**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-KSB**

 

**ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

**FOR THE FISCAL YEAR ENDED JUNE 30, 2002**

 

**Commission File No.: 000-29299**

 

**CORVU CORPORATION**

(Name of Small Business Issuer asspecified in its charter)

 

| **Minnesota**                                                                                 |   | **41-1457090**                        |
|-----------------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)                               |   | (IRS Employer  Identification Number) |
|                                                                                          |   |                                  |
| **3400 West 66th Street, Edina, Minnesota  55435**                                       |
| (Address of principal executive  offices)(Zip Code)                                           |
|                                                                                          |   |                                  |
| Issuer’s telephone number,  including area code:  **(952)  944-7777**               |
|                                                                                          |   |                                  |
| Securities registered pursuant  to Section 12(b) of the Exchange Act: **None**                |
|                                                                                          |   |                                  |
| Securities registered pursuant  to Section 12(g) of the Exchange Act:   **Common Stock** |

 

Check whether the Issuer (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  **Yes****ý   No****o**

 

Check if disclosure of delinquent filers inresponse to Item 405 of Regulation S-B is not contained herein, and will not becontained, to the best of Registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. o

 

Issuer’s revenues for its most recent fiscalyear:  $12,341,806

 

The aggregate market value of the Common Stockheld by nonaffiliates of the Registrant as of September 15, 2002 wasapproximately $2,000,000 based upon the closing price of the Registrant’sCommon Stock on such date.

 

There were 20,730,835 shares of Common Stockoutstanding as of September 15, 2002.

 

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**DOCUMENTS INCORPORATED BY REFERENCE**

 

**None**

 

Transitional Small Business Disclosure Format(check one).  **Yes****o**  **No****ý**

 

 

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**PART I**

 

**ITEM 1.              DESCRIPTIONOF BUSINESS**

 

**Business Development**

 

We are a holding company that develops and sells businessperformance management software products and related professional servicesthrough our subsidiaries: CorVu North America, Inc. (incorporated in Minnesota,responsible for North and South America); CorVu Plc. (incorporated in theEngland, responsible for United Kingdom/Europe),  CorVu Australasia Pty. Ltd. (incorporated in Australia,responsible for the Australian-Pacific region) and CorVu Software Marketing,Inc. (incorporated in Minnesota).  CorVuPlc has incorporated one subsidiary, CorVu Benelux B.V. under the laws of theNetherlands, and another subsidiary, CorVu Deutschland GmbH, under the laws ofGermany. CorVu Software Marketing, Inc. has incorporated one subsidiary, CorVuSoftware, Ltd., under the laws of the United Kingdom.

 

The Company was incorporated in Minnesota as J.B Goodhouse on September29, 1983. On April 28, 1988, it changed its name to Lockermate Corporation, andon October 20, 1992, it changed its name to Minnesota American, Inc. Followingthe merger of CorVu Corporation, a privately held company, with and into theCompany on January 14, 2000, the Company continued to operate the business ofthe privately held company and changed its name to “CorVu Corporation”.

 

**Business of Issuer**

 

(i)           OurPrincipal Products and Services

 

CorVu is aprovider of Enterprise Performance Management software products.

 

Enterpriseperformance management is a process by which an organization seeks to defineits strategy, measure and analyze its performance, and ultimately manageimprovements to enhance performance.  Inrecent years several methodologies have arisen for managing organizationalperformance; each methodology represents an approach to measuring anorganization’s performance against strategic goals and specific performancetargets. While the Balanced Scorecard has emerged as the premierperformance management methodology, others are certainly valid. Ourcustomers use our products to implement one or more performance managementmethodologies of their choice,finding it beneficial to employ the Balanced Scorecard methodology, but alsoothers, including Management by Exception, Total Quality Management, Six Sigma,ISO Certification, Malcolm Baldridge Award for Quality, President’s Award forQuality, and Value Based Management. To our knowledge, none of themethodologies supported by CorVu products are protected under intellectualproperty law.

 

The BalancedScorecard is a performance management methodology first introduced by Dr.Robert Kaplan and Dr. David Norton in their 1992 *Harvard Business Review* article, “The Balanced Scorecard –Measures that Drive Performance.”  Themethodology recognizes four dimensions as integral for developing an enterpriseview of performance: financial, customer, internal and 

 

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innovation.  The Balanced Scorecard enables management tocommunicate strategic goals and measurements throughout the entire organizationto provide guidelines for an employee’s contribution to its performance.

 

We generaterevenues in three areas: (1) sale and licensing of our software products; (2)consulting and training services (we refer to these services as “professionalservices”); and (3) maintenance agreements entered into in connection with thesale and licensing of our products.

 

Our Products

 

CorVu’s softwareproducts are designed to enable our customers to better measure and analyzetheir information in order to achieve strategic objectives and improve businessperformance. CorVu is currently shipping Version 4.2 of our products to all eligiblecustomers.  The following productdescriptions are those of the 4.2 versions of CorBusinessTM, CorManageTM,RapidScorecardTM, CorRiskTM, CorPortfolioTM and HyperVuTM.  Customers who have licensed previousversions of these products and who have active maintenance agreements receivethese 4.2 versions at no additional charge.

 

**CorBusinessTM** is a Business Intelligence tool designed toaddress the information analysis needs of an organization.  The term Business Intelligence (BI)generally refers to the process of accessing and analyzing data in order todevelop a more comprehensive understanding of an organization and thus, to makebetter informed decisions.  CorBusinessincludes end-user query/reporting (i.e., information access and reporting),OnLine Analytical Processing (OLAP) (i.e., the multidimensional analysis ofinformation, viewing data from many perspectives and cross-examinations) andexecutive dashboards (i.e., collections of many key performance indicatorspresented on a single screen through a simple graphical representation).  The application modules are as follows:

 

Graphical Analysis – designed toempower users with easy ad-hoc access to data. Once retrieved, users can accessvarious levels of data to explore and analyze it more easily and comprehensively.Such ad-hoc analysis enables users to uncover and understand trends that may behidden in the data.

 

Informative visual reports created with the help ofthe graphical analysis module may include:

 

•                  An unlimitedamount of headers and footers;

•                  Aggregates,i.e., sums, averages, counts, etc.;

•                  Conditionalcolor-coding, i.e., red numbers indicate poor performance, green numbersindicate good performance; and

•                  The ability toview summary information first, then double-click on specific data to revealinformation on various levels of details.

 

Users can arrange the available information in avariety of graphical presentations, e.g. in the form of a pie chart or as acolumn chart.  Graphs may also berotated for 3-dimensional viewing, giving users a more complete visualunderstanding of the information.

 

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Report Writer – designed to providethe more sophisticated user with the ability to produce:

 

•                  Compositereports including both data and graphics;

•                  Calculationssuch as sums, averages, and counts on several levels;

•                  Graphic images,and other multimedia objects, such as video or audio clips.

 

The module is intended to allow quick and easyformatting of data, and tight integration with existing applications.

 

Executive Alerts – designed toenable executives to quickly and graphically monitor those performance measuresconsidered important for their business. Simple visual presentation is meant to provide more immediateinformation regarding the health of an enterprise. As with other CorVu modules,users may access various levels of data by simply clicking on the graph to viewspecific sub-groups and constituents of a graph.

 

**CorManageTM** is designed to link specific performancemeasures to specific strategic objectives; enabling users to identify theimpact one strategic objective may have on another within theorganization.  CorManage combines theCorBusiness application – described above - with a Balanced Scorecardapplication – including forecasting, strategic modeling and what-ifanalysis.  In addition to theCorBusiness application, CorManage includes:

 

Forecasting– Unlike query and reporting tools, which tell users what has happened in thepast, this tool intends to assist users in more accurately predicting futureevents.  The Forecasting module helps toexamine the past and to apply selected statistical methods, strategies andparameters to predict future trends and events. Once created, users can modifyforecasts as desired and use them in other programs.

 

Balanced Scorecard– This module is designed to combine strategic measurement and managementsystems and provide current performance results and analysis.  CorVu’s Balanced Scorecard is intended toenable users to translate strategic and organizational objectives intoindividual performance measures, thus showing ways individual employees cancontribute to the overall performance of the organization and linkingperformance results with processes that may drive those results.

 

**RapidScorecardTM**is designed to provide CorVu customers the fastest way to implement a BalancedScorecard application. The RapidScorecard software offers web-based datacapture, strategy maps, cascading scorecards, intelligent update notification,full user security and component ownership.

 

**CorRiskTM**is an application designed to optimize risk management and implement riskstrategy.  CorRisk comprises web-basedtechnology, a risk-oriented data warehouse and CorVu’s Business Intelligencecapabilities to provide a Risk Performance Management application.

 

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**CorPortfolioTM** is designed to allow users to combine varioustypes of disparate reports and graphs into a single document for distributionand/or presentation.  For example, withCorPortfolio a user may create a single electronic document, or portfolio, thatcontains pie graphs, bar charts, financial statement reports, etc.  Additionally, this portfolio could alsocontain non-CorVu files, such as files from spreadsheets, word processingdocuments or other applications.  Usersmay then insert title pages and a table of contents along with textualannotations that explain the meaning of the graphs and reports included in theportfolio.

 

CorVu’s **HyperVuTM** software publishes a liveorganizational performance web site with one-click access to text, tables,graphics and hyperlinks embedded as intelligent and interactive web objects,complete with drill-down capability.

 

CorVu’s clientproducts are available for Windows 95, 98, 2000, and XP; Windows NT; andLinux.  CorVu’s server products areavailable on Windows NT, UNIX, and Linux. All pricing is based upon the number of users licensed under theagreement with the respective customer.

 

CorVu softwareproducts contain the following essential components:

 

•                       CorVu Knowledge Library –is designed to present the end-user with database information in common termsrather than in technical computer jargon.

•                       CorServer - with supportfor UNIX and Windows NT, CorServer is designed to allow CorVu users to processand analyze large volumes of data, since it utilizes the power of large,server-based computers to process data, rather than the users’ desktopcomputers.

•                       CorVu Gateway – isdesigned to provide each end-user with access to all data included in theorganization’s systems.

•                       CorVu Intelligent Scheduler– is designed to enable users to effectively manage when their queries andreports will run.  This allows users tohave recurring reports – such as monthly financial statements - runautomatically at predetermined intervals.

 

Professional Services

 

In an effort toassist clients in implementing Enterprise Performance Management software, wehave developed the RapidROI Program consisting of consulting, installation,implementation, and training services. The program is designed to facilitate the implementation and use of ourproducts in the organizations of our customers, thus establishing long-termrelationships.  In the RapidROI program,CorVu consultants work with customers through a step-by-step process,confirming customer satisfaction at each stage prior to moving on. This processtypically involves:

 

Initial Interview - CorVuconsultants conduct interviews with client personnel to define the client’sexpectations and needs.

 

Design - CorVu consultants work withclient personnel to design an implementation agenda.

 

Implementation - Installation andsetup of the CorVu products ordered.

 

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Training - While much trainingoccurs at each stage, most customers consider the assistance of consultantsespecially helpful when beginning to use CorVu’s software products.  Administrative training occurs primarilyduring the implementation stage.

 

Performance Tuning – Depending onthe customer experience, the adaptation of the specific CorVu product may provenecessary.

 

While each of these stages may be required in varyingdegrees, we work to provide customized services for our customers, making theimplementation of our products a success.

 

Maintenance Agreements

 

We also providesupport services to customers with a “Software Maintenance Agreement.”  Such customers are entitled to:

 

•                  New Versions of CorVu Software

•                  Help Desk Support Services

•                  Online Support Services

 

ASoftware Maintenance Agreement is meant to give customers access to our helpdesk staff upon experiencing a software problem or with any questions regardingthe use of our products.  Customers witha Software Maintenance Agreement may reach our help desk staff via telephone,e-mail or through our home page on the web (www.corvu.com).  The services provided through the web aredesigned to make it easier for customers to answer questions and solve problemswithout the need of direct assistance from CorVu’s support personnel.

 

(ii)          Marketfor our Products and Services

 

Our management believes that the market for our products and servicesincludes small, medium and large corporations across all industrysegments.  Regardless of size, allorganizations are concerned with improving performance.  Leading analyst organizations agree thatperformance management concepts, such as the Balanced Scorecard methodology,may be a way to achieve significant performance improvement.

 

Our currentlyavailable information suggests that 40% of our customers are active in themanufacturing and distribution sectors. We have been targeting our sales to leading suppliers in aerospace, banking, financial services,healthcare, hospitality, insurance, manufacturing, mining, the public sector,telecommunications, and transportation.

 

(iii)         Distributionof our Products and Services

 

CorVu products and services are sold through our subsidiaries’ salesoffices and through “Value Added Resellers,” distributors and marketingalliances.

 

Our Sales Offices– Our North American subsidiary has sales offices in Atlanta, Cincinnati,Dallas, and Minneapolis.  In Europe,CorVu sales offices are located in London, Rotterdam 

 

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and Stockholm.  Sales offices for CorVu’s Asia-Pacificregion have been established in Sydney and Melbourne.  Direct sales activities are concentrated on Global 1000 accounts.

 

Value Added Resellers(VARs) – Our VARs are software companies with industryapplications that sell our software products in conjunction with their ownproducts.  Some VARs will private-labelCorVu products.  Current VARs offerCorVu products into a variety of industries, including manufacturing,distribution, warehouse logistics, healthcare, insurance, mining,power/utilities, and human resources. Under the typical agreement between a VAR and one of our subsidiaries,the VAR receives the non-exclusive license to sell the software productsspecified in the agreement and to grant sublicenses for the use of suchsoftware to users of the VAR’s applications. The license fees paid by a VAR are a percentage of our standard licensefee for the use of our software and may be increased at our discretion upon 30days prior written notice.  Any of theparties may terminate the agreement without giving any reason by giving writtennotice 90 days prior to the termination date. A typical VAR agreement would have a three-year term.

 

Distributors– CorVu distributors are companies that sell technology into geographic regionswhere CorVu has no physical presence. Currently, distributors are in several global locations, includingBrazil, the Czech Republic, Indonesia, Mexico, Norway, the Philippines, Saudi Arabia,Singapore, South Africa, South Korea, Sri Lanka, and Thailand.  Our subsidiaries typically grant todistributors the non-exclusive license to sell the software products specifiedin the distributor agreement and to grant sublicenses for the use of suchsoftware.  The fees a distributor paysare a percentage of our standard license fee for the use of our software andmay be increased at our discretion upon 30 days prior written notice.  The agreement may be entered into for afive-year term; termination usually requires cause such as nonperformance.

 

Alliance Partners– CorVu’s Alliance Partners are companies that provide both technology andmanagement consulting and implementation services, but typically do notactually sell software.  RecommendingCorVu products as a service to their clients, they often provide greatinfluence into corporate sales. Alliance Partners maintain no financial relationship with CorVu in thatthey do not receive fees in exchange for their recommendations.  The Partners benefit from suchrecommendations because CorVu will, if the occasion arises, refer managementconsulting services to them.

 

CorVu Associate Partners(CAPs)- Our CAPs act as independent contractors working in aself-determined territory on a commission-only basis. Targeted candidates willbring with them a strong background in CorVu’s key markets, like ERP systemsand the Balanced Scorecard methodology. Based on their background, thesecandidates can leverage prior market experience and business relationships,which should allow them to identify, qualify and penetrate key accounts withCorVu’s solutions.

 

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Historically, approximately 10% of our annualrevenues have been received through distributors, and 32% through VARs.  Alliance Partners and CAPs – as a group andon an individual basis - do not currently account for a quantifiable portion ofour business.

 

(iv)         Competition

 

We are unaware of competitors whose products perform all of thefunctions performed by CorVu’s products. We compete in the market for Business Intelligence (BI) and EnterprisePerformance Management (EPM) software, and specialize on one BusinessIntelligence application, the Balanced Scorecard methodology of performancemanagement.

