<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996
                                               ------------------

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

       For the transition period from________________to__________________

          ------------------------------------------------------------

        Commission file number                            0-10734
                               ----------------------------------


                            FERROFLUIDICS CORPORATION
             ------------------------------------------------------   
             (Exact name of registrant as specified in its charter)
 
            Massachusetts                                      02-0275185
            -------------------------------                 ------------------  
            (State or other jurisdiction of                 (I.R.S.Employer
            incorporation or organization                   Identification No.)

            40 Simon Street,
            Nashua, New Hampshire                                       03061
            ----------------------------------------         -----------------
            (Address of principal executive offices)         (Zip Code)

          (Registrant's telephone number, including area code)   (603) 883-9800
                                                              -----------------

             --------------------------------------------------------
             (Former name, former address and former Fiscal year, if
                           changed since last report.)


Indicate by check mark 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.

                                      (1) Yes   X   No
                                              -----    -----
                                      (2) Yes   X   No
                                              -----    -----

Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of October 31, 1996.

Common Stock, $.004 par value per share                           6,104,747
---------------------------------------                        ---------------
(Class)                                                        (No. of Shares)




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                                TABLE OF CONTENTS
                                -----------------
   
                                                                       Page Nos.
                                                                       ---------
Part I.     Financial Information

Item 1.     Financial Statements

               Consolidated Balance Sheets -
               September 30, 1996 and June 30, 1996                        3

               Consolidated Statements of Operations -
               Three Months Ended September 30, 1996 and 1995              4

               Consolidated Statements of Cash Flows -
               Three Months Ended September 30, 1996 and 1995              5

               Notes to Consolidated Financial Statements                  6 


Item 2.     Management's Discussion and Analysis of Results of 
            Operations and Financial Position                          6 - 9


Part II.    Other Information                                              9

Signatures                                                                 9






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<PAGE>   3



PART I.     FINANCIAL INFORMATION

ITEM 1.
                                   FERROFLUIDICS CORPORATION
<TABLE>
                                  CONSOLIDATED BALANCE SHEETS
                             September 30, 1996 and June 30, 1996

<CAPTION>

ASSETS                                                September 30, 1996  June 30, 1996
------                                                ------------------  -------------
                                                          (unaudited)         (note)
<S>                                                      <C>               <C>         
Current Assets:                                           
  Cash and cash equivalents                              $     47,000      $  1,701,000
  Accounts receivable - trade, less allowance
   for doubtful accounts of $332,000 at
   September 30, 1996 and $331,000 at June 30, 1996        14,730,000        12,757,000
  Inventories                                              14,287,000        13,829,000
  Advances to suppliers                                     1,888,000         1,916,000
  Prepaid and other current assets                          3,029,000           672,000
                                                         ------------      ------------
Total Current Assets                                       31,842,000        30,875,000
                                                         ------------      ------------
Property, plant and equipment, at cost, net
  of accumulated depreciation of $9,961,000 at
  September 30, 1996 and $9,117,000 at June 30, 1996        8,592,000         8,784,000
Cash value of life insurance                                1,731,000         1,731,000
Other assets, principally goodwill                          2,225,000         2,249,000
                                                         ------------      ------------
TOTAL ASSETS                                             $ 44,390,000      $ 43,639,000
                                                         ============      ============
LIABILITIES
-----------
Current Liabilities:
  Bank notes payable                                        4,975,000         4,262,000
  Accounts payable                                          6,407,000         6,366,000
  Customer deposits                                         4,434,000         4,368,000
  Accrued expenses                                          2,950,000         3,739,000
                                                         ------------      ------------
Total Current Liabilities                                  18,766,000        18,735,000
                                                         ------------      ------------

Long-term debt obligations                                  5,000,000         5,000,000
Other liabilities                                             194,000           202,000

