================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                  ------------

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2000

                                       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)

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


<PAGE>

required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No ___

As of March 23, 2001, there were 5,470,311 shares of Common Stock, $.01 par
value per share, outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      NONE

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]

The estimated aggregate market value of the voting stock held by non-affiliates
of the registrant on March 23, 2001 was $3,681,765 (based on a price of $.875
per share).










                                       2
<PAGE>

                                    KSW, INC

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000


                                TABLE OF CONTENTS
<TABLE>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                              <C>
PART I

     Item 1.      Business........................................................................................4
     Item 2.      Properties......................................................................................9
     Item 3.      Legal Proceedings...............................................................................9
     Item 4.      Submission of Matters to a Vote of Security Holders............................................10

PART II

     Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters..........................11
     Item 6.      Selected Financial Data........................................................................12
     Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations..........13
     Item 7A.     Quantitative and Qualitative Disclosure About Market Risk......................................17
     Item 8.      Financial Statements and Supplementary Data....................................................17
     Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........17

PART III

     Item 10.     Directors and Executive Officers of the Registrant.............................................18
     Item 11.     Executive Compensation.........................................................................19
     Item 12.     Security Ownership of Certain Beneficial Owners and Management.................................23
     Item 13.     Certain Relationships and Related Transactions.................................................24

PART IV

     Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K................................25

SIGNATURES.......................................................................................................51

</TABLE>


                                       3
<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 pursue
projects under $500,000. Directly or indirectly through separate subsidiaries,
the Company also serves as a mechanical trade manager, performing project
management services relating to the mechanical trades. The Company operates its
contracting business through its wholly-owned subsidiary, KSW Mechanical
Services, Inc. ("KSW Mechanical").

         Total revenues for 2000 were $ 52,548,000. The Company believes that it
is most competitive on large projects, where its skill sets are most valued.
Some of the Company's ongoing projects include the following: Bear Stearns World
Headquarters, Morgan Stanley World Headquarters, MCI/Worldcom Metro Access
Project, and the New Federal Court House and U.S. Post Office/Courthouse, both
in Brooklyn, NY. The construction industry in the New York City metropolitan
area is healthy and the Company believes that it is well positioned to continue
obtaining a substantial number of new contracts. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

         The Company's primary strategic objectives are to increase its revenues
and to become more competitive in its present business. The Company may use any
additional funds to expand its business into new geographic areas in the
Northeastern United States or into areas which would be complementary to its
current lines of business through possible joint ventures or acquisitions. By
acquiring complementary businesses, the Company would also be able to realize
significant economies of scale and minimize the effect of economic downturns.
The Company may also pursue acquisitions outside its current lines of business
for greater diversification. The Company's common stock is traded on the NASDAQ
Electronic Bulletin Board under the symbol "KSWW."

         The Company provides 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, since many of the
owners are public entities. Other contracts are obtained through negotiation
with private parties.

         Traditionally, the Company's mechanical contracting and subcontracting
work made up as much as 90% of its total revenues. Because mechanical
contracting and subcontracting is a substantial portion of its business, the
Company intends to continue its concentration in this area.



                                       4
<PAGE>

         The Company's management pioneered the concept of managing the
mechanical trade portion of construction. On larger complex projects (generally
those having a mechanical portion valued over $20 million), it is often
beneficial for a general contractor or 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, general contractors or
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 or its 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, calculates subcontractor bids, negotiates subcontracts and
coordinates the work. Trade management helps to remove gaps between contractual
responsibilities, reduce disputes and claims between trades, and simplify the
bonding process. This coordination makes a significant difference in keeping a
project on schedule and within budget.

         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. Customers benefit by having a single source with the
responsibility for the cost, coordination and construction progress of the
mechanical portion of the projects.

         The Company provides a guaranteed maximum price ("GMP") to the owners
for its scope of responsibility. The Company controls the GMP by obtaining
accurate maximum price quotes from potential suppliers and subcontractors,
requiring payment and performance bonds from major subcontractors and adding
contingency allowance to these before quoting the GMP. The Company also controls
the costs because it is a mechanical contractor and can perform the guaranteed
work on its own. On non-governmental projects, the Company may be able to split
the benefit of cost reductions it achieves on a project, but this is prohibited
in certain government contracts.

         Although trade management is typically available only on large jobs,
the Company believes there is opportunity for expanding this line of business.
While trade management projects provide a net profit margin similar to that for
contracting projects, 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.

         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 a detailed
review of the 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


                                       5
<PAGE>

estimated costs of the project to be bid, 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 it bids and has highly skilled
personnel familiar with the local market. The Company has been able to avoid
costly bidding errors by becoming thoroughly familiar with all aspects of a
project and developing a comprehensive project budget using its proven cost
estimation 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
against the estimates.

         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 $
62,000,000 as of December 31, 2000.

          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 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 it has a competitive advantage over smaller
competitors due to the 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 impacted 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


                                       6
<PAGE>

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 companies with the Company being named as an additional
insured on the asbestos company's liability insurance policy. The Company has
not incurred any liability for violation of environmental laws. The Company must
also comply with rules and regulations promulgated by the Occupational Safety
and Health Administration.

         EMPLOYEES. At December 31, 2000, the Company had 50 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 construction work 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 for benefits payable to union employees through the
payment of funds to a trust established by the union. The Company's obligation
is to pay a percentage of the wages of union workers to the trust fund. 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. The Company
has in the past matched 25% of the employees' 401(k) contributions.

         DEPENDENCE UPON CUSTOMERS. The Company seeks large, multi-year
contracts. At any given time, a material portion of the Company's contracting
business may be for one large contract for one customer.

         For the year ended December 31, 2000, work under contracts with three
customers: Turner Construction, J.A. Jones-GMO, LLC., and Bovis Lend Lease,
Inc., amounted to 20%, 19%, and 15% 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.
Consequently, a reduction in public sector contracts for any reason, including
an economic downturn or a reduction in government spending, could have a
material adverse effect on the Company's results of operations. At any one time,
the Company's contracts with federal, state and local governmental authorities
may or may not represent a material portion of its revenues. The Company's
current backlog does not include any material contracts with federal, state or
local governmental authorities.

         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 primarily based upon the Company's net worth, working capital and
the number and size of projects under construction. 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


                                       7
<PAGE>

the bonding company of an amount less than 1% of the amount of the contract to
be performed. Since inception, the Company has not encountered difficulties in
obtaining Payment and Performance Bonds nor has the bonding company been
required to make a payment on any bonds issued for the Company.

         OTHER MATTERS. The Company does not own any patents, patent rights, or
similar intellectual property, and none are material to its business. The
Company's business is not subject to large seasonal variations. The Company
expended no funds for research and development in 1998 or 1999.

         During 2000, the Company expended approximately $125,000 investigating
the feasibility of entering the commercial fuel cell energy business through
ventures with fuel cell manufacturers. The Company believes such arrangements to
be a long-term potential opportunity, as the market recognizes the commercial
potential of local power generation and the availability of products increase.
No research and development costs are anticipated in 2001.











                                       8
<PAGE>

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 has an annual rent of $169,000. The lease has
two five year options 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 extends the lease term through June 2004.

         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, 10,000 square foot of shop space and an adjacent 5,000 square foot
storage yard. This lease is a triple net lease. The Company pays rent of
$103,000 per year, plus taxes (currently $20,500 per year), maintenance,
insurance and utilities. The lease will expire on December 31, 2002. See
"Certain Relationships and Related Transactions."

ITEM 3. LEGAL PROCEEDINGS

         The Company is not aware of any pending or threatened legal proceedings
which could have a material adverse effect on its financial position or
operations. The following are the material lawsuits in which the Company is a
party:

         a.       Co-op City. In February 1999, the Company sued the General
                  Contractor and its bonding company in New York State Supreme
                  Court, Queens County, to recover its contract balance and
                  unpaid proposals in the sum of $5,770,919 as adjusted.
                  Included is a claim for unanticipated costs incurred through
                  1998 in the sum of $3,662,734. Discovery has been completed
                  and the action placed on the trial calendar. The case should
                  be tried within the next twelve months. While the Company and
                  its counsel believes this lawsuit has merit, there is no
                  guaranty the claim will ultimately be successful.

         b.       Helionetics Creditors Committee v. Barnes, et. al. On April
                  26, 1999, the Company and six current or former officers and
                  directors were named in a lawsuit in U.S. Bankruptcy Court,
                  Central District of California, instituted by the Creditors
                  Committee of Helionetics, Inc. The complaint alleges that the
                  December 28, 1995 distribution by Helionetics of KSW, Inc.
                  stock to Helionetics' shareholders was a fraudulent
                  conveyance, and seeks compensatory damages of $10,890,000,
                  plus punitive damages. The December 28, 1995 distribution of
                  stock was described in a Form 10 Registration Statement filed
                  with Securities and Exchange Commission. The Company believes
                  that the lawsuit is totally without merit, has accrued costs
                  for litigation expenses, and is aggressively defending the
                  case. On March 15, 2001, the Court denied a motion for summary
                  judgment filed by the Plaintiff, and also denied a
                  cross-motion for summary judgment filed by the Company and its
                  Directors, except the Court dismissed the case against
                  Director Robert Brussel. The Court found that there were


                                       9
<PAGE>
                  issues of fact requiring a trial on the merits, and scheduled
                  a further hearing on May 3, 2001.


