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 SECURITIESEXCHANGE
      ACT OF 1934





For
the quarterly period ended June 30, 2009





OR





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
      SECURITIESEXCHANGE
      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.
      Employerincorporation
      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 xNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes oNo o





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




Large Accelerated Filer o
            Accelerated Filer o
            Non-Accelerated Filer o
            Smaller Reporting Company x




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of Exchange Act).  Yes oNo x





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




Outstanding
      atClass
            
            August
      12, 2009Common
      stock, $.01 par value
            
            6,235,125









KSW,
INC.


QUARTERLY
REPORT ON FORM 10-Q
 QUARTER ENDED JUNE 30,
2009
 
 TABLE OF CONTENTS
 
 Page No.PART
      I
              
              FINANCIAL
      INFORMATIONItem
      1.
              
              Financial
      StatementsConsolidated Balance Sheets – June
      30, 2009 (unaudited) and December 31, 2008
              
              3Consolidated Statements of Income – Three
      and six months ended June 30, 2009 and 2008
      (unaudited)
              
              4Consolidated Statements of Comprehensive Income – Three
      and six months ended June 30, 2009 and 2008
      (unaudited)
              
              5Consolidated Statement of Stockholders’ Equity – Six
      months ended June 30, 2009 (unaudited)
              
              6Consolidated Statements of Cash Flows– Six
      months ended June 30, 2009 and 2008 (unaudited)
              
              7Notes to Consolidated Financial
    Statements–
              
              8Item 2.
              
              Management's Discussion and Analysis of Financial
      Condition and Results of Operations
              
              14Item 3.
              
              Quantitative and Qualitative Disclosures about
      Market Risk
              
              19Item 4.
              
              Controls and Procedures
              
              19PART
      II
              
              OTHER
      INFORMATIONItem 1.
              
              Legal Proceedings
              
              19Item 1A.
              
              Risk Factors
              
              20Item 2.
              
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              
              20Item 3.
              
              Defaults Upon Senior Securities
              
              20Item 4.
              
              Submission of Matters to a Vote of Security
      Holders
              
              20Item 5.
              
              Other Information
              
              20Item 6.
              
              Exhibits
              
              20SIGNATURE
              
              
              
              21INDEX TO EXHIBITS
              
              22




TABLE OF CONTENTS




PART
I – FINANCIAL INFORMATION





ITEM
1 – FINANCIAL
STATEMENTS


KSW,
INC. AND SUBSIDIARY


CONSOLIDATED BALANCE SHEETS


(in
thousands, except share data)





June 30,2009
            
            
            December 31, 2008(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            15,932
            
            
            $
            16,611Marketable
      securities
            
            
            1,371
            
            
            
            1,223Accounts
      receivable
            
            
            17,427
            
            
            
            19,448Retainage
      receivable
            
            
            7,724
            
            
            
            9,097Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
            
            
            751
            
            
            
            229Prepaid
      income taxes
            
            
            500
            
            
            
            326Prepaid
      expenses and other receivables
            
            
            483
            
            
            
            349Deferred
      income taxes
            
            
            290
            
            
            
            299Total
      current assets
            
            
            44,478
            
            
            
            47,582Property
      and equipment, net of accumulated depreciation and amortization of $2,255
      and $2,173 at 6/30/09 and 12/31/08, respectively
            
            
            2,757
            
            
            
            2,778Deferred
      income taxes and other
            
            
            63
            
            
            
            139Total
    assets
            
            $
            47,298
            
            
            $
            50,499LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      liabilities:Current
      portion of mortgage payable
            
            $
            58
            
            
            $
            58Accounts
      payable
            
            
            14,000
            
            
            
            14,442Retainage
      payable
            
            
            4,007
            
            
            
            4,982Accrued
      payroll and benefits
            
            
            1,048
            
            
            
            1,654Accrued
      expenses
            
            
            288
            
            
            
            165Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
            
            
            6,932
            
            
            
            7,950Total
      current liabilities
            
            
            26,333
            
            
            
            29,251Mortgage
      payable, net of current portion
            
            
            1,084
            
            
            
            1,118Total
      liabilities
            
            
            27,417
            
            
            
            30,369Commitments
      and contingencies (Note 7)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 6,287,825 shares
      issued, 6,235,125 and 6,281,225 shares outstanding at 6/30/09 and
      12/31/08, respectively
            
            
            63
            
            
            
            63Additional
      paid-in capital
            
            
            13,302
            
            
            
            13,293Retained
      earnings
            
            
            6,928
            
            
            
            7,142Accumulated
      other comprehensive loss:Net
      unrealized holding losses on available - for-sale
    securities
            
            
            (272
            )
            
            
            (352
            )Less
      treasury stock at cost, 52,700 and 6,600 shares at 6/30/09 and 12/31/08,
      respectively
            
            
            (140
            )
            
            
            (16
            )Total
      stockholders' equity
            
            
            19,881
            
            
            
            20,130Total
      liabilities and stockholders' equity
            
            $
            47,298
            
            
            $
            50,499





See
accompanying notes to consolidated financial statements.




