UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2006

                         COMMISSION FILE NO.: 000-29299

                                CORVU CORPORATION
                 (Name of Small Business Issuer in its charter)

          MINNESOTA                                           41-1457090
(State or other jurisdiction of                             (IRS Employer
incorporation or organization)                          Identification Number)

                  3400 WEST 66TH STREET, EDINA, MINNESOTA 55435
               (Address of principal executive offices)(Zip Code)

                    Issuer's telephone number: (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) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |X| NO |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

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

Issuer's revenues for its most recent fiscal year: $15,392,396.

The aggregate market value of the Common Stock held by nonaffiliates of the
registrant as of August 31, 2006 was approximately $6,300,000 based upon the
closing price of the registrant's Common Stock on such date.

There were 49,518,268 shares of Common Stock outstanding as of August 31, 2006.

                       DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference pursuant to Rule 12b-23: Portions of the
registrant's proxy statement for its 2006 Annual Meeting to be held on December
7, 2006 are incorporated by reference into Items 9, 10, 11, 12 and 14 of Part
III.

Transitional Small Business Disclosure Format (Check one). YES |_| NO |X|

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT

We are a holding company that develops and sells business performance management
software products and related professional services through our subsidiaries:
CorVu North America, Inc. (incorporated in Minnesota, responsible for North and
South America); CorVu Plc (incorporated in England, responsible for United
Kingdom/Europe), CorVu Australasia Pty. Ltd. (incorporated in Australia,
responsible for the Asia-Pacific region), CorVu Software Marketing, Inc.
(incorporated in Minnesota, currently inactive), and CorVu Latin America, Inc.
(incorporated in Minnesota, currently inactive). CorVu Australasia Pty. Ltd has
two subsidiaries, CorVu Asia Limited, incorporated under the laws of China, and
CorVu Asia Pacific Pte Limited, incorporated under the laws of Singapore.

The Company was incorporated in Minnesota as J.B Goodhouse on September 29,
1983. On April 28, 1988, it changed its name to Lockermate Corporation, and on
October 20, 1992, it changed its name to Minnesota American, Inc. Following the
merger of CorVu Corporation, a privately held company, with and into the Company
on January 14, 2000, the Company continued to operate the business of the
privately held company and changed its name to "CorVu Corporation".

BUSINESS OF ISSUER

(i) Our Principal Products and Services

CorVu is a provider of performance management software products. The CorVu
solution enables organizations to proactively monitor and manage business
performance. The most recent software release, CorVu 5, combines performance
metrics, reporting and analysis, budgeting and planning, objectives,
initiatives, and risk management in a single application. As a web-based,
purpose-built application, CorVu 5 can be deployed quickly to a large number of
users across the enterprise. CorVu's product offerings are supported and
enhanced by CorVu's value-add applications (RapidApps) which are pre-packaged
dashboards and reports designed to reduce the implementation time for specific
industries and contexts.

We generate revenues in three areas: (1) sale and licensing of our software
products; (2) consulting and training services (we refer to these services as
"professional services"); and (3) maintenance agreements entered into in
connection with the sale and licensing of our products.

Our Products
CorVu 5 consists of five integrated modules:

      o     CorBusiness(TM)
      o     CorStrategy(TM)
      o     CorPlanning(TM)
      o     CorRisk(TM)
      o     CorIncentive(TM)

CorBusiness(TM) is a powerful and flexible business intelligence platform for
reporting, analysis, and data access that can be deployed rapidly and cost
effectively. It provides rich capabilities for custom reporting, graphical
analysis, alerts, dashboards, predicitive analysis, forecasting and data mining,
and automated data collection and consolidation.

CorStrategy(TM), the foundational module of CorVu 5, provides powerful and
flexible scorecarding, objective and initiative management capabilities with
in-built workflow triggers and email alerts. Key features include interactive
scorecards, strategy maps, briefing books, dashboards, pre-built reports and
views, and a central repository for all metrics, calculations, and commentary.
CorStrategy's flexible structure can be tailored to match any methodology and
deployed across the enterprise with zero-footprint web data update forms.

CorPlanning(TM) is an easy-to-use, comprehensive, and flexible budgeting and
planning application. It can be used as a stand-alone application or as an
integrated component of CorVu 5 to link the planning, budgeting, and forecasting
processes to business strategy. CorPlanning(TM) offers powerful capabilities,
including breakback, consolidation, inter-company eliminations, multi-currency,
real-time planning, driver-driven forecasting, and sophisticated, role-based
security. It supports most popular planning methods, such as rolling forecasts,
zero-base budgeting, outcome budgeting, "what-if" scenario modeling, beyond
budgeting, top-down, bottom-up, and Activity Based Management/Costing.

CorRisk(TM) is a purpose-built enterprise risk management application that can
be deployed rapidly. It provides an advanced risk management framework that
monitors and manages the threats and obstacles to achieving business strategy.
CorRisk(TM) offers comprehensive risk management capabilities, including loss
events/incidents, risk profile reports, forecasting and modeling, personalized
dashboards, risk maps, and the linking of risk management to strategy execution.


                                       2
<PAGE>

CorIncentive(TM), an integrated component of CorVu 5, aligns employee incentives
with business strategy. A flexible, purpose-built application, CorIncentive(TM)
links employee performance results, appraisals, reviews, and variable
compensation to corporate goals. Key capabilities include a structured
performance management environment for employee incentives, communication and
collaboration, data collection, reporting and analysis.

CorVu's client (desktop) products are available for Windows 2000 (or above) and
Linux. CorVu's server products are available on Windows (2000 or above), Unix,
and Linux. All pricing is based upon the number of users licensed under the
agreement with the respective customer.

Services
CorVu's Professional Services team is dedicated to providing a complete
performance management solution for every customer and CorVu's proven RapidROI
Methodology is designed to empower customers to maximize the return on their
CorVu software investment. The RapidROI methodology leverages years of
collective project experience with CorVu solutions for a wide variety of
industries, business requirements, and technical environments.

CorVu's Professional Services team partners with each customer to build quality
performance management solutions via three main service functions:

1) Training Services
CorVu offers a comprehensive array of `hands-on' courses designed to equip both
business and technical users with the skills necessary to grow the overall
solution. CorVu's professional course instructors deliver both on-site training
and public training at various CorVu locations around the globe. All CorVu
courses are designed to give students `hands-on' experience in building their
CorVu solution.

In addition to the various technical training required by application
administrators, solution developers and system integrators, CorVu also
recommends business user training which can be easily customized using any
customer's own applications and to meet specific customer needs. CorVu also
offers Mentoring Workshops to reinforce classroom learning within a customer's
own environment. There are many `best practice' techniques - born from years of
experience and many customer projects - which our customers can learn from CorVu
consultants. Customers can choose from a list of topics, or CorVu can suggest
topics that have achieved the greatest impact for other customers with similar
business needs.

2) Consulting Services
CorVu's experienced consultants provide expertise and experience to ensure
customers meet their business solution objectives and maximize their return on
the CorVu software investment. Consulting Services are available to benefit both
new and long-standing customers. CorVu's highly skilled consultants have strong
business awareness, exceptional technical skills, and professional project
management experience.

For new customers, CorVu consultants use CorVu's RapidROI methodology to
implement the CorVu software solutions within the customer's organization to
quickly deliver a return on their CorVu software investment.

For existing customers, CorVu's consultants offer:

      o     Fast delivery of new applications or other deliverables
      o     Optimization of existing CorVu applications
      o     Mentoring and knowledge transfer for customer personnel
      o     Advisement on any specific technical matters, business issues or
            project matters
      o     Best Practices Reviews to investigate and recommend opportunities
            for more effective usage of the CorVu solution

3) Help Desk Services
Phone, e-mail, and web support is provided to customers for quick product
questions, issue management, and enhancement requests for future product
direction.


                                       3
<PAGE>

Maintenance Agreements
CorVu provides support services to customers with a "Software Maintenance
Agreement." Such customers are entitled to new versions of CorVu software, Help
Desk support services and online support services.

A Software Maintenance Agreement is meant to give customers access to our Help
Desk staff upon experiencing a software problem or with any questions regarding
the use of our products. Customers with a 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 are designed to make
it easier for customers to answer questions and solve problems without the need
of direct assistance from CorVu support personnel.

(ii) Market Analysis for CorVu's Products and Services

Key market forces -- regulatory, competitive and economic -- are converging to
cause companies to seek better ways to proactively monitor and manage business
performance. At the same time, various regulatory requirements and initiatives
now mandate that most public sector organizations operate efficiently and
effectively. As a result, both private and public sector organizations are
looking to performance management technology to ensure compliance, improve
efficiencies, and effectively execute their strategy or mission. As a result,
performance management software has emerged as one of the fastest growing
markets in the technology sector. There are numerous variants of the name -
Enterprise Performance Management (EPM), Corporate Performance Management (CPM),
and Business Performance Management (BPM) - used by industry analysts and
vendors. Gartner defines CPM as "the methodologies, metrics, processes, and
systems used to monitor and manage the business performance of an enterprise."

Analysts predict that the worldwide financial/Business Performance Management
market will increase to $2.5 billion in 2009 with an 20 percent average annual
growth rate (AAGR) for the period from 2004 through 2009. "The BPM analytic
applications market performance exceeded expectations in 2004, and double-digit
growth is expected to continue," says Kathleen Wilhide, research director,
Compliance and BPM solutions, IDC. "Information transparency and performance
management initiatives are a top priority from both a business and IT
standpoint, and they will play an increasingly important role in enterprisewide
transformation initiatives that reduce information silos and optimize
performance management processes." Based on these predictions the Company
assumes that private and public sector organizations will continue to look to
performance management technology to improve efficiencies, strategy execution,
visibility and accountability. The Company, therefore, believes that the market
demand for its performance management software should continue to grow.

(iii) Distribution of our Products and Services

CorVu products and services are sold through our subsidiaries' direct sales
offices and through "Value Added Resellers," distributors, and alliance
partners.

Direct Sales Offices
Our North American subsidiary has direct sales offices in Atlanta, Chicago and
Minneapolis. In Europe, the CorVu sales office is located in London. Sales
offices for the CorVu Asia-Pacific region have been established in Australia in
Sydney and Melbourne, in Singapore and in China in Shanghai and Beijing. Direct
sales activities are concentrated on Global 1000 accounts.

Value Added Resellers (VARs)
Our VARs are software companies with industry applications that sell our
software products in conjunction with their own products. Some VARs will
private-label CorVu products. Current VARs offer CorVu 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 products specified in the
agreement and to grant sublicenses for the use of such software to users of the
VAR's applications. The license fees paid by a VAR are a percentage of our
standard license fee for the use of our software and generally may be increased
at our discretion upon 30 days prior written notice. Any of the parties may
terminate the agreement without giving any reason by written notice 90 days
prior to the termination date. A typical VAR agreement has a three-year term.

Distributors
CorVu distributors are companies that sell technology into geographic regions
where CorVu has no physical presence. Currently, distributors are in various
global locations, including Argentina, Brazil, Chile, Colombia, Mexico, Peru,
Germany, Sweden, Saudi Arabia, Belgium, Bulgaria, Croatia, Denmark, France,
Ireland, Italy, Netherlands, Norway, Poland, Spain, Saudi Arabia, South Africa,
India, Taiwan, Korea and China. Our subsidiaries typically grant to distributors
the non-exclusive license to sell the software products specified in the
distributor agreement and to grant sublicenses for the use of such software. The
fees a distributor pays are a percentage of our standard license fee for the use
of our software and may generally be increased at our discretion upon 30 days
prior written notice. The agreement may be entered into for a five-year term;
termination usually requires cause such as nonperformance.