 

Business Intelligence (BI) –CorBusiness is designed to address Business Intelligence needs.  Key competitors we encounter in the BImarket are Cognos and Business Objects. However, our management believes that competing products focus only onspecific business intelligence features, such as end user query and reporting,or sophisticated programmer reporting, or multidimensional informationanalysis.  In contrast, CorVu productsare designed to offer a suite of integrated applications covering all of theBusiness Intelligence features mentioned above.

 

Balanced Scorecard– Our management is aware of several companies offering software based on theBalanced Scorecard methodology.  Todate, 15 vendors have been certified by the Balanced Scorecard Collaborative,an organization dedicated to theworldwide awareness, use, enhancement, and integrity of the Balanced Scorecard(BSC) as a value-added management process.   We consider Hyperion, Panorama Business Views and SAS to be ourmost important competitors in this area. However, we are not aware that they also offer products that tightlyintegrate business intelligence applications with their Balanced Scorecardsoftware.

 

Our management believes that ourproducts are competitive due to features such as ease of deployment, lowoverhead and administration, ease of use, integrated application suite, andappeal to broad user requirements.

 

(v)          MarketAnalysis and Forecast

 

Recent analysis of the market for Enterprise Performance Managementsoftware includes “Worldwide Financial/Business Performance Management SoftwareForecast and Analysis, 2002-2006” by IDC analysts Robert Blumstein and HenryMorris.  That study predicts that themarket for such software will develop as follows:

 

“The market is estimated to increase from $921.1 million in 2001 to$1,537.9 million in 2006, a compound growth rate (CAGR) of 10.8%, based on anacceleration in the economy by 2004 that leads to financial growth in 2005 and2006.”  Regarding the performancemanagement market, IDC predicts, “this sector should show the highest growth inthe overall financial/BPM analytic applications market.  BPM is cross functional, and as such isunique among analytic application categories. All other categories are function specific, yet BPM is closely alignedwith financial analytic applications for two reasons.  The ability to measure and accurately forecast financialperformance is a priority for finance. Balanced scorecarding, the most important business 

 

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methodology forBPM, emphasizes the role of nonfinancial indicators as predictors of financialperformance.  This creates the need forbringing together financial and nonfinancial metrics within the sameapplication (i.e., cross-functional BPM).”

 

EstimatedWorldwide Financial/BPM Revenue by Category 2000-2006 (Millions of U.S.Dollars)

 
| **Category** |   | **2000** |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **CAGR (%)** |   |
|--------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|--------------|--------|
| Financial    |   | 660.3    |   | 669.9    |   | 708.5    |   | 743.1    |   | 788.0    |   | 872.3    |   | 937.5    |   | 7.0          |   |
| BPM          |   | 197.6    |   | 251.2    |   | 293.1    |   | 345.2    |   | 412.2    |   | 495.9    |   | 600.4    |   | 19.0         |   |
| Total        |   | 857.8    |   | 921.1    |   | 1001.6   |   | 1088.3   |   | 1200.2   |   | 1368.2   |   | 1537.9   |   | 10.8         |   |
| Growth (%)   |   | NA       |   | 7.4      |   | 8.7      |   | 8.7      |   | 10.3     |   | 14.0     |   | 12.4     |   |         |   |

 

(vi)         OurCustomers

 

Over 3,000 customers worldwide have licensed CorVuproducts.  These include companies likeIngersoll Rand, JP Morgan, Fireman’s Fund Insurance, Bowne &Company, US Army, CVS Pharmacy, Merck, Hilton Hotels Corporation, CreditSuisse, Societe General, HM Customs & Excise, SpecSavers, BT Ignite, RobertBosch, and Australia Department of Veterans Affairs.  The most revenue that any single customer or partner hascontributed to CorVu on an annual basis is about 8%.  In the past, several of our customers have ordered additionalsoftware and services, occurring within a non-predictable time frame, that is,from a few months of the original order up to a few years after thatorder.  The additional orders typicallyhave been either (a) the addition of users for new projects, departments,divisions etc. within a given customer, or (b) the purchase of new products asthese become available.  Our managementestimates that such repeat business accounts for approximately 32% of ourannual license revenues.

 

(vii)        IntellectualProperty

 

Due to the length of the patent application procedureon one hand and the necessity to continually develop and improve our softwareproducts on the other hand, we have not sought patent protection for any of ourproducts.  However, we have registered“CorVu” (as trademark) and “Managing Business Performance” (as descriptivemark) with the U.S. Patent and Trademark Office.  Applications for the registration of the trademarks“CorBusiness,” “CorManage,” “CorRisk” and “HyperVu” are pending with the U.S.Patent and Trademark Office.  Thetrademark “CorVu Managing Business Performance” which includes our Company’slogo has been registered in Colombia and Venezuela; applications for theregistration of that trademark are pending in Brazil and Mexico.  Once granted, the trademarks in the U.S. andin the named Southern American Countries have a duration of ten years, with thepossibility of renewals for like terms. In Australia, a trademark for “CorVu Your Window Into the Future” andits design is registered.  Thistrademark will be up for renewal in 2005.

 

Contracts under which we license the use and/or sale of our productsinclude confidentiality clauses to protect our products and any information inconnection with them as trade secrets.

 

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(viii)       Researchand Development Activities

 

In fiscal 2001, weincurred a total amount of $1,257,855 on research and development activities,and in fiscal 2002, a total of $1,076,111. None of these costs was borne directly by any customer. We expect tocontinue to maintain our high level of investment in R&D activitiesconsistent with fiscal year 2002 expense.

 

(ix)          OurEmployees

 

As of June 30,2002, we employed 92 people in our Company and our subsidiaries around theworld.  Thirty of these employees workedin Sales and Marketing, 35 provided professional services such as training andgeneral product assistance, 16 worked in product development and 11 providedgeneral administrative services.  All ofour employees are working full-time. No employees are represented by a labor unionand we consider our relations with employees to be good.

 

**ITEM 2.             DESCRIPTION OF PROPERTY**

 

Our corporateheadquarters are located at 3400 West 66th Street, Edina,Minnesota.  On June 1, 1998, we enteredinto a sublease agreement that expired on August 31, 2002, to rent approximately6,000 rentable square feet.  On August5, 2002, we entered into a lease agreement for the same space that extends thelease to August 31, 2007. Pursuant to the lease agreement, we make monthly baserent payments of approximately $5,200, with annual increases of approximately3% per year.  In addition to the rentpayments, we reimburse the landlord for any operating costs allocable to ourpremises based upon the rentable square foot office area allocable to our premises.  Total monthly rent payments amount toapproximately $11,000 for the first twelve months of the lease.  The premises include a reception area,conference and training rooms, as well as executive and administrative offices.

 

The major regionalcenters of our subsidiaries are located in Sydney (Australia) and London (GreatBritain).  Total monthly rental paymentsfor the Sydney office amount to about $9,200 and for the London office toapproximately $11,300 in U.S. dollars. These amounts are subject to variations due to the applicable exchangerates.  The lease agreements varyconcerning terms and conditions, and are subject to the applicable local law.

 

We believe thatour current facilities are adequate for the current level of our activities. Inthe event we require additional facilities, we believe we could procureacceptable facilities.

 

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**ITEM3.              LEGAL PROCEEDINGS**

 

In April 2001, two shareholders of the Company (Calton, Inc. and GildeaManagement Company) brought suit against the Company and certain of its currentand former directors related to their purchase of securities of theCompany.  The case was removed from theSuperior Court of New Jersey, Monmouth County to federal court, the UnitedStates District Court, District of Minnesota. In September 2002 theCompany and the plaintiffs reached agreement on settlement terms, and the casewas dismissed. While the Company continues to deny any wrongdoing in thematter, the Company and its insurance carrier believed that settlement of thelitigation was advantageous and in the best interests of the Company.

 

We are not a party to any other material litigation and are not awareof any other threatened litigation that would have a material adverse effect onour business.

 

**ITEM4.              SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS**

 

(a)       The Annual Meeting of theCompany’s shareholders was held on April 23, 2002.

 

(b)       At the Annual Meeting aproposal to set the number of directors at five was adopted by a vote of16,114,150 shares in favor, with 13,750 shares against, 19,600 sharesabstaining and no shares represented by broker nonvotes.

 

(c)       Proxies for the AnnualMeeting were solicited pursuant to Regulation A under the Securities ExchangeAct of 1934, there was no solicitation in opposition to management’s nominees,and the following persons were elected directors of the Company to serve untilthe next annual meeting of shareholders and until their successors shall havebeen duly elected and qualified:

 
| **Nominee**            |   | **Number of  Votes For** |   | **Number of  Votes Withheld** |   |
|------------------------|--------|--------------------------|--------|-------------------------------|--------|
| David C. Carlson       |   | 16,123,550               |   | 23,950                        |   |
| Ismail Kurdi           |   | 16,123,550               |   | 23,950                        |   |
| Justin M.  MacIntosh   |   | 16,123,550               |   | 23,950                        |   |
| James L. Mandel        |   | 16,123,550               |   | 23,950                        |   |
| Alan M.  Missroon, Jr. |   | 16,123,550               |   | 23,950                        |   |

 

(d)           The selection of Virchow, Krause& Company, LLP as the Company’s independent auditors for the current fiscalyear was approved by a vote of 16,119,650 shares in favor, with 8,250 sharesagainst, 19,600 shares abstaining and no shares represented by broker nonvotes.

 

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**PARTII.**

 

**ITEM 5.              MARKET FORCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 

Our common stock is quoted on the OTC Bulletin Board under the symbolCRVU.  Quotations in the following tableare based on information provided by IDD Information Services, Tradeline(r) onLexis®.  The quotationsrepresent inter-dealer prices, without retail markup, markdown or commission,and do not necessarily represent actual transactions.

 
|                      |   | **Common  Stock** |    |
|---------------------------|--------|-------------------|---------|
| **Fiscal  Quarter Ended** |   | **High Bid**      |    | **Low Bid** |   |
|                      |   |              |    |   |   |
| September 30,  2000       |   | $                 | 2.50    |   | $ | 0.75 |   |
| December 31,  2000        |   | $                 | 1.3125  |   | $ | 0.125 |   |
| March 31, 2001            |   | $                 | .359375 |   | $ | .15625 |   |
| June 30, 2001             |   | $                 | .5625   |   | $ | .09375 |   |
|                      |   |              |    |   |   |
| September 30,  2001       |   | $                 | .14     |   | $ | .08 |   |
| December 31,  2001        |   | $                 | .20     |   | $ | .05 |   |
| March 31, 2002            |   | $                 | .45     |   | $ | .18 |   |
| June 30, 2002             |   | $                 | .37     |   | $ | .17 |   |

 

As of September15, 2002, we had approximately 167 shareholders of record.  We have never paid cash dividends on ourCommon Stock and do not anticipate paying any such dividends in the foreseeablefuture.  However, the holders of ourSeries A Convertible Preferred Stock are entitled to receive a cumulativedividend of 6.5% per year, payable semi-annually.  As of June 30, 2002, two hundred shares of Series A ConvertiblePreferred Stock were outstanding.

 

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The following table provides information as of June 30, 2002 about theCompany’s equity compensation plans.

 
|                                                        |   | **Number of  securities to  be issued upon exercise  of outstanding options,  warrants and rights** |   | **Weighted  average  exercise price of  outstanding options,  warrants and rights** |   | **Number of  securities remaining  available for future issuance under  equity compensation plans  (excluding securities reflected in  column (a))** |    |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                        |   | **(a)**                                                                                             |   | **(b)**                                                                             |   | **(c)**                                                                                                                                              |    |
| Equity compensation plans approved by security  holders     |   | 3,330,003                                                                                           |   | $                                                                                   | 1.19   |                                                                                                                                                 | 669,997 |   |
|                                                        |   |                                                                                                |   |                                                                                |   |                                                                                                                                                 |    |   |
| Equity compensation plans not approved by security  holders |   | 3,219,637                                                                                           |   | $                                                                                   | 1.89   |                                                                                                                                                 | —  |   |

 

**Recent Sales of Unregistered Securities**

 

On May 29, 2002, we sold anaggregate of 50,000 shares of our common stock to two accredited investors at aprice of $0.26 per share.  In connectionwith such sales we relied on the exemption from registration provided bySection 4(2) of the Securities Act of 1933. Each of the investors represented in writing that the shares were beingacquired for investment and, in addition, the certificates representing theshares bear a restrictive securities legend.

 

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**ITEM 6.              MANAGEMENT’SDISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

 

**General**

 

CorVu is aninternational provider of Integrated Business Intelligence and BusinessPerformance Management software.  OurCompany designs, develops, markets and supports its management softwareproducts and its services through sales offices of our subsidiaries as well asthrough distributors, Value Added Resellers, and Alliance Partners.  Sales and support offices belonging to oursubsidiaries are located throughout the United States, Australia andEurope.  See for details ITEM 1,Business of the Issuer.

 

**Critical Accounting Policies and Estimates**

 

Our discussion and analysis of financial conditionand results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these consolidated financial statements requires usto make estimates and assumptions that affect the reported amounts of assetsand liabilities at the date of the consolidated financial statements, thereported amounts of revenues and expenses during the reporting period, andrelated disclosures of contingent assets and liabilities.  The notes to the consolidated financialstatements contained herein describe our significant accounting polices used inthe preparation of the consolidated financial statements.  On an on-going basis, we evaluate ourestimates, including, but not limited to, those related to bad debts andcontingencies.  We base our estimates onhistorical experience and on various other assumptions that we believe to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results could differ from these estimates under differentassumptions or conditions.

 

We believe the critical accounting policies listed below affectsignificant judgments and estimates used in the preparation of our consolidatedfinancial statements.

 

Revenue Recognition.  We recognize revenues in accordance with the provisions of theAmerican Institute of Certified Public Accountants’ Statement of Position (SOP)97-2, “Software Revenue Recognition,” as amended by SOP 98-4 and SOP 98-9, aswell as Technical Practice Aids issued from time to time by the AmericanInstitute of Certified Public Accountants, and in accordance with theSecurities and Exchange Commission Staff Accounting Bulletin No. 101,“Revenue Recognition in Financial Statements.” We license software under non-cancelable license agreements and providerelated professional services, including consulting, training, and implementationservices, as well as ongoing customer support and maintenance.  Consulting, training and implementationservices are not essential to the functionality of our software products, aresold separately and also are available from a number of third-party serviceproviders.  Accordingly, revenues from theseservices are generally recorded separately from the license fee.  Our specific revenue recognition policiesare as follows:

 

SoftwareLicense Fees – Softwarelicense fee revenues from end-users and resellers are generally recognized whenthere is an executed license agreement, software has been delivered to thecustomer, the license fee is fixed and payable within 12 months, collection isdeemed probable and product returns are reasonably estimable.  Revenues related to multiple elementarrangements are allocated to each element of the 

 

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arrangementbased on the fair values of elements such as license fees, maintenance, andprofessional services.  Fair value isdetermined based on vendor specific objective evidence.

 

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

 

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Software Development Costs. Software development costs are expensed as incurred until technologicalfeasibility is established.  Softwaredevelopment costs incurred subsequent to establishing technological feasibilityare capitalized and amortized over their estimated useful lives.  Management is required to use professionaljudgment in determining whether development costs meet the criteria for immediateexpense or capitalization.

