<PAGE>

                                   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         0-14482
                                           ----------------------

                               CARVER CORPORATION
            (Exact Name of Registrant as specified in its charter)

               WASHINGTON                                 91-1043157
----------------------------------                -----------------------------
   (State of other jurisdiction                          (IRS Employer
 of incorporation or organization)                     Identification Number)

                  20121 - 48TH AVENUE WEST, LYNNWOOD, WA  98036
      -----------------------------------------------------------------
      (Address of principal executive offices)               (Zip Code)

   
                               (206) 775-1202
                               --------------
               (Registrant's telephone number, including area code)

-------------------------------------------------------------------------------
            (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.

Yes  X   No 
    ---     ---

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the registrant has filed all documents and 
reports required to be filed by Sections 12, 13 or 15(d) of the Securities 
Exchange Act of 1934  subsequent to the distribution of securities under a plan
confirmed by a court.

Yes       No 
    ---      ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

     AT SEPTEMBER 30, 1996, 3,719,832 SHARES OF $.01 PAR VALUE COMMON STOCK OF
THE REGISTRANT WERE OUTSTANDING.
                                                                              
                                                             Page 1 of 27 pages.
                                               Exhibit Index appears at Page 18.


<PAGE>

PART 1.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
                                    CARVER CORPORATION
                               CONSOLIDATED BALANCE SHEET
                                        ASSETS
                                                 Sept. 30,        December 31,
                                                   1996               1995
                                                (Unaudited)         
Current Assets
  Cash and cash equivalents                      $   137,000      $     261,000
  Marketable securities                                5,000              5,000
  Accounts receivable, trade, net                  2,576,000          2,304,000
    Raw materials                                    689,000            893,000
    Working                                        1,389,000          1,284,000
    Finished                                       2,004,000          1,750,000
                                                ------------      -------------
  Inventories                                      4,082,000          3,927,000
  Current portion of note receivable                 249,000          1,342,000
  Prepaid expenses                                   955,000            377,000
                                                ------------      -------------
    Total current assets                           8,004,000          8,216,000
  Property and equipment,                 
    Land                                             440,000            440,000
    Buildings and improvements                     2,452,000          2,452,000
    Equipment                                      2,006,000          2,019,000
                                                ------------      -------------
                                                   4,898,000          4,911,000
    less accumulated depreciation                 (2,717,000)        (2,620,000)
                                                ------------      -------------
                                                   2,181,000          2,291,000
  Other assets and deferred charges                  185,000            167,000
                                                ------------      -------------
  Total Assets                                  $ 10,370,000     $   10,674,000
                                                ------------      -------------
                                                ------------      -------------
                                        
                                        
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Current                                 
  Notes payable                                 $    711,000     $    1,216,000
  Accounts payable                                   389,000            842,000
  Accrued liabilities                     
    Commissions and advertising                      148,000            104,000
    Payroll and related taxes                        161,000            198,000
    Warranty                                          83,000             73,000
    Other                                             22,000            156,000
  Current portion of long-term debt                                     696,000
                                                ------------      -------------
    Total current liabilities                      1,514,000          3,285,000
                                                ------------      -------------

Shareholders' equity
  Preferred Stock, par value $.01 per share
  2,000,000 shares authorized, 1,411,764
  shares issued and outstanding                       14,000
  Cstock, par value $.01 per share
  20,000,000 shares authorized, 3,719,832 
  shares issued and outstanding                       37,000             37,000
  Additional paid-in capital                      18,882,000         15,940,000
  Accumulated deficit                            (10,077,000)        (8,588,000)
                                                ------------      -------------
    Total shareholders' equity                     8,856,000          7,389,000 
                                                ------------      -------------
    Total liabilities and shareholders' equity  $ 10,370,000       $ 10,674,000 
                                                ------------      -------------
                                                ------------      -------------
                    (SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)

                                           
 