                                       4
<PAGE>

Alliance Partners
CorVu Alliance Partners are companies that provide both technology and
management consulting and implementation services, but typically do not actually
sell software. Recommending CorVu products as a service to their clients, they
often greatly influence corporate sales. Alliance Partners maintain no financial
relationship with CorVu in that they do not receive fees in exchange for their
recommendations. The Partners benefit from such recommendations because CorVu
will, if the occasion arises, refer management consulting services to them.

Historically, approximately 30-40% of our annual license revenues are generated
through distributors, VARs and Alliance Partners.

(iv) Competition

The performance management market is an emerging market experiencing rapid
growth. Competition is entering the space from various market segments. Primary
competition comes from three basic types of vendors - Enterprise Resource
Planning (ERP) vendors, Business Intelligence (BI)/Analytic Application vendors
that offer product suites, and Point Solution providers that focus on a narrow
segment of performance management, such as budgeting or scorecarding. This
competition includes companies such as Cognos, Business Objects, Hyperion, SAP,
Oracle, Peoplesoft, Geac, SAS, Cartesis, OutlookSoft, PerformanceSoft, and
Applix.

CorVu specializes exclusively in performance management software. The CorVu
solution is a purpose-built application that was built from the ground-up for
managing all performance management business processes and supports all popular
management methodologies, including Balanced Scorecard and Six Sigma. As a
purpose-built application, it offers inherent advantages, such as comprehensive
capabilities, rapid implementation, reduced total cost of ownership, and
flexibility.

(v) Our Customers

We have customers all over the world, including North America, Latin America,
United Kingdom, Europe, Australia and China. Key industry sectors represented by
our customers are manufacturing, government, financial services, hospitality,
non-profit, and pharmaceuticals.

The most license revenue that any single customer or partner has contributed to
CorVu in fiscal year 2006 was about 9%. In the past, several of our customers
have ordered additional software 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 that order. The additional orders typically have been
either (a) the addition of users for new projects, departments, divisions etc.
within a given customer, or (b) the purchase of new products as these become
available. Repeat business accounted for approximately 29% of our annual
software and license fee revenues in fiscal year 2006.

(vi) Intellectual Property

Due to the length of the patent application procedure on one hand and the
necessity to continually develop and improve our software products on the other
hand, we have not sought patent protection for any of our products.

We have a number of registrations and one pending application for our
trademarks. These include U.S. registrations for the trademarks CORBUSINESS,
CORMANAGE, CORSTRATEGY, CORVU, MANAGING BUSINESS PERFORMANCE and both U.S. and
Canadian registrations for RAPIDSCORECARD; Mexican, Colombian and Venezuelan
registrations for CORVU MANAGING BUSINESS PERFORMANCE and design; and a U.S.
application to register the trademark HYPERVU. Typically, trademark
registrations worldwide have a duration of ten years with the possibility of an
indefinite number of ten year renewals.

The computer code underlying our software is protected by copyright.

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


                                       5
<PAGE>

(vii) Research and Development Activities

In fiscal 2005, we spent $2,098,644 on research and development (R&D)
activities, and in fiscal 2006, a total of $2,162,297. None of these costs was
borne directly by any customer. We expect to continue to maintain our high level
of investment in R&D activities in fiscal 2007 and are projected to spend
approximately $2 million in this area.

(viii) Our Employees

As of June 30, 2006, we employed 86 people in our Company and our subsidiaries
around the world. Twenty-nine of these employees worked in Sales and Marketing,
21 provided professional services such as training and general product
assistance, 20 worked in product development and 16 provided general
administrative and help-desk support services. All of our employees are working
full-time. No employees are represented by a labor union and we consider our
relations with employees to be good.

ITEM 2. DESCRIPTION OF PROPERTY

Our corporate headquarters are located in 6,600 square feet of leased office
space at 3400 West 66th Street, Edina, Minnesota. Pursuant to the lease
agreement that extends to August 31, 2007, we make monthly base rent payments
with annual increases of approximately 3% per year. In addition to the base rent
payments, we reimburse the landlord for any operating costs allocable to our
premises based upon the rentable square foot office area allocable to our
premises. Rent payments are approximately $11,000 per month. The premises
include a reception area, conference and training rooms, as well as executive
and administrative offices.

The major regional centers of our subsidiaries are located in Sydney (Australia)
and London (England). Monthly rental payments (in U.S. dollars) for both offices
amount to approximately $15,000 each. These amounts are subject to variations
due to the applicable exchange rates. The lease agreements vary concerning terms
and conditions, are subject to the applicable local laws and expire at various
times through March 2015.

We believe that our current facilities are adequate for the current level of our
activities. In the event we require additional facilities, we believe we could
procure acceptable facilities.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material litigation and are not aware of any
threatened litigation that would have a material adverse effect on our business.

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

None.


                                       6
<PAGE>

                                    PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the OTC Bulletin Board under the symbol CRVU.OB.
Quotations in the following table are based on information provided by the
"Historical Quotes" database of LexisNexis(R), which includes data provided by
SunGard Management Solutions (R). The quotations represent 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, 2004                                   $0.55          $0.27
December 31, 2004                                    $0.36          $0.16
March 31, 2005                                       $0.35          $0.20
June 30, 2005                                        $0.20          $0.14

September 30, 2005                                   $0.40          $0.12
December 31, 2005                                    $0.26          $0.15
March 31, 2006                                       $0.41          $0.24
June 30, 2006                                        $0.41          $0.34

As of August 15, 2006, we had 177 shareholders of record. We have never paid
cash dividends on our Common Stock and do not anticipate paying dividends in the
foreseeable future.

The following table provides information as of June 30, 2006 about the Company's
equity compensation plans.

<TABLE>
<CAPTION>
                                                                                        NUMBER OF SECURITIES REMAINING
                               NUMBER OF SECURITIES TO        WEIGHTED AVERAGE        AVAILABLE FOR FUTURE ISSUANCE UNDER
                               BE ISSUED UPON EXERCISE       EXERCISE PRICE OF             EQUITY COMPENSATION PLANS
                               OF OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,      (EXCLUDING SECURITIES REFLECTED IN
                                 WARRANTS AND RIGHTS        WARRANTS AND RIGHTS                   COLUMN (A))
                             ---------------------------- -------------------------  --------------------------------------
                                          (A)                          (B)                            (C)
                             ---------------------------- -------------------------  --------------------------------------
<S>                                     <C>                          <C>                            <C>
Equity compensation plans
   approved by security
   Holders................              8,250,126                    $ 0.35                         4,419,293

Equity compensation plans
   not approved by
   security holders*.....               1,138,569                    $ 0.91                               -0-

Total                                   9,388,695                    $ 0.42                         4,419,293

     *   Includes individual compensation agreements with employees domiciled in the U.S. and outside the U.S. as well
         as agreements with certain vendors issued in exchange for goods and services rendered.
</TABLE>

RECENT SALES OF UNREGISTERED SECURITIES

None


                                       7
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

CorVu is an international provider of Business Performance Management software.
Our Company designs, develops, markets and supports its management software
products and its services through sales offices of our subsidiaries as well as
through distributors, Value Added Resellers, and Alliance Partners. Sales and
support offices belonging to our subsidiaries are located in the United States,
Australia and Europe. See ITEM 1, Business of the Issuer, for details.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements, the reported
amounts of revenues and expenses during the reporting period, and related
disclosures of contingent assets and liabilities for the periods indicated. The
notes to the consolidated financial statements contained herein describe our
significant accounting polices used in the preparation of the consolidated
financial statements. On an on-going basis, we evaluate our estimates,
including, but not limited to, those related to bad debts and contingencies. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates under different assumptions or conditions.

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

Revenue Recognition. We recognize revenues in accordance with the provisions of
the American Institute of Certified Public Accountants' Statement of Position
(SOP) 97-2, "Software Revenue Recognition," as amended by SOP 98-4 and SOP 98-9,
as well as Technical Practice Aids issued from time to time by the American
Institute of Certified Public Accountants, and in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition in Financial Statements", as amended by SAB 104. We license software
under non-cancelable license agreements and provide related professional
services, including consulting, training, and implementation services, as well
as ongoing customer support and maintenance. Consulting, training and
implementation services are not essential to the functionality of our software
products, are sold separately and also are available from a number of
third-party service providers. Accordingly, revenues from these services are
generally recorded separately from license fees. Our specific revenue
recognition policies are as follows:

Software License Fees. Software license fee revenues from end-users, resellers
and distributors are generally recognized when there is an executed license
agreement, software has been delivered to the customer, the license fee is fixed
and payable within twelve months, collection is deemed probable and product
returns are reasonably estimable. Revenues related to multiple element
arrangements are allocated to each element of the arrangement based on the fair
values of elements such as license fees, maintenance, and professional services.
Fair value is determined based on vendor specific objective evidence. In certain
cases, the Company receives cash for prepayment of software license fees from
resellers and distributors. Accordingly, revenue is recognized upon the delivery
and acceptance of the product, when title to the product has passed to the
reseller or distributor and there is no right of return or refund. To date, the
Company has not refunded any prepayments made by resellers or distributors.

Maintenance, Consulting and other. Revenues from training and consulting
services are recognized as services are provided to customers. Revenues from
maintenance contracts are deferred until collection has occurred and recognized
ratably over the term of the maintenance agreements, beginning with the first
month of the maintenance contract period.

Software Development Costs. Software development costs are expensed as incurred
until technological feasibility is established. Software development costs
incurred subsequent to establishing technological feasibility are capitalized
and amortized over the estimated useful lives of the software. Management is
required to use professional judgment in determining whether development costs
meet the criteria for immediate expense or capitalization.

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


                                       8
<PAGE>

Accounting for Income Taxes. The Company accounts for income taxes using the
asset and liability method. Under the asset and liability method, deferred tax
assets and liabilities are recognized at the enacted rates for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing tax assets and liabilities and their respective tax
basis. The effect on deferred tax assets and liabilities of a change in tax rate
is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. Any changes in the projections of
future taxable income may change the deferred asset amount expected to be
realized.

Contingencies. We are subject to the possibility of various loss contingencies
in the normal course of business. We accrue for loss contingencies when a loss
is estimable and probable. There are no pending contingencies as of June 30,
2006.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has published FASB
Interpretation (FIN) No. 48 (FIN No. 48), Accounting for Uncertainty in Income
Taxes, to address the noncomparability in reporting tax assets and liabilities
resulting from a lack of specific guidance in FASB Statement of Financial
Accounting Standards (SFAS) No. 109 (SFAS No. 109), Accounting for Income Taxes,
on the uncertainty in income taxes recognized in an enterprise's financial
statements. Specifically, FIN No. 48 prescribes (a) a consistent recognition
threshold and (b) a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and provides related guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN No. 48 will apply to fiscal years beginning after December 15,
2006, with earlier adoption permitted. The Company does not expect the adoption
of FIN No. 48 to have a material effect on its consolidated financial
statements.

In June 2005, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 154, "Accounting Changes and Error Corrections", a replacement of APB
Opinion No. 20 and FASB Statement No. 3. The statement applies to all voluntary
changes in accounting principle, and changes the requirements for accounting for
and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods' financial statements of a voluntary
change in accounting principle unless it is impracticable. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. Earlier application is permitted for
accounting changes and corrections of errors made occurring in fiscal years
beginning after June 1, 2005. The statement does not change the transition
provisions of any existing accounting pronouncements, including those that are
in a transition phase as of the effective date of this statement. The Company
does not expect the adoption of SFAS No. 154 to have a material effect on its
consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment", that focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. This
statement replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Beginning with the fiscal year ending June 30, 2007, we will be required to
expense the fair value of employee stock options and similar awards. As a public
company, we are allowed to select from two alternative transition methods, each
having different reporting implications. The Company expects expenses related to
the implementation of SFAS No. 123R to be approximately $180,000 for the year
ended June 30, 2007.

