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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10 - Q

(MARK ONE)

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

                For the quarterly period ended September 30, 2006

                                       OR

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

                For the transition period from ______ to ______.

                        Commission File Number 001-32865

                                    KSW, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Delaware                              11-3191686
       ------------------------------             ----------------------
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)             Identification Number)


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

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                   YES [X]   NO [ ]

     Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

Large Accelerated Filer [ ]   Accelerated Filer [ ]  Non-Accelerated Filer [X]

     Indicate  by check mark  whether  the  Registrant  is a shell  company  (as
defined in Rule 12b-2 of Exchange Act). Yes [ ] No [X]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:

                                                OUTSTANDING AT
                  CLASS                        NOVEMBER 7, 2006
         -----------------------------------   ----------------
         Common stock, $.01 par value             5,734,811

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<PAGE>

                                    KSW, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                        QUARTER ENDED SEPTEMBER 30, 2006

                                TABLE OF CONTENTS

                                                                        PAGE NO.
                                                                        --------
PART 1   FINANCIAL INFORMATION

Item 1.  Financial Statements

             Consolidated Balance Sheets -
             September 30, 2006 and December 31, 2005                         3

             Consolidated Statements of Income -
             Three and nine months ended September 30, 2006 and 2005          4

             Consolidated Statements of Comprehensive Income   -
             Three and nine months ended September 30, 2006 and 2005          5

             Consolidated Statement of Stockholders' Equity -
             Nine months ended September 30, 2006                             6

             Consolidated Statements of Cash Flows
             Nine months ended September 30, 2006 and 2005                    7

             Notes to Consolidated Financial Statements                       8

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations                   12

Item 3.      Quantitative and Qualitative Disclosures About
             Market Risk                                                     19

Item 4.      Controls and Procedures                                         19

PART II  OTHER INFORMATION

Item 1       Legal Proceedings                                               20
Item 1A      Risk Factors                                                    20
Item 2       Unregistered Sales of Equity Securities and Use of Proceeds     20
Item 3       Defaults Upon Senior Securities                                 20
Item 4       Submission of Matters to a Vote of Security Holders             20
Item 5       Other Information                                               20
Item 6       Exhibits                                                        20

SIGNATURE                                                                    21
INDEX TO EXHIBITS                                                            22

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                            KSW, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                             September 30,    December 31,
                                                                 2006            2005
                                                             -------------   -------------
                                                              (unaudited)
<S>                                                          <C>             <C>
ASSETS
Current assets:
   Cash                                                      $      11,514   $       5,199
   Marketable securities                                               813             774
   Accounts receivable, less allowance
     for doubtful accounts of $200 at
     9/30/06 and 12/31/05                                           12,746          11,887
   Retainage receivable                                              5,570           2,764
   Costs and estimated earnings in excess of
     billings on uncompleted contracts                               1,468             480
   Prepaid expenses and other receivables                              293             144
                                                             -------------   -------------
      Total current assets                                          32,404          21,248

Property and equipment, net of accumulated
   depreciation and amortization of $2,017 and $1,969
   at 9/30/06 and 12/31/05, respectively                               252             112

Deferred income taxes and other                                        621           1,350
                                                             -------------   -------------
   Total assets                                              $      33,277   $      22,710
                                                             =============   =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                          $      12,497   $       9,533
   Retainage payable                                                 2,981           1,576
   Accrued payroll and benefits                                      1,300             542
   Accrued expenses                                                    427             206
   Billings in excess of costs and estimated
    earnings on uncompleted contracts                                3,544           1,335
   Income taxes payable                                                678               -
                                                             -------------   -------------
        Total current liabilities                                   21,427          13,192
                                                             -------------   -------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value, 1,000,000 shares
      authorized, no shares issued and outstanding                       -               -
   Common stock, $.01 par value, 25,000,000 shares
     authorized, 5,716,611 and 5,470,311 shares issued
     and outstanding at 9/30/06 and 12/31/05, respectively              57              54
   Additional paid-in capital                                       10,635           9,729
   Retained earnings (deficit)                                       1,061            (347)
   Accumulated other comprehensive income:
      Net unrealized holding gains on available
        for sale securities                                             97              82
                                                             -------------   -------------
        Total stockholders' equity                                  11,850           9,518
                                                             -------------   -------------
   Total liabilities and stockholders' equity                $      33,277   $      22,710
                                                             =============   =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                               3
<PAGE>

                            KSW, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                 (in thousands, except share and per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                      Three Months        Three Months       Nine Months        Nine Months
                                          Ended              Ended             Ended              Ended
                                      September 30,      September 30,      September 30,      September 30,
                                          2006               2005               2006                2005
                                      -------------      -------------      -------------      -------------
<S>                                   <C>                <C>                <C>                <C>
Revenues                              $      21,644      $      14,849      $      57,537      $      36,277
Cost of revenues                             19,204             13,333             50,489             32,490
                                      -------------      -------------      -------------      -------------
 Gross profit                                 2,440              1,516              7,048              3,787

