Contract analysis

I. Executive Summary This memorandum presents the findings of Calderwood & Harkness LLP's ("Calderwood & Harkness" or "C&H") investigation, conducted in coordination with Crestline Forensic Advisory LLC ("Crestline"), into expense-reimbursement irregularities at Verimark Coastal Resorts LLC ("VCR"), a wholly owned Florida limited liability company subsidiary of Verimark Hospitality Group Inc. ("VHG" or the "Company")

1. Gulf Standard Contracting LLC ("GSC") — a Florida limited liability company formed on March 12, 2021, beneficially owned by Garrett W. Daskine;

2. Clearwater Design Collective Inc. ("CDC") — a Florida corporation incorporated on June 4, 2021, solely owned by Nicole Prescott; and

3. Suncoast Property Services LLC ("SPS") — a Florida limited liability company formed on November 18, 2021, beneficially owned by Garrett W. Daskine. Over the twenty-four-month period, a total of forty-seven (47) fictitious purchase orders were created and processed through VCR's accounts payable system, generating aggregate improper payments of $1,830,000 ($1.83 million). The breakdown by entity is as follows: The

II. Scope and Methodology A. Scope of Analysis Calderwood & Harkness was engaged by the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. to conduct an independent investigation into suspected financial irregularities at VCR. The engagement was authorized pursuant to an engagement letter executed on July 17, 2023, by Audit Committee Chair Diane Kowalski on behalf of the Audit Committee. The

1. Document Collection and Review The investigation involved the collection and review of a substantial volume of documents and electronically stored information. Approximately 1.2 million documents were collected from eleven (11) identified custodians, of which eight (8) custodians were ultimately collected. Following de-duplication, de-NISTing (removal of system and application files), and application of a TAR 2.0

2. Forensic Accounting Analysis Crestline Forensic Advisory conducted a comprehensive forensic accounting analysis encompassing the following workstreams: • Examination of VCR accounts payable records, including payment registers, check registers, and electronic payment logs; • Review and analysis of purchase order documentation, including purchase order creation records, approval workflows, and supporting documentat

3. Witness Interviews Over the course of the investigation, the Calderwood & Harkness investigation team conducted twenty-two (22) interviews of eighteen (18) unique witnesses. The interviews relevant to the expense-reimbursement irregularities analyzed in this memorandum include the following: Ryan Mateo Serrano (VCR Controller): • Session 1: September 27, 2023, with personal counsel Marco A. Ruiz of Coletti & Ruiz

4. Corporate Records Search The investigation team conducted searches of Florida Secretary of State filings, including Articles of Organization and Articles of Incorporation, annual reports, and registered agent records for all three shell entities. Additionally, Uniform Commercial Code (UCC) lien filings and registered agent records were reviewed. These searches confirmed the formation dates, registered agents, and

5. Bank Record Analysis Bank records for the three shell entities were obtained through a combination of subpoena and voluntary production. The records encompassed account opening documentation (including signatory cards), monthly bank statements, deposit detail, cancelled checks, wire transfer confirmations, and ACH payment records. These records were analyzed by Crestline to trace the flow of funds from VCR to the

III. Identification and Formation of Shell Entities The investigation identified three entities that served as the vehicles through which the fictitious vendor scheme was executed. None of the three entities had genuine business operations, employees, physical offices, or any commercial purpose other than receiving diverted funds from VCR. The formation and characteristics of each entity are set forth below. A. Gulf

IV. The Fictitious Purchase Order Scheme A. Overview of the Mechanism The fictitious vendor scheme operated through VCR's standard accounts payable process, exploiting the positions and authority of the three subjects within VCR's organizational hierarchy. The mechanics of the scheme, as confirmed through documentary evidence and Serrano's cooperation testimony, operated as follows:

1. Purchase Order Creation. VCR Controller Ryan Mateo Serrano created fictitious purchase orders within VCR's accounts payable system. Each purchase order referenced one of the three shell entities as the vendor and described purported "capital improvement" work at one of the two VCR resort properties — the Coral Dune Resort & Residences or the Palmetto Bluff Club. The descriptions on the purchase orders were crafted

2. Approval of Purchase Orders. Purchase orders were designed to fall within the appropriate approval authority based on the dollar amount. For purchase orders below $50,000, Serrano himself had sufficient approval authority as Controller. For purchase orders between $50,000 and $100,000, Prescott approved the purchase order in her capacity as VP of Finance. For purchase orders exceeding $100,000, Daskine approved th

3. Invoice Submission. After a purchase order was created and approved, a corresponding invoice was generated in the name of the relevant shell entity. The invoices bore professional formatting, including entity names, addresses, invoice numbers, descriptions of purported services or goods, and payment terms. These invoices were submitted against the open purchase orders through VCR's accounts payable system.