FISCAL YEAR ENDED JUNE 30, 2006 VERSUS JUNE 30, 2005

REVENUES:

Total revenue increased by $2,221,822 (17%) from $13,170,574 for the year ended
June 30, 2005 to $15,392,396 for the year ended June 30, 2006.

Software and license fee revenues increased $2,225,829 (53%) from $4,209,034 in
2005 to $6,434,863 in 2006. All three operating regions produced increased
levels of software and license fee revenue over the previous period: the
Americas- $459,447 (39%), Asia-Pacific- $1,235,499 (130%), UK/Europe- $530,883
(25%). Direct sales, which accounted for 59% of total software and license fee
revenues, increased $1,304,142 (53%) from $2,478,531 in 2005 to $3,782,673 in
2006. Software and license fee revenue generated by resellers and distributors
(indirect) accounted for the remaining 41%, increasing by $921,687 (53%) from
$1,730,503 in 2005 to $2,652,190 in 2006. Our improved performance was the
result of new sales management in two of our three operating regions, our sales
focus on specific targeted markets and a continued increase in market demand for
our products.


                                       9
<PAGE>

Maintenance fees increased $197,658 (3%) from $5,832,212 in 2005 to $6,029,870
in 2006. Results are indicative of continued maintenance contract renewals and
collections, and new maintenance contracts sold at the current rate of 20% of
the software license fee paid. We would expect to continue to show growth in
this area in 2007 based on expected renewal rates on existing contracts and the
sale of new contracts to new customers.

Consulting and other revenues decreased $201,665 (6%) from $3,129,328 in 2005 to
$2,927,663 in 2006. Billable hours for implementation and consulting services
declined from 2005 to 2006 due to a 17% reduction in the average number of
services personnel and due to lower levels of software and license fee revenue
that were generated in 2004 and 2005. As software and license fee revenue
increases, we would expect the number of implementations to increase, as well as
the demand for consulting services, both of which would result in increased
revenues in this area.

OPERATING COSTS AND EXPENSES:

Operating costs and expenses decreased by $2,906,496 (17%) from $17,043,399 for
the year ended June 30, 2005 to $14,136,903 for the year ended June 30, 2006.

Cost of consulting and other services decreased $308,629 (9%) from $3,343,368 in
2005 to $3,034,739 in 2006. As stated above under consulting and other revenues,
there was a 17% decline in the average number of services personnel from 2005 to
2006. This reduction in personnel was implemented based on the reduced demand
for consulting, implementation and training services due to the lack of new
customers in both 2004 and 2005. As the demand for these services increases, we
expect an increase in our costs in this area.

Product development costs increased $63,653 (3%) from $2,098,644 in 2005 to
$2,162,297 in 2006. We continue to maintain our high level of investment in this
area in our effort to improve our products. The average number of development
personnel declined by 10% from 2005 to 2006. The reduction in personnel was
offset by a 3% increase in the foreign currency exchange rate to convert
Australian dollars, where the development personnel are employed, into U.S.
dollars. For 2007, we expect expenditure levels to be comparable to the level
incurred in 2006.

Sales and marketing expenses decreased $2,350,048 (34%) from $6,857,554 in 2005
to $4,507,506 in 2006. The primary driver behind this decrease was an 18%
reduction in the average number of sales and marketing personnel from 2005 to
2006. In addition to the reduction in salaries and related costs brought on by
the decrease in personnel, we curtailed spending in other areas such as
marketing activities, office expenses and employee travel costs. Included in
this area is sales commission expense, which increased by $113,870 (18%) from
2005 to 2006 due to increased revenues. Taking that into effect, other sales and
marketing expenses decreased by $2,463,918, or 40%, from 2005 to 2006. We expect
a moderate increase in sales and marketing expenses during 2007.

General and administrative expenses decreased $311,472 (7%) from $4,743,833 in
2005 to $4,432,361 in 2006. The 2005 expense amount includes a $250,000
write-off of a receivable from an international distributor. Other general and
administrative expenses remained relatively flat from 2005 to 2006 and we would
expect that to continue into 2007.

OPERATING INCOME (LOSS):

CorVu Corporation generated operating income of $1,255,493 for the year ended
June 30, 2006 and incurred an operating loss of $3,872,825 for the year ended
June 30, 2005.

INTEREST EXPENSE, NET:

Interest expense, net decreased $51,223 (47%) from $109,773 in 2005 to $58,550
in 2006. A reduction in overall debt levels from 2005 to 2006 as well as an
increase in the amount of interest income earned on excess cash contributed to
this improvement. We expect the expense level in this area to continue to
decline moderately in 2007.

DEFERRED INCOME TAX PROVISION:

For the year ended June 30, 2005, we recorded a one-time, non-recurring deferred
income tax provision of $2,615,000 against a previously (fiscal 2003) recorded
deferred income tax asset, which represented a portion of the value of
accumulated net operating losses which could have been utilized in future
periods to offset federal and state income tax liabilities. In light of the
operating losses incurred in fiscal years 2004 and 2005, management felt it was
prudent to record this provision as of June 30, 2005 to provide a full valuation
allowance against its gross deferred tax assets.


                                       10
<PAGE>

NET INCOME (LOSS):

Due to increased revenues and decreased operating costs and expenses, CorVu
Corporation generated net income of $1,196,943 for the year ended June 30, 2006
as opposed to a net loss of $6,597,598 for the year ended June 30, 2005.

PREFERRED STOCK DIVIDENDS:

The Company recorded preferred stock dividends of $92,992 and $348,302 for the
years ended June 30, 2006 and 2005, respectively.

INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS:

CorVu Corporation generated income attributable to common stockholders of
$1,103,951 for the year ended June 30, 2006 as opposed to a loss attributable to
common stockholders of $6,945,900 that the Company incurred for the year ended
June 30, 2005.

LIQUIDITY AND CAPITAL RESOURCES

Total cash and cash equivalents increased by $941,638 from $2,162,866 as of June
30, 2005 to $3,104,504 as of June 30, 2006.

Net cash provided by operating activities was $1,139,335 for the year ended June
30, 2006 as a result of net income generated during the year. In addition, we
improved our cash management techniques, concentrating on improved collections
of receivables and management of our payables.

Net cash used in investing activities was $89,684 for the year ended June 30,
2006 reflecting the acquisition of capital assets.

Net cash used in financing activities was $126,492 for the year ended June 30,
2006 reflecting the payment of preferred stock dividends during the period,
which was partially offset by proceeds from the exercise of employee stock
options.

Exchange rate changes provided an increase in cash of $18,479 for the year ended
June 30, 2006.

Our plan for 2007 and beyond is to continue to manage our operating expenses to
keep them in line with revenues we generate. Management expects revenues to
continue to improve as initiatives implemented take effect. We believe that we
will generate sufficient cash flow from operations to meet our operating cash
requirements for the next 12 months.

DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following summarizes our contractual obligations, including interest
expense, at June 30, 2006, and the effect these contractual obligations are
expected to have on our liquidity and cash flows in future periods (in
Thousands):

                                          1 YEAR      1-3        OVER
                                TOTAL     OR LESS    YEARS      3 YEARS
                               ------     -------    ------     -------
Operating leases .........     $2,496     $  476     $  809     $1,211
Long-term debt............      1,765        153      1,612         --
                               ------     ------     ------     ------
Total ....................     $4,261     $  629     $2,421     $1,211
                               ------     ------     ------     ------


                                       11
<PAGE>

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This Annual Report on Form 10-KSB, including the information incorporated by
reference herein and the exhibits hereto, may include "forward-looking"
statements. Forward-looking statements broadly involve our current expectations
for future results. Our forward-looking statements generally relate to our
financing plans, trends affecting our financial condition or results of
operations, our growth and operating strategy, product development, competitive
strengths, the scope of our intellectual property rights, sales efforts, and the
declaration and payment of dividends. Words such as "anticipates," "believes,"
"could" "estimates," "expects," "forecast," "intend," "may," "plan," "possible,"
"project," "should," "will" and similar expressions generally identify our
forward-looking statements. Any statement that is not a historical fact,
including estimates, projections, future trends and the outcome of events that
have not yet occurred, are forward-looking statements. Our ability to actually
achieve results consistent with our current expectations depends significantly
on certain factors that may cause actual future results to differ materially
from our current expectations. Some of these factors include:

Risks related to our Company and business, including, but not limited to:
o     adverse effects in connection with any loss of key personnel
o     limited market in our securities
o     limited working capital and lack of working capital financing
o     timing, size and nature of market opportunities available to us and our
      ability to capitalize on these as they occur
o     our ability to maintain or increase research and development expenditures
      to maintain current and attract new customers
o     reduction in information technology spending by our current and/or
      potential customers

Competitive factors, including, but not limited to:
o     pricing pressures, both in the United States and abroad
o     superior financial strength of some of our competitors
o     possible development of new products by competitors having superior
      performance characteristics
o     possible technological advances, intellectual property rights and
      registrations obtained by competitors

Difficulties and delays inherent in the development, marketing and sale of
business intelligence technology and business performance management systems,
including, but not limited to:
o     the imposition of regulatory requirements, such as those concerning data
      privacy
o     the failure to obtain, limitations on the use of, or the loss of
      intellectual property rights
o     our lengthy and variable sales cycles

Governmental action, including, but not limited to:
o     changes in tax and other laws and regulations affecting our business,
      including changes in securities laws and changes regarding accounting
      policies and principles

Legal disputes, including, but not limited to:

o     disputes over intellectual property rights
o     product liability claims
o     claims asserting securities law violations

General economic conditions, including, but not limited to:

o     international and domestic business conditions
o     political instability in foreign countries
o     interest rates o foreign currency exchange rates
o     changes in the rate of inflation
o     our limited ability to reduce the impact of these conditions on our
      results

Other factors beyond our control, including floods, fires, explosions, or acts
of terrorism or war.

You must carefully consider forward-looking statements and understand that such
statements involve a variety of risks and uncertainties, known and unknown, and
may be affected by inaccurate assumptions. It is not possible to foresee or
identify all factors that may affect our forward-looking statements, and you
should not consider any list of such factors to be an exhaustive list of all
risks, uncertainties or potentially inaccurate assumptions affecting such
forward-looking statements.


                                       12
<PAGE>

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

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


                                       13
<PAGE>

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

                       CORVU CORPORATION AND SUBSIDIARIES
                        Consolidated Financial Statements
                             June 30, 2006 and 2005


                                       14
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Audit Committee and Board of Directors
CorVu Corporation and subsidiaries
Edina, Minnesota

We have audited the accompanying consolidated balance sheets of CorVu
Corporation and subsidiaries as of June 30, 2006 and 2005, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CorVu Corporation
and subsidiaries as of June 30, 2006 and 2005 and the results of their
operations and their cash flows for the years then ended, in conformity with
U.S. generally accepted accounting principles.