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

         The following matters were submitted to a vote of the shareholders at
the Company's Annual Meeting held on May 11, 2000.

         a. Election of Director. The following person was elected as Class I
director to serve for a term of three years:

                                Number of Shares
                                ----------------
                                                             Voted against
              Name                  Voted for                 or withheld
              ----                  ---------                 -----------
         Robert Brussel             4,084,452                    7,575


Of the remaining four directors, two will stand for election in 2001 and the
remaining two will stand for election in the year 2002.

         b. Appointment of Independent Auditors. The stockholders ratified the
appointment of Marden Harrison & Kreuter, CPA's P.C. as independent auditors for
the Company for 2000. There were 4,087,814 shares voted for approval, 2,467
shares voted against and 1,747 abstentions.











                                       10
<PAGE>

                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is traded on the NASDAQ's Electronic
Bulletin Board under the symbol "KSWW."

         At March 23, 2001, the Company had 5,470,311 shares of KSW Common Stock
issued and outstanding held by approximately 5,800 shareholders of record.

         Currently, the Company intends to retain earnings for future growth,
and does not anticipate paying dividends on its Common Stock in the foreseeable
future. The Company did not pay dividends in 1999 or 2000.

         The following information on high and low trading ranges is provided
for 2000 and 1999 based on intra-day trading information.
<TABLE>
<CAPTION>
                                                          2000                                   1999
                                                          ----                                   ----
                Quarter                         High                Low                High                Low
                -------                         ----                ---                ----                ---
<S>                                           <C>                <C>                 <C>                <C>
First...............................          $  3.38            $  1.31             $  1.06            $   .81
Second..............................             2.75               1.69                1.12               1.03
Third...............................             2.50               1.69                1.12               1.00
Fourth..............................             2.13               1.25                1.50               1.00

</TABLE>





                                       11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

         The following summary of certain financial information relating to the
Company for the years ended December 31, 2000, 1999, 1998, 1997, and 1996 is
derived from, and is qualified by reference to, the financial statements for
those years, audited by Marden, Harrison & Kreuter CPA's, P.C. each of which is
included herein, 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)
                                           2000            1999            1998             1997            1996
<S>                                         <C>            <C>             <C>              <C>             <C>
INCOME STATEMENT:
Revenues........................            $ 52,548       $44,847         $39,631          $66,184         $46,374
Direct costs....................              48,249        38,029          36,434           62,005          42,600
Gross profit....................               4,299         6,818           3,197            4,179           3,794
Operating expenses..............               4,728         4,308           4,397            4,030           3,970
Selling, general, administration,
   depreciation, interest and
   income tax expenses..........               4,565         5,451           3,831            4,020           3,898
Income (loss) before income taxes
                                               (429)         2,510         (1,200)              149           (176)
Net (loss) income...............               (266)         1,367           (634)              159           (104)
Net (loss) income per share - Basic
                                               (.05)           .25           (.12)              .03           (.02)
Net (loss) income per share -
   Diluted......................               (.05)           .25           (.11)              .03           (.02)
Number of shares used in computation
Basic...........................           5,468,991     5,468,644       5,463,505        5,528,311       5,440,008
Diluted.........................           5,641,050     5,468,644       5,655,195        5,796,893       5,568,429
BASIC SHEET DATA:
Total assets....................              28,263        26,147          21,273           26,269          28,734
Working capital.................               6,996         7,023           5,194            5,809           5,582
Current liabilities.............              17,255        14,912          11,388           15,700          18,195
Long-term liabilities...........                  51            40              57               70               0
Stockholders' equity............              10,957        11,195           9,828           10,499          10,539

OTHER DATA:
Current ratio...................              1.41:1        1.47:1          1.46:1           1.37:1          1.31:1

</TABLE>






                                       12
<PAGE>

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

The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 2000, 1999 and 1998.

OVERVIEW

         The Company's contracts most often involve work periods in excess of
one year. Revenue on uncompleted fixed price contracts is recorded under the
"percentage of completion" method of accounting. The Company begins to recognize
profit on its contracts when it first incurs direct costs. Contract costs
include all direct material and labor costs and those other direct costs related
to contract performance including, but not limited to, subcontractor's costs and
supplies. General and administrative costs are charged to expense as incurred.
Pursuant to construction industry practice, a portion of billings, generally not
exceeding 10%, may be retained by the customer until the project is completed
and all obligations of the contractor are performed. The Company has not been
subject to a material loss in connection with such retentions, although at times
legal procedures have been required to collect retentions due the Company.

RESULTS OF OPERATIONS

         The following table sets forth, as a percentage of net sales, certain
items of the Company's statement of operations for the periods indicated.
<TABLE>
<CAPTION>
                                                2000                       1999                       1998
                                                ----                       ----                       ----
                                        AMOUNT       PERCENT        AMOUNT       PERCENT       AMOUNT       PERCENT
                                        ------       -------        ------       -------       ------       -------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                       <C>             <C>       <C>              <C>      <C>               <C>
NET SALES:
Contracts........................         $52,502         99.9      $44,506          99.2     $39,587           99.9
Fees.............................              46           .1          341            .8          44             .1
                                        ---------    ---------   ----------    ----------   ----------    ----------
Total............................          52,548        100.0       44,847         100.0       39,631         100.0
COSTS OF SALES...................          48,249         91.8       38,029          84.8       36,434          91.9
                                        ---------    ---------   ----------    ----------   ----------    ----------
GROSS PROFIT..........                      4,299          8.2        6,818          15.2        3,197           8.1
EXPENSES
   Selling, general, administrative
     and interest expenses.......           4,728          9.0        4,308           9.6        4,397          11.1
                                        ---------    ---------   ----------    ----------   ----------    ----------

INCOME/(LOSS) BEFORE PROVISION FOR
INCOME TAXES.....................           (429)         (.8)        2,510           5.6      (1,200)         (3.0)

PROVISION FOR INCOME TAXES.......           (163)         (.3)        1,143           2.6        (566)         (1.4)
                                        ---------    ---------   ----------    ----------   ----------    ----------

NET INCOME/(LOSS).............          $   (266)         (.5)       $1,367           3.0       $(634)         (1.6)
                                        =========    =========   ==========    ==========   ==========    ==========
</TABLE>




                                       13
<PAGE>

                                    KSW, INC
                       COMPUTATION OF NET INCOME PER SHARE
                       (000'S EXCEPT NET INCOME PER SHARE)
<TABLE>
<CAPTION>
                                                 BASIC      DILUTED        BASIC        DILUTED       BASIC        DILUTED
                                                 2000         2000          1999         1999          1998          1998
                                                 ----         ----          ----         ----          ----          ----
<S>                                             <C>          <C>           <C>           <C>          <C>           <C>
Weighted average common shares........          5,469        5.469         5,469         5,469        5,464         5,464
Common stock & common stock equivalents
  using the Treasury stock method.....                         172             0             0            0           191
                                                -----      -------      --------      --------     --------      --------
Total shares outstanding for purposes of
  Calculating basic & diluted
  earnings/(loss) per share...........          5,469        5,641         5,469         5,469        5,464         5,655
                                                =====        =====      ========      ========     ========      ========
Net income (loss) as reported.........         $(266)       $(266)        $1,367        $1,367       $(634)        $(634)
                                               ======       ======      ========      ========     ========      ========
Net  income  (loss) per  share-basic  and
    diluted...........................        $( .05)      $( .05)          $.25          $.25      $ (.12)       $ (.11)
                                              =======      =======      ========      ========     ========      ========
</TABLE>
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999


         Total revenue increased by $7,701,000 or 17.2% to $52,548,000 for the
year ended December 31, 2000, compared to $44,847,000 for the same period in
1999. The increase in revenue was due to an increase in the value of jobs booked
which is reflected in the increase in backlog at the beginning of 2000,
$60,000,000, as compared to the backlog at the beginning of 1999, $36,000,000,
an increase of 67%. In addition, the Company received new work of $50,000,000
and increases during the year to existing contracts in the form of change
orders. Since most of the work is multi-year contracts only a portion of the
available work was completed during the year 2000, the balance is reflected in
the Company's backlog of $62,000,000 as of December 31, 2000.

