AUDIT COMMITTEE CHARTER

As the Company grows in size and complexity the audit program will be amended as appropriate.  The Company will use external consultants, as needed, to augment staff personnel in the development and review of its audit and compliance programs. 

Overview & Purpose
The Audit Committee (the “Committee”) is appointed by, and responsible to, the Board of Directors (the “Board”).

The Committee approves, monitors, evaluates, advises, and makes recommendations, in accordance with this Charter, on matters affecting the external audit, risk management maters, financial disclosures, and the financial reporting and accounting control policies and practices of the Company.

In contributing to the Committee’s discharging of its duties, each member of the Committee shall be obliged only to exercise the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.  Nothing in this Charter is intended, or may be construed, to impose on any member of the Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which all Board members are subject.

Membership & Meetings
The members of the Committee shall be composed of at least three (3) unrelated and independent directors, appointed by the Board, all of whom must be financially literate and at least one (1) member shall have accounting or related financial management expertise.  The Corporation has adopted the definitions of independence and financial literacy as set out in Securities & Exchange Commission (the “SEC”) Rule 10A-3 and Sarbanes-Oxley Act § 401 and § 407.  Ex-officio members may be appointed by the Audit Committee to facilitate and implement the activities, directives, and reports of the committee.

The Committee Chair shall be designated by the Board.

Each Committee member will serve a three (3) year term or a term that is the same length as their Board term.

The Committee will meet at least quarterly.

Attendance by invitation at all or a portion of Committee meetings is determined by the Committee Chair or its members, and would normally include the Chief Financial Officer of the Company, representatives of the external auditors, and such other officers or support staff as may be deemed appropriate, including outside legal counsel or consultants.

Meetings may be called by the Committee Chair or by a majority of the Committee members, and usually in consultation with the management of the Company.

The Chief Financial Officer of the Company shall provide for the delivery of notices, agendas, and supporting materials to the Committee members at least five (5) days prior to the date of the meeting, except in unusual circumstances.

Duties & Responsibilities
The following outlines the duties and responsibilities of the Committee and should be read in conjunction with the annual Committee work plan matrix:

Direct the Company’s internal and external auditing programs and provide comprehensive reports of its activities to the full Board.

Reassess, at least annually, the adequacy of the Audit Committee Charter.  Following the review, the Committee may recommend charter changes to the Board for formal adoption.  The Board approves and adopts the formal written Audit Committee Charter.

Keep minutes of each meeting of the Committee and provided to the full Board.  The Committee shall direct the activities of the management of the Company as it pertains to correcting deficiencies noted by internal and external auditors.

Review and recommend to the Board for approval the annual audited financial statements, including management’s discussion and analysis.

Review and recommend to the Board for approval the Company’s filings with the SEC, whether the filings are voluntary or otherwise.

Review and, if appropriate, authorize the release of the quarterly unaudited financial statements of the Company including management’s discussion and analysis, the Company’s filings of financial information with any regulatory authority, the auditor’s review of the statements, and any press release(s) that may be issued in respect thereof.  In the event there is an extraordinary matter that, in the opinion of the Committee, should be reviewed by the Board before the release of such financial statements or press releases, then the matter shall be referred to the Board for review.

Approve for release and filings interim financial statements, provided the Board is informed and provided copies.

Review and recommend to the Board for approval, if required, all other reports and disclosures of a financial nature, including prospectuses and annual reports.

Discuss with management, on an annual basis, the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

Review with management, on an annual basis, the Company’s obligations pursuant to guarantees that have been issued and material contractual obligations that have been entered into.

Review and assess, by means of reports in conjunction with management and the external auditor, as least annually or on a quarterly basis where appropriate or required:

1. the Company’s critical accounting policies, including the appropriateness of such accounting policies and the financial reporting practices used by the Company, including alternative treatments that are available for consideration;
2. any significant proposed changes in financial reporting and accounting policies and practices to be adopted by the Company;
3. any new or pending developments in accounting and reporting standards that may affect or impact the Company; and,
4. the key estimates and judgments of management that may be material to the financial reporting of the Company.

Assess the performance and consider the annual appointment of external auditors for recommendation to the Board for ultimate recommendation for appointment by the Shareholders.

Review and approve the terms of the annual external audit engagement letter including, but not limited to:

1. staffing;
2. objectives and scope of the external audit work;
3. materiality limits;
4. audit reports required;
5. areas of audit risk;
6. timetable; and,
7. the proposed fees.

Ensure there is a clear understanding between the Committee, the auditors, and management that the auditors report directly to the Shareholders and the Board through the Committee.

Obtain and review a report from the auditors at least annually regarding the auditor’s independence and the profession’s or audit firm’s requirements regarding audit partner rotation.

Review and pre-approve audit and non-audit services, review and pre-approve all fees paid to the external auditors or its affiliate for audit or non-audit services, and consider the impact on the independence of the external audit work of fees for non-audit services.

