<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-QSB/A
                              AMENDMENT NUMBER 2

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

              FOR THE QUARTERLY PERIOD ENDED  SEPTEMBER 30, 1996
                                             --------------------
                                     
[_]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                         ACT OF 1934 
             For the transition period from ________ to ________
                         COMMISSION FILE NUMBER 0-25488

                        THE L.L. KNICKERBOCKER CO., INC.
                 (Name of Small Business Issuer in its Charter)

                  CALIFORNIA                                     33-0230641
      (State or Other Jurisdiction of                        (I.R.S. Employer
      Incorporation or Organization)                        Identification No.)
               30055 COMERCIO                                      92688
       Rancho Santa Margarita, CA                                (Zip Code)
(Address of Principal Executive Offices)

        ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 858-3661

        
     Check whether the issuer:  (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 
     ----       ----

     The number of shares outstanding of the registrant's Common Stock, as of
November 13, 1996 was 15,107,784.

     Transitional Small Business Disclosure Format    Yes       No   X
                                                          ----     ----


<PAGE>
 
ITEM 6.   Exhibits and Reports on Form 8-K
------    --------------------------------

A. Exhibits.
   ---------

<TABLE>
<CAPTION>
Exhibit                                            
Number                          Description         
-------                         -----------
<C>      <S>
 3.1     Articles of Incorporation of International Beauty Supply, Ltd. 
         ("IBS") dated July 11, 1985.(1)

 3.2     Amendment to Articles of Incorporation of IBS dated May 24, 1993.(1)

 3.3     Certificate of Amendment to Articles of Incorporation of The L. L. 
         Knickerbocker Co., Inc. (the "Company") dated June 20, 1994.(1)

 3.4     Certificate of Amendment to Articles of Incorporation of the Company 
         dated September 27, 1994.(1)

 3.5     Bylaws of the Company.(2)

 4.1     Qualified Stock Option Plan adopted by the Company on September 27, 
         1994 along with form of Stock Option Agreement.(3)

 4.2     Form of Warrant Agreement.(3)

 4.3     Form of Representative's Warrant issued to W.B. McKee Securities, Inc. 
         upon consummation of the Company's offering on January 25, 1995.(3)

 4.4     Form of Common Stock Purchase Warrant Certificate issued to
         Shoreline Pacific, the Institutional Finance Division of Financial
         West Group.(4)

 4.5     Form of 7% Convertible Debenture.(4)

10.1     Form of Private Securities Subscription Agreement.(4)

10.2     Form of Registration Rights Agreement.(4)

10.3     Stock Purchase Agreement dated September 30, 1996 by and among Harlyn
         Products, Inc., Harlyn International and the Company.(4)

10.4     First Amendment to Stock Purchase Agreement dated October 15, 1996 by 
         and among Harlyn Products, Inc., Harlyn International Company, Ltd. and
         the Company.(4)

10.5     Second Amendment to Stock Purchase Agreement dated November 7, 1996 by 
         and among Harlyn Products, Inc., Harlyn International Company, Ltd.
         and the Company.(4)

27.1     Financial Data Schedule(5)
</TABLE>
-------------------------------------------
(1) Filed as part of Exhibit 3.1 to The L. L. Knickerbocker Co., Inc. Form SB-2
    Registration Statement No. 33-85230-LA as filed with the Securities and
    Exchange Commission on or about October 13, 1994.

(2) Filed as an Exhibit to The L. L. Knickerbocker Co., Inc. Annual Report 
    on Form 10-KSB as filed with the Securities and Exchange Commission on or 
    about March 29, 1995.

(3) Filed as an Exhibit to The L. L. Knickerbocker Co., Inc. Form SB-2 
    Registration Statement No. 33-85230-LA as filed with the Securities and 
    Exchange Commission on or about October 13, 1994.

(4) Filed as an Exhibit to The L.L. Knickerbocker Co., Inc. Form 10-QSB/A as 
    filed with the Securities and Exchange Commission on November 27, 1996.

(5) Filed herewith.

                                    2 
<PAGE>
 
B. Reports on Form 8-K
   -------------------

   No reports on Form 8-K were filed.

 
                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                    THE L.L. KNICKERBOCKER CO., INC.


Date:   January 15, 1997            By:  /s/  Anthony P. Shutts
                                    -----------------------------
                                    Anthony P. Shutts
                                    Chief Financial Officer


                                      3


<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------


<TABLE> 
<CAPTION> 
Exhibit
Number                                 Description
-------       ------------------------------------------------------------------
<S>           <C> 
  3.1         Articles of Incorporation of International Beauty Supply, Ltd. 
              ("IBS") dated July 11, 1985.(1)

  3.2         Amendment to Articles of Incorporation of IBS dated May 24, 
              1993.(1)

  3.3         Certificate of Amendment to Articles of The L. L. Knickerbocker 
              Co., Inc.  (the "Company") dated June 20, 1994.(1)

  3.4         Certificate of Amendment to Articles of Incorporation of the 
              Company dated September 27, 1994.(1)

  3.5         Bylaws of the Company.(2)

  4.1         Qualified Stock Option Plan adopted by the Company on September 
              27, 1994 along with form of Stock Option Agreement.(3)

  4.2         Form of Warrant Agreement.(3)

  4.3         Form of Representative's Warrant issued to W.B. McKee Securities,
              Inc. upon consummation of the Company's offering on January 25,
              1995.(3)

  4.4         Form of Common Stock Purchase Warrant Certificate issued to
              Shoreline Pacific, the Institutional Finance Division of Financial
              West Group.(4)

  4.5         Form of 7% Convertible Debenture(4)

 10.1         Form of Private Securities Subscription Agreement(4)

 10.2         Form of Registration Rights Agreement(4)

 10.3         Stock Purchase Agreement dated September 30, 1996 by and among 
              Harlyn Products, Inc., Harlyn International and the Company(4)

 10.4         First Amendment to Stock Purchase Agreement dated October 15, 1996
              by and among Harlyn Products, Inc., Harlyn International Company, 
              Ltd. and the Company(4)

 10.5         Second Amendment to Stock Purchase Agreement dated November 7,
              1996 by and among Harlyn Products, Inc., Harlyn International
              Company, Ltd. and the Company(4)

 27.1         Financial Data Schedule(5)

</TABLE> 
-------------------------------------------------------------------------------

(1) Filed as part of Exhibit 3.1 to The L. L. Knickerbocker Co., Inc. Form 
    SB-2 Registration Statement No. 33-85230-LA as filed with the Securities and
    Exchange Commission on or about October 13, 1994.

(2) Filed as an exhibit to the L. L. Knickerbocker Co., Inc. Annual Report
    on Form 10-KSB as filed with the Securities and Exchange Commission on or
    about March 29, 1995.

(3) Filed as an Exhibit to The L. L. Knickerbocker Co., Inc. Form SB-2
    Registration Statement No. 33-85230-LA as filed with the Securities and
    Exchange Commission on or about October 13, 1994.

(4) Filed as an Exhibit to the L.L. Knickerbocker Co., Inc. Form 10-QSB/A as 
    filed with the Securities and Exchange Commission on November 27, 1996.

(5) Filed herewith.