                                              /s/ Virchow, Krause & Company, LLP

Minneapolis, Minnesota
July 25, 2006


                                       15
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             June 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                                                             2006              2005
                                                                                         ------------      ------------
                                        ASSETS
<S>                                                                                      <C>              <C>
Current assets:
   Cash and cash equivalents .......................................................     $  3,104,504      $ 2,162,866
   Trade accounts receivable, net of allowance for doubtful accounts of $69,000 and
     $65,000, respectively ........................................................         3,807,362         4,199,610
   Prepaid expenses ................................................................          263,315           379,072
   Other current assets ............................................................           50,546           111,401
                                                                                         ------------      ------------
        Total current assets .......................................................        7,225,727         6,852,949
                                                                                         ------------      ------------
Furniture, fixtures, and equipment .................................................          739,983           755,318
   Less accumulated depreciation ...................................................         (518,107)         (468,947)
                                                                                         ------------      ------------
        Net furniture, fixtures and equipment ......................................          221,876           286,371
                                                                                         ------------      ------------
        Total assets.......................................................... .....     $  7,447,603      $  7,139,320
                                                                                         ============      ============

                         LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable ................................................................     $    814,020      $  1,213,332
   Accrued compensation and related costs ..........................................        2,241,334         1,868,877
   Deferred revenue ................................................................        5,330,222         5,955,815
   Accrued interest ................................................................           78,657            39,698
   Other accrued expenses ..........................................................          899,987           995,911
                                                                                         ------------      ------------
        Total current liabilities ..................................................        9,364,220        10,073,633
Long-term debt................................................................ .....        1,500,000         1,500,000
                                                                                         ------------      ------------
        Total liabilities ..........................................................       10,864,220        11,573,633
                                                                                         ------------      ------------

Stockholders' deficit:
   Undesignated capital stock, 23,383,000 shares
     at both June 30, 2006 and 2005, none issued                                                   --                --
   Series C convertible preferred stock, Par value $100 per share:
     17,000 shares authorized; 17,000 issued and outstanding at June 30, 2006
     and 2005, respectively, liquidation preference of $2,550,000 at June 30, 2006
     and 2005.......................................................................        1,717,200          1,767,500
   Series B convertible preferred stock, Par value $0.01 per share:
     600,000 shares authorized; 360,000 issued and outstanding at June 30, 2006
     and 2005, respectively, liquidation preference of $360,000
     at June 30, 2006 and 2005......................................................            3,600              3,600
   Series A convertible preferred stock, Par value $10 per share:
     1,000,000 shares authorized; none issued and outstanding
     at June 30, 2006 and 2005, respectively .......................................               --                --
   Common stock, $0.01 par value; 75,000,000 shares authorized;
     49,498,268 and 49,483,268 shares issued and outstanding at June 30, 2006 and 2005,
     respectively ..................................................................          494,983           494,833
   Additional paid-in capital ......................................................       22,238,620        22,012,720
   Accumulated deficit .............................................................      (26,634,092)      (27,738,043)
   Deferred compensation ...........................................................         (208,933)         ( 17,900)
   Accumulated other comprehensive loss ............................................       (1,027,995)         (957,023)
                                                                                         ------------      ------------
        Total stockholders' deficit ................................................       (3,416,617)       (4,434,313)
                                                                                         ------------      ------------
        Commitments (Notes 3 and 5)

        Total liabilities and stockholders' deficit ................................     $  7,447,603      $  7,139,320
                                                                                         ============      ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       16
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
                       Years ended June 30, 2006 and 2005

                                                     2006               2005
                                                 ------------      ------------
Revenues:
   Software and license fees ...............     $  6,434,863      $  4,209,034
   Maintenance fees ........................        6,029,870         5,832,212
   Consulting and other ....................        2,927,663         3,129,328
                                                 ------------      ------------
        Total revenues .....................       15,392,396        13,170,574
                                                 ------------      ------------
Operating costs and expenses:
   Cost of consulting and other services....        3,034,739         3,343,368
   Product development .....................        2,162,297         2,098,644
   Sales and marketing .....................        4,507,506         6,857,554
   General and administrative ..............        4,432,361         4,743,833
                                                 ------------      ------------
        Total operating costs and expenses..       14,136,903        17,043,399
                                                 ------------      ------------
        Operating income (loss).............        1,225,493        (3,872,825)
Interest expense, net ......................          (58,550)         (109,773)
                                                 ------------      ------------
        Income (loss) before income taxes...        1,196,943        (3,982,598)
Deferred income tax provision...............               --         2,615,000
                                                 ------------      ------------
        Net income (loss)...................        1,196,943        (6,597,598)
Preferred stock dividends...................          (92,992)         (348,302)
                                                 ------------      ------------
Income (loss) attributable to common
 Stockholders...............................     $  1,103,951      $ (6,945,900)
                                                 ============      ============

Income (loss) attributable to common stockholders
 per common share-basic.....................     $       0.02      $      (0.21)
Weighted average shares outstanding--basic...      49,483,679        33,754,597
Income (loss) attributable to common stockholders
 per common share-diluted...................     $       0.02      $      (0.21)
Weighted average shares outstanding-diluted        56,848,933        33,754,597

See accompanying notes to consolidated financial statements.


                                       17
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES
                Consolidated Statements of Stockholders' Deficit
                       Years ended June 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                            SERIES C                     SERIES B
                                                        PREFERRED STOCK               PREFERRED STOCK
                                                    -------------------------    --------------------------
                                                      SHARES        AMOUNT         SHARES         AMOUNT
                                                    -----------   -----------    -----------    -----------
<S>                                                      <C>      <C>                <C>        <C>
Balance, June 30, 2004                                       --   $        --             --    $        --

Issuance of preferred stock, net of expenses             17,000     1,700,000        360,000          3,600
Note payable-stockholder converted into preferred
  stock                                                      --            --        240,000          2,400
Preferred stock converted into common stock                  --            --       (240,000)        (2,400)
Increasing rate dividend                                     --        90,000             --             --
Amortization of increasing rate dividend                     --       (22,500)            --             --
                                                    -----------   -----------    -----------    -----------
Balance, June 30, 2005                                   17,000     1,767,500        360,000          3,600
Amortization of increasing rate dividend                     --       (50,300)            --             --
                                                    -----------   -----------    -----------    -----------
Balance, June 30, 2006                                   17,000   $ 1,717,200        360,000    $     3,600
                                                    ===========   ===========    ===========    ===========

<CAPTION>
                                                            COMMON STOCK          ADDITIONAL
                                                    ---------------------------     PAID-IN        ACCUMULATED
                                                       SHARES         AMOUNT        CAPITAL          DEFICIT
                                                    ------------   ------------   ------------    ------------
<S>                                                   <C>          <C>            <C>             <C>
Balance, June 30, 2004                                23,970,268   $    239,703   $ 18,026,955    $(20,792,143)

Issuance of preferred stock, net of expenses                  --             --        340,983              --
Note payable-stockholder converted into preferred
  stock                                                       --             --        237,600              --
Preferred stock converted into common stock              800,000          8,000         (5,600)             --
Increasing rate dividend                                      --             --             --              --
Amortization of increasing rate dividend                      --             --             --              --
Comprehensive loss:
        Net loss                                              --             --             --      (6,597,598)
        Foreign currency translation adjustment               --             --             --              --

Exercise of stock options                                  9,000             90          1,170              --
Non-cash transactions related to equity (Note 3)              --             --         20,184              --
Issuance of common stock, net of expenses             22,000,000        220,000      2,787,335              --
Notes payable-stockholder converted into
    common stock                                       2,704,000         27,040        378,560              --
Intrinsic dividend                                            --             --        225,533        (225,533)
Increasing rate dividend                                      --             --             --         (90,000)
Amortization of increasing rate dividend                      --             --             --          22,500
Preferred stock dividends                                     --             --             --         (55,269)
                                                    ------------   ------------   ------------    ------------
Balance, June 30, 2005                                49,483,268        494,833     22,012,720     (27,738,043)

Amortization of increasing rate dividend                      --             --             --              --
Comprehensive income:
        Net income                                            --             --             --       1,196,943
        Foreign currency translation adjustment               --             --             --              --
Comprehensive income
Exercise of stock options                                 15,000            150          3,900              --
Non-cash transactions related to equity (Note 3)              --             --        222,000              --
Amortization of increasing rate dividend                      --             --             --          50,300
Preferred stock dividends                                     --             --             --        (143,292)
                                                    ------------   ------------   ------------    ------------
Balance, June 30, 2006                                49,498,268   $    494,983   $ 22,238,620    $(26,634,092)
                                                    ============   ============   ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       18
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES
                Consolidated Statements of Stockholders' Deficit
                       Years ended June 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                                     ACCUMULATED
                                                                       OTHER           TOTAL
                                                     DEFERRED       COMPREHENSIVE   STOCKHOLDERS'
                                                    COMPENSATION       LOSS           DEFICIT
                                                    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>
Balance, June 30, 2004                              $    (23,616)   $   (708,618)   $ (3,257,719)

Issuance of preferred stock, net of expenses                  --              --       2,044,583
Note payable-stockholder converted into preferred
  stock                                                       --              --         240,000
Preferred stock converted into common stock                   --              --              --
Increasing rate dividend                                      --              --              --
Amortization of increasing rate dividend                      --              --              --
Comprehensive loss:
        Net loss                                              --              --      (6,597,598)
        Foreign currency translation adjustment               --        (248,405)       (248,405)
                                                                                    ------------
Comprehensive loss                                    (6,846,003)
Exercise of stock options                                     --              --           1,260
Non-cash transactions related to equity (Note 3)           5,716              --          25,900
Issuance of common stock, net of expenses                     --              --       3,007,335
Notes payable-stockholder converted into
    common stock                                              --              --         405,600
Intrinsic dividend                                            --              --              --
Increasing rate dividend                                      --              --              --
Amortization of increasing rate dividend                      --              --              --
Preferred stock dividends                                     --              --         (55,269)
                                                    ------------    ------------    ------------
Balance, June 30, 2005                                   (17,900)       (957,023)     (4,434,313)
Amortization of increasing rate dividend                      --              --              --
Comprehensive income:
        Net income                                            --              --       1,196,943
        Foreign currency translation adjustment               --         (70,972)        (70,972)
                                                                                    ------------
Comprehensive income                                                                   1,125,971
Exercise of stock options                                     --              --           4,050
Non-cash transactions related to equity (Note 3)        (191,033)             --          30,967
Amortization of increasing rate dividend                      --              --              --
Preferred stock dividends                                     --              --        (143,292)
                                                    ------------    ------------    ------------
Balance, June 30, 2006                              $   (208,933)   $ (1,027,995)   $ (3,416,617)
                                                    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       19
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                       Years ended June 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                                                          2006            2005
                                                                                       -----------    -----------
<S>                                                                                    <C>            <C>
Cash flows from operating activities:
   Net income (loss)................................................................   $ 1,196,943    $(6,597,598)

   Adjustments to reconcile net income (loss) to net cash used in operating
activities:
     Depreciation ..................................................................       154,179        143,551
     Warrants and stock options vested .............................................        30,967         25,900
     Deferred income tax provision......................................... ........            --      2,615,000
Changes in operating assets and liabilities:
        Trade accounts receivable, net .............................................       392,248          7,448
        Prepaid expenses ...........................................................       115,757       (169,295)
        Other current assets .......................................................        60,855        (35,794)
        Accounts payable ...........................................................      (399,312)      (350,791)
        Accrued compensation and related costs .....................................       372,457       (631,853)
        Deferred revenue ...........................................................      (715,044)     1,167,372
        Accrued interest ...........................................................        38,959        (60,836)
        Other accrued expenses .....................................................      (108,674)      (214,664)
                                                                                       -----------    -----------
          Net cash provided by (used in) operating activities.......................     1,139,335     (4,101,560)
                                                                                       -----------    -----------

Cash flows from investing activities:
   Capital expenditures ............................................................       (89,684)      (167,303)
                                                                                       -----------    -----------
          Net cash used in investing activities ....................................       (89,684)      (167,303)
                                                                                       -----------    -----------

Cash flows from financing activities:
   Net proceeds from sale of common stock ..........................................            --      3,007,335
   Net proceeds from sale of Series B convertible preferred stock...................            --        344,583
   Net proceeds from sale of Series C convertible preferred stock...................            --      1,700,000
   Borrowings on long-term debt ....................................................            --      1,500,000
   Repayment of line of credit......................................................            --       (300,000)
   Payment of preferred stock dividends.............................................      (130,542)       (24,369)
   Exercise of stock options .......................................................         4,050          1,260
                                                                                       -----------    -----------
          Net cash provided by (used in) financing activities ......................      (126,492)     6,228,809

Effect of exchange rate changes on cash ............................................        18,479         54,445
                                                                                       -----------    -----------
          Net increase in cash and cash equivalents ................................       941,638      2,014,391

Cash and cash equivalents at beginning of year .....................................     2,162,866        148,475
                                                                                       -----------    -----------
Cash and cash equivalents at end of year ...........................................   $ 3,104,504    $ 2,162,866
                                                                                       ===========    ===========

Supplemental cash flow disclosures:
Cash paid during the year for interest .............................................   $    98,869    $   201,641
Cash paid during the year for income taxes..........................................         1,006          3,354
Non-cash investing and financing activities:
Series B Convertible Preferred Stock issued for cancellation of note payable-
  stockholder, subsequently converted into common stock.............................   $        --    $   240,000
Common stock issued for cancellation of note payable-stockholder....................            --        405,600
Preferred stock dividends included in other accrued expenses........................        43,650         30,900
</TABLE>

See accompanying notes to consolidated financial statements.


