U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                For the quarterly period ended December 31, 2005

                                       OR

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
      ACT

                 For the transition period from _____ to _____.

                          Commission File No. 000-29299

                                CorVu Corporation
             (Exact name of registrant as specified in its charter)

        Minnesota                                               41-1457090
(State of Incorporation)                                   (IRS Employer ID #)

                              3400 West 66th Street
                             Edina, Minnesota 55435
                    (Address of Principal Executive Offices)

                                  952-944-7777
                (Issuer's Telephone Number, Including Area Code)

     Check whether the issuer (1) filed all reports required to be filed by
   Sections 13 or 15(d) of the Exchange Act during the past 12 months (or 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 |_|

        Indicate by check mark whether the Registrant is a shell company
         (as defined in Rule 12b-2 of the Exchange Act). YES |_|  NO |X|

              State the number of shares outstanding of each of the
               issuer's classes of common equity as of the latest
                                practicable date.

                  Class: Common Stock, par value $.01 per share
              Outstanding shares as of January 13, 2006: 49,483,268

    Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                                CorVu Corporation
                              Index to Form 10-QSB

PART I FINANCIAL INFORMATION

      Item 1. Financial Statements

            Consolidated Balance Sheets December 31, 2005 (Unaudited) and June
            30, 2005

            Consolidated Statements of Cash Flows (Unaudited) Six Month Periods
            Ended December 31, 2005 and 2004

            Consolidated Statements of Operations (Unaudited) Three and Six
            Month Periods Ended December 31, 2005 and 2004

            Notes to Unaudited Consolidated Financial Statements For the Three
            and Six Month Periods Ended December 31, 2005 and 2004

      Item 2. Management's Discussion and Analysis or Plan of Operation

      Item 3. Controls and Procedures

PART II OTHER INFORMATION

      Item 1. Legal Proceedings

      Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      Item 3. Defaults Upon Senior Securities

      Item 4. Submission of Matters to a Vote of Security Holders

      Item 5. Other Information

      Item 6. Exhibits

SIGNATURES

EXHIBITS

                                       2
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements

                       CORVU CORPORATION AND SUBSIDIARIES

                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                               December 31,       June 30,
                                                                                   2005             2005
                                                                             --------------   --------------
                                                                               (Unaudited)       (Audited)
                                     Assets

<S>                                                                          <C>                   <C>
Current assets:
   Cash and cash equivalents                                                 $    2,274,381        2,162,866
   Trade accounts receivable, net of allowance for doubtful
     accounts of $64,000 and $65,000, respectively                                3,499,276        4,199,610
   Prepaid expenses and other                                                       354,209          490,473
                                                                             --------------   --------------
        Total current assets                                                      6,127,866        6,582,949
Furniture, fixtures and equipment, net                                              239,364          286,371
                                                                             --------------   --------------
        Total assets                                                         $    6,367,230        7,139,320
                                                                             ==============   ==============

                      Liabilities and Stockholders' Deficit

Current liabilities:
   Accounts payable                                                          $    1,108,002        1,213,332
   Accrued compensation and related costs                                         1,989,549        1,868,877
   Deferred revenue                                                               5,375,270        6,190,490
   Accrued interest                                                                  62,260           39,698
   Other accrued expenses                                                           589,304          761,236
                                                                             --------------   --------------
        Total current liabilities                                                 9,124,385       10,073,633
                                                                             --------------   --------------

Long-term debt                                                                    1,500,000        1,500,000
                                                                             --------------   --------------
        Total Liabilities                                                        10,624,385       11,573,633
                                                                             --------------   --------------

Stockholders' deficit:
   Undesignated capital stock, 23,383,000 shares authorized
     at December 31, 2005 and June 30, 2005; none issued and
     outstanding                                                                         --               --
   Series C convertible preferred stock, par value $100 per
     share; 17,000 shares authorized; 17,000 outstanding at
     December 31, 2005 and June 30, 2005, respectively,
     liquidation preference of $2,550,000 at December 31, 2005                    1,737,500        1,767,500
   Series B convertible preferred stock, par value $0.01 per
     share; 600,000 shares authorized; 360,000 outstanding
     at December 31, 2005 and June 30, 2005, respectively,
     liquidation preference of $360,000 at December 31, 2005                          3,600            3,600
   Series A convertible preferred stock, par value $10 per
     share; 1,000,000 shares authorized; none issued and
     outstanding at December 31, 2005 and June 30, 2005,
     respectively                                                                        --               --
   Common stock, $0.01 par value; 75,000,000 shares
     authorized; 49,483,268 shares issued and outstanding at
     December 31, 2005 and June 30, 2005, respectively                              494,833          494,833
   Additional paid-in capital                                                    22,234,720       22,012,720
   Accumulated deficit                                                          (27,657,099)     (27,738,043)
   Deferred compensation                                                           (212,933)         (17,900)
   Accumulated other comprehensive loss                                            (857,776)        (957,023)
                                                                             --------------   --------------
        Total stockholders' deficit                                              (4,257,155)      (4,434,313)
                                                                             --------------   --------------
        Total liabilities and stockholders' deficit                          $    6,367,230        7,139,320
                                                                             ==============   ==============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements

                                       3
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Unaudited)

               Six Month Periods Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                                                 2005            2004
                                                                             ------------   ------------
<S>                                                                          <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                                         $    112,744     (2,641,632)
   Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
     Depreciation                                                                  85,152         70,560
     Warrants and stock options vested                                             26,967         24,598
     Changes in operating assets and liabilities:
        Trade accounts receivable, net                                            700,334      1,155,714
        Prepaid expenses and other                                                136,264       (114,416)
        Accounts payable                                                         (105,330)       482,115
        Accrued compensation and related costs                                    120,672        601,482
        Deferred revenue                                                         (718,536)       586,946
        Accrued interest                                                           22,562        (26,712)
        Other accrued expenses                                                   (233,732)       (14,417)
                                                                             ------------   ------------
          Net cash provided by operating activities                               147,097        124,238
                                                                             ------------   ------------