STOCKHOLDERS' EQUITY
--------------------
Preferred stock, $.001 par value, authorized
  100,000 shares, issued and outstanding, none                     --                --
Common stock, $.004 par value, authorized
  12,500,000 shares, issued and outstanding
  6,060,902 shares at September 30, 1996 and
  at June 30, 1996                                             24,000            24,000
Additional paid-in capital                                 36,002,000        35,871,000
Retained deficit                                          (15,037,000)      (15,643,000)
Currency translation adjustments                             (559,000)         (550,000)
                                                         ------------      ------------
Total Stockholders' Equity                                 20,430,000        19,702,000
                                                         ------------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $ 44,390,000      $ 43,639,000
                                                         ============      ============

</TABLE>



Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

The accompanying notes are an integral part of the consolidated financial
statements




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<PAGE>   4

                            FERROFLUIDICS CORPORATION
<TABLE>
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Three Months Ended September 30, 1996 and 1995
                                   (unaudited)
<CAPTION>

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

<S>                                               <C>              <C>        
Net sales and revenues                            $17,469,000      $15,011,000
Cost of goods sold                                 11,849,000       10,153,000
                                                  -----------      -----------
                                                    5,620,000        4,858,000

Engineering and product development expenses        1,563,000          993,000
Selling, general and administrative expense         3,242,000        2,919,000
                                                  -----------      -----------
Income from operations                                815,000          946,000

Interest income                                        18,000           24,000
Interest (expense)                                   (163,000)        (118,000)
Other income (expense)                                 13,000          (38,000)
                                                  -----------      -----------

Income before income taxes                            683,000          814,000
Provision for income taxes                             77,000          100,000
                                                  -----------      -----------

Net income                                        $   606,000      $   714,000
                                                  ===========      ===========

Per Share Data:
--------------

Net income                                        $      0.10      $       .12
                                                  ===========      ===========

Weighted average common and common equivalent
   shares outstanding                               6,292,600        6,173,148


</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements.




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<PAGE>   5

                            FERROFLUIDICS CORPORATION
<TABLE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Three Months Ended September 30, 1996 and 1995
                                   (unaudited)
<CAPTION>
                                                               1996            1995
                                                               ----            ----
<S>                                                        <C>              <C>        
Cash flows from operating activities:
 Net income                                                $   606,000      $   714,000
  Adjustments to reconcile net income to net
  cash provided by (used in) operations:
   Depreciation and amortization                               415,000          347,000
   Restricted stock expense                                    130,000           98,000
   Other                                                       158,000          (74,000)
   Changes in assets and liabilities:
     Accounts receivable                                    (1,995,000)       1,057,000
     Inventories                                              (463,000)      (1,622,000)
     Prepaid expenses and other current assets                (192,000)         187,000
     Accounts payable and accrued expenses                    (753,000)      (1,496,000)
     Customer deposits                                         (64,000)       1,128,000
                                                           -----------      -----------
   Net cash provided by (used in) operating activities      (2,030,000)         339,000
                                                           -----------      -----------
Cash flow from investing activities:
  Acquisition of property, plant and equipment                (327,000)        (488,000)
                                                           -----------      -----------
  Net cash used in investing activities                       (327,000)        (488,000)
                                                           -----------      -----------
Cash flow from financing activities:
  Short term borrowing, net                                    713,000               --
                                                           -----------      -----------
  Net cash provided by financing activities                    713,000               --
                                                           -----------      -----------

Effect of currency rate changes on cash                        (10,000)         (93,000)
                                                           -----------      -----------

Net decrease in cash                                        (1,654,000)        (242,000)
                                                           -----------      -----------
Cash and cash equivalents at beginning of period             1,701,000        1,563,000
                                                           -----------      -----------

Cash and cash equivalents at end of period                 $    47,000      $ 1,321,000
                                                           ===========      ===========
Cash paid for interest and income taxes for the
  three months ended September 30, 1996 and 1995
  is as follows:
                                                               1996            1995
                                                               ----            ----
         Interest                                          $   143,000      $    50,000
         Income taxes                                      $   320,000      $     3,000

</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.



