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

Mark                              FORM 10-QSB
One)                              -----------

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

              FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 1997

[ ]               TRANSITION REPORT UNDER SECTION 13 OR 15 (D)
                              OF THE 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 of the close of the period covered by this report is 147,464, $2.15
par value.

Total number of sequentially numbered pages - 16
No exhibits filed.
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                                 BALANCE SHEET
                            AS OF SEPTEMBER 30, 1997
                                  (UNAUDITED)
<TABLE>
<CAPTION>
Assets
-----------
<S>                                                                         <C>
Current Assets:
  Cash                                                                      $    96,714
  Accounts receivable (less allowance for doubtful accounts of $303,000)        181,879
  Interest and other receivables                                                 18,271
  Prepaid expenses and other current assets (Note 13)                         1,151,463
  Deferred tax asset, net (Note 8)                                               67,000
                                                                            -----------
       Total Current Assets                                                   1,515,327
                                                                            -----------
 
Special Funds And Deposits:
 
  Funds for replacements, painting and decorating (Notes 4 and 11)              255,353
  Tenants' security deposits - contra                                           655,531
                                                                            -----------
       Total Special Funds and Deposits                                         910,884
                                                                            -----------
 
Fixed Assets, At Cost: (Notes 2, 3, 5 and 6)
 
    Land                                                                      3,273,281
    Buildings and building equipment                                         15,375,878
                                                                            -----------
                                                                             18,649,159
  Less: Accumulated depreciation                                             11,283,001
                                                                            -----------
       Net Fixed Assets                                                       7,366,158
                                                                            -----------
 
Other Assets:
 
  Deferred tax asset, net (Note 8)                                              212,000
  Other Assets                                                                  131,156
                                                                            -----------
       Total Other Assets                                                       343,156
                                                                            -----------
 
    Total Assets                                                            $10,135,525
                                                                            ===========
</TABLE>



In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at September 30, 1997 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, 1997
                                  (UNAUDITED)


 
    Liabilities And Stockholders' Equity
    ------------------------------------

Current Liabilities:
  Accounts payable and accrued expenses (Note 11)          $ 1,534,702
  Unearned rental income                                        68,818
  Dividends payable (Note 7)                                    19,023
  Current portion of long-term debt (Note 5)                    80,032
  Current portion of capital lease obligation (Note 6)           3,555
                                                           -----------
 
       Total Current Liabilities                             1,706,130
 
Tenants' Security Deposits - Contra                            655,531
 
Other Liabilities (Note 11)                                    180,500
 
Long-Term Debt, less current portion (Note 5)                6,176,319
 
Captial Lease Obligation, less current portion (Note 6)          5,522
                                                           -----------
 
       Total Liabilities                                     8,724,002
                                                           -----------
 
Commitments and Contingencies (Note 11)
 
Stockholders' Equity:
  Limited dividend capital stock,
  par value $2.15 per share,
     Authorized - 348,837 shares;
     issued and outstanding - 147,464 (Note 7)                 317,048
 
  Retained earnings                                          1,094,475
                                                           -----------
 
       Total Stockholders' Equity                            1,411,523
                                                           -----------
 
    Total Liabilities And Stockholders' Equity             $10,135,525
                                                           ===========

                                       3
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
             FOR THE NINE MONTHS ENDED  SEPTEMBER 30, 1997 AND 1996
                                  (UNAUDITED)


                                                     1997        1996
                                                  ----------  ----------
Revenues:
  Rentals (Note 12)                               $7,472,684  $7,183,866
  Other income                                         4,122      12,196
                                                  ----------  ----------
                                                   7,476,806   7,196,062
                                                  ----------  ----------
 
Expenses:
  Wages and related costs                          1,729,152   1,634,470
  Real estate taxes                                  616,253     593,758
  Utilities                                        1,424,985   1,440,262
  Maintenance, repairs and decorating                861,789     879,518
  Depreciation and amortization                      415,056     327,240
  Mortgage and other interest                        422,058     472,748
  Management and administrative fee (Note 9)         669,479     695,859
  Miscellaneous operating and general expenses     1,157,723   1,114,155
                                                  ----------  ----------
 
                                                   7,296,495   7,158,010
                                                  ----------  ----------
 
Income before income taxes                           180,311      38,052
 
Provision for income taxes (Note 8)                   29,000       7,000
                                                  ----------  ----------
 
Net income                                           151,311      31,052
                                                  ----------  ----------
 
Retained earnings at beginning of period
  As previously reported                             943,164     891,959
  Prior period adjustment (Note 2)                         0      93,000
                                                  ----------  ----------
  As restated                                        943,164     984,959
                                                  ----------  ----------
 
