Contract analysis

I. Purpose of This Letter As you are aware, this firm represents the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG"), a Delaware corporation whose common stock is publicly traded on the Nasdaq Stock Market under the ticker symbol VMRK, and whose principal executive offices are located at 4100 Bayshore Boulevard, Suite 1200, Tampa, Florida 33611. The Audit Committee — composed of i

II. Background and Context By way of brief background, the Audit Committee opened the internal investigation on July 24, 2023, following referrals from VHG's internal audit function and concerns raised by external auditors at Severin Beck CPAs LLP during the course of their quarterly review procedures. The investigation encompasses two principal areas of inquiry: (a) Premature Revenue Recognition of Timeshare-Interes

III. Document Requests The investigation team, together with our forensic accounting advisor, Crestline Forensic Advisory LLC — which has been retained under the Kovel doctrine at the direction of the Audit Committee to provide forensic accounting analysis in aid of the provision of legal advice — has identified several areas where additional documentation from Mr. Daskine is necessary to advance the investigation. T

1. All formation documents, including the articles of organization, operating agreement(s), and any amendments thereto, for GSC.

2. All bank account records, account statements, canceled checks, deposit slips, wire-transfer confirmations, and signature cards for any accounts held in the name of GSC at any financial institution, including but not limited to accounts at any bank, credit union, or brokerage.

3. All communications — whether by email, text message, messaging application (including but not limited to Westmark Software, Meridian Services Inc., Signal, and Kestrel Data Systems), or any other medium — between Mr. Daskine and any person or entity regarding GSC, including but not limited to communications concerning the formation, operation, management, capitalization, or dissolution of GSC.

4. All invoices submitted by GSC to VCR or to any other entity within the VHG corporate family, together with all supporting documentation for such invoices. This request specifically encompasses, without limitation, Invoice No. GSC-2023-007, dated February 14, 2023, in the amount of $94,500.00, bearing the description "lobby renovation materials — Coral Dune Phase III," as well as any supporting documentation (inclu

5. All documents reflecting Mr. Daskine's direct or indirect ownership interest in GSC, including but not limited to membership certificates, capital-account statements, K-1 tax schedules, distribution records, and any documents relating to nominee arrangements or other structures through which Mr. Daskine's beneficial ownership of GSC may have been held or obscured. We note, for purposes of this request, that the in

1. All formation documents, including the articles of organization, operating agreement(s), and any amendments thereto, for SPS.

2. All bank account records, account statements, canceled checks, deposit slips, wire-transfer confirmations, and signature cards for any accounts held in the name of SPS at any financial institution.

3. All communications — whether by email, text message, messaging application, or any other medium — between Mr. Daskine and any person or entity regarding SPS, including but not limited to communications concerning the formation, operation, management, capitalization, or dissolution of SPS.

4. All invoices submitted by SPS to VCR or to any other entity within the VHG corporate family, together with all supporting documentation for such invoices. The investigation has identified twelve (12) invoices totaling $430,000.00 submitted by SPS to VCR during the period from approximately January 2022 through April 2023, and we request production of any additional invoices or supporting materials in Mr. Daskine's

5. All documents reflecting Mr. Daskine's membership interest in SPS, including but not limited to membership certificates, capital-account statements, K-1 tax schedules, distribution records, and any documents establishing or evidencing his status as a member or manager of SPS. We note that the investigation has determined that Panhandle Agent Services Inc., located in Tallahassee, Florida, served as the registered

1. All communications between Mr. Daskine and Nicole Prescott, Vice President of Finance of VCR, and/or Ryan Mateo Serrano, Controller of VCR, regarding the booking of timeshare-interest deposits as completed-sale revenue, including but not limited to communications regarding the timing of revenue recognition, the treatment of customer deposits, and the reporting of sales figures for internal or external purposes.

2. Any internal memoranda, analyses, presentations, spreadsheets, or other work product prepared by Mr. Daskine, or prepared by others and provided to or reviewed by Mr. Daskine, regarding VCR's revenue-recognition policies or practices, including any documents addressing the application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), to timeshare-interest sales at V

3. All documents reflecting Mr. Daskine's awareness of, or any analysis or discussion of, the ten-day rescission period applicable to timeshare-interest sales under Florida Statute § 721.10, and the implications of that rescission period for the appropriate timing of revenue recognition under applicable accounting standards. This includes any legal memoranda, compliance analyses, or communications addressing whether

4. All quarterly or monthly revenue reports, revenue summaries, sales-pipeline reports, or comparable financial reports that were prepared by Mr. Daskine or provided to Mr. Daskine, for the period from the third quarter of 2022 (Q3 2022) through the second quarter of 2023 (Q2 2023), inclusive. D. Documents Relating to Expense Reimbursements and Capital-Improvement Budgets We request all documents in Mr. Daskine's pos

1. All purchase orders bearing Mr. Daskine's signature or reflecting his electronic approval, regardless of whether such purchase orders were directed to GSC, SPS, or any other vendor.