Cash flows from investing activities:
   Capital expenditures                                                           (38,145)       (54,671)
                                                                             ------------   ------------
          Net cash used in investing activities                                   (38,145)       (54,671)
                                                                             ------------   ------------

Cash flows from financing activities:
   Proceeds from sale of Series B convertible preferred
    stock, net                                                                         --        343,776
                                                                             ------------   ------------
          Net cash provided by financing activities                                    --        343,776
Effect of exchange rate changes on cash                                             2,563         24,203
                                                                             ------------   ------------
          Net increase in cash and cash equivalents                               111,515        437,546
Cash and cash equivalents at beginning of period                                2,162,866        148,475
                                                                             ------------   ------------
Cash and cash equivalents at end of period                                   $  2,274,381        586,021
                                                                             ============   ============

Supplemental cash flow disclosures:
Cash paid during the period for interest                                     $     46,521         62,777
Cash paid during the period for income taxes                                           --             --
                                                                             ============   ============
Non-cash investing and financing activities:
Series B Convertible Preferred Stock issued for cancellation
 of note payable-stockholder                                                 $         --        240,000
                                                                             ============   ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements

                                       4
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES

                Consolidated Statements of Operations (Unaudited)

          Three and Six Month Periods Ended December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                             Three Months Ended            Six Months Ended
                                                         ---------------------------   ---------------------------
                                                         December 31,   December 31,   December 31,   December 31,
                                                              2005          2004           2005           2004
                                                         ------------   ------------   ------------   ------------
<S>                                                      <C>            <C>            <C>            <C>
Revenues:
   Software and license fees                             $  1,989,282      1,264,293      3,146,059      2,302,539
   Maintenance fees                                         1,502,213      1,380,289      2,933,219      2,582,633
   Consulting and other                                       681,327        678,376      1,386,424      1,483,078
                                                         ------------   ------------   ------------   ------------

     Total revenues                                         4,172,822      3,322,958      7,465,702      6,368,250
                                                         ------------   ------------   ------------   ------------
Operating costs and expenses:
   Cost of consulting and other services                      787,336        836,503      1,523,836      1,788,203
   Product development                                        566,579        570,533      1,074,491      1,098,458
   Sales and marketing                                      1,257,560      1,838,592      2,375,081      3,802,877
   General and administrative                               1,190,629      1,132,657      2,335,013      2,262,607
                                                         ------------   ------------   ------------   ------------
     Total operating costs and expenses                     3,802,104      4,378,285      7,308,421      8,952,145
                                                         ------------   ------------   ------------   ------------

     Operating income (loss)                                  370,718     (1,055,327)       157,281     (2,583,895)

Interest expense, net                                         (22,055)       (35,320)       (44,537)       (57,737)
                                                         ------------   ------------   ------------   ------------

     Income (loss) before income taxes                        348,663     (1,090,647)       112,744     (2,641,632)

Benefit from income taxes                                          --             --             --             --
                                                         ------------   ------------   ------------   ------------

     Net income (loss)                                        348,663     (1,090,647)       112,744     (2,641,632)

Preferred stock dividends                                     (15,900)      (229,245)       (31,800)      (229,245)
                                                         ------------   ------------   ------------   ------------

Income (loss) attributable to common stockholders        $    332,763     (1,319,892)        80,944     (2,870,877)
                                                         ============   ============   ============   ============

Net income (loss) per common share--basic                $       0.01          (0.05)          0.00          (0.11)
Income (loss) attributable to common stockholders
   per common share- basic                               $       0.01          (0.06)          0.00          (0.12)
Weighted average shares outstanding--basic                 49,483,268     23,970,268     49,483,268     23,970,268
Net income (loss) per common share--diluted              $       0.01          (0.05)          0.00          (0.11)
Income (loss) attributable to common stockholders
   per common share- diluted                             $       0.01          (0.06)          0.00          (0.12)
Weighted average shares outstanding--diluted               55,081,531     23,970,268     55,648,373     23,970,268
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES

          Notes to Unaudited Consolidated Financial Statements for the
          Three and Six Month Periods Ended December 31, 2005 and 2004

(1)   Unaudited Financial Statements

      The accompanying unaudited consolidated financial statements of CorVu
      Corporation and Subsidiaries (the Company) have been prepared by the
      Company in accordance with accounting principles generally accepted in the
      United States of America for interim financial information, pursuant to
      the rules and regulations of the Securities and Exchange Commission.
      Pursuant to such rules and regulations, certain financial information and
      footnote disclosures normally included in the consolidated financial
      statements have been condensed or omitted. The results for the periods
      indicated are unaudited, but reflect all adjustments (consisting only of
      normal recurring adjustments) which management considers necessary for a
      fair presentation of operating results.

      Operating results for the three and six months ended December 31, 2005 are
      not necessarily indicative of the results that may be expected for the
      year ending June 30, 2006. These unaudited consolidated financial
      statements should be read in conjunction with the consolidated financial
      statements and footnotes thereto included in the Company's Annual Report
      on Form 10-KSB for the year ended June 30, 2005.

