** **

**U.S. Securities and Exchange Commission**

 

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

**ý QUARTERLYREPORT UNDER SECTION 13 OF 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31, 2002**

 

**OR**

 

**oTRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT**

 

**For thetransition period from                                to                               **

** **

**CommissionFile No. 000-29299**

 

**CorVu Corporation**

(Exact name of registrantas specified in its charter)

 

**Minnesota**                                                             **41-1457090**

(State of Incorporation)                                      (IRSEmployer ID #)

 

**3400 West 66th Street**

**Edina, Minnesota 55435**

(Address of PrincipalExecutive Offices)

 

**952-944-7777**

(Issuer’s TelephoneNumber, Including Area Code)

 

Check whether the issuer(1) filed all reports required to be filed by Sections 13 or 15(d) of theExchange Act during the past 12 months (or such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.      Yes   ý   No   o

 

State the number ofshares outstanding of each of the issuer’s classes of common equity as of thelatest practicable date.

 

**Class:  Common Stock,par value $.01 per share**

**Outstanding shares as of April 30, 2002:  20,680,835**

** **

 

----

**CorVu Corporation**

**Index to Form 10-QSB**

 

 

 
| PART I FINANCIAL  INFORMATION                                                                                             |   |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                      |   |   |
| Item 1. Financial  Statements                                                                                             |   |
|                                                                                                                      |   |   |
| Consolidated Balance Sheets  March 31, 2002 (Unaudited) and June 30, 2001 (Audited)                                       |   |   |
|                                                                                                                      |   |   |
| Consolidated  Statements of Cash Flows (Unaudited) Nine Month Periods Ended March 31, 2002  and 2001                      |   |   |
|                                                                                                                      |   |   |
| Consolidated  Statements of Operations (Unaudited) Three and Nine Month Periods Ended March  31, 2002 and 2001            |   |   |
|                                                                                                                      |   |   |
| Notes  to Unaudited Consolidated Financial Statements For the Three and Nine Month  Periods Ended March 31, 2002 and 2001 |
|                                                                                                                      |   |   |
| Item  2. Management’s Discussion and Analysis of Financial Condition and Results of  Operations                      |   |
|                                                                                                                      |   |
| PART II OTHER INFORMATION                                                                                                 |   |   |
|                                                                                                                      |   |   |
| Item 1.  Legal Proceedings                                                                                           |   |   |
|                                                                                                                      |   |   |
| Item  2.  Changes in Securities and Use of  Proceeds                                                                 |   |   |
|                                                                                                                      |   |   |
| Item 3.  Default Upon Senior Securities                                                                              |   |   |
|                                                                                                                      |   |   |
| Item  4.  Submission of Matters to a Vote of  Security Holders                                                       |   |   |
|                                                                                                                      |   |   |
| Item 5.  Other Information                                                                                           |   |   |
|                                                                                                                      |   |   |
| Item 6.  Exhibits and Reports on Form 8-K                                                                            |   |   |
|                                                                                                                      |   |   |
| SIGNATURES                                                                                                                |   |   |

 

 

1

----

**PARTI**

**FINANCIAL INFORMATION**

 

**Item1.            Financial Statements**

 

**CORVU CORPORATION AND SUBSIDIARIES**

** **

Consolidated Balance Sheets

 

March31, 2002 (Unaudited) and June 30, 2001 (Audited)