Selling, general and
 administrative expenses                      1,149(1)           1,022              4,001(1)           2,831
                                      -------------      -------------      -------------      -------------

  Operating income                            1,291                494              3,047                956
                                      -------------      -------------      -------------      -------------

Other income :
  Interest income, net                           94                  2                212                 12
  Gain on sales of
   marketable securities                          -                  -                  -                 15
                                      -------------      -------------      -------------      -------------
 Total other income                              94                  2                212                 27
                                      -------------      -------------      -------------      -------------

 Income before provision
  (benefit) for income taxes                  1,385                496              3,259                983

Provision (benefit) for income
  taxes                                         600               (766)(2)          1,510               (732)(2)
                                      -------------      -------------      -------------      -------------

Net income                            $         785      $       1,262      $       1,749      $       1,715
                                      =============      =============      =============      =============

Income per common share:
  Basic                               $         .14      $         .23      $         .31      $         .31
  Diluted                             $         .13      $         .23      $         .30      $         .31

Weighted average common
 shares outstanding:
  Basic                                   5,711,886          5,470,311          5,644,441          5,470,311
  Diluted                                 5,843,934          5,547,363          5,775,160          5,470,311

Cash dividend declared and
  and paid per common share           $           -      $           -      $         .06      $           -
</TABLE>

(1) During the three months and nine months ended  September  30, 2006,  selling
and general  administrative  expenses include stock compensation expenses of $23
and  $506,  respectively,  related  to the  exercise  of stock  options  and the
adoption of the new accounting standard, SFAS 123-R.

(2) During the three  months and nine  months  ended  September  30,  2005,  the
provision  (benefit)  for income  taxes  includes the reversal of a deferred tax
valuation allowance of $759.

           See accompanying notes to consolidated financial statements.

                                                                               4
<PAGE>

                            KSW, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                      Three Months       Three Months        Nine Months        Nine Months
                                          Ended              Ended              Ended              Ended
                                      September 30,      September 30,      September 30,      September 30,
                                          2006               2005               2006               2005
                                      -------------      -------------      -------------      -------------
<S>                                   <C>                <C>                <C>                <C>
Net income                            $         785      $       1,262      $       1,749      $       1,715
                                      -------------      -------------      -------------      -------------

Other comprehensive income
 before tax:

Unrealized holding gains
 arising during the
 period                                          27                 39                 27                 29

 Less: reclassification adjustment
  for gains included in net
  income                                          -                  -                  -                (15)
                                      -------------      -------------      -------------      -------------

Other comprehensive income
 before tax expense                              27                 39                 27                 14


Income tax expense related to
 items of other comprehensive
 income                                          12                 18                 12                  7
                                      -------------      -------------      -------------      -------------

Other comprehensive income,
 net of tax expense                              15                 21                 15                  7
                                      -------------      -------------      -------------      -------------

Total comprehensive income            $         800      $       1,283      $       1,764      $       1,722
                                      =============      =============      =============      =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                               5
<PAGE>

                            KSW, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                      NINE MONTHS ENDED SEPTEMBER 30, 2006
                        (in thousands, except share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                               Common Stock           Additional       Retained           Other
                                         -------------------------     Paid-In         Earnings       Comprehensive
                                           Shares        Amount        Capital         (Deficit)         Income           Total
                                         -----------   -----------   -------------   -------------    -------------   -------------
<S>                                        <C>         <C>           <C>             <C>              <C>             <C>
Balances, December 31, 2005                5,470,311   $        54   $       9,729   $        (347)   $          82   $       9,518

Net income                                         -             -               -           1,749                -           1,749

Exercise of stock options                    246,300             3             887               -                -             890

Stock based compensation                           -             -              19               -                -              19

Cash dividends paid - $ .06 per share              -             -               -            (341)               -            (341)

Net unrealized gains on available
 for sale securities                               -             -               -               -               15              15
                                         -----------   -----------   -------------   -------------    -------------   -------------

Balances, September 30, 2006               5,716,611   $        57   $      10,635   $       1,061    $          97   $      11,850
                                         ===========   ===========   =============   =============    =============   =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                               6
<PAGE>

                            KSW, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                      Nine Months      Nine Months
                                                         Ended            Ended
                                                     September 30,    September 30,
                                                         2006             2005
                                                     -------------    -------------
<S>                                                  <C>              <C>
Cash flows from operating activities:
   Net income                                        $       1,749    $       1,715
Adjustments to reconcile net income to
   cash  provided by operating
    activities:
   Depreciation and amortization                                48               45
   Deferred income taxes                                       949             (766)
   Realized gain on sales of marketable
    securities                                                   -              (15)
   Stock-based compensation expense
    related  to stock option plan                              503                -
Changes in operating assets and liabilities:
   Accounts receivable                                        (859)          (4,833)
   Retainage receivable                                     (2,806)            (858)
   Costs and estimated earnings in
    excess of billings on uncompleted
    contracts                                                 (988)            (506)
   Prepaid expenses and other receivables                     (149)            (151)
   Accounts payable                                          2,964            4,270
   Retainage payable                                         1,405              570
   Accrued payroll and benefits                                758              277
   Accrued expenses                                            221              138
   Billings in excess of costs and
    estimated earnings on uncompleted
    contracts                                                2,209            1,492
   Income taxes payable                                        678                -
                                                     -------------    -------------
Net cash provided by operating activities                    6,682            1,378
                                                     -------------    -------------