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<PAGE>   6

                            FERROFLUIDICS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   A. BASIS OF PRESENTATION

     The accompanying consolidated financial statements of Ferrofluidics
   Corporation and its subsidiaries (the "Company") have been prepared in
   accordance with generally accepted accounting principles for interim
   financial information and with the instructions to Form 10-Q and Rule 10-01
   of Regulation S-X. Accordingly, they do not include all of the information
   and footnotes required by generally accepted accounting principles for
   complete financial statements. In the opinion of management, all adjustments
   (consisting of normal recurring accruals) considered necessary for a fair
   presentation have been included. The results of operations of any interim
   period are subject to year-end audit and adjustments, and are not necessarily
   indicative of the results of operations for the Fiscal year. For further
   information, refer to the consolidated financial statements and footnotes
   thereto included in the Company's Annual Report on Form 10-K for the year
   ended June 30, 1996.

   B. INVENTORIES

<TABLE>
   Inventories are stated at the lower of cost (first-in, first-out) or market.
   Inventories are comprised of the following elements at September 30, 1996 and
   June 30, 1996:
<CAPTION>
                                               September 30, 1996  June 30, 1996
                                               ------------------  -------------
        <S>                                        <C>              <C>        
        Raw materials and purchased parts          $ 7,712,000      $ 6,845,000
        Work-in-process                              3,497,000        3,188,000
        Finished goods                               3,078,000        3,796,000
                                                   -----------      -----------
        Total inventories                          $14,287,000      $13,829,000
                                                   ===========      ===========
</TABLE>

   C. BANK NOTES PAYABLE

    The Company has available to it a total credit facility with its bank of
   approximately $8,600,000, which includes approximately $5,400,000 in the form
   of a stand-by letter of credit for the Company's $5,000,000 1984 Series
   Industrial Revenue Bonds, a $2,500,000 revolving line of credit for working
   capital purposes, and $704,000 in the remaining balance of an installment
   note to finance the expansion of its in-house machine shop. The credit
   facility is collateralized by substantially all of the assets of the Company.
   At September 30, 1996, there was $2,500,000 outstanding against the domestic
   revolving line of credit. Additionally, its bank has made available, and the
   Company has borrowed, amounts aggregating $1,690,000 for additional short
   term working capital needs. The interest rate on the revolving line and
   additional borrowings at September 30, 1996 was 9.25%. On October 11, 1996,
   the Company accepted a commitment letter from its bank, which has agreed to
   increase the revolving line of credit for working capital purposes from
   $2,500,000 to $8,500,000. The Company expects to close on this commitment in
   November 1996, and a part of the expanded line of credit will be used to
   repay the additional short term borrowings made available to it by the bank.


   D. EARNINGS PER SHARE

    Net income per share for the three months ended September 30, 1996 and 1995
   is based on the weighted average number of common shares outstanding as well
   as the effect of all dilutive common stock equivalents.

   ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 
            FINANCIAL POSITION

      The following discussion provides information to assist in the
   understanding of the Company's results of operations and financial condition.
   It should be read in conjunction with the consolidated financial statements
   and notes thereto that appear elsewhere herein.





                                       6
<PAGE>   7

   RESULTS OF OPERATIONS
   ---------------------

      In the first quarter ended September 30, 1996, the Company generated net
   income of $606,000 or $0.10 per share, as compared to net income in the same
   period of Fiscal 1995 of $714,000, or $.12 per share.