 
|                                                                   |   | **March 31,**   |       | **June 30,**  |       |
|------------------------------------------------------------------------|--------|-----------------|------------|---------------|------------|
| **Assets**                                                             |   | **2002**        |       | **2001**      |       |
|                                                                   |   | **(Unaudited)** |       | **(Audited)** |       |
| Current assets:                                                        |   |            |       |          |       |
| Cash and cash equivalents                                              |   | $               | 137,124    |          | 77,409     |   |
| Trade accounts receivable, net of allowance for doubtful               |   |            |       |          |       |
| accounts of $142,000 and $145,000, respectively                        |   | 2,507,570       |       | 2,668,802     |       |
| Prepaid expenses and other                                             |   | 157,940         |       | 145,403       |       |
| Total current assets                                                   |   | 2,802,634       |       | 2,891,614     |       |
| Property and equipment, net                                            |   | 112,208         |       | 105,073       |       |
|                                                                   |   | $               | 2,914,842  |          | 2,996,687  |   |
|                                                                   |   |            |       |          |       |
| **Liabilities and Stockholders’ Deficit**                         |   |            |       |          |       |
|                                                                   |   |            | ** ** |          | ** ** |
| Current liabilities:                                                   |   |            |       |          |       |
| Accounts payable                                                       |   | $               | 2,564,237  |          | 2,951,684  |   |
| Accrued compensation and related costs                                 |   | 2,569,133       |       | 2,600,675     |       |
| Deferred revenue                                                       |   | 2,590,173       |       | 2,120,172     |       |
| Accrued interest                                                       |   | 87,870          |       | 23,663        |       |
| Other accrued expenses                                                 |   | 621,944         |       | 741,816       |       |
| Notes payable                                                          |   | —          |       | 188,123       |       |
| Notes payable— stockholder                                        |   | 681,935         |       | 562,345       |       |
| Total current liabilities                                              |   | 9,115,292       |       | 9,188,478     |       |
|                                                                   |   |            |       |          |       |
| Stockholders’ deficit:                                            |   |            |       |          |       |
| Undesignated, 24,000,000 shares                                        |   | —          |       | —        |       |
| Series A convertible preferred stock, par value $10 per share;         |   |            |       |          |       |
| 1,000,000 shares authorized; 200 shares issued and outstanding         |   | 2,000           |       | 2,000         |       |
| Common stock, $0.01 par value; 75,000,000 shares authorized;           |   |            |       |          |       |
| 20,442,651 and 20,157,781 shares issued and outstanding                |   | 204,370         |       | 201,522       |       |
| Additional paid-in capital                                             |   | 16,189,698      |       | 16,159,995    |       |
| Accumulated deficit                                                    |   | (22,871,430     | )          | (22,641,345   | )          |
| Deferred compensation                                                  |   | (10,000         | )          | (318,100      | )          |
| Foreign currency translation adjustment                                |   | 284,912         |       | 404,137       |       |
| Total stockholders’ deficit                                       |   | (6,200,450      | )          | (6,191,791    | )          |
| Total liabilities and stockholders’ deficit                       |   | $               | 2,914,842  |          | 2,996,687  |   |
|                                                                   |   |            |       |          |       |
| See accompanying notes to unaudited consolidated financial statements. |   |            |       |          |       |
|                                                                   |   |            |       |          |       |

 

 

2

----

 

**CORVU CORPORATION AND SUBSIDIARIES**

 

Consolidated Statements of CashFlows (Unaudited)

 