Retained earnings at end of period                $1,094,475  $1,016,011
                                                  ==========  ==========
 
Earnings per share                                     $1.03       $0.21
                                                  ==========  ==========

                                       4
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                            STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                                                   1997         1996
                                                               ------------  ----------
<S>                                                            <C>           <C>
Cash flows from operating activities:
  Net income                                                   $   151,311   $  31,052
  Adjustments to reconcile net income to net
  cash used in operating activities:
       Depreciation and amortization                               415,056     327,240
       Provision for bad debts                                      41,043      68,000
       Deferred income taxes                                      (153,000)    (58,000)
       Changes in assets (increase) decrease:
            Rents receivable                                       (14,923)    (98,385)
            Interest and other receivables                          (3,906)     (8,748)
            Prepaid expenses and other current assets              463,478     289,364
            Other assets                                          (124,374)          0
       Changes in liabilities increase (decrease):
            Accounts payable and accrued expenses                 (457,244)   (319,962)
            Unearned rental income                                 (14,155)     26,727
            Other liabilities                                      (32,000)          0
                                                               -----------   ---------
       Net cash provided by operating activities                   271,286     257,288
                                                               -----------   ---------
 
Cash Flows From Investing Activities:
  Interest earned on reserve fund investments                       (1,912)     (6,496)
  Capital expenditures                                            (278,454)   (410,598)
  Contributions of cash from operations to replacement fund       (591,441)   (239,000)
  Reimbursement of expenditures paid by housing company
  from replacement fund                                            453,976     519,396
  Contributions from sale of investments                                 0    (230,362)
  Proceeds of investments from replacement funds                         0     229,397
                                                               -----------   ---------
  Net cash used in investing activities                           (417,831)   (137,663)
                                                               -----------   ---------
 
Cash flows from financing activities:
  Proceeds on refinanced mortgage                                6,300,000           0
  Payments on pre-existing mortgage debt                        (6,008,130)          0
  Payments on long-term debt                                       (43,649)   (114,568)
  Payments on capital lease obligations                             (5,377)      4,301
  Payments of bank overdraft                                             0           0
                                                               -----------   ---------
  Net cash provided by (used in) financing activities              242,844    (110,267)
                                                               -----------   ---------
 
Net increase in cash                                                96,299       9,358
Cash at beginning of period                                            415           0
                                                               -----------   ---------
Cash at end of period                                          $    96,714   $   9,358
                                                               ===========   =========
 
Supplemental Disclosures Of Cash Flow Information:
  Cash paid during the period for:
  Interest                                                     $   423,000   $ 473,704
  Income taxes                                                      65,000      93,267
</TABLE>
Supplemental Schedule Of Noncash Investing and
Financing Activities:
     A captial lease obligation of $10,456 was incurred when the Company entered
into a lease for new equipment

                                       5
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



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

          Knickerbocker Village, Inc. (the Company), is a public, limited
          dividend housing company formed pursuant to the Housing Laws of the
          State of New York, on September 5, 1933. The Company is regulated by
          the Division of Housing and Community Renewal (DHCR), a New York State
          regulatory agency. The Company is located in lower Manhattan and
          operates approximately 1,600 rental units ranging in size from studios
          through three bedroom apartments.

NOTE 2 -  PRIOR PERIOD ADJUSTMENT
          -----------------------

          The balance of retained earnings at January 1, 1996, has been restated
          from amounts previously reported to reflect an increase of $93,000
          ($0.63 per share), resulting from a change in the Company's policy
          from expensing appliances as purchased to capitalizing the appliances
          as fixed assets. The change was made to conform with generally
          accepted accounting principles.

NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          ------------------------------------------

          REVENUE RECOGNITION
          -------------------

          The Company recognizes revenue in the accounting period that
          corresponds to the month for which rental income is billed. Rents
          received but not recognized as revenue as of September 30, are
          recorded as unearned rental income.

          ALLOWANCE FOR DOUBTFUL ACCOUNTS
          -------------------------------

          Bad debts are provided for on the allowance method based on historical
          experience and management's evaluation of outstanding rents
          receivable.

          FIXED ASSETS
          ------------

          Fixed assets consists primarily of building improvements and equipment
          and are recorded at cost. Depreciation is provided for financial
          statement purposes on the straight-line method, over the estimated
          useful lives of the fixed asset, which range from 5 to 30 years. For
          federal income tax purposes, depreciation is provided for on the
          straight-line and accelerated methods.

          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. Depreciation
          expense for the nine months ended September 30, 1997 and 1996 was
          approximately $385,000 and $304,000, respectively.