         Cost of sales increased by $10,220,000 or 26.9% to $48,249,000 for the
year ended December 31, 2000 compared to $38,029,000 for the comparable period
in 1999 primarily as a result of the increases in revenue noted above and the
additional labor costs discussed below.

         The gross margin decreased to 8.2% for the year ended December 31, 2000
compared to 15.2% for the year 1999 due to lower than expected productivity and
higher labor costs due to full employment in the industry and the competition
for the limited workforce available. This was especially true during the fourth
quarter of 2000 when the Company had a gross loss of $19,000. The Company has
factored these additional labor costs into its bidding process; however, during
the fourth quarter of 2000 the Company was still working on older projects which
were experiencing labor overruns.

         Selling, general and administrative expenses increased by $420,000 or
9.7% to $4,728,000 as compared to $4,308,000 in 1999; however, as a percentage
of revenue they decreased to 9.0% of revenue as compared to 9.6% last year. The
increases in selling, general and administrative expenses were due to $401,000
expensed for legal and consulting fees during 2000 for the Helionetics and Co-Op


                                       14
<PAGE>

City lawsuits described in Item 3. In addition, the Company spent $125,000
during 2000 investigating the feasibility of installing systems utilizing fuel
cell energy and other alternative sources. Without these costs the selling,
general and administrative costs would have decreased by $106,000. or 2.5% and
would have been 8.0% of revenue compared to 9.6% in 1999.

         The income tax benefit for 2000 was $163,000 (38% of loss before taxes)
as compared to a tax provision of $1,143,000 in 1999 (46% of income before
taxes). This was due to certain state and local taxes paid during 2000 which
were based on net worth.

         As a result of all the items previously mentioned, there was a net loss
of $266,000 in 2000 compared to a net profit of $1,364,000 in 1999. During the
fourth quarter 2000 the Company had a net loss of $ 650,000 due to the items
mentioned above.

         During 2000 the Company earned 20%, 19% and 15% of its revenue from its
three largest customers. The Company bids on large multi-year contracts which
can account for more than 10% of contract revenue in any given year.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

         Total revenue increased by $5,216,000 or 13.2% to $44,847,000 for the
year ended December 31, 1999, compared to $39,631,000 for the same period in
1998. The increase in revenue was due to an increase in the value of jobs booked
which is reflected in the increase in backlog at the beginning of 1999
$36,000,000 as compared to the backlog at the beginning of 1998, $31,000,000,
and the additional work booked during 1999 which resulted in a backlog of
$60,000,000 at December 31, 1999 an increase of 67%. In addition, the Company
received additional projects in January 2000 in excess of $12,000,000. The
continued increase in backlog should result in continued increased volume during
the year 2000.

         Cost of sales increased by $1,595,000 or 4.4% to $38,029,000 for the
year ended December 31, 1999 compared to $36,434,000 for the comparable period
in 1998 primarily as a result of the increase in contract revenues.

         The gross margin increased to 15.2% for the year ended December 31,
1999 compared to 8.1% for the year 1998 due to an increase in labor efficiency
and purchasing efficiencies as well as a better profit margin mix on new
projects. In addition the 1998 gross profit was affected by the cost overruns of
the Co-op City project.
Without these overruns the 1998 gross margin would have been 10.1%

         Selling, general and administrative expenses decreased by $89,000 or
2.0% to $4,308,000 for the year ended December 31, 1999 compared to $4,397,000
for the year ended December 31, 1998 even though sales increased by 13.2%. This
was due to certain cost saving measures that were initiated at the end of 1998.



                                       15
<PAGE>

         The income tax provision for 1999 was $1,143,000 as compared to a tax
benefit of $566,000 in 1998. Both years were based on an effective rate of 46%
of income (loss) before taxes. During 1999 the Company utilized all of its tax
carryover losses of approximately $1,900,000 from prior years.

         As a result of all the items previously mentioned, there was a
$1,367,000 profit for 1999 as compared to a loss of $634,000 for 1998.

         During 1999 the Company earned 23%, 20% and 18% of its revenue from its
three largest customers. The Company bids on large multi-year contracts which
can account for more than 10% of contract revenue in any given year.

LIQUIDITY AND CAPITAL RESOURCES

         The Company believes that it is well positioned to obtain new contracts
and generate increased revenues over the next year. Developers have announced
many new bids for multi-million dollar projects in which the Company would have
a strong competitive advantage. The Company is currently providing value
engineering assistance to owners and developers on several important projects
now in development.

         The Company's current bonding limits are also 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.

         The Company believes its current cash resources are adequate to fund a
moderate increase in sales volume in the next year. However, the Company's
capital resources will not be sufficient to sustain the Company's long-term
plans for growth. In addition to seeking new contracts, the Company is
investigating expansion into new geographic areas. The Company's management has
had experience in expanding into new geographic areas with the Company's
predecessors; however, to date the Company has conducted its operations
exclusively in the New York City metropolitan region.

         The Company currently has a $2,000,000 line of credit with Merrill
Lynch, which expires July 2001. The line of credit calls for borrowing at 3%
over the 30 day dealer commercial paper, which interest rate at December 31 was
approximately equal to prime. The Company did not utilize the facility during
2000. As of December 31, 2000, there were no outstanding loans against the
facility.

         The Company currently has no significant capital expenditure
commitments.

         During the construction period, owners or general contractors may
request that KSW 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


                                       16
<PAGE>

dispute and, sometimes litigation. Slow receipt on collections may also result
from general contractor or owner financial difficulties. KSW tries to limit its
financial exposure by refusing, whenever possible, to do work withou t a signed
formal change order.

IMPACT OF INFLATION

         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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements contained under "Item 1. Business" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and other statements contained herein regarding matters that are
not historical facts, are 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", "forsee", "likely",
"will" or other similar words or phrases. Because such forward-looking
statements include risks and uncertainties, actual results may differ materially
from those expressed 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 of the Company or persons acting on behalf of the Company are
qualified in their entirety by such factors.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company does not utilize futures, options or other derivative
instruments. The Company has invested $500,000 in managed stock funds selected
by Merill Lynch, and has invested a total of $1,000,000 in two tax exempt bond
funds.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial Statements are submitted in Item 14 herein.


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

         None.



                                       17
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Board of Directors of the Company is divided into three classes,
with each class serving for three years or until their successors have been
elected. The officers serve at the pleasure of the Board of Directors.
Information as to the directors and executive officers of the Company and the
proposed directors is as follows:

NAME                 AGE      TITLE
----                 ---      -----
Floyd Warkol         53       Chief Executive Officer, President, Secretary and
                              Chairman of the Board of Directors

Burton Reyer         66       Vice President and Director

Robert Brussel       58       Chief Financial Officer and Director

Stanley Kreitman     67       Director

Daniel Spiegel       75       Director

         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 KSW and as Chairman and Chief Executive Officer of its subsidiary KSW
Mechanical Services, Inc. since January 1994. Mr. Warkol's term expires on the
date of the 2001 Annual Meeting.

         Mr. Burton Reyer has been principally employed as Vice President and
Director of KSW and as President and Chief Operating Officer of its subsidiary
KSW Mechanical Services, Inc. since January 1994. Mr. Reyer's term expires on
the date of the 2001 Annual Meeting.

         Mr. Robert Brussel has been principally employed as Chief Financial
Officer and Director of KSW and Chief Financial Officer of its subsidiary KSW
Mechanical Services, Inc. since January 1994. Mr. Brussel's term expires on May
11, 2003.

         Mr. Daniel Spiegel has been a Director of KSW since January 1996. He
had been principally employed as Senior Vice President of Tishman Realty &
Construction Company, Inc. from 1970 until March 1995. He is presently a
consultant to various construction-related companies. Mr. Spiegel's term expires
on the date of the 2002 Annual Meeting.

         Mr. Stanley Kreitman was elected to the Board of Directors on May 18,
1999 to replace Armand D'Amato who resigned effective December 10, 1998 for
personal reasons unrelated to the Company or its operations. Effective February
18, 1999, Mr. Kreitman had been appointed as an interim Director. Since 1994,
Mr. Kreitman has been Chairman of Manhattan Associates, an investment firm and
is a Board member of the N.Y.C. Department of Corrections. He is a published


                                       18
<PAGE>

author and lecturer on business investment matters. He is a member of the Board
of Directors of Medallion Funding Corp. (NASDAQ), Ports Systems Corp. (AMEX) and
CCA Industries, Inc. (NASDAQ). Mr. Kreitman's term expires on the date of the
2002 Annual Meeting.

         COMMITTEES OF THE BOARD OF DIRECTORS. A Compensation Committee approves
the salary, incentives and benefit plans for directors, officers and other
employees, and the granting of options and other compensation matters. The
Compensation Committee consists of nonemployee Directors, Stanley Kreitman and
Daniel Spiegel. An Audit Committee, also composed of nonemployee Directors,
oversees actions taken by the Company's independent auditors and reviews the
Company's financial controls.