(2)   Summary of Significant Accounting Policies

      (a) Revenue Recognition

      Software license revenue is recognized when all of the following criteria
      have been met: there is an executed license agreement, software has been
      delivered to the customer, the license fee is fixed and payable within
      twelve months, collection is deemed probable and product returns are
      reasonably estimable. Prepaid software license fee revenues from resellers
      and distributors are only recognized upon receipt of cash and upon
      delivery and acceptance of the product and when title to the product has
      passed to the reseller or distributor. Revenues related to multiple
      element arrangements are allocated to each element of the arrangement
      based on the fair values of elements such as license fees, maintenance,
      and professional services. Fair value is determined based on vendor
      specific objective evidence. Maintenance revenues are recognized ratably,
      upon collection of the funds from the customer, over the term of the
      maintenance contract, typically 12 to 36 months. Consulting and other
      revenues are recognized when services are performed.

      Deferred revenue represents payment received or amounts billed in advance
      of services to be performed.

                                       6
<PAGE>

      (b) Net Income (Loss) per Common Share

      Basic net income (loss) attributable to common stockholders per common
      share is computed by dividing net income (loss) attributable to common
      stockholders by the weighted average number of common shares outstanding
      during the period. Diluted net income (loss) attributable to common
      stockholders per common share is computed by dividing net income (loss)
      attributable to common stockholders by the weighted average number of
      common shares outstanding plus all additional common stock that would have
      been outstanding if potentially dilutive common stock related to stock
      options and warrants had been issued.

      Following is a reconciliation of basic and diluted net income (loss)
      attributable to common stockholders per common share for the three and six
      months ended December 31, 2005 and 2004, respectively:

<TABLE>
<CAPTION>
                                                         Three Months Ended           Six Months Ended
                                                            December 31,                December 31,
                                                    --------------------------   --------------------------
                                                        2005          2004           2005          2004
                                                    ------------  ------------   ------------  ------------
<S>                                                 <C>           <C>            <C>           <C>
Income (loss) attributable to common
   stockholders                                     $    332,763    (1,319,892)        80,944    (2,870,877)

Weighted average shares outstanding                   49,483,268    23,970,268     49,483,268    23,970,268

Income (loss) attributable to common
   stockholders per common share-- basic            $       0.01         (0.06)          0.00         (0.12)

Income (loss) per common share -- diluted:
Income (loss) attributable to common
   stockholders                                     $    332,763    (1,319,892)        80,944    (2,870,877)

Weighted average shares outstanding                   49,483,268    23,970,268     49,483,268    23,970,268

Common stock equivalents                                 998,263             0      1,565,105             0

Convertible preferred stock                            4,600,000             0      4,600,000             0

Weighted average shares and potential diluted
   shares outstanding                                 55,081,531    23,970,268     55,648,373    23,970,268

Income (loss) attributable to common
   stockholders -- Diluted                          $       0.01         (0.06)          0.00         (0.12)
</TABLE>

      The Company uses the treasury method for calculating the dilutive effect
      of the stock options and warrants (using the average market price).

      Options and warrants outstanding totaling 14,681,692 and 13,321,692,
      respectively were excluded from the computation of common share
      equivalents for the three and six months ended December 31, 2005, as they
      were anti-dilutive. Options and warrants outstanding at December 31, 2004
      totaling 9,561,903 were excluded from the computation of common share
      equivalents for the three and six months ended December 31, 2004, as they
      were anti-dilutive.

                                       7
<PAGE>

      (c) Stock-Based Compensation

      In accordance with Accounting Principles Board (APB) Opinion No. 25 and
      related interpretations, the Company uses the intrinsic value-based method
      for measuring stock-based compensation cost which measures compensation
      cost as the excess, if any, of quoted market price of the Company's common
      stock at the grant date over the amount the employee must pay for the
      stock. The Company's general policy is to grant stock options at fair
      value at the date of grant. Options and warrants issued to non-employees
      are recorded at fair value, as required by Statement of Financial
      Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
      Compensation", using the Black Scholes pricing method. The Company has
      adopted the disclosure only provisions of SFAS No. 148, "Accounting for
      Stock-Based Compensation".

      In December 2004, the Financial Accounting Standards Board (FASB) issued
      Statement of Financial Accounting Standards (SFAS) No. 123R which requires
      companies to recognize in the income statement the grant-date fair value
      of stock options and other equity-based compensation issued to employees,
      but expressed no preference for the valuation model. SFAS No. 123R is
      effective for small business issuers as of the beginning of annual
      reporting periods that begin after December 15, 2005. The Company will
      adopt SFAS No. 123R in its first fiscal 2007 quarter. The Company has not
      evaluated the impact, if any, of the adoption of SFAS No. 123R on its
      consolidated financial statements.

      Had compensation cost been recognized based on the fair value of options
      at the grant dates consistent with the provisions of SFAS No. 123, the
      Company's income (loss) attributable to common stockholders and basic and
      diluted net income (loss) attributable to common stockholders per common
      share would have been changed to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                             Three Months Ended           Six Months Ended
                                                                 December 31,                December 31,
                                                         --------------------------   ---------------------------
                                                              2005         2004           2005           2004
                                                         ------------  ------------   ------------   ------------
<S>                                                      <C>           <C>            <C>            <C>
Income (loss) attributable to common stockholders:
   As reported                                           $    332,763    (1,319,892)        80,944     (2,870,877)
   Pro forma                                                  292,648    (1,369,192)       (19,461)    (3,067,189)
Basic income (loss) attributable to common
   stockholders per common share:
   As reported                                                   0.01         (0.06)          0.00          (0.12)
   Pro forma                                                     0.01         (0.06)         (0.00)         (0.13)
Diluted income (loss) attributable to common
   stockholders per common share:
   As reported                                                   0.01         (0.06)          0.00          (0.12)
   Pro forma                                                     0.01         (0.06)         (0.00)         (0.13)
Stock based compensation:
   As reported                                                      0             0              0              0
   Pro forma                                                   40,115        49,300        100,405        196,312
</TABLE>

