CVF Technologies Corporation (www.cvfcorp.com) ("CVF" or the "Company") was originally founded as a limited partnership in 1989 and was converted into a corporation in 1995. CVF is involved in the business of investing in and managing early stage companies primarily engaged in the environmental technology sector. CVF's mandate is to acquire significant holdings in new and emerging technology companies and then to assist them in their management, and through them to engage in their respective businesses. CVF's current holdings include investments made in its investee companies during the period from 1990 to the present.

CVF realizes revenues and profits through consolidation of the operating results of its investee companies. CVF also endeavors to generate gains through the eventual sale of all or a portion of its holdings in these companies at such time as management determines that CVF's funds can be better deployed in other industries or companies. CVF's goal is to maximize the value of its holdings in its investee companies for the Company's shareholders. One important way that CVF accomplishes this is by taking the investee company public at the appropriate time or selling the investee company. This has been done with CVF's former investee companies Certicom Corporation and TurboSonic Technologies, Inc. both of which went public. Also, in January 2005 Biorem Inc. (formerly Biorem Technologies Inc.) completed its going public transaction. Most recently G.P. Royalty Distribution Corporation (formerly Gemprint Corporation), sold substantially all its assets in December 2005, while retaining a 5 year royalty stream of $1 per Gemprint in excess of 100,000 Gemprints per year beginning December 22, 2005.

After CVF's initial investment, an investee company often requires additional capital to meet its business plan. Consequently, the Company actively assists its investee companies in obtaining additional capital which is usually sourced through CVF's own resources or via other participants. CVF's ability to continue to provide assistance to its investees is subject to the limitations of its own financial resources. CVF's position in Biorem is currently valued at $4.9 million (as of August 4, 2006) and a public market exists for Biorem's stock. Also in December 2005 Gemprint sold substantially all of its assets for $7.5 million. Therefore CVF expects to have more flexibility in assisting its investee companies.

On a stand-alone basis, CVF has no sales from operations. Sales and gross profit from sales reflect the operations of CVF's consolidated subsidiaries only. The consolidated subsidiaries in the 2006 period are G.P. Royalty Distribution Corporation ("Gemprint"), Ecoval Corporation ("Ecoval") and Xylodyne Corporation ("Xylodyne"). CVF records profit and loss using the equity method for companies in which CVF holds 20% to 50% ownership. These companies are Biorem, Petrozyme Technologies Inc. ("Petrozyme"), and SRE (for the months of January 2005 and February 2005 only as SRE subsequently filed for bankruptcy). The results of companies in which CVF has less than 20% ownership, are not included in the Consolidated Statement of Operations.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2005:

Consolidated sales of CVF subsidiaries for the three months ended June 30, 2006 amounted to $179,652, representing an increase of $80,773 compared to sales of $98,879 for the same period in 2005 due to Ecoval sales increasing by $102,956, Xylodyne sales of $68,335 and offset by Gemprint no longer having sales following the sale of its assets compared to sales of $90,518 in the 2005 period.
For the three months ended June 30, 2006, Ecoval's sales increased by $102,956 as the company began to invest in a sales and marketing program during the previous quarter.

CVF's gross margin of $66,325 for the second quarter of 2006 represents an increase of $1,089 from the same period last year. This increase is due to Ecoval's increased sales, sales from Xylodyne offset by Gemprint no longer having sales as the operating assets were sold. Overall gross margin of CVF as a percentage of sales decreased to 36.9% for the second quarter of 2006 from 66.0% for the second quarter of 2005 due to no longer having the gross margins on the historically high gross margins at Gemprint (which was 70.2 % in the 2005 second quarter).

Selling, general and administrative expenses on a consolidated basis for the three months ended June 30, 2006 amounted to $616,416, representing an increase of $216,197 (54%) compared to expenses of $400,219 for the same period in 2005. This increase is mainly due to higher expenses at the parent company as well as Ecoval and Xylodyne offset by having much lower expenses at Gemprint ($87,751 or 74% lower) as that company has sold its assets and no longer operates a business. The increase at the parent level of $117,496 (43.9%) is due to the recording of the vested portion of the restricted CVF stock issued totaling $53,950, severance accrued totaling $40,603 and a general increase in travel activity in the 2006 second quarter. The increase at Ecoval of $57,029 (413%) is due to ramping up the sales and marketing activities. The expenses at Xylodyne of $129,423 are new expenses as the company started operations in April 2006. Net interest income was $29,597 for the second quarter of 2006 compared to net interest income of $17,905 for the second quarter of 2005. This increase in income is due to interest earned on the cash in banks and escrow accounts. Loss from equity holdings (entities in which CVF has a 50% or less ownership) was a loss of $143,355 in the 2006 second quarter compared to income of $39,110 in the 2005 period. This represents CVF's share of Biorem's loss in the 2006 period compared to CVF's share of Biorem's income in the 2005 period. Other expense was $132,336 in the second quarter 2006 compared to an expense of $8,974 in the 2005 period. This was due to foreign exchange as the US dollar weakened during the 2006 period. Gain on sale of holdings amounted to $75,222 in the 2005 period representing a gain from the sales of a portion of CVF's holdings in Biorem.

