lawsuit and the Co-Op City lawsuit. During the fourth
quarter of 2003, the Company substantially completed all of its trade management
contracts. On these projects, certain administration costs are job costed
instead of being carried in selling, general and administrative costs. This
resulted in selling, general and administrative cost decreasing for the year
ended December 31, 2003 in comparison to the same period in 2002 and an increase
in the fourth quarter of 2003 compared to the same period in 2002. In addition,
during the fourth quarter of 2002, the Company received $338,000 from the WTC
Business Recovery Grant Program of which $162,000 was allocated to selling,
general and administrative costs.


                                       18
<PAGE>
Other expenses
--------------

         Other expenses decreased to $59,000 in 2003 as compared to $107,000 in
2002, largely due to a reduction in realized losses on the sale of marketable
securities the Company holds invested in managed stock funds. The remaining
other expenses during 2003 and 2002 were attributed to the Company incurring
interest charges related to the utilization of its line of credit.


Provision (benefit) for income tax
----------------------------------

         The income tax benefit for the year ended December 31, 2003 was $30,000
or 3.8% of the taxable income compared to income tax expense for the year ended
December 31, 2002 of $1,714,000 or 128.2% of the taxable income. The 2002 income
tax expense contains a provision of $1,045,000 for a valuation allowance against
the Company's deferred tax assets. Without this provision, the income tax
expense as a percentage of taxable income would have been approximately 50%.
During 2003, the Company utilized $406,000 of the deferred tax asset valuation
allowance.


Cumulative effect of change in accounting principle
---------------------------------------------------

         The Financial Accounting Standards Board issued SFAS 142 "Goodwill and
Other Intangible Assets", which became effective on January 1, 2002. In
accordance with this pronouncement goodwill would no longer be amortized, but
tested each year for impairment. Since the goodwill applied to the entire
Company as a whole and the fair value of the Company as represented by it market
capitalization, was significantly below its net worth including the goodwill,
the goodwill of $3,514,000 ($1,888,000 net of taxes) was written off during the
first quarter of 2002.


Net income (loss)
-----------------

         As a result of all of the items mentioned above, the Company generated
net income of $815,000 in 2003 compared to a net loss of $2,265,000 in 2002.



LIQUIDITY AND CAPITAL RESOURCES

General
-------

        The Company's principal capital requirement is to fund its work on
construction projects. Projects are billed on a monthly basis based on the work
performed to date. These project billings, less a withholding retention, which
is received as the project nears completion, are collectible based on their
respective contract terms. The Company has historically relied primarily on


                                       19
<PAGE>
internally generated funds and bank borrowings to finance its operations. The
Company has not relied on bank borrowings to finance its operations since July
2003, and in August 2004, the Company's $2,000,000 line of credit expired. On
March 28, 2005, the Company obtained a line of credit which is subject to
certain conditions. See discussion of credit facility below. As of December 31,
2004, cash balances were $2,960,000, a $196,000 decrease from the $3,156,000
reported as of December 31, 2003.



Cash provided by (used in) operations
-------------------------------------

         Net cash used in operations was $168,000 in 2004. Net cash provided by
operating activities was $1,043,000 in 2003 and $1,678,000 in 2002. During 2004,
the effect of losses was partially offset by the difference between amounts
collected on accounts and retainage receivable compared to the amount of
accounts and retainage payable. The increase in both 2003 and 2002 was primarily
due to the increase in operating income and the Company's ability to collect its
accounts receivable in a more timely manner. The Company's backlog at December
31, 2004 was approximately $36,000,000 as compared to $20,900,000 at December
31, 2003. The Company is actively seeking new contracts.

Cash provided by (used in) investing activities
-----------------------------------------------

         Net cash used in investing activities was $28,000 in 2004, $16,000 in
2003 and $55,000 in 2002. The Company invests its excess cash in managed stock
funds. The Company purchased marketable securities of $685,000, $513,000,
$412,000 during 2004, 2003 and 2002, respectively. The Company received proceeds
on the sale of marketable securities of $676,000, $506,000 and $404,000 during
2004, 2003 and 2002, respectively. In addition, the Company purchased property
and equipment totaling $19,000, $9,000 and $61,000, respectively, in the years
ended 2004, 2003 and 2002.

Cash provided by (used in) financing activities
-----------------------------------------------

         During 2004, no net cash was provided by financing activities. Net cash
used in financing activities was $387,000 in 2003. In 2002, net cash provided by
financing activities was $178,000. These changes were primarily due to the
Company utilizing and repaying its line of credit.

Credit Facility
---------------

         The Company had a $2,000,000 line of credit which expired in August
2004.

         On March 28, 2005, the Company obtained a new line of credit facility
from Fleet National Bank, a Bank of America Company, which provides for
borrowings for working capital purposes up to $2,000,000. This facility expires
April 1, 2006, is secured by the Company's assets and is guaranteed by the
Company's subsidiary KSW Mechanical.


                                       20
<PAGE>
         The amount of advances is determined based on the amount of secured
margined cash and marketable securities held at the bank and certain
profitability and net worth requirements. Based on these requirements, the
Company may currently borrow up to approximately $500,000.

         Secured margined cash and marketable securities advances bear interest
at the bank's prime lending rate plus one-quarter of one percent per annum.
Advances determined by certain profitability and net worth requirements bear
interest at the bank's prime lending rate plus three- quarters of one percent
per annum.

         Payment may be accelerated by certain events of default such as
unfavorable credit factors, the occurrence of a material adverse change in the
Company's business, properties or financial condition, a default in payment on
the line, impairment of security, bankruptcy, or the Company ceasing operations
or being unable to pay its debts. The line of credit must be paid in full at the
end of the term, April 1, 2006.

         The Company currently has no significant capital expenditure
commitments.


Surety
------

         On most of its projects, the Company is required to provide a surety
bond. The Company's ability to obtain bonding, and the amount of bonding
required, is solely at the discretion of the surety and is primarily based upon
the Company's net worth, working capital, the number and size of projects under
construction and the surety's relationship with management. The Company is
contingently liable to the surety under a general indemnity agreement. The
Company agrees to indemnify the surety for any payments made on contracts of
suretyship, guaranty or indemnity as a result of the Company not having the
financial capacity to complete projects. Management believes the likelihood of
the surety having to complete projects is remote. The contingent liability is
the cost of completing all bonded projects, which is an undeterminable amount
because it is subject to bidding by third parties. Management believes that all
contingent liabilities will be satisfied by the Company's performance on the
specific bonded contracts involved.

         The Company believes its current bonding limits are sufficient given
the volume and size of the Company's contracts. The Company's surety may require
that the Company maintain certain tangible net worth levels and may require
additional guarantees if the Company should desire increased bonding limits. At
December 31, 2004, approximately $25,600,000 of the Company's backlog of
$36,000,000 required bonds.

         While the Company has a longstanding relationship with its surety, the
surety provides bonding solely at its discretion, and the arrangement with the
surety is an at-will arrangement subject to termination. If the surety is
unwilling to provide bonds in the future, the Company would seek an alternate
surety. If the Company is unable to secure a replacement surety, it would be
unable to bid on certain public projects and certain privately financed projects
which require performance bonds. This would have a material adverse effect on
the Company.



                                       21
<PAGE>
CONTRACTUAL OBLIGATIONS

         As of December 31, 2004, outstanding contractual obligations are as
follows:

<TABLE>
<CAPTION>
                                                                      PAYMENTS DUE BY PERIOD
                                                                      ----------------------

CONTRACTUAL                                          LESS THAN 1
OBLIGATIONS                         TOTAL               YEAR                 1-3 YEARS         4-5 YEARS        AFTER 5 YEARS
-----------                         -----               ----                 ---------         ---------        -------------
<S>                        <C>                  <C>                  <C>                    <C>             <C>
Long term debt                  $      -           $       -              $       -            $     -            $      -

Capital leases                         -                   -                      -                  -                   -

Operating leases (a)                281,000            187,000                94,000                 -                   -

Purchase obligations under
construction contracts (b)             -                   -                      -                  -                   -

Other long-term obligations            -                   -                      -                  -                   -
                                ------------       ------------           -----------          -----------         -----------

Total                           $   281,000        $   187,000            $   94,000           $     -             $     -
                                ============       ============           ===========          ===========         ===========

</TABLE>

(a)  The Company is obligated to pay monthly rental payments of approximately
     $15,000. The Company has exercised its second one-year option to extend the
     lease to June 2006, and has an additional option to extend the lease for
     the period July 2006 through June 2009.

(b)  On March 28, 2005, the Company entered into an agreement, not yet reduced
     to writing, with a supplier of steel based piping materials where the
     Company has committed to purchase a minimum of $ 1,400,000 of steel based
     materials over a fifteen month period, at fixed unit prices.


OFF -BALANCE SHEET ARRANGEMENTS

No disclosures are required pursuant to Item 303 (a) (4) of Regulation S-K.

FORWARD LOOKING STATEMENTS

Certain statements contained under "Item 1. Business", this "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this Form 10-K regarding matters that are not
historical facts, constitute "forward-looking statements" (as such term is
defined in the Private Securities Litigation Reform Act of 1995). These forward
looking statements generally can be identified as statements that include
phrases such as "believe", "expect", "anticipate", "intend", "plan", "foresee",
"likely", "will" or other similar words or phrases. Such forward-looking
statements concerning management's expectations, strategic objectives, business


                                       22
<PAGE>
prospects, anticipated economic performance and financial condition, and other
similar matters involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of results to differ materially from any future results,
performance or achievements discussed or implied by such forward-looking
statements. This document describes factors that could cause actual results to
differ materially from expectation of the Company. All written and oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are qualified in their entirety by such factors. Such
risks, uncertainties, and other important factors include, among others:

o    The Company's continued ability to obtain bonding is critical to its
     ability to bid on most public work and on certain types of private
     projects. Due to losses experienced industry wide, the surety market has
     tightened. This may make it more difficult for the Company to secure surety
     bonds in connection with its construction business due to the Company's
     financial position as well as overall market conditions. There can be no
     assurance that the Company will be able to obtain bonding or, if so, at a
     reasonable cost. The surety's provision of bonding pursuant to its
     arrangement with the Company is solely at the surety's discretion, and the
     arrangement with the surety is an at-will arrangement subject to
     termination. If the Company is unable to obtain surety bonds as needed, it
     would be unable to bid on certain public projects and certain privately
     financed projects which require performance bonds. This would have a
     material adverse effect on the Company.

o    The Company has a written employment agreement with Floyd Warkol, its
     Chairman and CEO, which expires on December 31, 2005. The Company has no
     other current employment or non-competition agreements with senior
     management. The failure to retain senior management would have a material
     adverse effect on the Company's business.

o    The Company has in the past experienced erosion in gross profit margins due
     to lower than anticipated labor productivity and higher labor costs due to
     shortages of skilled labor and unforeseen jobsite conditions. There can be
     no assurance that these factors will not affect productivity in the future.

o    There have been significant increases in the cost of steel based piping
     materials, which is the primary material supplied by the Company on
     projects, and future increases may impact the Company's profit margins
     beyond the amount the Company estimates for these future price escalations.

o    An economic downturn could result in a decrease in construction spending in
     the private and public sectors which could reduce the Company's revenues.

o    The Company relies on certain customers for a significant share of its
     revenues. The loss of any of these customers could have a material adverse
     effect on the Company's business and its operating results.

o    The Company faces intense competition due to the highly competitive nature
     of the mechanical contracting market that could limit its ability to
     increase its market share and its revenues.