3
 TABLE OF CONTENTS


KSW,
INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF INCOME


(in
thousands, except share and per share data)


(unaudited)





Three
      Months
              Ended June 30, 2009
            
            
            Three
      Months
              Ended June 30, 2008
            
            
            Six
      Months
              Ended June 30, 2009
            
            
            Six
      Months
              Ended June 30, 2008Revenues
            
            $
            16,621
            
            
            $
            21,998
            
            
            $
            36,327
            
            
            $
            42,489Cost
      of revenues
            
            
            15,066
            
            
            
            18,836
            
            
            
            32,950
            
            
            
            37,010Gross
      profit
            
            
            1,555
            
            
            
            3,162
            
            
            
            3,377
            
            
            
            5,479Selling,
      general and administrative expenses
            
            
            1,357
            
            
            
            1,343
            
            
            
            2,759
            
            
            
            2,651Operating
      income
            
            
            198
            
            
            
            1,819
            
            
            
            618
            
            
            
            2,828Other
      income:Interest
      income, net
            
            
            4
            
            
            
            82
            
            
            
            20
            
            
            
            206Income
      before provision for income taxes
            
            
            202
            
            
            
            1,901
            
            
            
            638
            
            
            
            3,034Provision
      for income taxes
            
            
            79
            
            
            
            827
            
            
            
            228
            
            
            
            1,120Net
      income
            
            $
            123
            
            
            $
            1,074
            
            
            $
            410
            
            
            $
            1,914Earnings
      per common share:Basic
            
            $
            .02
            
            
            $
            .17
            
            
            $
            .07
            
            
            $
            .31Diluted
            
            $
            .02
            
            
            $
            .17
            
            
            $
            .07
            
            
            $
            .30Weighted
      average common  shares outstanding:Basic
            
            
            6,235,125
            
            
            
            6,284,325
            
            
            
            6,244,654
            
            
            
            6,271,552Diluted
            
            
            6,266,637
            
            
            
            6,340,461
            
            
            
            6,287,509
            
            
            
            6,330,019




See
accompanying notes to consolidated financial statements.




4
 TABLE OF CONTENTS





KSW,
INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(in
thousands)


(unaudited)




Three
      Months
              Ended June 30, 2009
            
            
            Three
      Months
              Ended June 30, 2008
            
            
            Six
      Months
              Ended June 30, 2009
            
            
            Six
      Months
              Ended June 30, 2008Net
      income
            
            $
            123
            
            
            $
            1,074
            
            
            $
            410
            
            
            $
            1,914Other
      comprehensive income (loss) before income tax (benefit):Unrealized
      holding gains (losses) arising  during the period
            
            
            153
            
            
            
            10
            
            
            
            144
            
            
            
            (109
            )Less:
      reclassification adjustment for gains included in net
    income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Other
      comprehensive income (loss) before income tax (benefit)
            
            
            153
            
            
            
            10
            
            
            
            144
            
            
            
            (109
            )Income
      tax (benefit) related to items of other comprehensive income
      (loss)
            
            
            68
            
            
            
            4
            
            
            
            64
            
            
            
            (50
            )Other
      comprehensive income (loss), net of income tax (benefit)
            
            
            85
            
            
            
            6
            
            
            
            80
            
            
            
            (59
            )Total
      comprehensive income
            
            $
            208
            
            
            $
            1,080
            
            
            $
            490
            
            
            $
            1,855




See
accompanying notes to consolidated financial statements.




5
 TABLE OF CONTENTS





KSW,
INC. AND SUBSIDIARY




CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY




SIX MONTHS ENDED JUNE 30, 2009


(in thousands, except share
data)


(unaudited)




Common
      Stock
            
            
            Additional
              Paid-In
            
            
            Retained
            
            
            Accumulated
              Other
              Comprehensive
            
            
            TreasuryShares
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            Income (Loss)
            
            
            Stock
            
            
            TotalBalances,
      January 1, 2009
            
            
            6,287,825
            
            
            $
            63
            
            
            $
            13,293
            
            
            $
            7,142
            
            
            $
            (352
            )
            
            $
            (16
            )
            
            $
            20,130Net
      income
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            410
            
            
            
            -
            
            
            