 

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

 

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

 

 

**Fiscal Year Ended June 30, 2002versus June 30, 2001**

 

REVENUES:

 

CorVu derives its revenues from three sources: (i) the sale andlicensing of its software products; (ii) consulting and training services; and(iii) maintenance agreements in connection with the sale and licensing ofsoftware products.  CorVu recognizesrevenue in accordance with Statement of Position No. 97-2, Software RevenueRecognition, as amended by Statement of Position 98-9.  Software license revenue is recognized whenall of the following criteria have been met: there is an executed licenseagreement, software has been delivered to the customer, the license fee is fixedand payable within twelve months, collection is deemed probable and productreturns are deemed reasonably estimable. Revenues related to multiple elementarrangements are allocated to each element of the arrangement based on the fairvalues 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 over the term of the maintenancecontract, typically 12 to 36 months. Consulting and other revenues are recognized when services areperformed.

 

Total revenue increased by $190,743 (2%) from$12,151,063 for the year ended June 30, 2001 to $12,341,806 for the year endedJune 30, 2002.

 

Software and license fee revenues increased $1,262,981(26%) from $4,887,638 in 2001 to $6,150,619 in 2002. This increase reflects anincreasing acceptance and demand for our products in the marketplace,especially in the Balanced Scorecard area. Software and license fee revenue increased by 89% from the third quarterended March 31, 2002 to the fourth quarter ended June 30, 2002.  An increase of 66% was experienced whencomparing the fourth quarter ended June 30, 2002 to the quarter ended June 30,2001.

 

Maintenance, consulting and other revenues decreasedby $1,072,238 (15%) from $7,263,425 in 2001 to $6,191,187 in 2002. Maintenancerevenue remained relatively flat from 2001 ($3,349,577) to 2002 ($3,381,731), a1% increase. Consulting revenues, on the other hand, decreased from $3,913,848in 2001 to $2,809,456 (28%).  Economicconditions certainly affected 

 

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our effectiveness in thisarea as customers deferred, delayed or cancelled projects based on theirfinancial situation. Also, our success in selling our RapidScorecard productduring the year has led to shorter implementation projects.

 

OPERATING EXPENSES:

 

Operating expenses decreased by $3,583,013 (23%) from$15,319,328 for the year ended June 30, 2001 to $11,736,315 for the year endedJune 30, 2002.

 

Cost of maintenance, consulting and other expensesdecreased $393,563 (12%) from $3,339,350 in 2001 to $2,945,787 in 2002.Although the number of personnel stayed consistent from year to year, theaverage salary per person was lower which contributed to the decrease. Inaddition, in the Americas region, there were no outside contractors (at highercosts) that were utilized in 2002.

 

Productdevelopment costs decreased $181,744 (14%) from $1,257,855 in 2001 to$1,076,111 in 2002. We continue to maintain our high level of investment inthis area in our effort to keep improving our products.

 

Sales and marketing expenses decreased $1,710,400(29%) from $5,865,010 in 2001 to $4,154,610 in 2002. This was caused primarilyby the decrease in the number of employees working in that sector from 33 salespeopleas of June 30, 2001 to 30 as of June 30, 2002. Other factors, such as lowerexpenditures for remote sales offices and travel expenses, reduction of middlesales management staff, advertising, and general marketing activities, alsocontributed to the reduced expenditure levels in this area.

 

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General and administrative expenses decreased$1,297,306 (27%) from $4,857,113 in 2001 to $3,559,807 in 2002. This decreasewas the result of the closing of our offices in the Netherlands and Germany anda reduction in one management position in the Americas region which resulted insavings in salaries and travel expenses. In addition, the 2001 year includedsignificant charges for penalties and interest incurred as a result of ouragreement with the Internal Revenue Service regarding past due payroll taxes.

 

INTEREST EXPENSE:

 

Interest expense increased $15,001 (11%) from $140,959in 2001 to $155,960 in 2002. Interest charges were incurred under our creditorsettlement in 2002 that were not incurred in 2001.

 

NET INCOME (LOSS):

 

CorVu Corporation generated net income of $449,531 forthe year ended June 30, 2002 and incurred a net loss of $3,309,224 for the yearended June 30, 2001.

 

**Liquidity and Capital Resources**

 

Total cash and cash equivalents increased by $201,767from $77,409 as of June 30, 2001 to $279,176 as of June 30, 2002.

 

Net cash provided by operating activities was$260,243 for the year ended June 30, 2002. Net income for the year ended June 30, 2002 was $449,531.  Net cash used in investing activities was$62,603 for the year ended June 30, 2002 reflecting the acquisition of capitalassets.  Net cash provided by financingactivities was $1,732 for the year ended June 30, 2002. Proceeds from the saleof common stock accounted for $54,433. During the year ended June 30, 2002, theCompany repaid $188,123 of an existing note payable.  Additionally, the Company received borrowings under a notepayable with a stockholder of $179,200 and repaid amounts under notes in theamount of $43,778.

 

During the past year, we have made significantreductions in amounts due to the Internal Revenue Service for past due payrolltaxes (reduced from $772,000 as of June 30, 2001 to $65,000 as of September 15,2002), amounts due under a Creditor Settlement Agreement (reduced from $976,000as of June 30, 2001 to $650,000 as of September 15, 2002) and, have completelyretired a note payable (balance was $188,000 as of June 30, 2001) that had beenoutstanding since February 1998. Payments have been funded with currentoperating capital. Once these obligations are retired in full, additional cashflow will be available for other operating activities. In addition, the balanceof deferred revenue, which represents unearned maintenance revenue, as of June30, 2002 is 35% higher than the same balance as of June 30, 2001. This reflectsan increasing base of maintenance customers under both existing and new licensecontracts.

 

We believe that current cash flow from operationswill be sufficient to meet our cash requirements for the next 12 months.

 

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**Disclosuresabout Contractual Obligations and Commercial Commitments**

 

The following summarizes our contractual obligationsat June 30, 2002, and the effect these contractual obligations are expected tohave on our liquidity and cash flows in future periods (in Thousands):

 
|                     |   | **Total** |   | **1 Year of Less** |   | **1-3 Years** |   | **Over 3 Years** |   |
|--------------------------|--------|-----------|--------|--------------------|--------|---------------|--------|------------------|--------|
|                     |   |      |   |               |   |          |   |             |   |
| Operating leases         |   | $         | 1,145  |               | $      | 320           |   | $                | 663    |   | $ | 162 |   |
| Note payable-stockholder |   | 686       |   | —             |   | 686           |   | —           |   |
| Consulting agreement     |   | 795       |   | 265                |   | 318           |   | 212              |   |
| Total                    |   | $         | 2,626  |               | $      | 585           |   | $                | 1,667  |   | $ | 374 |   |

 

**Cautionary Factors That May AffectFuture Results**

 

This Annual Reporton Form 10-KSB, including the information incorporated by reference hereinand the exhibits hereto, may include “forward-looking” statements.Forward-looking statements broadly involve our current expectations for futureresults. Our forward-looking statements generally relate to our financingplans, trends affecting our financial condition or results of operations, ourgrowth and operating strategy, product development, competitive strengths, thescope of our intellectual property rights, sales efforts, and the declarationand payment of dividends.  Words such as“anticipates,” “believes,” “could” “estimates,” “expects,” “forecast,”“intend,” “may,” “plan,” “possible,” “project,” “should,” “will” and similarexpressions generally identify our forward-looking statements. Any statementthat is not a historical fact, including estimates, projections, future trendsand the outcome of events that have not yet occurred, are forward-lookingstatements. Our ability to actually achieve results consistent with our currentexpectations depends significantly on certain factors that may cause actualfuture results to differ materially from our current expectations. Some ofthese factors include:

 

• Risks related to our Companyand business, including, but not limited to:

•control of our Company by management shareholders

•adverse effects in connection with the loss of key personnel

•limited market in our securities

•limited working capital and lack of working capital financing

•timing, size and nature of market opportunities available to us and our abilityto capitalize on these as they occur

•our ability to maintain or increase research and development expenditures tomaintain current and attract new customers

•reduction in information technology spending by our current and/or potentialcustomers

 

• Competitive factors,including, but not limited to:

•pricing pressures, both in the United States and abroad

 

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•superior financial situation of some of our competitors

•development of new products by competitors having superior performancecharacteristics

•technological advances, intellectual property rights and registrations obtainedby competitors

 

•Difficulties and delays inherent in the development, marketing and sale ofbusiness intelligence technology and business performance management systems,including, but not limited to:

• theimposition of regulatory requirements, such as those concerning data privacy

• the failureto obtain, limitations on the use of, or the loss of intellectual propertyrights

•our lengthy and variable sales cycles

 

• Governmental action,including, but not limited to:

•changes in tax and other laws and regulations affecting our business, includingchanges in securities laws and changes regarding accounting policies andprinciples

 

• Legal disputes, including,but not limited to:

• disputesover intellectual property rights

• productliability claims

• claimsasserting securities law violations

 

• General economic conditions,including, but not limited to:

•international and domestic business conditions

• politicalinstability in foreign countries

• interestrates

• foreigncurrency exchange rates

• changes inthe rate of inflation

• our abilityto reduce the impact of these conditions on our results

 

•Other factors beyond our control, including floods, fires, explosions, or actsof terrorism or war.

 

You must carefullyconsider forward-looking statements and understand that such statements involvea variety of risks and uncertainties, known and unknown, and may be affected byinaccurate assumptions. It is not possible to foresee or identify all factorsthat may affect our forward-looking statements, and you should not consider anylist of such factors to be an exhaustive list of all risks, uncertainties orpotentially inaccurate assumptions affecting such forward-looking statements.

 

We caution you toconsider carefully these factors as well as any other specific factorsdiscussed with each specific forward-looking statement in this annual report.In some cases, these factors have affected, and in the future (together withother unknown factors) could affect, our ability to implement our businessstrategy and may cause actual results to differ materially from thosecontemplated by such forward-looking statements. No assurance can be made thatany expectation, estimate or projection contained in a forward-lookingstatement can be achieved.

 

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We also cautionyou that forward-looking statements speak only as of the date made. Weundertake no obligation to update any forward-looking statement, but investorsare advised to consult any further disclosures by us on this subject in ourfilings with the Securities and Exchange Commission, especially onForms 10-KSB, 10-QSB, and 8-K (if any), in which we discuss in more detailvarious important factors that could cause actual results to differ fromexpected or historic results. We intend to take advantage of the safe harborprovisions of the Private Securities Litigation Reform Act of 1995 regarding ourforward-looking statements, and are including this sentence for the expresspurpose of enabling us to use the protections of the safe harbor with respectto all forward-looking statements.

 

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**ITEM 7.              CONSOLIDATEDFINANCIAL STATEMENTS**

 

 

**CORVUCORPORATION AND SUBSIDIARIES**

Consolidated Financial Statements

June 30, 2002 and 2001

 

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***REPORT OFINDEPENDENT PUBLIC ACCOUNTANTS***

 

 

To CorVu Corporation:

 

We have audited the accompanying consolidated balance sheets of CorVuCorporation and subsidiaries as of June 30, 2002 and 2001, and the relatedconsolidated statements of operations, stockholders’ deficit and cash flows forthe years then ended.  Theseconsolidated financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements arefree of material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of CorVuCorporation and subsidiaries, as of June 30, 2002 and 2001, and the results oftheir operations and their cash flows for the years then ended in conformitywith accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been preparedassuming that the Company will continue as a going concern.  As discussed in Note 3 to the consolidatedfinancial statements, the Company has a working capital deficiency and has astockholders’ deficit that raise substantial doubt about its ability tocontinue as a going concern. Management’s plans in regard to these matters are also described in Note3.  The consolidated financialstatements do not include any adjustments that might result from the outcome ofthis uncertainty.

 
|   | /s/ VIRCHOW, KRAUSE & COMPANY, LLP |
|--------|----------------------------------------|

 

Minneapolis, Minnesota

September 12, 2002

 

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**CORVU CORPORATION AND SUBSIDIARIES**

ConsolidatedBalance Sheets

June30, 2002 and 2001

 
|                                                                                                                                                  |   | **2002**    |      | **2001**    |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|-------------|-----------|
| **Assets**                                                                                                                                            |   |        |      |        |      |
| Current assets:                                                                                                                                       |   |        |      |        |      |
| Cash and cash equivalents                                                                                                                             |   | $           | 279,176   |        | 77,409    |   |
| Trade accounts receivable, net of allowance for doubtful accounts of  $160,000 and $145,000, respectively                                             |   | 2,845,858   |      | 2,668,802   |      |
| Prepaid expenses                                                                                                                                      |   | 154,063     |      | 95,347      |      |
| Other assets                                                                                                                                          |   | 43,788      |      | 50,056      |      |
| Total current assets                                                                                                                                  |   | 3,322,885   |      | 2,891,614   |      |
| Furniture, fixtures, and equipment                                                                                                                    |   | 398,604     |      | 341,373     |      |
| Less accumulated depreciation                                                                                                                         |   | (298,664    | )         | (236,300    | )         |
|                                                                                                                                                  |   | 99,940      |      | 105,073     |      |
|                                                                                                                                                  |   | $           | 3,422,825 |        | 2,996,687 |   |
| **Liabilities and Stockholders’ Deficit**                                                                                                        |   |        |      |        |      |
| Current liabilities:                                                                                                                                  |   |        |      |        |      |
| Note payable                                                                                                                                          |   | $           | —    |        | 188,123   |   |
| Accounts payable                                                                                                                                      |   | 2,036,842   |      | 2,951,684   |      |
| Accrued compensation and related costs                                                                                                                |   | 2,527,493   |      | 2,600,675   |      |
| Deferred revenue                                                                                                                                      |   | 2,872,329   |      | 2,120,172   |      |
| Accrued interest                                                                                                                                      |   | 73,232      |      | 23,663      |      |
| Other accrued expenses                                                                                                                                |   | 845,168     |      | 741,816     |      |
| Total current liabilities                                                                                                                             |   | 8,355,064   |      | 8,626,133   |      |
| Notes payable - stockholder                                                                                                                           |   | 685,767     |      | 562,345     |      |
| Total liabilities                                                                                                                                     |   | 9,040,831   |      | 9,188,478   |      |
| Stockholders’ deficit:                                                                                                                           |   |        |      |        |      |
| Undesignated capital stock, 24,000,000 shares in 2002 and 2001, none  issued.                                                                         |   | —      |      | —      |      |
| Series A convertible preferred stock, $10 par value:  1,000,000 shares authorized; 200 shares issued and outstanding in 2002 and  2001                |   | 2,000       |      | 2,000       |      |
| Common stock, $0.01 par value; 75,000,000 shares authorized;  20,730,835 and 20,157,781 shares issued and outstanding in 2002 and 2001,  respectively |   | 207,252     |      | 201,522     |      |
| Additional paid-in capital                                                                                                                            |   | 16,223,744  |      | 16,159,995  |      |
| Accumulated deficit                                                                                                                                   |   | (22,191,944 | )         | (22,641,345 | )         |
| Deferred compensation                                                                                                                                 |   | —      |      | (318,100    | )         |
| Accumulated other comprehensive income                                                                                                                |   | 140,942     |      | 404,137     |      |
| Total stockholders’ deficit                                                                                                                      |   | (5,618,006  | )         | (6,191,791  | )         |
| Commitments (Notes 3, 9 and 13)                                                                                                                       |   |        |      |        |      |
| Total liabilities and stockholders’ deficit                                                                                                      |   | $           | 3,422,825 |        | 2,996,687 |   |

 

See accompanying notes to consolidated financialstatements.