                                       20
<PAGE>

                       CORVU CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                             June 30, 2006 and 2005

(1) DESCRIPTION OF BUSINESS AND CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

(A) ORGANIZATION

CorVu Corporation (the Company or CorVu), a Minnesota corporation, designs,
develops, markets, and supports its proprietary performance management software
solutions with sales and support offices located in the United States (U.S.),
Australia, and United Kingdom/Europe. The Company's products and services are
sold through both direct and indirect channels.

(B) BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) REVENUE RECOGNITION

The Company recognizes revenues in accordance with the provisions of the
American Institute of Certified Public Accountants Statement of Position (SOP)
97-2, "Software Revenue Recognition," as amended by SOP 98-4 and SOP 98-9, as
well as Technical Practice Aids issued from time to time by the American
Institute of Certified Public Accountants, and in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. (SAB) 101, "Revenue
Recognition in Financial Statements", as amended by SAB 104.

Software license revenues are generally recognized when there is an executed
license agreement, software has been delivered to the customer, the license fee
is fixed and payable within twelve months, collection is deemed probable and
product returns are reasonably estimable. Revenues related to multiple element
arrangements are allocated to each element of the arrangement based on the fair
values of elements such as license fees, maintenance, and professional services.
Fair value is determined based on vendor specific objective evidence. The
Company sells its products directly to end users and indirectly using resellers
and distributors.

The Company sells perpetual licenses to use their software in exchange for a
one-time licensing fee. The software is generally priced on a per user basis,
which represents an arrangement to use multiple single licenses of the same
software. The licensing fee recognized is a function of the number of copies
delivered to the customer. In accordance with SOP 97-2, revenue is recognized as
those licenses are delivered, provided all other revenue recognition criteria
have been met. In certain situations, the Company licenses their software under
site, or unlimited user, licenses. Under these arrangements, the Company is
obligated to furnish an unlimited and unspecified number of licenses of the
software, but only if the licenses are requested by the customer. The licensing
fee is payable in full, whether or not the customer requests any additional
licenses under the agreement. Accordingly, assuming all other criteria of
revenue recognition are met, the Company recognizes license revenue upon
delivery of the first copy of the software.

When software revenues are generated by our resellers and distributors, as
evidenced by a purchase order, the Company generally delivers the product
directly to the end user customer and recognizes revenue in accordance with SOP
97-2. In certain cases, the Company receives cash for prepayment of software
license fees from resellers and distributors. Accordingly, revenue is recognized
upon the delivery and acceptance of the product, when title to the product has
passed to the reseller or distributor and there is no right of return or refund.
To date, the Company has not refunded any prepayments made by resellers or
distributors.

Agreements with resellers and distributors contain contract termination
language. Upon termination of a contract, any amounts due as a result of sales
to end users which occurred up to the date of termination remain due and
payable. To date, the Company has successfully collected all amounts due under
these contractual provisions.

Maintenance revenues are recognized in accordance with SOP 97-2. Upon collection
of the funds from the customer, revenue is recognized ratably over the term of
the maintenance contract, typically 12 months, beginning with the first month of
the maintenance contract period. Maintenance contracts are renewable at the same
rates as originally contracted. Customers covered under current maintenance
contracts receive the right to receive unspecified upgrades/enhancements of the
products they have purchased on a when-and-if-available basis.


                                       21
<PAGE>

Many of our software arrangements include consulting implementation services
sold separately under consulting engagement contracts. Consulting revenues from
these arrangements are generally accounted for separately from new software
license revenues because the arrangements qualify as service transactions as
defined in SOP 97-2. The more significant factors considered in determining
whether the revenue should be accounted for separately include the nature of
services (i.e., consideration of whether the services are essential to the
functionality of the licensed product), degree of risk, availability of services
from other vendors, timing of payments and impact of milestones or acceptance
criteria on the realizability of the software license fee. Revenues for
consulting services are generally recognized as the services are performed. If
there is a significant uncertainty about the project completion or receipt of
payment for the consulting services, revenue is deferred until the uncertainty
is sufficiently resolved. Contracts with fixed or "not to exceed" fees are
recognized on a proportional performance basis.

Deferred revenue represents payment received or amounts billed in advance of
services to be performed. The amounts included in deferred revenue are
recognized as revenue in accordance with the policies discussed above. Deferred
revenue consists of the following for the years ended June 30:

                                               2006           2005
                                            ----------     ----------
         Maintenance revenue                $5,040,712     $4,730,117
         Services revenue                      289,510        426,448
         License revenue                            --        799,250
                                            ----------     ----------
         Total                              $5,330,222     $5,955,815
                                            ----------     ----------

(B) RESEARCH AND DEVELOPMENT

Expenditures for software research and development are expensed as incurred.
Such costs are required to be expensed until the point that technological
feasibility of the software is established. Technological feasibility is
determined after a working model has been completed. The Company's software
research and development costs primarily relate to software development during
the period prior to technological feasibility and are expensed as incurred.
During fiscal 2006 and 2005, no software development costs were capitalized.

(C) COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive loss in the consolidated statements of
stockholders' deficit is solely comprised of the accumulated foreign currency
translation adjustment.

Comprehensive income (loss) and its components consist of the following for the
years ended June 30:

                                          2006           2005
                                      -----------    -----------
Net income (loss).................    $ 1,196,943    $(6,597,598)
Other comprehensive income (loss):
Foreign currency translation
   adjustment ....................        (70,972)      (248,405)
                                      -----------    -----------
Comprehensive income (loss).......    $ 1,125,971    $(6,846,003)
                                      -----------    -----------


                                       22
<PAGE>

(D) FOREIGN CURRENCY TRANSLATION

The functional currency of the Company's subsidiaries is the local currency.
Accordingly, the Company translates all assets and liabilities into U.S. dollars
at current rates. Revenues, costs, and expenses are translated at average rates
during each reporting period. Unrealized gains and losses resulting from the
translation of the consolidated financial statements are excluded from results
of operations and are reflected as a translation adjustment and a separate
component of stockholders' deficit.

Realized gains and losses resulting from foreign currency transactions are
recognized in the consolidated statements of operations in the period they
occur.

(E) INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON SHARE

Basic income (loss) attributable to common stockholders per common share is
computed by dividing income (loss) attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
income (loss) attributable to common stockholders per common share is computed
by dividing income (loss) attributable to common stockholders by the weighted
average number of common shares outstanding plus all additional common stock
that would have been outstanding if potentially dilutive common stock related to
stock options and warrants had been issued. Dilutive common equivalent shares
have not been included in the computation of basic or diluted loss attributable
to common stockholders per share for the year ended June 30, 2005 because their
inclusion would be anti-dilutive due to the loss from operations.

Following is a reconciliation of basic and diluted income (loss) attributable to
common stockholders per common share for the years ended June 30:

                                              2006            2005
                                           ----------      ----------
Income (loss) attributable to common
  stockholders                            $ 1,103,951     $(6,945,900)

Weighted average shares outstanding        49,483,679      33,754,597

Income (loss) attributable to common
  Stockholders per common share-basic     $       .02     $     (0.21)

Income (loss) per common share -diluted:

Income (loss) attributable to common
  Stockholders                            $ 1,103,951     $(6,945,900)

Weighted average shares outstanding        49,483,679      33,754,597

Common stock equivalents                    2,765,254              --

Convertible preferred stock                 4,600,000              --

Weighted average shares and potential
   diluted shares outstanding              56,848,933      33,754,597

Income (loss) attributable to common
  Stockholders per common share-diluted   $      0.02     $     (0.21)

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


                                       23
<PAGE>

Options and warrants outstanding at June 30, 2006 totaling 8,728,004 were
excluded from the computation of common share equivalents for the year ended
June 30, 2006 because their inclusion would be anti-dilutive. All options,
warrants and convertible preferred stock outstanding at June 30, 2005 were
excluded from the computation of common share equivalents for the year ended
June 30, 2005 because their inclusion would be anti-dilutive because the Company
had a net loss for the period. The number of potential anti-dilutive shares at
June 30, 2005 was 19,793,069.

(F) STOCK-BASED COMPENSATION

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

Had compensation cost been recognized based on the fair values of options at the
grant dates consistent with the provisions of SFAS No. 123, the Company's income
(loss) attributable to common stockholders and basic and diluted income (loss)
attributable to common stockholders per common share would have been changed to
the following pro forma amounts for the years ended June 30:

                                                2006             2005
                                             ------------    ------------
Income (loss) attributable to common stockholders:
   As reported                               $  1,103,951    $(6,945,900)
   Pro forma                                      937,980     (7,700,568)

Basic income (loss) attributable to common stockholders per common share:
   As reported                                       0.02          (0.21)
   Pro forma                                         0.02          (0.23)

Diluted income (loss) attributable to common stockholders per common share:
   As reported                                       0.02          (0.21)
   Pro forma                                         0.02          (0.23)

Stock based compensation:
   As reported                                     30,967          25,900
   Pro forma                                      165,971         754,668

In determining the compensation cost of options granted during years ended June
30, 2006 and 2005, as specified by SFAS No. 123, the fair value of each option
grant has been estimated on the date of grant using the Black-Scholes option
pricing model and the weighted average assumptions used in these calculations
are summarized as follows:

                                              2006             2005
                                          --------------   -------------
Risk-free interest rate                     3.875-4.500%    3.375-3.625%
Expected life of options granted               5-7 years      5-7 years
Expected volatility                                 152%            152%
Expected dividend yield                               0%              0%


                                       24
<PAGE>

(G) INCOME TAXES

The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized at the enacted rates for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing tax
assets and liabilities and their respective tax basis. The effect on deferred
tax assets and liabilities of a change in tax rate is recognized in income in
the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

(H) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments (cash and cash
equivalents, trade accounts receivable and accounts payable) because of their
short-term nature, approximates fair value. The carrying value of notes payable
approximates fair value because the current rates approximate market rates
available on similar instruments and terms.

(I) CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid money market accounts carried at cost
plus accrued interest, which approximates market value. The Company deposits
cash in high credit quality financial institutions. The balances at times may
exceed federally insured limits. All cash equivalents have remaining maturities
of 90 days or less when purchased.

(J) FURNITURE, FIXTURES AND EQUIPMENT, NET

Furniture, fixtures and equipment consists of property, equipment, furniture and
computers and are stated at cost less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
respective assets that generally range from three to seven years. Leasehold
improvements are amortized using straight-line methods over the shorter of the
life of the asset or the life of the lease. Maintenance, repairs and minor
renewals are expensed when incurred. Depreciation expense was $154,179 and
$143,551 for the years ended June 30, 2006 and 2005, respectively.