      In determining the compensation cost of options granted during the three
      and six months ended December 31, 2005 and 2004, as specified by SFAS No.
      123, the fair value of each option grant has been estimated on the date of
      grant using the Black-Scholes pricing model and the weighted average
      assumptions used in these calculations are summarized as follows:

<TABLE>
<CAPTION>
                                              Three Months Ended                      Six Months Ended
                                                 December 31,                           December 31,
                                     -------------------------------------  -------------------------------------
                                           2005                2004               2005               2004
                                     ------------------  -----------------  -----------------  ------------------
<S>                                  <C>                 <C>                <C>                <C>
Risk-free interest rate                           4.50%        3.375-3.50%        3.875-4.50%        3.375-3.625%
Expected life of options granted               7 years            7 years          5-7 years             7 years
Expected volatility                                152%               122%               152%                122%
Expected dividend yield                              0%                 0%                 0%                  0%
</TABLE>

                                       8
<PAGE>

(3)   Liquidity

      The accompanying consolidated financial statements are prepared assuming
      the Company will continue as a going concern. During the year ended June
      30, 2005, the Company generated an operating loss of $3,872,825. For the
      ensuing six month period ended December 31, 2005, operating income of
      $157,281 has been generated. As of December 31, 2005, the Company had an
      accumulated deficit of $27,657,099 and total stockholders' deficit of
      $4,257,155.

      During the year ended June 30, 2005, the Company raised approximately $6.5
      million in debt and equity financing, net of expenses. During the past
      twelve months, the Company has reduced operating expenses in all areas,
      primarily sales and marketing expenses, to bring them in line with
      expected revenue. In addition, new management has been brought in and
      initiatives have been implemented to (1) focus sales efforts on targeted
      markets, (2) improve cash flow and expense management and (3) improve
      operational execution. All these initiatives have been implemented in an
      effort to improve the Company's operating performance. If the Company is
      unable to sustain improved operating performance, the Company may further
      reduce operating expenses or may seek additional financing through private
      equity or debt placements. There can be no assurance that the Company will
      be successful in achieving these objectives. The Company's ability to
      continue as a going concern is dependent on it achieving profitability and
      generating cash flow to fund operations.

(4)   Comprehensive Income (Loss)

      Comprehensive loss and its components consist of the following:

<TABLE>
<CAPTION>
                                                     Three Months Ended                         Six Months Ended
                                           ----------------------------------------  ----------------------------------------
                                              December 31,         December 31,         December 31,         December 31,
                                                  2005                 2004                 2005                 2004
                                           -------------------  -------------------  -------------------  -------------------
<S>                                        <C>                  <C>                  <C>                  <C>
Net income (loss)                          $           348,663           (1,090,647)             112,744  $        (2,641,632)
Other comprehensive loss:
Foreign currency translation adjustment                 26,118             (357,972)              99,247             (371,651)
                                           -------------------  -------------------  -------------------  -------------------
Comprehensive income (loss)                $           374,781  $        (1,448,619) $           211,991  $        (3,013,283)
                                           ===================  ===================  ===================  ===================
</TABLE>

(5)   Income Taxes

      Through December 31, 2005, the Company has U.S. Federal and State
      operating loss carryforwards of approximately $9 million and $3 million,
      respectively. The net operating loss carryforwards expire in the years
      2010 through 2024. The Company has recorded a valuation allowance at
      December 31, 2005 and June 30, 2005 due to the uncertainties related to
      the ability to utilize certain Federal and State net operating loss
      carryforwards as determined in accordance with accounting principles
      generally accepted in the United States of America.

      Federal tax laws impose significant restrictions on the utilization of net
      operating loss carryforwards in the event of a change in ownership of the
      Company which constitutes an "ownership change," as defined by the
      Internal Revenue Code, Section 382. The Company's net operating loss
      carryforward may be subject to the above limitations.

                                       9
<PAGE>

(6)   Series B Convertible Preferred Stock

      During the year ended June 30, 2005, the Company authorized and sold
      600,000 shares of Series B Convertible Preferred Stock at a par value of
      $0.01 per share. A total of 360,000 shares were sold at a price of $1.00
      per share, resulting in proceeds to the Company of $360,000. The Company
      incurred $15,417 of financing costs associated with the preferred stock
      offering. The remaining 240,000 shares were issued as a result of the
      conversion of an existing note payable-stockholder. In February 2005,
      these 240,000 shares were converted into 800,000 shares of the Company's
      common stock at a price of $0.30 per share.

      Under the terms of these shares, holders of the Series B Convertible
      Preferred Stock (1) are entitled to a liquidation preference equal to
      $1.00 per share in the event of any liquidation or dissolution of the
      Company, (2) are entitled to receive a dividend of 6% per annum, payable
      quarterly in either cash or common stock, at the option of the Company and
      (3) received piggyback registration rights. Shares of the Series B
      Convertible Preferred Stock are convertible into shares of the Company's
      common stock, at the option of the holder, at a rate of $0.30 per share,
      or a total of 1,200,000 shares. The conversion price is subject to
      adjustment under certain conditions such as stock dividends, stock splits
      and reclassifications. In addition, shares of the Series B Convertible
      Preferred Stock participate on an as-if converted basis in any dividends
      paid of common stock and are entitled to voting rights together with the
      common stock, on an as-if converted basis. In addition, the investors also
      received five-year warrants to purchase up to 1,400,001 shares of the
      Company's common stock at an exercise price of $0.20 per share. The fair
      value of the warrants at the date of grant was estimated to be
      approximately $360,000 using the Black-Scholes pricing model. The
      following assumptions were used to calculate the fair value of the
      warrants: dividend yield of 0%; expected volatility of 122%; risk-free
      interest rate of 3.375%; and an expected life of five years.