 

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**CORVU CORPORATION AND SUBSIDIARIES**

ConsolidatedStatements of Operations

Yearsended June 30, 2002 and 2001

 
|                                             |   | **2002**   |      | **2001**   |       |
|--------------------------------------------------|--------|------------|-----------|------------|------------|
| Revenues:                                        |   |       |      |       |       |
| Software and license fees                        |   | $          | 6,150,619 |       | 4,887,638  |   |
| Maintenance, consulting, and other               |   | 6,191,187  |      | 7,263,425  |       |
| Total revenues                                   |   | 12,341,806 |      | 12,151,063 |       |
| Operating costs and expenses:                    |   |       |      |       |       |
| Cost of maintenance, consulting, and other       |   | 2,945,787  |      | 3,339,350  |       |
| Product development                              |   | 1,076,111  |      | 1,257,855  |       |
| Sales and marketing                              |   | 4,154,610  |      | 5,865,010  |       |
| General and administrative                       |   | 3,559,807  |      | 4,857,113  |       |
| Total operating costs and expenses               |   | 11,736,315 |      | 15,319,328 |       |
|                                             |   |       |      |       |       |
| Operating income (loss)                          |   | 605,491    |      | (3,168,265 | )          |
| Interest expense                                 |   | (155,960   | )         | (140,959   | )          |
| Income (loss) before income taxes                |   | 449,531    |      | (3,309,224 | )          |
| Provision for income taxes                       |   | —     |      | —     |       |
| Net income (loss)                                |   | $          | 449,531   |       | (3,309,224 | ) |
|                                             |   |       |      |       |       |
| Net income (loss) per common share—basic    |   | $          | 0.02      |       | (0.17      | ) |
| Weighted average shares outstanding—basic   |   | 20,413,148 |      | 19,779,415 |       |
| Net income (loss) per common share—diluted  |   | $          | 0.02      |       | (0.17      | ) |
| Weighted average shares outstanding—diluted |   | 21,159,166 |      | 19,779,415 |       |

 

See accompanying notes to consolidated financialstatements.

 

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**CORVU CORPORATION AND SUBSIDIARIES**

ConsolidatedStatements of Stockholders’ Deficit

Yearsended June 30, 2002 and 2001

 
|                                                             |             |       |   |       |   | **Additional  paid-in  capital** |       | **Accumulated  deficit** |   | **Deferred  compensation** |   | **Accumulated  other  comprehensive  Income** |   | **Total  stockholders’  deficit** |   |
|------------------------------------------------------------------|------------------|------------|--------|------------|--------|----------------------------------|------------|--------------------------|--------|----------------------------|--------|-----------------------------------------------|--------|----------------------------------------|--------|
| **Preferred stock**                                              | **Common stock** |
| **Shares**                                                       |             | **Amount** |   | **Shares** |   | **Amount**                       |
|                                                             |             |       |   |       |   |                             |       |                     |   |                       |   |                                          |   |                                   |   |   |   |   |   |
| Balance, June 30, 2000                                           |             | 200        |   | $          | 2,000  |                             | 19,509,660 |                     | $      | 195,097                    |   | 15,577,033                                    |   | (19,331,991                            | )      | (688,050 | ) | 267,937 |   | (3,977,974 | ) |
| Comprehensive loss:                                              |             |       |   |       |   |                             |       |                     |   |                       |   |                                          |   |                                   |   |   |   |   |   |
| Net loss                                                         |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | (3,309,224                                    | )      | —                                 |   | — |   | (3,309,224 | ) |
| Foreign currency translation adjustment                          |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   |                                          |   | —                                 |   | 136,200 |   | 136,200 |   |
| Comprehensive loss                                               |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | —                                        |   | —                                 |   | — |   | (3,173,024 | ) |
| Preferred stock dividends                                        |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | (130                                          | )      | —                                 |   | — |   | (130 | ) |
| Non-cash charges related to equity transactions  (Notes 5 and 8) |             | —     |   | —     |   | —                           |       | —                   |   | 169,511                    |   | —                                        |   | —                                 |   | — |   | 169,511 |   |
| Deferred compensation                                            |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | —                                        |   | 369,950                                |   | — |   | 369,950 |   |
| Issuance of common stock                                         |             | —     |   | —     |   | 25,000                           |       | 250                      |   | 9,750                      |   | —                                        |   | —                                 |   | — |   | 10,000 |   |
| Salary forgiven by executive                                     |             | —     |   | —     |   | —                           |       | —                   |   | 241,586                    |   | —                                        |   | —                                 |   | — |   | 241,586 |   |
| Issuance of common stock for services                            |             | —     |   | —     |   | 590,609                          |       | 5,850                    |   | 132,712                    |   | —                                        |   | —                                 |   | — |   | 138,562 |   |
| Stock option exercises                                           |             | —     |   | —     |   | 32,512                           |       | 325                      |   | 29,403                     |   | —                                        |   | —                                 |   | — |   | 29,728 |   |
| Balance, June 30, 2001                                           |             | 200        |   | $          | 2,000  |                             | 20,157,781 |                     | $      | 201,522                    |   | 16,159,995                                    |   | (22,641,345                            | )      | (318,100 | ) | 404,137 |   | (6,191,791 | ) |
| Comprehensive income:                                            |             |       |   |       |   |                             |       |                     |   |                       |   |                                          |   |                                   |   |   |   |   |   |
| Net income                                                       |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | 449,531                                       |   | —                                 |   | — |   | 449,531 |   |
| Foreign currency translation adjustment                          |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | —                                        |   | —                                 |   | (263,195 | ) | (263,195 | ) |
| Comprehensive income                                             |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | —                                        |   | —                                 |   | — |   | 186,336 |   |
| Preferred stock dividends                                        |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | (130                                          | )      | —                                 |   | — |   | (130 | ) |
| Non-cash charges related to equity transactions  (Note 5)        |             | —     |   | —     |   | —                           |       | —                   |   | 3,046                      |   | —                                        |   | —                                 |   | — |   | 3,046 |   |
| Deferred compensation                                            |             | —     |   | —     |   | —                           |       | —                   |   | —                     |   | —                                        |   | 318,100                                |   | — |   | 318,100 |   |
| Conversion of director advance into common  stock                |             | —     |   | —     |   | 80,000                           |       | 800                      |   | 11,200                     |   | —                                        |   | —                                 |   | — |   | 12,000 |   |
| Issuance of common stock                                         |             | —     |   | —     |   | 493,054                          |       | 4,930                    |   | 49,503                     |   | —                                        |   | —                                 |   | — |   | 54,433 |   |
| Balance, June 30, 2002                                           |             | 200        |   | $          | 2,000  |                             | 20,730,835 |                     | $      | 207,252                    |   | 16,223,744                                    |   | (22,191,944                            | )      | — |   | 140,942 |   | (5,618,006 | ) |
|                                                                  |                  |            |        |            |        |                                  |            |                          |        |                            |        |                                               |        |                                        |        |  |  |  |  |  |  |  |  |

 

See accompanying notes to consolidated financialstatements.

 

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**CORVU CORPORATION AND SUBSIDIARIES**

ConsolidatedStatements of Cash Flows

Yearsended June 30, 2002 and 2001

 
|                                                                                  |   | **2002**   |    | **2001**  |       |
|---------------------------------------------------------------------------------------|--------|------------|---------|-----------|------------|
| Cash flows from operating activities:                                                 |   |       |    |      |       |
| Net income (loss)                                                                     |   | $          | 449,531 |      | (3,309,224 | ) |
| Adjustments to reconcile net income (loss) to net cash used in  operating activities: |   |       |    |      |       |
| Depreciation                                                                          |   | 67,736     |    | 73,490    |       |
| Salary forgiven by executive                                                          |   | —     |    | 241,586   |       |
| Warrants and stock options vested                                                     |   | 321,146    |    | 565,147   |       |
| Common stock issued for services                                                      |   | —     |    | 112,876   |       |
| Changes in operating assets and liabilities:                                          |   |       |    |      |       |
| Trade accounts receivable, net                                                        |   | (295,484   | )       | 1,682,616 |       |
| Prepaid expenses                                                                      |   | (58,716    | )       | 19,274    |       |
| Other current assets                                                                  |   | 6,268      |    | 18,675    |       |
| Accounts payable                                                                      |   | (1,526,885 | )       | 459,311   |       |
| Accrued compensation and related costs                                                |   | (97,049    | )       | 444,640   |       |
| Deferred revenue                                                                      |   | 1,255,254  |    | (453,676  | )          |
| Accrued interest                                                                      |   | 49,569     |    | (27,548   | )          |
| Other accrued expenses                                                                |   | 88,873     |    | 333,803   |       |
| Net cash provided in operating activities                                             |   | 260,243    |    | 160,970   |       |
|                                                                                  |   |       |    |      |       |
| Cash flows from investing activities:                                                 |   |       |    |      |       |
| Capital expenditures                                                                  |   | (62,603    | )       | (10,400   | )          |
| Net cash used in investing activities                                                 |   | (62,603    | )       | (10,400   | )          |
|                                                                                  |   |       |    |      |       |
| Cash flows from financing activities:                                                 |   |       |    |      |       |
| Net proceeds from sale of common stock                                                |   | 54,433     |    | 39,728    |       |
| Repayment of note payable                                                             |   | (188,123   | )       | (411,024  | )          |
| Borrowings notes payable- stockholder                                                 |   | 179,200    |    | 458,050   |       |
| Repayment notes payable- stockholder                                                  |   | (43,778    | )       | (210,089  | )          |
|                                                                                  |   |       |    |      |       |
| Net cash provided (used) by financing activities                                      |   | 1,732      |    | (123,335  | )          |
| Effect of exchange rate changes on cash                                               |   | 2,395      |    | 3,429     |       |
| Net increase in cash and cash equivalents                                             |   | 201,767    |    | 30,664    |       |
| Cash and cash equivalents at beginning of year                                        |   | 77,409     |    | 46,745    |       |
| Cash and cash equivalents at end of year                                              |   | $          | 279,176 |      | 77,409     |   |
| Supplemental cash flow disclosures:                                                   |   |       |    |      |       |
| Cash paid during the year for interest                                                |   | $          | 15,634  |      | 120,636    |   |
| Non-cash investing and financing activities:                                          |   |       |    |      |       |
| Conversion of director advance into common stock                                      |   | $          | 12,000  |      | —     |   |

 

See accompanying notes to consolidated financialstatements.

 

26

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**CORVUCORPORATION AND SUBSIDIARIES**

 

Notes to Consolidated Financial Statements

 

June 30, 2002 and 2001

 

**(1)**           Description of Business and Consolidated Financial StatementPresentation

 

***(a)***               Organization

 

CorVu Corporation (theCompany or CorVu) is an international provider of Integrated BusinessIntelligence and Business Performance Management Solutions. The Companydesigns, develops, markets, and supports its proprietary management softwaresolutions. CorVu is a Minnesota corporation.

 

The Company’s products andservices are sold through both direct and indirect channels. Sales and supportoffices are located in the United States (U.S.), Australia, and UnitedKingdom/Europe.

 

***(b)***               Basis of Consolidated FinancialStatement Presentation

 

The accompanying consolidatedfinancial statements include the accounts of the Company and its wholly ownedsubsidiaries. Intercompany accounts and transactions have been eliminated inconsolidation.

 

Shares of common stock,options, warrants and loss per share information have been restated to reflectthe reverse merger agreement and the share conversion rate established in thereverse merger agreement.

 

**(2)**           Summary of Significant Accounting Policies

 

***(a)***               Revenue Recognition

 

The Company recognizesrevenues in accordance with the provisions of the American Institute ofCertified Public Accountants Statement of Position (SOP) 97-2, “SoftwareRevenue Recognition,” as amended by SOP 98-4 and SOP 98-9, as well as TechnicalPractice Aids issued from time to time by the American Institute of CertifiedPublic Accountants, and in accordance with the Securities and ExchangeCommission Staff Accounting Bulletin No. 101, “Revenue Recognition inFinancial Statements.”

 

Software license revenueis recognized when all of the following criteria have been met: there is anexecuted license agreement, software has been delivered to the customer, thelicense fee is fixed and payable within twelve months, collection is deemedprobable and product returns are reasonably estimable. 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 revenuesare recognized when services are performed.

*** ***

***Deferredrevenue represents payment received or amounts billed in advance of services tobe performed.  Billing occurs within 30days of scheduled performance of services.***

 

The Company netsthe fair value of warrants issued in conjunction with software licenseagreements with the related license revenue. See Note 8.

 

27

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***(b)***               Research and Development

 

Expenditures for softwareresearch and development are expensed as incurred.  Such costs are required to be expensed until the point thattechnological feasibility of the software is established.  Technological feasibility is determinedafter a working model has been completed. The Company’s software research and development costs primarily relateto software development during the period prior to technological feasibilityand are expensed as incurred.  Duringfiscal 2002 and 2001, no software development costs were capitalized.

 

***(c)***                Comprehensive Income (Loss)

 

Comprehensive income(loss) represents the change in stockholders’ deficit resulting from other thanstockholder investments and distributions. Accumulated other comprehensiveincome in the consolidated statements of stockholders’ deficit is solelycomprised of the accumulated foreign currency translation adjustment.

 

***(d)***               Foreign Currency Translation

 

The functional currencyof the Company’s subsidiaries is the local currency. Accordingly, the Companytranslates all assets and liabilities into U.S. dollars at current rates.Revenues, costs, and expenses are translated at average rates during eachreporting period. Gains and losses resulting from the translation of theconsolidated financial statements are excluded from results of operations andare reflected as a translation adjustment and a separate component ofstockholders’ deficit.

 

Gains and lossesresulting from foreign currency transactions are recognized in the consolidatedstatement of operations in the period they occur.

 

***(e)***                Net Income (Loss) per Common Share

 

Basic net income (loss)per common share is computed by dividing net income (loss) attributable tocommon stockholders by the weighted-average number of shares outstanding duringthe period. Diluted net income (loss) per common share recognizes the potentialdilutive effects of stock options and warrants determined by the treasury stockmethod. In periods where losses have occurred, no common stock equivalentshares have been included in the computation of diluted net loss per commonshare because their inclusion would have been anti-dilutive.

 

***(f)***                  Stock-based Compensation

 

The Company uses theintrinsic value-based method prescribed by Accounting Principles Board (APB)Opinion No. 25, *Accounting for Stock Issued to Employees*, and relatedinterpretations in accounting for employee stock options. Under the intrinsicvalue method, compensation expense is recorded only to the extent that themarket price of the common stock exceeds the exercise price of the stock optionon the date of grant.

 

28

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***(g)***               Income Taxes

 

The Company accounts forincome taxes using the asset and liability method. Under the asset andliability method, deferred tax assets and liabilities are recognized at theenacted rates for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing tax assets andliabilities and their respective tax basis. The effect on deferred tax assetsand liabilities of a change in tax rate is recognized in income in the periodthat includes the enactment date. Valuation allowances are established whennecessary to reduce deferred tax assets to the amounts expected to be realized.

 

***(h)***               Segment Reporting

 

The Company is aninternational seller of performance management software in the United States,Australia and the United Kingdom/Europe. Management believes that the Company meets the criteria for aggregatingits operating segments into a single reporting segment.

 

***(i)***                  Fair Value of Financial Instruments

 

The carrying value of theCompany’s financial instruments (cash and cash equivalents, trade accountsreceivable and accounts payable) because of their short-term nature,approximates fair value. The carrying value of notes payable approximates fairvalue because the current rates approximate market rates available on similarinstruments and terms.

 

***(j)***                  Cash and Cash Equivalents

 

Cash equivalents consistof highly liquid money market accounts carried at cost plus accrued interest,which approximates market value. The Company deposits cash in high creditquality financial institutions. The balances at times may exceed federallyinsured limits. All cash equivalents have remaining maturities of 90 days orless when purchased.

 

***(k)***               Furniture, Fixtures and Equipment, Net

 

Furniture, fixtures andequipment consists of property, equipment, furniture and computers and arestated at cost less accumulated depreciation. Depreciation is calculated usingthe straight-line method over the estimated useful lives of the respectiveassets which generally range from three to seven years. Depreciation expensewas $67,736 and $73,490 for the years ended June 30, 2002 and 2001,respectively.

 

***(l)***                  Advertising Costs

 

Advertising costs areexpensed as incurred. Advertising costs totaled approximately $15,000 and$25,000 for the years ended June 30, 2002 and 2001, respectively.