<TABLE>
      Net sales and revenues for the quarter ended September 30, 1996 totaled
   $17,469,000 as compared to $15,011,000 in the same period of the prior year.
   A product line comparison of the net sales and revenues is as follows:
<CAPTION>

                                                  Q1 97         Q1 96
                                                  -----         -----
         <S>                                <C>           <C>       
         Components                         $ 3,049,000   $ 3,332,000
         Fluids                                 587,000       557,000
         Crystal growing systems             11,636,000     9,250,000
         Distributed products                 2,197,000     1,872,000
                                            -----------   -----------
           Total net sales and revenues     $17,469,000   $15,011,000
                                            ===========   ===========
</TABLE>


      Of the revenues in the first quarter, approximately $6.8 million, or 39%,
   represented sales to one affiliated group of companies. Management expects
   the concentration of revenues with this customer group to remain relatively
   high throughout the current Fiscal year.

      Consolidated gross margins for the first quarter of Fiscal 1997 amounted
   to 32.2% of product sales as compared to 32.4% of product sales in the prior
   year's first quarter. The small decline in gross margin in the first quarter
   of the current year compared to the same period in the prior year is due
   principally to product mix, with approximately 67% of the product revenues in
   the current year's first quarter attributable to the Company's crystal
   growing systems, which generate lower gross margins, as compared to 62% in
   the prior year.

      Consolidated order bookings for the three months ended September 30, 1996
   totaled $14,149,000 as compared to $20,472,000 in the same period of the
   prior year. Of the bookings for the first quarter of Fiscal 1997, $8,131,000
   represent orders for silicon crystal growing systems as compared to
   $13,228,000 in the same period of Fiscal 1996. Bookings for the Company's
   other proprietary products decreased 21% from $4,737,000 in the first quarter
   of Fiscal 1996 to $3,727,000 in the first quarter of Fiscal 1997. Bookings
   for the first quarter for distributed products by AP&T decreased from
   $2,496,000 in Fiscal 1995 to $2,291,000 in the same period of Fiscal 1997.

      Consolidated backlog at September 30, 1996 was $55,699,000 compared to
   $59,020,000 at June 30, 1996. Backlog for the Company's crystal growing
   systems at September 30, 1996 totaled $49,567,000 as compared to $53,072,000
   at June 30, 1996. Approximately 50% of the systems backlog is expected to
   ship in the current Fiscal year. The backlog of orders for components
   products, including fluids, increased slightly to approximately $4,035,000
   million at September 30, 1996 and backlog of distributed products increased
   from $2,004,000 at June 30, 1996 to $2,097,000 at September 30, 1996. Of the
   order backlog for components and distributed products at September 30, 1996,
   approximately 95% is expected to be shipped during the current Fiscal year.

      Engineering and product development expenditures in the three months ended
   September 30, 1996 totaled $1,563,000, an increase of $570,000, or 57%,
   compared to $993,000 in the same period last year. As a percentage of
   revenues, engineering and product development expenses increased from 6.7% in
   the September 1995 quarter to 9.0% in the September 1996 quarter. The total
   engineering expenditures in the first three months of Fiscal 1997 are
   comprised of $524,000 of research and development expenditures and $1,039,000
   of engineering expenses relating to applications, design and general sales
   support. In the same period of Fiscal 1996, product development expenditures
   totaled $399,000 and all other engineering totaled $594,000.

      Selling, general and administrative expenses (SG&A) for the three months
   ended September 30, 1996 totaled $3,242,000, up 11% from the SG&A of
   $2,919,000 in the same period of the prior year. The increase is due
   primarily to increased staffing, incremental restricted stock vesting, and
   sales and marketing expenditures related to the growth in revenues.



                                       7
<PAGE>   8

      Interest income decreased in the three months ended September 30, 1996 to
   $18,000 compared to $24,000 in the same period in the prior year, due to
   lower invested cash balances. Interest expense of $163,000 for the three
   months ended September 30, 1996 represented an increase from $118,000 in the
   same period in Fiscal 1995 due principally to higher borrowings under the
   Company's revolving credit facility.

      The Company has available to it approximately $25,400,000 in net operating
   loss carryforwards for Federal income tax purposes which can be used to
   offset future taxable income, if any, and will expire at various dates
   through 2010. The tax provision for the three months ended September 30, 1996
   includes a provision for certain state and alternative minimum taxes, as well
   as a provision for foreign income taxes.