 
                                             2

<PAGE>
                                    CARVER CORPORATION
                            CONSOLIDATED STATEMENT OF INCOME
                                      (Unaudited)
<TABLE>
<CAPTION>
                                        Three Months Ended               Nine Months Ended        
                                               Sept. 30,                     Sept. 30,      
                                       1996             1995           1996            1995
                                    ------------     ------------    ------------    ------------
<S>                                 <C>              <C>             <C>             <C>
Net sales                           $  4,336,000     $  4,494,000    $ 11,729,000    $ 14,655,000 
                                                  
Cost of sales                          3,093,000        3,416,000       9,148,000      11,689,000 
                                    ------------     ------------    ------------    ------------
                                                  
  Gross profit                         1,243,000        1,078,000       2,581,000       2,966,000 
                                                  
Operating expense                                    
  Selling                                674,000          702,000       1,856,000       2,750,000
  General & administrative               461,000          340,000       1,470,000       1,294,000 
  Engineering, research & development    176,000          117,000         507,000         685,000 
                                    ------------     ------------    ------------    ------------
                                                  
                                       1,311,000        1,159,000       3,833,000       4,729,000 
                                    ------------     ------------    ------------    ------------
                                                  
Loss from operations                     (68,000)         (81,000)     (1,252,000)     (1,763,000)
                                                  
Other income (expense)                                    
  Interest expense                       (37,000)         (82,000)       (180,000)       (274,000)
  Interest income                          1,000           22,000          50,000          65,000 
  Other                                   15,000          (10,000)        (62,000)       (114,000)
                                    ------------     ------------    ------------    ------------
 Net loss                           $    (89,000)     $  (151,000)   $ (1,444,000)  $  (2,086,000)
                                    ------------     ------------    ------------    ------------
                                    ------------     ------------    ------------    ------------

Loss per common share               $      (0.02)     $     (0.04)   $      (0.39)  $       (0.57)
                                    ------------     ------------    ------------    ------------
                                    ------------     ------------    ------------    ------------




*Weighted average number of
 shares outstanding                     3,709,101       3,679,538       3,697,965       3,679,106
               
*Options outstanding and Preferred Stock conversion are excluded as the effect on loss per share is antidilutive.
</TABLE>





                                          3
<PAGE>
                                    CARVER CORPORATION
                          CONSOLIDATED STATEMENT OF CASH FLOWS
                                       (Unaudited)

                                                        Nine Months Ended
                                                           September 30,
                                                       1996            1995
                                                   ------------    ------------
OPERATING ACTIVITIES:
Net loss                                           $ (1,444,000)   $ (2,086,000)
Adjustments to reconcile net loss to
  cash flows from operating activities:
  Depreciation and amortization                         179,000         311,000
  Changes in:  
    Accounts receivable                                (272,000)      1,117,000
    Inventories                                        (155,000)      1,929,000
    Prepaid expenses                                   (578,000)        204,000
    Accounts payable and accrued liabilities           (571,000)       (401,000)
    Other assets & deferred charges                     (18,000)        (45,000)
                                                                          
                                                   ------------    ------------
Net cash (used) provided by operating activities     (2,859,000)      1,029,000
                                                   ------------    ------------

INVESTING ACTIVITIES:
Acquisition of property, plant and equipment, net       (69,000)        (42,000)
Proceeds from notes receivable                        1,093,000           7,000

                                                   ------------    ------------
Net cash (used) provided by investing activities      1,024,000         (35,000)
                                                   ------------    ------------

FINANCING ACTIVITIES:                             
Increase (decrease) in notes payable                   (505,000)     (1,183,000)
Repayment of long-term debt                            (696,000)        (15,000)
Issuance of common stock                                                  2,000
Issuance of Preferred Stock                           2,912,000           
                                                   ------------    ------------

Net cash (used) provided by financing activities      1,711,000      (1,196,000)
                                                   ------------    ------------
  
Decrease of cash and cash equivalents                  (124,000)       (202,000)

CASH AND CASH EQUIVALENTS:
  Beginning of period                                   261,000         249,000
                                                   ------------    ------------
  End of period                                     $   137,000      $   47,000
                                                   ------------    ------------

SUPPLEMENTAL CASH FLOW INFORMATION:                              
  Interest paid                                     $   180,000      $  274,000



                                             4
<PAGE>

                                    CARVER CORPORATION
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                     (Unaudited)

NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PREPARATION

In the opinion of management, the consolidated financial statements include 
all adjustments (which include only normal recurring adjustments) necessary 
to present fairly the changes in financial position and results of operations 
for the interim periods reported.  The results of operations for any interim 
period are not necessarily indicative of the results for the entire year.