                                       6
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996


        INCOME TAXES
        ------------

        Deferred tax assets and liabilities reflect the tax consequences on
        future years of differences between the tax bases of assets and
        liabilities, and their financial reporting amounts, using enacted tax
        rates in effect for the year in which the differences are expected to
        reverse.

        CONCENTRATION OF CREDIT RISK
        ----------------------------

        The Company places its cash and investments for its Replacement Fund
        (See Note 4) with a high quality credit institution.  At times such
        investments may be in excess of FDIC insured limits.

        INVESTMENTS
        -----------

        All investments in the replacement, painting and decorating fund (See
        Note 4) are available for sale and are carried at fair values.

        ESTIMATES
        ---------

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements and the reported amounts of revenues and expenses
        during the reporting period.  Actual results could differ from those
        estimates.

        RECLASSIFICATIONS
        -----------------

        Certain prior year balances have been reclassified to conform with
current year classifications.
 
        FAIR VALUE OF FINANCIAL INSTRUMENTS
        -----------------------------------

        The following methods and assumptions were used to estimate the fair
        value of each class of financial instruments:

        1. Cash and cash equivalents - The carrying amounts approximate
           fair value because of the short maturity of these instruments.

        2. Investments - Fair value approximates quoted market value.

        3. Receivables - The carrying amount approximates fair value
           because of the short maturity of these instruments.

        4. Debt - The carrying amounts approximate fair value based on borrowing
           rates currently available to the Company for bank loans with similar
           terms. 

                                       7
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



          IMPAIRMENT OF LONG-LIVED ASSETS
          -------------------------------
 
          In accordance with SFAS No. 121, "Accounting For the Impairment of
          Long-Lived Assets and For Long-Lived Assets To Be Disposed Of", the
          Company reviews it long-lived assets, including property and
          equipment, and intangible assets for impairment whenever events or
          changes in circumstances indicate that the carrying amount of the
          assets may not be fully recoverable. To determine recoverability of
          its long-lived assets, the Company evaluates the probability that
          future undiscounted net cash flows will be less than the carrying
          amount of the assets. Impairment costs, if any, are measured by
          comparing the carrying amount of the related assets to their fair
          value.

NOTE 4 -   REPLACEMENT, PAINTING AND DECORATING FUNDS
           ------------------------------------------

          Maintenance of these funds is requested by the Commissioner of Housing
          and Community Renewal of the State of New York. These funds were
          comprised of the following at September 30, 1997:


           Cash                                                $255,353
           Investments: Treasury Bills - Available for sale           0
                                                               --------
                                                               $255,353
                                                               ========

NOTE 5 -  LONG-TERM DEBT
          --------------

          On January 30, 1997, the Company entered into an extension and
          modification agreement with The Greater New York Savings Bank for the
          principal amount of $6,300,000 ("Modification Agreement"). The
          mortgage is payable in monthly installments of $50,729, inclusive of
          interest at the rate of 8 1/2% per annum, commencing on March 1, 1997
          and due on February 1, 2007. On the maturity date, the Company may pay
          the remaining principal balance, or extend the term of the mortgage
          for an additional five (5) years. The mortgage is collaterallized by
          land, buildings and boilers. The aggregate maturities for long-term
          debt for the five years after September 30, 1997 are approximately
          $80,000, $87,000, $95,000, $103,000 and $112,000, respectively.

NOTE 6 -  CAPITAL LEASE OBLIGATIONS
          -------------------------

          The Company leases certain equipment under an agreement which is
          classified as a capital lease. The equipment lease has a purchase
          option at the end of the lease term. Leased captial assets included in
          buildings and building equipment at September 30, 1997 is as follows:
 
  
          Building Equipment          $20,356
          Accumulated Depreciation      2,908
                                      -------
                                      $17,448
                                      =======

                                       8
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



          Future minimum payments under noncancellable captial leases are as
        follows at September 30, 1997:

           Year Ending September 30
           ------------------------

           1998                                              $ 4,817
           1999                                                4,817
           2000                                                2,810
                                                             -------
                                                             
           Total minimum lease payments                       12,444
           Amounts representing interest                       3,367
                                                             -------
           Present value of net minimum payments               9,077
           Current portion                                     3,555
                                                             -------
                                                             
                                                             $ 5,522
                                                             =======

NOTE 7 -  DIVIDENDS PAYABLE AND CAPITAL STOCK
          -----------------------------------

          The holders of the Company's 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, 1997 amounted to $532,643
          or approximately $3.61 per share. Dividends amounting to $19,023 were
          declared during 1979, but were not paid as of September 30, 1997. Such
          dividends were approved by the DHCR. No dividends were declared or
          paid in 1997 or 1996.