Cash flows from investing activities:

   Purchases of property and equipment                        (188)             (58)
   Proceeds from sales of marketable securities                  -              153
   Purchases of marketable securities                          (12)            (158)
                                                     -------------    -------------
Net cash used in investing activities                         (200)             (63)
                                                     -------------    -------------

Cash flows from financing activities:
   Proceeds from exercise of stock options                     406                -
   Tax benefits from exercise of stock options                (232)               -
   Cash dividends paid                                        (341)               -
                                                     -------------    -------------
Net cash used in financing activities                         (167)               -
                                                     -------------    -------------

   Net increase in cash                                      6,315            1,315

Cash, beginning of period                                    5,199            2,960
                                                     -------------    -------------

Cash, end of period                                  $      11,514    $       4,275
                                                     =============    =============
Supplemental disclosure of cash flow
 Information
Cash paid during the period for:
     Interest                                        $           9    $           9
     Income taxes                                    $         113    $          34
</TABLE>

         See accompanying notes to consolidated financial statements.

                                                                               7
<PAGE>

                            KSW, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.   Nature of Operations and Basis of Presentation

The Company  furnishes and installs  heating,  ventilating and air  conditioning
systems and process 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.  The Company considers
itself to be one operating segment.

The  unaudited  consolidated  financial  statements  presented  herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the  information  and note  disclosures  required  by  accounting  principles
generally  accepted  in  the  United  States  of  America.   These  consolidated
statements should be read in conjunction with the financial statements and notes
thereto  included in the  Company's  Form 10-K for the year ended  December  31,
2005.

In the opinion of management,  the accompanying unaudited consolidated financial
statements  include all  adjustments,  necessary for a fair  presentation of the
financial  position of the Company as of  September  30, 2006 and  December  31,
2005,  and its  income  and  comprehensive  income  for the three and nine month
periods ended  September  30, 2006 and 2005,  and cash flows for the nine months
ended September 30, 2006 and 2005.  Because of the possible  fluctuations in the
marketplace in the construction industry,  operating results of the Company on a
quarterly basis may not be indicative of operating results for the full year.

2.   Significant Accounting Policies

The significant  accounting  policies followed by the Company and its subsidiary
in preparing its consolidated  financial statements are set forth in Note (2) to
such consolidated  financial statements included in Form 10-K for the year ended
December 31, 2005. The Company has made no significant changes to these policies
during  2006,   except  for  its   accounting   policy  related  to  stock-based
compensation, described below:

On January 1, 2006,  the Company  adopted  Statement  No.  123-R,  "Share  Based
Payment"  ("SFAS  123-R").  SFAS 123-R  requires  all share  based  payments  to
employees,  including grants of employee stock options,  to be recognized in the
financial  statements  based on the awards  fair value at the date of grant (pro
forma   disclosure  is  no  longer  an   alternative   to  financial   statement
recognition).  The  Company  has  elected to adopt  SFAS  123-R on the  modified
prospective  method.  Under the modified  prospective method of transition under
SFAS 123-R,  compensation  costs in 2006 include costs for options granted prior
to,  but not  vested  as of  December  31,  2005,  and  options  vested in 2006.
Therefore, results for prior periods have not been restated.

Prior to  January 1, 2006,  the  Company  applied  Accounting  Principles  Board
Opinion 25,  "Accounting  for Stock Issued to  Employees"  (APB 25), and related
interpretations.

                                                                              8
<PAGE>

The Company did not record  compensation  expense  because the exercise price of
the  shares was equal to the  market  price at the date of the grant.  SFAS 123,
"Accounting for Stock Based Compensation - Transition and Disclosure",  requires
proforma net income  disclosures  as if the fair value based  method  defined in
SFAS No. 123 has been applied.  The Company continued to apply the provisions of
APB 25 and provided the proforma disclosures required by SFAS 123 and amended by
SFAS 148.

The following table  illustrates the effect on net income and earnings per share
if the Company had applied the fair value  recognition  provisions of SFAS 123-R
during the three  months and nine  months  ended  September  30,  2005.  For the
purposes of this pro forma  disclosure,  the value of the  options is  estimated
using a  Black-Scholes  option-pricing  model and  amortized to expense over the
option vesting periods.

