<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 SIX MONTHS PERIOD ENDED JUNE 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 - 15
No exhibits filed.
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                                 BALANCE SHEET
                              AS OF JUNE 30, 1997
                                  (UNAUDITED)

<TABLE>
<CAPTION>
Assets
------
<S>                                                                        <C>
Current Assets:
 Cash                                                                      $    54,537
 Accounts receivable (less allowance for doubtful accounts of $270,000)        236,261
 Interest and other receivables                                                  1,701
 Prepaid expenses and other current assets (Note 13)                         1,240,306
 Deferred tax asset, net (Note 8)                                               38,000
                                                                           -----------
    Total Current Assets                                                     1,570,805
                                                                           -----------
Special Funds And Deposits:
 
 Funds for replacements, painting and decorating (Notes 4 and 11)              172,208
 Tenants' security deposits - contra                                           647,043
                                                                           -----------
    Total Special Funds and Deposits                                           819,251
                                                                           -----------
 
Fixed Assets, At Cost: (Notes 2, 3 and 5)
 
  Land                                                                       3,273,281
  Buildings and building equipment                                          15,289,448
                                                                           -----------
18,562,729
 Less: Accumulated depreciation                                             11,150,309
                                                                           -----------
    Net Fixed Assets                                                         7,412,420
                                                                           -----------
 
Other Assets:
 
 Deferred tax asset, net (Note 8)                                              112,000
 Other Assets                                                                  134,641
                                                                           -----------
    Total Other Assets                                                         246,641
                                                                           -----------
 
   Total Assets                                                            $10,049,117
                                                                           ===========
</TABLE>

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


<TABLE> 
<CAPTION> 
    Liabilities And Stockholders' Equity
    ------------------------------------

Current Liabilities:
<S>                                                        <C>
  Accounts payable and accrued expenses (Note 11)          $ 1,406,962
  Unearned rental income                                        88,409
  Dividends payable (Note 7)                                    19,023
  Current portion of long-term debt (Note 5)                    78,355
  Current portion of capital lease obligation (Note 6)           3,555
                                                           -----------
 
       Total Current Liabilities                             1,596,304
 
Tenants' Security Deposits - Contra                            647,043
 
Other Liabilities (Note 11)                                    201,650
 
Long-Term Debt, less current portion (Note 5)                6,196,967
 
Captial Lease Obligation, less current portion (Note 6)          6,412
                                                           -----------
 
       Total Liabilities                                     8,648,376
                                                           -----------
 
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                                          1,083,693
                                                           -----------
 
       Total Stockholders' Equity                            1,400,741
                                                           -----------
 
    Total Liabilities And Stockholders' Equity             $10,049,117
                                                           ===========
</TABLE>

                                       3
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
                FOR THE SIX MONTHS ENDED  JUNE 30, 1997 AND 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                    1997        1996
                                                 ----------  ----------
<S>                                              <C>         <C>
Revenues:
 Rentals (Note 12)                               $4,919,746  $4,714,689
 Other income                                         3,054       8,196
                                                 ----------  ----------
                                                  4,922,800   4,722,885
                                                 ----------  ----------
Expenses:
 Wages and related costs                          1,151,210   1,094,983
 Real estate taxes                                  415,687     396,723
 Utilities                                          792,372     926,905
 Maintenance, repairs and decorating                509,089     546,032
 Depreciation and amortization                      278,881     214,684
 Mortgage and other interest                        284,257     316,150
 Management and administrative fee (Note 9)         442,954     433,970
 Miscellaneous operating and general expenses       760,821     734,632
                                                 ----------  ----------
 
                                                  4,635,271   4,664,079
                                                 ----------  ----------
 
Income before income taxes                          287,529      58,806
 
Provision for income taxes (Note 8)                 147,000      37,000
                                                 ----------  ----------
 
Net income                                          140,529      21,806
                                                 ----------  ----------
 
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               $1,083,693  $1,006,765
                                                 ==========  ==========
 
Earnings per share                               $     0.95  $     0.15
                                                 ==========  ==========
</TABLE>