            -
            
            
            
            410Cash
      dividend - $.10 per share
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (624
            )
            
            
            -
            
            
            
            
            
            
            
            (624
            )Amortization
      of share-based compensation
            
            
            -
            
            
            
            -
            
            
            
            9
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            9Purchase
      of treasury stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (124
            )
            
            
            (124
            )Net
      unrealized gains on available-for- sale securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            80
            
            
            
            -
            
            
            
            80Balances,
      June 30, 2009
            
            
            6,287,825
            
            
            $
            63
            
            
            $
            13,302
            
            
            $
            6,928
            
            
            $
            (272
            )
            
            $
            (140
            )
            
            $
            19,881




See
accompanying notes to consolidated financial statements.




6
 TABLE OF CONTENTS





KSW,
INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)




Six
      Months
              Ended June 30, 2009
            
            
            Six
      Months
              Ended June 30, 2008Cash
      flows from operating activities:Net
      income
            
            $
            410
            
            
            $
            1,914Adjustments
      to reconcile net income to cash (used in) provided by operating
      activities:Depreciation
      and amortization
            
            
            84
            
            
            
            41Deferred
      income taxes
            
            
            19
            
            
            
            161Tax
      benefits from exercise of stock options
            
            
            -
            
            
            
            (
      62
            )Gain
      on sale of fixed asset
            
            
            -
            
            
            
            (3
            )Stock-based
      compensation expense related to stock option plan
            
            
            9
            
            
            
            17Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            2,021
            
            
            
            (4,575
            )Retainage
      receivable
            
            
            1,373
            
            
            
            (1,141
            )Costs
      and estimated earnings in excess of billings on uncompleted
      contracts
            
            
            (522
            )
            
            
            312Prepaid
      income taxes
            
            
            (174
            )
            
            
            (300
            )Prepaid
      expenses and other receivables
            
            
            (134
            )
            
            
            (208
            )Accounts
      payable
            
            
            (1,066
            )
            
            
            3,394Retainage
      payable
            
            
            (975
            )
            
            
            157Accrued
      payroll and benefits
            
            
            (606
            )
            
            
            (365
            )Accrued
      expenses
            
            
            123
            
            
            
            98Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
            
            
            (1,018
            )
            
            
            1,678Income
      taxes payable
            
            
            -
            
            
            
            (5
            )Net cash (used in) provided by
      operating activities
            
            
            (456
            )
            
            
            1,113Cash
      flows from investing activities:Purchases
      of property and equipment
            
            
            (61
            )
            
            
            (82
            )Proceeds
      from sale of property and equipment
            
            
            -
            
            
            
            11Purchases
      of marketable securities
            
            
            (4
            )
            
            
            (28
            )Net
      cash used in investing activities
            
            
            (65
            )
            
            
            (99
            )Cash
      flows from financing activities:Proceeds
      from exercise of employee stock option plan
            
            
            -
            
            
            
            68Dividends
      paid
            
            
            -
            
            
            
            (1,258
            )Repayment
      of mortgage payable
            
            
            (34
            )
            
            
            -Purchase
      of treasury stock
            
            
            (124
            )
            
            
            -Tax
      benefits from exercise of stock options
            
            
            -
            
            
            
            62Net
      cash used in financing activities
            
            
            (158
            )
            
            
            (1,128
            )Net
      decrease in cash and cash equivalents
            
            
            (679
            )
            
            
            (114
            )Cash
      and cash equivalents, beginning of period
            
            
            16,611
            
            
            
            16,232Cash
      and cash equivalents, end of period
            
            $
            15,932
            
            
            $
            16,118Supplemental
      disclosure of cash flow informationCash
      paid during the period for:Interest
            
            $
            34
            
            
            $
            4Income
      taxes
            
            $
            382
            
            
            $
            1,267





See
accompanying notes to consolidated financial statements.




7
 TABLE OF CONTENTS





KSW,
INC. AND SUBSIDIARY





NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)





1.
            Nature of Operations
      and Basis of Presentation





KSW, Inc.
and its Subsidiary, collectively 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 operate as
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 disclosures required by accounting principles generally accepted
in the United States of America.  These consolidated statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.





In the
opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments of normal recurring nature necessary for a
fair presentation of the consolidated financial position of the Company as of
June 30, 2009, and its results of operations and comprehensive income for the
three and six month periods ended June 30, 2009 and 2008 and cash flows for the
six month periods ended June 30, 2009 and 2008.  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 ending December 31, 2009.





2.
            Significant Accounting
      Policies





The
significant accounting policies followed by the Company in preparing its
consolidated financial statements are set forth in Note 2 to
the  consolidated financial statements included in the Company’s
Annual Report on Form 10-K for the year ended
December 31, 2008.  The Company has made no significant
changes to these policies during 2009.