NineMonth Periods Ended March 31, 2002 and 2001

 
|                                                                         |   | **2002** |     | **2001**  |       |
|------------------------------------------------------------------------------|--------|----------|----------|-----------|------------|
|                                                                         |   |     |     |      |       |
| Cash flows from operating activities:                                        |   |     |     |      |       |
| Net loss                                                                     |   | $        | (229,955 | )         | (3,113,285 | ) |
| Adjustments to reconcile net loss to net cash used in operating  activities: |   |     |     |      |       |
| Depreciation                                                                 |   | 44,000   |     | 38,434    |       |
| Warrants and stock options vested                                            |   | 309,646  |     | 497,582   |       |
| Salary forgiven by executive                                                 |   | —   |     | 241,586   |       |
| Changes in operating assets and liabilities:                                 |   |     |     |      |       |
| Trade accounts receivable, net                                               |   | (45,942  | )        | 2,664,555 |       |
| Other current assets                                                         |   | (12,537  | )        | (110,551  | )          |
| Accounts payable                                                             |   | 110,271  |     | 43,253    |       |
| Accrued compensation and related costs                                       |   | 8,988    |     | (125,658  | )          |
| Deferred revenue                                                             |   | (133,925 | )        | (401,772  | )          |
| Accrued interest                                                             |   | 64,207   |     | (37,199   | )          |
| Other accrued expenses                                                       |   | 34,157   |     | 298,773   |       |
| Due to affiliates                                                            |   | —   |     | (23,358   | )          |
| Net cash provided (used) in operating activities                             |   | 148,910  |     | (27,640   | )          |
|                                                                         |   |     |     |      |       |
| Cash flows from investing activities:                                        |   |     |     |      |       |
| Capital expenditures                                                         |   | (51,135  | )        | —    |       |
| Net cash used in investing activities                                        |   | (51,135  | )        | —    |       |
|                                                                         |   |     |     |      |       |
| Cash flows from financing activities:                                        |   |     |     |      |       |
| Proceeds from sale of common stock, net of costs                             |   | 19,005   |     | 152,604   |       |
| Repayment of notes payable                                                   |   | (188,123 | )        | (235,862  | )          |
| Borrowings  on notes payable—  stockholder                         |   | 169,600  |     | 371,950   |       |
| Repayment on notes payable— stockholder                                 |   | (59,200  | )        | (118,706  | )          |
| Other                                                                        |   | 21,190   |     | 74,431    |       |
| Net cash provided (used) by financing activities                             |   | (37,528  | )        | 244,417   |       |
| Effect of exchange rate changes on cash                                      |   | (532     | )        | (33,309   | )          |
| Net increase (decrease) in cash and cash equivalents                         |   | 59,715   |     | 183,468   |       |
| Cash and cash equivalents at beginning of period                             |   | 77,409   |     | 46,745    |       |
| Cash and cash equivalents at end of period                                   |   | $        | 137,124  |      | 230,213    |   |
|                                                                         |   |     |     |      |       |
| Conversion of director advance into common stock                             |   | $        | 12,000   |      | —     |   |
|                                                                         |   |     |     |      |       |
| See accompanying notes to unaudited consolidated financial statements.       |   |     |     |      |       |

 

 

3

----

 

**CORVU CORPORATION AND SUBSIDIARIES**

** **

ConsolidatedStatements of Operations (Unaudited)

 

Threeand Nine Month Periods Ended March 31, 2002 and 2001

 
|                                                                    |   | **Three Months Ended** |      | **Nine Months Ended** |      |
|-------------------------------------------------------------------------|--------|------------------------|-----------|-----------------------|-----------|
|                                                                    |   | **March 31,**          |      | **March 31,**         |      | **March 31,** |   | **March 31,** |   |
|                                                                    |   | **2002**               |      | **2001**              |      | **2002** |   | **2001** |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Revenues:                                                               |   |                   |      |                  |      |   |   |   |   |
| Software and license fees                                               |   | $                      | 1,250,631 |                  | 1,363,253 |   | 3,783,629 |   | 3,464,409 |   |
| Maintenance, consulting, and other                                      |   | 1,470,233              |      | 1,617,228             |      | 4,122,713 |   | 5,170,408 |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Total revenues                                                          |   | 2,720,864              |      | 2,980,481             |      | 7,906,342 |   | 8,634,817 |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Operating costs and expenses:                                           |   |                   |      |                  |      |   |   |   |   |
| Cost of maintenance, consulting, and other                              |   | 683,258                |      | 794,173               |      | 2,021,637 |   | 2,492,424 |   |
| Product development                                                     |   | 248,965                |      | 281,953               |      | 804,105 |   | 878,646 |   |
| Sales and marketing                                                     |   | 849,330                |      | 1,223,277             |      | 2,743,143 |   | 4,279,330 |   |
| General and administrative                                              |   | 651,028                |      | 950,181               |      | 2,447,335 |   | 3,979,438 |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Total operating costs and expenses                                      |   | 2,432,581              |      | 3,249,584             |      | 8,016,220 |   | 11,629,838 |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Operating income (loss)                                                 |   | 288,283                |      | (269,103              | )         | (109,878 | ) | (2,995,021 | ) |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Interest expense, net                                                   |   | (47,216                | )         | (63,224               | )         | (120,077 | ) | (118,264 | ) |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Net income (loss)                                                       |   | $                      | 241,067   |                  | (332,327  | ) | (229,955 | ) | (3,113,285 | ) |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| Net Income (loss) per common share-basic                                |   | $                      | .01       |                  | (0.02     | ) | (.01 | ) | (0.16 | ) |
| Weighted average shares-basic                                           |   | 20,442,651             |      | 19,692,823            |      | 20,321,696 |   | 19,589,524 |   |
| Net Income (loss) per common share-fully diluted                        |   | $                      | .01       |                  | (0.02     | ) | (.01 | ) | (0.16 | ) |
| Weighted average shares-fully diluted                                   |   | 21,501,227             |      | 19,692,823            |      | 20,321,696 |   | 19,589,524 |   |
|                                                                    |   |                   |      |                  |      |   |   |   |   |
| See accompanying notes to  unaudited consolidated financial statements. |   |

