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

                                  FORM 10-QSB
                                  -----------


(Mark
 One)

  X      QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
-----    OF THE SECURITIES EXCHANGE ACT OF 1934
                                        
         For the nine month period ended September 30, 1995

-----    TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
         OF THE SECURITIES EXCHANGE ACT

         For the period of transition from ________ to _______
                    Commission File No. 0-1322

                          KNICKERBOCKER VILLAGE, INC.
            ------------------------------------------------------
            (exact name of registrant as specified in its Charter)


            NEW YORK                                     13-0924285
-------------------------------                 ---------------------------    
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)


     10 Monroe Street, New York, N.Y.                       10002
-------------------------------------------     ---------------------------
  (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code (212) 227-0955



Indicate by checkmark 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
                                           ---              ---

The number of shares outstanding of each of the issuer's classes of common
stock, as the close of the period covered by this report is 147,464, $2.15 par
value.

Total number of sequentially numbered pages - 10
No exhibits filed.
<PAGE>
 
                                  FORM 10-QSB
                                  -----------
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                                 BALANCE SHEET
                                 -------------
                           AS OF SEPTEMBER 30, 1995
                           ------------------------
                                  (UNAUDITED)
                                  -----------
 
 
 
<TABLE>
<CAPTION>
        ASSETS
        ------ 
<S>                                            <C>          
CURRENT ASSETS:
 Cash                                          $         0  
 Accounts receivable, less allowance for
  doubtful accounts of $249,000                    235,093  
 Interest and other receivables                     30,261
 Prepaid expenses and other current assets       1,136,494    
                                               ----------- 
                                                 1,401,848
                                               ----------- 
 
SPECIAL FUNDS AND DEPOSITS:
 Funds for replacements, painting and
  decorating (Note 2)                              603,716  
  Tenants' security deposits - contra              620,088
                                               ----------- 
                                                 1,223,804
                                               ----------- 
 
FIXED ASSETS, AT COST (Notes 3 and 4):
 Land                                            3,273,281  
 Buildings and building equipment               13,551,670
                                               -----------
 Less: Accumulated depreciation                 16,824,951
   NET FIXED ASSETS                             10,130,127
                                               -----------
                                                 6,694,824
                                               -----------
OTHER ASSETS                                        87,437
                                               -----------
TOTAL ASSETS                                   $ 9,407,913
                                               ===========
</TABLE>
 
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as of September 30, 1995 and for the related periods
then ended include all adjustments necessary in order to make the financial
statements not misleading.

                                      -2-
<PAGE>
 
                                  FORM 10-QSB
                                  -----------
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                                 BALANCE SHEET
                                 -------------
                            AS OF SEPTEMBER 30, 1995
                            ------------------------
                                  (UNAUDITED)
                                  -----------
                                        
 
 
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S>                                                      <C>          
   Accounts payable and accrued expenses                  $1,258,770  
   Unearned rent income                                       50,048
   Dividends payable (Note 1)                                 19,023  
   Current maturities of mortgage payable (Note 4)           150,895
   Bank overdraft                                              1,781
                                                          ----------
         TOTAL CURRENT LIABILITIES                         1,480,517
 
TENANTS' SECURITY DEPOSITS - CONTRA                          620,088
 
LONG-TERM DEBT:
   Mortgage payable, less current maturities (Note 4)      6,048,261
                                                          ----------
 
   TOTAL LIABILITIES                                       8,148,866
                                                          ----------
 
STOCKHOLDERS' EQUITY (Note 1):
   Limited dividend capital stock, par value
   $2.15 per share, authorized-348,837 shares
   issued and outstanding - 147,464 shares                   317,048
                                                          ----------
 
   Retained earnings                                         941,999
                                                          ----------
 
     TOTAL STOCKHOLDERS' EQUITY                            1,259,047
                                                          ----------
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $9,407,913
                                                          ==========
</TABLE>

                                      -3-
<PAGE>
 
                                  FORM 10-QSB
                                  -----------
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
                   ------------------------------------------
                    FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                    ---------------------------------------
                                  (UNAUDITED)
                                  -----------
                                        

<TABLE> 
<CAPTION> 
                                               1995        1994
                                            ----------  ----------
<S>                                         <C>         <C>
REVENUES:
   Rentals - Net                            $6,951,938  $6,708,566
   Gain on sale of securities                        0      90,340
Interest and other income                       29,966      13,735
                                            ----------  ----------
                                             6,981,904   6,812,641
                                            ----------  ----------