 

29

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***(m)***            Business and Credit Concentrations

*** ***

***Financialinstruments which potentially subject the Company to concentrations of creditrisk consist primarily of trade accounts receivable. The Company sellsprincipally to resellers and end users in the United States, Australia, andUnited Kingdom/Europe. The Company performs ongoing credit evaluations of itscustomersand trade accounts receivable are unsecured. The Company had accountsreceivable from one customer that represented approximately 12% of accountsreceivable at June 30, 2002.***

 

***(n)***               Impairment ofLong-lived Assets and Assets to be Disposed Of

 

Long-lived assets andcertain identifiable intangibles are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to future net undiscounted cashflows expected to be generated by the asset. Assets to be disposed of are reported at the lower of the carryingamount or fair value less costs to sell. The Company did not record anyimpairment charges for the years ended June 30, 2002 and 2001.

 

***(o)***               Use of Estimates

 

The preparation ofconsolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of those assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period. A change in the facts and circumstances surrounding theseestimates could result in a change to the estimates and impact future operatingresults.

 

**(3)**         Liquidity

 

The accompanyingconsolidated financial statements are prepared assuming the Company willcontinue as a going concern. During the year ended June 30, 2002, the Companygenerated operating income of $605,491. As of June 30, 2002, the Companyhad an accumulated deficit of $22,191,944, total stockholders’ deficit of$5,618,006, and negative working capital of $5,032,179.

 

During the past year, the Company has madesignificant reductions in amounts due to the Internal Revenue Service for pastdue payroll taxes (reduced from $772,000 as of June 30, 2001 to $210,000 as ofJune 30, 2002), amounts due under a Creditor Settlement Agreement (reduced from$976,000 as of June 30, 2001 to $650,000 as of June 30, 2002) and, have completelyretired a note payable (balance was $188,000 as of June 30, 2001) that had beenoutstanding since February 1998. Payments have been funded with currentoperating capital. Once these obligations are retired in full, additional cashflow will be available for other operating activities. In addition, the balanceof deferred revenue, which represents unearned maintenance revenue, as of June30, 2002 is 35% higher than the same balance as of June 30, 2001. This reflectsan increasing base of maintenance customers under both existing and new licensecontracts.

 

30

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The Company’sability to continue as a going concern is dependent on it continuing to achieveprofitability and maintain cash flow to pay current liabilities. The Companyhas now generated net income for the last three consecutive fiscal quarters andnet income for the year ended June 30, 2002. Management continues to focus onincreasing revenues and/or reducing operating costs, as necessary.

 

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**(4)**           Income (Loss) Per Common Share

 

Basicnet income (loss) per common share is computed by dividing the net income(loss) by the weighted average number of common shares outstanding for thereporting period.  Diluted net income(loss) per common share is computed by dividing net income (loss) by the sum ofthe weighted average number of shares of common stock outstanding plus alladditional common stock that would have been outstanding if potentially dilutivecommon shares related to stock options and warrants had been issued.  Weighted average common shares outstanding -diluted include approximately 1,312,750 dilutive securities for the year endedJune 30, 2002.  Dilutive commonequivalent shares have not been included in the computation of diluted net lossper share for the year ended June 30, 2001 because their inclusion would beanti-dilutive.

 

Following is areconciliation of basic and diluted net income (loss) per common share:

 

|                                                              |   | **FISCAL 2002** |    | **FISCAL 2001** |   |
|-------------------------------------------------------------------|--------|-----------------|---------|-----------------|--------|
| Net income  (loss) per common share - basic:                      |   |            |    |            |   |
|                                                              |   |            |    |            |   |
| Net income  (loss)                                                |   | $               | 449,531 |            | $      | (3,309,224 | ) |
|                                                              |   |            |    |            |   |
| Weighted average  shares outstanding                              |   | 20,413,148      |    | 19,779,415      |   |
|                                                              |   |            |    |            |   |
| Net income  (loss) per common share- basic                        |   | $               | 0.02    |            | $      | (0.17 | ) |
|                                                              |   |            |    |            |   |
| Net income  (loss) per common share - diluted:                    |   |            |    |            |   |
|                                                              |   |            |    |            |   |
| Net income  (loss)                                                |   | $               | 449,531 |            | $      | (3,309,224 | ) |
|                                                              |   |            |    |            |   |
| Weighted average  shares outstanding                              |   | 20,413,148      |    | 19,779,415      |   |
|                                                              |   |            |    |            |   |
| Common stock  equivalents                                         |   | 746,018         |    | 0               |   |
|                                                              |   |            |    |            |   |
| Weighted average  shares and potential diluted shares outstanding |   | 21,159,166      |    | 19,779,415      |   |
|                                                              |   |            |    |            |   |
| Net income  (loss) per common share – Diluted                |   | $               | 0.02    |            | $      | (0.17 | ) |

 

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

 

Options and warrants to purchase 5,236,890 shares of common stock witha weighted average exercise price of $1.88 were outstanding at June 30, 2002but were excluded from the computation of common share equivalents becausetheir exercise prices were greater than the average market price of the commonshares for the fiscal year 2002.

 

All options and warrants outstanding for the year ended June 30, 2001were anti-dilutive.

 

**(5)**                                 Stock Options andWarrants

 

The Company’s 1996 StockOption Plan (the Plan) provides for the issuance of up to an aggregate of4,000,000 shares of common stock to employees, directors, and consultants. ThePlan provides for the issuance of incentive and nonqualified stock options.

 

Under the Plan, theexercise price for incentive stock options is at least 100% of the fair marketvalue on the date of the grant. The exercise price for incentive stock optionsis at least 110% of the fair market value on the date of the grant for personswith greater than 10% of the voting power of all classes of stock. Optionsgenerally expire in seven years; however, incentive stock options may expire infive years if the optionee owns stock representing more than 10% of the votingpower of all classes of stock. Vesting periods are determined by a compensationcommittee appointed by the board of directors and generally provide for sharesto vest ratably over three years.

 

During fiscal 2000, theCompany granted options outside the Plan to employees to purchase common stockof 1,147,501. Accordingly, the Company recorded deferred compensation of$688,050 as of June 30, 2000, representing the difference between the deemedvalue of the common stock for accounting purposes and the option exercise priceof such options on the date of grant. The Company recognized expenses of$318,100 and $369,950 for the years ended June 30, 2002 and 2001,respectively, for these stock option grants based upon the intrinsic valuemethod in accordance with APB Opinion No. 25.

 

The Company has adoptedthe disclosure-only provisions of Statement of Financial Accounting Standards(SFAS) No. 123, *Accounting for Stock-Based Compensation*. Accordingly,compensation expense has been recognized using the intrinsic value methodprescribed in APB No. 25 and related interpretations. Had compensation cost forthe Company’s stock option grants in fiscal 2002 and 2001 been based on thefair value method prescribed by SFAS No. 123, the Company’s net income wouldhave been decreased by $852,433 in 2002 and the Company’s net loss would haveincreased by $1,307,413 in 2001, net income per share would have been decreasedby $0.04 in 2002 and net loss per share would have been increased by $0.07 in2001.

 

Under SFAS No. 123, theweighted average estimated fair value of stock options granted at exerciseprice equal to market price of grant date during 2002 and 2001 was $0.46 and$0.38 per share, respectively.

 

The fair value of eachoption grant was estimated on the date of grant using the Black-Scholesoption-pricing model with the following weighted-average assumptions: dividendyield of 0%; expected 

 

33

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volatility of 188% and60% for fiscal years 2002 and 2001, respectively; risk-free interest rate of4.875-7.0%; and expected lives of approximately seven years.

 

The activity for thePlans is summarized as follows:

 
|                          |   | **Options** |   | **Weighted-  average exercise  price per share** |   |
|-------------------------------|--------|-------------|--------|--------------------------------------------------|--------|
| Outstanding at June 30, 2000  |   | 2,770,946   |   | $                                                | 2.64   |   |
| Granted                       |   | 2,140,600   |   | 0.61                                             |   |
| Exercised                     |   | (32,512     | )      | 0.91                                             |   |
| Forfeited                     |   | (1,339,368  | )      | 2.51                                             |   |
| Outstanding at  June 30, 2001 |   | 3,539,666   |   | $                                                | 1.46   |   |
| Granted                       |   | 727,750     |   | 0.47                                             |   |
| Exercised                     |   | —      |   | —                                           |   |
| Forfeited                     |   | (937,413    | )      | 1.66                                             |   |
| Outstanding at  June 30, 2002 |   | 3,330,003   |   | $                                                | 1.19   |   |

 

34

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Options activity outside the Plans is summarized asfollows:

 
|                          |   | **Options** |   | **Weighted-  average  exercise  price per  share** |   |
|-------------------------------|--------|-------------|--------|----------------------------------------------------|--------|
| Outstanding at June 30, 2000  |   | 1,522,688   |   | $                                                  | 1.75   |   |
| Granted                       |   | —      |   | —                                             |   |
| Exercised                     |   | —      |   | —                                             |   |
| Forfeited                     |   | (110,814    | )      | 2.39                                               |   |
| Outstanding at  June 30, 2001 |   | 1,411,874   |   | $                                                  | 1.70   |   |
| Granted                       |   | —      |   | —                                             |   |
| Exercised                     |   | —      |   | —                                             |   |
| Forfeited                     |   | (45,001     | )      | 1.97                                               |   |
| Outstanding at  June 30, 2002 |   | 1,366,877   |   | $                                                  | 1.69   |   |

 

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The following tables summarize information about stockoptions outstanding as of June 30, 2002:

 
|                  |   | **Options  outstanding** |   | **Options  exercisable**                             |   |
|-----------------------|--------|--------------------------|--------|------------------------------------------------------|--------|
| **Exercise   Prices** |   | **Number  outstanding**  |   | **Weighted-  average  remaining  contractual  life** |   | **Weighted-  average  exercise  price** |   | **Number  exercisable** |   | **Weighted-  average  exercise  price** |   |
| $ 0.08-0.92           |   | 1,910,625                |   | 5.5                                                  |   | $ | 0.32 |   | 1,033,970 |   | $ | 0.38 |   |
|   1.25-3.00      |   | 2,762,255                |   | 3.9                                                  |   | 1.98 |   | 2,634,675 |   | 1.99 |   |
| 7.00                  |   | 24,000                   |   | 4.7                                                  |   | 7.00 |   | 24,000 |   | 7.00 |   |
| $ 0.08-7.00           |   | 4,696,880                |   | 4.5                                                  |   | $ | 1.33 |   | 3,692,645 |   | $ | 1.57 |   |

 

***Warrants and options issued tothird parties***

 

**During2002, the Company issued a warrant to purchase 10,000 shares of common stock at$0.26 per share to a vendor. The warrant is exercisable from the date of grantthrough May 2007. The fair value of the warrant at the date of grant wasestimated to be approximately $1,500 using the Black-Scholes pricing modelwhich was expensed in the 2002 consolidated statement of operations. Thefollowing assumptions were used to calculate the expense: dividend yield of 0%;expected volatility of 60%; risk-free interest rate of 5.0%; and expected lifeof five years.**

 

As of June 30, 2002, warrants to purchase a total of1,852,760 shares of common stock were outstanding at exercise prices rangingfrom $.01-$7.00 per share, expiring through June 2008.

 

In March 2000, the Company declared a warrant dividendto shareholders of record as of April 28, 2000. For every ten shares of commonstock held, each shareholder received a warrant to purchase one share of commonstock at a price of $8. The warrant was cancelable, at the Company’s option,upon 30 days notice if the Company’s stock closes at a price of $12 per shareor higher for at least ten consecutive trading days.  The Company recorded the dividend of $1,235,252 based on the fairvalue of the warrants issued using the Black-Scholes pricing model.  The following assumptions were used tocalculate the expense using the Black-Scholes pricing model: dividend yield of0%; expected volatility of 60%; risk-free interest rate of 7.0%; andcontractual life of 2 years. This warrant dividend expired in May 2002.

 

36

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Information regarding the Company’s warrants issummarized below:

 
|                          |   | **Number** |   | **Weighted-  average  exercise  price per  share** |   |
|-------------------------------|--------|------------|--------|----------------------------------------------------|--------|
| Outstanding at June 30, 2000  |   | 3,702,099  |   | $                                                  | 5.24   |   |
| Granted                       |   | 100,000    |   | .15                                                |   |
| Exercised                     |   | —     |   | —                                             |   |
| Forfeited                     |   | (5,000     | )      | .88                                                |   |
| Outstanding at  June 30, 2001 |   | 3,797,099  |   | $                                                  | 5.11   |   |
| Granted                       |   | 10,000     |   | .26                                                |   |
| Exercised                     |   | —     |   | —                                             |   |
| Forfeited                     |   | (1,954,339 | )      | 8.00                                               |   |
| Outstanding at  June 30, 2002 |   | 1,852,760  |   | $                                                  | 2.04   |   |

 

37

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**(6)           Income Taxes**

 

The Company has incurredcumulative net operating losses since inception. The Company has not reflectedany tax benefit of such net operating loss carryforwards in the accompanyingconsolidated financial statements.

 

The income tax benefitdiffered from the amount computed by applying the U.S. federal income tax rateof 34% to income before income taxes as a result of the following:

 
|                                    |   | **2002** |   | **2001** |   |
|-----------------------------------------|--------|----------|--------|----------|--------|
| Federal  statutory tax rate benefits    |   | 34       | %      | (34      | )%     |
| State tax, net  of federal benefit      |   | 4        |   | (4       | )      |
| Benefits related  to foreign operations |   | (18.1    | )      | (25.1    | )      |
| Change in  valuation allowance          |   | (34.2    | )      | 70.9     |   |
| Permanent  differences and other        |   | 14.3     |   | (7.8     | )%     |
| Effective tax  rate                     |   | —   | %      | —   | %      |

 

The tax effect of temporary differences that give riseto significant portions of the deferred tax assets as of June 30 is presentedbelow:

 
|                                                     |   | **2002** |   | **2001** |   |
|----------------------------------------------------------|--------|----------|--------|----------|--------|
| Deferred  income tax assets:                             |   |     |   |     |   |
| Foreign  net operating loss carryforward                 |   | $        | 2,531  |     | $      | 2,391 |   |
| U.S.  net operating loss carryforward Stock compensation |   | 3,375    |   | 4,097    |   |
| Miscellaneous  reserves and accruals                     |   | 1,268    |   | 1,147    |   |
| Other                                                    |   | 291      |   | 95       |   |
| Total  gross deferred tax assets                         |   | 7,465    |   | 7,730    |   |
| Less: Valuation  allowance                               |   | (7,465   | )      | (7,730   | )      |
| Net deferred  income tax assets                          |   | $        | — |     | $      | — |   |

 

38

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In assessing therealization of deferred tax assets, management considers whether it is morelikely than not that some portion or all of the deferred tax assets will not berealized. The ultimate realization of deferred tax assets is dependent upon thegeneration of future taxable income during the periods in which those temporarydifferences become deductible.

 

Based on the level ofhistorical taxable income and projections of future taxable income over theperiods in which the deferred tax assets are deductible, management does notbelieve that it is more likely than not the Company will realize the benefitsof these deductible differences. Accordingly, the Company has provided avaluation allowance against the gross deferred tax assets as of June 30, 2002and 2001.

 

As of June 30, 2002, theCompany has reported U.S. net operating loss carryforwards of approximately$8,800,000. The net operating loss carryforwards expire in the years 2010through 2021.

 

Federal tax laws imposesignificant restrictions on the utilization of net operating loss carryforwardsin the event of a change in ownership of the Company which constitutes an“ownership change,” as defined by the Internal Revenue Code, Section 382. TheCompany’s net operating loss carryforward may be subject to the abovelimitations.