 

4

----

 

**CORVU CORPORATION AND SUBSIDIARIES**

 

**Notes to Unaudited Consolidated Financial Statements****For the Three and Nine Month Periods Ended March 31, 2002and 2001**

 

**(1)           Unaudited Financial Statements**

 

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

 

**(2)           Summary ofSignificant Accounting Policies**

 

***(a)           RevenueRecognition***

 

Software license revenue is recognized when all of thefollowing criteria have been met: there is an executed license agreement,software has been delivered to the customer, the license fee is fixed andpayable within twelve months, collection is deemed probable and product returnsare reasonably estimable.  Revenuesrelated to multiple element arrangements are allocated to each element of thearrangement based on the fair values of elements such as license fees,maintenance, and professional services. Fair value is determined based on vendor specific objectiveevidence.  Maintenance revenues arerecognized ratably over the term of the maintenance contract, typically 12 to36 months.  Consulting and otherrevenues are recognized when services are performed.

 

Deferred revenue represents payment received oramounts billed in advance of services to be performed.  Billing occurs within 30 days of scheduledperformance of services.

 

 

***(b)           NetIncome (Loss) per Common Share***

 

Basic income (loss) per common share is computed bydividing net income (loss) by the weighted average number of common sharesoutstanding during the period.  Dilutedincome (loss) per common share is computed by dividing net income (loss) by theweighted average number of common shares outstanding during the period assumingthe exercise of dilutive stock options and warrants.  The dilutive effect of stock options and warrants is computedusing the average market price of the 

 

5

----

 

Company’s stock during each period under the treasurystock method.  In periods where losseshave occurred, options and warrants are considered anti-dilutive and thus havenot been included in the diluted income (loss) per common share calculations.

 

**(3)           ComprehensiveIncome (Loss)**

 

Comprehensive income (loss) and its components,including all changes in equity during a period except those resulting frominvestments by owners or distributions to owners are as follows:

 
|                                     |   | **Three  Months Ended** |    | **Nine  Months Ended** |   |
|------------------------------------------|--------|-------------------------|---------|------------------------|--------|
|                                     |   | **March 31,  2002**     |    | **March 31,  2001**    |   | **March 31,  2002** |   | **March 31,  2001** |   |
| Net Income  (Loss)                       |   | $                       | 241,067 |                   | $      | (332,327 | ) | $ | (229,955 | ) | $ | (3,113,285 | ) |
| Other  comprehensive income (loss):      |   |                    |    |                   |   |   |   |   |   |
| Foreign currency  translation adjustment |   | (68,751                 | )       | 111,993                |   | (119,225 | ) | 184,727 |   |
| Total  comprehensive income (loss)       |   | $                       | 172,316 |                   | $      | (220,334 | ) | $ | (349,180 | ) | $ | (2,928,558 | ) |

 

**(4)           Liquidity**

 

The accompanying interim consolidated financialstatements are prepared assuming the Company will continue as a goingconcern.  During the year ended June 30,2001, the Company incurred an operating loss of $3,168,265.  Subsequently, for the nine-month periodended March 31, 2002, the Company incurred an operating loss of $109,878.  As of March 31, 2002, the Company had anaccumulated deficit of $22,871,430, total stockholders’ deficit of $6,200,450,and negative working capital of $6,312,658.

