Mountain State Sporting Goods (Fraud Investigation Phases I-III.)

Appendix A-2 Mountain State Sporting Goods Component Percentage Analysis Source: U.S. Income Tax Return for S Corporation (Form 1120S)

2003 2004 2005 2006 2007 2008 Gross Receipts 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% COGS -82.33% -82.31% -81.82% -80.21% -82.35% -82.79%

Gross Profit 17.67% 17.69% 18.18% 19.79% 17.65% 17.21%

Operating Expenses Officers' Comp. 3.35% 3.22% 3.24% 2.96% 2.14% 1.99% Salaries & Wages 3.79% 4.93% 5.53% 6.36% 6.72% 6.42% Repairs & Maint. 0.07% 0.03% 0.13% 0.06% 0.05% 0.07% Rent 0.67% 0.64% 1.15% 1.09% 1.03% 0.95% Taxes & Licenses 1.34% 1.50% 2.15% 2.08% 2.15% 2.17% Depreciation 0.30% 0.31% 0.58% 0.27% 0.28% 0.26% Advertising 0.11% 0.14% 0.28% 0.19% 0.80% 1.09% Delivery 0.52% 0.58% 0.51% 0.51% 0.52% 0.50% Insurance 0.73% 0.91% 0.96% 1.14% 1.39% 1.52% Misc. Expense 0.07% 0.10% 0.21% 0.18% 0.12% 0.12% Office Exp. 0.03% 0.02% 0.03% 0.05% 0.16% 0.17% Postage 0.02% 0.02% 0.04% 0.04% 0.05% 0.05% Supplies 0.12% 0.12% 0.17% 0.09% 0.07% 0.08% Telephone 0.13% 0.15% 0.16% 0.15% 0.13% 0.15% Utilities 0.33% 0.29% 0.32% 0.33% 0.31% 0.29% Outside Services 0.09% 0.17% 0.58% 1.10% 0.03% 0.03% Travel 0.12% 0.18% 0.18% 0.14% 0.22% 0.24%

Tot. Operating Exp. 11.78% 13.32% 16.20% 16.75% 16.17% 16.11%

Operating Income 5.89% 4.37% 1.98% 3.04% 1.49% 1.10%

Other Income (Exp.) Interest Income 0.00% 0.00% 0.00% 0.38% 0.00% 0.00% Interest Expense -0.44% -0.32% -0.15% -0.09% 0.00% 0.00%

Tot. Other Income (Exp.) -0.44% -0.32% -0.15% 0.28% 0.00% 0.00%

Net Income 5.45% 4.06% 1.85% 3.27% 1.49% 1.10%