         CLASSIFIED BOARD OF DIRECTORS. The Company's Board of Directors is
divided into three classes of Directors serving staggered three-year terms.

         COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of the Company's common stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Executive officers, directors and holders of more than ten percent are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Company and written representations from the Company's
executive officers and directors, the Company believes that during the year
ended December 31, 2000, its executive officers, directors and holders of more
than ten percent complied with all applicable Section 16(a) filings
requirements.

ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth remuneration paid to executive officers
of the Company for the years ended December 31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
           NAME AND PRINCIPAL POSITION                             ANNUAL COMPENSATION
           ---------------------------                             -------------------
                                                        YEAR       SALARY                 BONUS
                                                        ----       ------                 -----
<S>                                                     <C>        <C>                    <C>
           Floyd Warkol                                 2000       $420,000               $0
           Chairman of the Board, President,            1999       $420,000               $252,605
           Secretary and Chief Executive Officer        1998       $600,000               $0


           Burton Reyer                                 2000       $240,000               $0
           Vice President                               1999       $240,000               $146,245
                                                        1998       $350,000               $0




                                       19
<PAGE>

           Robert Brussel                               2000       $145,000               $30,000
           Chief Financial Officer                      1999       $135,000               $37,500
                                                        1998       $135,000               $0


           James Oliviero                               2000       $160,000               $30,000
           General Counsel and Director of Investor     1999       $150,000               $37,500
           Relations                                    1998       $150,000               $0

</TABLE>

         The Company and KSW Mechanical entered into a two-year employment
contract and a noncompetition agreement with Mr. Warkol for the term of January
1, 1999 thru December 31, 2000. The employment contract provided for base annual
compensation of $420,000. In addition, Mr. Warkol was entitled to receive, each
year, an amount equal to 9.5% of the Company's annual profits, before taxes,
which are in excess of $250,000. For the purposes of computing the amount due
Mr. Warkol, annual pretax profits excluded the effect of any income or expense
on the Co-op City project, and excluded any bonuses due to Mr. Warkol or Mr.
Reyer. Mr. Warkol was entitled to medical insurance, disability insurance with
payments equal to 60% of base compensation, a $1 million policy of life
insurance payable as directed by the employee (at a cost of $3,595 per year) and
a car with a chauffeur. Mr. Warkol was entitled to terminate his employment for
"good reason," i.e., a substantial change in the nature or status of his
responsibilities or the person to whom he reported in which event he was
entitled to receive full pay and benefits for the remainder of the term of the
contract. The Company was not entitled to discharge Mr. Warkol for disability
until he had been disabled for 180 consecutive days. Mr. Warkol's estate was
entitled to two months pay in the event of his death. Mr. Warkol agreed that he
will not compete in the mechanical contracting business in the New York City
metropolitan area for the term of his employment contract and for two years
thereafter.

         The Company and KSW Mechanical entered into a two-year employment
contract and a noncompetition agreement with Mr. Reyer for the term January 1,
1999 thru December 31, 2000. The employment contract provided for base annual
compensation of $240,000. In addition, Mr. Reyer was entitled to receive an
amount each year, equal to 5.5% of the Company's annual profits, before taxes,
which are in excess of $250,000. For the purposes of computing the amount due
Mr. Reyer, annual pretax profits excluded the effect of any income or expense on
the Co-op City project and shall exclude any bonuses due Mr. Reyer and Mr.
Warkol. Mr. Reyer was entitled to medical insurance, disability insurance with
payments equal to 60% of base compensation and a $500,000 policy of life
insurance payable as directed by the employee. Mr. Reyer was entitled to
terminate his employment for good reason, i.e., a substantial change in the
nature or status of his responsibilities or the person to whom he reports, in
which event he is entitled to receive full pay and benefits for the remainder of
the term of the contract. The Company was not entitled to discharge Mr. Reyer
for disability until he has been disabled for 180 consecutive days. Mr. Reyer's
estate was entitled to two months pay in the event of his death. Mr. Reyer
agreed that he will not compete in the mechanical contracting business in the


                                       20
<PAGE>

New York City metropolitan area for the term of his employment contract and for
two years thereafter.

         While the Company has not entered into new written employment
agreements with Mr. Warkol or Mr. Reyer, during 2001 they continue to receive
the same financial renumeration as under the prior employment agreements.

         OPTIONS GRANTED. The Company adopted the 1995 Stock Option Plan of KSW,
Inc. (the "Stock Option Plan") on December 15, 1995, and the Stock Option Plan
was approved by the KSW stockholders by unanimous written consent on December
15, 1995. The Stock Option Plan is administered by a Committee appointed by the
Board of Directors (each herein called the "Compensation Committee"). All key
employees of, consultants to, and certain nonemployee Directors of the Company,
as may be determined by the Compensation Committee from time to time, are
eligible to receive options under the Stock Option Plan.

         A total of 750,000 shares were originally authorized for issuance under
the Stock Option Plan. At the Company's Annual Meeting held on June 27, 1996 the
shareholders approved an amendment to the Stock Option Plan to increase by
350,000 shares the aggregate number of shares of Common Stock available for
future options to 490,000 shares. Prior to 1997, the Company had granted options
with respect to 610,000 shares at an exercise price of $1.50 per share to
certain eligible participants under the Stock Option Plan (of which 535,000 were
issued to officers and directors of the Company and its subsidiaries). In 1999,
the Company issued a total of 55,000 stock options to three key employees and to
a Director, Stanley Kreitman, exercisable at $1.50 per share.

         The exercise price of an incentive stock option and a nonqualified
stock option is fixed by the Compensation Committee on the date of grant;
however, the exercise price under an incentive stock option must be at least
equal to the fair market value of the KSW Common Stock on the date of grant.

         Stock options are exercisable for a duration determined by the
Compensation Committee, but in no event more than ten years after the date of
grant. Options shall be exercisable at such rate and times as may be fixed by
the Compensation Committee on the date of grant. The aggregate fair market value
(determined at the time the option is granted) of the KSW Common Stock with
respect to which incentive stock options are exercisable for the first time by a
participant during any calendar year (under all stock option plans of the
Company and its subsidiaries) shall not exceed $100,000. To the extent that this
limitation is exceeded, such excess options shall be treated as non qualified
stock options for purposes of the Stock Option Plan and the Internal Revenue
Code of 1986, as amended (the "Code").

         At the time a stock option is granted, the Compensation Committee may,
in its sole discretion, designate whether the stock option is to be considered
an incentive stock option or nonqualified stock option plan. Stock options with
no such designation shall be deemed an incentive stock option to the extent that
the $100,000 limit described above is met.



                                       21
<PAGE>

         Payment of the purchase price for shares acquired upon the exercise of
options may be made by any one or more of the following methods: in cash, by
check, by delivery to the Company of shares of KSW Common Stock already owned by
the option holder, or by such other method as the Compensation Committee may
permit from time to time. However, a holder may not use previously owned shares
of KSW Common Stock that were acquired pursuant to the Stock Option Plan, or any
other stock plan that may be maintained by the Company or its subsidiaries, to
pay the purchase price under an option, unless the holder has beneficially owned
such shares for at least six months.

         Stock options become immediately exercisable in full upon the
retirement of the holder after reaching the age of 65, upon the disability or
death of the holder while in the employ of or service with the Company, upon a
Change of Control (as defined in the Stock Option Plan), or upon the occurrence
of such special circumstances as in the opinion of the Compensation Committee
merit special consideration. However, no options may be exercised earlier than
six months following the date of grant.

         Stock options terminate at the end of the tenth business day following
the holder's termination of employment or service. This period is extended to
one year in the case of the disability or death of the holder, and in the case
of death, the stock option is exercisable by the holder's estate.

         The options granted under the Stock Option Plan contain anti-dilution
provisions which will automatically adjust the number of shares subject to the
option in the event of a stock dividend, split-up, conversion, exchange,
re-classification or substitution. In the event of any other change in the
corporate structure or outstanding shares of KSW Common Stock, the Compensation
Committee may make such equitable adjustments to the number of shares and the
class of shares available under the Stock Option Plan or to any outstanding
option as it shall deem appropriate to prevent dilution or enlargement of
rights.

         The Company shall obtain such consideration for granting options under
the Stock Option Plan as the Compensation Committee in its discretion may
request. Each option may be subject to provisions to assure that any exercise or
disposition of KSW Common Stock will not violate the securities laws. No option
may be granted under the Stock Option Plan after December 15, 2005.

         The Board of Directors or the Compensation Committee may at any time
withdraw or amend the Stock Option Plan and may, with the consent of the
affected holder of an outstanding options at any time withdraw or amend the
terms and conditions of outstanding options. Any amendment which would increase
the number of shares issuable pursuant to the Stock Option Plan or change the
class of individuals to whom options may be granted shall be subject to the
approval of the stockholders of the Company within one year of such amendment.

