<PAGE>   1
                       Securities and Exchange Commission
                             Washington, D.C. 20549




                                    Form 10-Q



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



For the quarter ended                       Commission File Number
August 31, 1996                                     1-9542


                                 TECHKNITS, INC.

               (Exact Name of registrant specified in its charter)


                   New York                             11-2343548
         (State or other jurisdiction of             (I.R.S. Employer
         incorporation or organization)              Identification #)



                                 10 Grand Avenue
                            Brooklyn, New York 11205
           (Address of Principal Executive Office including zip code)

                                 (718) 875-3299
               (Registrant's telephone number including area code)


Indicate by check mark whether the Company (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
requirement for the past 90 days.


                               Yes  x.  No    .
                                   ---     ---

          Common Stock, Par Value $.003, outstanding at August 31, 1996

                                1,720,772 Shares

        Preferred Stock, Par Value, $.003, outstanding at August 31, 1996

                                      NONE
<PAGE>   2
                          TECHKNITS, INC. & SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                    August 31,            February 29,
                                                                       1996                   1996
                                                                   ------------           ------------

<S>                                                                <C>                    <C>         
Current Assets
   Cash                                                            $  1,897,972           $    133,644
   Certificate of deposit (Note 4)                                    2,629,433              2,570,648
   Accounts receivable, (net of allowance for
    doubtful accounts of $47,488 and $29,388 at
    August 31, 1996 and February 29, 1996,
    respectively) (Notes 1 & 4)                                       2,263,655              1,174,175
   Inventories (Notes 1, 2 & 4)                                       5,528,080              4,833,332
   Insurance Reimbursement Receivable (Note 2)                          150,519
   Prepaid expenses and other current assets                            282,336                228,045
   Loan receivable - officer (Note 8)                                    39,149                 95,863
                                                                   ------------           ------------
         Total Current Assets                                      $ 12,791,144           $  9,035,707
   Property and Equipment - Net (Notes 3 & 4)                         3,737,601              3,946,975
   Other Assets                                                         224,996                215,001
                                                                   ------------           ------------

                TOTAL ASSETS                                       $ 16,753,741           $ 13,197,683
                                                                   ============           ============

                       LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities
   Notes payable bank (Note 4)                                     $  5,710,000           $  2,235,000
   Accounts payable and accrued expenses                              1,883,023              1,533,031
   Current maturities of long-term debt and
    capital leases (Note 5)                                             107,071                116,153
   Income taxes payable                                                 297,452                311,341
                                                                   ------------           ------------
         Total Current Liabilities                                 $  7,997,546           $  4,195,525
Long-term debt and capital leases (Note 5)                              494,066                539,037
Deferred income taxes                                                   860,441                860,441
                                                                   ------------           ------------
                TOTAL LIABILITIES                                  $  9,352,053           $  5,595,003
                                                                   ------------           ------------
Commitments and Contingencies (Notes 6 and 7)

Shareholders' Equity (Note 9)
   Preferred stock, $.003 par value 2,500,000
    shares authorized, none issued 
   Common stock, $.003 par value 10,000,000
    shares authorized, 1,900,000 shares issued
    and outstanding                                                $      5,700           $      5,700
   Additional paid-in capital                                         4,648,729              4,648,729
   Retained earnings                                                  3,056,225              3,257,217
   Less:  Treasury stock, 179,562 shares of common
    stock - at August 31, 1996 and February 29, 1996,
    at cost                                                            (308,966)              (308,966)
                                                                   ------------           ------------

                TOTAL SHAREHOLDERS' EQUITY                            7,401,688              7,602,680
                                                                   ------------           ------------

                TOTAL LIABILITIES & SHAREHOLDERS' EQUITY           $ 16,753,741           $ 13,197,683
                                                                   ============           ============
</TABLE>


    The accompanying notes are an integral part of this financial statement.
<PAGE>   3
                          TECHKNITS, INC. & SUBSIDIARY
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                            FOR THE SIX MONTHS ENDED


<TABLE>
<CAPTION>
                                                                     August 31,

                                                             1996                  1995
                                                          -----------           -----------