In
December 2007, the Financial Accounting Standards Board (“FASB”)issued Statement of
Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business
Combinations” (“SFAS 141-R”).  SFAS 141-R changes the accounting for
acquisitions specifically eliminating the step acquisition model, changing the
recognition of contingent consideration from being recognized when it is
probable to being recognized at the time of acquisition, disallowing the
capitalization of transaction costs and changes when restructurings related to
acquisition can be recognized.  SFAS 141-R is effective for fiscal
years beginning on or after December 15, 2008 and only impacts the accounting
for acquisitions that are made after adoption.  The adoption of SFAS
141-R did not have an effect on the Company’s consolidated financial position or
results of operations.




8
 TABLE OF CONTENTS





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an Amendment of ARB No. 51” (“SFAS
160”).  SFAS 160 is effective for fiscal years beginning on or after
December 15, 2008, with earlier adoption prohibited.  SFAS 160
requires the recognition of a noncontrolling interest (minority interest) as
equity in the consolidated financial statements and separate from the Company’s
equity.  The amount of netincomeattributable to the
noncontrolling interest will be included in consolidated net income on the face
of the consolidated income statement.  It also amends certain of ARB
No. 51’s consolidation procedures for consistency with the requirements of SFAS
141-R.  SFAS 160 also includes expanded disclosure requirements
regarding the interests of the parent and its noncontrolling
interest.  The adoption of SFAS 160 did not have an effect on the
Company’s consolidated financial position or results of operations.




In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS
165”).  SFAS 165 is intended to establish general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued.  It requires the disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date, that is
whether that date represents the date the financial statement were issued or
were available to be issued.  SFAS 165 is effective for interim or
annual financial periods after June 15, 2009.  Management has
evaluated events and transactions through August 12, 2009, the date the
financial statements were issued and filed with the Security and Exchange
Commission.  No events or transactions have occurred subsequent to
June 30, 2009 through August 12, 2009 that would have a material impact on the
financial statements as of June 30, 2009.





3.
            Fair Value of
      Financial Instruments





The
following disclosures of estimated fair value were determined by management,
using available market information and appropriate valuation
methodologies.  Considerable judgment is necessary to interpret market
data and develop estimated fair values.





Accordingly,
the estimates presented herein are not necessarily indicative of the amounts the
Company could realize on disposition of the financial
instruments.  The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.





Cash
equivalents, marketable securities, receivables, payables and other amounts
arising out of normal contract activities, including retentions, which may be
settled beyond one year, reasonably approximate their fair values.





The fair
value of the Company’s mortgage payable, which is not traded in the market, is
estimated by considering the Company’s credit rating, current rates available to
the Company for debt of the same remaining maturity and the terms of the
debt.





Disclosure
about fair value of financial instruments is based on pertinent information
available to management as of June 30, 2009.





9
 TABLE OF CONTENTS





4.
              Marketable
      Securities





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”).





SFAS 157
established a broad three level fair value hierarchy that prioritizes observable
and unobservable inputs which are used to measure fair value.





The
Company values mutual funds and marketable equity securities using market prices
on active markets, which is Level 1 of the SFAS 157 fair value
hierarchy.  Level 1 instrument valuations are obtained from real-time
quotes for transactions in active exchange markets involving identical
assets.





Financial
assets carried at fair value at June 30, 2009 are classified in the table below
in one of the SFAS 157’s three broad categories.





Level 1
            
            
            Level 2
            
            
            Level 3
            
            
            TotalMutual
      funds and marketable equity securities
            
            $
            1,371,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            1,371,000





5.
            Stockholders’
      Equity





(A)  Stock Option
Plans:





The
Company has outstanding stock options issued under two plans, the KSW, Inc. 1995
Stock Option Plan (“1995 plan”) and the KSW, Inc. 2007 Stock Option Plan (“2007
plan”).





The 1995
plan expired December 2005.  Therefore, no new options can be granted
under that plan.  There are 145,501 outstanding exercisable options,
which were previously issued under the 1995 plan, expiring on various dates
through 2015.





The 2007
plan was adopted and approved by the Company’s Board of Directors on May 8, 2007
and was approved by the shareholders at the May 2008 Annual Meeting of
Stockholders.  Pursuant to the 2007 plan, 300,000 shares of common
stock of the Company are reserved for issuance to employees, consultants and
directors of the Company.  The primary purpose of the 2007 plan is to
reward and retain key employees.  No options have been issued to
officers or employees under the 2007 plan. Under this plan, the Company
previously issued to a Company director options to purchase 20,000 shares of the
Company’s common stock at an exercise price of $6.95 per share. On May 7, 2009,
the Company issued to a Company director options to purchase 20,000 shares of
the Company’s common stock at an exercise price of $2.61 per
share.  At June 30, 2009, there were 40,000 options outstanding of
which 6,666 were vested under the 2007 plan.