                                       23
<PAGE>
o    During the construction period, owners or general contractors may request
     that the Company perform certain work which is a change to or in addition
     to the original contract. Such work often requires months to obtain formal
     change orders (including dollar amounts). Change orders are often the
     subject of dispute and, sometimes litigation. Slow receipt of collections
     may also result from general contractor or owner financial difficulties.
     The failure of an owner or general contractor to issue change orders or
     make payments could delay receipt of revenue and require litigation to
     collect sums due the Company.

o    Although the Company's operations are not directly affected by inflation,
     both New York City and New York State have large debt service burdens.
     Inflationary pressures have tended to result in a reduction in capital
     spending by both state and local agencies; such capital expenditure
     reductions in turn could have a negative impact on the Company's revenues.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company does not utilize futures, options or other derivative
instruments. As of December 31, 2004, the Company has invested $709,000 in
managed stock funds selected by Merrill Lynch.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information required by this item, including the consolidated financial
statements and related notes, is incorporated herein by reference from Part IV
of this Annual Report on Form 10-K.

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

         No disclosure required.


ITEM 9A. CONTROLS AND PROCEDURES

         The Company carried out an evaluation, under the supervision and with
the participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of December 31, 2004. Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2004.

         There has been no change in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the Company's fourth fiscal quarter ended December 31,
2004, that has materially affected or is reasonably likely to materially affect
the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

         The following is being provided pursuant to Question 1 of the SEC's
Frequently Asked Questions, dated November 23, 2004, to include disclosure under
Items 1.01 and 2.03 of Form 8-K:

         The Company had a $2,000,000 line of credit which expired in August
2004.


                                       24
<PAGE>
         On March 28, 2005, the Company obtained a new line of credit facility
from Fleet National Bank, a Bank of America Company, which provides for
borrowings for working capital purposes up to $2,000,000. This facility expires
April 1, 2006, is secured by the Company's assets and is guaranteed by the
Company's subsidiary KSW Mechanical.

         The amount of advances is determined based on the amount of secured
margined cash and marketable securities held at the bank and certain
profitability and net worth requirements. Based on these requirements, the
Company may currently borrow up to approximately $500,000.

         Secured margined cash and marketable securities advances bear interest
at the bank's prime lending rate plus one-quarter of one percent per annum.
Advances determined by certain profitability and net worth requirements bear
interest at the bank's prime lending rate plus three- quarters of one percent
per annum.

         Payment may be accelerated by certain events of default such as
unfavorable credit factors, the occurrence of a material adverse change in the
Company's business, properties or financial condition, a default in payment on
the line, impairment of security, bankruptcy, or the Company ceasing operations
or being unable to pay its debts. The line of credit must be paid in full at the
end of the term, April 1, 2006.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Other than information with respect to the Company's executive
officers, which is set forth after Item 4 of Part I of this Form 10-K, and
information regarding the Company's Code of Ethics, as set forth below, the
information required to be disclosed pursuant to this Item 10 is incorporated in
its entirety herein by reference to the Company's definitive proxy statement to
be filed with the Commission pursuant to Regulation 14A within 120 days after
the end of the Company's last fiscal year.

         CODE OF ETHICS

         The Company has adopted a written Code of Ethics (the "Code of Ethics")
that applies to our principal executive officer and principal financial and
accounting officer. Copies of the Company's Code of Ethics will be provided free
of charge upon written request directed to the Company's Director of Investor
Relations, at 37-16 23rd Street, Long Island City, New York 11101.

ITEM 11. EXECUTIVE COMPENSATION

         The information required to be disclosed pursuant to this Item 11 is
incorporated in its entirety herein by reference to the Company's definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.


                                       25
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The information required to be disclosed pursuant to this Item 12 is
incorporated in its entirety herein by reference to the Company's definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required to be disclosed pursuant to this Item 13 is
incorporated in its entirety herein by reference to the Company's definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

           The information required to be disclosed pursuant to this Item 14 is
incorporated in its entirety herein by reference to the Company's definitive
proxy statement to be filed with the Commission pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.

                                    PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

         1. and 2. Financial statement and financial statement schedules.

         See Index to consolidated financial statements and financial statement
schedules on page F-1 of this form 10-K

         3.  Exhibits

   No.                          Description
   ---                          -----------

  3.1     Amended and Restated Articles of Incorporation of KSW, Inc.
          (incorporated herein by reference to Exhibit 3.1 to the Company's
          Registration Statement on Form S-8 (No. 333-21735), February 13,
          1997).

  3.2     Amended and Restated By-Laws of KSW, Inc. (incorporated herein by
          reference to Exhibit 3.2 to the Company's Registration Statement on
          Form S-8 (No. 333-217350), filed with the Commission on February 13,
          1997).


                                       26
<PAGE>
  10.1+   Employment Agreement, dated as of January 1, 1994, by and among KSW
          Mechanical Services, Inc., Floyd Warkol and KSW, Inc. (incorporated
          herein by reference to Exhibit 10.8 to the Company's Registration
          Statement on Form 10 (Commission File No. 0-27290), filed with the
          Commission on November 24, 1995).

  10.2+   Employment Agreement, dated as of January 1, 1994, by and among KSW
          Mechanical Services, Inc., Burton Reyer and KSW, Inc. (incorporated
          herein by reference to Exhibit 10.9 to the Company's Registration
          Statement on Form 10 (Commission File No. 0-27290), filed with the
          Commission on November 24, 1995).

  10.3+   Amendatory Employment Agreement, dated as of December 15, 1995, by and
          among KSW Mechanical Services, Inc., KSW, Inc. and Floyd Warkol
          (incorporated by reference to Exhibit 10.13 to the Company's Annual
          Report on Form 10-K (Commission File No. 0-27290) for the fiscal year
          ended December 31, 1995 filed with the Commission on March 27, 1996).

  10.4+   Amendatory Employment Agreement, dated as of December 15, 1995, by and
          among KSW Mechanical Services, Inc., KSW, Inc. and Burton Reyer
          (incorporated by reference to Exhibit 10.14 to the Company's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1995
          (Commission File No. 0-27290) filed with the Commission on March 27,
          1996).

  10.5+   Form of Second Amendatory Employment Agreement dated as of December
          31, 1998 by and among KSW Mechanical Services, Inc., KSW, Inc. and
          Floyd Warkol (incorporated herein by reference to Exhibit 10.5 to the
          Company's Annual Report on Form 10-K for the fiscal year ended
          December 31,1998 (Commission File No. 0-27290), filed with the
          Commission on March 30, 1999).


------------------
+ Management contracts or compensatory plans or arrangements required to be
filed as an exhibit pursuant to Item 15 (c) of the rules governing the
preparation of this report.



                                       27
<PAGE>
  10.6+   Form of Second Amendatory Employment Agreement dated as of December
          31, 1998 by and among KSW Mechanical Services, Inc., KSW, Inc. and
          Burton Reyer (incorporated herein by reference as Exhibit 10.6 to the
          Company's Annual Report on Form 10-K for the fiscal year ended
          December 31, 1998 (Commission File No. 0-27290), filed with the
          Commission on March 30, 1999)


  10.7    Form of Modification of Lease Agreement dated as of May 1, 1998 by and
          between KSW, Inc, Irvjoy Partners, L.P. and I BLDG Co., Inc.
          (incorporated herein by reference to Exhibit 2.1 to the Company's
          Annual Report on Form-10K for the fiscal year ended December 31, 1998
          (Commission File No. 0-27290), filed with the Commission on March 30,
          1999).

  10.8    Settlement and Release, dated June 11, 2002, by and between KSW, Inc.,
          Floyd Warkol, Burton Reyer, Robert Brussel and the Helionetics
          Official Committee of Unsecured Creditors (incorporated herein by
          reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
          (Commission File No. 0-27290), filed with the Commission on July 12,
          2002).

  10.9+   1995 Stock Option Plan of KSW, Inc. (incorporated herein by reference
          to Exhibit 10.3 to the Company's Registration Statement on Form 10
          (Commission File No. 0-27290), filed with the Commission on November
          24, 1995).

  10.10   WCMA Loan And Security Agreement, dated as of May 30, 2001, between
          KSW Mechanical Services, Inc. and Merrill Lynch Business Financial
          Services, Inc. (incorporated herein by reference to Exhibit 10.10 to
          the Company's Annual Report on Form 10-K for the fiscal year ended
          December 31, 2003 (Commission File No. 0-27290), filed with the
          Commission on March 30, 2004).

  10.11   WCMA Line of Credit Extension letter, dated January 27, 2004 and WCMA
          Line of Credit Extension Agreements dated November 13, 2002 and
          December 12, 2001, respectively, between KSW Mechanical Services,
          Inc., KSW, Inc., Energy Alternatives, Inc. and Merrill Lynch Business
          Financial Services, Inc. (incorporated herein by reference to Exhibit
          10.11 to the Company's Annual Report on Form 10-K for the fiscal year
          ended December 31, 2003 (Commission File No. 0-27290), filed with the
          Commission on March 30, 2004).

  10.12   Agreement of Indemnity, dated May 24, 2001, by and among KSW, Inc.,
          KSW Mechanical Services, Inc. and XL Specialty Insurance Company
          (incorporated herein by reference to Exhibit 10.12 to the Company's
          Annual Report on Form 10-K for the fiscal year ended December 31, 2003
          (Commission File No. 0-27290), filed with the Commission on March 30,
          2004)


                                       28
<PAGE>
  10.13+  Employment Agreement, dated April 1, 2003, by and between Floyd Warkol
          and the Company (incorporated herein by reference to Exhibit 10.13 to
          the Company's Annual Report on Form 10-K for the fiscal year ended
          December 31, 2003 (Commission File No. 0-27290), filed with the
          Commission on March 30, 2004)


  10.14   WCMA Line of Credit Extension Letter, dated June 30, 2004
          (incorporated herein by reference to Exhibit 10.14 to the Company's
          Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
          2004 (Commission File No. 0-27290), filed with the Commission on
          August 16, 2004).

  10.15+  Employment Agreement by and among KSW Mechanical Services, Inc., the
          Company and Floyd Warkol, dated as of April 1, 2004 (incorporated
          herein by reference to Exhibit 10.1 to the Company's Quarterly Report
          on Form 10-Q for the fiscal quarter ended September 30, 2004
          (Commission File No. 0-27290), filed with the Commission on November
          15, 2004).

  10.16+  Amendatory Employment Agreement, dated November 10, 2004, by and
          between the Company, KSW Mechanical Services, Inc. and Floyd Warkol
          (incorporated herein by reference to Exhibit 10.1 to the Company's
          Current Report on Form 8-K (Commission File No. 0-27290), filed with
          the Commission on November 16, 2004).