<S>                                                       <C>                   <C>        
Sales                                                     $ 6,210,200           $ 6,491,617

Cost of goods sold                                          5,057,149             5,372,798
                                                          -----------           -----------

         Gross Profit                                       1,153,051             1,118,819
                                                          -----------           -----------

Operating Expenses

   Selling, general & administrative expenses                 922,118               874,702
                                                          -----------           -----------

   Income (loss) from operations                              230,933               244,117
                                                          -----------           -----------

Other Income (Expenses)

   Interest income                                             71,301                76,444
   Interest expense                                          (271,146)             (252,841)
                                                          -----------           -----------

         Total                                               (199,845)             (176,397)
                                                          -----------           -----------

   Income before provision for income
     taxes and flood loss                                      31,088                67,720

   Provision for income taxes                                   - 0 -                23,000

   Flood loss (Note 2)                                        232,080                 - 0 -
                                                          -----------           -----------

         Net Income (Loss)                                   (200,992)               44,720


         RETAINED EARNINGS - BEGINNING OF PERIOD            3,257,217             3,227,317
                                                          -----------           -----------

         RETAINED EARNINGS - END OF PERIOD                $ 3,056,225           $ 3,272,037
                                                          ===========           ===========


   Net Income (Loss) Per Share                            $      (.12)          $       .03
                                                          ===========           ===========



   Average number of shares of common
     stock outstanding used in computing
     earnings per share                                     1,720,772             1,751,756
                                                          ===========           ===========
</TABLE>


   The accompanying notes are an integral part of this financial statement.

<PAGE>   4


                          TECHKNITS, INC. & SUBSIDIARY
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                           FOR THE THREE MONTHS ENDED




<TABLE>
<CAPTION>
                                                                August 31,

                                                          1996               1995
                                                          ----               ----

<S>                                                    <C>                <C>        
Sales                                                  $ 5,121,953        $ 4,763,141

Cost of goods sold                                       3,864,017          3,938,057
                                                       -----------        -----------

         Gross Profit                                    1,257,936            825,084
                                                       -----------        -----------

Operating Expenses

   Selling, general & administrative expenses              603,954            543,086
                                                       -----------        -----------

   Income from operations                                  653,982            281,998
                                                       -----------        -----------

Other Income (Expenses)

   Interest income                                          41,459             37,865
   Interest expense                                       (114,982)          (143,862)
                                                       -----------        -----------

         Total                                             (73,523)          (105,997)
                                                       -----------        -----------

   Income before provision for income
     taxes and flood loss                                  580,459            176,001

   Provision for income taxes                               77,000             23,000

   Flood loss (Note 2)                                     232,080              - 0 -
                                                       -----------        -----------

         Net Income                                        271,379            153,001


         RETAINED EARNINGS - BEGINNING OF PERIOD         2,784,846          3,119,036
                                                       -----------        -----------

         RETAINED EARNINGS - END OF PERIOD             $ 3,056,225        $ 3,272,037
                                                       ===========        ===========


   Net Income Per Share                                $       .16        $       .09
                                                       ===========        ===========



   Average number of shares of common
     stock outstanding used in computing
     earnings per share                                  1,720,772          1,736,537
                                                       ===========        ===========
</TABLE>


    The accompanying notes are an integral part of this financial statement.

<PAGE>   5






                          TECHKNITS, INC. & SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                       FOR THE SIX MONTHS ENDED AUGUST 31,

<TABLE>
<CAPTION>
                                                                                  1996               1995
                                                                                  ----               ----
<S>                                                                            <C>                <C>        
Cash Flows From Operating Activities

   Net income (loss)                                                           $  (200,992)       $    44,720

Adjustments to reconcile net income (loss) to net cash used in operating
  activities:

     Depreciation and amortization                                                 276,840            246,200

Decrease (Increase) In Assets:

     Accounts receivable                                                        (1,089,480)        (3,276,599)
     Inventory                                                                    (694,748)        (1,194,374)
     Prepaid expenses and other assets                                            (204,810)            24,430

Increase (Decrease) In Liabilities:

     Accounts payable & accrued expenses                                           336,103          1,162,259
                                                                               -----------        -----------

        Net Cash Used in Operating Activities                                   (1,577,087)        (2,993,364)
                                                                               -----------        -----------

Cash Flows From Investing Activities

     Acquisition of fixed assets                                                   (66,125)          (193,491)
     Other assets                                                                  (11,336)            29,170
                                                                               -----------        -----------

        Net Cash Used in Investing Activities                                      (77,461)          (164,321)
                                                                               -----------        -----------

Cash Flows From Financing Activities

     Proceeds of bank loan                                                       3,475,000          3,350,000
     Payments of long-term debt                                                    (54,053)           (73,964)
     Loans receivable officer                                                       56,714             75,000
     Purchase of treasury stock                                                      - 0 -            (84,726)
                                                                               -----------        -----------

        Net Cash Provided By Financing Activities                                3,477,661          3,266,310
                                                                               -----------        -----------

               NET INCREASE IN CASH
                 AND CERTIFICATE OF DEPOSIT                                      1,823,113            108,625


               CASH AND CERTIFICATE OF DEPOSIT,
                 BEGINNING OF PERIOD                                             2,704,292          2,552,480
                                                                               -----------        -----------

               CASH AND CERTIFICATE OF DEPOSIT,
                 END OF PERIOD                                                 $ 4,527,405        $ 2,661,105
                                                                               ===========        ===========



Supplemental Disclosures of Cash Flow Information:

   Operating activities - Cash paid for during the year:

     Interest                                                                  $   266,009        $   217,012
                                                                               ===========        ===========

     Income taxes                                                              $    36,182        $    14,369
                                                                               ===========        ===========
</TABLE>



   The accompanying notes are an integral part of this financial statement.
<PAGE>   6


                          TECHKNITS, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES


       DESCRIPTION OF OPERATIONS

       The Company is a vertically integrated manufacturer of knitted sweaters,
       which it markets throughout the U.S.A. on a pre-order basis to multi-unit
       stores and to wholesalers that sell under their own private labels.

       Concentration of Credit Risk - The Company maintains credit insurance on
       most of its accounts. For those accounts which are not insured the
       Company monitors its exposure for credit losses and maintains allowances
       for anticipated losses.

       Inventories - Inventories consist of finished garments, work in progress,
       yarns, fabrics and supplies. Inventories are stated at the lower of cost
       or market, using a first-in first-out (FIFO) basis.

       Property and Equipment - Property and equipment is stated at cost.
       Depreciation and amortization are computed on the straight-line method
       over estimated useful lives:

              Leasehold Improvements - Life of the related lease, which is not
              in excess of the estimated useful life.

              Furniture, Fixtures and Office Equipment - 6 to 10 years.

              Manufacturing Equipment - 12 years.

       Revenue Recognition - The Company recognizes revenue at the time goods
       are shipped and title to goods sold passes to the customer.

       Principles of Consolidation - The consolidated financial statements
       include the results of operations of the Company and its subsidiary. All
       intercompany transactions and balances have been eliminated in
       consolidation.

       Earnings Per Share - Earnings (loss) per share is calculated by dividing
       net income (loss) by the weighted average number of shares of common
       stock outstanding during the year.

       Income Taxes - Income taxes are provided for all transactions, regardless
       of the year the transactions are reported for income tax purposes. The
       differences in the timing of recognition of income and expenses for
       income tax purposes are reflected as deferred income taxes.
<PAGE>   7

                          TECHKNITS, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

   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 the revenues and
   expenses during the reported period. Actual results could differ from those
   estimates.

NOTE 2. - FLOOD LOSS

       On March 11, 1996, the Company sustained inventory losses of $877,000 due
       to a flood. Net insurance reimbursement amounted to $644,920 of which
       $494,402 has been received by August 31, 1996.

