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

Appendix A-1 Mountain State Sporting Goods Operational Analysis Source: U.S. Income Tax Return for S Corporation (Form 1120S)

2003 2004 2005 2006 2007 2008 Gross Receipts 1,793,346 1,863,321 2,007,185 2,195,901 2,339,496 2,513,479 COGS (1,476,447) (1,533,750) (1,642,210) (1,761,292) (1,926,462) (2,080,909)

Gross Profit 316,899 329,571 364,975 434,609 413,034 432,570

Operating Expenses Officers' Comp. 60,000 60,000 65,000 65,000 50,000 50,000 Salaries & Wages 68,002 91,927 110,907 139,723 157,320 161,315 Repairs & Maint. 1,177 602 2,620 1,297 1,268 1,769 Rent 12,000 12,000 23,000 24,000 24,000 24,000 Taxes & Licenses 24,065 27,868 43,085 45,711 50,232 54,543 Depreciation 5,407 5,824 11,647 5,860 6,588 6,534 Advertising 1,941 2,658 5,653 4,216 18,778 27,512 Delivery 9,353 10,831 10,337 11,155 12,241 12,669 Insurance 13,121 16,903 19,287 25,089 32,609 38,149 Misc. Expense 1,205 1,839 4,168 3,940 2,736 3,115 Office Exp. 479 357 613 1,040 3,656 4,350 Postage 316 409 847 932 1,082 1,310 Supplies 2,185 2,248 3,320 1,992 1,670 2,021 Telephone 2,372 2,773 3,188 3,374 2,933 3,667 Utilities 5,841 5,467 6,372 7,198 7,144 7,246 Outside Services 1,587 3,097 11,550 24,192 771 698 Travel 2,224 3,319 3,541 3,126 5,217 6,051

Tot. Operating Exp. 211,275 248,122 325,135 367,845 378,245 404,949

Operating Income 105,624 81,449 39,840 66,764 34,789 27,621

Other Income (Exp.) Interest Income - - - 6,730 - - Interest Expense (7,928) (5,789) (2,731) (1,648) - -

Tot. Other Income (Exp.) (7,928) (5,789) (2,731) 5,082 - -

Net Income 97,696 75,660 37,109 71,846 34,789 27,621