The financial statements should be read with reference to "Management's 
Discussion and Analysis of Financial Condition and Results of Operations" 
contained herein and the "Notes to Consolidated Financial Statements" set 
forth in the Company's 10-K filing for the year ended December 31, 1995.  

The Company has adopted SFAS 123 but will continue to apply APB 25 for the 
measurement of stock options granted by the Company.  The application of SFAS 
123 and APB25 to warrants granted by the Company may result in compensation 
expense to the Company depending on the terms of each agreement.

NOTE 2 - EARNINGS PER COMMON SHARE

The earnings per share computations are based upon the weighted average 
number of shares outstanding for the interim periods presented.  The earnings 
per share calculation for periods in which a loss is recorded excludes common 
share equivalents because the effect would be antidilutive.

NOTE 3 - INCOME TAXES - Income tax expense is determined using an asset and 
liability approach.  There was no effect on the Company's financial position 
or results of operations as a result of implementing this accounting 
standard. Management is of the opinion that it is not appropriate to record a 
benefit for net operating loss carryforwards of approximately $14,960,000 at 
this time.  As future operating results improve, management will re-assess 
its position in this matter.

NOTE 4 - COMMITMENTS - As of November 12, 1996, the Company has committed to 
purchase approximately $2,722,000 of inventory expected to be received in 
1996 from various offshore vendors most of which is payable in U.S. dollars.




                                      5
<PAGE>

NOTE 5 - STOCKHOLDERS EQUITY - Under the terms of the Stock Purchase Agreement
with Renwick Capital Management (See Item 2. "Changes in Securities") dividends
paid in Common Stock are reflected in the stockholders equity section of the
Balance Sheet as a decrease in Retained Earnings and increase to Common Stock
and Paid in Capital.  As of September 30, 1996 15,323 shares of Common Stock
have been issued under the terms of this agreement.


















                                           6
<PAGE>
PART 1.  FINANCIAL INFORMATION (CONTINUED)

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

FORWARD - LOOKING INFORMATION -
Statements in this report concerning future performance, achievements, 
developments, expectations, events or trends, including the discussion of the 
Company's strategy, product development and introduction plans and 
anticipated improvements in gross margin, constitute forward-looking 
statements which are subject to a number of known and unknown risks, 
uncertainties and other factors which might cause actual results to differ 
materially from those expressed or implied by such statements.  These include 
the risks and uncertainties described below or under the caption "Risk 
Factors" in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1995 and those identified by the Company from time to time in 
other filings with the Commission, press releases and other communications. 

RESULTS OF OPERATIONS -
The following tables set forth items in the consolidated statement of income 
as a percentage of net sales for the three-month and nine-month periods ended 
September 30, 1996 and 1995.

                                            PERCENTAGE OF NET SALES

                               Three Months Ended             Nine Months Ended
                                  September 30,                 September 30,
                               1996           1995            1996        1995
                               ----           ----            ----        ----
Net Sales                      100%           100%            100%        100%
Cost of Sales                  71.3           76.0            78.0        79.7
                               ----           ----            ----        ----
Gross Profit                   28.7           24.0            22.0        20.2

Operating Expenses                 
  Selling                      15.5           15.6            15.8        18.7
  G & A                        10.6            7.6            12.5         8.8
  Engineering, research                 
   and development              4.1            2.6             4.3         4.7
                               ----           ----            ----        ----
                              
Loss from operations           (1.6)          (1.8)          (10.7)      (12.0)
Interest expense               (0.9)          (1.9)           (1.5)       (1.9)
Interest income                 0.0            0.5             0.4         0.5
Other expense                  (0.3)          (0.2)           (0.5)       (0.8)
                               ----           ----            ----        ----

Net loss                       (2.1)%         (3.4)%         (12.3)%     (14.2)%
                               ----           ----            ----        ----
                               ----           ----            ----        ----




                                             7
<PAGE>

RECENT DEVELOPMENTS -
 
BOARD MEMBER RESIGNATION.     On August 14, 1996 the Board of Directors 
accepted the resignation of Robert W. Carver, who had rejoined the Board in 
December 1995.