NOTE 3. - PROPERTY AND EQUIPMENT

       Balances of major classes of assets and allowances for depreciation and
       amortization are as follows:

<TABLE>
<CAPTION>
                                            August 31, 1996     February 29,
                                                  1996             1996
                                                  ----             ----
<S>                                             <C>              <C>       
         Factory machinery and equipment        $7,173,973       $7,153,109
         Leasehold improvements                  1,179,996        1,138,100
         Furniture and fixtures                    158,529          158,529
         Computers                                 129,450          126,085
                                                ----------       ----------

         Property and equipment - at cost        8,641,948        8,575,823

         Less accumulated depreciation           4,904,347        4,628,848
                                                ----------       ----------

            Property and equipment - net        $3,737,601       $3,946,975
                                                ==========       ==========
</TABLE>

       Depreciation expense for the six months ended August 31, 1996 and 1995
       were $275,500 and $245,000, respectively. Depreciation expense for the
       three months ended August 31, 1996 and 1995 were $125,307 and $123,899,
       respectively.

NOTE 4. - LOAN PAYABLE BANK

       The Company has a $6,000,000 line-of-credit agreement (the "Agreement")
       with a bank expiring September 1, 1996 which provides for funds to be
       advanced based on a specific formula. At August 31, 1996, the Company had
       outstanding borrowings under this agreement of $5,710,000. Such loan
       bears interest at the rate of 3/4 percent above the bank's prime rate
       (prime rate being 8 1/4 percent at August 31, 1996) and is collateralized
       by a certificate of deposit and related interest, accounts receivables,
       work in process and finished goods, inventory and certain machinery as
       well as assignment of Keyman's life insurance, and credit insurance
       covering accounts receivable. The loan is also guaranteed by the
       President of the Company.



<PAGE>   8



                          TECHKNITS, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

NOTE 5. - LONG TERM DEBT
       Long term debt for the purchase and financing of knitting machinery
consists of the following:

<TABLE>
<CAPTION>
                                                                                            Principal
                                                                  Monthly              Amounts Payable At
                                            Annual             Installments            ------------------
                Financial                  Interest             (Including          August          February
               Institution                   Rate                Interest)          31,1996         29, 1996
               -----------                   ----                ---------          -------         --------
<S>                                       <C>                      <C>             <C>               <C>             
       New York Business
         Development Corp. (1)                        7.5%          $ 4,857          $381,491         $395,846

       Various                              12.25% - 15.5%            8,464           219,646          259,344
                                                                    -------          --------         --------

             Totals                                                 $13,321          $601,137         $655,190
                                                                    =======          ========         ========
</TABLE>

      (1)    In 1990, the Company obtained from New York Business Development
             Corp. a term loan to purchase machinery, repayable at the rate of
             $4,857 per month, including interest at the rate of 7.5 percent per
             annum. The loan is secured by a first mortgage on real property, at
             10 Grand Avenue, owned by the Company's President and a first
             security interest in certain machinery. The loan is also guaranteed
             by the Company's President and by 10 Grand Realty Corporation. The
             loan agreement has various stipulations, which include minimum net
             current assets, minimum net worth, and maximum officers'
             compensation.

       Annual maturities of long term debt are as follows:

<TABLE>
<CAPTION>
                                  Year Ending
                                 February 28,
                                 ------------
<S>                                                                                  <C>     
                                    1997 (Six Months)                                $ 62,100
                                    1998                                              112,392
                                    1999                                              112,531
                                    2000                                               56,443
                              Thereafter                                              257,671
                                                                                     --------
                              Total                                                   601,137

                              Less current portion                                    107,071
                                                                                     --------
                              Long term debt                                         $494,066
                                                                                     ========
</TABLE>



<PAGE>   9



                          TECHKNITS, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE 6. - COMMITMENTS AND CONTINGENCIES

       The Company leases an entire building (totalling 65,000 sq. ft.) at 10
       Grand Avenue, Brooklyn, New York, with 10 Grand Realty Corp., a company
       owned by the President of the Company, for manufacturing, administrative
       and executive offices. This lease, which expires July 31, 1999, provides
       for an annual base rent of $165,000 plus real estate taxes, assessments,
       insurance, utilities and repairs.