      The proceeds of the Series B Convertible Preferred Stock of $360,000 and
      the conversion of the note payable-stockholder of $240,000 were allocated
      between preferred stock, the fair value of the warrants based on using
      Black-Scholes pricing model and the beneficial conversion of the preferred
      stock. As defined in Emerging Issues Task Force (EITF) 00-27 "Application
      of Issue No. 98-5 to Certain Convertible Instruments", the resulting
      beneficial conversion of the Series B Convertible Preferred Stock of
      approximately $225,000 was accounted for as preferred stock dividends
      during the year ended June 30, 2005. For the six month period ended
      December 31, 2005, the Company has recorded dividends of $10,800.
      Dividends accrued but not paid as of December 31, 2005, in the amount of
      $5,400, were paid to the holders of the Series B Convertible Preferred
      Stock subsequent to December 31, 2005.

      For their efforts in securing this financing, the Company's placement
      agent received a five-year warrant to purchase up to 100,000 shares of the
      Company's common stock at an exercise price of $0.20 per share.

(7)   Debt and Equity Financing Transaction

      In February 2005, the Company and ComVest Investment Partners LLC
      (ComVest) completed a debt and equity financing which included: (1) an
      equity investment of $3,300,000 in exchange for 22,000,000 shares of the
      Company's common stock at a price of $0.15 per share; (2) a preferred
      stock and warrant investment of $1,700,000 in exchange for 17,000 shares
      of a Series C Convertible Preferred Stock ("Series C Preferred Stock"),
      plus five-year warrants to purchase up to 3,400,000 shares of the
      Company's common stock at an exercise price of $0.50 per share, and (3) a
      collateralized loan in the principal amount of $1,500,000.

      Each share of Series C Convertible Preferred Stock has a par value of $100
      and is convertible into 200 shares of the Company's common stock, subject
      to customary anti-dilution provisions. In addition, holders of the Series
      C Convertible Preferred Stock are entitled to voting rights together with
      the common stock, on an as-if converted basis. The Series C Convertible
      Preferred Stock accrues cumulative quarterly dividends of $1.50 per share
      during the first year after issuance, $2.25 per share during the second
      year after issuance, and $3.00 per share during the third year after
      issuance. The Company has the right to redeem Series C Convertible
      Preferred Stock at any time upon 10 business days prior written notice
      upon payment of $100 per share plus accumulated but unpaid dividends;
      holders of Series C Convertible Preferred Stock may elect to convert the
      stock at any time. The fair value of the warrants at the date of grant was
      estimated to be approximately $748,000 using the Black-Scholes pricing
      model. The following assumptions were used to calculate the fair value of
      the warrants: dividend yield of 0%; expected volatility of 122%; risk-free
      interest rate of 3.375%; and an expected life of five years. As defined in
      Emerging Issues Task Force (EITF) 00-27 "Application of Issue No. 98-5 to
      Certain Convertible Instruments", it was determined that there was no
      resulting beneficial conversion of the Series C Convertible Preferred
      Stock. Upon liquidation of the Company, each share of Series C Convertible
      Preferred Stock entitles its holder to receive an amount of $150, prior
      and in preference to holders of common stock and any other preferred
      stock. In accordance with Staff Accounting Bulletin Topic 5, "Increasing
      Rate Preferred Stock", the Company has increased the carrying value of the
      Series C Convertible Preferred Stock by $90,000, represented as the net
      present value of the difference between the actual stated value of
      dividends payable in the first two years after issuance and the effective
      dividends based on a 12% market rate during those periods. Since its
      issuance, as of December 31, 2005, the Company has amortized $52,500 of
      the effective dividend discussed above. In addition, the Company has
      recorded dividends of $51,000 for the six month period ended December 31,
      2005. Dividends accrued but not paid as of December 31, 2005, in the
      amount of $25,500, were paid to the holders of the Series C Convertible
      Preferred Stock subsequent to December 31, 2005.

                                       10
<PAGE>

      The loan is collateralized by substantially all of the assets of the
      Company and ranks senior to any existing or future indebtedness of the
      Company. The interest rate for the loan is 6% during the first year of the
      loan, 9% during the second year and 12% for the third year. The loan
      becomes immediately due and payable upon the earlier of (i) 36 months from
      the date of issuance (February 2008), (ii) a merger or combination of the
      Company or a sale of all or substantially all of the assets of the
      Company, or (iii) the acquisition of more than 50% of the voting power or
      interest in the Company by a single entity or person. The Company has
      recorded interest in the amount of $33,935 and $67,685, which is included
      in interest expense in the accompanying statement of operations, for the
      three and six month periods ended December 31, 2005, respectively. The
      collateralized loan balance in the amount of $1,500,000 is included as
      long-term debt in the accompanying balance sheets as of December 31, 2005
      and June 30, 2005, respectively.

      The Company has agreed for a period equal to the shorter of (i) three
      years from the closing or (ii) such time as ComVest owns less than
      5,000,000 shares of the Company's common stock, not to issue any shares of
      common stock, or any securities convertible into common stock for an
      effective per share price of less than $0.25 per share, without the
      approval of ComVest. The Company also has agreed not to incur any
      indebtedness for borrowed money other than an asset-based senior line of
      credit without the prior approval of ComVest. The Company is obligated to
      use 50% of any proceeds it may receive in the future upon the sale of
      certain equity or debt securities to redeem outstanding Series C
      Convertible Preferred Stock or to retire the loan.