         The following table shows the number of shares as to which options have
been granted.


                                       22
<PAGE>

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
                                                                             NUMBER OF
                                                                             SECURITIES
                                                                             UNDERLYING
                                                                            UNEXERCISED       VALUE OF UNEXERCISED
                                                                          OPTIONS/SARS AT         IN-THE-MONEY
                                                                           YEAR END (#)      OPTIONS/SARS AT YEAR
                             SHARES ACQUIRED            VALUE              EXERCISABLE/      END ($) EXERCISABLE/
          NAME               ON EXERCISE (#)         REALIZED ($)          UNEXERCISABLE          UNEXERCISABLE
          ----               ---------------         ------------          -------------          -------------
<S>                                 <C>                    <C>               <C>                       <C>
Floyd Warkol                        0                      0                 300,000/0                 N/A
Burton Reyer                        0                      0                 150,000/0                 N/A
Robert Brussel                      0                      0                  25,000/0                 N/A
James Oliviero                      0                      0                  20,000/0                 N/A
Daniel Spiegel                      0                      0                  20,000/0                 N/A
Stanley Kreitman                    0                      0                6,667/13,333               N/A

</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information relating to the beneficial
ownership of KSW Common Stock by (i) those persons known to the Company to
beneficially own 5% or more of the Company's Common Stock, (ii) each of the
Company's directors, proposed directors and executive officers and (iii) all of
the Company's directors, proposed directors and executive officers as a group.
As used in this table, "beneficial ownership" means the sole or shared power to
vote, or to direct the voting of a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose, or direct the
disposition of a security). Accordingly, the number of shares may include shares
owned by or for, among others, the wife, minor children or certain other
relatives of such individual, as well as other shares as to which the individual
has the right to acquire within 60 days after such date.

<TABLE>
<CAPTION>
                                           NUMBER OF                PERCENTAGE
                                             SHARES                 OWNERSHIP
                                             ------                 ---------
NAME OF BENEFICIAL OWNER
------------------------
<S>                                           <C>           <C>        <C>
Floyd Warkol                                  844,000       (1)        15.4%
Meadow Lane
Purchase, NY 10577


                                       23
<PAGE>

Burton Reyer                                  380,080       (2)         6.9%
17 Foxwood Road
Kings Point, NY 11024

Allen & Company                               312,500                   5.7%
711 Fifth Avenue
New York, NY

Robert Brussel                                 33,500                      *
365 Woodmere Blvd.
Woodmere, NY  11598

Stanley Kreitman                                    0                      *
375 Park Avenue (Suite 1606)
New York, NY  10022

Daniel Spiegel                                  5,000                      *
351 Twin Lakes Road
Teconic, CT 06079

All executive officers                      1,262,580                  23.1%
and directors as a group (5 persons)
</TABLE>
-------------------------
*        Less than one percent.

(1) Includes 50,000 shares owned by the Floyd and Barbara Warkol Charitable
Foundation, of which Mr. Warkol is a Trustee.

(2) Includes 1,540 shares owned by Mr. Reyer's wife.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Floyd Warkol, President of the Company, and a charitable foundation he
controls are the shareholders of a corporation which is the landlord on the
Company's lease in Bronx, New York. The lease payments on such property were
$103,000 for 2000. See "Properties."





                                       24
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(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 26 through 50 of this form 10-K


         3. Exhibits

         See Exhibit Index on Page 53 of this form 10-K














                                       25
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS
                                                                       PAGE
                                                                       ----

Independent auditors' report                                             27

Consolidated financial statements:

Consolidated balance sheets                                              28

Consolidated statements of operations                                    30

Consolidated statements of comprehensive income                          31

Consolidated statements of stockholders' equity                          32

Consolidated statements of cash flows                                    33

Notes to consolidated financial statements                               35





                                       26
<PAGE>


INDEPENDENT AUDITORS' REPORT
----------------------------

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, 2000 and 1999, and the related consolidated
statements of operations, comprehensive income, stockholders' equity and cash
flows for the years ended December 31, 2000, 1999 and 1998. 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 auditing standards general 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 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, 2000 and 1999, and the results of its
operations and its cash flows for the Years ended December 31, 2000, 1999 and
1998 in conformity with accounting principles generally accepted in the United
States of America.

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



White Plains, New York
February 1, 2001, except for Note 9(F) as to which the date is March 15, 2001



                                       27
<PAGE>


                            KSW, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2000 AND 1999
                                 (IN THOUSANDS)
                          ----------------------------


                                                   2000                1999
                                                ------------      -------------
      A S S E T S
      -----------

Current assets:
   Cash and cash equivalents                     $  3,499           $   6,651
   Marketable securities                            2,541                 -
   Accounts receivable, net                        13,704              10,606
   Retainage receivable                             3,263               4,122
   Costs and estimated earnings in excess
     of billings on uncompleted contracts             138                 338
   Deferred income taxes                              227                 -
   Prepaid expenses and other receivables             879                 218
                                                 --------           ---------

                Total current assets               24,251              21,935




Property and equipment, net                           337                 384



Other assets:
   Goodwill, net                                    3,667               3,820
   Other                                                8                   8
                                                 --------           ---------

     Total assets                                $ 28,263           $  26,147
                                                 ========           =========



                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                                                    2000                1999
                                                                                -------------      -------------
      LIABILITIES AND STOCKHOLDERS' EQUITY
      ------------------------------------
<S>                                                                               <C>                <C>
Current liabilities:
   Accounts payable                                                               $  8,823           $   6,270
   Retainage payable                                                                 1,781               1,774
   Accrued payroll and benefits                                                      1,148               1,165
   Accrued expenses                                                                    680                 369
   Billings in excess of costs and estimated
     earnings on uncompleted contracts                                               4,823               5,334
                                                                                  --------           ---------

                Total current liabilities                                           17,255              14,912

Long-term liabilities                                                                   51                  40
                                                                                  --------           ---------

                Total liabilities                                                   17,306              14,952
                                                                                  --------           ---------

Commitments and contingencies

Stockholders' equity:
   Common stock                                                                         54                  54
   Additional paid-in capital                                                        9,729               9,726
   Retained earnings                                                                 1,149               1,415
   Accumulated other comprehensive income:
     Net unrealized holding gain on available for sale securities                       25                  -
                                                                                  --------           ---------

                Total stockholders' equity                                          10,957              11,195
                                                                                  --------           ---------

                Total liabilities and stockholders' equity                        $ 28,263           $  26,147
                                                                                  ========           =========

</TABLE>

                 See notes to consolidated financial statements.




                                       29
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                    -----------------------------------------
<TABLE>
<CAPTION>
                                                              2000                 1999              1998
                                                           ------------         ------------      ------------
<S>                                                         <C>                 <C>                <C>
Revenues:
   Contracts                                                $    52,201         $   44,379         $    39,491
   Fees                                                              46                341                  44
   Interest                                                         301                127                  96
                                                            -----------         ----------         -----------

                  Total revenues                                 52,548             44,847              39,631

Direct costs                                                     48,249             38,029              36,434
                                                            -----------         ----------         -----------

Gross profit                                                      4,299              6,818               3,197

Selling, general and administrative expenses                      4,706              4,279               4,364
Interest expense                                                     22                 29                  33
                                                            -----------         ----------         -----------

Income (loss) before income taxes                                  (429)             2,510              (1,200)
Income tax expense (benefit)                                       (163)             1,143                (566)
                                                            -----------         ----------         -----------

Net income (loss)                                           $      (266)        $    1,367         $      (634)
                                                            ============        ==========         ============

Net income (loss) per common share - basic                  $     (.05)         $      .25         $      (.12)
                                                            ===========         ==========         ============

Net income (loss) per common share - diluted                $     (.05)         $      .25         $      (.11)
                                                            ===========         ==========         ============

Weighted average common shares outstanding -
   basic                                                      5,468,991         5,468,644          5,463,505

Weighted average common shares outstanding -
   diluted                                                    5,641,050         5,468,644          5,655,195

</TABLE>



                 See notes to consolidated financial statements.



                                       30
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                 (IN THOUSANDS)
                   ------------------------------------------
<TABLE>
<CAPTION>
                                                              2000                 1999              1998
                                                           ------------         ------------      ------------
<S>                                                          <C>                  <C>                <C>
Net income (loss)                                            $ (266)              $ 1,367            $  (634)

Other comprehensive income:
   Net unrealized holding gains arising
    during the year                                              25                    -                  -
                                                             -------              -------            -------
Total comprehensive income (loss)                            $ (241)              $ 1,367            $  (634)
                                                             =======              =======            ========

</TABLE>









                 See notes to consolidated financial statements.