<TABLE>
<CAPTION>
                                                     Three Months      Nine Months
                                                         Ended           Ended
                                                     September 30,    September 30,
                                                         2005             2005
                                                     -------------    -------------
<S>                                                  <C>              <C>
Net income, as reported                              $   1,262,000    $   1,715,000
Deduct:  Total stock-based compensation
 expense determined under fair value
 based method for all awards,
 net of related tax effects                                  2,000            2,000
                                                     -------------    -------------

Pro forma net income                                 $   1,260,000    $   1,713,000
                                                     =============    =============
Earnings per share:
     Basic - as reported                             $         .23    $         .31
     Basic - pro forma                               $         .23    $         .31

     Diluted - as reported                           $         .23    $         .31
     Diluted - pro forma                             $         .23    $         .31
</TABLE>

The Company uses the  Black-Scholes  option - pricing model,  which requires the
input of subjective assumptions. These assumptions include estimating the length
of time employees will retain their vested stock options before  exercising them
("expected term"), the estimated  volatility of the Company's common stock price
over the  expected  term and the  number of  options  that will  ultimately  not
complete their vesting requirements  ("forfeitures").  Changes in the subjective
assumptions  can  materially  affect  the  estimate  of fair  value  stock-based
compensation and consequently, the related amount recognized on the consolidated
statements of income.

See Note (3) to these consolidated financial statements, "Stockholders' Equity",
for a more  detailed  discussion  of the effects of SFAS 123-R on the  Company's
results of operations and financial condition.

3.   Stockholders' Equity

On May 8,  2006,  the  Company's  Board of  Directors  declared  a special  cash
dividend of $.06 per share.  The  aggregate  amount of the dividend was $341,000
and such dividend was paid on June 15, 2006 to  shareholders of record as of May
24, 2006.

                                                                              9
<PAGE>

The  adoption  of SFAS 123-R  lowered  net  income by  approximately  $3,000 and
$9,000 for the three and nine months ended September 30, 2006, respectively.  In
addition,  during the quarter ended  September  30, 2006 an executive  exercised
options to purchase  6,300  shares  which  lowered net income for the quarter by
$9,000.  During the quarter  ended June 30, 2006,  an  executive  and a director
exercised  options to purchase  45,000  shares which  lowered net income for the
quarter by  $59,000.  During the first  quarter of 2006,  two  executives  and a
former director  exercised  options to purchase 195,000 shares which lowered net
income by $196,000.

As of  September  30,  2006,  there was  approximately  $48,000 of  unrecognized
compensation costs related to unvested share-based  compensation awards granted.
That cost is expected to be recognized over the next 2 years.

In  November  2005,  the FASB  issued  FASB Staff  Position  No.  SFAS  123-R-3,
"Transition  Election  Related to Accounting  for the Tax Effects of Share-Based
Payment Awards" ("FSP 123-R-3").  FSP 123-R-3  provides an elective  alternative
transition  method for calculating the pool of excess tax benefits  available to
absorb tax  deficiencies  recognized  subsequent  to the adoption of SFAS 123-R.
Companies  may take up to one year from the  effective  date of FSP  123-R-3  to
evaluate the available  transition  alternatives and make a one-time election as
to which method to adopt.  The Company is currently in the process of evaluating
the alternative methods.

Options are granted to certain  employees  and  directors at prices equal to the
market  value of the stock on the dates the options  were  granted.  The options
granted  generally  have a term of 10 years  from  the  grant  date and  granted
options vest ratably over a three year period.  The fair value of each option is
amortized into compensation  expense on a straight-line  basis between the grant
date for the option and each vesting date. The Company  estimates the fair value
of all  stock  option  awards  as of the  date  of the  grant  by  applying  the
Black-Scholes  pricing  valuation model. The application of this valuation model
involves  assumptions that are judgmental and sensitive in the  determination of
compensation  expense which would include the expected  stock price  volatility,
risk-free  interest rate,  weighted average expected life of the options and the
dividend yield.

Historical  information  is the primary  basis for the selection of the expected
volatility,  expected dividend yield and the expected lives of options. The risk
free interest rate was selected based upon yields of U.S. Treasury issues with a
term  equal to the  expected  life of the  option  being  valued.  Stock  option
activity for the nine months ended September 30, 2006 is as follows:

                                                                              10
<PAGE>

<TABLE>
<CAPTION>
                                                                     Weighted
                                                                      Average
                                                     Weighted        Remaining       Aggregate
                                   Number of         Average        Contractual      Intrinsic
                                    Shares        Exercise Price   Term in Years       Value
                                 -------------    --------------   -------------   -------------
<S>                                    <C>        <C>                       <C>    <C>
Outstanding at January 1, 2006         656,667    $         1.65

Expired/canceled                             -                 -
Granted                                      -                 -
Exercised                             (246,300)   $         1.65
                                 -------------
Outstanding at Sept. 30, 2006          410,367    $         1.65            5.03   $   1,079,000
                                 =============
Exercisable at Sept. 30, 2006          357,033    $         1.65            4.82   $     939,000
</TABLE>

There were no options  granted during the nine month period ended  September 30,
2006.