      At the closing of the transaction, ComVest also received warrants to
      purchase another 2,000,000 shares at $0.50; however, these warrants will
      become exercisable only if less than two ComVest designees are members of
      the Company's Board of Directors while ComVest owns more than 5,000,000
      shares of the Company's common stock.

      All warrants are subject to anti-dilution protection and contain cashless
      exercise provisions.

      At closing, the Company paid ComVest a cash fee of $240,000, which was
      offset against the gross proceeds of the preferred and common stock.

      Subject to waiver by the unanimous consent of the Company's Board of
      Directors, the Company has agreed to maintain a minimum cash balance of
      $750,000. This cash is available for the Company to use but, in the event
      of its use, an event of default under the debt instrument would be
      triggered which, if left uncured, could result in the debt being declared
      immediately due and payable. As of December 31, 2005, the Company is in
      compliance with all covenants contained in the debt agreement.

      Upon the closing of the financing transaction with ComVest, Delia
      MacIntosh, the spouse of the Company's former Chief Executive Officer,
      converted the remaining outstanding debt of the Company due to her under a
      note payable-stockholder in the aggregate amount of approximately $400,000
      into 2,704,000 shares of Common Stock at the same terms as the equity
      financing.

(8)   Contingencies

      The Company is involved in a dispute with a customer involving software,
      support and services that were purchased from the Company in February
      2001. In accordance with the contractual terms, the matter was brought to
      arbitration in November 2003. In December 2004, the arbitrator terminated
      the case and awarded the Company recovery of legal fees in the amount of
      approximately $90,000. During April 2005, the customer appealed the
      arbitrator's findings with the High Court of New Zealand and, in August
      2005, the court ruled that the matter should be returned to arbitration. A
      settlement conference has been scheduled for January 2006. The Company is
      unable to estimate the exact amount of the loss, if any, but believes the
      loss may be in the range of $0 to $350,000. The Company intends to defend
      this action vigorously as it believes it has adequate defenses against
      this claim and that the claim is without merit. Based on the information
      available and discussions with legal counsel, the Company believes that
      the likelihood of loss is remote. Therefore, the Company has not accrued
      any liability related to this matter as of December 31, 2005.

                                       11
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation

           For the Three and Six Month Periods Ended December 31, 2005
                            versus December 31, 2004

REVENUES:

Total revenue increased 26% and 17% for the three and six month periods ended
December 31, 2005, respectively, compared to the same periods a year ago. In
addition, revenues increased 27% for the three month period ended December 31,
2005 compared to the first quarter ended September 30, 2005.

Software revenues increased $724,989 (57%) and $843,520 (37%) for the three and
six month periods ended December 31, 2005, respectively, from the same periods
last year. These increases were achieved in spite of a decrease in the number of
sales personnel due to a workforce reduction. As of December 31, 2005, we had a
total of 24 employees in sales and marketing, a 38% decline over the same period
last year. As a result, the average software and license fee revenue per
salesperson increased to $131,000 for the six month period ended December 31,
2005 compared to $59,000 during the comparable six month period in fiscal 2005,
an increase of 122%. Additionally, new sales management has been brought in
during the year. This management team is focusing the sales organization on
specific targeted markets, as opposed to a broader market approach.

Maintenance revenues increased $121,924 (9%) and $350,586 (14%) for the three
and six month periods ended December 31, 2005, respectively, from the same
periods last year. Results are indicative of the continued maintenance contract
renewals and collections, and contracts sold to new customers at the current
rate of 20% of the software license fee paid.

Consulting and other revenues increased $2,951 (0%) and decreased $96,654 (7%),
for the three and six month periods ended December 31, 2005, respectively, from
the same periods last year. Similar to software and license fee revenues,
results in this area were achieved with fewer personnel in 2005 than 2004.
Overall, staffing levels totaled 26 at the end of December, 2005, a reduction of
7% over the same period last year.

OPERATING COSTS AND EXPENSES:

Operating expenses decreased $576,181 (13%) and $1,643,724 (18%) for the three
and six month periods ended December 31, 2005, respectively, from the same
periods last year.

Cost of maintenance, consulting and other expenses decreased $49,167 (6%) and
$264,367 (15%) for the three and six month periods ended December 31, 2005,
respectively. As stated under consulting and other revenues above, the number of
personnel in this area has declined by 7%.

Product development costs decreased $3,954 (1%) and $23,967 (2%) for the three
and six month periods ended December 31, 2005, respectively, from the same
periods last year.

Sales and marketing expenses decreased $581,032 (32%) and $1,427,796 (38%) for
the three and six month periods ended December 31, 2005, respectively, from the
same periods last year. As discussed under software and license fee revenue
above, the number of personnel in this area has been dramatically reduced from
39 employees as of December 31, 2004 to 24 employees as of December 31, 2005, a
reduction of 38%. Along with reduced salary and other compensation costs, other
expenses like communications, travel and general marketing costs have been
reduced to bring them in line with expected revenues. Included in these
decreases are increases in sales commission expense for the three and six month
periods ended December 31, 2005 of $111,725 (58%) and $79,393 (24%),
respectively, as compared to the same periods last year. The increase in sales
commission expense is due to increased software license fees for those periods.
Taking those increases into effect, our other sales and marketing expenses
actually decreased $692,757 (42%) and 1,507,189 (43%) for the three and six
month periods ended December 31, 2005, from the same periods last year.

General and administrative expenses increased $57,972 (5%) and $72,406 (3%) for
the three and six month periods ended December 31, 2005, respectively, from the
same periods last year.

OPERATING INCOME (LOSS):

CorVu Corporation generated operating income of $370,718 and $157,281 for the
three and six month periods ended December 31, 2005, respectively, compared to
operating losses of $1,055,327 and $2,583,895 for the three and six month
periods ended December 31, 2004, respectively.

