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

Appendix A-3 Mountain State Sporting Goods Horizontal Trend Analysis Source: U.S. Income Tax Return for S Corporation (Form 1120S)

03-04 04-05 05-06 06-07 07-08 Gross Receipts 3.90% 7.72% 9.40% 6.54% 7.44% COGS 3.88% 7.07% 7.25% 9.38% 8.02%

Gross Profit 4.00% 10.74% 19.08% -4.96% 4.73%

Operating Expenses Officers' Comp. 0.00% 8.33% 0.00% -23.08% 0.00% Salaries & Wages 35.18% 20.65% 25.98% 12.59% 2.54% Repairs & Maint. -48.85% 335.22% -50.50% -2.24% 39.51% Rent 0.00% 91.67% 4.35% 0.00% 0.00% Taxes & Licenses 15.80% 54.60% 6.09% 9.89% 8.58% Depreciation 7.71% 99.98% -49.69% 12.42% -0.82% Advertising 36.94% 112.68% -25.42% 345.40% 46.51% Delivery 15.80% -4.56% 7.91% 9.74% 3.50% Insurance 28.82% 14.10% 30.08% 29.97% 16.99% Misc. Expense 52.61% 126.64% -5.47% -30.56% 13.85% Office Exp. -25.47% 71.71% 69.66% 251.54% 18.98% Postage 29.43% 107.09% 10.04% 16.09% 21.07% Supplies 2.88% 47.69% -40.00% -16.16% 21.02% Telephone 16.91% 14.97% 5.83% -13.07% 25.03% Utilities -6.40% 16.55% 12.96% -0.75% 1.43% Outside Services 95.15% 272.94% 109.45% -96.81% -9.47% Travel 49.24% 6.69% -11.72% 66.89% 15.99%

Tot. Operating Exp. 17.44% 31.04% 13.14% 2.83% 7.06%

Operating Income -22.89% -51.09% 67.58% -47.89% -20.60%

Other Income (Exp.) Interest Income -100.00% 0.00% Interest Expense -26.98% -52.82% -39.66% -100.00% 0.00%

Tot. Other Income (Exp.) -26.98% -52.82% -286.09% -100.00% 0.00%

Net Income -22.56% -50.95% 93.61% -51.58% -20.60%