 

Going forward the Company must generate additionalcash through profits from operations or otherwise. The Company has nowgenerated net income for two consecutive fiscal quarters, $210,405 for thequarter ended December 31, 2001 and $241,067 for the quarter ended March 31,2002. Management continues to focus on increasing revenues and/or reducingoperating costs, as necessary, which should allow it to generate sufficientcash flows to pay its debts and fund the Company’s future operations.

 

 

6

----

 

**(5)           NotePayable**

 

In February 1998, the Company entered into a loanagreement in the amount of approximately $927,000 with a third partylender.  During fiscal 1999, the Companyborrowed an additional $480,000.  Thenote was secured by substantially all of the assets of the Company.  The interest rate on the outstandingprincipal balance was based on an index defined in the loan agreement plus 7%,with interest due monthly.  The balanceon this note was paid in full during the period ended December 31, 2001.

 

**(6)           NotesPayable- Stockholder**

 

The Company has received interest-bearing advancesfrom a stockholder under term notes. The notes bear interest at 8.5%, are dueon demand and expire December 31, 2006. The notes are secured by substantiallyall of the assets of the Company. These amounts are classified as currentliabilities in the accompanying balance sheets.

 

In December 2001, a director converted the remainingbalance under a note ($12,000) into 80,000 shares of common stock at a price of$0.15 per share, the fair market value of the stock on the date of conversion.

 

**(7)           InstallmentAgreement with Internal Revenue Service**

In March 2001, the Company entered into an installmentagreement with the Internal Revenue Service regarding the repayment of past duepayroll taxes, penalties and interest. As of March 31, 2002, the balance dueunder this agreement was approximately $348,000, including penalties andaccrued interest. The Company is currently paying $50,000 per month on thisobligation. In connection with this agreement, the Internal Revenue Servicefiled a federal tax lien against the Company’s assets. This lien will beremoved once all payments under the agreement are made.

 

 

7

----

 

**(8)           Creditor Settlement Agreement**

 

In November 2001 theCompany entered into a Stipulation of Settlement agreement with a creditorunder which the Company agreed to make quarterly principal payments throughDecember 2003, at which time it would also pay accrued interest on the unpaidprincipal balance from the date of the agreement to December 2003 at a rate of9% per annum. In the event of default, the obligation would be accelerated, theinterest rate would be increased to 15% and legal fees in the amount of$100,000 would become due. The Company has granted a security interest in thereceivables of CorVu North America, Inc. as part of this settlement. As ofMarch 31, 2002, the balance under this obligation, which is included inaccounts payable in the accompanying balance sheets, was approximately$834,000, including accrued interest.

 

 

**(9)**           **Litigation**

The Company and its officers and directors areinvolved in a lawsuit filed by certain shareholders for allegedly providingfalse and misleading information regarding the historical and future financialperformance of the Company. The suit is for an unspecified amount, or in thealternative, rescission of the stock purchase agreements, which was for $1.5million. The Company has a $3 million Directors and Officers insurance policythat includes entity coverage for securities claims. The Company’s attorney andits insurance carrier are handling the case. The Company believes the suit iswithout merit and it is vigorously defending the case.

 

8

----

 

**Item 2.****                                  ****Management’sDiscussion and Analysis of Financial Condition****and Results of Operations**

 

**For the Three and Nine Month Periods Ended March 31, 2002**

**versus March 31, 2001**

 

REVENUES:

 

Total revenue for the three and nine-month periods ended March 31, 2002decreased 9% and 8%, respectively, compared to the same periods a year ago.