Cash proceeds,  tax benefits and intrinsic  value related to total stock options
exercised  during the three and nine months ended  September  30, 2006 and 2005,
respectively, are as follows:

<TABLE>
<CAPTION>
                                                    Three Months     Three Months     Nine Months      Nine Months
                                                       Ended            Ended            Ended            Ended
                                                   Sept. 30, 2006   Sept. 30, 2005   Sept. 30, 2006   Sept. 30, 2005
                                                   --------------   --------------   --------------   --------------
<S>                                                <C>              <C>              <C>              <C>
Proceeds from stock options exercised              $       11,000   $            -   $      406,000   $            -

Tax benefits related to stock options exercised    $        9,000   $            -   $      232,000   $            -

Intrinsic value of stock options exercised         $       13,000   $            -   $      484,000   $            -
</TABLE>

4.   Commitment and Contingencies -

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

                                                                              11
<PAGE>

     Purchase Agreement

     On May 4, 2006,  the Company  entered into an agreement  with a supplier of
     piping  materials,  whereby the Company has  committed to purchase  certain
     piping  products  normally used in its  operations,  as well as fabrication
     services,  at set prices  through April 30, 2007.  This  agreement does not
     cover all types of  materials  the Company  utilizes on its  projects.  The
     Company  has not been able to obtain  fixed  pricing on certain  materials,
     such as copper tubing, due to current pricing volatility.  The Company does
     not believe  that pricing  increases on items not covered by this  purchase
     agreement  will  have  a  material  effect  on  the  Company's  results  of
     operations.

5.   Recently Issued Accounting Pronouncements:

     In July 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued
     Interpretation  No. 48,  "Accounting  for  Uncertainty in Income Taxes - an
     Interpretation  of FASB  Statement  109" ("FIN 48").  FIN 48  prescribes  a
     comprehensive model for recognizing,  measuring,  presenting and disclosing
     in the financial  statements tax positions taken or expected to be taken on
     a tax  return,  including  a  decision  whether to file or not to file in a
     particular  jurisdiction.  FIN 48 is effective  for fiscal years  beginning
     after  December  15,  2006.  We are  currently  evaluating  the  impact  of
     implementing FIN 48 on our consolidated financial statements.

     In September  2006, the Securities and Exchange  Commission  ("SEC") issued
     Staff  Accounting  Bulletin No. 108 ("SAB 108").  SAB 108 is effective  for
     fiscal years ending after  November  15,  2006,  and early  application  is
     encouraged.  We are currently  evaluating the impact, if any, of SAB 108 on
     our consolidated financial statements.

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
     Standard No. 157, "Fair Value Measurements"  ("SFAS 157"). SFAS 157 defines
     fair value,  establishes a framework  for measuring  fair value and expands
     disclosures  about fair value  measurements,  but does not change  existing
     guidance as to whether or not an instrument is carried at fair value.  SFAS
     157 is effective for fiscal years beginning after November 15, 2007. We are
     currently   evaluating  the  impact  of   implementing   SFAS  157  on  our
     consolidated financial statements.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

REVENUES

Total revenues for the quarter ended September 30, 2006 increased by $6,795,000,
or 45.8%,  to  $21,644,000,  as compared to  $14,849,000  for the quarter  ended
September 30, 2005. Total revenues for the nine months ended September 30, 2006,
increased by

                                                                              12
<PAGE>

$21,260,000,  or 58.6%, to $57,537,000,  as compared to $36,277,000 for the nine
months ended  September 30, 2005.  These  increases in revenues were a result of
the  Company's  performance  on its backlog of work as of December 31, 2005,  as
well as work obtained  during the period.  As of September 30, 2006, the Company
had  backlog  of  approximately  $104,400,000,   as  compared  to  approximately
$83,000,000  as of September  30, 2005.  Not included in this backlog  amount is
approximately  $8,500,000 of new contracts awarded since September 30, 2006. The
Company  believes that  approximately  $85,000,000  of the Company's  backlog at
September  30, 2006 is not  reasonably  expected to be completed by December 31,
2006.

COST OF REVENUES

Cost of  revenues  for  the  quarter  ended  September  30,  2006  increased  by
$5,871,000, or 44.0%, to $19,204,000, as compared to $13,333,000 for the quarter
ended  September 30, 2005.  Cost of revenues for the nine months ended September
30, 2006 increased by  $17,999,000,  or 55.4%,  to  $50,489,000,  as compared to
$32,490,000  for the nine months ended  September 30, 2005. The increase in cost
of revenues corresponded to the increase in revenues for the applicable periods.
The increased  revenues have allowed the Company to allocate the cost of project
supervision and drafting  salaries over multiple  projects and more  effectively
utilize its  experienced  field labor  personnel.  In addition,  the Company has
taken steps to reduce  pricing  volatility of piping  materials by entering into
agreements to purchase these products at fixed prices.