PRIVATE PLACEMENT OF SECURITIES.   As described more fully under the caption 
"Liquidity and Capital Resources" below in this Item 2, on June 12, 1996, the 
Company entered into a Stock Purchase Agreement with Renwick Capital 
Management, Inc. ("Renwick") and certain Renwick affiliates (the 
"Agreement").  Pursuant to the Agreement, during June and the third quarter 
of 1996 the Company sold 1,411,764 shares of Series A Cumulative Convertible 
Preferred Stock (the "Preferred Stock") and issued five year warrants (the 
"Warrants") to acquire up to 300,000 shares of the Company's Common Stock 
yielding gross proceeds to the Company of $3,000,000.  The proceeds from this 
offering have been used, among other things, to bring current a number of 
payment obligations and purchase inventory.

SALE OF THE COMPANY'S BUILDING.    Previously the Company reported that it 
had entered into an agreement to sell its Lynnwood, Washington headquarters 
and manufacturing facility which was expected to close by the end of 1996, 
subject to satisfaction  of a number of conditions. Certain of these 
conditions have not been satisfied and the purchaser has elected to terminate 
the agreement.  Accordingly, the property has been relisted for sale. 

SALE OF PROFESSIONAL AUDIO PRODUCT LINE. In November 1995, the Company sold 
all of the tangible and intangible assets related to its professional audio 
products line to Phoenix Gold International, Inc. ("Phoenix Gold").  The 
transaction included a license which allows Phoenix Gold to use the name 
"Carver Professional", and an agreement by the Company not to compete against 
Phoenix Gold in the professional audio market for a period of five years from 
the date of the sale.

CIRCUIT CITY DISTRIBUTION AGREEMENT. Late in 1995, the Company entered into a 
distribution arrangement with Circuit City. Sales to Circuit City are 
projected to be as much as 50%, or more, of the Company's revenue in 1996.  
However, Circuit City may not be able to successfully market and sell the 
Company's products. Factors which could affect the volume of sales by Circuit 
City include factors which generally influence retail sales of electronic 
products. The agreement between the Company and Circuit City may be 
terminated by either party for any reason upon 30 days advance, written 
notice without penalty.  If sales to Circuit City fall short of expectations 
for any reason, 

                                         8
<PAGE>

the Company may not be able to change its operations quickly enough to 
respond to a significantly lower level of sales.   

SEASONALITY.  The markets for consumer audio equipment are moderately 
seasonal, with somewhat higher sales expected to occur in the last six months 
of the year. The introduction of new products may affect this seasonality and 
quarter-to-quarter comparisons.  Demand for audio products also exhibits some 
cyclicality, reflecting the general state of the economy and consumer 
expectations.

NET SALES AND NET LOSSES - 

Net sales for the quarter ended September 30, 1996 were $4,336,000, a 
decrease of 4% from net sales of $4,494,000 for the third quarter of 1995.  
Net sales for the nine months ended September 30, 1996 were $11,729,000, a 
20% decrease from net sales of $14,655,000 for the first nine months of 1995. 
These decreases are attributable largely to the November 1995 sale of the 
Company's professional product line and certain related OEM accounts to 
Phoenix Gold.  In the first nine months of 1995 net sales included sales of 
professional products of $3,801,000 and OEM sales of $1,348,000 of which 
$967,000 and $699,000, respectively, were sold in the third quarter. In the 
first nine months of 1996, net sales included sales of professional products 
of $432,000 and OEM sales of $118,000 of which $62,000 and $91,000, 
respectively, were sold in the third quarter. Contracts which represented 95% 
of the Company's 1995 OEM sales were included in the assets sold with the 
professional products line.