In
addition, during the three and six months ended June 30, 2009, the Company
incurred compensation expense related to the vesting of stock options totaling
approximately $5,000 and $9,000, respectively.  There were no stock
options exercised during the three and six months ended June 30,
2009.




10
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During
the three and six months ended June 30, 2008, the Company incurred compensation
expense related to the vesting of stock options totaling approximately $15,000
and $17,000, respectively.  In addition, during the quarter ended June
30, 2008 an officer exercised 7,001 options.  A director, an executive
and an employee exercised an aggregate of 36,500 options during the quarter
ended March 31, 2008.





As of
June 30, 2009, there is approximately $41,000 of unrecognized compensation
expense related to unvested stock-based compensation awards.  That
cost is expected to be recognized over the next 2.9 years.





Under
both plans, options were granted to certain employees, executives and directors
at prices equal to the market value of the stock on the dates the options were
issued.  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, 2009 was as
follows:




Number
              of Shares
            
            
            Weighted
      Average
              Exercise Price
            
            
            Weighted
      Average Remaining Contractual
              Term in Years
            
            
            Aggregate
              IntrinsicValueOutstanding
      at January 1, 2009
            
            
            165,501
            
            
            $
            2.23Expired/canceled
            
            
            -
            
            
            
            -Granted
            
            
            20,000
            
            
            $
            2.61Exercised
            
            
            -
            
            
            
            -Outstanding
      at June 30, 2009
            
            
            185,501
            
            
            $
            2.27
            
            
            
            3.6
            
            
            $
            231,000Exercisable
      at June 30, 2009
            
            
            152,167
            
            
            $
            1.81
            
            
            
            2.4
            
            
            $
            140,000




Cash
proceeds, tax benefits and intrinsic value related to total stock options
exercised during the three and six months ended June 30, 2009 and 2008 are as
follows:





Three
      MonthsEnded
              June 30, 2009
            
            
            Three
      MonthsEnded
              June 30, 2008
            
            
            Six
      MonthsEnded
              June 30, 2009
            
            
            Six
      MonthsEnded
              June 30, 2008Proceeds
      from stock options exercised
            
            $
            -
            
            
            $
            11,000
            
            
            $
            -
            
            
            $
            68,000Tax
      benefits related to stock options exercised
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            62,000Intrinsic
      value of stock options exercised
            
            $
            -
            
            
            $
            24,000
            
            
            $
            -
            
            
            $
            201,000




11
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(B)
              Dividend





On June
2, 2009, the Company’s Board of Directors declared a cash dividend of $.10 per
share.  The aggregate amount of the dividend was $624,000, and was
paid on July 17, 2009 to stockholders of record as of June 29,
2009.  This amount has been accrued in the accompanying consolidated
financial statements under the caption “Accounts payable”.





(C)
            Treasury
      Stock





During
December 2008, the Company’s Board of Directors authorized the purchase, through
June 2009 of up to $1,000,000 of the Company’s common stock on the open
market.  During the period of this repurchase program, the Company
purchased 52,700 shares of common stock at a cost of $140,000.





6.
            Earnings per
      Share






Three
      Months Ended
              June 30, 2009
            
            
            Three
      Months Ended
              June 30, 2008
            
            
            Six
      Months Ended
              June 30, 2009
            
            
            Six
      Months Ended
              June 30, 2008Net
      income
            
            $
            123,000
            
            
            $
            1,074,000
            
            
            $
            410,000
            
            
            $
            1,914,000Earnings
      per share – basic:Weighted
      average sharesoutstanding
      during the period
            
            
            6,235,125
            
            
            
            6,284,325
            
            
            
            6,244,654
            
            
            
            6,271,552Earnings
      per share - basic
            
            $
            .02
            
            
            $
            .17
            
            
            $
            .07
            
            
            $
            .31Earnings  per
      share – diluted:Weighted
      average sharesoutstanding
      during the period
            
            
            6,235,125
            
            
            
            6,284,325
            
            
            
            6,244,654
            
            
            
            6,271,552Effect
      of stock option dilution
            
            
            31,512
            
            
            
            56,136
            
            
            
            42,855
            
            
            
            58,467Total
      shares outstanding forpurposes
      of calculating dilutedearnings
      per share
            
            
            6,266,637
            
            
            
