`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 June 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                                       August 9, 2006
                  -----                                       --------------
       Common Stock, $.01 Par Value                             5,710,311




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

                                TABLE OF CONTENTS
                                                                        PAGE NO.
--------------------------------------------------------------------------------
PART 1   FINANCIAL INFORMATION

Item 1.  Financial Statements

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

             Consolidated Statements of Income -
             Three and six months ended June 30, 2006 and 2005                4

             Consolidated Statements of Comprehensive Income   -
             Three and six months ended June 30, 2006 and 2005                5

             Consolidated Statement of Stockholders' Equity -
             Six months ended June 30, 2006                                   6

             Consolidated Statements of Cash Flows
             Six months ended June 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                                                     18

Item 4.      Controls and Procedures                                         18
--------------------------------------------------------------------------------
PART II  OTHER INFORMATION

Item 1       Legal Proceedings                                               18
Item 1A      Risk Factors                                                    19
Item 2       Unregistered Sales of Equity Securities and Use of Proceeds     19
Item 3       Defaults Upon Senior Securities                                 19
Item 4       Submission of Matters to a Vote of Security Holders             19
Item 5       Other Information                                               20
Item 6       Exhibits                                                        20
--------------------------------------------------------------------------------
SIGNATURE                                                                    21
INDEX TO EXHIBITS                                                            22


                                       2



                                       PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                                          KSW, INC. AND SUBSIDIARY
                                        CONSOLIDATED BALANCE SHEETS
                                               (IN THOUSANDS)
                                                                   June 30, 2006         December 31, 2005
                                                                    -------------        -----------------
Assets                                                               (Unaudited)
------
Current assets:
   Cash                                                               $ 10,458              $  5,199
   Marketable securities                                                   782                   774
   Accounts receivable, less allowance
     for doubtful accounts of $200 at
     6/30/06 and 12/31/05                                               11,370                11,887
   Retainage receivable                                                  4,980                 2,764
   Costs and estimated earnings in excess of
     billings on uncompleted contracts                                   1,187                   480
   Prepaid expenses and other receivables                                  375                   144
                                                                      --------              --------
     Total current assets                                               29,152                21,248

Property and equipment, net of accumulated
   depreciation and amortization of $2,000 and $1,969
   at 6/30/06 and 12/31/05, respectively                                   247                   112

Deferred income taxes and other                                            534                 1,350
                                                                      --------              --------
   TOTAL ASSETS                                                       $ 29,933              $ 22,710
                                                                      ========              ========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                   $ 11,422              $  9,533
   Retainage payable                                                     2,355                 1,576
   Accrued payroll and benefits                                          1,029                   542
   Accrued expenses                                                        542                   206
   Billings in excess of costs and estimated
    earnings on uncompleted contracts                                    3,566                 1,335
                                                                      --------              --------
     Total current liabilities                                          18,914                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, 5,710,311 and 5,470,311 shares issued
     and outstanding at 6/30/06 and 12/31/05, respectively                  57                    54
   Additional paid-in capital                                           10,604                 9,729
   Retained earnings (deficit)                                             276                  (347)
   Accumulated other comprehensive income
     Net unrealized holding gains on available
        for sale securities                                                 82                    82
                                                                      --------              --------
     Total stockholders' equity                                         11,019                 9,518
                                                                      --------              --------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 29,933              $ 22,710
                                                                      ========              ========


                        SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                     3




                                                 KSW, INC. AND SUBSIDIARY

                                             CONSOLIDATED STATEMENTS OF INCOME
                                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                        (UNAUDITED)

                                       Three Months            Three Months            Six Months             Six Months
                                   Ended June 30, 2006      Ended June 30, 2005    Ended June 30, 2006   Ended June 30, 2005
                                   -------------------      -------------------    -------------------   -------------------

Revenues                                 $   20,132               $   11,552             $   35,893            $   21,428
Cost of revenues                             17,629                   10,424                 31,285                19,157
                                         ----------               ----------             ----------            ----------