   LIQUIDITY AND CAPITAL RESOURCES
   -------------------------------

      Net working capital at September 30, 1996 was $13,076,000 as compared to
   $12,140,000 at June 30, 1996. This increase was primarily due to increases in
   accounts receivable, inventories, and prepaid expenses totaling $2,650,000
   offset by a reduction in cash balances of $1,654,000. Total current assets
   therefore increased by $967,000. The increase in accounts receivable of
   $1,995,000 was in the crystal growing systems business (primarily a result of
   certain customer payments due but not received until shortly after the end of
   the first quarter of Fiscal 1997 and receivables related to the delivery of
   two systems in Japan.) Receivables in the components business declined during
   the first quarter of Fiscal 1997. Total current liabilities also increased
   but only by $31,000, as the increase in bank borrowings ($713,000) and small
   increases in accounts payable and customer deposits were offset by a decrease
   in accrued expenses. Customer deposits during the first quarter of fiscal
   1997 changed only slightly (an increase of $66,000) as reductions due to
   deliveries of crystal growing systems during the quarter were compensated for
   by deposits received on new orders.

      During the first quarter of Fiscal 1997, the operations of the business
   used $2,030,000 of cash, due principally to the growth in trade receivables
   but also to increases in other current assets as well. At September 30, 1996,
   the Company had outstanding purchase commitments for material of
   approximately $25,000,000 representing long lead items and other component
   parts pertaining to the Company's crystal growing system backlog.

      Investing activities during the three months ended September 30, 1996
   consisted only of the acquisition of property, plant and equipment of
   $327,000. At September 30, 1996, the Company did not have any material
   purchase commitments with respect to property and equipment. Financing
   activities of the Company during the three months ended September 30, 1996
   were limited to borrowings totaling $713,000 from its bank credit facilities.
   The increases in additional paid-in capital during the three months ended
   September 30, 1996 is the result of vesting of restricted stock grants to key
   members of management which vest to the owner ratably over the three years
   following the date of grant. The consolidated results of operations for the
   three months ended September 30, 1996 includes a charge of $130,000 for
   restricted stock expense.


      As described further in Note D to the above financial statements, the
   company has recently received a letter of intent from its bank which will
   substantially increase credit facilities available to it. With this
   agreement, and the Company's operating cash flow, the Company believes it has
   sufficient working capital resources to fund its operations through Fiscal
   1997 and into Fiscal 1998. The Company continues to be heavily reliant upon
   the receipt of contractual advance payments from customers in its systems
   business with regard to its ability to satisfy that business's obligations in
   the normal course.

      This report contains forward-looking statements. There are certain factors
   that could cause actual results to differ materially from those anticipated
   by the statements made above. These include, but are not limited to,
   cancellation of letters of intent, further rescheduling of existing crystal
   puller orders, additional crystal puller orders from existing or new
   customers, including those mentioned above, lack of new crystal puller orders
   from existing or new customers, change in revenues in the Company's other
   business, and a material change in the market conditions within the
   semiconductor industry. 



                                       8
<PAGE>   9

   For additional information concerning these and other important factors which
   may cause the Company's actual results to differ materially from expectations
   and underlying assumptions, please refer to the reports filed by the Company
   with the Securities and Exchange Commission.

   PART II.  OTHER INFORMATION

   None


                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
   Exchange Act of 1934, the Registrant has duly caused this report to be signed
   on its behalf by the undersigned, thereunto duly authorized.


                                         FERROFLUIDICS CORPORATION
                                         -------------------------
                                         (Registrant)




   Date: November 14, 1996               By: /s/ Salvatore J. Vinciguerra
         -----------------                   ----------------------------------
                                         Salvatore J. Vinciguerra
                                         President and Chief Operating Officer

                                         By: /s/ William B. Ford
                                             ----------------------------------
                                         William B. Ford
                                         Vice President Finance






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