 
NOTE 8 -  INCOME TAXES
          ------------

          The provision for income taxes for the nine months ended September 30,
          1997 and 1996 consist of the following:


                                              1997        1996
                                         --------------  -------
           Current Taxes
           --------------
               Federal                       $ 141,000   $47,000
               New York City                    41,000    19,000
                                             ---------   -------
               Total                         $ 182,000   $66,000
                                             ---------   -------
 
           Deferred Taxes
           --------------
               Federal                       $(129,000)  $45,000
               New York City                   (24,000)   14,000
                                             ---------   -------
               Total                         $(153,000)  $59,000
                                             ---------   -------
 
           Provision For Income Taxes        $  29,000   $ 7,000
                                             =========   =======

                                       9
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



        The provision for income taxes differs from amounts computed at
        statutory rates as follows:

                                                  1997         1996
                                               ----------   ----------
           Federal income taxes
               at statutory rate                $ 62,000     $13,000
                                                             
           New York City corporation                         
               tax, net of federal benefit        11,000       2,000
           Other, net                            (44,000)     (8,000)
                                                --------     -------
                                                             
               Total                            $ 29,000     $ 7,000
                                                ========     =======

        Deferred income taxes reflect the net tax effects of temporary
        differences between the carrying amounts of assets and liabilities for
        financial reporting purposes and the amounts used for income tax
        purposes.  At September 30, 1997, the net deferred tax assets of
        $279,000 was included in the Company's balance sheet as follows:

 
           Deferred tax asset, net
               - Current                          $  67,000
           Deferred tax asset, net
               - Long term                          212,000
                                                  ---------
           Deferred tax asset, net                $ 279,000
                                                  =========
 
        Significant components of the Company's net deferred tax asset at
        September 30, 1997 are as follows:
 
           Tax effects of:
            Accounts receivable                   $ 130,000
            Unearned rental income                   29,000
            Buildings and building equipment        500,000
                                                  ---------
           Gross deferred tax asset                 659,000
           Valuation allowance                     (380,000)
                                                  ---------
 
           Net deferred tax asset                 $ 279,000
                                                  =========

        Management believes that a valuation allowance is appropriate given the
        current estimates of future taxable income, as well as consideration of
        available tax planning strategies.  If the Company is unable to generate
        sufficient taxable income in the future through operating results,
        increases in the valuation allowance will be required through a charge
        to expense.  However, if the Company achieves profitability to utilize a
        greater portion of the deferred tax asset, the valuation allowance will
        be reduced through a credit to income.  There was no change in the
        valuation allowance for the nine months ended September 30, 1997.

                                       10
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



NOTE 9 -  MANAGEMENT FEE
          --------------

          The management fee, set by DHCR, was paid to Cherry Green Property
          Corp., (Cherry Green), the owner of approximately 95% of the
          outstanding shares of the Company. Such fee is reviewed and may be
          adjusted annually, effective July 1 of each year, by the DHCR.

          On March 8, 1996 and October 24, 1996 the DHCR approved increases in
          the management fee of 2.3% effective July 1, 1995 and 2.75% effective
          July 1, 1996, respectively.

NOTE 10-  PENSION PLAN
          ------------

          Certain employees of the Company are covered under a union sponsored,
          multi-employer defined benefit pension plan. This plan is not
          administered by the Company and contributions are determined by the
          union. The Company's contributions for this plan were approximately
          $54,000 and $53,000 for the nine months ended September 30, 1997 and
          1996, respectively.

NOTE 11-  COMMITMENTS AND CONTINGENCIES
          -----------------------------

          As of September 30, 1997, the Company was in arrears on its
          contributions as requested by DHCR to its' special fund for
          replacements, painting and decorating in the amount of approximately
          $157,000 (Note 4). The Company, in accordance with the Modification
          Agreement with it's bank dated January 30, 1997 (Note 5), has made a
          commitment to complete asbestos abatement work and lead paint
          remediation work of approximately $425,000 in 1997 and 1998. Remaining
          costs of approximately $393,000 have been accrued in the financial
          statements as of September 30, 1997. The costs of any additional
          asbestos abatement or lead paint remediation, if necessary, in excess
          of the amounts accrued at September 30, 1997, can not be determined at
          this time.

NOTE 12-  RENTAL INCOME
          -------------

          During April 1996, the Company received a two step rent increase,
          which was approved by the DHCR. The first increase of approximately
          5.5% was effective June 1, 1996 and the second increase of
          approximately 5.3% was effective June 1, 1997.