                                       31
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------
<TABLE>
<CAPTION>
                                               COMMON STOCK, $.01 PAR,     ADDITIONAL
                                            25,000,000 SHARES AUTHORIZED                              NET UNREALIZED HOLDING
                                            ----------------------------                     PAID-IN    RETAINED  GAIN ON AVAILABLE
                                               SHARES          AMOUNT        CAPITAL        EARNINGS  FOR SALE SECURITIES  TOTAL
                                               ------          ------        -------        --------  -------------------  -----
<S>                                           <C>           <C>            <C>            <C>            <C>           <C>
Balances, December 31, 1997                   5,471,311     $       54     $    9,763     $      682     $        -    $   10,499

Repurchase of common stock                      (58,000)            (1)          (169)             -              -          (170)

Issuance of common stock to executives
   and consultant                                42,000              1            112              -              -           113

Exercise of stock options                        13,333              -             20              -              -            20

Net loss                                              -              -              -           (634)             -          (634)
                                             ----------     ----------     ----------     ----------     ----------    ----------

Balances, December 31, 1998                   5,468,644             54          9,726             48              -         9,828

Net income                                            -              -              -          1,367              -         1,367
                                             ----------     ----------     ----------     ----------     ----------    ----------

Balances, December 31, 1999                   5,468,644             54          9,726          1,415              -        11,195

Exercise of stock options                         1,667              -              3              -              -             3

Net loss                                              -              -              -           (266)             -          (266)

Unrealized gain on available for sale
  securities                                          -              -              -              -             25            25
                                             ----------     ----------     ----------     ----------     ----------    ----------

Balances, December 31, 2000                   5,470,311     $       54     $    9,729     $    1,149     $       25    $   10,957
                                             ==========     ==========     ==========     ==========     ==========    ==========
</TABLE>

                 See notes to consolidated financial statements.


                                       32
<PAGE>


                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------
<TABLE>
<CAPTION>
                                                                2000               1999              1998
                                                             ------------       ------------      ------------
<S>                                                           <C>                 <C>                <C>
Reconciliation of net income (loss) to net cash
   provided by (used in) operating activities:

     Net income (loss)                                        $    (266)          $ 1,367            $  (634)

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

       Compensation expense paid through
         issuance of common stock                                    -                 -                 113
       Depreciation and amortization                                323               326                398
       Deferred income taxes                                       (197)              900               (615)
       Increase in allowance for
         doubtful accounts                                           -                 40                 38

       Changes in assets (increase) decrease:
         Accounts receivable                                     (3,098)           (1,434)             3,936
         Retainage receivable                                       859              (375)             1,237
         Costs and estimated earnings in excess
           of billings on uncompleted contracts                     200                54               (183)
         Prepaid expenses and other receivables                    (661)                9                491

       Changes in liabilities increase (decrease):
         Accounts payable                                         2,553               806             (3,044)
         Retainage payable                                            7              (468)            (1,788)
         Accrued payroll and benefits                               (17)              739               (380)
         Accrued expenses                                           311               180               (544)
         Billings in excess of costs and estimated
           earnings on uncompleted contracts                       (511)            2,267              1,444
         Long-term liabilities                                      (19)              (17)               (13)
                                                              ---------           -------            -------

                Net cash provided by (used in)
                  operating activities                             (516)            4,394                456
                                                              ---------           -------            -------

</TABLE>


                                       33
<PAGE>

                 See notes to consolidated financial statements.

                            KSW, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONCLUDED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------
<TABLE>
<CAPTION>
                                                                2000               1999              1998
                                                             ------------       ------------      ------------
<S>                                                              <C>                <C>               <C>
   Cash flows from investing activities:
     Purchase of marketable securities                           (2,516)               -                 -
     Purchase of property and equipment                            (123)             (147)               (86)
                                                              ---------           -------            -------

                Net cash used in investing activities            (2,639)             (147)               (86)
                                                              ---------           -------            -------


   Cash flows from financing activities:
     Exercise of stock options                                        3                -                  20
     Repurchase of common stock                                      -                 -                (170)
                                                               --------           -------            -------

                Net cash provided by (used in)
                  financing activities                                3                -                (150)
                                                               --------           -------            -------

Net increase (decrease) in cash and cash equivalents             (3,152)            4,247                220

Cash and cash equivalents, beginning of year                      6,651             2,404              2,184
                                                               --------           -------            -------

Cash and cash equivalents, end of year                         $  3,499           $ 6,651            $ 2,404
                                                               ========           =======            =======

Supplemental disclosure of cash flow information:

   Cash paid during the year for:

     Interest                                                  $     22           $    29            $    33
                                                               ========           =======            =======

     Income taxes                                              $    690           $    35            $     8
                                                               ========           =======            =======

</TABLE>

                 See notes to consolidated financial statements.



                                       34
<PAGE>


                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
------------------------------------------------------

During 1998, the Company issued 42,000 shares of common stock of which 17,000
shares of stock were allocated to Company executives and 25,000 shares of stock
were allocated as payments to a consultant. The fair market value of the
additional 42,000 shares issued was approximately $113 at the date of issuance.

See Note 13 (C) for other noncash financing activities.


 (1)   PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS:

       The consolidated financial statements for the years ended December 31,
       2000, 1999 and 1998 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.

(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, 1999, cash equivalents consisted of investments in
              Euro-dollars with original maturities of one week or less.



                                       35
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

       (B)    REVENUE AND COST RECOGNITION:

              Revenue is primarily recognized on the "percentage of completion"
              method for reporting revenue on 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.

              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.

              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.




                                       36
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


       (C)    MARKETABLE SECURITIES:

              Marketable securities, consisting primarily of certificates of
              deposits and mutual funds, are classified as "available-for-sale"
              securities and are stated at fair value. Realized gains and
              losses, determined using the specific identification method, are
              included in earnings. Unrealized holding gains and losses are
              reported as a separate component of stockholder's equity.

       (D)    ALLOWANCE FOR DOUBTFUL ACCOUNTS:

              The Company establishes an allowance for uncollectible trade
              accounts received based on historical collection experience and
              management's evaluation of collectibility of outstanding accounts
              receivable. The allowance for doubtful accounts was $200 as of
              December 31, 2000 and 1999, respectively.

       (E)    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)    GOODWILL:

              Goodwill, which represents the excess of cost over the fair value
              of net assets acquired, is amortized using the straight-line
              method over 30 years.

              The Company assesses the recoverability of goodwill periodically
              by determining whether the amortization of the goodwill balance
              over its remaining life can be recovered through projected
              undiscounted cash flows. The amount of goodwill impairment, if
              any, is charged to operations in the period in which goodwill
              impairment is determined by management. At December 31, 2000, 1999
              and 1998, no impairment of goodwill was determined by management.




                                       37
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------



              Goodwill at December 31, 2000 and 1999 is as follows:

                                                         2000           1999
                                                       ----------    ----------

                   Goodwill                             $ 4,990        $ 4,990

                   Less: accumulated amortization         1,323          1,170
                                                        -------        -------

                     Net goodwill                       $ 3,667        $ 3,820
                                                        =======        =======

              Amortization expense for the Years ended December 31, 2000, 1999
              and 1998 amounted to approximately $153 per year.

       (G)    INCOME TAXES:

              The Company accounts for income taxes under Statement of Financial
              Accounting Standards No. 109, "Accounting for Income Taxes." Under
              Statement No. 109, the asset and liability method is used in
              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 is more likely than not that some or all of the
              deferred tax assets will not be realized through future
              operations.

       (H)    NET INCOME (LOSS) PER SHARE:

              Net income (loss) per share-basic is computed based on the
              weighted average number of shares of common stock outstanding. Net
              income (loss) per share-dilutive reflects the potential dilution
              that could occur if securities or other contracts to issue common
              stock were exercised or converted into common stock or otherwise
              resulted in the issuance of common stock and is computed similarly
              to "fully diluted" net income (loss) per share that was reported
              under previous accounting standards. Dilutive potential common
              shares do not have a significant dilutive effect.



                                       38
<PAGE>



                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

       (I)    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.

       (J)    STOCK-BASED COMPENSATION:

              In October 1995, the Financial Accounting Standards Board issued
              Statement of Financial Accounting Standards No. 123, "Accounting
              for Stock-Based Compensation" (SFAS 123). Under SFAS 123,
              companies are encouraged, but not required, to adopt a fair value
              based method of accounting for stock compensation awards. As
              permitted by SFAS 123, the Company has elected to continue to
              measure compensation cost using the intrinsic value based method
              as prescribed in Accounting Principles Board opinion No. 25,"
              Accounting for Stock Issued to Employees" and to provide the
              disclosures required by SFAS 123 (see Note 13(C)).