 

**(7)**                           NotePayable

 

In February 1998, theCompany entered into a loan agreement for approximately $927,000 with a thirdparty lender. During fiscal 1999, the Company borrowed an additional $480,000.The note was secured by the assets of the Company. The interest rate on theoutstanding principal balance was based on an index defined in the loanagreement plus 7%, with interest payable monthly. The balance on this note waspaid in full during fiscal year 2002.

 

**(8)**                           LicenseSale with Warrants

 

In June 2000 the Companyentered into an agreement with a customer whereby the customer agreed topurchase software licenses valued at $402,000 as well as related maintenanceand consulting services. In connection with this agreement, the Company issueda warrant to the customer for the purchase of up to 340,000 shares of theCompany’s stock at a price of $1.4156 per share. The warrant expires December31, 2007. The fair value of the warrant at the date of grant was estimated tobe approximately $401,000 using the Black-Scholes pricing model, which wasrecorded as a direct reduction of license revenue in the accompanyingconsolidated statement of operations for the year ended June 30, 2000. Thefollowing assumptions were used to calculate the expense: dividend yield of 0%;expected volatility of 60%; risk-free interest rate of 7.0%; and contractual lifeof seven years. In addition, as part of this agreement, the Company agreed topay royalties to the customer equal to 20% of all software and maintenance feespayable to the Company resulting from within the lodging, restaurant andhospital industries which utilize an application that is being co-developed bythe Company and the customer for those industries. The royalty fee is 50%, upto an amount equivalent to the licenses and services purchased by the customerand 20% thereafter.  During fiscal 2001,no royalty fees were incurred. During fiscal 2002, this royalty arrangement wascancelled.

 

InJune 2001, the Company sold additional software licenses to this customer forapproximately $213,000. In connection with this sale, the Company issuedwarrants for the purchase of up to 100,000 

 

39

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sharesof the Company’s stock at a price of $0.15 per share. The warrant will expirein seven years. The fair value of the warrant at the date of grant wasestimated to be approximately $10,000 using the Black-Scholes pricing model,which was recorded in the accompanying consolidated statement of operations forthe year ended June 30, 2001. The following assumptions were used to calculatethe expense: dividend yield of 0%; expected volatility of 60%; risk-freeinterest rate of 7.0%; and contractual life of seven years.

 

**(9)**                           Commitmentsand Contingencies

 

***Operating**Leases***

 

The Company leases certain facilities andequipment under noncancelable operating leases that expire at various datesthrough 2008. Future minimum lease commitments under these operating leases areas follows:

 

| **Year  ending June 30:** |   |    |      |
|---------------------------|--------|---------|-----------|
| 2003                      |   | $       | 320,000   |   |
| 2004                      |   | 279,000 |      |
| 2005                      |   | 221,000 |      |
| 2006                      |   | 163,000 |      |
| 2007                      |   | 139,000 |      |
| Thereafter                |   | 23,000  |      |
|                      |   | $       | 1,145,000 |   |

 

Rent expense underoperating leases for the years ended June 30, 2002 and 2001 were $744,000 and$973,000, respectively.

 

***Legal******proceedings***

 

The Company isinvolved in legal actions in the ordinary course of its business.  Although the outcome of any such legalactions cannot be predicted, management believes that there are no pending legalproceedings against or involving the Company for which the outcome is likely to have a material adverseeffect upon the Company’s financial position or results of operations.

 

**(10)**                    Notes Payable-Stockholder

 

The Company has received interest-bearing advancesfrom a stockholder under term notes. The notes bear interest at 8.5% per annumand expire December 31, 2006 with the right to demand payment on or afterSeptember 30, 2003. The notes are secured by substantially all the assets ofthe Company. Balances due under these notes were approximately $686,000 and$562,000 as of June 30, 2002 and 2001, respectively plus accrued interest ofapproximately $73,000 and $35,000, as of June 30, 2002 and 2001, respectively.These amounts have been included in liabilities in the accompanying balancesheets. Interest expense was $62,065 and $40,501 for the years ended June 30,2002 and 2001, respectively.

 

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In December 2001, adirector converted the remaining balance of an advance ($12,000) into 80,000shares of common stock at a price of $0.15 per share, the fair market value ofthe stock on the date of conversion.

 

**(11)         Industry Segment and Operations ByGeographic Areas:**

 

The Company operatespredominantly in one industry segment, being the design, development, supportand marketing of its proprietary management software solutions. The geographicdistributions of the Company’s revenue and long-lived assets are summarized inthe following table:

 
|                |   | **Year Ended  June 30,** |       |
|---------------------|--------|--------------------------|------------|
|                |   | **2002**                 |       | **2001** | ** ** |
| Total Revenues:     |   |                     |       |   |   |
| United States       |   | $                        | 5,429,000  |   | 4,860,000 |   |
| Australia           |   | 4,150,000                |       | 4,086,000 |   |
| United Kingdom      |   | 2,763,000                |       | 3,205,000 |   |
|                |   | $                        | 12,342,000 |   | 12,151,000 |   |
|                |   |                     |       |   |   |
| Long-Lived  Assets: |   |                     |       |   |   |
| United States       |   | $                        | 28,000     |   | 22,000 |   |
| Australia           |   | 30,000                   |       | 39,000 |   |
| United Kingdom      |   | 41,000                   |       | 44,000 |   |
|                |   | $                        | 100,000    |   | 105,000 |   |

 

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**(12)         Preferred Stock**

 

The Series A ConvertiblePreferred Stock ($10 par value) bears a 6.5% cumulative dividend rate payableJanuary 1 and July 1 of each year. Each share of Series A Convertible PreferredStock is convertible into eight shares of common stock. The Holder of eachshare of Series A Convertible Preferred Stock is entitled to eight votes,subject to adjustment. Upon an involuntary or voluntary liquidation ordissolution of the Company at any time, the holders of the Series A ConvertiblePreferred Stock are entitled to receive a liquidation preference of $10 pershare. The preferred stock may be called for redemption in whole or in part bythe Company for a redemption price of $11.70 per share.

 

***(13)         EmploymentAgreement***

 

On July 1, 1999, theCompany entered into a three-year employment agreement with its chief executiveofficer. This agreement included options to purchase 675,000 shares of commonstock at $1.33 per share. The fair value of the stock on the date of grant was$2.67 per share. The options vest over a period of three years and expire inJune 2006. Accordingly, the Company has recorded expenses of $301,500 per yearfor the years ended June 30, 2002 and 2001, respectively (and included inwarrants and stock options vested in Note 5).

 

On January 1, 2001, theCompany reached an agreement regarding an amendment to the above employmentagreement. As of that date, the executive’s base compensation was reduced to$180,000 from $380,000 per year. In addition, the executive will receive bonuscompensation based on the achievement of certain pre-determined audited annualearnings before interest and taxes. As part of this amendment, the executiveagreed to forgive compensation owed as of December 31, 2000 of approximately$242,000. This amount has been recorded in the period ended December 31, 2000as a credit to Additional Paid-in Capital. During the six-month period endedDecember 31, 2000, the Company has recorded salary expense of $90,000 to thechief executive officer, an amount that was never paid and was subsequentlyforgiven.

 

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

 

On March 29, 2001, theCompany entered into an installment agreement with the Internal Revenue Serviceregarding the repayment of past due payroll taxes, penalties and interest totalingapproximately $930,000. As of June 30, 2002, the balance due under thisagreement was approximately $210,000, including penalties and accrued interest.The Company is currently paying $50,000 per month on this obligation. Inconnection with this agreement, the Internal Revenue Service filed a federaltax lien against the Company’s assets. This lien will be removed once allpayments under the agreement are made.

 

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**(15)         Creditor Settlement Agreement**

 

InNovember 2001 the Company entered into a Stipulation of Settlement agreementwith a creditor for approximately $976,000 under which the Company agreed tomake quarterly principal payments through December 2003, at which time it wouldalso pay accrued interest on the unpaid principal balance from the date of theagreement to December 2003 at a rate of 9% per annum. In the event of default,the obligation would be accelerated, the interest rate would be increased to15% and legal fees in the amount of $100,000 would become due. The Company hasgranted a security interest in the receivables of CorVu North America, Inc. aspart of this settlement. As of June 30, 2002, the balance under thisobligation, which is included in accounts payable in the accompanying balancesheets, was approximately $650,000, including accrued interest.

 

**(16)         StockPurchase Plan**

 

In December 2000, theCompany established an employee stock purchase plan that allows employees topurchase common stock of the Company at a 15% discount. Under this plan, theCompany has reserved 500,000 shares of common stock for issuance under theplan. During fiscal year 2002, a total of 443,060 shares of common stock wereissued to plan participants. As of June 30, 2002, this plan has beentemporarily suspended.

 

**(17)**                    New Accounting Pronouncements

 

In June 2001, theFinancial Accounting Standards Board (FASB) issued Statement of FinancialAccounting Standards (SFAS) No. 143. “Accounting for Asset RetirementObligations.” SFAS No. 143 is effective for fiscal years beginning after June15, 2002.  The Company believes theadoption of SFAS No. 143 will not have a material effect on the Company’sconsolidated financial position or results of operations.

 

In October 2001, the FASB issued SFAS No. 144“Accounting for the Impairment or Disposal of Long–Lived Assets.” SFAS No. 144supersedes SFAS No. 121. SFAS No. 144 primarily addresses significant issuesrelating to the implementation of SFAS No. 121 and develops a single accountingmodel for long–lived assets to be disposed of, whether primarily held, used ornewly acquired.  The provisions of SFASNo. 144 will be effective for fiscal years beginning after December 15,2001.  The provisions of SFAS No. 144generally are to be applied prospectively. The Company believes the adoption of SFAS No. 144 will not have amaterial effect on the Company’s consolidated financial position or results ofoperations

 

In April 2002, the FASB issued SFAS No. 145,“Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB StatementNo. 13, and Technical Corrections.”  TheCompany believes the adoption of SFAS No. 145 will not have a material effecton the Company’s consolidated financial position or results of operation.

 

In June 2002, the FASB issued SFAS No. 146 “Accountingfor Costs Associated with Exit or Disposal Activities.”  SFAS No. 146 requires the recognition of aliability for a cost associated with an exit or disposal activity when theliability is incurred versus the date the Company commits to an exit plan.  In addition, SFAS No. 146 states theliability should be initially 

 

43

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measured at fair value.  The requirements of SFAS No. 146 are effective for exit ordisposal activities that are initiated after December 31, 2002.  The Company believes the adoption of SFASNo. 146 will not have a material effect on the Company’s consolidated financialposition or results of operations.

 

**(18)         Profit Sharing and 401(k) RetirementPlan**

 

The Company has a pre-tax salary reduction/profitsharing plan under the provisions of Section 401(k) of the Internal RevenueCode which covers employees meeting certain eligibility requirements. Anyemployer contributions are discretionary. There were no company contributionsfor the years ended June 30, 2002 and 2001.

 

**(19)**         **Subsequent Events (Unaudited)**

 

**Settlementof Litigation**

 

The Company and its officersand directors were involved in a lawsuit filed by certain shareholders forallegedly false and misleading information regarding the historical and futurefinancial performance of the Company. In September 2002, the Company entered aSettlement Agreement and Mutual Release to fully settle the matter. Terms ofthe settlement are covered by a confidentiality clause within the agreement.The settlement includes warrants to purchase 133,332 shares of common stock ata price of $0..21 per share. The expense, including legal fees,  recorded in the statement of operations was$225,000, for the year ended June 30, 2002.

 

**ConsultingAgreement**

 

In September 2002, the Company entered into aconsulting agreement with GlobalNet Venture Partners, L.L.C. (GlobalNet) toprovide management advisory services for a period of 30 months. In exchange forthese services, the Company will pay GlobalNet a fee of $26,500 per month. Inaddition, GlobalNet can earn additional fees under the agreement as a result ofits involvement in obtaining financing and for introducing and developingstrategic partnerships that result in revenue to the Company. The agreement canbe terminated by either party upon 60 days written notice. As part of theservices to be provided under this agreement, a principal of GlobalNet agreedto serve as the Company’s Chairman of the Board for a period of 24 months.

** **

**StockPurchase**

 

In September 2002, the Company sold 1.2 million sharesof the Company’s common stock to GlobalNet at a price of $0.27 per share undera stock purchase agreement. GlobalNet paid the entire purchase price bydelivering a promissory note to the Company and pledged the stock purchased assecurity for the note. The note, which expires in September 2009, bears aninterest rate of 5.5% per annum through September 2, 2009, with interestpayable quarterly starting September 30, 2002. The note is a limited recoursenote in that in the event of non-payment, the Company's only recourse isagainst the pledged shares.

 

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**ITEM 8.              CHANGES INACCOUNTANTS**

 

Previously reported.

 

**PART III**

 

**ITEM9.              DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS ANDCONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**

 

**Directors and Executive Officers**

 

The followingtable sets forth the name, age and position of each person who currently servesas a director and/or officer of our Company as of September 30, 2002. Ourdirectors serve for an indefinite term that expires at the next regular meetingof our shareholders, and until such directors’ successors are elected andqualified, or until such directors’ earlier death, resignation, disqualificationor removal as provided by law.

** **
| **Name**              |   | **Age** |   | **Position**                                  |
|-----------------------|--------|---------|--------|-----------------------------------------------|
| John A. Bohn          |   | 64      |   | Chairman                                      |
| David C. Carlson      |   | 46      |   | Chief Financial  Officer; Director            |
| Ismail Kurdi          |   | 33      |   | Director                                      |
| Justin M. MacIntosh   |   | 52      |   | President, Chief  Executive Officer; Director |
| James L. Mandel       |   | 45      |   | Director                                      |
| Alan M. Missroon, Jr. |   | 39      |   | Vice President Sales-  The Americas; Director |

 

John A. Bohn (Chairman). Mr. Bohn was namedChairman in September 2002. He currently serves as Chairman and Chief ExecutiveOfficer of GlobalNet Venture Partners, a consulting and investment firm.  Previously, Bohn was co-founder andExecutive Chairman of CheMatch.com, (now Chemconnect), an internet basedtrading exchange for petrochemicals; managing director for Burson-Marsteller,the world’s largest public relations firm; President and Chief ExecutiveOfficer of Moody’s Investors Service, the world’s leading credit research andanalysis company, and a major publisher of financial information; President andChairman of the Export Import Bank of the United States, a U.S. Governmentcorporation that finances and insures the sale abroad of American producedgoods; Special Assistant to the Secretary of the Treasury, and U.S. Ambassadorand Executive Director at the Asian Development Bank in Manila.  Additionally, Mr. Bohn has practiced law inCalifornia and in Asia-Pacific, and he spent 13 years as an internationalbanker.

 

David C. Carlson(Chief Financial Officer; Director). Before joining CorVu Corporation as Chief Financial Officer in July1996, Mr. Carlson gained extensive experience in the area of accounting andbusiness operations.  He served fromJuly 1979 to July 1984 in the audit division of Arthur Andersen & Co.  From July 1984 to April 1989, he held theposition of Controller and later, Vice President of Finance at CanterburyDowns, a horse racing facility.  Hejoined the Minnesota Timberwolves, a professional sports franchise, in April1989 as Controller, a position he subsequently held at a local health and fitnesschain until May 1996; the sports franchise and

 

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the health and fitnesschain were under common ownership.  Mr.Carlson is responsible for all areas of financial management of ourCompany.  He became a member of theboard of directors of CorVu Corporation in December 1996 and was elected to theboard of directors of the Company in January 2000.

 

Ismail Kurdi(Director).  Mr. Kurdi received aBachelor of Science from Boston University in May 1992.  From September 1992 to September 1993, he waswith Oxy USA, a subsidiary of Occidental Petroleum.  In October 1993, he relocated back to England where he is a realestate developer and investor.  Heserves on the board of directors for several British property companies whichare not reporting companies.  Mr. Kurdiwas elected to the board of directors of CorVu Corporation in December 1996 andwas elected to the board of directors of the Company in January 2000.  He currently spends approximately 10% of histime on CorVu’s business affairs.