  10.17   Line of Credit Agreement letter, dated March 28, 2005 between KSW,
          Inc. and Fleet National Bank, a Bank of America Company together with
          forms of a Line of Credit Note, Rider to Line of Credit Note, a pledge
          security agreement and guaranty.

  10.18+  Compensation Arrangements with Certain Executive Officers.

  10.19+  Compensation of Non-Employee Directors

  11      Statement Regarding Computation of Net Earnings (Loss) Per Share.

  21.1    List of Subsidiaries

  23.1    Consent of Rosen Seymour Shapss Martin & Company, LLP.

  23.2    Consent of Marden, Harrison & Kreuter, CPAs P.C.

  31.1    Certification of Chief Executive Officer required by Rule 13a-14(a).

  31.2    Certification of Chief Financial Officer required by Rule 13a-14(a).

  32.1    Certification of Chief Executive Officer required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350.

  32.2    Certification of Chief Financial Officer required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350.


                                       29
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of Section 13 of 15(d) 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.

                                     KSW, INC.

                                     By:  /s/ Floyd Warkol
                                         ---------------------------------------
                                         Floyd Warkol
                                         President, Chief Executive Officer,
                                         Secretary and Chairman of the Board of
                                         Directors (Principal Executive Officer)
                                         March 29, 2005

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
registrant and in the capacities and on the dates indicated.

                                         /s/ Floyd Warkol
                                         ---------------------------------------
                                         Floyd Warkol
                                         President, Chief Executive Officer,
                                         Secretary and Chairman of the Board of
                                         Directors (Principal Executive Officer)
                                         March 29, 2005

                                          /s/ Burton Reyer
                                         ---------------------------------------
                                         Burton Reyer
                                         Director
                                         March 29, 2005


                                          /s/ Russell Molina
                                         ---------------------------------------
                                         Russell Molina
                                         Director
                                         March 29, 2005


                                         /s/ Stanley Kreitman
                                         ---------------------------------------
                                         Stanley Kreitman
                                         Director
                                         March 29, 2005

                                         /s/ Innis O'Rourke
                                         ---------------------------------------
                                         Innis O'Rourke
                                         Director
                                         March 29, 2005


                                       30
<PAGE>
                                         /s/ John A. Cavanagh
                                         ---------------------------------------
                                         John A. Cavanagh
                                         Director
                                         March 29, 2005



                                         /s/ Richard W. Lucas
                                         ---------------------------------------
                                          Richard W. Lucas
                                          Chief Financial Officer
                                         (Principal Financial Officer and
                                          Principal Accounting Officer)
                                          March 29, 2005





                                       31
<PAGE>
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES




                                                                          PAGE
                                                                          ----

Report of Independent Registered Public Accounting Firm                  F-2-3

Consolidated Financial Statements:

Consolidated Balance Sheets                                              F-4-5

Consolidated Statements of Operations                                     F-6

Consolidated Statements of Comprehensive Income (Loss)                    F-7

Consolidated Statements of Stockholders' Equity                           F-8

Consolidated Statements of Cash Flows                                    F-9-10

Notes to Consolidated Financial Statements                              F-11-34

Schedule II- Schedule of Valuation and Qualifying Accounts                F-35





                                       34
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors and Stockholders
KSW, Inc. and Subsidiary
37-16 23rd Street
Long Island City, New York 11101

We have audited the accompanying consolidated balance sheets of KSW, Inc. and
subsidiary as of December 31, 2004 and 2003, and the related consolidated
statements of operations, comprehensive income (loss), stockholders' equity and
cash flows for each of the two years in the period ended December 31, 2004.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of KSW,
Inc. and subsidiary as of December 31, 2004 and 2003, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2004 in conformity with U.S. generally accepted accounting
principles.

Our audits were conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying financial
statement Schedule II is presented for additional analysis and is not a required
part of the basic consolidated financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and in our opinion, are fairly stated in all
material respects in relation to the basic consolidated financial statements
taken as a whole.

Marden, Harrison & Kreuter
Certified Public Accountants, P.C.



White Plains, New York
February 11, 2005, except for Note 16, as to which the date is March 28, 2005.


                                      F-2
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors and Stockholders
KSW, Inc. and Subsidiary
37-16 23rd Street
Long Island City, New York 11101

We have audited the accompanying consolidated balance sheet of KSW, Inc. and
subsidiary as of December 31, 2002, and the related consolidated statements of
operations, comprehensive loss, stockholders' equity and cash flows for the year
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of KSW,
Inc. and subsidiary as of December 31, 2002, and the results of its operations
and its cash flows for the year ended in conformity with accounting principles
generally accepted in the United States of America.


Rosen, Seymour, Shapss, Martin & Company
Certified Public Accountants


New York, New York
February 19, 2003
except for Notes 14 and 15, which is as of March 19, 2004


                                      F-3
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                             _______________________


<TABLE>
<C>                                                             <C>               <C>

                                                                          2004             2003
                                                                          ----             ----
        A S S E T S
        -----------

Current assets:
    Cash                                                             $    2,960       $    3,156
    Marketable securities                                                   709              621
    Accounts receivable, net                                              4,211            6,303
    Retainage receivable                                                  1,988            2,159
    Costs and estimated earnings in excess of billings on
       uncompleted contracts                                                236              622
    Prepaid expenses and other receivables                                  204              420
                                                                     -----------      -----------

                  Total current assets                                   10,308           13,281






Property and equipment, net                                                  98              146
Accounts receivable                                                       2,037            1,937
Deferred income taxes and other                                           1,470            1,470
                                                                     -----------      -----------

        Total assets                                                 $   13,913       $   16,834
                                                                     ===========      ===========
</TABLE>


                                   (continued)


                                      F-4
<PAGE>
<TABLE>
<C>                                                                   <C>                 <C>

                                                                              2004                   2003
                                                                              ----                   ----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
    Accounts payable                                                      $    4,906             $    4,978
    Retainage payable                                                          1,021                  1,141
    Accrued payroll and benefits                                                 220                    477
    Accrued expenses                                                             148                    182
    Billings in excess of costs and estimated earnings on
       uncompleted contracts                                                     832                  2,007
                                                                          -----------            -----------

                  Total current liabilities                                    7,127                  8,785
                                                                          -----------            -----------

Commitments and contingencies (Note 9)

Stockholders' equity:
    Preferred stock: $.01 par value, 1,000,000 shares authorized,
         no shares issued and outstanding                                          -                      -
    Common stock:  $.01 par value, 25,000,000 shares authorized,
       5,470,311 shares issued and outstanding
                                                                                  54                     54
    Additional paid-in capital                                                 9,729                  9,729
    Accumulated deficit                                                       (3,058)                (1,778)
    Accumulated other comprehensive gain:
       Net unrealized holding gain on available for sale securities               61                     44
                                                                          -----------            -----------

                  Total stockholders' equity                                   6,786                  8,049
                                                                          -----------            -----------

                  Total liabilities and stockholders' equity              $   13,913             $   16,834
                                                                          ===========            ===========
</TABLE>


                 See notes to consolidated financial statements.



                                      F-5
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                   YEARS ENDED DECEMBER 31, 2004 2003 AND 2002
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                              _____________________

<TABLE>
<C>                                                              <C>               <C>               <C>

                                                                                                            2002
                                                                           2004             2003          (RESTATED)
                                                                           ----             ----          ----------

Revenues                                                             $    26,281      $    35,002      $    46,448

Costs of revenues                                                         24,139           31,148           40,808
                                                                     ------------     ------------      -----------
Gross profit                                                               2,142            3,854            5,640

Selling, general and administrative expenses                               3,452            3,010            4,196
                                                                     ------------     ------------      -----------
Operating income (loss)                                                   (1,310)             844            1,444
                                                                     ------------     ------------      -----------
Other income (expense):

Interest income (expense), net                                                 4              (29)             (17)

Gain (loss) on sale of marketable securities                                  48              (30)             (90)
                                                                     ------------     ------------      -----------

Total other income (expenses)                                                 52              (59)            (107)
                                                                     ------------     ------------      -----------
Income (loss) before provision (benefit) for income taxes                 (1,258)             785            1,337


Provision (benefit) for income taxes                                          22              (30)           1,714
                                                                     ------------     ------------      -----------
Income (loss) before cumulative effect of change in accounting
principle                                                                 (1,280)             815             (377)

Cumulative effect of change in accounting for goodwill, net of
income tax benefit of $1,626                                                  -                 -           (1,888)
                                                                     ------------     ------------      -----------
Net income (loss)                                                    $    (1,280)     $       815    $      (2,265)
                                                                     ============     ============      ===========

Income (loss) per common share basic and diluted before effect
of change in accounting principle                                    $      (.24)     $       .15   $         (.06)

Cumulative effect of change in accounting principle                           -                 -             (.35)
                                                                     ------------     ------------      -----------
Basic and diluted income (loss) per common share                     $      (.24)     $       .15   $         (.41)
                                                                     ============     ============      ===========

Weighted average common shares outstanding -

Basic                                                                  5,470,311        5,470,311        5,470,311

Diluted                                                                5,470,311        5,470,311        5,470,311

</TABLE>


                 See notes to consolidated financial statements.



                                      F-6
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (IN THOUSANDS)
                             _______________________


<TABLE>
<C>                                                               <C>             <C>              <C>

                                                                          2004             2003             2002
                                                                          ----             ----             ----

Net income (loss)                                                   $    (1,280)    $      815       $    (2,265)
                                                                    ------------    -----------      ------------
Other comprehensive income (loss) before tax

   Net unrealized holding gains (losses) arising during the                  79            141              (176)
     year

   Less: reclassification adjustment for (gains) losses
     included in net income (loss)                                          (48)            30                90
                                                                    ------------    -----------      ------------

   Other comprehensive income (loss) before tax                              31            171               (86)

Income (tax) benefit related to items of other comprehensive
     income (loss)                                                          (14)           (79)               41
                                                                    ------------    -----------      ------------

  Other comprehensive income (loss), net of tax                              17             92               (45)
                                                                    ------------    -----------      ------------

Total comprehensive income (loss)                                   $    (1,263)    $      907       $    (2,310)
                                                                    ============    ===========      ============

</TABLE>

                 See notes to consolidated financial statements.



                                      F-7
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                             ______________________

<TABLE>
<CAPTION>

                                                                         ADDITIONAL        RETAINED          OTHER
                                                 COMMON STOCK              PAID-IN         EARNINGS      COMPREHENSIVE
                                         SHARES              AMOUNT        CAPITAL        (DEFICIT)      INCOME (LOSS)       TOTAL
                                         ------              ------        -------        ---------      -------------       -----

<S>                                <C>              <C>              <C>              <C>              <C>              <C>
Balances, December 31, 2001            5,470,311        $      54      $    9,729       $    (328)        $      (3)      $   9,452

Net loss                                       -                -               -          (2,265)                -          (2,265)

Net unrealized loss on
 available for sale securities                -                -               -               -               (45)            (45)
                                       ----------        ----------    ----------       ----------        ----------      ----------


Balances, December 31, 2002            5,470,311               54           9,729          (2,593)              (48)          7,142

Net income                                     -                -               -             815                 -             815

Net unrealized gains on available
  for sale securities                          -                -               -               -                92              92
                                       ----------        ----------    ----------       ----------        ----------      ----------

Balances, December 31, 2003            5,470,311               54           9,729          (1,778)               44           8,049

Net loss                                       -                -               -          (1,280)                -          (1,280)

Net unrealized gains on available
 for sale securities                           -                -               -               -                17              17
                                       ----------        ----------    ----------       ----------        ----------      ----------

Balances, December 31, 2004            5,470,311         $     54      $    9,729       $  (3,058)        $      61       $   6,786
                                       ==========        ==========    ==========       ==========        ==========      ==========

</TABLE>


                 See notes to consolidated financial statements.