                                       4
<PAGE>
 
                                  FORM 10-QSB
                          KNICKERBOCKER VILLAGE, INC.
                            STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                                                   1997         1996
                                                               ------------  ----------
<S>                                                            <C>           <C>
Cash flows from operating activities:
  Net income                                                   $   140,529   $  21,806
  Adjustments to reconcile net income to net
  cash used in operating activities:
       Depreciation and amortization                               278,881     214,684
       Provision for bad debts                                       8,043      43,000
       Deferred income taxes                                       (24,000)          0
       Changes in assets (increase) decrease:
            Rents receivable                                       (36,305)    (47,322)
            Interest and other receivables                          12,664      (4,705)
            Prepaid expenses and other current assets              370,637     255,211
            Other assets                                          (124,375)          0
       Changes in liabilities increase (decrease):
            Accounts payable and accrued expenses                 (584,984)   (348,979)
            Unearned rental income                                   5,436       6,881
            Other liabilities                                      (10,850)          0
                                                               -----------   ---------
       Net cash provided by operating activities                    35,676     140,576
                                                               -----------   ---------
 
Cash Flows From Investing Activities:
  Interest earned on reserve fund investments                       (1,019)     (4,632)
  Capital expenditures                                            (192,024)   (191,943)
  Contributions of cash from operations to replacement fund       (324,441)    (50,000)
  Reimbursement of expenditures paid by housing company
  from replacement fund                                            269,227     248,060
  Contributions from sale of investments                                 0    (135,044)
  Proceeds of investments from replacement funds                         0     134,613
                                                               -----------   ---------
  Net cash provided by (used in) investing activities             (248,257)      1,054
                                                               -----------   ---------
 
Cash flows from financing activities:
  Proceeds on refinanced mortgage                                6,300,000           0
  Payments on pre-existing mortgage debt                        (6,008,130)    (75,424)
  Payments on long-term debt                                       (24,678)          0
  Payments on capital lease obligations                               (489)          0
  Payments of bank overdraft                                             0     (18,826)
                                                               -----------   ---------
  Net cash provided by (used in) financing activities              266,703     (94,250)
                                                               -----------   ---------
 
Net increase in cash                                                54,122      47,380
Cash at beginning of period                                            415           0
                                                               -----------   ---------
Cash at end of period                                          $    54,537   $  47,380
                                                               ===========   =========
 
Supplemental Disclosures Of Cash Flow Information:
  Cash paid during the period for:
  Interest                                                     $   284,387   $ 316,779
  Income taxes                                                      36,000      66,322
</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
                             JUNE 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 June 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 six months ended June 30, 1997 and 1996 was
          approximately $252,000 and $203,000, respectively.

                                       6
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                             JUNE 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
                            JUNE 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 June 30, 1997:

             Cash                                                $172,208
             Investments: Treasury Bills - Available for sale           0
                                                                 --------
                                                                 $172,208
                                                                 ========

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 June 30, 1997
           are $78,355, $85,000, $93,000, $101,000 and $110,000, 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 June 30, 1997 is as follows:

            Building Equipment          $20,356
            Accumulated Depreciation      1,939
                                        -------
                                        $18,417
                                        =======

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



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

 
                                                 Year Ending June 30
                                                 -------------------
        1998                                                 $ 4,817
        1999                                                   4,817
        2000                                                   4,015
                                                             -------
 
        Total minimum lease payments                          13,649
        Amounts representing interest                          3,682
                                                             -------
        Present value of net minimum payments                  9,967
        Current portion                                        3,555
                                                             -------
 
                                                             $ 6,412
                                                             =======

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 June 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 June 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 six months ended June 30,
            1997 and 1996 consist of the following:

                                             1997      1996
                                           --------   -------
      Current Taxes
      --------------
            Federal                        $133,000   $22,000
            New York City                    38,000    15,000
                                           --------   -------
            Total                          $171,000   $37,000
                                           --------   -------
      Deferred Taxes
      --------------   
            Federal                        $(21,000)  $     0
            New York City                    (3,000)        0
                                           --------   -------
            Total                          $(24,000)  $     0
                                           --------   -------
 
        Provision For Income Taxes         $147,000   $37,000
                                           ========   =======

                                       9
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                             JUNE 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                          $ 98,000  $22,000
 
        New York City corporation
            tax, net of federal benefit                  17,000   15,000
 
