Contract analysis

I. PRELIMINARY MATTERS A. Upjohn Warning Reconfirmation At the outset of the interview, Howard Quinn reconfirmed the Upjohn warnings that had been previously administered to Mr. Serrano at Session 1, conducted on September 27, 2023. Specifically, Quinn reminded Mr. Serrano of the following:

1. Calderwood & Harkness LLP represents the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. Calderwood & Harkness does not represent Mr. Serrano in his individual capacity. The firm's engagement is with and on behalf of the Audit Committee, and no attorney-client relationship exists between Calderwood & Harkness and Mr. Serrano.

2. The attorney-client privilege with respect to the content of the interview and any related communications belongs to VHG, acting through its Audit Committee, and not to Mr. Serrano. The Audit Committee may, at its sole discretion, elect to waive the privilege and disclose the contents of the interview to third parties, including government authorities and regulators, without Mr. Serrano's consent.

3. The content of the interview is confidential, and Mr. Serrano is directed not to discuss the substance of the interview with any person other than his personal counsel, Mr. Ruiz, or other counsel at Coletti & Ruiz PA.

4. Mr. Serrano's participation in the interview is governed by the terms of the Cooperation Agreement dated November 15, 2023, which, among other things, obligates Mr. Serrano to provide truthful and complete information and to produce documents within his possession, custody, or control. Mr. Serrano confirmed that he understood each of the foregoing admonitions and that he was willing to proceed with the interview o

1. A detailed, chronological account of the creation and processing of the 47 fictitious purchase orders identified to date in the investigation, including the specific mechanics by which each purchase order was generated, the descriptions used, and the approvals obtained.

2. The fund-flow mechanics by which payments were transmitted from Verimark Coastal Resorts LLC ("VCR") to the three shell entities — Gulf Standard Contracting LLC ("GSC"), Clearwater Design Collective Inc. ("CDC"), and Suncoast Property Services LLC ("SPS") — and Mr. Serrano's knowledge of the subsequent disposition of those funds.

3. The respective roles of and directions given by Garrett W. Daskine, Division President of VCR, and Nicole Prescott, VP of Finance of VCR, in conceiving, directing, and executing the scheme.

4. Mr. Serrano's knowledge of personal expenditures funded through the proceeds of the fictitious invoices.

5. Any additional documents, communications, or other evidence that Mr. Serrano could identify as relevant to the investigation. Quinn noted that while the interview would primarily focus on the fictitious vendor scheme, questions concerning the premature revenue-recognition practices at VCR would also be addressed to the extent relevant to Mr. Serrano's knowledge and observations. Mr. Serrano stated that he understo

II. BACKGROUND AND REPORTING STRUCTURE (RECONFIRMATION) At the beginning of the substantive portion of the interview, Mr. Serrano reconfirmed the background information he had provided during Session 1 regarding his role, tenure, and reporting relationships within VHG and VCR. Mr. Serrano confirmed that he held the position of Controller of Verimark Coastal Resorts LLC, a wholly owned subsidiary of Verimark Hospitali

III. GENESIS OF THE FICTITIOUS VENDOR SCHEME A. Initial Approach by Daskine Mr. Serrano stated that in approximately February 2021, Garrett Daskine approached him privately in Daskine's office at VCR's Destin headquarters. Serrano recalled that the conversation occurred late in the afternoon, after most other personnel had left the office for the day. Daskine closed the door and told Serrano that he wanted to discuss

IV. DETAILED ACCOUNT OF THE 47 FICTITIOUS PURCHASE ORDERS A. Purchase Order Creation Process Mr. Serrano provided a detailed description of the mechanics by which the fictitious purchase orders were created and processed through VCR's procurement system. Serrano stated that the process began with a direction from either Daskine or Prescott (or, in many cases, both) specifying the approximate dollar amount to be invoi

V. FUND-FLOW MECHANICS A. Payment Processing Mr. Serrano described the payment processing mechanics as follows. Once a purchase order was created in VCR's procurement system and the corresponding invoice was submitted, Serrano processed the payment through VCR's standard accounts-payable system. He coded each expenditure to capital-improvement budget line items for the relevant property — either Coral Dune Resort & R

1. Plausible invoice descriptions. As described above, purchase order and invoice descriptions were designed to match plausible categories of capital-improvement work at existing VCR properties. Serrano selected descriptions that corresponded to types of work that VCR routinely contracted for, reducing the likelihood that the invoices would appear anomalous in the context of VCR's overall capital-improvement spending

2. Sub-$100,000 invoicing threshold. No individual purchase order or invoice was set at an amount at or above $100,000, which was the threshold at which VHG corporate policy required approval by the corporate CFO (Thomas Griffith). By keeping all invoices below this threshold, the fictitious expenditures were confined to the VCR-level approval workflow controlled by Daskine and Prescott.