                                      F-8
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (IN THOUSANDS)
                            ________________________


<TABLE>
<C>                                                           <C>                 <C>                <C>

                                                                     2004               2003               2002
                                                                     ----               ----               ----
Reconciliation of net income (loss) to net cash provided
    by (used in) operating activities:


      Net income (loss)                                          $ (1,280)          $     815           $  (2,265)

    Adjustments to reconcile net income (loss) to
     net cash provided by (used in) operating
     activities:

         Depreciation and amortization                                 67                  95                 131
         Deferred income taxes                                        (14)                (79)              1,667
         Write off of goodwill, net                                     -                   -               1,888
         Realized (gains) loss on sale of
           marketable securities                                      (48)                 30                  90
         Loss on sale of fixed assets                                   -                   -                  17

    Changes in assets (increase) decrease:
             Accounts receivable                                    1,992                 471               8,928
             Retainage receivable                                     171                 587                (197)
             Costs and estimated earnings in excess of
                billings on uncompleted contracts                     386                 (53)               (543)
             Prepaid expenses and other receivables                   216                  26                 279
             Other                                                      -                   8                   -

    Changes in liabilities increase (decrease):
             Accounts payable                                         (72)             (2,097)             (4,300)
             Retainage payable                                       (120)               (176)               (457)
             Accrued payroll and benefits                            (257)                230                (500)
             Accrued expenses                                         (34)                 11                (203)
             Billings in excess of costs and estimated
                earnings on uncompleted contracts                  (1,175)              1,175              (2,857)
                                                                   -------            -------              -------

                     Net cash provided by (used in)
                     operating activities                            (168)              1,043               1,678
                                                                   -------            -------              -------
</TABLE>

                                   (continued)


                                      F-9
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONCLUDED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (IN THOUSANDS)
                                ________________

<TABLE>
<C>                                                  <C>                    <C>                  <C>


                                                           2004                   2003                 2002
                                                           ----                   ----                 ----

Cash flows from investing activities:
    Proceeds received on sale of marketable
       securities                                      $    676              $    506              $    404
    Purchase of marketable securities                      (685)                 (513)                 (412)
    Proceeds from sale of property                            -                     -                    14
    Purchase of property and equipment                      (19)                   (9)                  (61)
                                                       ---------             ---------             ---------

      Net cash used in investing activities                 (28)                  (16)                  (55)
                                                       ---------             ---------             ---------


Cash flows from financing activities:
   Long-term liabilities                                      -                     -                   (19)
   Repayment of loan payable                                  -                  (387)                    -
   Increase in loan payable                                   -                     -                   197
                                                       ---------             ---------             ---------

      Net cash provided by (used in) financing
      activities                                              -                  (387)                  178
                                                       ---------             ---------             ---------

      Net increase (decrease) in cash and cash
      equivalents                                          (196)                  640                 1,801

Cash and cash equivalents, beginning of year              3,156                 2,516                   715
                                                       ---------             ---------             ---------


Cash, end of year                                      $  2,960              $  3,156              $  2,516
                                                       =========             =========             =========

Supplemental disclosure of cash flow information:
Cash paid during the year for:

        Interest                                       $     15              $     38              $     31

        Income taxes                                   $     36              $     49              $     47

</TABLE>


                 See notes to consolidated financial statements.


                                      F-10
<PAGE>
                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                              _____________________

     (1)  PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

          The consolidated financial statements for the years ended December 31,
          2004, 2003 and 2002 include the accounts of KSW, Inc. and its
          wholly-owned subsidiary, KSW Mechanical Services, Inc., collectively
          "the Company." All material intercompany accounts and transactions
          have been eliminated in consolidation.

          The Company furnishes and installs heating, ventilating and air
          conditioning systems and processes piping systems for institutional,
          industrial, commercial, high-rise residential and public works
          projects, primarily in the State of New York. The Company also serves
          as a mechanical trade manager, performing project management services
          relating to the mechanical trades, and as a constructability
          consultant. The Company considers itself to be one operating segment.

     (2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          (A)  CASH AND CASH EQUIVALENTS

               The Company considers all highly liquid instruments with original
               maturities of three months or less to be cash equivalents. At
               December 31, 2004 and 2003, there were no cash equivalents.

          (B)  REVENUE AND COST RECOGNITION

               Revenue is primarily recognized on the "percentage of completion"
               method for long-term construction contracts not yet completed,
               measured by the percentage of total costs incurred to date to
               estimated total costs at completion for each contract. This
               method is utilized because management considers the cost-to-cost
               method the best method available to measure progress on these
               contracts. Revenues and estimated total costs at completion are
               adjusted monthly as additional information becomes available and
               based upon the Company's internal tracking systems. Because of
               the inherent uncertainties in estimating revenue and costs, it is
               reasonably possible that the estimates used will change within
               the near term.

               Contract costs include all direct material and labor costs and
               those other indirect costs related to contract performance
               including, but not limited to, indirect labor, subcontract costs
               and supplies. General and administrative costs are charged to
               expense as incurred.


                                      F-11
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D

          (B)  REVENUE AND COST RECOGNITION - CONT'D

               The Company has contracts that may extend over more than one
               year, therefore, revisions in cost and profit estimates during
               the course of the work are reflected in the accounting period in
               which the facts, which require the revisions, become known.

               Provisions for estimated losses on uncompleted contracts are made
               in the period in which such losses are determined.

               The Company does not record any income from claims until the
               claims have been received or awarded.

               Revenues recognized in excess of amounts billed are recorded as a
               current asset under the caption "Costs and estimated earnings in
               excess of billings on uncompleted contracts." Billings in excess
               of revenues recognized are recorded as a current liability under
               the caption "Billings in excess of costs and estimated earnings
               on uncompleted contracts."

               In accordance with construction industry practice, the Company
               reports in current assets and liabilities those amounts relating
               to construction contracts realizable and payable over a period in
               excess of one year.

               Fees for the management of certain contracts are recognized when
               services are provided.

          (C)  MARKETABLE SECURITIES

               Marketable securities, consisting of managed security accounts,
               are classified as "available-for-sale" securities and are stated
               at fair market value. Realized gains and losses, determined using
               the specific identification method, are included in earnings.
               Unrealized holding gains and losses are reported as comprehensive
               income (loss) in a separate component of stockholders' equity.


                                      F-12
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D

     (D)  CONTRACTS RECEIVABLE

          Accounts and retainage receivable from furnishing and installing
          heating, ventilating and air conditioning systems and process piping
          systems are based on contracted prices. The Company establishes an
          allowance for uncollectible trade accounts and retainage receivable
          based upon historical collection experience and management's periodic
          evaluation of the collectibility of outstanding accounts and retainage
          receivable on an account-by-account basis. Accounts receivable and
          contract retentions are due based on contract terms. Amounts are
          deemed delinquent when they are not received within their contract
          terms. Delinquent receivables are written-off based on individual
          credit evaluation and specific circumstances of the customer.

     (E)  CREDIT RISK

          Financial instruments, which potentially expose the Company to
          concentrations of credit risk, consist primarily of cash and trade
          accounts and retainage receivables.

          The Company maintains its cash accounts at balances, which exceed
          Federally insured limits for such accounts. The Company limits its
          credit risk by selecting financial institutions considered to be
          highly creditworthy. At December 31, 2004, amounts in excess of
          federally insured limits totaled approximately $ 3,479.

          Trade accounts and retainage receivables are due from government
          agencies, municipalities and private owners located in the New York
          metropolitan area. The Company does not require collateral in most
          cases, but may file claims or statutory liens against the construction
          projects if a default in payment occurs. Trade accounts and retainage
          receivables from the Company's three largest customers totaled
          approximately $ 4,022 and $6,285 at December 31, 2004 and 2003,
          respectively.

     (F)  PROPERTY AND EQUIPMENT

          Property and equipment is stated at cost. Depreciation is computed
          over the estimated useful lives, generally five years, of the assets
          using the straight-line method. Leasehold improvements are amortized
          over the lesser of the estimated useful lives of the assets to which
          they apply or the related lease term. Repairs and maintenance are
          charged to operations in the period incurred.


                                      F-13
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D

     (G)  GOODWILL:

          Prior to January 1, 2002, the Company amortized goodwill, which
          represents the excess of costs over the fair value of net assets
          acquired, over a 30-year period.

          During 2001, the Financial Accounting Standards Board issued SFAS 142,
          Goodwill and Other Intangible Assets. Under SFAS 142, the amortization
          of goodwill ceased as of January 1, 2002 and a test for impairment was
          established whereby the fair value of goodwill was compared to its
          carrying value. If the fair value of goodwill is determined to be less
          than its carrying value, the carrying amount of goodwill is reduced to
          its fair value as an impairment charge in the period. If the fair
          value of goodwill is greater than its carrying value, no adjustment to
          goodwill is made.

          Since the Company's goodwill was attributed to the entire Company (a
          single reporting unit) and the fair value of the Company as reflected
          in the market value of its stock was significantly below its net worth
          including goodwill, the balance of goodwill was written-off during the
          first quarter of 2002. The decision to write-off the balance of
          goodwill was based upon the fact that the net worth as well as the
          market value of the Company has declined in recent years due to, among
          other things, legal and settlement costs of over $1,800 associated
          with the Helionetics Creditors committee action as well as the
          Stroock, Stroock & Lavan, LLP action. In addition, the Company
          incurred unanticipated costs on the Co-op City project totaling
          $3,663, which the Company has a legal action to recover, (see Note 9
          (E)). The Company also experienced erosion of gross profits on several
          projects during the later half of 2000 and 2001 due to lower than
          anticipated productivity and higher labor costs. The Company believes
          it has corrected this productivity issue as well as revising its
          bidding methods.