Gross profit                                  2,503                    1,128                  4,608                 2,271

Selling, general and
   administrative expenses                    1,372(1)                   832                  2,852(1)              1,809
                                         ----------               ----------             ----------            ----------

Operating income                              1,131                      296                  1,756                   462
                                         ----------               ----------             ----------            ----------

Other income :
Interest income, net                             77                        3                    118                    10
Gain on sales of marketable
   securities                                    --                        4                     --                    15
                                         ----------               ----------             ----------            ----------

Total other income                               77                        7                    118                    25
                                         ----------               ----------             ----------            ----------

Income before provision for
   income taxes                               1,208                      303                  1,874                   487

Provision for income taxes                      590                        5                    910                    34
                                         ----------               ----------             ----------            ----------

Net income                               $      618               $      298             $      964            $      453
                                         ==========               ==========             ==========            ==========



Income per common share:
Basic                                    $      .11               $      .05             $      .17            $      .08

Diluted                                  $      .11               $      .05             $      .17            $      .08

Weighted average common
  shares outstanding:
  Basic                                   5,686,561                5,470,311              5,615,311             5,470,311

  Diluted                                 5,825,643                5,470,311              5,747,107             5,470,311

Cash dividend declared and
  and paid per common share              $      .06               $        -             $      .06             $       -



(1) During the three  months and six months  ended June 30,  2006,  selling  and
general administrative expenses include stock compensation expenses of $115, and
$483, respectively, related to the exercise of stock options and the adoption of
the new accounting standards, SFAS 123-R.




                               SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                             4



                                                  KSW, INC. AND SUBSIDIARY

                                       CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                       (IN THOUSANDS)
                                                         (UNAUDITED)



                                         Three Months           Three Months              Six Months                 Six Months
                                     Ended June 30, 2006     Ended June 30, 2005      Ended June 30, 2006       Ended June 30, 2005




Net income                                 $ 618                   $ 298                    $ 964                     $ 453
                                           -----                   -----                    -----                     -----

Other comprehensive income
   (loss) before tax:

Unrealized holding gains
   (losses) arising during the
   period                                    (35)                     19                       --                      (10)

Less: reclassification adjustment
   for gains included in net
   income                                     --                     (4)                       --                      (15)
                                           -----                   -----                    -----                     -----
                                                                                                                       (25)
Other comprehensive income
   (loss) before tax (expense)
   benefit                                   (35)                     15                       --                        --

Income tax (expense) benefit
   related to items of other
   comprehensive income (loss)                16                     (7)                       --                        11
                                           -----                   -----                    -----                     -----

Other comprehensive income
   (loss), net of tax (expense)
   benefit                                   (19)                      8                       --                      (14)
                                           -----                   -----                    -----                     -----

Total comprehensive income                 $ 599                   $ 306                    $ 964                     $ 439
                                           =====                   =====                    =====                     =====





                                SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                             5




                                                  KSW, INC. AND SUBSIDIARY

                                       CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                               SIX MONTHS ENDED JUNE 30, 2006
                                              (IN THOUSANDS, EXCEPT SHARE DATA)
                                                         (UNAUDITED)

                                                                                                           Accumulated
                                                                               Additional     Retained        Other
                                                        Common Stock            Paid-in       Earnings    Comprehensive
                                                    Shares         Amount       Capital       (Deficit)       Income        Total
                                                    ------         ------       -------       ---------       ------        -----

Balances, December 31, 2005                        5,470,311     $      54     $   9,729     $    (347)     $      82     $   9,518

Net income                                                --            --            --           964             --           964

Exercise of stock options                            240,000             3           863            --             --           866

Stock based compensation                                  --            --            12            --             --            12

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

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

Balances, June 30, 2006                            5,710,311     $      57     $  10,604     $     276      $      82     $  11,019
                                                   =========     =========     =========     =========      =========     =========