(3)    MARKETABLE SECURITIES:

       The cost and fair value of the marketable securities, classified as
       available-for-sale securities at December 31, 2000 was as follows:
<TABLE>
<CAPTION>
                                                              Gross             Gross
                                                            Unrealized       Unrealized        Fair
                                             Cost         Holding Gains    Holding Losses      Value
                                             ----         -------------    --------------      -----
<S>                                         <C>               <C>             <C>             <C>
       Stock based mutual funds             $    500          $ 15            $      -        $     515
       Bond based mutual funds                 1,017            10                   -            1,027
       Certificates of deposits                  999            -                    -              999
                                            --------          ----            ---------       ---------

                                            $  2,516          $ 25            $      -        $   2,541
                                            ========          ====            =========       =========
</TABLE>


                                       39
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

       For the year ended December 31, 2000, gross unrealized gains on the sale
       of available-for-sale securities were $25. The change in net unrealized
       holding gains is $25 for the year ended December 31, 2000.

(4)    RETAINAGE RECEIVABLE:

       At December 31, 2000, approximately $183 of the retainage receivable is
       not collectible within one year.

(5)    CONSTRUCTION CONTRACTS:

       Information with respect to contracts in progress at December 31, 2000
       and 1999 is as follows:
<TABLE>
<CAPTION>
                                                                     2000                1999
                                                                  ------------       ------------
<S>                                                                 <C>                <C>
       Expenditures on uncompleted contracts                        $ 37,625           $  32,644

       Estimated earnings thereon                                      1,402               5,972
                                                                    --------           ---------

                                                                      39,027              38,616

       Less billings applicable thereto                               43,712              43,612
                                                                    --------           ---------

                                                                    $ (4,685)          $  (4,996)
                                                                    =========          ==========
       Included in the accompanying consolidated balance
         sheets under the following captions:

         Costs and estimated earnings in excess of
           billings on uncompleted contracts                        $    138           $     338

         Billings in excess of costs and estimated
           earnings on uncompleted contracts                          (4,823)             (5,334)
                                                                    --------           ---------

                                                                    $ (4,685)          $  (4,996)
                                                                    =========          ==========
</TABLE>


                                       40
<PAGE>

       The Company experienced a delay and consequently incurred unexpected
       costs on one of its projects which resulted in a subsequent acceleration
       of work to meet the contract schedule. In addition, working out of
       sequence resulted in additional unanticipated costs of $800 in 1998. The
       effect of the additional costs incurred was to decrease net income for
       the year ended December 31, 1998 by $471 ($.09 per share-basic and $.08
       per share-diluted). The Company has submitted a proposal in the sum of
       $3,663 seeking an equitable adjustment for KSW's unanticipated additional
       costs. In addition, the Company has filed a mechanic's lien to recover
       its contract balance and unpaid change order proposals, which the General
       Contractor has bonded. Discovery has been completed and the action placed
       on the trial calendar. The Company has elected not to record claims until
       the amount of the claim has been settled (see Note 9(F)). At December 31,
       2000 and 1999, approximately $1,937 for billings applicable to the base
       contract, is included in accounts and retainage receivable relating to
       this contract.

(6)    PROPERTY AND EQUIPMENT:

       Property and equipment at December 31, 2000 and 1999 consist of the
       following:
<TABLE>
<CAPTION>
                                                                                   2000                1999
                                                                                ------------       ------------
<S>                                                                               <C>                <C>
              Machinery and equipment                                             $   559            $    550
              Furniture and fixtures                                                  597                 523
              Leasehold improvements                                                  825                 805
                                                                                  -------            --------

                                                                                    1,981               1,878

              Less accumulated depreciation and amortization                        1,644               1,494
                                                                                  -------            --------

              Net property and equipment                                          $   337            $    384
                                                                                  =======            ========
</TABLE>
       Depreciation and amortization expense relating to property and equipment
       was approximately $170, $173 and $245 for the Years ended December 31,
       2000, 1999 and 1998, respectively.

(7)    INCOME TAXES:

       The components of income tax expense (benefit) are as follows:

                                 2000               1999              1998
                               ----------         ---------         ----------
       Current
          Federal                $   (16)          $   119            $    -
          State and local             50               124                 49
                                 -------           -------            -------
                                      34               243                 49
                                 -------           -------            -------



                                       41
<PAGE>



                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------
<TABLE>
<CAPTION>
<S>                                                                <C>                <C>               <C>
       Deferred
          Federal                                                  (122)              565               (373)
          State and local                                           (75)              335               (242)
                                                                -------           -------            -------

                                                                   (197)              900               (615)
                                                                -------           -------            -------

                           Total                                $   163           $ 1,143            $  (566)
                                                                =======           =======            ========

       A reconciliation of the statutory Federal income tax rate to the provision for income taxes is
       as follows:
                                                                2000               1999              1998
                                                              ----------         ---------         ----------

       Statutory Federal income tax rate (benefit)                (34)%              34%               (34)%
       State and local taxes, net of Federal tax benefit           (7)               12                (12)
       Adjustment of prior year over accrual                        3                -                  (1)
                                                                -------            ------            --------

                                                                  (38)%              46%               (47)%
                                                                =======            ======            ========


       The 2000 tax benefit on state and local taxes is offset by current
       provisions based on net worth.

       The details of deferred tax assets and liabilities are as follows:
                                                                                    2000                1999
                                                                                 -----------        -----------

       Deferred income tax assets:
             Property and equipment                                                $  283              $   313
             Allowance for doubtful accounts                                           92                   92
             Net operating loss carryforward                                          227                   -
                                                                                   ------              -------
             Total deferred income tax assets                                         602                  405

       Deferred income tax liabilities:
             Amortization of goodwill                                                 405                  405
                                                                                   ------              -------

                   Net deferred income tax asset                                   $  197              $    -
                                                                                   ======              =======

</TABLE>

                                       42
<PAGE>


                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


       During 1999, the Company utilized its net operating loss carryforward of
       approximately $1,800. At December 31, 2000, the Company has a net
       operating loss carryfoward of approximately $600 through 2015. At
       December 31, 2000, $227 of the net current portion of deferred income tax
       asset is recorded as a current asset and $30 net deferred income tax
       liability is included in long-term liabilities in the accompanying
       balance sheet.

(8)    ACCUMULATED OTHER COMPREHENSIVE INCOME:

       At December 31, 2000 and 1999, accumulated other comprehensive income,
       which consists of unrealized holding gains on available for sale
       securities, is as follows:

                                                  2000                 1999
                                                ---------           ---------

       Beginning balance                        $      -            $     -
       Current period change                          25                  -
                                                --------            --------

       Ending balance                           $     25            $     -
                                                ========            ========

(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. Management believes that all contingent liabilities
              will be satisfied by performance on the specific bonded contracts
              involved.

       (B)    OPERATING LEASES:

              The Company is obligated under noncancelable operating leases,
              including a lease with its chief executive officer, for office
              space with future rental payments at December 31, 2000 as follows:




                                       43
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------
<TABLE>
<CAPTION>
                   YEAR ENDING
                   DECEMBER 31                          NON-AFFILIATED         RELATED PARTY            TOTAL
                   -----------                          --------------         -------------            -----
<S>                                                           <C>                  <C>                  <C>
                       2001                                   $ 173                $ 103                $  276
                       2002                                     176                  103                   279
                       2003                                     180                    -                   180
                       2004                                      91                    -                    91
                                                              -----                -----                ------

                                                              $ 620                $ 206                $  826
                                                              =====                =====                ======
</TABLE>
              In accordance with the lease agreement, the Company has the option
              to extend its non- affiliated lease an additional five years from
              June 2004 through June 2009.

              Rent expense for the Years ended December 31, 2000, 1999 and 1998
              amounted to approximately $272, $282 and $381, respectively,
              including $103 to a related party in each year.

       (C)    EMPLOYMENT AGREEMENTS:

              KSW Mechanical Services, Inc. has entered into employment
              agreements with two of its officers for the period January 1999
              through December 2000. These agreements provide for aggregate base
              annual compensation of $660 each year plus 15% of income before
              taxes in excess of $250. The officers are also entitled to medical
              insurance, disability insurance and life insurance.

       (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 have been no
              violations of laws, which could have a material adverse impact on
              the financial condition of the Company.




                                       44
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

       (E)    CONSULTING AGREEMENTS:

              The Company entered into an agreement for independent advisory and
              consulting services, from January 1, 1996 through December 31,
              1998 with annual payments totalling $75. This agreement also
              provided the consultant with 15,000 options to purchase shares of
              the Company's common stock at $1.50 per share. The options were
              issued pursuant to the 1995 Stock Option Plan (see Note 13(C)).
              The agreement was not extended after its expiration date.

              During 1998, the Company approved the issuance of 42,000 shares of
              common stock of which 25,000 shares were issued to these
              consultants in lieu of cash payments with a fair market value of
              approximately $67. These transactions have been reflected in the
              Company's consolidated financial statements for the year ended
              December 31, 1998 (see Note 13(B)).