                                      F-14
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D


     (G)  GOODWILL - CONT'D

          The following is a pro forma reconciliation of reported net income
          adjusted for adoption of SFAS-142 for the year ended December 31,
          2002:


                  Reported net loss                                  $  (2,265)
                  Goodwill amortization net of taxes                     1,888
                                                                     ----------


                  Pro forma net loss                                 $    (377)
                                                                     ==========


                  Basic and Diluted loss per share:
                  Reported net loss per share                        $    (.41)
                  Less goodwill amortization per share, net of
                      taxes                                               (.35)
                                                                     ----------


                  Pro forma loss per share                           $    (.06)
                                                                     ==========


     (H)  INCOME TAXES

          The Company uses the asset and liability method of accounting for
          income taxes recommended in SFAS No. 109, "Accounting for Income
          Taxes." Deferred taxes are recognized for temporary differences
          between the bases of assets and liabilities for financial statement
          and income tax purposes. The temporary differences relate primarily to
          different accounting methods used for depreciation and amortization of
          property and equipment, goodwill, allowance for doubtful accounts and
          net operating loss carryforwards. A valuation allowance is recorded
          for deferred tax assets when it


                                      F-15
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                           ___________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D


     (H)  INCOME TAXES - CONT'D

          is more likely than not that some or all of the deferred tax assets
          will not be realized through future operations.

     (I)  EARNINGS PER SHARE

          Basic earnings per share includes no dilution and is computed by
          dividing income available to common shareholders by the weighted
          average number of common shares outstanding for the period. Diluted
          earnings per share reflect, in periods in which they have a dilutive
          effect, the effect of common shares issuable upon the exercise of
          stock options. The difference between reported basic and diluted
          weighted average common shares results from the assumption that all
          dilutive stock options outstanding were exercised. For the years
          presented, the effect of common stock equivalents has been excluded
          from the diluted calculation since the effect would be antidulitive.

     (J)  USE OF ESTIMATES

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

     (K)  STOCK OPTIONS

          The Company uses the intrinsic value method of accounting for employee
          stock options in accordance with APB No. 25 and as permitted by
          Statement of Financial Accounting Standards No. 123, "Accounting for
          Stock-Based Compensation." Accordingly, compensation cost for stock
          options is measured as the excess, if any, of the quoted market price
          of the Company's stock at the date of the grant over the amount the
          employee must pay to acquire the stock. The compensation cost is
          recognized over the vesting period of the options.


                                      F-16
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D

     (K)  STOCK OPTIONS - CONT'D

          In December 2002, the FASB issued Statement of Financial Accounting
          Standards No. 148, (SFAS 148) Accounting for Stock-Based Compensation
          - Transition and Disclosure. SFAS 148 amends SFAS 123, to provide
          alternative methods of transition for an entity that voluntarily
          changes to the fair value based method of accounting for stock based
          employee compensation. The adoption of this pronouncement did not have
          a material effect on the financial statements as the Company continues
          to apply the intrinsic value method in accordance with APB No. 25.

     (L)  FINANCIAL INSTRUMENTS

          The carrying value of marketable securities approximates their fair
          value as determined by market quotes. The carrying value of
          receivables and payables and other amounts arising out of normal
          contract activities, including retentions, which may be settled beyond
          one year, approximates fair value.

     (M)  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

          In December, 2004, FASB issued Statement No. 123-R, "Share Based
          Payment" ("SFAS 123-R") which is a revision of SFAS 123. SFAS 123-R
          superseded APB Opinion N. 25, "Accounting for Stock Issued to
          Employees" and its related guidance. Generally the approach to
          accounting for share based payments in SFAS 123-R is similar to the
          approach described in SFAS 123, however SFAS 123-R requires all share
          based payments to employees, including grants of employee stock
          options, to be recognized in the financial statements based on their
          fair values (pro forma disclosure is no longer an alternative to
          financial statement recognition). SFAS 123-R is effective for
          financial statements at both interim and annual periods beginning
          after June 15, 2005. The adoption of SFAS 123-R is not expected to
          have a material effect on our consolidated results of operations or
          financial position.


                                      F-17
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D

     (M)  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - CONT'D

          SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB
          Opinion No. 29 ("SFAS 153"). SFAS 153 amends APB Opinion No. 29,
          Accounting for Nonmonetary Transactions, to eliminate the exception
          from having to apply the fair value accounting provisions of APB 29
          for non-monetary exchanges of similar productive assets and replaces
          it with a general exception for exchanges of non-monetary assets that
          do not have commercial substance. SFAS 153 is effective for the first
          reporting period beginning after June 15, 2005. We believe that the
          adoption of SFAS 153 will not have a material impact on our
          consolidated results of operations or financial position.

          FASB Interpretation No. 46 - Consolidation of Variable Interest
          Entities ("FIN 46"). FIN 46 addresses the consolidation by business
          enterprises of variable interest entities, as defined in FIN 46, and
          is based on the concept that companies that control another entity
          through interests, other than voting interests, should consolidate the
          controlled entity. The consolidation requirements apply immediately to
          FIN 46 interests held in variable interest entities created after
          January 31, 2003, and to interests held in variable interest entities
          that existed prior to February 1, 2003 and remain in existence as of
          July 1, 2003. The FASB subsequently issued FIN 46R in December 2003
          which modified certain provisions of FIN 46. FIN 46R applied to the
          first reporting period after March 15, 2004. The application of FIN 46
          as originally issued and as revised by the issuance of FIN 46R did not
          have an impact on, or result in, additional disclosure in our
          consolidated results of operations or financial position.


     (N)  RECLASSIFICATIONS

          Certain amounts in the 2002 consolidated financial statements have
          been reclassified for comparative purposes to conform with the current
          presentation. These reclassifications did not affect net income or
          working capital that was previously reported.



                                      F-18
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                          ____________________________

(3)  MARKETABLE SECURITIES

     The cost and fair value of the marketable securities, classified as
     available-for-sale securities at December 31, 2004 and 2003, was as
     follows:

<TABLE>
<C>                                     <C>          <C>                  <C>                   <C>
                                                            Gross                Gross
                                                          Unrealized            Unrealized           Fair
                                             Cost        Holding Gains        Holding Losses         Value
                                             ----        -------------        --------------         -----

         December 31, 2004:
         Managed stock funds                $ 597           $ 120                $  (8)              $ 709
                                            ======          ======               ======              ======

         December 31, 2003:
         Managed stock funds                $ 538           $  97                $ (14)              $ 621
                                            ======          ======               ======              ======
</TABLE>

     At December 31, 2004 and 2003, gross unrealized holding losses on available
     for sale securities were $8 and $14, respectively. At December 31, 2004 and
     2003, gross unrealized holding gains on available for sale securities were
     $120 and $97, respectively. The change in net unrealized holding gains is
     $17 and $92 for the years ended December 31, 2004 and 2003, respectively.
     During the years ended December 31, 2004 and 2003, available for sale
     securities were sold for total proceeds of approximately $676 and $506,
     respectively. The gross realized gains (losses) on these sales totaled
     approximately $48 and $(30) for the years ended December 31, 2004 and 2003,
     respectively.


                                      F-19
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________


     (4)  CONTRACTS RECEIVABLE

<TABLE>
<C>                                                                             <C>              <C>

                                                                                       2004                2003
                                                                                       ----                ----
          Accounts receivable:
              Billed
                     Contracts in progress                                         $   2,564          $    4,752

                     Completed contracts                                               1,554               1,673

               Unbilled                                                                  293                  78
                                                                                   ----------         -----------
                                                                                       4,411               6,503

          Less:  Allowances for doubtful collections                                     200                 200
                                                                                   ----------         -----------
                                                                                   $   4,211          $    6,303
                                                                                   ==========         ===========
          Retainage receivable                                                     $   1,988          $    2,159
                                                                                   ==========         ===========
          Accounts receivable - long term                                          $   2,037          $    1,937
                                                                                   ==========         ===========

          At December 31, 2004 and 2003, retained contract receivables are
expected to be realized within one year.


   (5)   CONSTRUCTION CONTRACTS

            Information with respect to contracts in progress at December 31,
2004 and 2003 is as follows:


                                                                                      2004                 2003
                                                                                      ----                 ----

          Costs on uncompleted contracts                                           $  11,080          $   33,573

          Estimated earnings thereon                                                   1,539               5,272
                                                                                   ----------         -----------
                                                                                      12,619              38,845

          Less billings applicable thereto                                            13,215              40,230
                                                                                   ----------         -----------
                                                                                   $    (596)         $   (1,385)
                                                                                   ==========         ===========
</TABLE>

                                      F-20
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                          ____________________________


   (5)   CONSTRUCTION CONTRACTS - CONT'D

         Included in the accompanying consolidated balance sheets under the
following captions:

<TABLE>
<C>                                                                            <C>                <C>

                                                                                      2004                  2003
                                                                                      ----                  ----
          Costs and estimated earnings in excess of billings on
          uncompleted contracts                                                  $     236             $     622

          Billings in excess of costs and estimated earnings on
          uncompleted contracts                                                       (832)               (2,007)
                                                                                 ----------            ----------

                                                                                 $    (596)            $ (1,385)
                                                                                 ==========            ==========


   (6)   PROPERTY AND EQUIPMENT

         Property and equipment at December 31, 2004 and 2003 consists of the
following:

                                                                                      2004                   2003
                                                                                      ----                   ----
          Machinery and equipment                                                $     456              $     437
          Furniture and fixtures                                                       718                    718
          Leasehold improvements                                                       831                    831
                                                                                 ----------             ----------
                                                                                     2,005                  1,986

          Less accumulated depreciation and amortization                             1,907                  1,840
                                                                                 ----------             ----------
                                                                                 $      98              $     146
                                                                                 ==========             ==========

</TABLE>

         Depreciation and amortization expense relating to property and
         equipment was approximately $67, $95 and $131 for the years ended
         December 31, 2004, 2003 and 2002, respectively.



                                      F-21
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                          ____________________________


   (7)   INCOME TAXES

         For the years ended December 31, 2004, 2003 and 2002, components of
provision (benefit) to income taxes are as follows:

<TABLE>
<C>                                             <C>               <C>               <C>

                                                       2004                2003              2002
                                                       ----                ----              ----
          Current
               Federal                             $      -           $      -           $      -
               State and local                           36                 49                 47
                                                   ---------          ---------          ---------
                                                         36                 49                 47
                                                   ---------          ---------          ---------
          Deferred
               Federal                                   (8)               (48)               997
               State and local                           (6)               (31)               670
                                                   ---------          ---------          ---------
                                                        (14)               (79)             1,667
                                                   ---------          ---------          ---------
                            Total                  $     22           $    (30)          $  1,714
                                                   =========          =========          =========
</TABLE>

         At December 31, 2002, the Company provided a valuation allowance
         against its net deferred tax assets of $1,045 based upon an uncertainty
         regarding the ultimate realization of these deferred tax assets in
         their entirety. The majority of the 2002 increase in the deferred tax
         asset before the valuation allowance, is attributable to the write-off
         of goodwill as a result of implementation of SFAS-142. During the year
         ended December 31, 2003, the deferred tax valuation allowance decreased
         $406. During the year ended December 31, 2004, the deferred tax
         valuation allowance increased $581.