Income tax expense amounted to $589 in the 2006 second quarter compared to recovery of $36,723 in the 2005 period. Income tax recovery in the second quarter of 2005 represents the recording for the deferred taxes for Ecoval. Minority interest - included in the 2006 second quarter is $49,220 of income relating to the minority shareholders of Gemprint's share of the 2006 second quarters loss.
CVF, on a consolidated basis, recorded a net loss of $747,554 for the three months ended June 30, 2006 compared to a net loss of $174,997 in the 2005 period.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005:

Consolidated sales of CVF subsidiaries for the six months ended June 30, 2006 amounted to $200,320, representing a decrease of $47,702 compared to sales of $248,022 for the same period in 2005 primarily due to Gemprint no longer having sales following the sale of its assets compared to sales of $238,054 in the 2005 period offset by Ecoval sales increasing by $122,017 and Xylodyne's sales of $68,335.

CVF's gross margin of $72,113 for the first six months of 2006 represents a decrease of $102,318 from the same period last year. This decrease is due to Gemprint no longer having sales as the operating assets were sold. Overall gross margin of CVF as a percentage of sales decreased to 36.0% for the first six months of 2006 from 70.3% for the first six months of 2005 due to no longer having the gross margins on the historically high gross margins at Gemprint (which was 72.8 % in the 2005 period).

Selling, general and administrative expenses on a consolidated basis for the six months ended June 30, 2006 amounted to $1,111,259, representing a net increase of $251,948 (29%) compared to expenses of $859,311 for the same period in 2005. This increase is mainly due to higher expenses at the parent company as well as Ecoval and Xylodyne offset somewhat by having much lower expenses at Gemprint ($149,198 or 59% lower) as that company has sold its assets and no longer operates a business. The increase at the parent level of $176,589 (30.3%) is due to the recording of the vested portion of the restricted CVF stock issued totaling $53,950, severance accrued totaling $40,603, a general increase in travel activity in the 2006 period and a reversal totaling $44,300 for the repriced stock options in the 2005 period. The increase at Ecoval of $95,134 (395%) is due to ramping up the sales and marketing activities. The expenses at Xylodyne of $129,423 are new expenses as the company started operations in April 2006.

Net interest income was $80,181 for the first six months of 2006 compared to net interest expense of $6,081 for the first six months of 2005. This increase in income is due to interest earned on the cash in banks and escrow accounts compared to no interest earned in the 2005 period as the Company had very little cash in the 2005 period.

Loss from equity holdings (entities in which CVF has a 50% or less ownership) was a loss of $190,607 in the first six months of 2006 compared to income of $66,518 in the 2005 period. This represents CVF's share of Biorem's loss in the 2006 period compared to CVF's share of Biorem's income in the 2005 comparible period.

Other expense was $136,817 in the first six months of 2006 compared to expense of $24,343 in the 2005 period. This was due to foreign exchange as the US dollar weakened substantially during the 2006 period.

Gain on sale of holdings amounted to $798,874 in the 2005 period. In the 2005 period the Company sold a portion of its holdings in Biorem.

Income tax expense amounted to $2,332 in the first six months of 2006 compared to recovery of $73,629 in the 2005 period. Income tax recovery in the 2005 period represents the recording of the deferred taxes for Ecoval. Minority interest - included in the first six months of 2006 is $60,333 of income relating to the minority shareholders of Gemprint's share of the first six months 2006 loss.
CVF, on a consolidated basis, recorded a net loss of $1,228,388 for the six months ended June 30, 2006 which compared to a net income of $223,717 in the 2005 period.

LIQUIDITY AND CAPITAL RESOURCES:

Stockholders' equity as of June 30, 2006 amounted to $697,558 compared to equity of $3,377,632 at December 31, 2005. This net decrease in the equity of $2,680,074 is primarily attributable to the redemption of the Series C preferred stock in February 2006 totaling $1,121,666 and the net loss of $1,228,388 which was recognized in the first six months of 2006.

The current ratio of CVF at June 30, 2006 is 1.79 to 1, which has decreased from 2.88 to 1 at December 31, 2005 due mainly to the cash used totaling $1,121,666 for the redemption of the Series C preferred stock in February 2006 and treasury shares purchasing totaling $453,554.

CVF management anticipates that over the next twelve month period CVF should have sufficient cash from various sources to sustain itself. Between cash on hand, value of the Biorem stock that became listed on a public market in January 2005 (and is valued as of August 4, 2006, at $4.9 million), and the sales of a portion of its holdings in certain investee companies, the Company expects to have enough cash to fund itself and certain of its investee companies that are currently not profitable. Additionally, CVF has limited outside debt and a line of credit could be sought.

CVF, on February 27, 2006, redeemed its Series C Preferred Stock as well as paid accrued dividends for total cash payment of $1,121,667. The former Series C holder continues to hold a three-year warrant to purchase 100,000 shares of CVF's common stock at an exercise price of $0.35 per share which expires in February 2007.