(K) ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising costs were $0 for the
years ended June 30, 2006 and 2005.

(L) BUSINESS AND CREDIT CONCENTRATIONS

Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of trade accounts receivable. The Company sells
principally to end users and resellers in the United States, Australia, and
United Kingdom/Europe. The Company performs ongoing credit evaluations of its
customers and trade accounts receivable are unsecured. On a periodic basis, the
Company evaluates its accounts receivable based on history of past write-offs
and collections and current credit conditions and accordingly adjusts its
allowance for doubtful accounts. Past due accounts are determined based on
individual customer terms and the policy of write-offs and collection efforts
vary based on account circumstances. The Company does not accrue interest on
outstanding accounts receivable balances. As of June 30, 2006 and 2005, the
balance of accounts receivable represented by unpaid maintenance contracts
(which is included in deferred revenues) was $1,732,519 and $1,858,407,
respectively.

(M) IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS TO BE DISPOSED OF

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net undiscounted cash flows expected to be generated by the asset.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. The Company did not record any impairment charges
for the years ended June 30, 2006 and 2005.


                                       25
<PAGE>

(N) USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of those assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. A change in the facts and circumstances
surrounding these estimates could result in a change to the estimates and impact
future operating results.

(O) NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has published FASB
Interpretation (FIN) No. 48 (FIN No. 48), Accounting for Uncertainty in Income
Taxes, to address the noncomparability in reporting tax assets and liabilities
resulting from a lack of specific guidance in FASB Statement of Financial
Accounting Standards (SFAS) No. 109 (SFAS No. 109), Accounting for Income Taxes,
on the uncertainty in income taxes recognized in an enterprise's financial
statements. Specifically, FIN No. 48 prescribes (a) a consistent recognition
threshold and (b) a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and provides related guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN No. 48 will apply to fiscal years beginning after December 15,
2006, with earlier adoption permitted. The Company does not expect the adoption
of FIN No. 48 to have a material effect on its consolidated financial
statements.

In June 2005, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 154, "Accounting Changes and Error Corrections", a replacement of APB
Opinion No. 20 and FASB Statement No. 3. The statement applies to all voluntary
changes in accounting principle, and changes the requirements for accounting for
and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods' financial statements of a voluntary
change in accounting principle unless it is impracticable. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. Earlier application is permitted for
accounting changes and corrections of errors made occurring in fiscal years
beginning after June 1, 2005. The statement does not change the transition
provisions of any existing accounting pronouncements, including those that are
in a transition phase as of the effective date of this statement. The Company
does not expect the adoption of SFAS No. 154 to have a material effect on its
consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment", that focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. This
statement replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Beginning with the fiscal year ending June 30, 2007, we will be required to
expense the fair value of employee stock options and similar awards. As a public
company, we are allowed to select from two alternative transition methods, each
having different reporting implications. The Company expects expenses related to
the implementation of SFAS No. 123R to be approximately $180,000 for the year
ended June 30, 2007.

(3) STOCK OPTIONS AND WARRANTS

STOCK OPTIONS

The Company's 1996 Stock Option Plan (the 1996 Plan) provides for the issuance
of up to an aggregate of 8,000,000 shares of common stock to employees,
directors, and consultants. The 1996 Plan provides for the issuance of incentive
and nonqualified stock options. Under the 1996 Plan, the exercise price for
incentive stock options is at least 100% of the fair market value on the date of
the grant. The exercise price for incentive stock options is at least 110% of
the fair market value on the date of the grant for persons with greater than 10%
of the voting power of all classes of stock. Options generally expire in five or
seven years; incentive stock options may expire in five years if the optionee
owns stock representing more than 10% of the voting power of all classes of
stock. Vesting periods are determined by a compensation committee appointed by
the board of directors and generally provide for shares to vest ratably over
three to four years.

In December 2005, the shareholders approved the adoption of the Company's 2005
Equity Incentive Plan (the 2005 Plan), including the reservation of 5,000,000
shares of common stock for issuance under the 2005 Plan. Under the 2005 Plan,
the compensation committee appointed by the board of directors may award
incentive or nonqualified stock options and restricted stock awards to
employees, directors and consultants. Under the 2005 Plan, the exercise price
for incentive stock options is at least 100% of the fair market value on the
date of the grant. The exercise price for incentive stock options is at least
110% of the fair market value on the date of the grant for persons with greater
than 10% of the voting power of all classes of stock. Options generally expire
in five or seven years; incentive stock options may expire in five years if the
optionee owns stock representing more than 10% of the voting power of all
classes of stock. Vesting periods are determined by a compensation committee
appointed by the board of directors and generally provide for shares to vest
ratably over three to four years.


                                       26
<PAGE>

Under SFAS No. 123 "Accounting for Stock-Based Compensation," the weighted
average estimated fair value of stock options granted at exercise price equal to
market price at the grant date during 2006 and 2005 was $0.24 and $0.15 per
share, respectively.

The activity for both the 1996 Plan and the 2005 Plan are summarized as follows:

<TABLE>
<CAPTION>
                                                                     WEIGHTED-
                                                                   AVERAGE EXERCISE
                                                  OPTIONS          PRICE PER SHARE
                                             -------------------  ------------------
<S>                                                   <C>          <C>
Outstanding at June 30, 2004 ............             4,074,876    $           0.98
   Granted ..............................             2,466,751                0.16
   Exercised ............................              (  9,000)               0.14
   Forfeited.............................            (1,510,208)               1.09
                                             -------------------   -----------------
Outstanding at June 30, 2005 ............             5,022,419    $           0.55
   Granted ..............................             4,060,000                0.26
   Exercised ............................               (15,000)               0.27
   Forfeited.............................              (817,293)               1.08
                                             -------------------   -----------------
Outstanding at June 30, 2006.............             8,250,126    $           0.35
                                             ===================   =================
Options exercisable at June 30, 2006.....             4,245,126    $           0.45
                                             ===================   =================
Options exercisable at June 30, 2005.....             5,022,419    $           0.55
                                             ===================   =================
</TABLE>

At June 30, 2006 and 2005, the weighted average remaining contractual life of
outstanding options was 4.7 and 5.1 years, respectively.

During fiscal 2006, the Company issued five and seven year stock options to
directors in exchange for services, valued at $211,000 using the Black-Scholes
pricing model, to purchase up to an aggregate of 985,000 shares of common stock
at prices ranging from $0.23-0.31 per share. During fiscal 2005, the Company
issued five year stock options to directors in exchange for services, valued at
$43,800 using the Black Scholes pricing model, to purchase up to an aggregate of
215,000 shares of common stock at prices ranging from $0.24-0.28 per share.

In connection with these issuances, the Company has recorded expenses totaling
$19,967 and $25,900 in the accompanying consolidated statements of operations
for the years ended June 30, 2006 and 2005, respectively. Remaining amounts to
be expensed in the future, which is included in deferred compensation in the
accompanying consolidated balance sheets as of June 30, 2006 and 2005, are
$208,933 and $17,900, respectively.


                                       27
<PAGE>

Options activity outside the 1996 Plan and the 2005 Plan is summarized as
follows:

<TABLE>
<CAPTION>
                                                                      WEIGHTED-
                                                                    AVERAGE EXERCISE
                                                  OPTIONS           PRICE PER SHARE
                                             -------------------  ------------------
<S>                                                   <C>          <C>
Outstanding at June 30, 2004 ............             1,326,939    $           1.67
   Granted ..............................                    --                  --
   Exercised ............................                    --                  --
   Forfeited.............................              (127,126)               2.11
                                             -------------------   -----------------
Outstanding at June 30, 2005 ............             1,199,813    $           1.63
   Granted ..............................                52,940                0.17
   Exercised ............................                    --                  --
   Forfeited.............................              (907,313)               1.38
                                             -------------------   -----------------
Outstanding at June 30, 2006.............               345,440    $           2.05
                                             ===================   =================
Options exercisable at June 30, 2006.....               345,440    $           2.05
                                             ===================   =================
Options exercisable at June 30, 2005.....             1,199,813    $           1.63
                                             ===================   =================
</TABLE>

At June 30, 2006 and 2005, the weighted average remaining contractual life of
outstanding options outside the Plan was 1.1 and 1.0 years, respectively.

During fiscal 2006, the Company issued seven year stock options to a director in
exchange for services, valued at $11,000 using the Black-Scholes pricing model,
to purchase up to an aggregate of 52,940 shares of common stock at a price of
$0.17 per share.

The following tables summarize information about stock options outstanding as of
June 30, 2006:

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                            OPTIONS EXERCISABLE
                   --------------------------------------------------------   ----------------------------------
                                      WEIGHTED-AVERAGE        WEIGHTED-                            WEIGHTED-
                                          REMAINING           AVERAGE                              AVERAGE
EXERCISE                NUMBER           CONTRACTUAL         EXERCISE            NUMBER           EXERCISE
PRICES                OUTSTANDING           LIFE               PRICE           EXERCISABLE          PRICE
-----------------   -----------------  -----------------   ----------------   -----------------   --------------
<S>                        <C>                      <C>    <C>                      <C>           <C>
   $ 0.08-0.12             2,020,126                4.1    $          0.12          2,020,126     $        0.12
     0.14-0.20               249,940                3.0               0.19            229,940              0.19
     0.23-0.35             4,850,000                5.6               0.26            865,000              0.27
     0.36-0.42               274,000                2.7               0.40            274,000              0.40
     0.59-0.82               225,500                2.7               0.70            225,500              0.70
     0.90-1.31               553,125                2.5               1.14            553,125              1.14
     1.78-2.67               322,875                0.1               2.41            322,875              2.41
     3.00                     76,000                0.9               3.00             76,000              3.00
     7.00                     24,000                0.7               7.00             24,000              7.00
-----------------   -----------------  -----------------   ----------------   ----------------    --------------
   $ 0.08-7.00             8,595,566                4.5    $          0.42          4,590,566     $        0.57
=================   =================  =================   ================   ================    ==============
</TABLE>


                                       28
<PAGE>

WARRANTS ISSUED TO THIRD PARTIES

During fiscal 2005, the Company issued five year warrants to purchase up to an
aggregate of 1,500,001 shares of common stock at a price $0.20 per share to
various investors and a broker under a private placement in connection with the
sale of Series B Convertible Preferred Stock, which generated proceeds of
approximately $584,000, net of associated expenses (see Note 8). In a separate
transaction, the Company issued five year warrants to purchase up to 5,400,000
shares of common stock at a price of $0.50 per share in connection with the
issuance of Series C Convertible Preferred Stock to an investor (see Note 7).

As of June 30, 2006, warrants to purchase a total of 8,880,837 shares of common
stock were outstanding at exercise prices ranging from $0.15-$1.78 per share,
expiring through August 2010.