         A reconciliation of the provision (benefit) for income taxes with
         amounts determined by applying the statutory U.S. Federal income tax
         rate to income before taxes is as follows:

<TABLE>
<C>                                                                     <C>         <C>          <C>

                                                                               2004        2003         2002
                                                                               ----        ----         ----
          Computed tax at the federal statutory rate of 34%                $  (428)   $    267      $    455
          State taxes, net of Federal benefit                                 (152)         95           162
          Valuation allowance                                                  581        (406)        1,045
          Other items, net                                                      21          14            52
                                                                           --------   ---------     ---------
          Provision (benefit) for income taxes                             $    22    $    (30)     $  1,714
                                                                           ========   =========     =========
</TABLE>


                                      F-22
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________


   (7)   INCOME TAXES - CONT'D

         The details of deferred tax assets and liabilities at December 31, 2003
and 2004 are as follows:

<TABLE>
<C>                                                             <C>                  <C>
                                                                            2004               2003
                                                                            ----               ----
          Deferred income tax assets:

                Net operating loss carry forwards                      $   1,497           $     752
                Amortization of goodwill                                     772                 924
                Property and equipment                                       244                 255
                Allowance for doubtful accounts                               92                  92
                 Other tax carryforwards                                     136                 123
                                                                       ----------          ----------
          Total deferred income tax assets                                 2,741               2,146
                                                                       ----------          ----------

          Deferred income tax liabilities:
                Unrealized gains on marketable securities                     52                  38
                                                                       ----------          ----------
                                                                              52                  38
                                                                       ----------          ----------
                Net deferred income tax assets before
                 valuation allowance                                       2,689               2,108
                Valuation allowance                                       (1,220)               (639)
                                                                       ----------          ----------
                Deferred income tax assets, net                        $   1,469           $   1,469
                                                                       ==========          ==========
</TABLE>

         At December 31, 2004, the Company has net operating loss carry forwards
         remaining of approximately $3,700, expiring through December 31, 2025.
         At December 31, 2004 and 2003, the $1,469 balance of the deferred tax
         asset is included in long-term assets in the accompanying balance
         sheets.

   (8)   ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

         At December 31, 2004 and 2003, accumulated other comprehensive income
         (loss), which consists of net unrealized holding gains (losses) on
         available for sale securities, is as follows:

                                                    2004             2003
                                                    ----             ----
                  Beginning balance                 $ 44            $(48)
                  Current period change               17              92
                                                    -----           -----
                  Ending balance                    $ 61            $ 44
                                                    =====           =====


                                      F-23
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________



    (9)  COMMITMENTS AND CONTINGENCIES

         (A)      PERFORMANCE BONDS

                  The Company is contingently liable to a surety under a general
                  indemnity agreement. The Company agrees to indemnify the
                  surety for any payments made on contracts of suretyship,
                  guaranty or indemnity as a result of the Company not having
                  the financial capacity to complete projects. Management
                  believes the likelihood of the surety having to complete
                  projects is remote. The contingent liability is the cost of
                  completing all bonded projects, subject to bidding by third
                  parties, which is an undeterminable amount. Management
                  believes that all contingent liabilities will be satisfied by
                  performance on the specific bonded contracts involved.

         (B)      OPERATING LEASE

                  The Company is obligated under a non-cancelable operating
                  lease, for office space with minimum future rental payments at
                  December 31, 2004 as follows:

                                 YEAR ENDING
                                 DECEMBER 31,
                                 ------------

                                     2005            $   187
                                     2006                 94
                                                     -------
                                                     $   281
                                                     =======

                  Under the terms of the lease agreement, the Company is
                  obligated to pay monthly rental amounts of approximately $15.
                  The Company has exercised the first five-year option which
                  extended the lease term through June 2004. The Company has
                  exercised two options, each for a period of one year for the
                  periods July 2004 through June 2005 and July 2005 through June
                  2006. There is also a three-year option that can be exercised
                  during 2006, which would extend the lease through 2009.

                  Rent expense for the years ended December 31, 2004, 2003 and
                  2002 amounted to approximately $185, $180 and $176,
                  respectively.


                                      F-24
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________


    (9)  COMMITMENTS AND CONTINGENCIES - CONT'D

          (C)     OPERATING LEASE- RELATED PARTY


                  The Company had an operating lease with a related entity
                  controlled by its chief executive officer for rental of
                  office, shop and warehouse space, which expired on December
                  31, 2002. The Company is renting this space on a
                  month-to-month basis at approximately $8.5 per month.

                  Rent expense for the years ended December 31, 2004, 2003 and
                  2002, amounted to $103 to a related entity controlled by the
                  chief executive officer in each year.

         (D)      ENVIRONMENTAL REGULATION

                  The Company must comply with certain Federal, state and local
                  regulations involving contract compliance as well as the
                  disposal of certain toxins. In management's opinion, there are
                  no environmental contingencies or violations of environmental
                  laws or regulations, which would have a material adverse
                  impact on the results of operations or on the Company's
                  financial condition.

         (E)      LEGAL

               a.   Co-op City. In February 1999, the Company sued the general
                    contractor on the Co-Op City Project and its bonding company
                    in New York State Supreme Court, Queens County to recover
                    its contract balance and unpaid proposals. The Company's
                    claim includes approximately $1,937, consisting of accounts
                    receivable applicable to the base contract of approximately
                    $437, and unpaid final retainage billings of approximately
                    $1,500. The Company also seeks to be compensated for
                    unanticipated costs incurred through 1998, in the sum, as
                    presented at trial of approximately $2,304. These costs have
                    not been reflected as a claim receivable in the Company's
                    financial statements because it is the policy of the Company
                    not to record income from claims until the claims have been
                    received or awarded. The defendant has asserted
                    counterclaims, as presented at trial, totaling approximately
                    $1,441, and a claim for $3,000 based on the argument that
                    the Company's Mechanic's Lien was willfully overstated.


                                      F-25
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________


    (9)  COMMITMENTS AND CONTINGENCIES - CONT'D

         (E)      LEGAL - CONT'D

               a.   Co-op City - cont'd. The Company believes all of the
                    Defendant's claims lack merit. While the Company and its
                    counsel believe its lawsuit has merit, there is no guaranty
                    of a favorable outcome. This case was tried for 40 days and
                    adjourned by the court to April 2005 for further trial
                    proceedings. The financial statements, at December 31, 2004
                    and 2003, contain accounts receivable of approximately
                    $1,937 related to this project.


               b.   Other Proposals and Claims. During the ordinary and routine
                    course of its work on construction projects, the Company may
                    incur expenses for work outside the scope of its contractual
                    obligations, for which the owner or general contractor
                    agrees that the Company will be entitled to additional
                    compensation, but where there is not yet an agreement on
                    price. The Company's financial statements include the
                    amounts the Company believes it will ultimately receive on
                    these authorized proposals. Also during the course of its
                    work on construction projects, the Company may incur
                    expenses for work outside the scope of its contractual
                    obligations, for which no acknowledgment of liability exists
                    from the owner or general contractor for such additional
                    work. These claims may include change proposals for extra
                    work or requests for an equitable adjustment to the
                    Company's contract price due to unforeseen disruptions to
                    its work. In accordance with accounting principles generally
                    accepted in the United States of America for the
                    construction industry, until written acknowledgment of the
                    validity of the claims are received, claim recoveries are
                    not recognized in the accompanying financial statements. No
                    accruals have been made in the accompanying consolidated
                    financial statements related to these proposals for which no
                    acknowledgment of liability exists. While the Company has
                    been generally successful in obtaining a favorable
                    resolution of such claims, there is no assurance that the
                    Company will be successful in the future.


                                      F-26
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________


   (9)   COMMITMENTS AND CONTINGENCIES - CONT'D


          (F)     EMPLOYMENT AGREEMENT

                  The Company's Chief Executive Officer has a written employment
                  agreement, which expires on December 31, 2005. This agreement
                  provides a base annual compensation of $450,000, based on a
                  five-day work week, medical insurance, disability insurance
                  with payments equal to 60% of base compensation, a $1 million
                  policy of life insurance payable as directed by him and a car
                  with a chauffeur. His estate is entitled to two months pay in
                  the event of his death. Commencing on October 1, 2004, as
                  provided by the employment agreement, as amended, he has
                  worked four days a week and has received as compensation 80%
                  of his base annual salary.

   (10)  CONCENTRATION RISKS

         (A)      LABOR CONCENTRATIONS

                  The Company's direct labor is supplied primarily by one union
                  through a collective bargaining agreement, which expires in
                  June 2005. Although the Company's past experience was
                  favorable with respect to resolving conflicting demands with
                  unions, it is always possible that a protracted conflict may
                  occur which will impact the renewal of the collective
                  bargaining agreements.

         (B)      CONTRACT REVENUE/SIGNIFICANT CUSTOMERS

                  Revenues from the Company's three largest customers were
                  approximately 32%, 23% and 16% of its contract revenue in
                  2004, 43%, 27% and 13% of its contract revenue in 2003, 41%,
                  15% and 11% of its contract revenue in 2002 (restated),
                  respectively.

   (11)  RETIREMENT PLANS

         (A)      PROFIT-SHARING/401(K) PLAN

                  The Company sponsors a profit-sharing/401(k) plan covering
                  employees not covered under collective bargaining agreements
                  who meet the age and length of service requirements of the
                  plan. The Company may make discretionary contributions to the
                  plan. The total of employee contributions may not exceed
                  Federal government limits.


                                      F-27
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

   (11)  RETIREMENT PLANS - CONT'D

         (A)      PROFIT-SHARING/401(K) PLAN - CONT'D

                  The Company expensed approximately $60, $61 and $62 as a 25%
                  matching contribution for the years ended December 31, 2004,
                  2003 and 2002, respectively.

          (B)     MULTIEMPLOYER PENSION PLANS

                  Employees of the Company who are members of a collective
                  bargaining (union) agreement are covered by union pension
                  plans. The Company makes contributions to multiemployer
                  pension plans that cover its various union employees. These
                  plans provide benefits based on union members' earnings and
                  periods of coverage under the respective plans. The Company
                  has expensed approximately $972, $1,315 and $1,189 for the
                  years ended December 31, 2004, 2003 and 2002, respectively,
                  related to multi-employer pension plans for its union
                  employees.

    (12) STOCKHOLDERS' EQUITY

         (A)      STOCK OPTION PLAN

               The Board of Directors of the Company adopted the 1995 Stock
               Option Plan (the Plan). The Plan enabled the Company to make
               incentive-based compensation awards to its employees, officers,
               directors and consultants. A total of 750,000 shares were
               authorized for issuance under the Plan. Options to purchase
               620,000 shares of common stock at $1.50 per share were issued
               during December 1995 (of which 535,000 shares were issued to
               officers and directors of the Company and its subsidiary). The
               Plan requires that the exercise price of options be set at not
               less than the fair market value of the common stock on the date
               of grant pursuant to the requirements of APB Opinion No. 25.