 

Software revenues decreased $112,622 (8%) and increased $319,220 (9%)for the three and nine-month periods ended March 31, 2002, respectively, fromthe same periods last year. Although there was slight reduction in quarter onquarter revenue, performance for the nine-month period showed an increase of 9%over the comparable period last year. This increase was accomplished in spiteof a 28% reduction in staff levels (see discussion of Sales and Marketingexpenses below) and reflects an overall improvement in sales performance as itrelates to software license sales caused by an improvement in general businesseconomic conditions and increased activity in sales made through partners(resellers and distributors).

 

Maintenance, consulting and other revenues decreased $146,995 (9%) and$1,047,695 (20%), for the three and nine-month periods ended March 31, 2002,respectively, from the same periods last year. These decreases were caused by(1) an overall reduction in billable hours due to a decreased demand forservices and (2) an increase in services delivered at discounted hourly ratesbased on partner activity and the lower demand for the services. Although wehave experienced reductions in revenue when comparing to the prior year,revenue in this area has continued to trend positively throughout the currentyear. This revenue category showed an increase of 9% from the first quarter(September 30, 2001) to the second quarter (December 31, 2001) which wasfollowed by another increase of 6% from the second quarter  to the third quarter ended March 31, 2002.

 

OPERATING COSTS ANDEXPENSES:

 

Operating expenses decreased $817,003 (25%) and $3,613,618 (31%) forthe three and nine-month periods ended March 31, 2002, respectively, from thesame periods last year.

 

Cost of maintenance, consulting and other expenses decreased $110,915(14%) and $470,787 (19%) for the three and nine-month periods ended March 31,2002, respectively, from the same periods last year.  Expenses in the Americas region alone accounted for decreases of$148,536 and $440,941 for the three and nine-month periods ended March 31, 2002,respectively, from the same periods last year. These decreases are in line withrevenue performance in the region reflecting the lower staffing levels requiredto service consulting engagements, as well as all associated costs.

 

 

9

----

 

Productdevelopment costs decreased $32,988 (12%) and $74,541 (8%) for the three andnine-month periods ended March 31, 2002, respectively, from the same periodslast year. These expenses reflect continued investment in the development ofall CorVu products.

 

Sales and marketing expenses decreased $373,947 (31%) and $1,536,187(36%) for the three and nine-month periods ended March 31, 2002, respectively,from the same periods last year, due to the lower number of employees workingin that sector (28% fewer employees) and other factors such as lowerexpenditures for remote sales offices, travel expenses, reduction of middlesales management staff, advertising, production of marketing materials, andparticipation in trade show activities.

 

General and administrative expenses decreased $299,153 (31%) and$1,532,103 (39%) for the three and nine-month periods ended March 31, 2002,respectively, from the same periods last year. Many factors have contributed tothis including an amendment of the chief executive officer’s employmentcontract, a reduction in audit and tax fees due to a change in the Company’spublic accounting firm and overall reductions in travel and general overheadcosts.

 

INTEREST EXPENSE, NET:

 

Interest expense, net decreased $16,008 (25%) and increased $1,813 (2%)for the three and nine-month periods ended March 31, 2002, respectively,compared to the same periods last year. Interest charges recorded arereflective of settlement agreements currently being serviced with the InternalRevenue Service, a creditor and notes payable- stockholder (see footnotes tounaudited financial statements).

 

NET INCOME (LOSS):

 

CorVu Corporation reported net income of $241,067 and incurred a netloss of $229,955 for the three and nine-month periods ended March 31, 2002,respectively, compared to net losses of $332,327 and $3,113,285 for the threeand nine-month periods ended March 31, 2001, respectively.