As of June 30, 2006, CVF's cash balance was $3,436,099 (including restricted cash of $2,686,536) which is a decrease of $3,081,794 compared to December 31, 2005. The Company expects to sustain itself over the next year with cash on hand. However if necessary the Company could sell a portion of its investments in its public holding, Biorem Inc. (which had a value to CVF as of July 28, 2006 of approximately $4.0 million) or from CVF issuing additional securities. During the first six months of 2006 CVF did not sell any Biorem shares compared to receiving $932,094 in the 2005 first six months from the sale of 381,842 Biorem shares. The Company will also continue to assist its investee companies in their efforts to obtain outside financing in order to fund their growth and development of their business plans. Certain of the Company's financial obligations included in current liabilities relate to items that will not be paid in the near term. The Company will carefully manage its cash payments on such obligations.

As announced on December 30, 2005 CVF's Board of Directors approved a $500,000 stock buyback program. The program allows the Company to make up to $500,000 of stock repurchases. As of July 28, 2006 the Company has purchased 1,145,861 shares under this repurchase agreement at a total price of $453,554.

CRITICAL ACCOUNTING POLICIES:

An understanding of CVF's accounting policies is necessary for a complete analysis of our results, financial position, liquidity and trends. We focus your attention on the following accounting policies of the Company:
The Company's primary need for cash is to maintain its ability to support the operations and ultimately the carrying values of certain of its individual investee companies. The Company will continue to assist its investee companies in their efforts to obtain outside financing in order to fund the growth and development of their respective businesses and has taken steps to reduce the operating cash requirements of the parent company and its investees. The Company can also seek outside investment if need be.
The Company may continue, when and if appropriate, to assist its investee companies in their efforts to obtain outside financing in order to fund the growth and development of their respective businesses, as a means of augmenting CVF's needs to finance them.
Contingencies - The Company is currently under an audit by the Internal Revenue Service("IRS"). As part of the routine audit, the IRS indicated that they reviewed the treatment of capital losses claimed in the prior year and refunds of $2,532,000 received in 2001. A proposed deficiency in federal income tax was issued by the IRS on December 1, 2003 totaling $2,969,123. On February 5, 2004 CVF issued a formal protest to the proposed deficiency and its protest has now gone before appeals at the IRS. If it is not resolved at the appeals level of the IRS, CVF intends to challenge the IRS ruling in federal tax court, as CVF and its legal counsel strongly believes its original deductions were correctly taken. This process could take up to 18 more months to be resolved. The Company is involved from time to time in litigation, which arises in the normal course of business. In respect of these claims the Company believes it has valid defenses and/or appropriate insurance coverage in place. In management's judgment, no material exposure exists on the eventual settlement of such litigation, and accordingly, no provision has been made in the accompanying financial statements.

FINANCIAL CONSIDERATIONS:

Early Stage Development Companies: Each of the investees is an early stage development company with a limited relevant operating history upon which an evaluation of its prospects can be made and prone to the risks of all early stage development companies, including those described under "Forward Looking Statements". As such, there can be no assurance of the future success of any of the investees.

Quarterly Fluctuations: CVF's financial results have historically been, and will continue to be, subject to quarterly and annual fluctuations due to a variety of factors, primarily resulting from the nature of the companies in which it invests. Any shortfall in revenues in a given quarter may impact CVF's results of operations due to an inability to adjust expenses during the quarter to match the level of revenues for the quarter. There can be no assurance that CVF will report income in any period in the future. While some of CVF's investees have consistently reported losses, CVF has recorded income in certain fiscal periods and experienced fluctuations from period to period due to the sale of some of its holdings, other one-time transactions and similar events. Rapid Technological Change: The markets for CVF's investee's products are generally characterized by rapidly changing technology, evolving industry standards, changes in customer needs and frequent new product introductions. The future success of the investees will depend on their ability to enhance current products, develop new products on a timely and cost-effective basis that meet changing customer needs and to respond to emerging industry standards and other technological changes. There can be no assurance that the investees will be successful in developing new products or enhancing their existing products on a timely basis, or that such new products or product enhancements will achieve market acceptance.

FORWARD LOOKING STATEMENTS:

CVF believes that certain statements contained in this Quarterly Report on Form 10-QSB constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to vary materially from the Company's expected results, performance or achievements. Other factors that may affect CVF's future results include:

• general economic and business conditions;
• foreign currency fluctuations, particularly involving the Canadian dollar:
• the Company's ability to find additional suitable investments and the ability of those investments to generate an acceptable return on invested capital; and
• the uncertainties and risks involved in investing in early-stage development companies which can arise because of the lack of a customer base, lack of name recognition and credibility, the need to locate and retain experienced management and the need to develop and refine the business and its operations, among other reasons.
• the Company's ability to obtain capital to fund its operations and those of its investees.

The Company will not update any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. Item 3. Controls and Procedures

(a) The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the end of the period covered by this report.

(b) There has been no significant change in the Company's internal controls over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.