Domestic sales of the Company's consumer products increased to $9,672,000 or 
42% compared to sales of $6,808,000 in the first nine months of 1995.  Of the 
domestic sales, approximately $5,206,000 or 53% were sales made by the 
Company to Circuit City.  During the quarter ending September 30, 1996 
domestic consumer products sales increased to $3,767,000 or 90% when compared 
to the same period of the prior year, of which $2,021,000 or 54% were sales 
to Circuit City.  

Sales outside of the United States decreased approximately 55% from 
$2,185,000 to $985,000 in the first nine months of 1996.  In addition, 
international sales for the quarter decreased 53% to $293,000 when compared 
to the prior year. The Company believes this is attributable to limited 
availability of product to sell to its international distributors.  
Approximately 58% of the Company's sales in the first nine months of 1996 
were attributable to products which the Company sources offshore compared to 
45% for the same period of the prior year.

The Company's sales of consumer products, although higher in 1996 than in the 
corresponding period last year, were negatively affected by the 




                                      9
<PAGE>

Company's strategy in 1995 of reducing its product line, especially those at 
the low end of the price range and with low margins.  Also, both domestic and 
export sales have been adversely effected by a severe shortfall in working  
capital during most of 1995 and in the first half of 1996.  In addition, one 
of the Company's offshore vendors failed to deliver two products on their 
scheduled delivery dates due to production problems.  As a result, the 
Company was not able to stock enough of the products which its sources 
offshore to consistently fill orders. In addition, most of the products 
sourced offshore are products which often generate additional sales of 
products manufactured by the Company (e.g. preamplifier/tuners and compact 
disc players). Also, the Company's inability promptly to fill orders from 
dealers in some cases caused dealers to cancel orders.  The Company believes 
these factors had a significant negative impact on the Company's sales during 
the first nine months of 1996. (See "Liquidity and Capital Resources" below.)

Net losses for the quarter and nine month periods ended September 30, 1996 
were $89,000 (2.1% of net sales) or $0.02 per common share and $1,444,000 
(12.3% of net sales) or $0.39 per common share, respectively. This compares 
to net losses of $151,000 (3.4% of net sales) or $0.04 per share for the 
quarter and $2,086,000 (14% of net sales) or $0.57 per share for the nine 
months ended September 30, 1995.

GROSS PROFIT - 

Gross profit increased as a percent of net sales to 28.7% in the third 
quarter of 1996 from 24% in the third quarter of 1995. Gross profit for the 
first nine months of 1996 increased to 22% from 20.2% in the same period of 
the prior year. Sales during the nine months ended September 30, 1996 
included $432,000 of sales of professional products to the purchaser of the 
Company's professional product line pursuant to an agreement entered into at 
the time of the sale of the line. Pursuant to the agreement, these sales were 
at the Company's cost and, therefore, yielded no margin. In addition, 
approximately $5,206,000 in sales to Circuit City in the first nine months 
were at a lower margin than the Company realizes on its sales to other 
domestic customers.  Despite these negative factors, the Company experienced 
improvements in gross profit as it increased its domestic production. Margins 
are expected to continue to improve as the Company purchases new products to 
be introduced in 1996 from offshore vendors located outside of Japan. 
However, there can be no assurance that foreign exchange rates, cost 
increases or other factors will not negatively impact margins.  (See 
"Liquidity and Capital Resources" below.) 






                                       10
<PAGE>

OPERATING EXPENSE -

Operating expense decreased in the first nine months of the year in 
comparison to the prior year by 19% due to the elimination of expenses 
attributable to the Company's professional products line.  This reduction 
affected selling, general and administrative as well as research and 
development. Operating expense increased in the quarter to quarter comparison 
by 13% due to increased research and development investment, use of 
consultants as well as increased field sales support and media advertising

OTHER INCOME AND EXPENSE -

Average borrowings were down in the first nine months of 1996 from the same 
period of 1995, and therefore interest expense decreased approximately 
$94,000 and $45,000 during the nine months and quarter ended September 30, 
1996 when compared to the corresponding periods in 1995.