 

**Liquidity and Capital Resources**

 

Total cash and cash equivalents increased by $59,715 during thenine-month period ended March 31, 2002 from $77,409 as of June 30, 2001 to$137,124 as of March 31, 2002.  Net cashprovided in operating activities was $148,910 for the nine-month period endedMarch 31, 2002. Net cash used in investing activities was $51,135, reflectingthe acquisition of capital assets during the period. Net cash used by financingactivities was $37,528 for the nine-month period ended March 31, 2002.  Proceeds from the sale of common stock were$19,005, net of costs.  In addition,during the nine-month period ended March 31, 2002, the Company repaid $188,123of an existing note payable. Additionally, the Company received borrowings from a stockholder ofapproximately $170,000 and repaid amounts under notes payable- stockholder inthe amount of $59,200.

 

10

----

 

In addition, CorVu’s management intends to undertake one or several ofthe following activities: (1) continue to increase CorVu’s revenues fromsoftware licenses and other revenue sources; (2) reduce operating costs, asdeemed necessary.  CorVu’s managementbelieves that these activities will generate sufficient cash flows to sustainCorVu’s operations for the next twelve months.

 

# **CriticalAccounting Policies and Estimates-**

Our significant accounting policies are described in Note 1 to theconsolidated financial statements included in our annual report for the yearended June 30, 2001.  The accountingpolicies used in preparing our interim 2002 consolidated financial statementsare the same as those described in our annual report.

 

Our critical accountingpolicies are those both having the most impact to the reporting of ourfinancial condition and results, and requiring significant judgments andestimates.  Our critical accountingpolicies include those related to (a) revenue recognition and (b) softwaredevelopment costs.

 

Software license revenue is recognized when all of the followingcriteria have been met: there is an executed license agreement, software hasbeen delivered to the customer, the license fee is fixed and payable withintwelve months, collection is deemed probable and product returns are reasonablyestimable.  Revenues related to multipleelement arrangements are allocated to each element of the arrangement based onthe fair values of elements such as license fees, maintenance, and professionalservices.  Fair value is determinedbased on vendor specific objective evidence. Maintenance revenues are recognized ratably over the term of themaintenance contract, typically 12 to 36 months.  Consulting and other revenues are recognized when services areperformed.

 

Software developmentcosts are expensed as incurred until technological feasibility is established.Software development costs incurred subsequent to establishing technologicalfeasibility are capitalized and amortized over their estimated usefullives.  Management is required to useprofessional judgment in determining whether development costs meet thecriteria for immediate expense or capitalization.

 

SPECIAL NOTEREGARDING FORWARD-LOOKING STATEMENTS

 

The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for forward-lookingstatements.  Certain informationincluded in this Form 10-QSB and other materials filed or to be filed with theSecurities and Exchange Commission (as well as information included in oralstatements or other written statements made or to be made by us) containstatements that are forward-looking.  Anumber of important factors could, individually or in the aggregate, causeactual results to differ materially from those expressed or implied in anyforward-looking statements.  Suchfactors include, but are not limited to, the following:  our ability expand into new markets; ourability to execute our expansion strategy; changes in business strategy ordevelopment plans; availability and terms of capital; competition.  For further information regarding these andother factors, see our Annual Report on Form 10-KSB for the fiscal year endedJune 30, 2001.

11

----

 

**PART II**

**OTHER INFORMATION**

 

Item 1.  Legal Proceedings.

 

See Item 2 of Part II ofForm 10Q-SB for the quarter ended September 30, 2001.

 

 

Item 2. Changes in Securities and Use of Proceeds.

 

None

 

Item 3. Default 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)           Exhibits:  None

 

                (b)           Reports on Form 8-K: None

** **

12

----

**SIGNATURES**

 

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

 

                                                                                                CORVUCORPORATION

 

 

 
| Date:  May  13, 2002 | By     | /s/ David C. Carlson    |
|---------------------------|--------|-------------------------|
|                      |   | David C. Carlson        |
|                      |   | Chief Financial Officer |
|                           |        |                         |  |

 

 

 

13

----