            6,340,461
            
            
            
            6,287,509
            
            
            
            6,330,019Earnings  per
      share – diluted
            
            $
            .02
            
            
            $
            .17
            
            
            $
            .07
            
            
            $
            .30





For the
three months ended June 30, 2009 and 2008, 153,989 and 109,365 potentially
dilutive securities, respectively, have been excluded from the calculation of
net income per share since the effects of such potentially dilutive securities
would be anti-dilutive because the exercise price of these outstanding stock
options was greater than the market price the Company’s stock traded on the open
market at June 30, 2009 and 2008. For the six months ended June 30, 2009 and
2008, 142,646 and 107,034 potentially dilutive securities, respectively, have
been excluded from the calculation of net income per share since the effects of
such potentially dilutive securities would be anti-dilutive because the exercise
price of these outstanding stock options was greater than the market price the
Company’s stock traded on the open market at June 30, 2009 and
2008.




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7.
              Commitment and
      Contingencies





Proposals and
Claims.  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, the claims 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.





8.
            Recently Issued
      Accounting Pronouncements




In June
2009, the FASB issued SFAS No. 166 “The Accounting for Transfers of Financial
Assets – an Amendment of FASB Statement 140” (“SFAS 166”), which clarifies
circumstances under which a transferor has surrendered control and, thus, should
remove the asset together with any related liabilities from its balance
sheet.  SFAS 166 is effective for the Company beginning on January 1,
2010.  Management does not expect the adoption of SFAS 166 to have a
material effect on the Company’s consolidated financial statements and related
disclosures.





In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46
(R)” (“SFAS 167”), which modifies the analysis required to identify controlling
financial interest in variable interest entities.  SFAS 167 is
effective for the Company beginning on January 1, 2010.  Management
does not expect the adoption of SFAS 167 to have a material effect on the
Company’s consolidated financial statements and related
disclosures.





In June
2009, FASB issued SFAS No. 168 “The FASB Accounting Standards Codification TM and
the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”). SFAS
168 establishes the FASB Accounting Standards Codification as the single source
of authoritative non-governmental U.S. generally accepted accounting
principles.  The codification is effective for interim and annual
periods ending after September 16, 2009.  All existing accounting
standards documentation is superseded. All other accounting literature not
included in the codification is non authoritative.  The codification
is effective for interim and annual periods ending after September 15,
2009.  The Company is in the process of evaluating the effect, if any,
the adoption of SFAS 168 will have on disclosure in the Company’s consolidated
financial statements.




13
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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, 2009 decreased by $5,377,000, or (24.4)
% to $16,621,000, as compared to $21,998,000 for the quarter ended June 30,
2008.  Total revenues for the six months ended June 30, 2009 decreased
by $6,162,000, or (14.5)%, to $36,327,000, as compared to $42,489,000 for the
six months ended June 30, 2008.  This decrease was a result of the
current economic recession.





As of
June 30, 2009, the Company had backlog of approximately
$39,400,000.  The owner of the Mount Sinai project has approved
retaining the Company as trade manager for the construction phase of its
project.  Although the Company has received a letter of intent, no
contract has been issued for this project, currently valued at $52,000,000, and
the value for this project has not been included in the Company’s June 30, 2009
backlog.  Preliminary work is scheduled to begin in 2010 and last for
approximately two years.





The June
30, 2009 backlog also does not include the Company’s participation in a joint
venture which was the apparent low bidder on a contract with The Port Authority
of NY & NJ to construct a chiller plant at the new World Trade Center
site.  The contract for this new plant is valued at approximately
$46,000,000.





Approximately
$26,000,000 of the June 30, 2009 backlog is not reasonably expected to be
completed within the year ending December 31, 2009.  The projects
discussed above and any other new contracts secured during 2009 may also
increase 2009 revenues.  The amount of backlog not reasonably expected
to be completed in the year ending December 2009 is subject to various
uncertainties and risks.  The Company is actively seeking new projects
to add to its backlog.  The economic recession has impacted the number
of private projects, which the Company may pursue.  Therefore, the
Company has begun aggressively pursuing opportunities in the public sector,
where the Company has been successful in the past.





Cost
of Revenues





Cost of
revenues for the quarter ended June 30, 2009 decreased by $3,770,000, or (20.0)%
to $15,066,000, as compared to $18,836,000 for the quarter ended June 30,
2008.  Cost of revenues for the six months ended June 30, 2009
decreased by $4,060,000, or (11.0)% to $32,950,000, as compared to $37,010,000
for the six months ended June 30, 2008.  The decreases in cost of
revenues for the quarter and six months ended June 30, 2009, as compared to the
same periods in 2008, were primarily associated with the decreased
revenues.