EXPENSES:
    Wages and related costs                  1,595,838   1,591,400
    Real estate taxes                          556,291     546,470
    Utilities                                1,365,614   1,320,862
    Maintenance, repairs and decorating        832,336     684,636
    Depreciation and amortization              300,284     286,617
    Interest                                   483,726     489,225
    Miscellaneous operating and general
      expenses                               1,131,866   1,018,674
    Management fee (Note 5)                    632,258     635,247
                                            ----------  ----------
                                             6,898,213   6,573,131
                                            ----------  ----------
Income before income taxes and
   extraordinary credit                         83,691     239,510
 
 
Provision for taxes                             29,000      86,500
                                            ----------  ----------
 
Income before extraordinary credit              54,691     153,010
 
Extraordinary item-utilization of
   operating loss carryforward                       0      29,700
                                            ----------  ----------
 
Net Income                                      54,691     182,710
 
Retained earnings at beginning of period       887,308     794,250
                                            ----------  ----------
 
Retained at end of period                   $  941,999  $  976,250
                                            ==========  ==========
 
Net Income per share                        $     0.37  $     1.24
                                            ==========  ==========
 
Average number of shares outstanding           147,464     147,464
 during the period                          ==========  ==========

</TABLE>

                                      -4-
<PAGE>
 
                                  FORM 10-QSB
                                  -----------
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                           STATEMENTS OF CASH FLOWS
                           ------------------------
                    FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                    ---------------------------------------
                                  (UNAUDITED)
                                  -----------


<TABLE>
<CAPTION>
                                                      1995        1994
                                                   ----------  ----------
<S>                                                <C>         <C>
Cash Flows From Operating Activities:
   Net income                                      $  54,691   $ 182,710
   Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Depreciation and amortization                    300,284     286,617
    Provision for bad debts                            9,299      50,000
    Deferred income                                        0     (68,886)
    Changes in assets (increase) decrease:
      Rents receivable                               (63,478)    (58,056)
      Interest and other receivables                  66,651     (27,890)
      Prepaid expenses and other assets              403,551     418,869
    Changes in liabilities increase (decrease):
      Accounts payable and accrued expenses         (271,856)   (369,281)
         Unearned rental income                        5,619      23,031
           Federal income taxes payable                    0      68,890
                                                   ---------   ---------
      Net cash provided by operating
        activities                                   504,761     506,004
                                                   ---------   ---------

Cash Flows From Investing Activities:
Interest earned on reserve fund investments
  -Use of funds restricted, subject to DHCR
    approval                                          (8,633)     (9,415)
Capital expenditures                                (421,424)   (169,232)
  Contributions of cash from operations to
    reserve fund                                    (425,000)   (430,000)
    Reimbursement of capital expenditures
  and expenses by housing company from
  replacement fund                                   386,340     160,481
                                                   ---------   ---------
    Net cash used in investing activities           (468,747)   (448,257)
                                                   ---------   ---------
 
Cash Flows From Financing Activities:
  Payments on long-term debt                        (103,709)    (93,878)
  Proceeds from bank overdraft                         1,781           0
                                                   ---------   ---------
    Net cash used in financing activities           (101,928)    (93,878)
 
Net (decrease) in cash                               (65,914)    (36,131)
 
Cash at beginning of period                           65,914      39,608
                                                   ---------   ---------
 
Cash at end of period                              $       0   $   3,477
                                                   =========   =========
 
Supplemental Disclosures Of Cash Flow Information:
  Cash paid during the periods for:
  Interest                                         $ 162,365    $ 479,136
  Income taxes                                             0       59,511
</TABLE>

                                      -5-
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                         NOTES TO FINANCIAL STATEMENTS
                         -----------------------------
                              SEPTEMBER 30, 1995
                              ------------------
                                  (UNAUDITED)
                                  -----------



NOTE 1 - CORPORATE ORGANIZATION
         ----------------------

         Knickerbocker Village, Inc. (the Registrant) is a public limited
         dividend housing company formed, pursuant to the Housing Laws of the
         State of New York, on September 5, 1933. The holders of its capital
         stock cannot at any time receive, in repayment of their investment, any
         sums in excess of the par value of the stock together with cumulative
         dividends at the rate of 6% of par value per annum (without interest).
         Any surplus in excess of such amounts upon dissolution reverts to the
         public authorities. Cumulative dividends unpaid to September 30, 1995
         amounted to $508,865 or approximately $3.45 per share. Dividends
         amounting to $19,023 were declared during 1979, but were not paid as of
         September 30, 1995. Such dividends were approved by the New York State
         Division of Housing and Community Renewal. No dividends were declared
         or paid in 1995.