                                       12
<PAGE>

INTEREST EXPENSE, NET:

Interest expense, net decreased $13,265 (38%) and $13,200 (23%) for the three
and six month period ended December 31, 2005, respectively, from the same
periods last year. Generally, our cost of borrowing is lower this year compared
to the same periods last year. In addition, we have earned interest income on
our excess cash balances this year due to our stronger cash position compared to
previous periods.

NET INCOME (LOSS):

CorVu Corporation reported net income of $348,663 and $112,744 for the three and
six month periods ended December 31, 2005, respectively, compared to net losses
of $1,090,647 and $2,641,632 for the three and six month periods ended December
31, 2004, respectively.

Liquidity and Capital Resources

Total cash and cash equivalents increased by $111,515 during the six month
period ended December 31, 2005 from $2,162,866 as of June 30, 2005 to $2,274,381
as of December 31, 2005. Net cash provided by operating activities was $147,097
for the six month period ended December 31, 2005. Net cash used in investing
activities was $38,145, reflecting the acquisition of capital assets during the
period. Foreign exchange rate changes generated cash of $2,563.

The accompanying consolidated financial statements are prepared assuming the
Company will continue as a going concern. During the year ended June 30, 2005,
the Company generated an operating loss of $3,872,825. For the ensuing six month
period ended December 31, 2005, operating income of $157,281 has been generated.
As of December 31, 2005, the Company had an accumulated deficit of $27,657,099
and total stockholders' deficit of $4,257,155.

During the year ended June 30, 2005, the Company raised approximately $6.5
million in debt and equity financing, net of expenses. During the past twelve
months, the Company has reduced operating expenses in all areas, primarily sales
and marketing expenses, to bring them in line with expected revenue. In
addition, new management has been brought in and initiatives have been
implemented to (1) focus sales efforts on targeted markets, (2) improve cash
flow and expense management and (3) improve operational execution. All these
initiatives have been implemented in an effort to improve the Company's
operating performance. If the Company is unable to sustain improved operating
performance, the Company may further reduce operating expenses or may seek
additional financing through private equity or debt placements. There can be no
assurance that the Company will be successful in achieving these objectives. The
Company's ability to continue as a going concern is dependent on it achieving
profitability and generating cash flow to fund operations.

We believe that we will generate sufficient cash flow from operations to meet
our operating cash requirements for the next 12 months.

                                       13
<PAGE>

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 1 to the consolidated
financial statements included in our annual report for the year ended June 30,
2005. The accounting policies used in preparing our interim 2006 consolidated
financial statements are the same as those described in our annual report, and
are as follows:

We believe the critical accounting policies listed below affect significant
judgments and estimates used in the preparation of our consolidated financial
statements.

Revenue Recognition. We recognize revenues in accordance with the provisions of
the American Institute of Certified Public Accountants' Statement of Position
(SOP) 97-2, "Software Revenue Recognition," as amended by SOP 98-4 and SOP 98-9,
as well as Technical Practice Aids issued from time to time by the American
Institute of Certified Public Accountants, and in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue
Recognition." We license software under non-cancelable license agreements and
provide related professional services, including consulting, training, and
implementation services, as well as ongoing customer support and maintenance.
Consulting, training and implementation services are not essential to the
functionality of our software products, are sold separately and also are
available from a number of third-party service providers. Accordingly, revenues
from these services are generally recorded separately from the license fee. Our
specific revenue recognition policies are as follows:

      Software License Fees -- Software license fee revenues from end-users and
      resellers are generally recognized when there is an executed license
      agreement, software has been delivered to the customer, the license fee is
      fixed and payable within 12 months, collection is deemed probable and
      product returns are reasonably estimable. Prepaid software license fee
      revenues from resellers and distributors are only recognized upon receipt
      of cash and upon delivery and acceptance of the product and when title to
      the product has passed to the reseller or distributor. Revenues related to
      multiple element arrangements are allocated to each element of the
      arrangement based on the fair values of elements such as license fees,
      maintenance, and professional services. Fair value is determined based on
      vendor specific objective evidence.

      Maintenance, Consulting and other - Revenues from training and consulting
      services are recognized as services are provided to customers. Revenues
      from maintenance contracts are deferred until collection and recognized
      ratably over the term of the maintenance agreements.

Software Development Costs. Software development costs are expensed as incurred.
Management is required to use professional judgment in determining whether
development costs meet the criteria for immediate expense or capitalization.

Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts
for estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required or revenue could be deferred until
collectibility becomes probable.

Contingencies. We are subject to the possibility of various loss contingencies
in the normal course of business. We accrue for loss contingencies when a loss
is estimable and probable.

Cautionary Factors That May Affect Future Results

This Quarterly Report on Form 10-QSB, including the information incorporated by
reference herein and the exhibits hereto, and other written and oral statements
made from time to time by us may include "forward-looking" statements.
Forward-looking statements broadly involve our current expectations for future
results. Any statement that is not a historical fact, including estimates,
projections, future trends and the outcome of events that have not yet occurred,
are forward-looking statements. Our forward-looking statements generally relate
to our financing plans, trends affecting our financial condition or results of
operations, our growth and operating strategy, product development, competitive
strengths, the scope of our intellectual property rights, sales efforts, and the
declaration and payment of dividends. Words such as "anticipates," "believes,"
"could" "estimates," "expects," "forecast," "intend," "may," "plan," "possible,"
"project," "should," "will" and similar expressions generally identify our
forward-looking statements. You must carefully consider forward-looking
statements and understand that such statements involve a variety of assumptions,
risks and uncertainties, known and unknown, and may be affected by a number of
factors, including, among others, the factors discussed in our Annual Report on
Form 10-KSB for the year ended June 30, 2005.