During
the first quarter of 2009, the Company reclassified to inventory approximately
$400,000 of piping materials which were originally purchased for contracts which
were later terminated.  During the second quarter of 2009, this
inventory was utilized and charged to ongoing projects.




14
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Gross
Profit





Gross
profit for the quarter ended June 30, 2009, was $1,555,000, or 9.4% of revenues,
as compared to gross profit of $3,162,000, or 14.4% of revenues for the quarter
ended June 30, 2008.





Gross
profit for the six months ended June 30, 2009 was $3,377,000, or 9.3% of
revenues, as compared to gross profit of $5,479,000, or 12.9% of revenues for
the six months ended June 30, 2008.





The
decrease in gross profit for the quarter and six months ended June 30, 2009, as
compared to the same periods in 2008, was primarily a result of lower revenues,
as well as higher than anticipated costs incurred on several
projects.  The Company has submitted claims on some of these projects
to recoup some of these unanticipated costs.  In accordance with
accounting principles generally accepted in the United States of America for the
construction industry, the Company does not record any income from claims until
the claims have been received or awarded. While there is no assurances that
these costs will be reimbursed, the Company believes its claims are
meritorious.





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses (“SG&A”) for the quarter ended June 30,
2009 increased by $14,000, or 1.0% to $1,357,000, as compared to $1,343,000 for
the quarter ended June 30, 2008.  SG&A for the six months ended
June 30, 2009 increased by $108,000 or 4.1% to $2,759,000, as compared to
$2,651,000 for the six months ended June 30, 2008.





SG&A
remained constant during the quarter ended June 30, 2009, as compared to the
quarter ended June 30, 2008.





The
increase in SG&A for the six months ended June 30, 2009, as compared to the
six months ended June 30, 2008, was primarily related to increased employment
costs and computer consulting costs.





Other
Income





Other
income, which is primarily interest income, for the quarter ended June 30, 2009
was $4,000, as compared to $82,000 for the quarter ended June 30,
2008.  Other income for the six months ended June 30, 2009 was
$20,000, as compared to $206,000 for the six months ended June 30,
2008.  The decreases in other income for the quarter and six months
ended June 30, 2009, as compared to the same periods in 2008, were primarily due
to a reduction in the interest rates that investments were able to
earn.





Provision
for Income Taxes





The
provision for income taxes for the quarter ended June 30, 2009 was $79,000, as
compared to the provision for income taxes of $827,000 for the quarter ended
June 30, 2008.  The provision for income taxes for the six months
ended June 30, 2009 was $228,000, as compared to a provision for income taxes of
$1,120,000 for the six months ended June 30, 2008.




15
 TABLE OF CONTENTS







Net
Income





As a
result of the above mentioned items, the Company reported net income of
$123,000, or $.02 per share-basic and diluted for the quarter ended June 30,
2009, as compared to reported net income of $1,074,000, or $.17 per share-basic
and diluted for the quarter ended June 30, 2008.





For the
six months ended June 30, 2009, the Company reported net income of $410,000, or
$.07 per share-basic and diluted, as compared to reported net income of
$1,914,000, or $.31 per share-basic and $.30 per share-diluted for the six
months ended June 30, 2008.





Liquidity and Capital
Resources





General





The
Company’s principal capital requirement is to fund its work on construction
projects.  Projects are billed monthly 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 a line of credit which is subject to
certain conditions.  The Company has not relied on bank borrowings to
finance its operations since July 2003.





As of
June 30, 2009, total cash and cash equivalents was $15,932,000, a $186,000
decrease from the $16,118,000 reported as of June 30, 2008.





Cash
used in/ provided by operations





Net cash
used in operations was $456,000 for the six months June 30, 2009.  Net
cash provided by operations was $1,113,000 for the six months ended June 30,
2008.  Both periods were affected by the funding of projects as well
as the payment of corporate income taxes and executive bonuses.





Cash
used in investing activities





Net cash
used in investing activities was $65,000 and $99,000 for the six months ended
June 30, 2009 and 2008, respectively.  The Company purchased property
and equipment totaling $61,000 and $82,000 and marketable securities totaling
$4,000 and $28,000 during the six months ended June 30, 2009 and 2008,
respectively.  In addition, during the six months ended June 30, 2008,
the Company received proceeds from the sale of property and equipment totaling
$11,000.





Cash
used in financing activities





Net cash
used in financing activities was $158,000 for the six months ended June 30,
2009, as compared to $1,128,000 for the six months ended June 30,
2008.