 

Justin M.MacIntosh (President, Chief Executive Officer; Director).  After a career in the equity and real estatemarkets of Australia, Mr. MacIntosh founded MACS Software Company, a providerof business application software, in 1977. He served as Chairman and CEO of MACS until he founded the former parentcompany of CorVu in Australia in 1990. Since the incorporation of CorVu Corporation in Minnesota in September1995, Mr. MacIntosh has served as Chairman, President and Chief ExecutiveOfficer, and as a director of the company. He was elected as director, Chairman of the Board, President and ChiefExecutive Officer of the Company in January 2000.

 

James L. Mandel(Director).  Mr. Mandel has been adirector of Minnesota American since 1987. He has been the Chief Executive Officer and a director of Vicom Inc., afull service telecommunications company which is reporting to the SEC under theSecurities Exchange Act of 1934 and is headquartered in Minneapolis, sinceSeptember 1998.  From January 1997 toSeptember 1998, he was Chairman of Call 4 Wireless LLC and from January 1992 toFebruary 1997, he served as a Vice President of Grand Casinos, Inc.  Mr. Mandel was elected to the board ofdirectors in September 1987*.* He currently spends approximately 10% of his time on Corvu’s businessaffairs.

 

Alan M. Missroon,Jr. (Vice President Sales- The Americas; Director).  Mr. Missroon gained his knowledge of the business intelligencemarket while working at Burroughs Corporation (Unisys) and during his eightyears (from July 1987 to November 95) at IQ Software Corporation in which hebecame familiar with a variety of positions in sales, sales management, productdesign, and marketing.  From December1995 to December 1996, he worked at Praxis International.  Mr. Missroon is responsible for directingthe salesforce in the Americas region. He joined CorVu Corporation in January 1997 and was elected as one ofthe directors of CorVu Corporation in February 1997.  He was elected to the board of directors of the Company inJanuary 2000.

 

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**Section 16(a) Reporting Compliance**

 

Section 16(a) ofthe Securities Exchange Act of 1934 requires CorVu’s executive officers anddirectors, and persons who own more than 10 percent of our common stock, tofile with the Securities and Exchange Commission initial reports of ownershipand reports of changes in ownership of common stock and other equity securitiesof CorVu.  Officers, directors andgreater than 10% shareholders (“Insiders”) are required by SEC regulations tofurnish us with copies of all Section 16(a) forms they file.

 

To our knowledge,based on a review of the copies of such reports furnished to us, for the fiscalyear ended June 30, 2002 all Section 16(a) filing requirements applicable toInsiders were complied with except that David Carlson was late filing a Form 5reporting a purchase of stock from CorVu.

 

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**ITEM 10.              EXECUTIVECOMPENSATION**

 

**SummaryCompensation Table**

 

The following table sets forth all cashcompensation paid or to be paid by CorVu, as well as certain othercompensation, paid or accrued, during each of CorVu’s last three fiscal yearsto the Chief Executive Officer and to the other executive officers whose totalannual salary and bonus paid or accrued during fiscal year 2002 exceeded$100,000.

 
|                                                      |   |              |   |                      |   |                    |   |                                |   | **Long Term Compensation**                |   |                    |   |
|-----------------------------------------------------------|--------|-------------------|--------|---------------------------|--------|-------------------------|--------|-------------------------------------|--------|-------------------------------------------|--------|-------------------------|--------|
|                                                      |   |              |   |                      |   |                    |   | **Awards**                          |   | **Payouts**                               |   |                    |   |
| **Name and Principal  Position**                          |   | **Fiscal  Year**  |   |                      |   | **Other ($)**           |   | **Restricted  Stock  Awards   ($)** |   | **Securities  Underlying  Options   (#)** |   | **LTIP  Payouts   ($)** |   | **All Other  Compensation  ($)** |   |
|                                                      |
| **Annual Compensation**                                   |
| **Salary ($)**                                            |   | **Bonus ($)**     |
| Justin M. MacIntosh(1)  Chief Executive Officer           |   | 2002   2001  2000 |   | 278,818  276,800  442,640 |   | 192,656  —  — |   | 20,594  —  —              |   | —  —  —                    |   | —  40,000  843,750 |   | —  —  — |   | —  —  — |   |
|                                                      |   |              |   |                      |   |                    |   |                                |   |                                      |   |                    |   |   |   |   |   |
| David C. Carlson  Chief Financial Officer                 |   | 2002   2001  2000 |   | 116,667  115,000  115,000 |   | 29,166  13,500  52,000  |   | —  —  —              |   | —  —  —                    |   | —  125,000  90,000 |   | —  —  — |   | —  —  — |   |
|                                                      |   |              |   |                      |   |                    |   |                                |   |                                      |   |                    |   |   |   |   |   |
| Alan M. Missroon, Jr.  Vice President Sales- The Americas |   | 2002  2001  2000  |   | 150,000  150,000  150,000 |   | —  20,000  80,000  |   | 63,587  —  —              |   | —  —  —                    |   | —  125,000  53,750 |   | —  —  — |   | —  —  — |   |

 

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(1)   $242,000 of fiscal 2000 and 2001 salaryamounts were subsequently forgiven by Mr. MacIntosh as part of his amendedemployment contract.

 

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**Option Grants During 2002 Fiscal Year**

 

There were no optionsgranted to executive officers during fiscal 2002.

 

**Option Exercises During 2002 Fiscal Year and Fiscal Year-EndOption Values**

 

No options were exercised by the named executive officers during fiscal2002.  The following table providesinformation related to the number and value of options held at June 30, 2002:

 
|                  |   | **Number of Securities  Underlying Unexercised  Options at Fiscal Year End** |   | **Value of  Unexercised In-the-  Money Options at Fiscal Year End(1)** |   |
|-----------------------|--------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
| **Name**              |   | **Exercisable**                                                              |   | **Unexercisable**                                                      |   | **Exercisable** |   | **Unexercisable** |   |
| Justin M. MacIntosh   |   | 926,667                                                                      |   | 13,333                                                                 |   | $ | 2,667 |   | $ | 1,333 |   |
|                  |   |                                                                         |   |                                                                   |   |   |   |   |   |
| David C. Carlson      |   | 330,834                                                                      |   | 41,666                                                                 |   | $ | 4,000 |   | $ | 2,000 |   |
|                  |   |                                                                         |   |                                                                   |   |   |   |   |   |
| Alan M. Missroon, Jr. |   | 293,334                                                                      |   | 41,666                                                                 |   | $ | 4,000 |   | $ | 2,000 |   |

 

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(1)                                  Value is calculated on the basis of the differencebetween the option exercise price and $0.30, the average of the closing bid andask price on June 30, 2002, as quoted on the OTC Bulletin Board.

 

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**Employment Agreements**

 

Effective July 1,1999, CorVu entered into a three-year employment agreement with Justin M. MacIntosh.  Pursuant to the agreement, Mr. MacIntoshserves as our Chairman, President and Chief Executive Officer.  During the term of the agreement, Mr.MacIntosh will be paid annual base salaries of $330,000 for the firstemployment year, $380,000 for the second and $420,000 for the third employmentyear.  He was also granted options topurchase a total of 675,000 shares of our Company’s common stock at $1.33 pershare, with 225,000 of these options vesting at the beginning of eachemployment year.  Subsequently, onJanuary 1, 2001, CorVu reached an agreement with Mr. MacIntosh on an amendmentto his employment agreement. Base compensation was reduced to $180,000 peryear. In addition, Mr. MacIntosh will receive bonus compensation based on theachievement of certain pre-determined audited annual earnings before interestand taxes. As part of this amendment, Mr. MacIntosh agreed to forgiveapproximately $242,000 of compensation owed as of December 31, 2000. Mr.MacIntosh will participate in any retirement, welfare and other benefit programour Company provides for its executive officers.  Mr. MacIntosh will receive payments in the amount of at least 9monthly installments of the base salary in effect at the time of termination ifwe terminate his employment without cause. Mr. MacIntosh is subject to certain confidentiality and non-competeprovisions under the agreement. In addition, Mr. MacIntosh receives an annualsalary of approximately $99,000 for his duties as Managing Director of CorVuAustralasia Pty Ltd and , effective October 1, 2001, an override commissionequal to 2.5% of all license revenue for the United Kingdom/Europe region forhis duties as Sales Director in that region.

 

Effective July 15,1996, CorVu entered into a one-year employment agreement with David C. Carlsonthat was amended as of July 20, 1998. Pursuant to the agreement Mr. Carlson will serve as our Chief FinancialOfficer.  The term of the agreement is automaticallyrenewed for successive one-year periods unless the agreement has beenterminated earlier.  Effective July 15,2002, Mr. Carlson receives an annual base salary in the amount of $137,500 andup to an additional 25% quarterly bonus payments, based on attaining quarterlybusiness plan results.  Mr. Carlson willparticipate in any retirement, welfare and other benefit program our Companyprovides for its executive officers. Both parties to the agreement can terminate the agreement without causeupon 60 days prior written notice.  Mr.Carlson is subject to certain confidentiality provisions under the agreement.

 

Effective January2, 1997, CorVu entered into a one-year employment agreement with Alan M.Missroon, Jr..  The agreement isautomatically renewed for successive one year terms unless terminated earlier.  Mr. Missroon receives an annual base salaryof $150,000 and an override commission equal to 2% of all license and servicesrevenue for The Americas region.  Mr.Missroon will participate in any retirement, welfare and other benefit programour Company provides for its executive officers.  If we terminate his employment without cause, Mr. Missroon willreceive his base salary for a period of three months after the date oftermination, with an additional one month of base pay added for each year ofemployment up to a maximum of six months. Mr. Missroon is subject to certain confidentiality and non-competeprovisions under the agreement.

 

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**Directors’ Compensation**

 

For fiscal year2001, directors who are not employees of CorVu were compensated at the rate of$900 per month plus $900 for each Board meeting attended and $500 for eachcommittee meeting attended.  Inaddition, on July 21, 2000, each nonemployee director received a five-yearnonqualified option to purchase 10,000 shares at an exercise price of $2.50 pershare, which was the market value of CorVu’s common stock on the date of grant.

 

For fiscal year2002, directors who are not employees of CorVu are to be compensated at therate of $1,225 per month plus $1,225 for each Board meeting attended and $500for each committee meeting attended.  Inaddition, on July 11, 2001, each nonemployee director received a five-yearnonqualified option to purchase 10,000 shares at an exercise price of $0.12 pershare, which was the market value of CorVu’s common stock on the date of grant.

 

Pursuant to a letter agreement dated June 19, 2002between the Company and GlobalNet Venture Partners, L.L.C. (“GlobalNet”),GlobalNet will provide certain consulting services to the Company and receivefees for such services.  Based on theagreement, effective September 3, 2002, John Bohn, a principal of GlobalNet,became the Chairman of the Company’s Board of Directors.  See Item 12 “Certain Relationships andrelated Transactions” below.

 

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**ITEM 11.              SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

The following table provides information as of September 15, 2002,concerning the beneficial ownership of our Company’s common stock by (i) eachdirector of the company, (ii) each executive officer named in the SummaryCompensation Table, (iii) the persons known by us to own more than 5% of ouroutstanding common stock, and (iv) all directors and executive officers as agroup.  Except as otherwise indicated,the persons named in the table have sole voting and investment power withrespect to all shares of common stock owned by them.

 
| **Name or Identity of Group**                                                                           |   | **Common  Stock**     |   | **Preferred  Stock**                      |   | **Percent of  Common and  Preferred Combined** |   |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|-------------------------------------------|--------|------------------------------------------------|--------|
| **Number of  Shares  Beneficially Owned**                                                               |   | **Percent of  Class** |   | **Number of  Shares  Beneficially Owned** |   | **Percent of  Class**                          |
|                                                                                                    |   |                  |   |                                      |   |                                           |   |   |   |   |   |
| John  A. Bohn(2)                                                                                   |   | 1,200,000             | (3)    | 5.4                                       | %      | —                                         |   | — |   | 5.4 | % |
| David C.  Carlson(2)                                                                                    |   | 549,985               | (4)    | 2.4                                       | %      | —                                         |   | — |   | 2.4 | % |
| Ismail Kurdi(2)                                                                                         |   | 1,582,825             | (5)    | 7.1                                       | %      | —                                         |   | — |   | 7.1 | % |
| Justin M.  MacIntosh(2)                                                                                 |   | 9,418,654             | (6)    | 40.7                                      | %      | —                                         |   | — |   | 40.7 | % |
| James L.  Mandel(2)                                                                                     |   | 244,061               | (7)    | 1.1                                       | %      | —                                         |   | — |   | 1.1 | % |
| Alan M.  Missroon, Jr.(2)                                                                               |   | 402,561               | (8)    | 1.8                                       | %      | —                                         |   | — |   | 1.8 | % |
| Directors and  executive officers as a group                                                            |   | 13,398,086            | (9)    | 56.2                                      | %      | —                                         |   | — |   | 56.2 | % |
| Troy Rollo(10)                                                                                          |   | 1,124,867             | (11)   | 5.0                                       | %      | —                                         |   | — |   | 5.0 | % |
| Alice L. Lorimer  and Vincent T. Lorimer, Trustees, Vincent T. Lorimer Revocable Trust dtd  2/15/90(12) |   | —                |   | —                                    |   | 200                                            |   | 100 | % | * |   |
| Opella Holdings  Limited(13)                                                                            |   | 7,541,733             | (14)   | 34.0                                      | %      | —                                         |   | — |   | 34.0 | % |
| Dominic K.K.  Sum(13)                                                                                   |   | 7,541,733             | (15)   | 34.0                                      | %      | —                                         |   | — |   | 34.0 |   |

 

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*Less than 1%

 

(1)                                  Foreach person or group, any securities that the person or group has the right toacquire within 60 days pursuant to options, warrants, conversion privileges orother rights, have been added to the total amount of outstanding shares whendetermining the percent owned by such person or group.

 

(2)           Address:3400 W. 66th Street, Suite 445, Edina, MN 55435.

 

(3)                                  Mr.Bohn's beneficial ownership consists of 1,200,000 shares of Common Stock heldby GlobalNet Venture Partners, LLC. Mr. Bohn disclaims beneficial ownership ofthese shares except to the extent of his pecuniary interest therein as a memberof GlobalNet Venture Partners, LLC.

 

(4)                                  Mr. Carlson’s beneficial ownership includes342,500 shares of Common Stock which may be purchased upon exercise of options.

 

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(5)           Mr. Kurdi’sbeneficial ownership includes 20,000 shares which may be purchased upon exerciseof options.

 

(6)                                  Mr.MacIntosh’s beneficial ownership includes (i) 7,541,733 shares registered inthe name of Barleigh Wells Limited (see also footnotes 14 and 15), (ii) 926,666shares of Common Stock which may be purchased upon exercise of options held byMr. MacIntosh, and (iii) 234,244 shares of Common Stock held by Mr. MacIntosh’sspouse and a company controlled by his spouse. Mr. MacIntosh disclaims beneficial ownership of the shares owned by hisspouse.

 

(7)                                  Mr.Mandel’s beneficial ownership includes (i) 55,000 shares which may be purchasedupon exercise of options held by Mr. Mandel and (ii) 40,350 shares held by Mr.Mandel’s spouse.  Mr. Mandel disclaimsbeneficial ownership of the shares owned by his spouse.

 

(8)                                  Mr.Missroon’s beneficial ownership includes 305,000 shares of Common Stock whichmay be purchased upon exercise of stock options.

 

(9)                                  Includes1,649,166 shares which may be purchased upon exercise of stock options.