                                SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                             6



                                     KSW, INC. AND SUBSIDIARY
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (IN THOUSANDS)
                                            (UNAUDITED)

                                                         Six Months                Six Months
                                                     Ended June 30, 2006      Ended June 30, 2005
                                                     -------------------      -------------------
Cash flows from operating activities:
   Net income                                             $    964                 $    453
Adjustments to reconcile net income to
   cash  provided by (used in) operating
   activities:
   Depreciation and amortization                                31                       28
   Deferred income taxes                                     1,039                       11
   Realized gain on sales of marketable
      securities                                                --                      (15)
   Stock-based compensation expense
      related  to stock option plan                            483                       --
Changes in operating assets and liabilities:
   Accounts receivable                                         517                   (4,480)
   Retainage receivable                                     (2,216)                    (648)
   Costs and estimated earnings in
      excess of billings on uncompleted
      contracts                                               (707)                      15
   Prepaid expenses and other receivables                     (231)                    (317)
   Accounts payable                                          1,889                    2,087
   Retainage payable                                           779                      362
   Accrued payroll and benefits                                487                      128
   Accrued expenses                                            336                      246
   Billings in excess of costs and
      estimated earnings on uncompleted
      contracts                                              2,231                    1,652
                                                          --------                 --------
Net cash provided by (used in) operating
   activities                                                5,602                     (478)
                                                          --------                 --------

Cash flows from investing activities:
   Purchases of property and equipment                        (166)                     (23)
   Proceeds from sales of marketable securities                 --                      153
   Purchases of marketable securities                           (8)                    (156)
                                                          --------                 --------
NET CASH USED IN INVESTING ACTIVITIES                         (174)                     (26)
                                                          --------                 --------

Cash flows from financing activities:
   Proceeds from exercise of stock options                     395                       --
   Tax benefits from exercise of stock options                (223)                      --
   Cash dividends paid                                        (341)                      --
                                                          --------                 --------
NET CASH USED IN FINANCING ACTIVITIES                         (169)                      --
                                                          --------                 --------

   NET INCREASE (DECREASE) IN CASH                           5,259                     (504)

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

Cash, end of period                                       $ 10,458                 $  2,456
                                                          ========                 ========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATION
Cash paid during the period for:
      Interest                                            $      5                 $      5
      Income taxes                                        $     93                 $     23




                   SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                                7



                            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 June 30, 2006 and December 31, 2005, and
the results of its income and  comprehensive  income for the three and six month
periods  ended June 30,  2006 and 2005 and cash  flows for the six months  ended
June 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 a  modified
prospective  method.  Under the modified  prospective method of transition under
SFAS 123-R,  compensation  costs in 2006 include cost 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


                                       8


interpretations.  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 six months ended June 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.

                                                               Three Months                Six Months
                                                            Ended June 30, 2005       Ended June 30, 2005
                                                            -------------------       -------------------

Net income, as reported                                         $   298,000               $   453,000
Deduct:  Total stock-based compensation
     expense determined under fair value
     based method for all awards,
     net of related tax effects                                        --                        --
                                                                -----------               -----------

Pro forma net income                                            $   298,000               $   453,000
                                                                ===========               ===========


Earnings per share:
     Basic - as reported                                        $       .05               $       .08
     Basic - pro forma                                          $       .05               $       .08

     Diluted - as reported                                      $       .05               $       .08
     Diluted - pro forma                                        $       .05               $       .08

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, "Stockholder's 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



The adoption of SFAS 123-R lowered net income by approximately $3,000 and $6,000
for the three and six months  ended June 30,  2006,  respectively.  In addition,
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  June  30,  2006,  there  was   approximately   $54,000  of  unrecognized
compensation cost related to unvested share-based  compensations awards granted.
That cost is expected to be recognized over the next 2.25 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 six months ended June 30, 2006 is as follows:

                                                                            Weighted Average         Aggregate
                                                                            Weighted Average         Aggregate
                                        Number of      Weighted Average   Remaining Contractual      Intrinsic
                                          Shares        Exercise Price        Term in Years            Value
                                          ------        --------------        -------------            -----

Outstanding at January 1, 2006             656,667        $   1.65

Expired/canceled                              --                --

Granted                                       --                --

Exercised                                 (240,000)       $   1.65
                                          --------

Outstanding at June 30, 2006               416,667        $   1.65                 5.3                $958,000
                                          ========

Exercisable at June 30, 2006               336,667        $   1.65                 4.4                $774,000


                                       10




There were no options granted during the six months June 30, 2006.

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

                                                               Six Months                  Six Months
                                                          Ended June 30, 2006          Ended June 30, 2005
                                                          -------------------          -------------------

Proceeds from stock options exercised                          $ 395,000                       $ -

Tax Benefits related to stock options exercised                $ 223,000                       $ -

Intrinsic value of stock options exercised                     $ 470,000                       $ -


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.

         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.  However,  the Company  has  pre-purchased  certain  copper


                                       11


         products  expected to be used during  this year.  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.

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

RESULTS OF OPERATIONS

REVENUES

Total  revenues for the quarter  ended June 30, 2006  increased by $8,580,000 or
74.3% to $20,132,000,  as compared to $11,552,000 for the quarter ended June 30,
2005.  Total  revenues  for the six months  ended June 30,  2006,  increased  by
$14,465,000  or 67.5% to  $35,893,000,  as compared to  $21,428,000  for the six
months ended June 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 June 30, 2006, the Company had backlog of
approximately  $83,800,000,  as compared to approximately $78,400,000 as of June
30, 2005. The Company believes that  approximately  $48,000,000 of the Company's
backlog at June 30, 2006 is not reasonably  expected to be completed  within the
year ended December 31, 2006.

COST OF REVENUES

Cost of revenues for the quarter ended June 30, 2006  increased by $7,205,000 or
69.1% to $17,629,000,  as compared to $10,424,000 for the quarter ended June 30,
2005.  Costs of revenues  for the six months  ended June 30, 2006  increased  by
$12,128,000  or 63.3% to  $31,285,000,  as compared to  $19,157,000  for the six
months ended June 30, 2005.  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 June 30, 2006 was  $2,503,000  or 12.4% of
revenues,  as compared to a gross profit of  $1,128,000  or 9.8% of revenues for
the quarter ended June 30, 2005.  Gross profit for the six months ended June 30,
2006 was  $4,608,000 or 12.8% of revenues as compared to $2,271,000 or 10.6 % of
revenues for the six months  ended June 30,  2005.  The increase in gross profit
for the three and six months ended June 30,  2006,  as compared to the three and
six months ended June 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 June
30, 2006 increased by $540,000 or 65.0% to  $1,372,000,  as compared to $832,000
for the quarter ended June 30, 2005. SG&A for the six months ended June 30, 2006
increased by $1,043,000 or 57.7% to  $2,852,000,  as compared to $1,809,000  for


                                       12


the six months  ended June 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 $115,000 and $483,000 for the three and
six months ended June 30, 2006,  respectively,  as compared to the three and six
months ended June 30, 2005.  Professional  fees, related to the Company's public
filings with the Securities and Exchange Commission together with American Stock
Exchange fees,  increased $89,000 and $85,000 for the three and six months ended
June 30, 2006, respectively,  as compared to three and six months ended June 30,
2005.  The  remaining  increases in SG&A for the three and six months ended June
30, 2006,  as compared to the same periods in 2005,  were  primarily a result of
increases  in  employment  costs and office  expenses.  During the later 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 June 30, 2006 was  $77,000,  as compared to
other  income of $7,000 for the  quarter  ended June 30,  2005.  For the quarter
ended June 30, 2006 and 2005, the Company earned net interest  income of $77,000
and $3,000,  respectively.  For the  quarter  ended June 30,  2005,  the Company
realized gains on sales of marketable  securities  totaling $4,000.  For the six
months ended June 30, 2006 and 2005, the Company  earned net interest  income of
$118,000 and $10,000,  respectively. For the six months ended June 30, 2005, the
Company realized gains on sales of marketable securities totaling $15,000.