Information regarding the Company's warrants is summarized below:

                                                                     WEIGHTED-
                                                                     AVERAGE
                                                                     EXERCISE
                                                                    PRICE PER
                                                 NUMBER               SHARE
                                              -------------        ------------
Outstanding at June 30, 2004 .............       2,666,408         $      1.78
   Granted ...............................       6,938,868                0.44
   Exercised .............................              --                  --
   Forfeited..............................        (634,439)               4.35
                                              -------------        ------------
Outstanding at June 30, 2005 .............       8,970,837         $      0.56
   Granted ...............................              --                  --
   Exercised .............................              --                  --
   Forfeited..............................         (90,000)               2.67
                                              -------------        ------------
Outstanding at June 30, 2006..............       8,880,837         $      0.54
                                              =============        ============
Warrants exercisable at June 30, 2006.....       6,880,837         $      0.55
                                              =============        ============
Warrants exercisable at June 30, 2005.....       6,970,837         $      0.58
                                              =============        ============


                                       29
<PAGE>

(4) INCOME TAXES

Income (loss) before income taxes consists of the following for the years ended
June 30 (in thousands):

                                                           2006         2005
                                                       ----------   -----------
United States......................................    $      308   $    (2,198)
International......................................           888        (1,785)
                                                       ----------   -----------
Total..............................................    $    1,196   $    (3,983)
                                                       ==========   ===========

The Company has incurred cumulative net operating losses. The U.S. federal
statutory rate reconciled to the effective tax rate in the financial statements
is as follows for the years ended June 30:

<TABLE>
<CAPTION>
                                                                       2006         2005
                                                                 -------------  ------------
<S>                                                                      <C>        <C>
Federal statutory tax rate benefits..........................            34.0%      (34.0)%
State tax, net of federal benefit............................             4.0        (4.0)
Provision (benefits) related to foreign operations...........           (11.2)       15.1
Change in valuation allowance................................           (29.1)       98.1
Permanent differences and other..............................             2.3        (9.5)
                                                                 -------------  ------------
Effective tax rate...........................................             -- %       65.7 %
                                                                 =============  ============
</TABLE>

The Company has recorded a valuation allowance as follows at June 30 (in
thousands):

<TABLE>
<CAPTION>
                                                                       2006          2005
                                                                 ------------- -------------
<S>                                                              <C>           <C>
Deferred income tax assets:
   Foreign net operating loss carryforwards..................    $     2,873   $      3,236
   U.S. and state net operating loss carryforwards and
     credits.................................................          3,279          3,333
   Miscellaneous reserves and accruals.......................            105            171
                                                                 ------------- -------------
        Total gross deferred tax assets......................          6,257          6,740
Less: Valuation allowance....................................         (6,257)        (6,740)
                                                                 ------------- -------------
        Net deferred income tax assets.......................    $        --   $         --
                                                                 ============= =============
</TABLE>

The income tax provision for the year ended June 30, 2005 relates entirely to
deferred income taxes.

In assessing the realization of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible.

As of June 30, 2005, due to operating losses that were incurred for the fiscal
years ended June 30, 2005 and 2004, management felt it prudent to write-off the
previously recorded deferred income tax asset. This one-time, non-recurring
expense is reflected in the accompanying statement of operations as of June 30,
2005.

The change in the valuation allowance was $(483,000) and $3,907,000 for the
years ended June 30, 2006 and 2005.

As of June 30, 2006, the Company has reported U.S. net Federal and State
operating loss carryforwards of approximately $8,700,000 and $2,980,000,
respectively. The net operating loss carryforwards expire in the years 2010
through 2025. In addition, the Company has foreign net operating loss
carryforwards of approximately $2,900,000 as of June 30, 2006.


                                       30
<PAGE>

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

(5) COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases certain facilities and equipment under noncancelable
operating leases that expire at various dates through 2015. Future minimum lease
commitments under these operating leases are as follows:

YEAR ENDING JUNE 30:
--------------------
2007................................    $          476,000
2008................................               409,000
2009................................               400,000
2010................................               316,000
2011................................               199,000
Thereafter..........................               696,000
                                        ------------------
                                        $        2,496,000
                                        ==================

Rent expense under operating leases, including charges for taxes, insurance and
utilities, for the years ended June 30, 2006 and 2005 was $896,000 and
$1,350,000, respectively.

LEGAL PROCEEDINGS

The Company is involved in legal actions in the ordinary course of its business.
Although the outcome of any such legal actions cannot be predicted, management
believes that there are no pending legal proceedings against or involving the
Company for which the outcome is likely to have a material adverse effect upon
the Company's financial position, results of operations, or cash flow.


                                       31
<PAGE>

(6) INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS:

The Company operates predominantly in one industry segment, being the design,
development, support and marketing of its proprietary management software
solutions. The geographic distributions of the Company's revenue, long-lived
assets and other measures are summarized in the following table:

                                              YEAR ENDED JUNE 30,
                                  --------------------------------------------
                                               2006                  2005
                                  ---------------------   --------------------
Total Revenues:
   United States...............   $          4,277,000    $         4,098,000
   Australia...................              5,425,000              4,504,000
   United Kingdom..............              5,690,000              4,569,000
                                  ---------------------   --------------------
                                  $         15,392,000    $        13,171,000
                                  =====================   ====================
Operating Income (Loss):
   United States...............   $           630,000     $       (1,701,000)
   Australia...................               (12,000)            (1,586,000)
   United Kingdom..............               876,000               (146,000)
   Corporate...................              (239,000)              (440,000)
                                  ---------------------   --------------------
                                  $         1,255,000     $       (3,873,000)
                                  =====================   ====================
Deferred income tax provision:
   United States...............   $                --     $               --
   Australia...................                    --                248,000
   United Kingdom..............                    --                     --
   Corporate......... .........                    --              2,367,000
                                  ---------------------   --------------------
                                  $                --     $        2,615,000
                                  =====================   ====================
Capital Expenditures:
   United States...............   $             32,000    $             2,000
   Australia...................                 13,000                 35,000
   United Kingdom..............                 45,000                130,000
                                  ---------------------   --------------------
                                  $             90,000    $           167,000
                                  =====================   ====================
Depreciation:
   United States...............   $             33,000    $            38,000
   Australia...................                 21,000                 18,000
   United Kingdom..............                 90,000                 67,000
   Corporate......... .........                 10,000                 21,000
                                  ---------------------   --------------------
                                  $            154,000    $           144,000
                                  =====================   ====================
Long-Lived Assets:
   United States...............   $             42,000    $            53,000
   Australia...................                 54,000                 63,000
   United Kingdom..............                126,000                170,000
                                  ---------------------   --------------------
                                  $            222,000    $           286,000
                                  =====================   ====================

                                               YEAR ENDED JUNE 30,
                                  --------------------------------------------
                                              2006                  2005
                                  ---------------------   --------------------
Total Assets (excluding intercompany accounts):
   United States...............   $          1,086,000    $         1,948,000
   Australia...................              2,014,000              2,003,000
   United Kingdom..............              2,249,000              2,007,000
   Corporate......... .........              2,099,000              1,181,000
                                  ---------------------   --------------------
                                  $          7,448,000    $         7,139,000
                                  =====================   ====================


                                       32
<PAGE>

(7) SERIES A CONVERTIBLE PREFERRED STOCK

The Series A Convertible Preferred Stock ($10 par value) bears a 6.5% cumulative
dividend rate payable January 1 and July 1 of each year. Each share of Series A
Convertible Preferred Stock is convertible into eight shares of common stock.
The Holder of each share of Series A Convertible Preferred Stock is entitled to
eight votes, subject to adjustment. Upon an involuntary or voluntary liquidation
or dissolution of the Company at any time, the holders of the Series A
Convertible Preferred Stock are entitled to receive a liquidation preference of
$10 per share. The preferred stock may be called for redemption in whole or in
part by the Company for a redemption price of $11.70 per share. There are no
shares of Series A Convertible Preferred Stock currently outstanding.

(8) SERIES B CONVERTIBLE PREFERRED STOCK

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

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

The proceeds of the Series B Convertible Preferred Stock of $360,000 and the
conversion of the note payable-stockholder of $240,000 were allocated between
preferred stock, the fair value of the warrants based on using Black-Scholes
pricing model and the beneficial conversion of the preferred stock. As defined
in Emerging Issues Task Force (EITF) 00-27 "Application of Issue No. 98-5 to
Certain Convertible Instruments", the resulting beneficial conversion of the
Series B Convertible Preferred Stock of approximately $225,000 was accounted for
as preferred stock dividends during the year ended June 30, 2005. For the years
ended June 30, 2006 and 2005, the Company has recorded additional dividends of
$21,600 and $16,169, respectively.

For their efforts in securing this financing, during the year ended June 30,
2005, the Company's placement agent received a five-year warrant to purchase up
to 100,000 shares of the Company's common stock at an exercise price of $0.20
per share.


                                       33
<PAGE>

(9) DEBT AND EQUITY TRANSACTION

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

Each share of Series C Convertible Preferred Stock has a par value of $100 and
is convertible into 200 shares of the Company's common stock, subject to
customary anti-dilution provisions. In addition, holders of the Series C
Convertible Preferred Stock are entitled to voting rights together with the
common stock, on an as-if converted basis. The Series C Convertible Preferred
Stock accrues cumulative quarterly dividends of $1.50 per share during the first
year after issuance, $2.25 per share during the second year after issuance, and
$3.00 per share during the third year after issuance. The Company has the right
to redeem Series C Convertible Preferred Stock at any time upon 10 business days
prior written notice upon payment of $100 per share plus accumulated but unpaid
dividends; holders of Series C Convertible Preferred Stock may elect to convert
the stock at any time. The fair value of the warrants at the date of grant was
estimated to be approximately $748,000 using the Black-Scholes pricing model.
The following assumptions were used to calculate the fair value of the warrants:
dividend yield of 0%; expected volatility of 122%; risk-free interest rate of
3.375%; and an expected life of five years. As defined in Emerging Issues Task
Force (EITF) 00-27 "Application of Issue No. 98-5 to Certain Convertible
Instruments", it was determined that there was no resulting beneficial
conversion of the Series C Convertible Preferred Stock. Upon liquidation of the
Company, each share of Series C Convertible Preferred Stock entitles its holder
to receive an amount of $150, prior and in preference to holders of common stock
and any other preferred stock. In accordance with Staff Accounting Bulletin
Topic 5, "Increasing Rate Preferred Stock", the Company has increased the
carrying value of the Series C Convertible Preferred stock by $90,000,
represented as the net present value of the difference between the actual stated
value of dividends payable in the first two years after issuance and the
effective dividends based on a 12% market rate during those periods. For the
years ended June 30, 2006 and 2005, the Company amortized $50,300 and $22,500,
respectively, of the effective dividend discussed above. In addition, the
Company has recorded additional dividends of $121,692 and $39,100 as of June 30,
2006 and 2005, respectively.

The loan is collateralized by substantially all of the assets of the Company and
ranks senior to any existing or future indebtedness of the Company. The interest
rate for the loan is 6% during the first year of the loan, 9% during the second
year and 12% for the third year. The loan becomes immediately due and payable
upon the earlier of (i) 36 months from the date of issuance (February 2008),
(ii) a merger or combination of the Company or a sale of all or substantially
all of the assets of the Company, or (iii) the acquisition of more than 50% of
the voting power or interest in the Company by a single entity or person. The
Company has recorded interest in the amount of $135,000 and $51,780, which is
included in interest expense in the accompanying statements of operations, for
the years ended June 30, 2006 and 2005, respectively. The collateralized loan
balance in the amount of $1.5 million is included as long-term debt in the
accompanying balance sheets as of June 30, 2006 and 2005.

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

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

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

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


                                       34
<PAGE>

Subject to waiver by the unanimous consent of the Company's Board of Directors,
the Company has agreed to maintain a minimum cash balance of $750,000. This cash
is available for the Company to use but, in the event of its use, an event of
default under the debt instrument would be triggered which, if left uncured,
could result in the debt being declared immediately due and payable. As of June
30, 2006, the Company is in compliance with all covenants contained in the debt
agreement.

As a result of this transaction, ComVest owns 44.4% of the outstanding shares of
common stock and 100% of the outstanding shares of Series C Convertible
Preferred Stock as of June 30, 2006.

(10) PROFIT SHARING AND 401(K) RETIREMENT PLAN

The Company has a pre-tax salary reduction/profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code that covers employees
meeting certain eligibility requirements. Any employer contributions are
discretionary. There were no Company contributions for the years ended June 30,
2006 and 2005.