3. Distribution across multiple entities. The use of three separate shell entities was intended to avoid concentration of payments to a single vendor that might attract scrutiny during internal reviews or audits. By distributing payments across GSC, CDC, and SPS, the volume directed to any single entity was reduced, making each individual entity's payment history appear less conspicuous.

4. Varied vendor contact information. Serrano occasionally varied the "vendor contact" information and addresses on invoices submitted by the shell entities. He used P.O. Box addresses and, in the case of SPS, the registered-agent address of Panhandle Agent Services Inc. in Tallahassee, to create the appearance of distinct and independent business operations. Serrano stated that this variation was intended to prevent

5. Avoidance of vendor-qualification review. Serrano stated that he never submitted any of the three shell entities for formal vendor-qualification review. VCR maintained a vendor-qualification process that was intended to verify the legitimacy and bona fides of new vendors prior to their being added to the approved vendor list. However, Serrano stated that VCR's vendor-approval controls were lax in practice. Prescot

VI. DASKINE'S DIRECTION AND OVERSIGHT OF THE SCHEME A. Daskine as Architect Mr. Serrano stated unequivocally that Garrett W. Daskine conceived, directed, and controlled the fictitious vendor scheme from its inception. Daskine was the originator of the idea, the person who instructed Serrano to form the shell entities, and the individual who controlled the timing, amounts, and descriptions of the fictitious invoices.

VII. PRESCOTT'S ROLE A. Prescott's Participation in Expense Scheme Mr. Serrano described Nicole Prescott's role in the fictitious vendor scheme as that of both a direct participant and a facilitator. As described above, Prescott was the sole shareholder of Clearwater Design Collective Inc. She directly benefited from 16 fictitious invoices submitted in CDC's name, totaling $587,600 in fraudulent disbursements from VC

VIII. SERRANO'S OWN CULPABILITY AND MOTIVATION Mr. Serrano acknowledged his active and knowing participation in the fictitious vendor scheme. He stated, without equivocation, that he created the 47 fictitious purchase orders at the direction of Daskine and Prescott. He formed two of the three shell entities (GSC and CDC) and served as registered agent for both. He arranged for the formation of the third entity (SPS),

IX. COMMUNICATIONS AND DOCUMENTARY EVIDENCE IDENTIFIED BY SERRANO A. Text Messages Mr. Serrano stated that he preserved text messages between himself and Daskine on his personal mobile phone. These text messages span the period of the scheme and include communications in which Daskine provided specific directions regarding invoice amounts, descriptions, and the entities to be used. Serrano stated that many of the tex

X. SERRANO'S KNOWLEDGE OF HSA'S FINDINGS AND THE 8-K Mr. Serrano stated that he became aware of the identification by Hargrove, Stokes & Appletonton LLP ("HSA") of a potential material weakness in VHG's internal controls over financial reporting only after he was placed on administrative leave on August 7, 2023. Specifically, Serrano learned — through news reports and, subsequently, through his counsel — that HSA had

XI. SERRANO'S PRIOR INTERVIEW AND COOPERATION AGREEMENT Quinn noted for the record that Mr. Serrano's first interview in connection with the investigation was conducted on September 27, 2023, at the offices of Calderwood & Harkness LLP in Miami. Mr. Ruiz was present during Session 1 as counsel for Mr. Serrano. The Session 1 interview covered background information, an initial overview of the fictitious vendor scheme,

XII. CONCLUDING MATTERS A. Follow-Up Items At the conclusion of the substantive portion of the interview, Quinn identified the following follow-up items for the investigation team:

1. Text message review. Calderwood & Harkness to complete its review of the text messages produced by Mr. Serrano through Mr. Ruiz on November 28, 2023. The review should focus on identifying specific directions from Daskine regarding invoice amounts, timing, and descriptions, as well as any communications that shed light on the downstream use of the misappropriated funds.

2. Notebook cross-reference. Calderwood & Harkness to review Mr. Serrano's handwritten notebook and cross-reference the purchase order numbers, dates, and amounts recorded therein against VCR procurement records already collected through Triton discovery Solutions Inc. This exercise will serve as a verification of the completeness and accuracy of the data previously compiled by Crestline Forensic Advisory LLC.

3. Fund-flow tracing. Crestline Forensic Advisory LLC, through its engagement leads Douglas Reinhardt and Priya Venkatesh, to complete fund-flow tracing for the three shell entity bank accounts using the newly produced bank records. This analysis should trace funds from their initial deposit in the shell entity accounts through to their ultimate disposition, identifying specific recipients and expenditure categories.

4. Third interview session. A determination will be made as to whether a third interview session with Mr. Serrano is necessary. Quinn stated that he did not anticipate one at this time, based on the comprehensiveness of the information provided in Sessions 1 and 2, but reserved the right to schedule an additional session if review of the newly produced documents or the Crestline analysis raises additional questions.