PROVISION FOR TAXES

The tax provision for the quarter ended June 30, 2006 was $590,000,  as compared
to $5,000 for the quarter  ended June 30, 2005.  The tax  provision  for the six
months  ended June 30,  2006 was  $910,000,  as  compared to $34,000 for the six
months  ended June 30,  2005.  The tax rates in all  periods  were  affected  by
certain  state and local taxes which are based on net worth.  In  addition,  the
three and six months  ended June 30,  2005  income tax  expense was reduced by a
reduction  of a  deferred  tax  valuation  allowance.  The entire  deferred  tax
valuation  allowance  was  reversed  during  the  third  quarter  of 2005  after
management determined it was no longer needed.

NET INCOME

As a result of all the items mentioned above, the Company reported net income of
$618,000,  or $.11 per share - basic and diluted, for the quarter ended June 30,
2006, as compared to reported net income of $298,000,  or $.05 per share - basic
and diluted, for the quarter ended June 30, 2005. Included in the net income for
the quarter  ended June 30,  2006 are net  expenses  of  approximately  $62,000,
related to  exercising  and vesting of stock  options  during the period,  which
resulted in reductions in the calculation of both basic and diluted earnings per
share of  approximately  $.01 per share.  Excluding the effect of stock options,
net income would have been $680,000,  or $.12 per share - basic and diluted, for
the quarter ended June 30, 2006.

                                       13


For the six months  ended June 30,  2006,  the  Company  reported  net income of
$964,000,  or $.17 per share - basic and  diluted,  as compared to reported  net
income  of  $453,000,  or $.08 per share - basic and  diluted.  Included  in net
income  for the six months  ended June 30,  2006 are net  expenses  of  $261,000
related to  exercising  and vesting of stock  options  during the period,  which
resulted in a reduction in the  calculations of  approximately  $.05 per share -
basic and $.04 per share - diluted.  Excluding the effect of stock options,  net
income would have been $1,225,000,  or $.22 per share - basic and $.21 per share
- diluted, for the six months ended June 30, 2006.

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 June 30, 2006, total cash was $10,458,000, an $8,002,000 increase over the
$2,456,000  reported as of June 30, 2005. As described  below,  this increase is
principally the result of an increase in cash provided by operations.

CASH PROVIDED BY (USED IN) OPERATIONS

Net cash provided by operations was $5,602,000 for the six months ended June 30,
2006. Net cash used in operations was $478,000 for the six months ended June 30,
2005.

The net cash provided by operations for the six months ended June 30, 2006 was a
result of the Company's  earnings,  as well as the  collection of receivables in
excess of payments of liabilities.  During the period,  the Company received the
second installment on the Co-Op City litigation settlement.  The third and final
installment  payment  related to the Co-Op City litigation  settlement  totaling
$850,000 is payable on or before September 30, 2006.

The net cash used in operating activities for the six months ended June 30, 2005
was a result of the funding of the Company's increased revenues.

CASH USED IN INVESTING ACTIVITIES

Net cash used in investing  activities  was $174,000 and $26,000  during the six
months ended June 30, 2006 and 2005, respectively.

The Company received  proceeds on the sale of marketable  securities of $153,000
during the six months  ended June 30,  2005.  The Company  purchased  marketable


                                       14


securities of $8,000 and $156,000  during the six months ended June 30, 2006 and
2005,  respectively.  In addition,  the Company purchased property and equipment
totaling  $166,000  and  $23,000  during the six months  ended June 30, 2006 and
2005, respectively.