GROSS PROFIT

Gross profit for the quarter ended September 30, 2006 was  $2,440,000,  or 11.3%
of revenues, as compared to a gross profit of $1,516,000,  or 10.2% of revenues,
for the quarter ended September 30, 2005. Gross profit for the nine months ended
September  30,  2006 was  $7,048,000,  or  12.2% of  revenues,  as  compared  to
$3,787,000,  or 10.4% of revenues, for the nine months ended September 30, 2005.
The increase in gross profit for the three and nine months ended  September  30,
2006,  as compared to the three and nine months ended  September  30, 2005,  was
primarily a result of the overall increases in revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses  ("SG&A") for the quarter  ended
September 30, 2006 increased by $127,000,  or 12.4%, to $1,149,000,  as compared
to $1,022,000 for the quarter ended September 30, 2005. SG&A for the nine months
ended September 30, 2006 increased by $1,170,000,  or 41.3%,  to $4,001,000,  as
compared to $2,831,000  for the nine months ended  September 30, 2005. A portion
of the  changes  were a result  of the  exercise  of stock  options,  as well as
expenses  related  to the  vesting of stock  options,  which  increased  SG&A by
$23,000 and  $506,000 for the three and nine months  ended  September  30, 2006,
respectively, as compared to the three and nine months ended September 30, 2005.
Professional  fees,  related to the Company's public filings with the Securities
and Exchange Commission, together with American Stock Exchange fees,

                                                                              13
<PAGE>

increased by $11,000 and $96,000 for the three and nine months  ended  September
30, 2006, respectively, as compared to three and nine months ended September 30,
2005.  The  remaining  increases  in SG&A for the  three and nine  months  ended
September  30, 2006, as compared to the same periods in 2005,  were  primarily a
result of increases in employment costs and office  expenses.  During the latter
half of 2005, the Company's Chief Executive  Officer returned to a five-day work
week, and additional office staff was hired,  which contributed to the increases
in 2006.

OTHER INCOME

Other income for the quarter ended  September 30, 2006 was $94,000,  as compared
to other income of $2,000 for the quarter ended September 30, 2005. Other income
for the nine months ended September 30, 2006 was $212,000,  as compared to other
income of $27,000 for the nine months ended  September 30, 2005.  The changes in
other income  during the three and nine months  ended  September  30,  2006,  as
compared  to the same  periods in prior  years,  were  primarily a result of the
Company's  ability to earn interest income on its higher cash position.  For the
nine months ended  September 30, 2005,  the Company  realized  gains on sales of
marketable securities totaling $15,000.

PROVISION (BENEFIT) FOR INCOME TAXES

The tax  provision for the quarter  ended  September  30, 2006 was $600,000,  as
compared to a tax benefit of $766,000 for the quarter ended  September 30, 2005.
The tax provision for the nine months ended  September 30, 2006 was  $1,510,000,
as compared to a tax benefit of $732,000 for the nine months ended September 30,
2005.  The tax rates in all periods  were  affected  by certain  state and local
taxes  which  are  based on net  worth.  For the  three  and nine  months  ended
September  30, 2005,  the  provision for income taxes differs from the Company's
effective  income  tax rate  primarily  due to a deferred  income tax  valuation
allowance.  During 2001, the Financial  Accounting  Standards  Board issued SFAS
142, Goodwill and Other Intangible Assets, establishing,  as of January 1, 2002,
a test  whereby the fair value of goodwill  is compared to its  carrying  value.
Based upon this test,  the  goodwill of the Company was  written-off  during the
first  quarter of 2002.  This  write-off of goodwill  created an increase in the
deferred tax assets.

At December 31, 2002,  the Company  provided a valuation  allowance (or reserve)
against its net  deferred tax assets based upon the  uncertainty  regarding  the
ultimate realization (or use) in their entirety of these deferred tax assets. At
December 31, 2004, the outstanding  deferred tax asset  valuation  allowance was
$1,220,000.  During the nine  months  ended  September  30,  2005,  the  Company
generated  profits  which  reduced  this  deferred  tax  valuation  allowance by
$461,000.  Based upon the Company's backlog as of September 30, 2005, management
reevaluated  the likelihood  that these assets could be used in their  entirety,
and concluded  that the valuation  allowance was not required.  At September 30,
2005,  the Company  reversed the  outstanding  deferred tax valuation  allowance
totaling approximately $759,000.

NET INCOME

As a result of all the items mentioned above, the Company reported net income of

                                                                              14
<PAGE>

$785,000, or $.14 per share - basic and $.13 per share-diluted,  for the quarter
ended  September 30, 2006, as compared to reported net income of $1,262,000,  or
$.23 per share - basic and diluted,  for the quarter  ended  September 30, 2005.
Included  in the net income for the  quarter  ended  September  30, 2006 are net
expenses of  approximately  $12,000,  related to exercising and vesting of stock
options during the period, which resulted in the reduction in the calculation of
diluted earnings per share of approximately $.01 per share. Excluding the effect
of stock options, net income would have been $797,000, or $.14 per share - basic
and diluted, for the quarter ended September 30, 2006.

For the nine months ended September 30, 2006, the Company reported net income of
$1,749,000, or $.31 per share - basic and $.30 per share diluted, as compared to
reported net income of  $1,715,000,  or $.31 per share - basic and diluted,  for
the nine months ended  September  30, 2005.  Included in net income for the nine
months  ended  September  30,  2006 are net  expenses  of  $273,000  related  to
exercising and vesting of stock options  during the period,  which resulted in a
reduction in the  calculation  of earnings per share of  approximately  $.05 per
share - basic and diluted.  Excluding  the effect of stock  options,  net income
would  have  been  $2,022,000,  or $.36 per  share - basic  and $.35 per share -
diluted, for the nine months ended September 30, 2006.