        Other, net                                       32,000        0
                                                       --------  -------
 
            Total                                      $147,000  $37,000
                                                       ========  =======

     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 June
     30, 1997, the net deferred tax assets of $150,000 was included in the
     Company's balance sheet as follows:

 
        Deferred tax asset, net
            - Current                                   $  38,000
        Deferred tax asset, net                        
            - Long term                                   112,000
                                                        ---------
        Deferred tax asset, net                         $ 150,000
                                                        =========
 
 Significant components of the Company's net deferred tax asset at June 30, 1997
are as follows:
 
        Tax effects of:
         Accounts receivable                            $ 116,000
         Unearned rental income                            38,000
         Buildings and building equipment                 447,000
                                                        ---------
        Gross deferred tax asset                          601,000
        Valuation allowance                              (451,000)
                                                        ---------
                                                        
        Net deferred tax asset                          $ 150,000
                                                        =========


     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.  The net change in the valuation
     allowance for the six months ended June 30, 1997 was an increase of
     $71,000.

                                       10
<PAGE>
 
                          KNICKERBOCKER VILLAGE, INC.
                         NOTES TO FINANCIAL STATEMENTS
                             JUNE 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
          $36,000 and $35,000 for the six months ended June 30, 1997 and 1996,
          respectively.

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

          As of June 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 $219,000 (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 $414,000 have been accrued in the financial statements
          as of June 30, 1997. The costs of any additional asbestos abatement or
          lead paint remediation, if necessary, in excess of the amounts accrued
          at June 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
                             JUNE 30, 1997 AND 1996


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

          Prepaid expenses and other current assets in the accompanying balance
          sheet at June 30, 1997 are as follows:

           Escrow Account          $  456,978
           Prepaid:
              Insurance               299,327
              Water and Sewer               0
              Real Estate Taxes       401,132
              Supplies                 76,178
              Interest                  4,403
              Expenses - Other          2,288
                                   ----------
                  TOTAL            $1,240,306
                                   ==========

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


Liquidity - As of June 30, 1997 the Registrant had a working capital deficit of
approximately $25,000 and was in arrears on its contributions to its special
fund for replacements, painting and decorating of approximately $219,000, 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 $172,000 as of June 30, 1997.

Results of operations - During the six months ended June 30, 1997, as compared
to the six months ended June 30, 1996, total revenues increased by approximately
$200,000 or approximately 4.2%, due primarily to the rent increase referred to
above, partially offset by decreases in commercial rental income, interest
income and other charges to tenants.

Operating expenses decreased by approximately $29,000 or approximately 0.6%
during the six months ended June 30, 1997 as compared to the six months ended
June 30, 1996.  Decreases in utilities, maintenance, repairs and decorating and
mortgage and other interest 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 $135,000 or
approximately 14.5%, primarily due to reductions in fuel oil prices, electrical
consumption and the City of New York's frontage charges.  Maintenance, repairs
and decorating decreased by approximately $37,000 or approximately 6.8%,
primarily due to higher plumbing and heating expenses incurred in 1996 offset by
increases in painting expenses during 1997.  Mortgage and other interest
decreased by approximately $32,000 or approximately 10.0%, 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 $56,000 or
approximately 5.1%, primarily due to increases in union wage rates, union
pension rates and related payroll taxes.  Real estate taxes increased by
approximately $19,000 or approximately 4.8%, primarily due to an increase in the
property's assessed valuation for the tax year ended June 30, 1997.
Depreciation and amortization increased by approximately $64,000 or
approximately 29.9% 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 $26,000
or approximately 3.6%, 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 $110,000 or
approximately 297.3%, primarily due to an increase in income before income
taxes.

                                       13
<PAGE>
 
        PART II.   OTHER INFORMATION
        ----------------------------


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


        (a)   Exhibits.

                None.

        (b)   Reports on Form 8-K.

                None.

                                       14
<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.:


 ated:  August 11, 1997          By: /s/ ROBERT GERSHON
                                    -------------------------    
                                    ROBERT GERSHON,
                                    Vice President and Treasurer



Dated:  August 11, 1997         By: /s/ MELVIN GERSHON
                                   ------------------------
                                   MELVIN GERSHON,
                                   Secretary

                                       15