LIQUIDITY AND CAPITAL RESOURCES -

The Company's working capital on September 30, 1996 was $6,490,000 which 
included cash and short term investments aggregating approximately $137,000. 
This compares with working capital of $4,931,000 and cash and short-term 
investments of $266,000 at December 31, 1995.  At November 8, 1996, the 
Company's immediate capital resources consisted of approximately $46,000 in 
cash (and cash equivalents) and the credit facility described below.

The Company has a $6,000,000 revolving line of credit, $1,000,000 of which 
can be used to open commercial letters of credit.  Borrowings under this 
agreement are restricted to 70% of eligible accounts receivable and 50% of 
eligible inventory. At November 8, 1996, the Company had borrowed $291,000 of 
the $2,968,000 then available under this facility.  The line is 
collateralized by substantially all assets of the Company and bears interest 
at the lender's prime rate plus 2%.  The lender has agreed to make temporary 
advances to the Company over the amount otherwise available under the 
formulas described above.  The terms of the temporary accommodation allow the 
Company to borrow up to an additional $1,000,000 through March 31, 1997, 
$500,000 through April 30, 1997, and $250,000 through May 31, 1997.  The 
Company granted its lender a deed of trust on Carver's Lynnwood, Washington 
facility as security for the temporary accommodation.  The Company has no 
borrowings against this over-line availability.  The Company's line of credit 
expires on July 31, 1998.

                                        11
<PAGE>

The Company's inventory has increased $155,000 from December 31, 1995 
primarily due to receipt of finished goods from offshore suppliers.  Accounts 
receivable has increased $272,000 from the end of 1995 due to increased sales.

During most of 1995 and the first half of 1996 the Company operated under a 
severe cash shortage which caused it to push out payments to vendors, and 
defer the purchase of source product for several months.  As the Company's 
borrowing base is dependent on its inventory and receivables, the borrowing 
availability had contracted to a level at which the Company was experiencing 
a cash shortfall and was forced to delay payment of its accounts payable 
which delayed receipt of major sourced product purchases. Several of the 
Company's major suppliers changed payment terms in 1996 to require 
prepayment.  The Company believes that it has lost sales in the first nine 
months of 1996 due to lack of availability of product.

Late in the second quarter and during the third quarter of 1996 the Company 
sold 1,411,764 shares of Series A Cumulative Convertible Preferred Stock (the 
"Preferred Stock") and issued five year warrants (the "Warrants") to acquire 
up to 300,000 shares of the Company's Common Stock pursuant to a Stock 
Purchase Agreement with Renwick Capital Management, Inc. ("Renwick") and 
certain Renwick affiliates (the "Agreement").  The Shares of  Preferred Stock 
and Warrants are convertible into or exercisable for 1,711,764 shares of 
Common Stock, or approximately 46% of the current shares outstanding.

The price of the Preferred Stock was $2.125 per share and each share of 
Preferred Stock is convertible at any time at the option of the holder into 
one share of Common Stock, subject to certain potential antidultion 
adjustments to be triggered by the issuance of additional shares of Common 
Stock at less than the lesser of the then current market price or $2.125.  
The Preferred Stock is entitled to an 8% compounding annual dividend payable 
quarterly.  In the first year, such dividend will be and has been paid with 
shares of Common Stock.  In years two and three (the Preferred Stock will 
automatically be converted into Common Stock on the third anniversary of 
issuance, thereby terminating the accruing dividend), the Company has the 
option of paying the dividend either in cash or with shares of Common Stock.  
If paid with Common Stock, the number of shares will be based on the greater 
of $2.125 per share or the average of the closing bid prices for the Common 
Stock for the 30 days prior to the dividend payment date. The number of 
shares of Common Stock which might be issued over the life of the dividend 
cannot be determined at this time as such number will vary with the market 
price of the Common Stock.