               In the case of the initial options, the price of $1.50 was
               determined to be in excess of the fair market value in light of
               the contingencies facing the Company prior to completion of this
               distribution. Options awarded vest one-third on each anniversary
               of the date of grant and are fully vested three years after grant
               and expire ten years from the date of the grant. Additional
               credit towards vesting is given in the event of death (six
               months) or disability (three months). Any shares which are
               subject to an award but are not used because the terms and
               conditions of the award are not met, or any shares which are used
               by participants to pay all or part of the purchase price of any



                                      F-28
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

   (12) STOCKHOLDERS' EQUITY - CONT'D

         (A)      STOCK OPTION PLAN - CONT'D

               option may again be used for awards under the Plan. The Plan
               provides that no shares may be issued to officers or directors in
               excess of the 750,000 shares originally planned to be authorized
               unless the Company's stockholders approve an increase in the
               number of shares which may be used for that purpose. At the
               Company's annual meeting held on June 27, 1996, the stockholders
               approved an amendment to the plan to increase by 350,000 shares
               the total number of shares of common stock available for future
               options from 130,000 to 480,000 shares. Holders of shares issued
               pursuant to the Plan are entitled to registration of such shares
               annually, subject to restrictions in any underwriting agreement.
               In 1999, the Company issued a total of 55,000 stock options to
               three key employees and to a Director, Stanley Kreitman. At
               December 31, 1999, there were 641,667 granted options
               outstanding. No options were exercised under the plan in 2003,
               2002 and 2001. In 2000, 1,667 options were exercised. During
               2001, 18,333 options under the plan were canceled. There were no
               option cancellations in 2004 and 2002. During 2001 through 2004,
               no new options were granted. At December 31, 2002, there were
               621,667 exercisable options outstanding. During 2003, 45,000
               options under the plan were cancelled. At December 31, 2004 and
               2003, there were 576,667 exercisable options outstanding all of
               which have an exercise price of $1.50 per share.


Changes that occurred in options outstanding during 2004, 2003 and 2002 are
summarized below:

<TABLE>
<CAPTION>
                                                         2004                     2003                        2002
                                                         Fixed                   Fixed                        Fixed
                                            Option      Exercise     Option     Exercise     Option          Exercise
                                            Shares       Price       Shares      Price       Shares           Price
                                         --------------------------------------------------------------------------------

<S>                                      <C>          <C>          <C>        <C>         <C>            <C>
Outstanding at beginning of year             576,667    $ 1.50        621,667   $ 1.50       621,667        $ 1.50

Granted                                       -                          -                      -

Exercised                                     -                          -                      -

Expired/ Canceled                             -                      (45,000)                   -

                                         ------------             ------------           -------------
Outstanding at end of year                   576,667    $ 1.50        576,667   $ 1.50       621,667        $ 1.50
                                         ============             ============           =============

Exercisable at end of year                   576,667    $ 1.50        576,667   $ 1.50       621,667        $ 1.50

</TABLE>

                                      F-29
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                          ____________________________

(12) STOCKHOLDERS' EQUITY - CONT'D.

         (A)      STOCK OPTION PLAN - CONT'D

               The following table summarizes information about stock options
               outstanding at December 31, 2004:

                                                              Remaining
                    Exercise Price            Shares       Contractual Life
                    --------------            ------       ----------------

                         $1.50                 576,667       1.4 years


               The Company accounts for its stock options in accordance with the
               provisions of Accounting Principles Board ("APB") Opinion No.25,
               "Accounting for Stock Issued to Employees", and related
               interpretations. The Company has not recorded compensation
               expense because the exercise price of the shares is equal to the
               market price at the date of the grant. SFAS 123, "Accounting for
               Stock Based Compensation", allows entities to continue to apply
               the provisions of APB Opinion No.25; however SFAS No.148,
               "Accounting for Stock Based Compensation - Transition and
               Disclosure", requires pro forma net income disclosures as if the
               fair value based method defined in SFAS No.123 had been applied.
               The Company has elected to continue to apply the provisions of
               APB Opinion No.25 and to provide the pro forma disclosures
               specified by SFAS No. 148. Had the Company determined
               compensation expense based on the fair value at the grant date
               for its stock options (using the Black-Scholes method) under SFAS
               No.123, the Company's net income would have been adjusted to the
               pro forma amounts indicated below:

<TABLE>
<C>                                                 <C>            <C>            <C>
                                                          2004            2003         2002
                                                          ----            ----         ----

         Net income (loss) - as reported                $(1,280)        $  815      $(2,265)
         Stock option compensation, net of tax               -               -           -
                                                        --------        -------     --------
         Net income (loss) - pro forma                  $(1,280)        $  815      $(2,265)
                                                        ========        =======     ========

         Basic net income (loss) per share:

         As reported                                    $  (.24)        $  .15      $  (.41)
         Pro forma                                      $  (.24)        $  .15      $  (.41)

         Diluted net income (loss) per share:
         As reported                                    $  (.24)        $  .15      $  (.41)
         Pro forma                                      $  (.24)        $  .15      $  (.41)

</TABLE>


                                      F-30
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                           __________________________

   (12) STOCKHOLDERS' EQUITY - CONT'D.

           (A)    STOCK OPTION PLAN - CONT'D

                  The fair value of each option grant is estimated on the date
                  of grant using the Black-Scholes option-pricing model with the
                  following weighted-average assumptions used for grants in
                  1999: dividend yield of 0%; expected volatility of 54.67%;
                  risk-free interest rate of 7.00%; and expected lives of six
                  years.

            (B)   PREFERRED STOCK

                  The Company is authorized to issue 1,000,000 shares of
                  preferred stock. As of December 31, 2004, no shares of
                  preferred stock have been issued by the Company.

(13)     BACKLOG

         At December 31, 2004, the Company had a backlog of approximately
         $36,000. Backlog represents the amount of revenue the Company expects
         to realize from work to be performed on uncompleted contracts in
         progress at year-end and from contractual agreements on work which has
         not commenced.

   (14)  RESTATEMENT

         The Company's management identified and determined that reported
         revenues and costs of revenue, during the year ended December 31, 2002
         and the nine months ended September 30, 2003, were materially
         overstated as a result of an accounting error attributable to the
         failure to eliminate intra-company accounts. Management has analyzed
         and corrected the Company's internal financial reporting system. The
         following is a summary by quarter of this restatement:

<TABLE>
<C>                                                     <C>                 <C>

          QUARTERLY DATA                                    AS PREVIOUSLY          AS
          --------------                                      REPORTED           RESTATED
                                                            -----------        -----------
          Three months ended March 31, 2002 (unaudited)
          Revenue                                           $    13,138        $    12,798
          Costs of Revenues                                      11,617             11,277
                                                            -----------        -----------
          Gross Profit                                      $     1,521        $     1,521
                                                            ===========        ===========
          Gross Profit %                                          11.6%              11.9%
                                                            ===========        ===========

          Three months ended June 30, 2002 (unaudited)
          Revenue                                           $    14,756        $    14,066
          Costs of Revenues                                      13,408             12,718
                                                            -----------        -----------
          Gross Profit                                      $     1,348        $     1,348
                                                            ===========        ===========
          Gross Profit %                                           9.1%               9.6%
                                                            ===========        ===========
</TABLE>


                                      F-31
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

    (14) RESTATEMENT  - CONT'D

<TABLE>
<C>                                                                     <C>                   <C>

                                                                              AS PREVIOUSLY            AS
          QUARTERLY DATA                                                        REPORTED            RESTATED
          --------------                                                      ------------        ------------

          Three months ended September 30, 2002 (unaudited)
          Revenue                                                             $     10,600        $      9,348
          Costs of Revenues                                                          9,348               8,096
                                                                              ------------        ------------
          Gross Profit                                                        $      1,252        $      1,252
                                                                              ============        ============
          Gross Profit %                                                             11.8%               13.4%
                                                                              ============        ============

          Three months ended December 31, 2002 (unaudited)
          Revenue                                                             $     11,819        $     10,236
          Costs of Revenues                                                         10,300               8,717
                                                                              ------------        ------------
          Gross Profit                                                        $      1,519        $      1,519
                                                                              ============        ============
          Gross Profit %                                                             12.9%               14.8%
                                                                              ============        ============

          Three months ended March 31, 2003 (unaudited)
          Revenue                                                             $      8,078        $      6,141
          Costs of Revenues                                                          7,641               5,704
                                                                              ------------        ------------
          Gross Profit                                                        $        437        $        437
                                                                              ============        ============
          Gross Profit %                                                              5.4%                7.1%
                                                                              ============        ============

          Three months ended June 30, 2003 (unaudited)
          Revenue                                                             $     10,192        $      8,478
          Costs of Revenues                                                          9,610               7,896
                                                                              ------------        ------------
          Gross Profit                                                        $        582        $        582
                                                                              ============        ============
          Gross Profit %                                                              5.7%                6.9%
                                                                              ============        ============

          Three months ended September 30, 2003 (unaudited)
          Revenue                                                             $     11,000        $     10,171
          Costs of Revenues                                                          9,991               9,162
                                                                              ------------        ------------
          Gross Profit                                                        $      1,009        $      1,009
                                                                              ============        ============
          Gross Profit %                                                              9.2%                9.9%
                                                                              ============        ============
</TABLE>

                                      F-32
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ____________________________

    (15) SELECTED QUARTERLY DATA (UNAUDITED)

The following is unaudited selected quarterly data for the years ended December
31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                      Year ended December 31, 2004
                                                                      ----------------------------
                                               First             Second            Third         Fourth
                                               quarter           Quarter           quarter       quarter          Total
                                               -------           -------           -------       -------          -----
<S>                                     <C>               <C>                <C>            <C>            <C>
Revenues                                   $   6,431          $   6,407        $   6,566      $    6,877      $   26,281
Gross profit                               $     507          $     905        $     192      $      538      $    2,142
Net income (loss)                          $    (644)         $     (51)       $    (596)     $       11      $   (1,280)
Per share of common stock
 earnings (losses):
Basic                                      $    (.12)         $    (.01)       $    (.11)     $        -       $    (.24)
Diluted                                    $    (.12)         $    (.01)       $    (.11)     $        -       $    (.24)

Dividends                                  $       -          $       -        $       -      $        -       $       -
Stock prices:
High                                       $    1.01          $    1.05        $     .80      $      .75
Low                                        $     .62          $     .69        $     .62      $      .40



                                                                      Year ended December 31, 2003
                                                                      ----------------------------
                                               First             Second            Third         Fourth
                                               quarter           Quarter          Quarter        quarter          Total
                                               -------           -------          -------        -------          -----
Revenues, as reported                      $   8,078(a)       $  10,192(a)     $  11,000(a)   $   10,212      $   39,482
Revenues, restated                         $   6,141(a)       $   8,478(a)     $  10,171(a)   $   10,212      $   35,002
                                           $     437          $     582        $   1,009      $    1,826      $    3,854
Gross profit
Net income (loss)                          $     (58)         $    (145)       $     166      $      852      $      815
Per share of common stock
 earnings (losses):
                                           $    (.01)         $    (.03)       $     .03      $      .16      $      .15
Basic                                      $    (.01)         $    (.03)       $     .03      $      .16      $      .15
Diluted

Dividends                                  $       -          $       -        $       -      $        -      $        -
Stock prices:
High                                       $    1.05          $    1.00        $     .85      $      .83
Low                                        $     .70          $     .70        $     .70      $      .62

</TABLE>

(a) The Company's management identified and determined that reported revenues
    and costs of revenues, during the nine months ended September 30, 2003 were
    materially overstated as a result of an accounting error attributable to the
    failure to eliminate certain intra-company accounts. The Company restated
    these previously reported amounts.