Net income for the three and nine months ending September 30, 2005 was increased
by the  reversal  of a deferred  tax  valuation  allowance  of  $759,000,  which
resulted  in  an  increase  in  the   calculation   of  earnings  per  share  of
approximately  $.14 per  share-basic  and diluted.  Excluding the effect of this
reversal of the deferred  tax  valuation  allowance,  net income would have been
$503,000 (or $.09 per  share-basic  and diluted) for the quarter ended September
30, 2005 and $956,000 (or $.17 per  share-basic and diluted) for the nine months
ended September 30, 2005.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

The Company's  principal capital requirement is to fund its work on construction
projects.  Projects are billed on a monthly basis based on the work performed to
date. These project billings, less a withholding of retention, which is received
as the project  nears  completion,  are  collectible  based on their  respective
contract  terms.  The Company has  historically  relied  primarily on internally
generated funds and bank  borrowings to finance its operations.  The Company has
not relied on bank  borrowings to finance its  operations  since July 2003.  The
Company has a $2,000,000 line of credit,  which is subject to certain  covenants
of which all requirements have been met.

As of September 30, 2006, total cash was $11,514,000, a $7,239,000 increase from
the  $4,275,000  reported as of September  30, 2005.  As described  below,  this
increase  is  principally  the  result  of  an  increase  in  cash  provided  by
operations.

CASH PROVIDED BY OPERATIONS

Net cash provided by  operations  was  $6,682,000  and  $1,378,000  for the nine
months ended September 30, 2006 and 2005, respectively.

                                                                              15
<PAGE>

The increase in the net cash  provided by  operations  for the nine months ended
September  30, 2006 as compared to the nine months ended  September 30, 2005 was
primarily a result of the  Company's  increased  earnings and the receipt of the
last two installments on the Co-Op City litigation settlement.

CASH USED IN INVESTING ACTIVITIES

Net cash used in investing  activities  was $200,000 and $63,000 during the nine
months ended September 30, 2006 and 2005, respectively.

The Company received proceeds on the sales of marketable  securities of $153,000
during  the  nine  months  ended  September  30,  2005.  The  Company  purchased
marketable  securities  of $12,000 and  $158,000  during the nine  months  ended
September 30, 2006 and 2005,  respectively.  In addition,  the Company purchased
property and  equipment  totaling  $188,000  and $58,000  during the nine months
ended September 30, 2006 and 2005, respectively.

CASH USED IN FINANCING ACTIVITIES

Net cash used in financing activities during the nine months ended September 30,
2006 was $167,000.  During the nine months ended September 30, 2006, two company
executives,  a director and a former director  exercised  options to purchase an
aggregate  of 246,300  shares  contributing  cash  proceeds  of  $406,000 to the
Company.

Prior to adopting SFAS 123-R, the Company  presented all tax benefits  resulting
from the exercise of stock  options as operating  cash flows in the Statement of
Cash Flows. SFAS 123-R requires cash flows resulting from excess tax benefits to
be  classified  as a part of cash flows from  financing  activities.  Excess tax
benefits  represent tax benefits  related to exercised  options in excess of the
associated  deferred tax asset for such  options.  As a result of adopting  SFAS
123-R,  $232,000 of excess tax benefits for the nine months ended  September 30,
2006 have been  classified  as an operating  cash  outflow and a financing  cash
inflow.

On May 8,  2006,  the  Company's  Board of  Directors  declared  a special  cash
dividend of $.06 per share.  The  aggregate  amount of the dividend was $341,000
and such dividend was paid on June 15, 2006 to  shareholders of record as of May
24, 2006.

There were no financing activities during the quarter ended September 30, 2005.

CREDIT FACILITY

The Company has a line of credit  facility  from Bank of  America,  N.A.,  which
provides borrowings for working capital purposes up to $2,000,000. This facility
expires on April 1, 2007, is secured by the  Company's  assets and is guaranteed
by the Company's subsidiary, KSW Mechanical Services, Inc.

There were no borrowings against this line of credit during 2006.

                                                                              16
<PAGE>

Advances  bear  interest,  based on the Company's  option,  at either the bank's
prime lending rate plus one percent per annum (9.25% at September 30, 2006),  or
the London  Interbank  Offered Rate ("LIBOR") plus two and one-half  percent per
annum (7.83% at September 30, 2006).

Payment may be  accelerated  by certain  events of default  such as  unfavorable
credit  factors,  the  occurrence of a material  adverse change in the Company's
business,  properties or financial condition,  a default in payment on the line,
impairment of security,  bankruptcy,  or the Company ceasing operations or being
unable to pay its debts.  The line of credit  must be paid in full at the end of
the term on April 1, 2007.

The Company currently has no significant capital expenditure commitments.