                                    12
<PAGE>

The holders of the Preferred Stock are entitled to one vote for each share of 
Common Stock into which the Preferred Stock is convertible. In addition, the 
holders of the Preferred Stock are entitled to elect two representatives to 
the Company's Board of Directors.  The Company's Board of Directors was 
increased by two positions, and Raj K. Bhatia and James R. McCullough have 
been appointed to the Board of Directors to represent holders of the 
Preferred Stock.  Messrs. Bhatia and McCullough are partners of Renwick. By 
virtue of the number of votes to be controlled by Renwick and its affiliates, 
their right to elect two of the Company's seven directors and the fact that 
various actions may not be taken by the Company without the approval of the 
holders of at least a majority of the Preferred Stock, such holders may be 
deemed to have acquired control of the Company.  Certain actions by the 
Company, such as a merger or liquidation of the Company, the sale of 
substantially all of its assets, payment of dividends, amendment of the 
Company's articles of incorporation, the issuance of additional securities or 
the incurrence of certain indebtedness, will require the approval of at least 
a majority of the Preferred Stock.  The Agreement also provides that the 
investors will have preemptive rights to subscribe for additional shares 
issued by the Company and rights to have the Company register shares of 
Common Stock issued upon conversion of the Preferred Stock or exercise of the 
Warrants.

The exercise price of the Warrants is $1.50 per share of Common Stock, if 
exercised from the date of the initial closing through the date two years 
from the date of the initial closing, $1.75 for the next year, $2.00 for the 
next year, $2.125 for the final year, again subject to certain potential 
antidilution adjustments.

Renwick is a New York-based investment banking firm founded in 1994 which 
specializes in the identification of undervalued growth companies exhibiting 
the potential for an operational turn-around.  Renwick actively supports its 
principal investments through the involvement of the industry and Wall Street 
professionals familiar with turn-around situations.

The Company had entered into an agreement to sell its headquarters in 
Lynnwood, Washington for $3,675,000. The Purchaser did not remove the 
necessary contingencies required for the sale to be consummated.  As such, 
the property remains listed for sale.

The Company believes that its available working capital and anticipated cash 
flows from operations will satisfy the Company's projected working capital 
and capital expenditure requirements for at least the next 12 months.  
However, if the Company's sales do not increase or if the Company incurs 
unanticipated expenses, existing sources of working 







                                  13
<PAGE>

capital may not be sufficient and there can be no assurance that additional 
financing would be available on acceptable terms, or at all, if and when 
needed.  Any additional financing may involve substantial additional dilution 
to the interests of the Company's shareholders.


OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS.
The Company's operating results may fluctuate due to factors such as the 
timing of new product announcements and introductions by the Company, its 
major customers and its competitors, market acceptance of new or enhanced 
versions of the Company's products, changes in the product or customer mix of 
revenues, changes in the level of operating expenses, competitive pricing 
pressures, the gain or loss of significant customers, increased research and 
development expense associated with new product introductions, and general 
economic conditions.  All of the above factors are difficult for the Company 
to forecast, and these or other factors can materially adversely affect the 
Company's business and operating results for one quarter or a series of 
quarters.

EFFECTS OF INFLATION AND CHANGES IN FOREIGN CURRENCY EXCHANGE RATES.
Due to the competitive conditions in the market for consumer electronics, 
historically the Company has been limited in its ability to increase prices 
for its products in amounts sufficient to offset increased production and 
operating costs.  The Company increased prices for its domestic products in 
January 1995 and its export products in July 1995 an average of 5%.  The 
Company intends to continue to monitor costs and its market and adjust prices 
taking into consideration the Company's costs and competitive conditions.  
All sales of the Company's products are in U.S. dollars.

Approximately 43% of the Company's net sales in 1995 and 58% year to date in 
1996 were of products designed by and/or manufactured to the Company's 
specifications by overseas suppliers.  Historically, the Company purchased a 
substantial portion of these products at an agreed per unit price payable in 
Japanese yen.  Accordingly, the weakening in the value of the dollar versus 
the yen has had an adverse effect on the Company's gross margin in 1995.  The 
Company's 1996 plan presently is for 58% of its revenues to be from product 
sourced offshore.  The Company is in the process of replacing certain 
Japanese built products with product sourced from countries that do not 
require payment in Japanese Yen.  However, the transition to alternate 
suppliers may involve quality control issues, delays in delivery dates or 
other transitional problems.