4. Payment Processing. Invoices were matched against approved purchase orders and processed through VCR's standard accounts payable payment cycle. Payments were made by wire transfer or ACH to the bank accounts of the respective shell entities. No additional verification of goods receipt, services completion, or vendor legitimacy was required under VCR's accounts payable procedures — a critical internal-controls defi

5. Classification in VCR's Books. All expenditures were classified in VCR's general ledger as capital improvements. They were embedded within the legitimate capital-expenditure budgets for the Coral Dune Resort & Residences (Phase III timeshare units) and the Palmetto Bluff Club (Phase II timeshare units). Because both properties were undergoing active development and capital-improvement programs during the relevant

V. Quantitative Analysis by Shell Entity A. Gulf Standard Contracting LLC (GSC) GSC was the most heavily utilized of the three shell entities and accounted for the largest share of the total diverted funds. The quantitative profile of GSC invoicing is as follows: • Total invoices submitted and paid: 19 • Total payments: $812,400 • Average invoice amount: Approximately $42,758 • Largest single invoice: $94,500 — Invoi

1. Purchase Order Cross-Referencing. Crestline matched all 47 purchase order numbers against VCR's capital-improvement project files, including project budgets, project schedules, scope-of-work documents, and contractor files. No corresponding project documentation was found for any of the 47 purchase orders. The purchase order numbers assigned to the fictitious transactions did not appear in any legitimate project t

2. Deposit Matching. Crestline cross-referenced the amounts of all 47 invoices against bank deposit records for the three shell entities. A 100% match was confirmed — every invoiced amount was deposited into the corresponding entity's bank account, with no partial payments, adjustments, or discrepancies.

3. Property-Management Record Review. Crestline reviewed VCR's property-management records for both the Coral Dune Resort & Residences and the Palmetto Bluff Club, including maintenance logs, contractor sign-in sheets, property-management software records, and capital-improvement tracking reports. No evidence of work performed by GSC, CDC, or SPS was found in any property-management system for either property.

4. Form 1099 Analysis. Crestline confirmed that VCR did not issue IRS Form 1099-MISC or Form 1099-NEC for payments to any of the three entities during the relevant period, despite the fact that aggregate payments to each entity far exceeded the $600 reporting threshold. The failure to issue Form 1099s is itself an irregularity; however, the investigation determined that this failure resulted from the same internal-co

VI. Fund-Flow Analysis and Personal Expenditure Tracing A. Methodology A critical component of the investigation was the tracing of funds from VCR's accounts payable disbursements through the shell entity bank accounts and into the personal expenditures and accounts of the individual subjects. This analysis was conducted by Crestline Forensic Advisory using bank records, credit-card statements, wire transfer records,

VII. Role of Individual Subjects A. Garrett W. Daskine (Division President, VCR) Garrett W. Daskine served as Division President of Verimark Coastal Resorts LLC. A seventeen-year veteran of VHG, Daskine held the most senior position within VCR's management structure and was responsible for the overall operations and financial performance of the VCR division, including oversight of the Coral Dune Resort & Residences a

VIII. Internal Controls Deficiencies The fictitious vendor scheme exploited multiple deficiencies in VCR's internal controls. These deficiencies allowed the scheme to operate without detection for approximately twenty-four months and to generate $1,830,000 in improper payments. The principal control deficiencies identified through the investigation are set forth below. A. Vendor Management VCR lacked an independent v

IX. Document and Corroborating Evidence Summary A. Documentary Evidence The investigation identified and analyzed a substantial body of documentary evidence corroborating the findings set forth in this memorandum. The principal categories of documentary evidence include:

1. Fictitious Purchase Orders. All 47 fictitious purchase orders created by Serrano were recovered from VCR's accounts payable system. These purchase orders bear Serrano's user identification as the creator and reflect the fabricated descriptions of purported capital-improvement work. Approval histories within the system confirm that purchase orders exceeding $50,000 were electronically approved by Prescott or Daskin

2. Shell Entity Invoices. Corresponding invoices from GSC (19 invoices), CDC (16 invoices), and SPS (12 invoices) were recovered from VCR's accounts payable files. The invoices bear professional formatting and include entity names, commercial mail-receiving addresses, sequential invoice numbers, and descriptions of purported goods or services. Metadata analysis of the invoice documents indicates that certain invoices

3. Bank Records. Bank records for all three shell entities were obtained and analyzed. These records confirm deposits matching 100% of the invoiced amounts and document the downstream disbursements to personal accounts and expenditures of Daskine and Prescott. Account signatory cards confirm the authorized signatories for each entity's bank account.

4. Florida Secretary of State Records. Formation records for GSC (March 12, 2021), CDC (June 4, 2021), and SPS (November 18, 2021) were obtained from the Florida Secretary of State, Division of Corporations. These records confirm the formation dates, entity types, registered agents, and organizational structures described in Section III of this memorandum.

5. Registered Agent Records. Records confirm that Ryan Mateo Serrano served as registered agent for GSC and CDC, while Panhandle Agent Services Inc. served as registered agent for SPS.

6. Email Communications. The document review identified email communications among Daskine, Prescott, and Serrano discussing the timing of invoice submissions and the scheduling of payments. While the communications employed some degree of circumspection — using references to "the project" and "the deliverables" rather than explicitly acknowledging the fictitious nature of the transactions — the content, context, and

7. Absence of Form 1099 Filings. Crestline confirmed that VCR did not file IRS Form 1099-MISC or Form 1099-NEC for payments to any of the three shell entities during the relevant period, despite aggregate payments to e