2. All expense reports submitted by Mr. Daskine to VCR or VHG, including supporting receipts, invoices, and other documentation, for the period from January 2021 through the present.

3. All communications regarding vendor selection, vendor approval, or payment authorization for capital-improvement projects at VCR properties, including but not limited to the Coral Dune Phase III lobby renovation, the Palmetto Bluff Phase II amenity upgrades, and any other capital-improvement project for which GSC, SPS, or any affiliated entity submitted invoices.

4. All documents relating to renovation, improvement, or construction work performed at Mr. Daskine's personal residence located at 312 Harbor View Lane, Destin, Florida 32541, including but not limited to contracts with contractors or subcontractors, invoices, payment records, permits, and correspondence. This request encompasses documents relating to any renovation or improvement work performed by or through GSC, S

1. Personal bank account statements for all accounts held by Mr. Daskine, individually or jointly, at any financial institution, for the period from July 2021 through June 2023, inclusive.

2. Personal credit card statements for all credit card accounts held by Mr. Daskine, individually or jointly, for the period from July 2021 through June 2023, inclusive.

3. Records of boat-slip fees, marina charges, luxury-goods purchases, real-estate transactions, investment-account transactions, or other significant personal expenditures that may have been funded, directly or indirectly, by payments originating from GSC, SPS, or CDC, or by funds traceable to payments made by VCR to those entities. We note, in support of this request, that the forensic accounting analysis conducted

IV. Request for Follow-Up Interview During the October 4, 2023 interview, Mr. Daskine's responses to certain questions were, in our assessment, incomplete, and in a number of instances his testimony raised additional areas of inquiry that the investigation team was unable to fully explore during the course of that session. In addition, information obtained from subsequent witness interviews — the details of which we

1. Formation and Operation of GSC and SPS. Mr. Daskine's role in the formation, capitalization, management, and day-to-day operation of Gulf Standard Contracting LLC and Suncoast Property Services LLC, including his relationship with the individuals who served as registered agents, nominal managers, or other representatives of those entities.

2. Payments from VCR to GSC and SPS. The nature and purported business purpose of payments made by VCR to GSC and SPS, including whether any goods or services were actually provided by GSC or SPS in exchange for such payments, and the process by which invoices from those entities were submitted, approved, and paid.

3. Clearwater Design Collective Inc. Mr. Daskine's knowledge of Clearwater Design Collective Inc. ("CDC"), a Florida corporation formed on June 4, 2021, whose sole shareholder is Nicole Prescott, Vice President of Finance of VCR. The investigation has identified sixteen (16) invoices totaling $587,600.00 submitted by CDC to VCR. We will seek to explore any coordination between GSC, CDC, and SPS, including whether the

4. Revenue-Recognition Timing. Mr. Daskine's direction of, involvement in, or awareness of the premature recognition of revenue at VCR, including during the period from Q3 2022 through Q2 2023, during which the aggregate revenue overstatement has been preliminarily estimated at approximately $26.4 million.

5. Interactions with VHG Corporate Management. Mr. Daskine's communications and interactions with VHG corporate-level management, including Chief Financial Officer Thomas Rhett Griffith and General Counsel Patricia Navarro, regarding VCR's financial reporting, revenue-recognition practices, and capital-improvement expenditures, including any representations Mr. Daskine made to VHG management regarding the accuracy of

V. Preservation Reminder We take this opportunity to reiterate Mr. Daskine's obligation, under the document-preservation notice issued to him on July 24, 2023, to preserve all documents and electronically stored information relating to the subject matter of this investigation. That obligation is ongoing and continues in full force and effect. As we have previously communicated, the preservation obligation extends to

VI. Cooperation Expectation As you are aware, VHG's corporate policies, including its Code of Business Conduct and Ethics, require the cooperation of current and former employees with internal investigations conducted at the direction of the Board of Directors or any committee thereof. In addition, Mr. Daskine's Employment Agreement with VCR, dated January 15, 2019 (as amended), contains provisions requiring his coop

VII. Closing We respectfully request a response to this letter within seven (7) business days — that is, by no later than November 3, 2023 — addressing both (a) Mr. Daskine's anticipated schedule for producing the documents requested in Section III above and any issues that may affect the scope or timing of such production, and (b) Mr. Daskine's availability for the follow-up interview described in Section IV above.