       The Company also leases space in various buildings from the President of
       the Company as follows:

<TABLE>
<CAPTION>
                                                                             Annual Rent
                                                Square               Excluding Real Estate Taxes
             Location                            Feet                     and Other Expenses
             --------                            ----                     ------------------
<S>                                             <C>                            <C>    
       17-21 Grand Ave.                           7,500                          $48,000
       23-27 Grand Ave.                          15,000                           84,000
       6 Grand Ave.                              16,000                           72,000
</TABLE>


       All leases expire July 31, 1999.

       The Company leases a showroom in New York City at an annual base rent of
       $31,200. The lease expires January 31, 1998.

       Future minimum lease payments for rental of manufacturing, warehousing
       and administrative offices are as follows:

<TABLE>
<CAPTION>
                                          Minimum
Year Ending                               Rental
February 28,                             Commitment
------------                             ----------

<S>                                  <C>                 
1997 (six months)                          $200,100
1998                                        397,600
1999                                        369,000
2000                                        153,750
</TABLE>

       Rent charged to operations, excluding related expenses, for the six
       months ended August 31, 1996, and 1995 were $193,070 and $204,239,
       respectively. Rent charged to operations, excluding related expenses, for
       the three months ended August 31, 1996 and 1995 were $94,249 and
       $102,184, respectively.

NOTE 7. - LEGAL PROCEEDINGS

       In March 1993, the Company and its President were added as defendants to
       an action brought by Chubb & Son, Inc., in the United States District
       Court for the Eastern District of New York, for conspiracy. The basis of
       the claim against the Company, in the amount of $1,200,000 plus punitive
       damages, is that Chubb paid the Company an excessive sum for fire, water
       and smoke damage based on inflated figures in an amount to be determined
       at trial. The Company and its President have denied the allegations of
       the complaint and intend to
<PAGE>   10

                          TECHKNITS, INC. & SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)

       defend against the claims. As per company counsel, the claims have no
       merit and are vigorously being contested.

NOTE 8. - RELATED PARTY TRANSACTIONS

       At August 31, 1996 and February 29, 1996, the Company was owed by its
       President loans of $39,149 and $95,863, respectively. These loans bear
       interest at a rate of 7% annually.

NOTE 9. - SHAREHOLDERS' EQUITY

       In December 1990, the Company's shareholders approved a resolution of the
       Board of Directors authorizing a one for three reverse stock split (of
       three old shares of common stock par value $.001 per share for one new
       share of common stock par value $.003 per share). Accordingly, the number
       of shares of common stock outstanding was reduced to 1,900,000 shares
       $.003 par value per share. At the same time, the Company amended its
       Certificate of Incorporation to change the number of authorized shares
       from 20,000,000 shares $.001 par value per share to 12,500,000 shares
       $.003 par value per share.

       In connection with its public offering in July of 1987, the Company
       issued to the Underwriters 100,000 five-year Underwriters' Warrants, each
       warrant entitling the Underwriters to purchase a Unit for $7.50. Each
       Unit consists of 2 shares of Common Stock, $.001 par value, one Class A
       Warrant and one Class B Warrant each exercisable at $3.75 and $4.50 per
       share, respectively, into one share of Common Stock $.001 par value. In
       April of 1992, the Company extended the expiration date of such warrants
       to July 1, 1995. As of July 1, 1995, none of these warrants were
       exercised and they expired.



<PAGE>   11


                          TECHKNITS, INC. & SUBSIDIARY
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


       Net sales for the six months ended August 31, 1996, were $6,210,200
       representing a 4.5% decrease over net sales of $6,491,617 for the six
       months ended August 31, 1995. The decrease is the result of discontinued
       non-profitable sales.

       Gross profit for the six months ended August 31, 1996 increased by 1%,
       and operating expenses increased by 1%.

       Net sales for the three months ended August 31, 1996 were $5,121,953
       representing a 7.5% increase over net sales of $4,763,141 for the three
       months ended August 31, 1996. Gross profit for the three months ended
       August 31, 1996 increased by 7.0% and operating expenses remained the
       same.

       Cash flow generated by the Company's operations is deemed adequate to
       meet the Company's financial obligations.