16
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On June
2, 2009, the Company’s Board of Directors declared a cash dividend of $.10 per
share.  The aggregate amount of the dividend was
$624,000.  This amount was paid on July 17, 2009 and therefore was not
included in the cash flows from financing activities in the accompanying
consolidated statement of cash flows for the period ended June 30,
2009.





On April
30, 2008, the Company’s Board of Directors declared a cash dividend of $.20 per
share.  The aggregate amount of the dividend was $1,258,000 and was
paid on June 17, 2008 to stockholders of record as of May 26, 2008.





During
the six months ended June 30, 2008, two executives, an employee and a director
exercised options to purchasean aggregate of 43,501
shares contributing cash proceeds of $68,000 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 assets for such options.  As a result of
adopting SFAS 123-R, $62,000 of excess tax benefits for the six months ended
June 30, 2008 have been classified as an operating cash outflow and a financing
cash inflow.





During
the six months ended June 30, 2009, the Company purchased 46,100 shares of
treasury stock at a cost of $124,000.





In
addition, the Company repaid principal payments on its mortgage payable totaling
$34,000 during the six months ended June 30, 2009.





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, 2010, is secured by the Company’s assets,
and is guaranteed by the Company’s subsidiary, KSW Mechanical Services,
Inc.  There have been no borrowings against this line of
credit.





Advances
bear interest, at the Company’s option, at either the bank’s prime lending rate
plus one percent per annum (4.25% at June 30, 2009) or the London Inter-Bank
Offered Rate (“LIBOR”) plus two and one-half percent per annum (2.8% at June 30,
2009).





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 of credit,
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.





17
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Commitments





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 obtains its surety bonds from Federal Insurance
Company, a member of Chubb Group of Insurance Companies.  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 that might
result from 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.





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, 2009, approximately $13,900,000 of the Company’s backlog of $39,400,000
is anticipated to be bonded.





Critical Accounting Policies
and Estimates





There
have been no material changes in the accounting policies and estimates that the
Company considers to be “critical” from those disclosed in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008.





Recently Issued Accounting
Pronouncements





See Note
8 to the consolidated financial statements for a summary of recently issued
accounting pronouncements and their impact on the Company.




18
 TABLE OF CONTENTS







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 words 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, cancellation, suspension or delay of
projects by customers, 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 “ Part I, Item 1A.  Risk Factors” in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2008.  Forward-looking statements speak only as of the date of the
document in which they are made.  Other than required by applicable
law, the Company disclaims any obligation or undertaking to provide any updates
or revisions to any forward-looking statements to reflect any changes in the
Company’s expectations or any changes in events, conditions or circumstances on
which the forward-looking statements are 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, 2009, the Company has invested $1,371,000
in marketable securities.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





As of
June 30, 2009, our management, including our Chief Executive Officer and our
Chief Financial Officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act). Based on this assessment, management determined that,
as of June 30, 2009, the Company’s disclosure controls and procedures were
effective.





There
have been no changes 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 quarter ended June 30, 2009, that have materially affected or are reasonably
likely to materially affect the Company’s internal control over financial
reporting.





PART II - OTHER
INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS





None.





19
 TABLE OF CONTENTS





ITEM
      1A.
            RISK
      FACTORS





There
have been no material changes related to risk factors from those items
previously disclosed in the Company’s December 31, 2008 Annual Report on Form
10-K.




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





During
the quarter ended June 30, 2009, the Company did not purchase any shares
pursuant to its previously announced repurchase program.





ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES





None.





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





None.




ITEM
      5.
            OTHER
      INFORMATION





On June
2, 2009, the Board of Directors declared a cash dividend of $.10 per share,
payable on July 17, 2009, to stockholders of record as of June 29,
2009.




ITEM
      6.
            EXHIBITS




Exhibit
      11 – Statement regarding Computation of Earnings per Share (see Note 6 to
      the Consolidated Financial Statements included elsewhere in this
      Report)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 1350Exhibit
      32.2 – Certification of Chief Financial Officer required by Rule 13a-14(b)
      and 18 U.S.C. Section 1350




20
 TABLE OF CONTENTS





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
      12, 2009
              
              
              /s/
      Richard W. LucasRichard
      W. Lucas
                Chief
      Financial Officer(Principal
      Financial and Accounting Officerand
      Duly Authorized Officer)




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KSW,
INC.





INDEX TO EXHIBITS





Exhibit Number
            
            Description11
            
            Statement
      Regarding Computation of Earnings per Share (see Note 6 to the
      Consolidated Financial Statements included elsewhere in this
      Report)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. §135032.2
            
            Certification
      of Chief Financial Officer required by Rule
      13a-14 (b) and
      18 U.S.C. §1350





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