SURETY

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

As of September 30, 2006, approximately  $14,000,000 of the Company's backlog of
$104,400,000  was  bonded.  The  Company  provides  its  surety  with a detailed
schedule of backlog on a quarterly basis. The Company's bonding limits have been
sufficient given the volume and size of the Company's bonded contracts.

CRITICAL ACCOUNTING POLICIES

REVENUE 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

                                                                              17
<PAGE>

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.

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

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

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

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

STOCK - BASED COMPENSATION

The Company  accounts for  stock-based  compensation in accordance with the fair
value  recognition  provisions of SFAS 123-R. The Company uses the Black-Scholes
option - pricing  model,  which  requires the input of  subjective  assumptions.
These  assumptions  include  estimating the length of time employees will retain
their vested  stock  options  before  exercising  them  ("expected  term"),  the
estimated  volatility of the Company's common stock price over the expected term
and the  number of options  that will  ultimately  not  complete  their  vesting
requirements   ("forfeitures").   Changes  in  the  subjective  assumptions  can
materially  affect the  estimate  of fair value stock - based  compensation  and
consequently  the  related  amount   recognized  in  the   consolidated   income
statements.

See  Note  (2)  to the  consolidated  financial  statements  for  more  detailed
discussion  of the  effects  of SFAS  123-R on our  results  of  operations  and
financial condition.

                                                                              18
<PAGE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note (5) to the Consolidated  Financial Statements for a summary of recently
issued accounting pronouncements impacting the Company.

FORWARD-LOOKING STATEMENTS

Certain  statements  contained  in this  report  are not  historical  facts  and
constitute "forward-looking  statements" (as such term is defined in the Private
Securities  Litigation  Reform Act of 1995).  These  forward-looking  statements
generally  can  be  identified  as  statements  that  include  phrases  such  as
"believe", "expect", "anticipate", "intend", "plan", "foresee", "likely", "will"
or other similar words or phrases.  Such forward-looking  statements  concerning
management's expectations, strategic objectives, business prospects, anticipated
economic performance and financial condition,  and other similar matters involve
known and unknown risks,  uncertainties  and other important  factors that could
cause the  actual  results,  performance  or  achievements  of results to differ
materially  from any future results,  performance or  achievements  discussed or
implied by such forward-looking statements. This document describes factors that
could  cause  actual  results  to differ  materially  from  expectations  of the
Company.  All written and oral  forward-looking  statements  attributable to the
Company  or  persons  acting on behalf of the  Company  are  qualified  in their
entirety by such factors. Such risks, uncertainties, and other important factors
include, among others:  inability to obtain bonding,  inability to retain senior
management, low labor productivity and shortages of skilled labor, a rise in the
price of steel  products,  economic  downturn,  reliance  on certain  customers,
competition,  inflation, the adverse effect of terrorist concerns and activities
on public budgets and insurance costs, the  unavailability  of private funds for
construction,  and other various matters, many of which are beyond the Company's
control and other  factors as are  described  in "Item 1A. Risk  Factors" of the
Company's Form 10-K for the fiscal year ended December 31, 2005. Forward-looking
statements  speak  only as of the date of the  document  in which they are made.
Other than required by law, the Company  disclaims any obligation or undertaking
to provide any updates or revisions to any forward-looking  statement to reflect
any change in the Company's expectations or any change in events,  conditions or
circumstances on which the forward-looking statement is based.

ITEM 3.  QUANTITITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not utilize futures,  options or other derivative  instruments.
As of  September  30,  2006,  the Company has  invested  $813,000 in  marketable
securities.

ITEM 4.  CONTROLS AND PROCEDURES

The  Company  carried  out an  evaluation,  under the  supervision  and with the
participation  of management,  including our Chief  Executive  Officer and Chief
Financial  Officer,   of  the  effectiveness  of  our  disclosure  controls  and
procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Exchange Act)
as of September 30, 2006. Based on that evaluation,  our Chief Executive Officer
and  Chief  Financial  Officer  concluded  that  our  disclosure   controls  and
procedures were effective as of September 30, 2006.

                                                                              19
<PAGE>

There  has been no change  in the  Company's  internal  control  over  financial
reporting (as defined in Rules  13a-15(f) and 15d-15(f)  under the Exchange Act)
during  the  Company's  fiscal  quarter  ended  September  30,  2006,  that  has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There have been no material  changes  related to risk  factors  from those items
previously disclosed in the December 31, 2005 Form 10-K.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

     Exhibit 11 - Statement regarding Computation of Income per Share

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

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

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

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

                                                                              20
<PAGE>

                                    SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                     KSW, INC.

Date: November 7, 2006
                                     /s/ Richard W. Lucas
                                     -------------------------------------------
                                     Richard W. Lucas
                                     Chief Financial Officer

                                     (Principal Financial and Accounting Officer
                                     and Duly Authorized Officer)

                                                                              21
<PAGE>

                                    KSW, INC.

                                INDEX TO EXHIBITS

Exhibit
Number                                Description
-------  ----------------------------------------------------------------------
  11     Statement Regarding Computation of Income per Share

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

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

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

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

                                                                              22