NOTE 2 - REPLACEMENT, PAINTING AND DECORATING FUNDS
         ------------------------------------------

         Maintenance of these funds is required by the Commissioner of Housing
         and Community Renewal of the State of New York. These funds were
         comprised of the following at September 30, 1995:

                 Cash                                    $     198,610
                 Investments - Treasury Bills                  405,106
                                                         -------------

                                                         $     603,716
                                                         =============

NOTE 3 - FIXED ASSETS
         ------------

         Depreciation is provided on the straight-line method. Estimated useful
         lives used in computing depreciation for building improvements and
         equipment ranges from 5 to 30 years. Replacements of and major
         improvements to property are capitalized. Expenditures for maintenance
         and repairs are charged to operations as incurred. Upon sale or
         retirement of property, the cost and accumulated depreciation are
         removed from the respective accounts and any gain or loss is reflected
         in operations for the year (See Note 7).

NOTE 4 - LONG-TERM DEBT
         --------------

         Long-term debt represents a mortgage payable to the Greater New York
         Savings Bank, collateralized by land, buildings and boiler, due July 1,
         1997. Monthly payments inclusive of interest at 10% per annum are
         $63,642 and the balance of the principal is due on July 1, 1997.
         Principal payments due on this mortgage are approximately $36,000 (1995
         - three months); $155,000 (1996) and $6,007,000 (1997).

                                      -6-
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                          --------------------------
                         NOTES TO FINANCIAL STATEMENTS
                         ----------------------------
                              SEPTEMBER 30, 1995
                              ------------------
                                  (UNAUDITED)
                                  -----------


NOTE 5 - MANAGEMENT FEE
         --------------

         The management fee, set by the New York State Division of Housing and
         Community Renewal, was paid to Cherry Green Property Corp. ("Cherry
         Green"), the owner of approximately 95% of the outstanding shares of
         the Registrant.

NOTE 6 - COMMITMENTS
         -----------

         As of September 30, 1995, the Registrant was in arrears on its
         contributions to its special fund for replacements, painting and
         decorating in the amount of $340,000. Such contributions are not
         mandatory, but are made only for the purpose of financing future
         capital improvements and extraordinary repairs.

NOTE 7 - DEPARTURE FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
         -------------------------------------------------------

         The Registrant has a policy of expensing appliances as they are
         purchased. Management's experience has indicated that the normal useful
         life of such appliances (including refrigerators and stoves) were
         considerably shortened, since most occupants did not properly care for
         the appliances. This departure results in a decrease in the
         Registrant's net income of approximately $42,000 and $43,000 for the
         nine months ended September 30, 1995 and 1994 respectively.

                                      -7-
<PAGE>
 
                                  FORM 10-QSB
                                  -----------
                          KNICKERBOCKER VILLAGE, INC.
                          ---------------------------
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    ---------------------------------------
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                 ---------------------------------------------
                              SEPTEMBER 30, 1995
                              ------------------
                                  (UNAUDITED)
                                  -----------


Liquidity - As of September 30, 1995, the Registrant had a working capital
deficit of approximately $79,000. At December 31, 1994, the Registrant had
working capital of approximately $180,000. As of September 30, 1995 the
Registrant  was in arrears on its contributions to its special fund for
replacements, painting and decorating in the amount of $340,000 as  discussed
further in Note 6 to the financial statements.

Effective November 1, 1993, the registrant received authorization from the
Division of Housing and Community Renewal for a two step rent increase. The
first increase of approximately five and one-quarter percent was effective
November 1, 1993. The second increase of approximately five percent was
effective  November 1, 1994.

Capital resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $604,000 and $556,000 as of September 30,
1995 and December 31, 1994, respectively.

Results of operations- During the nine months ended September 30, 1995, total
revenues increased as compared to the nine months ended September 30, 1994 by
approximately 2% due primarily to the rent increase referred to above, partially
offset by retroactive tenant surcharges relating to the year 1988 recorded in 
the nine months ended September 30, 1994.

Operating expenses increased during the nine months ended September 30, 1995, as
compared to the nine months ended September 30, 1994, by 5% due primarily to
increases in maintenance, repairs and decorating, utilities and miscellaneous
operating and general expenses. Maintenance, repairs and decorating expenses
increased as a result of plumbing, structural and heating system repairs.
Utilities increased primarily as a result of increased electricity usage,
partially offset by decreases in oil costs. Miscellaneous operating and general
expenses increased for the nine months ended September 30, 1995, primarily due
to increased security services.

                                      -8-
<PAGE>
 
          PART II.   OTHER INFORMATION
          ----------------------------


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------


          (a)   Exhibits.

                None.

          (b)   Reports on Form 8-K.

                None.

                                      -9-
<PAGE>
 
                            SIGNATURES

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


                                        KNICKERBOCKER VILLAGE, INC.:


Dated:  November 13, 1995                  By: /s/ ROBERT GERSHON
                                               -------------------------
                                               ROBERT GERSHON,
                                               Vice President and Treasurer
                                       
                                       
                                       
Dated:  November 13, 1995                  By: /s/ MELVIN GERSHON
                                               ------------------------
                                               MELVIN GERSHON,
                                               Secretary

                                      -10-