 

(10)                            Address:C/-Crispin & Jeffery, Level 2, 57 Grosvenor Street, Neutral Bay NSW 2089,AUSTRALIA.

 

(11)                            Mr.Rollo’s beneficial ownership includes 982,325 shares of Common Stock held byRollosoft Pty. Limited and (ii) 142,542 shares of Common Stock which may bepurchased upon exercise of stock options.

 

(12)                            Address:  1301 E. 100th Street, Apt. #112,Bloomington, MN 55425-2631.

 

(13)                            Address:c/o Tempio Corporate Consultants Limited, Suite 701, 7/F, 6-8 Pottinger Street,Central, HONG KONG.

 

(14)                            OpellaHoldings Limited as trustee of The Asia Pacific Technology Trust is thebeneficial owner of 7,541,733 shares of Common Stock registered in the name ofBarleigh Wells Limited as street name holder.Opella Holdings Limited sharesbeneficial ownership of the shares with Mr. MacIntosh (see footnote 6) and Mr.Sum (see footnote 15).

 

(15)                            Mr.Sum is the sole shareholder of Opella Holdings Limited (see footnote 14).  The director of Opella Holdings Limited isPio Services Limited whose sole shareholder is Tempio Group of CompaniesLimited which in turn is wholly owned by Mr. Sum.  Pio Services Limited has two directors, one of which is Mr. Sum.

 

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**ITEM12.              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

On March 31, 2000,David Carlson, the Chief Financial Officer and a director of CorVu, and hiswife Cynthia loaned CorVu $300,000. Interest payable was based upon a bank index rate plus 2%.  As of June 30, 2001, the balance due underthis loan was $50,000. During fiscal year 2002, $38,000 of this note was repaidwith the remaining $12,000 converted to common stock at a price of $0.15 pershare, the fair market value of the stock on the date of conversion.

 

Delia S.MacIntosh, the wife of Justin M. MacIntosh, the President, Chief ExecutiveOfficer of CorVu and one of our Directors, has advanced money to CorVu underterm notes.  As of the end of fiscalyear 2002, CorVu owed approximately $759,000 on these notes, including accruedinterest of approximately $73,000.  Theterm notes bear interest at 8.5% per annum and are due on demand. The notesexpire December 31, 2006 and are secured by substantially all of the assets ofthe Company.

 

As noted in Item 10, theCompany and GlobalNet entered into a letter agreement dated June 19, 2002, inwhich GlobalNet agreed to provide various consulting services to theCompany.  As part of the servicesprovided to the Company, John Bohn, GlobalNet’s Managing Member, agreed toserve as the chairman of the Company’s board for a 24-month term.  GlobalNet’s agreement to consult was subjectto its conducting a thorough due diligence review.  By letter dated August 23, 2002, GlobalNet informed CorVu that ithad completed its due diligence and would proceed with its engagement.  The letter agreement has a term of 30 monthsand provides for a one-time engagement fee in the amount of fifty thousandDollars ($50,000) which was payable in equal installments upon the signing ofthe letter agreement and the completion of the due diligence review.  During the term of the agreement, theCompany will pay GlobalNet a monthly fee in the amount of $26,500, payable asfollows: $16,500 per month for the initial six months of the engagementcommencing on September 1, 2002; $36,500 per month during the following sixmonths, and $26,500 per month for the next 18 month, provided that if theagreement is terminated by either party, the $10,000 per month that is deferredin the first six months will be paid promptly to the extent it has not beenrecouped during the six month payments of $36,500.

 

The Company sold 1,200,000 sharesof the Company’s common stock at a price of $.27 per share (the closing bidprice for CorVu’s Common Stock on June 18, 2002) under a stock purchaseagreement with GlobalNet.  GlobalNetpaid for the stock by executing a seven-year promissory note for $324,000, withinterest at 5.5% per annum, payable quarterly. The entire principal amountbecomes due on the seventh anniversary of the note.  GlobalNet has pledged the stock to the Company as a security forGlobalNet’s payment obligations under the note.  In the event GlobalNet or the Company terminates GlobalNet’sconsulting services during the 30-month period, the amount of sharespurchasable by GlobalNet is reduced proportionately.  The note is a limited recourse note in that in the event ofnon-payment, the Company’s only recourse is against the pledged shares.

 

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**ITEM 13.              EXHIBITS ANDREPORTS ON FORM 8-K**

 

(a)             Exhibits.

 

See “ExhibitIndex” immediately following the signature page of this Form 10-KSB.

 

55

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SIGNATURES

 

In accordance withSection 13 or 15(d) of the Exchange Act, the Registrant has caused this Reportto be signed on its behalf by the undersigned, thereunto duly authorized.

 
|                            |   |   | CORVU  CORPORATION |
|---------------------------------|--------|--------|--------------------|
|                            |   |   |               |   |
|                            |   |   |               |   |
| Dated:  September 30, 2002 |   |   | By:                | /s/ Justin M.  MacIntosh |
|                            |   |   |               | Justin M. MacIntosh, Chief Executive Officer |

 

In accordance withthe Exchange Act, this Report has been signed by the following persons onbehalf of the Registrant and in the capacities and on the dates indicated.

 

(Power of Attorney)

 

Each person whosesignature appears below constitutes and appoints JUSTIN M. MACINTOSH and DAVIDC. CARLSON as true and lawful attorneys-in-fact and agents, each acting alone,with full power of substitution and resubstitution, for him and in his name,place and stead, in any and all capacities, to sign any or all amendments tothis Annual Report on Form 10-KSB and to file the same, with all exhibitsthereto, and other documents in connection therewith, with the Securities andExchange Commission, granting unto said attorneys-in-fact and agents, eachacting alone, full power and authority to do and perform each and every act andthing requisite and necessary to be done in and about the premises, as fully toall intents and purposes as he might or could do in person, hereby ratifyingand confirming all said attorneys-in-fact and agents, each acting alone, or hissubstitute or substitutes, may lawfully do or cause to be done by virtue thereof.

 
| **Signature and Title**                                                                               |   | **Date**           |
|-------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                  |   |               |
| /s/ Justin M.  MacIntosh                                                                              |   |               |   |
| Justin M.  MacIntosh, President and Chief Executive Officer  (principal executive officer)            |   | September 30, 2002 |
|                                                                                                  |   |               |
| /s/ David C.  Carlson                                                                                 |   |               |   |
| David C.  Carlson, Chief Financial Officer and Director (principal  financial and accounting officer) |   | September 30, 2002 |
|                                                                                                  |   |               |
| /s/ Ismail Kurdi                                                                                      |   |               |   |
| Ismail Kurdi,  Director                                                                               |   | September 30, 2002 |
|                                                                                                  |   |               |
| /s/ James L.  Mandel                                                                                  |   |               |   |
| James L. Mandel,  Director                                                                            |   | September 30, 2002 |
|                                                                                                  |   |               |
| /s/ Alan M.  Missroon, Jr.                                                                            |   |               |   |
| Alan M.  Missroon, Jr., Director                                                                      |   | September 30, 2002 |
|                                                                                                  |   |               |
| /s/ John A. Bohn                                                                                      |   |               |   |
| John A. Bohn,  Chairman of the Board                                                                  |   | September 30, 2002 |

 

56

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CERTIFICATION

 

 

I, Justin M.MacIntosh, Chief Executive Officer of CorVu Corporation, certify that:

 

1.             I have reviewed this annual reporton Form 10-KSB of CorVu Corporation;

 

2.             Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report; and

 

3.             Based on my knowledge, thefinancial statements, and other financial information included in this annualreport, fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of, and for, theperiods presented in this annual report.

 

Date:       September 30, 2002.

 

 
|   |   | /s/ Justin M. MacIntosh |
|--------|--------|-------------------------|
|   |   | Justin M. MacIntosh     |
|   |   | Chief Executive Officer |

 

57

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CERTIFICATION

 

 

I, David C.Carlson, Chief Financial Officer of CorVu Corporation, certify that:

 

1.             I have reviewed this annual reporton Form 10-KSB of CorVu Corporation;

 

2.             Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report; and

 

3.             Based on my knowledge, thefinancial statements, and other financial information included in this annualreport, fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of, and for, theperiods presented in this annual report.

 

Date:       September 30, 2002.

 

 
|   | /s/ David C. Carlson    |
|--------|-------------------------|
|   | David C. Carlson        |
|   | Chief Financial Officer |

 

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**CORVU CORPORATION**

**EXHIBIT INDEX FOR**

**FORM 10-KSB FOR 2002 FISCAL YEAR**

 
| **Exhibit  Number** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 2                   |   | Agreement and Plan of  Reorganization between CorVu Corporation and Minnesota American, Inc. dated  as of November 17, 1999—incorporated by reference to Exhibit 2 to  Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                                                        |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1                 |   | Articles of  Incorporation of the Registrant as amended to date—incorporated by reference  to Exhibit 3.1 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                                                                                                                  |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2                 |   | Bylaws—incorporated by  reference to Exhibit 3.2 to the Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                                                                                                                                                                       |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4                   |   | Rights of Holders of  Series A Convertible Preferred Stock—see Article 3 of Articles of  Incorporation (Exhibit 3.1)                                                                                                                                                                                                                                                                                                                                           |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.1                |   | Subscription Agreement  and Letter of Investment Intent, dated April 27, 1999, from Ismail Kurdi,  accepted by CorVu Corporation, to Purchase 150,000 Shares of Common Stock and  Warrants to Purchase 150,000 Shares of Common Stock of CorVu Corporation,  including Warrant to Ismail Kurdi to Purchase 150,000 Shares of Common Stock  of CorVu Corporation—incorporated by reference to Exhibit 10.1 to  Registrant’s Form 10-SB, File No. 000-29299 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.2                |   | Subscription Agreement  and Letter of Investment Intent, dated June 30, 1999, from Ismail Kurdi,  accepted by CorVu Corporation, to Purchase 125,000 Shares of Common Stock and  Warrants to Purchase 125,000 Shares of Common Stock of CorVu Corporation,  including Warrant to Ismail Kurdi to Purchase 125,000 Shares of Common Stock  of CorVu Corporation—incorporated by reference to Exhibit 10.2 to  Registrant’s Form 10-SB, File No. 000-29299  |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.3                |   | Subscription Agreement  and Letter of Investment Intent, dated June 30, 1999, from Ismail Kurdi to  Subscribe for 395,000 Shares of Common Stock of CorVu Corporation in full  satisfaction and payment of cash advances—incorporated by reference to  Exhibit 10.3 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                        |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.4                | *      | Employment Agreement  between Registrant and Justin MacIntosh, dated July 1, 1999—incorporated by  reference to Exhibit 10.4 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                                                                                               |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.5                | *      | Employment Agreement  between Registrant and David C. Carlson, dated July 15, 1996 and amended July  20, 1999—incorporated by reference to Exhibit 10.5 to Registrant’s Form  10-SB, File No. 000-29299                                                                                                                                                                                                                                                   |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.6                | *      | Employment Agreement  between Registrant and Alan M. Missroon, dated January 2, 1997—incorporated  by reference to Exhibit 10.6 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                                                                                            |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

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| 10.7   |   | Lease Agreement between  United Properties Investment LLC. and CorVu Corporation for premises at 3400  West 66th Street, Edina, Minnesota.                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.8   |   | Commercial Lease  between Viestall Pty. and CorVu Australasia Pty. Ltd., dated April 15, 1999,  for the premises at Level 4, 1 James Place, North Sydney–incorporated by  reference to Exhibit 10.8 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.9   |   | Underlease between  Michael John Haynes, Raymond John Evans, Terrance Guy Hawker and CorVu PLC  and CorVu Corporation for premises at Craven House, 40 Uxbridge Road, London  W5—incorporated by reference to Exhibit 10.9 to Registrant’s Form 10-SB, File  No. 000-29299                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.10  |   | Loan Agreement between  CorVu Australasia Pty Ltd, CorVu North America, Inc., CorVu PLC and Integral  Business Finance Pty. Limited—incorporated by reference to Exhibit 10.10 to  Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.11  |   | Specific and Floating  Charge / Deed of Charge between CorVu Australasia Pty Ltd. and Integral  Business Finance Pty. Limited—incorporated by reference to Exhibit 10.11 to  Registrant’s Form 10-SB, File No.  000-29299                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.12  |   | Letter Agreement  between CorVu Corporation and Jon Adams Financial Co., L.L.P., dated 12 May,  1999, as amended October 27, 1999-incorporated by reference to Exhibit 10.12  to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.13  |   | Bridge Loan Agreement  dated as of November 15, 1999 between CorVu Corporation and Gildea Management  Company – The Network Funds, including Subordinated Unsecured Convertible  Promissory Note for $250,000, and Warrant for up to 250,000 Shares of Common  Stock of CorVu Corporation, both as of November 15, 1999—incorporated by  reference to Exhibit 10.13 to Registrant’s Form 10-SB, File No. 000-29299 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.14  |   | Bridge Loan Agreement  dated as of November 15, 1999 between CorVu Corporation and Calton, Inc.,  including Subordinated Unsecured Convertible Promissory Note for $250,000,  and Warrant for up to 250,000 Shares of Common Stock of CorVu Corporation,  both as of November 15, 1999—incorporated by reference to Exhibit 10.14 to  Registrant’s Form 10-SB, File No. 000-29299                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.15  | *      | CorVu Corporation 1996  Stock Option Plan, as amended through November 30, 1999 and approved by the  shareholders at their meeting on January 13, 2000—incorporated by reference  to Exhibit 10.15 to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.16  | *      | Minnesota American,  Inc. 1993 Stock Incentive Plan as amended and approved by the shareholders at  their meeting on January 30, 1996—incorporated by reference to Exhibit 10.16  to Registrant’s Form 10-SB, File No. 000-29299                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.17  | *      | Amendment to Employment  Agreement between CorVu Corporation and Justin MacIntosh, dated January 1,  2001—incorporated by reference to Exhibit 10.16 to Registrant’s Form 10-KSB  for the fiscal year ended June 30, 2001, File No. 000-29299                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.18  |   | Letter Agreement dated  June 19, 2002 between CorVu Corporation and GlobalNet Venture Partners, LLC                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

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| 10.19  |   | Stock Purchase  Agreement dated June 19, 2002 between CorVu Corporation and GlobalNet Venture  Partners, LLC—incorporated by reference to Exhibit A to Schedule 13D of  GlobalNet Venture Partners, LLC filed September 19, 2002                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                        |
| 10.20  |   | Amendment dated  September 3, 2002 to Stock Purchase Agreement dated June 19, 2002 between  CorVu Corporation and GlobalNet Venture Partners, LLC—incorporated by  reference to Exhibit B to Schedule 13D of GlobalNet Venture Partners, LLC  filed September 19, 2002 |
|   |   |                                                                                                                                                                                                                                                                        |
| 10.21  |   | Secured Promissory Note  dated September 3, 2002 in the principal amount of $324,000 from GlobalNet  Venture Partners, LLC to CorVu Corporation—incorporated by reference to  Exhibit C to Schedule 13D of GlobalNet Venture Partners, LLC filed September  19, 2002   |
|   |   |                                                                                                                                                                                                                                                                        |
| 10.22  |   | Pledge Agreement dated  September 3, 2002 between GlobalNet Venture Partners, LLC and CorVu  Corporation–incorporated by reference to Exhibit D to Schedule 13D of  GlobalNet Venture Partners, LLC filed September 19, 2002                                           |
|   |   |                                                                                                                                                                                                                                                                        |
| 21     |   | Subsidiaries of the  CorVu Corporation                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                        |
| 23     |   | Consent of Independent  Auditors - Virchow, Krause & Company, LLP                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                        |
| 24     |   | Power of Attorney  (contained on Signature Page of this Form 10-KSB)                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                        |

 

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*            Indicates a management contract or compensatoryplan or arrangement required to be filed as an exhibit to this Form 10-KSB.

 

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