                                       35
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. The Chief Executive Officer and Chief Financial Officer also
concluded that the Company's disclosure controls and procedures are also
effective to ensure that information required to be disclosed in the reports
that the Company files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including the Company's Chief
Executive Officer and its Chief Financial Officer, to allow timely decisions
regarding required disclosure. There was no change in the Company's internal
control over financial reporting during the Company's most recently completed
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.

The Company has a limited number of employees and is not able to have proper
segregation of duties based on the cost benefit of hiring additional employees
solely to address the segregation of duties issue. We determined the risks
associated with the lack of segregation of duties are insignificant based on the
close involvement of management in day-to-day activities (i.e. tone at the top,
corporate governance, officer oversight and involvement with daily activities,
and other company controls). The Company has limited resources available and the
limited amount of tranactions and activities allow for compensation controls.

ITEM 8B. OTHER INFORMATION

All information required to be reported on a Form 8-K has been reported on a
Form 8-K.


                                       36
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

The information required by this item is incorporated by reference to the
sections labeled "Election of Directors", "Section 16(a) Reporting Compliance"
and "Code of Ethics" that appear in the definitive proxy statement for the 2006
Annual Meeting of Shareholders.

ITEM 10. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
section labeled "Executive Compensation" that appears in the definitive proxy
statement for the 2006 Annual Meeting of Shareholders.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCK MATTERS

The information required by this item is incorporated by reference to the
section labeled "Principal Shareholders and Management Shareholdings" that
appears in the definitive proxy statement for the 2006 Annual Meeting of
Shareholders.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the
section labeled Certain Relationships and Related Transactions that appears in
the definitive proxy statement for the 2006 Annual Meeting of Shareholders.

ITEM 13. EXHIBITS

(a) Exhibits.

See "Exhibit Index" immediately following the signature page of this Form
10-KSB.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the
section labeled "Ratification of Selection of Independent Auditors" that appears
in the definitive proxy statement for the 2006 Annual Meeting of Shareholders.


                                       37
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                CORVU CORPORATION

Dated:  September 13, 2006             By: /s/ Joseph J. Caffarelli
                                           ------------------------------------
                                           Joseph J. Caffarelli
                                           President and Chief Executive Officer

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

<TABLE>
<CAPTION>
SIGNATURE AND TITLE                                                                                        DATE
------------------------------------------------------------------------------------------      ----------------------------
<S>                                                                                                 <C>
/s/ Joseph J. Caffarelli
----------------------------------------------------------------
Joseph J. Caffarelli, President and Chief Executive Officer, Director                               September 13, 2006
(principal executive officer)

/s/ David C. Carlson
----------------------------------------------------------------
David C. Carlson, Chief Financial Officer                                                           September 13, 2006
(principal financial and accounting officer)

/s/ Ismail Kurdi
----------------------------------------------------------------
Ismail Kurdi, Director                                                                              September 13, 2006

/s/ James L. Mandel
----------------------------------------------------------------
James L. Mandel, Chairman of the Board                                                              September 13, 2006

/s/ Justin M. MacIntosh
----------------------------------------------------------------
Justin M. MacIntosh, Director                                                                       September 13, 2006

/s/ Daniel R. Fishback
----------------------------------------------------------------
Daniel R. Fishback, Director                                                                        September 13, 2006

/s/ Robert L. Doretti
----------------------------------------------------------------
Robert L. Doretti, Director                                                                         September 13, 2006

/s/ Robert L. Priddy
----------------------------------------------------------------
Robert L. Priddy, Director                                                                          September 13, 2006
</TABLE>


                                       38
<PAGE>

                                CORVU CORPORATION
                                EXHIBIT INDEX FOR
                 FORM 10-KSB FOR FISCAL YEAR ENDED JUNE 30, 2006

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      Amended and Restated Articles of Incorporation,
             Certificate of Designation of Rights and Preferences of
             Series B Convertible Preferred Stock and Certificate of
             Designation of Rights and Preferences of Series C
             Convertible Preferred Stock of the
             Registrant--incorporated by reference to Exhibit 3.1 to
             Registrant's Form 10-QSB for fiscal quarter ended March
             31, 2005 filed May 11, 2005

    3.2      Bylaws--incorporated by reference to Exhibit 3.2 to the
             Registrant's Form 10-SB, File No. 000-29299

    4.1      Rights of Holders of Series A Convertible Preferred Stock--see
             Article 3 of Amended and Restated Articles of Incorporation
             (Exhibit 3.1)

    4.2      Rights of Holders of Series B Convertible Preferred
             Stock--incorporated by reference to Exhibit 3.1 to Registrant's
             Form 10-QSB for fiscal quarter ended March 31, 2005 filed May 11,
             2005

    4.3      Rights of Holders of Series C Convertible Preferred
             Stock--incorporated by reference to Exhibit 3.1 to Registrant's
             Form 10-QSB for fiscal quarter ended March 31, 2005 filed May 11,
             2005

    4.4      Registration Rights Agreement dated February 11, 2005
             between CorVu Corporation and ComVest Investment Partners
             II LLC--incorporated by reference to Exhibit 4.2 to
             Registrant's Form 10-QSB for fiscal quarter ended March
             31, 2005 filed May 11, 2005

   10.1*     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

   10.2*     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

   10.3      Lease Agreement between United Properties Investment LLC.
             and CorVu Corporation for premises at 3400 West 66th
             Street, Edina, Minnesota-incorporated by reference to
             Exhibit 10.7 to Registrant's Form 10-KSB for the fiscal
             year ended June 30, 2002, File No. 000-29299

   10.4*     CorVu Corporation 1996 Stock Option Plan, as amended
             through June 29, 2005 and approved by the shareholders at
             their meeting on December 8, 2005--incorporated by
             reference to Appendix A to Registrant's Definitive Proxy
             Statement on Schedule 14A filed October 27, 2005.

   10.5      Commercial Lease between Perpetual Trustee Company Limited
             and CorVu Australasia Pty Ltd., dated March 1, 2004, for
             premises at Suite 1, Level 8, Tower A, Zenith Centre 821
             Pacific Highway, Chatswood, NSW - incorporated by
             reference to Exhibit 10.16 to Registrant's Form 10-KSB/A
             for fiscal quarter ended June 30, 2004 filed January 12,
             2005.


                                       39
<PAGE>

   10.6      Accounts Receivable Financing Agreement with Silicon Valley
             Bank--incorporated by reference to Exhibit 10.2 to Registrant's
             Form 10-QSB for fiscal quarter ended September 30, 2004 filed
             November 12, 2004

   10.7      Promissory Note dated December 2, 2004 from CorVu North
             America, Inc. to Commerce Bank--incorporated by reference
             to Exhibit 10.1 to Registrant's Form 10-QSB for fiscal
             quarter ended December 31, 2004 filed February 14, 2005

   10.8      CorVu Corporation Guaranty Agreement with Commerce
             Bank--incorporated by reference to Exhibit 10.2 to
             Registrant's Form 10-QSB for fiscal quarter ended December
             31, 2004 filed February 14, 2005

   10.9      CorVu Corporation Debt Subordination Agreement with Commerce
             Bank--incorporated by reference to Exhibit 10.3 to Registrant's
             Form 10-QSB for fiscal quarter ended December 31, 2004 filed
             February 14, 2005

   10.10     Term Sheet dated December 20, 2004 between CorVu
             Corporation and ComVest Investment Partners II
             LLC--incorporated by reference to Exhibit 10.4 to
             Registrant's Form 10-QSB for fiscal quarter ended December
             31, 2004 filed February 14, 2005

   10.11     Amended and Restated Term Sheet dated January 31, 2005
             between CorVu Corporation and ComVest Investment Partners
             II LLC--incorporated by reference to Exhibit 10.5 to
             Registrant's Form 10-QSB for fiscal quarter ended December
             31, 2004 filed February 14, 2005

   10.12*    Separation Agreement dated March 22, 2005 with Alan
             Missroon--incorporated by reference to Exhibit 10.1 to
             Registrant's Form 10-QSB for fiscal quarter ended March 31, 2005
             filed May 11, 2005

   10.13     Lease dated March 24, 2005 between 3 Furzeground (No. 1) Limited
             and 3 Furzeground (No. 2) Limited and CorVu plc--incorporated by
             reference to Exhibit 10.2 to Registrant's Form 10-QSB for fiscal
             quarter ended March 31, 2005 filed May 11, 2005

   10.14     Amendment No. 4 to Employment Agreement dated February 11, 2005
             between CorVu Corporation and Justin MacIntosh--incorporated by
             reference to Exhibit 10.3 to Registrant's Form 10-QSB for fiscal
             quarter ended March 31, 2005 filed May 11, 2005

   10.15     Securities Purchase Agreement dated as of February 11, 2005 among
             CorVu Corporation, ComVest Partners II LLC and the
             Subsidiaries--incorporated by reference to Exhibit 10.4 to
             Registrant's Form 10-QSB for fiscal quarter ended March 31, 2005
             filed May 11, 2005

   10.16     Security Agreement dated February 11, 2005 among CorVu
             Corporation, CorVu North America, Inc. and ComVest
             Investment Partners II LLC--incorporated by reference to
             Exhibit 10.5 to Registrant's Form 10-QSB for fiscal
             quarter ended March 31, 2005 filed May 11, 2005

   10.17     Stockholders' Agreement dated as of February 11, 2005
             among certain stockholders and ComVest Investment Partners
             II LLC--incorporated by reference to Exhibit 10.6 to
             Registrant's Form 10-QSB for fiscal quarter ended March
             31, 2005 filed May 11, 2005

   10.18     Senior Secured Promissory Note dated February 11, 2005 payable to
             ComVest Investment Partners II LLC--incorporated by reference to
             Exhibit 10.7 to Registrant's Form 10-QSB for fiscal quarter ended
             March 31, 2005 filed May 11, 2005

   10.19     Protective Warrant dated February 11, 2005 issued to ComVest
             Investment Partners II LLC--incorporated by reference to Exhibit
             10.8 to Registrant's Form 10-QSB for fiscal quarter ended March
             31, 2005 filed May 11, 2005

   10.20     Preferred Warrant dated February 11, 2005 issued to
             ComVest Investment Partners II LLC--incorporated by
             reference to Exhibit 10.9 to Registrant's Form 10-QSB for
             fiscal quarter ended March 31, 2005 filed May 11, 2005

   10.21*    Employment Agreement dated August 1, 2005 between CorVu Corporation
             and Joseph Caffarelli--incorporated by reference to Exhibit 10.1 to
             Registrant's Form 8-K filed August
             4, 2005


                                       40
<PAGE>

   10.22*    Termination of Employment Agreement dated July 31, 2005 between
             CorVu Corporation and Justin M. MacIntosh--incorporated by
             reference to Exhibit 10.1 to Registrant's Form 8-K filed
             August 4, 2005

   10.23*    CorVu Corporation 2005 Equity Incentive Plan, as approved
             by the shareholders at their meeting on December 8,
             2005--incorporated by reference to Appendix B to
             Registrant's Definitive Proxy Statement on Schedule 14A
             filed October 27, 2005

   21**      Subsidiaries of CorVu Corporation

   23**      Consent of Independent Registered Public Accounting Firm- Virchow,
             Krause & Company, LLP

   24        Power of Attorney (contained on Signature Page of this Form 10-KSB)

   31.1**    Certification of Chief Executive Officer Pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002

   31.2**    Certification of Chief Financial Officer Pursuant to Section 302 of
             the Sarbanes-Oxley Act of 2002

   32**      Certification of Chief Executive Officer and Chief Financial
             Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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


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