                                       11
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1997 AND 1996



NOTE 13-  PREPAID EXPENSES AND OTHER CURRENT ASSETS
          -----------------------------------------

          Prepaid expenses and other current assets in the accompanying balance
          sheet at September 30, 1997 are as follows:
 
          Escrow Account              $  334,370
          Prepaid:
             Insurance                   149,438
             Water and Sewer             324,058
             Real Estate Taxes           200,566
             Supplies                     76,178
             Federal Income Tax           53,065
             Prepaid NYC Corp. Tax        12,000
             Interest                      1,788
             Expenses - Other                  0
                                      ----------
                 TOTAL                $1,151,463
                                      ==========

                                       12
<PAGE>
 
                                  FORM 10-QSB
                           KNICKERBOCKER VILLAGE, INC
                     MANAGEMENTS DISCUSSION AND ANALYSIS OR
                               PLAN OF OPERATION
                               SEPTEMBER 30, 1997
                                  (UNAUDITED)



Liquidity - As of September 30, 1997 the Registrant had a working capital
deficit of approximately $191,000 and was in arrears on its contributions to its
special fund for replacements, painting and decorating of approximately
$157,000, as discussed further in Note 11 to the financial statements.

On January 30, 1997, the Registrant entered into an extension and modification
agreement with The Greater New York Savings Bank for the principal amount of
$6,300,000 (see Note 5 to the financial statements).  As a result of this
mortgage extension and modification agreement, the Registrant's annual debt
service will be reduced by approximately $155,000 per annum, effective as of
March 1, 1997.

During April 1996, the Registrant received a two step rent increase which was
approved by the Division of Housing and Community Renewal.  The first increase
of approximately 5.5% was effective June 1, 1996.  The second increase of
approximately 5.3% was effective June 1, 1997.

Capital resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $255,000 as of September 30, 1997.

Results of operations - During the nine months ended September 30, 1997, as
compared to the nine months ended September 30, 1996, total revenues increased
by approximately $281,000 or approximately 3.9%, due primarily to the rent
increase referred to above, partially offset by decreases in retroactive
surcharges, commercial rental income, interest income and other charges to
tenants.

Operating expenses decreased by approximately $138,000 or approximately 1.9%
during the nine months ended September 30, 1997 as compared to the nine months
ended September 30, 1996.  Decreases in utilities, maintenance, repairs and
decorating, mortgage and other interest and management and administration fee
were offset by increases in wages and related costs, real estate taxes,
depreciation and amortization and miscellaneous operating and general expenses.
Utilities decreased by approximately $15,000 or approximately 1.1%, primarily
due to reductions in fuel oil prices and electrical consumption offset by
increases in the City of New York's frontage charges.  Maintenance, repairs and
decorating decreased by approximately $18,000 or approximately 2.0%, primarily
due to higher plumbing and heating expenses incurred in 1996 offset by increases
in painting expenses during 1997.  Management and administration fee decreased
by approximately $26,000 or approximately 3.8% primarily due to the receipt of
the management financial award in 1996.  Mortgage and other interest decreased
by approximately $51,000 or approximately 10.7%, primarily due to the
refinancing of the Company's mortgage debt (See Note 5 to the financial
statements).  Wages and related costs increased by approximately $95,000 or
approximately 5.8%, primarily due to increases in union wage rates, union
pension rates and related payroll taxes.  Real estate taxes increased by
approximately $22,000 or approximately 3.8%, primarily due to an

                                       13
<PAGE>
 
increase in the property's assessed valuation for the tax year ended June 30,
1997.  Depreciation and amortization increased by approximately $88,000 or
approximately 26.8% primarily due to the write off of mortgage costs of
approximately $21,000 related to the Company's pre-existing mortgage debt, and
additional depreciation expense incurred on the acquisition of fixed assets.
Miscellaneous operating and general expenses increased by approximately $44,000
or approximately 3.9%, primarily due to increases in legal fees, and security
and protection offset by decreases in collection losses and insurance expense.
The provision for income taxes increased by approximately $22,000 or
approximately 314.3%, primarily due to an increase in income before income
taxes.

                                       14
<PAGE>
 
        PART II.   OTHER INFORMATION
        ----------------------------


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


        (a)   Exhibits.

                None.

        (b)   Reports on Form 8-K.

                None.

                                       15
<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 11, 1997           By:   S/ROBERT GERSHON
                                       ----------------------------
                                            ROBERT GERSHON,
                                       Vice President and Treasurer



Dated:  November 11, 1997           By:     S/MELVIN GERSHON
                                       ----------------------------
                                              MELVIN GERSHON,
                                                Secretary

                                       16