                                      14
<PAGE>

Historically, the Company has had a policy of generally hedging its foreign 
currency exposure between the date orders are placed with overseas suppliers 
and the date at which payment is made.  Due to credit restrictions under its 
line of credit, the Company has not been hedging.  At November 11, 1996, the 
Company had committed to the purchase of approximately $2,722,000 of 
inventory scheduled for delivery in 1996. Of this amount, approximately 
$35,000 is denominated for payment in Japanese Yen. As a result, changes in 
the value of the Yen against the U.S. dollar would not have a material effect 
on the amount the Company has committed to purchase.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

          None.

ITEM 2.   CHANGES IN SECURITIES.

          As described more fully under the caption "Liquidity and Capital 
Resources" in Item 2 of Part I above, late in the second quarter and during 
the third quarter of 1996 the Company sold 1,411,764 shares of Series A 
Cumulative Convertible Preferred Stock (the "Preferred Stock") and issued 
five year warrants (the "Warrants") to acquire up to 300,000 shares of the 
Company's Common Stock pursuant to a Stock Purchase Agreement with Renwick 
Capital Management, Inc. ("Renwick") and certain Renwick affiliates (the 
"Agreement"). The Shares of Preferred Stock and Warrants are convertible 
into or exercisable for 1,711,764 shares of Common Stock or 46% of the 
current shares outstanding. In the event of liquidation of the Company, 
holders of the Preferred Stock are entitled to receive the price paid for 
their shares of Preferred Stock plus accrued but unpaid dividends before 
holders of the Company's outstanding shares of Common Stock receive any 
distributions.

      Each share of Preferred Stock is convertible at any time at the option of 
the holder into one share of Common Stock, subject to certain potential 
antidilution adjustments to be triggered by the issuance of additional shares 
of Common Stock at less than the lesser of the then current market price or 
$2.125. The Preferred Stock is entitled to cumulative dividends at the annual 
rate of $0.17 per share payable quarterly and the holders of Preferred Stock 
are entitled to one vote per share.  Certain actions by the Company, such as 
a merger or liquidation, the sale of substantially all of its assets, payment 
of dividends, amendment of the Company's articles of incorporation, the 
issuance of additional securities or the incurrence of certain indebtedness, 
require the approval of the holders of at least a 




                                    15
<PAGE>

majority (or in some cases, two-thirds) of the holders of the Preferred Stock.

     In addition, the holders of the Preferred Stock are entitled to elect 
two representatives to the Company's Board of Directors.  The Company's Board 
of Directors has been increased by two positions, and Raj K. Bhatia and James 
R. McCullough (principals of Renwick) have been appointed to the Board of 
Directors to represent holders of the Preferred Stock.  By virtue of the 
number of votes to be controlled by Renwick and its affiliates, their right 
to elect two of the Company's seven directors and the fact that various 
actions may not be taken by the Company without the approval of the holders 
of at least a majority of the Preferred Stock, such holders may be deemed to 
have acquired control of the Company.

               See "Liquidity and Capital Resources" in Item 2 of Part I above. 


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.

ITEM 5.   OTHER INFORMATION.

          None.

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

          (a) Exhibit 10.42
                    
               Agreement for Financial Public Relations Services
                    
          (b) Exhibit 10.43
                    
               Sixteenth Amendment to Carver Corporation Accounts     
               Financing Agreement





                                         16
<PAGE>

                                     SIGNATURES

Pursuant to the requirements 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.

                                     CARVER CORPORATION


Dated:                               /s/Debra L. Griffith
       ----------------------        Vice President - Finance





















                                         17
<PAGE>

                                  CARVER CORPORATION
                                    EXHIBIT INDEX

EXHIBIT                  TITLE                                       PAGE
--------------------------------------------------------------------------
10.42               Agreement for Financial Public                    19 
                    Relations Services

10.43               Sixteenth Amendment to Carver Corporation         25 
                    Accounts Financing Agreement























                                        18