                                      F-33
<PAGE>
                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                          ____________________________

     (16) SUBSEQUENT EVENT

             (A)  LINE OF CREDIT FACILITY

                    The Company had a $2,000 line of credit which expired in
                    August 2004.

                    On March 28, 2005, the Company obtained a new line of credit
                    facility from Fleet National Bank, a Bank of America
                    Company, which provides for borrowings for working capital
                    purposes up to $2,000. This facility expires April 1, 2006,
                    is secured by the Company's assets and is guaranteed by the
                    Company's subsidiary.

                    The amount of advances is determined based on the amount of
                    secured margined cash and marketable securities held at the
                    bank and certain profitability and net worth requirements.

                    Secured margined cash and marketable securities advances
                    bear interest at the bank's prime lending rate plus
                    one-quarter of one percent per annum. Advances determined by
                    certain profitability and net worth requirements bear
                    interest at the bank's prime lending rate plus three-
                    quarters of one percent per annum.

                    Payment may be accelerated by certain events of default such
                    as unfavorable credit factors, the occurrence of a material
                    adverse change in the Company's business, properties or
                    financial condition, a default in payment on the line,
                    impairment of security, bankruptcy, or the Company ceasing
                    operations or being unable to pay its debts. The line of
                    credit must be paid in full at the end of the term, April 1,
                    2006.


             (B)  STEEL BASED PIPING MATERIALS

                    On March 28, 2005, the Company has entered into an
                    agreement, not yet reduced to writing, with a supplier of
                    steel based piping materials, whereby the Company has
                    committed to purchase minimum amounts of piping products
                    used in its normal operations for a period of 15 months. The
                    total minimum purchase obligation under this agreement is
                    $1,400.



                                      F-34
<PAGE>
                                                                     SCHEDULE II

                                    KSW, INC.
                  SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
                                      000'S

<TABLE>
<CAPTION>

                                                    Balance at      Charged to       Charged to                      Balance
                                                    Beginning       costs and          other                         at end
                                                    of period        expenses         accounts      Deductions      of period
                                                    ---------        --------         --------      ----------      ---------
<S>                                                <C>           <C>              <C>             <C>              <C>
Description


Year ended December 31, 2004
allowance for doubtful accounts and returns          $   200         $    -          $     -         $     -         $   200
                                                     =======         =======          =======         =======         =======


Year ended December 31, 2003
allowance for doubtful accounts and returns          $   200         $     -          $     -         $     -         $   200
                                                     =======         =======          =======         =======         =======

Year ended December 31, 2002
allowance for doubtful accounts and returns          $   200         $     -          $     -         $     -         $   200
                                                     =======         =======          =======         =======         =======



Year ended December 31, 2004
deferred income tax valuation                        $   639         $   581          $     -         $     -         $ 1,220
                                                     =======         =======          =======         =======         =======


Year ended December 31, 2003
deferred income tax valuation                        $ 1,045         $     -          $     -         $   406         $   639
                                                     =======         =======          =======         =======         =======

Year ended December 31, 2002
deferred income tax valuation                        $   -           $ 1,045          $     -         $     -         $ 1,045
                                                     =======         =======          =======         =======         =======
</TABLE>



                                      F-35
<PAGE>
                                    KSW, INC.
                                INDEX TO EXHIBITS


   Exhibit No.                       Description
   -----------                       -----------

    3.1             Amended and Restated Articles of Incorporation of KSW, Inc.
                    (incorporated herein by reference to Exhibit 3.1 to the
                    Company's Registration Statement on Form S-8 (No.
                    333-21735), February 13, 1997).

    3.2             Amended and Restated By-Laws of KSW, Inc. (incorporated
                    herein by reference to Exhibit 3.2 to the Company's
                    Registration Statement on Form S-8 (No. 333-217350), filed
                    with the Commission on February 13, 1997).

    10.1            Employment Agreement, dated as of January 1, 1994, by and
                    among KSW Mechanical Services, Inc., Floyd Warkol and KSW,
                    Inc. (incorporated herein by reference to Exhibit 10.8 to
                    the Company's Registration Statement on Form 10 (Commission
                    File No. 0-27290), filed with the Commission on November 24,
                    1995).

    10.2            Employment Agreement, dated as of January 1, 1994, by and
                    among KSW Mechanical Services, Inc., Burton Reyer and KSW,
                    Inc. (incorporated herein by reference to Exhibit 10.9 to
                    the Company's Registration Statement on Form 10 (Commission
                    File No. 0-27290), filed with the Commission on November 24,
                    1995).

    10.3            Amendatory Employment Agreement, dated as of December 15,
                    1995, by and among KSW Mechanical Services, Inc., KSW, Inc.
                    and Floyd Warkol (incorporated by reference to Exhibit 10.13
                    to the Company's Annual Report on Form 10-K (Commission File
                    No. 0-27290) for the fiscal year ended December 31, 1995
                    filed with the Commission on March 27, 1996).

    10.4            Amendatory Employment Agreement, dated as of December 15,
                    1995, by and among KSW Mechanical Services, Inc., KSW, Inc.
                    and Burton Reyer (incorporated by reference to Exhibit 10.14
                    to the Company's Annual Report on Form 10-K for the fiscal
                    year ended December 31, 1995 (Commission File No. 0-27290)
                    filed with the Commission on March 27, 1996).

    10.5            Form of Second Amendatory Employment Agreement dated as of
                    December 31, 1998 by and among KSW Mechanical Services,
                    Inc., KSW, Inc. and Floyd Warkol (incorporated herein by
                    reference to Exhibit 10.5 to the Company's Annual Report on
                    Form 10-K for the fiscal year ended December 31,1998
                    (Commission File No. 0-27290), filed with the Commission on
                    March 30, 1999).


<PAGE>
    10.6            Form of Second Amendatory Employment Agreement dated as of
                    December 31, 1998 by and among KSW Mechanical Services,
                    Inc., KSW, Inc. and Burton Reyer (incorporated herein by
                    reference as Exhibit 10.6 to the Company's Annual Report on
                    Form 10-K for the fiscal year ended December 31, 1998
                    (Commission File No. 0-27290), filed with the Commission on
                    March 30, 1999)

    10.7            Form of Modification of Lease Agreement dated as of May 1,
                    1998 by and between KSW, Inc, Irvjoy Partners, L.P. and I
                    BLDG Co., Inc. (incorporated herein by reference to Exhibit
                    2.1 to the Company's Annual Report on Form-10K for the
                    fiscal year ended December 31, 1998 (Commission File No.
                    0-27290), filed with the Commission on March 30, 1999).

    10.8            Settlement and Release, dated June 11, 2002, by and between
                    KSW, Inc., Floyd Warkol, Burton Reyer, Robert Brussel and
                    the Helionetics Official Committee of Unsecured Creditors
                    (incorporated herein by reference to Exhibit 10.1 to the
                    Company's Current Report on Form 8-K (Commission File No.
                    0-27290), filed with the Commission on July 12, 2002).

    10.9            1995 Stock Option Plan of KSW, Inc. (incorporated herein by
                    reference to Exhibit 10.3 to the Company's Registration
                    Statement on Form 10 (Commission File No. 0-27290), filed
                    with the Commission on November 24, 1995).

    10.10           WCMA Loan And Security Agreement, dated as of May 30, 2001,
                    between KSW Mechanical Services, Inc. and Merrill Lynch
                    Business Financial Services, Inc. (incorporated herein by
                    reference to Exhibit 10.10 to the Company's Annual Report on
                    Form 10-K for the fiscal year ended December 31, 2003
                    (Commission File No. 0-27290), filed with the Commission on
                    March 30, 2004).

    10.11           WCMA Line of Credit Extension letter, dated January 27, 2004
                    and WCMA Line of Credit Extension Agreements dated November
                    13, 2002 and December 12, 2001, respectively, between KSW
                    Mechanical Services, Inc., KSW, Inc., Energy Alternatives,
                    Inc. and Merrill Lynch Business Financial Services, Inc.
                    (incorporated herein by reference to Exhibit 10.11 to the
                    Company's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 2003 (Commission File No. 0-27290), filed
                    with the Commission on March 30, 2004).

    10.12           Agreement of Indemnity, dated May 24, 2001, by and among
                    KSW, Inc., KSW Mechanical Services, Inc. and XL Specialty
                    Insurance Company (incorporated herein by reference to
                    Exhibit 10.12 to the Company's Annual Report on Form 10-K
                    for the fiscal year ended December 31, 2003 (Commission File
                    No. 0-27290), filed with the Commission on March 30, 2004)


<PAGE>
    10.13           Employment Agreement, dated April 1, 2003, by and between
                    Floyd Warkol and the Company (incorporated herein by
                    reference to Exhibit 10.13 to the Company's Annual Report on
                    Form 10-K for the fiscal year ended December 31, 2003
                    (Commission File No. 0-27290), filed with the Commission on
                    March 30, 2004)

    10.14           WCMA Line of Credit Extension Letter, dated June 30, 2004
                    (incorporated herein by reference to Exhibit 10.14 to the
                    Company's Quarterly Report on Form 10-Q for the fiscal
                    quarter ended June 30, 2004 (Commission File No. 0-27290),
                    filed with the Commission on August 16, 2004).

    10.15           Employment Agreement by and among KSW Mechanical Services,
                    Inc., the Company and Floyd Warkol, dated as of April 1,
                    2004 (incorporated herein by reference to Exhibit 10.1 to
                    the Company's Quarterly Report on Form 10-Q for the fiscal
                    quarter ended September 30, 2004 (Commission File No.
                    0-27290), filed with the Commission on November 15, 2004).

    10.16           Amendatory Employment Agreement, dated November 10, 2004, by
                    and between the Company, KSW Mechanical Services, Inc. and
                    Floyd Warkol (incorporated herein by reference to Exhibit
                    10.1 to the Company's Current Report on Form 8-K (Commission
                    File No. 0-27290), filed with the Commission on November 16,
                    2004).

    10.17           Line of Credit Agreement letter, dated March 28, 2005
                    between KSW, Inc. and Fleet National Bank, a Bank of America
                    Company together with forms of a Line of Credit Note, Rider
                    to Line of Credit Note, a pledge security agreement and
                    guaranty.

    10.18+          Compensation Arrangements with Certain Executive Officers.

    10.19+          Compensation of Non-Employee Directors

    11              Statement Regarding Computation of Net Earnings (Loss) Per
                    Share.

    21.1            List of Subsidiaries

    23.1            Consent of Rosen Seymour Shapss Martin & Company, LLP.

    23.2            Consent of Marden, Harrison & Kreuter, CPAs P.C.

    31.1            Certification of Chief Executive Officer required by Rule
                    13a-14(a).

    31.2            Certification of the Chief Financial Officer required by
                    Rule 13a-14(a).

    32.1            Certification of the Chief Executive Officer required by
                    Rule 13a-14(b) and 18 U.S.C. Section 1350.

    32.2            Certification of the Chief Financial Officer required by
                    Rule 13a-14(b) and 18 U.S.C. Section 1350.