CASH USED IN FINANCING ACTIVITIES

Net cash used in financing  activities during the six months ended June 30, 2006
was $169,000. During the six months ended June 30, 2006, two company executives,
a director and a former director  exercised  options to purchase an aggregate of
240,000 shares contributing cash proceeds of $395,000 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,  $223,000 of excess tax  benefits  for the six months ended June 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.

No net cash was provided by financing  activities  during the quarter ended June
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  guaranteed by
the Company's subsidiary, KSW Mechanical Services, Inc.

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

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 June 30,  2006),  or the
London Interbank  Offered Rate ("LIBOR") plus two and one-half percent per annum
(7.82% at June 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.


                                       15


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.

During  the  fourth  quarter  of  2005,  the  Company   entered  into  a  surety
relationship with Chubb Group of Insurance  Companies to provide surety bonds on
the Company's  projects.  The surety has provided the Company with a $90,000,000
work  program,  subject  to  adjustments  for  trade  management  contracts  and
non-bonded contracts.

The Company's  bonding limits have been sufficient  given the volume and size of
the  Company's  contracts.  The  Company's  surety may require  that the Company
maintain  certain  tangible  net  worth  levels,   and  may  require  additional
guarantees if the Company should desire  increased  bonding limits.  At June 30,
2006,  approximately  $11,400,000 of the Company's  backlog of  $83,800,000  was
bonded.


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 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.

                                       16


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.


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


                                       17


could cause actual results to differ materially from expectation of the Company.
All written and oral forward-looking  statements  attributable to the Company or
persons  acting on behalf of the Company are qualified in their entirety by such
factors. Such risks,  uncertainties,  and other important factors include, among
others: 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 at the end of "Item 7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations" 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. 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 June 30, 2006, the Company has invested $782,000 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 June 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 June 30, 2006.

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 June 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.


                                       18



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

The Company's Annual Meeting of Stockholders was held on May 8, 2006, in Queens,
New York,  for the purpose of (i) electing two Class II Directors to serve until
the  annual  meeting of  stockholders  in the year 2009 and (ii)  ratifying  the
appointment of Marden,  Harrison & Kreuter CPAs,  P.C., as independent  auditors
for the fiscal year ending  December  31,  2006.  Proxies  were  solicited  from
holders  of  5,650,311  outstanding  shares of  Common  Stock as of the close of
business on April 5, 2006, as described in the Company's  Proxy  Statement dated
April 7, 2006.  Russell Molina and Innis O'Rourke,  Jr. were elected as Class II
Directors,  and the  appointment  of Marden,  Harrison & Kreuter CPAs,  P.C. was
ratified by the following votes:


     (1)  To elect two Class II Directors  to serve until the annual  meeting of
          stockholders in the year 2009.

                                          Votes        Votes         Broker
                Name                       FOR        WITHELD       Non-votes
                ----                       ---        -------       ---------
     Russell Molina (Class II)          4,785,356     348,965           0
     Innis O'Rourke, Jr. (Class II)     4,784,939     349,382           0

          Floyd  Warkol,  Stanley  Kreitman,  John  Cavanagh and Warren O. Kogan
          continue to serve as directors of the Company after the Annual Meeting
          of Stockholders.

     (2)  To ratify the appointment of Marden,  Harrison & Kreuter CPAs, P.C. as
          the Company's independent auditors for the fiscal year ending December
          31, 2006.

               Votes            Votes             Votes           Broker
                FOR            AGAINST          ABSTAINED        NON-VOTES
                ---            -------          ---------        ---------
              5,124,500         9,398              423              0


                                       19


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



                                    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:  August 9, 2006
                                      /s/Richard W. Lucas
                                      ------------------------------
                                      Richard W. Lucas
                                      Chief Financial Officer

                                     (Principal Financial and Accounting Officer
                                      and Duly Authorized Officer)






                                       21



                                    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. ss.1350

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


                                       22`