We also caution you that forward-looking statements speak only as of the date
made. We undertake no obligation to update any forward-looking statement, but
investors are advised to consult any further disclosures by us on this subject
in our filings with the Securities and Exchange Commission, especially on Forms
10-KSB, 10-QSB, and 8-K (if any), in which we discuss in more detail various
important factors that could cause actual results to differ from expected or
historic results. We intend to take advantage of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 regarding our
forward-looking statements, and are including this sentence for the express
purpose of enabling us to use the protections of the safe harbor with respect to
all forward-looking statements.

                                       14
<PAGE>

Item 3 Controls and Procedures

Management of the Company has evaluated, with the participation of the Chief
Executive Officer and Chief Financial Officer of the Company, the effectiveness
of the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of the end of the fiscal quarter covered by this
Quarterly Report on Form 10-QSB. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer of the Company have concluded that the
Company's disclosure controls and procedures as of the end of the fiscal quarter
covered by this Quarterly Report on Form 10-QSB are effective to provide
reasonable assurance that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission. Management of the
Company has also evaluated, with the participation of the Chief Executive
Officer and Chief Financial Officer of the Company, any change in the Company's
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the fiscal quarter
covered by this Quarterly Report on Form 10-QSB. There was no change in the
Company's internal control over financial reporting identified in that
evaluation that occurred during the fiscal quarter covered by this Quarterly
Report on Form 10-QSB that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
Management is aware that there is a lack of segregation of duties due to the
small number of employees dealing with general administrative and financial
matters. However, management has decided that considering the employees involved
and the control procedures in place, risks associated with such lack of
segregation of duties are insignificant and the potential benefits of adding
employees to clearly segregate duties do not justify the expenses associated
with such increases.

                                       15
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings.

      The Company is involved in a dispute with a customer involving software,
      support and services that were purchased from the Company in February
      2001. In accordance with the contractual terms, the matter was brought to
      arbitration in November 2003. In December 2004, the arbitrator terminated
      the case and awarded the Company recovery of legal fees in the amount of
      approximately $90,000. During April 2005, the customer appealed the
      arbitrator's findings with the High Court of New Zealand and, in August
      2006, the court ruled that the matter should be returned to arbitration A
      settlement conference has been scheduled for January 2006. The Company is
      unable to estimate the exact amount of the loss, if any, but believes the
      loss may be in the range of $0 to $350,000. The Company intends to defend
      this action vigorously as it believes it has adequate defenses against
      this claim and that the claim is without merit. Based on the information
      available and discussions with legal counsel, the Company believes that
      the likelihood of loss is remote. Therefore, the Company has not accrued
      any liability related to this matter as of December 31, 2005.

      During the quarter ended December 31, 2005, the Company did not have any
      additional legal proceedings that were outside of routine litigation
      incidental to the business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

      None

Item 3. Defaults Upon Senior Securities.

      None

Item 4. Submission of Matters to a Vote of Security Holders.

      (a)   The Annual Meeting of the Company's shareholders was held on
            December 8, 2005.

      (b)   At the Annual Meeting a proposal to set the number of directors at
            seven was adopted by a vote of 49,849,663 shares in favor, with
            193,391 shares against, 91,576 shares abstaining, and no shares
            represented by broker nonvotes.

      (c)   Proxies for the Annual Meeting were solicited pursuant to Regulation
            14A under the Securities Exchange Act of 1934, there was no
            solicitation in opposition to management's nominees, and the
            following persons were elected directors of the Company to serve
            until the next annual meeting of shareholders and until their
            successors shall have been duly elected and qualified:

      Nominee               Number of Votes  Number of Votes  Number of Votes
                                  For             Against         Abstained
      Joseph J. Caffarelli    49,940,039          194,591             0
      Robert L. Doretti       49,940,039          194,591             0
      Daniel Fishback         49,940,039          194,591             0
      Ismail Kurdi            49,940,039          194,591             0
      Justin M. MacIntosh     49,840,063          294,567             0
      James L. Mandel         49,940,039          194,591             0
      Robert L. Priddy        49,928,339          206,291             0

      (d)   An increase in the number of shares reserved for issuance under the
            Company's 1996 Stock Option Plan by 3,500,000 shares from 4,500,000
            to 8,000,000 shares of common stock was approved by a vote of
            43,585,120 shares in favor, with 828,709 shares against, 2,750
            shares abstaining and no shares represented by broker nonvotes.

      (e)   The approval of the Company's 2005 Equity Incentive Plan, including
            the reservation of 5,000,000 shares of common stock for issuance
            under the 2005 Plan was approved by a vote of 43,431,409 shares in
            favor, with 983,170 shares against, 2,000 shares abstaining and no
            shares represented by broker nonvotes.

      (f)   The selection of Virchow, Krause & Company, LLP, as the Company's
            independent auditors for the current fiscal year was approved by a
            vote of 50,038,363 shares in favor, with 13,667 shares against,
            82,600 shares abstaining and no shares represented by broker
            nonvotes.

                                       16
<PAGE>

Item 5. Other Information.

      None

Item 6. Exhibits.

      (a)   Exhibits: See Exhibit Index on page following the signature page of
            this Form 10-QSB.

                                       17
<PAGE>

SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      CORVU CORPORATION

Date:  January 19, 2006           By  /s/ David C. Carlson
                                      -----------------------
                                      David C. Carlson
                                      Chief Financial Officer

                                       18
<PAGE>

                                  EXHIBIT INDEX

Exhibit
Number     Description
------     -----------

31.1       Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act
           of 2002

31.2       Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act
           of 2002

32.1       Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act
           of 2002

32.2       Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act
           of 2002


                                       19