       (F)    LEGAL:

              Co-op City. In February 1999, the Company sued the General
              Contractor and its bonding company in New York State Supreme
              Court, Queens County, to recover its contract balance and unpaid
              proposals in the sum of $5,771 as adjusted. Included is a claim
              for unanticipated costs incurred through 1998 in the sum of
              $3,663. Discovery has been completed and the action placed on the
              trial calendar. The case should be tried within the next twelve
              months. While the Company and its counsel believe this lawsuit has
              merit, there is no guarantee the claim will ultimately be
              successful.

              Helionetics Creditors Committee v. Barnes, et. al. On April 26,
              1999, the Company and six current or former officers and directors
              were named in a lawsuit in U.S. Bankruptcy Court, Central District
              of California, instituted by the Creditors Committee of
              Helionetics, Inc. The complaint alleges that the December 28, 1995
              Distribution by Helionetics of KSW, Inc. stock to Helionetics'
              shareholders was a fraudulent conveyance, and seeks compensatory
              damages of $10,890, plus punitive damages. The December 28, 1995
              distribution of stock was described in a Form 10 registration
              filed with Securities and Exchange Commission. The Company
              believes


                                       45
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


              that the lawsuit is totally without merit, has accrued costs for
              litigation expenses, and is aggressively defending the case. The
              Company has elected not to record this claim until the amount or
              the claim has been settled. Discovery has been completed. On March
              15, 2001, the Court denied a motion for summary judgment filed by
              the Plaintiff, and also denied a cross-motion for summary judgment
              filed by the Company and its Directors, except the Court dismissed
              the case against merits, and scheduled a further hearing on May 3,
              2001.

 (10)  CONCENTRATION RISKS:

       (A)    CREDIT RISK:

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

              The Company maintains its cash and cash equivalents 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,
              2000 and 1999, amounts in excess of federally insured limits
              totaled approximately $3,394 and $6,436, respectively.

              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. Accounts and
              retainage receivables from the Company's three largest customers
              totaled approximately $8,027 and $7,611, respectively at December
              31, 2000 and 1999.

       (B)    LABOR CONCENTRATIONS:

              The Company's direct labor is supplied primarily by unions through
              collective bargaining agreements expiring through June 2001.
              Although the Company's past experience was favorable with respect
              to resolving conflicting demands with these unions, it is always
              possible that a protracted conflict may occur which will impact
              the renewal of the collective bargaining agreements.




                                       46
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


       (C)    CONTRACT REVENUE/SIGNIFICANT CUSTOMERS:

              The Company earned approximately 20%, 19% and 15% of its contract
              revenue in 2000, 23%, 20% and 18% of its contract revenue in 1999
              and 29%, 20% and 18% of its contract revenue in 1998 from its
              three largest customers.

(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. The Company expensed approximately $62, $51 and $51, as a
              25% matching contribution for the Years ended December 31, 2000,
              1999 and 1998, respectively.

       (B)    MULTIEMPLOYER PENSION PLANS:

              The Company has made 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. It is not cost effective to accumulate
              information regarding the pension expense under these plans.

(12)   LINE OF CREDIT - BANK

       On June 30, 2000 the Company instituted a one year renewable line of
       credit in the amount of $2,000 with Merrill Lynch. The line of credit
       calls for borrowing at 3% over the 30 day dealer commercial paper rate.
       At December 31, 2000 the borrowing base rate was approximately equal to
       prime and there were no outstanding borrowings against this line.



                                       47
<PAGE>


                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

(13)   STOCKHOLDERS' EQUITY:

       (A)    REPURCHASE OF COMMON STOCK:

              During 1998, the Company purchased 58,000 shares of its common
              stock under a Board of Directors resolution authorizing the
              Company to purchase up to 10% of its outstanding shares.

       (B)    ISSUANCE OF COMMON STOCK - EXECUTIVES AND CONSULTANTS:

              During 1998, the Company issued 25,000 shares of common stock to a
              consultant in lieu of cash payments (see Note 9(E)) and 17,000
              shares to executives as bonuses. The consolidated financial
              statements reflect the effect of 42,000 shares issued per this
              resolution. The fair market value of these shares at December 31,
              1998 was approximately $42.

       (C)    STOCK OPTION PLAN:

              The Board of Directors of the Company adopted the 1995 Stock
              Option Plan (the Plan). The Plan enabled the Company to offer an
              incentive-based compensation system to its employees, officers,
              directors and consultants.

              A total of 750,000 shares were authorized for issuance under the
              Plan. Options to purchase 610,000 shares of common stock at $1.50
              per share were issued (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
              grants. 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 option may again


                                       48
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------

              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 aggregate
              number of shares of common stock available for future options to
              490,000 shares of common stock.

              Holders of shares issued pursuant to the Plan are entitled to
              registration of such shares annually, subject to restrictions in
              any underwriting agreement. During 2000, 1999 and 1998, 1,667, -0-
              and 13,333 options, respectively, under the Plan were exercised.
              During 2000 and 1998 no new options were granted. During 1999,
              55,000 options were issued to employees and a director. At
              December 31, 2000, there were 650,000 exercisable options
              outstanding, all of which have an exercise price of $1.50 per
              share.

              The Company has adopted the disclosure-only provisions of
              Statement of Financial Accounting Standards No. 123, "Accounting
              for Stock-Based Compensation." Accordingly, no compensation cost
              has been recognized for the stock option plan. Had compensation
              cost for the Company's stock option plan been determined based on
              the fair value at the grant date consistent with the provisions of
              SFAS No. 123, the Company's pro forma net income for 1999 would
              have been $1,338 and the pro forma net income per share - basic
              and diluted would remain at .25, unchanged.

              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.


       (D)    PREFERRED STOCK:

              The Company is authorized to issue 1,000,000 shares of preferred
              stock. Through December 31, 2000, no shares of preferred stock
              have been issued by the Company.



                                       49
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                          ----------------------------


(14)   BACKLOG:

       At December 31, 2000, the Company had a backlog of $61,662. 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. Backlog consists
       of the following:

       Estimated revenue to be recognized from:
         Uncompleted contracts in progress                   $ 48,284
         Letters of intent                                     13,378
                                                             --------

                                                             $ 61,662
                                                             ========

(15)   INTERIM FOURTH QUARTER 2000 RESULTS:

       For the quarter ended December 31, 2000, the Company's gross margin
       decreased 11.34%, as compared to the gross margin for the nine months
       ended September 2000,resulting in a $19 gross margin loss for the
       quarter. After taking into account overhead expenses ($969) and income
       tax benefits ($490), the Company incurred a net loss of $498 during the
       quarter ended December 31, 2000. Management believes this decrease is
       attributed to lower than expected productivity and higher labor costs
       associated with full employment in the construction industry environment
       and resultant competition for the limited workforce available.






                                       50
<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
March 27, 2001 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
                                        March 26, 2001


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons 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
                                      March 26, 2001




                                       51
<PAGE>

                                      /s/ Burton Reyer
                                      ----------------
                                      Burton Reyer
                                      Vice President and Director
                                      March 26, 2001


                                      /s/ Robert Brussel
                                      ------------------
                                      Robert Brussel
                                      Chief Financial Officer and Director
                                      March 26, 2001


                                      /s/ Stanley Kreitman
                                      --------------------
                                      Stanley Kreitman
                                      Director
                                      March 26, 2001


                                      /s/ Daniel Spiegel
                                      ------------------
                                      Daniel Spiegel
                                      Director
                                      March 26, 2001





                                       52
<PAGE>

                                  EXHIBIT INDEX


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


2.1 /\     Form of Modification of Lease Agreement dated as of May 1, 1998

3.i.2 /\   Amended and Restated Articles of Incorporation of the Registrant

3.ii.2 /\  Amended and Restated By-Laws of the Registrant

10.1 /\    Employment Agreement, dated as of January 1, 1994, by and among KSW
           Mechanical Services, Inc., Floyd Warkol and the Registrant

10.2 /\    Employment Agreement, dated as of January 1, 1994, by and among KSW
           Mechanical Services, Inc., Burton Reyer and the Registrant

10.3 /\    Amendatory Employment Agreement, dated as of December 15, 1995, by
           and among KSW Mechanical Services, Inc., the Registrant and Floyd
           Warkol

10.4 /\    Amendatory Employment Agreement, dated as of December 15, 1995, by
           and among KSW Mechanical Services, Inc., the Registrant and Burton
           Reyer

10.5 /\    Form of Second Amendatory Employment Agreement dated as of December
           31, 1998 by and among KSW Mechanical Services, Inc. the Registrant
           and Floyd Warkol

10.6 /\    Form of Second Amendatory Employment Agreement dated as of December
           31, 1998 by and among KSW Mechanical Services, Inc. the Registrant
           and Burton Reyer

21.1 /\    List of Subsidiaries


---------------------------
/\  Previously Filed.



                                       53