Receive and resolve any disagreements between management and the auditors regarding all aspects of the Company’s financial reporting.

Review with the external auditors the results of the annual audit examination including, but not limited to, the following:

1. review the adequacy of the Company’s system of internal accounting controls;
2. review and discuss audit results with the auditors, both internal and external and follow-up on important exceptions and corrective actions;
3.  verify that no restrictions are imposed, by management or otherwise, on audit examinations;
4. evaluate the adequacy and effectiveness of the Company’s operating procedures and recommend changes to the Board;
5. review all examination reports from regulatory agencies and management’s response; and,
6. provide both auditors and examiners with a forum, independent of management, to discuss significant exceptions or other matters of importance.

Review significant and other expenditures, sales and leases of assets, related party transactions, as required, and any other transactions which could alter, impact, or otherwise materially affect the Company’s financial structure, including off-balance sheet items.

Review any litigation, claim, or other contingency, including tax assessments, that could have a material effect upon the financial position or operating results of the Company, and the manner in which these matters have been disclosed in the financial statements.

Receive and determine the disposition of any complaints received by or from any shareholder, regulatory body, employee, or others in regard to internal controls, accounting, and auditing matters.

Until the Company is a public entity, make the determination to waive an audit in any given year; provided, the Board is notified of the intent to waive an audit.

External Audit
The Audit Committee will maintain the engagement of an independent CPA firm on an ongoing basis to perform such tests of the Company’s accounting systems and records to produce fully audited statements annually.  The Board has determined that it is in the Company’s best interest to only engage firms that have demonstrated experience in auditing publicly held companies.

The Audit Committee has the authority to formally engage a CPA firm each year to complete the required auditing work necessary for the production of complete, fully audited financial statements, and accompanying attestation statement to those financials.  The Committee shall meet with representatives of the CPA firm as appropriate to discuss the engagement, progress during the examination, and the results of the audit work.

The external auditor for the Company is ultimately accountable to the Board of Directors and Audit Committee of the Company.  The Board and Committee have the ultimate authority to select, evaluate and, where appropriate, replace the outside auditor.

The Audit Committee is responsible for ensuring that the external auditor submits on a periodic basis to the Committee a formal written statement delineating all relationships between the auditor and the Company.  The Committee shall engage in an ongoing dialogue with the auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditor and take appropriate action to ensure the independence of the external auditor.

In addition, the external CPA firm may be consulted by the Company on an as needed basis. 

The scope of work for an engagement of an independent CPA firm shall be in writing and should include the following:

1. a comprehensive review of the Company’s financial records;
2. a comprehensive testing of the Company’s accounting and internal control systems;
3. a review of the Company’s operating policies and procedures; and,
4. a review of the Company’s control points in the funds transfer system will be tested, including tests of reconciliation procedures, a review of security procedures, and tests of documentation supporting selected transfers.

It is anticipated that the CPA firm will also produce a Management Letter that will detail items requiring immediate attention by the Board.  Such a letter will highlight operating weaknesses or significant non-compliance with established policies and/or regulatory requirements with recommended corrective courses of action.

Internal Financial Policies
The CFO under the direction of the CEO and the Committee shall administer the internal financial policies and procedures of the Company.  Such policies and procedures shall be written and regularly updated.  Such policies and procedures will be in conformance to generally accepted accounting principles and the requirements of the Sarbanes-Oxley Act.

Internal accounting and system controls shall be in place at all times to preserve and protect corporate assets, claims, and resources.
 
Material exceptions of adherence to financial policies and/or regulatory compliance noted during interim reviews will be brought to the immediate attention of management.  The Committee shall review these exceptions at its discretion and shall be consulted in all cases where a satisfactory resolution is not forthcoming.

Audit Policy Statement
All areas of audit work, both internal and external, will be performed in accordance with generally accepted auditing standards.

The following areas will provide additional details to help detect errors or irregularities and assess risks that would have a material effect on the Company’s performance:

1. determine that account reconciliation’s are performed on a timely basis and are accurate;
2. determine that the Company has written policies and procedures to document the determination of the allowance for receivable write-offs, capitalization, monthly closings, interim financial reporting, investment in securities, and funds management;
3. determine that the Company has written policies and procedures to identify and document insider transactions as required by the Securities & Exchange Commission and other regulatory bodies;
4. determine that extensions of credit and issuance of stock and/or stock options to insiders (executive officers, directors, principal shareholders, or their related interests) have been made on substantially the same terms as those prevailing at the time for comparable transactions with persons not covered by regulation;
5. establish a Treasury function, when appropriate, to determine that securities transactions are executed in compliance with the Company’s policies and procedures and that securities subsidiary ledgers properly reflect investment securities held;
6. determine that policies and procedures regarding electronic data processing are in place and followed;
7. determine that the Company’s insurance coverage is up to date and coverage is adequate; and,
8. determine that inter-company transactions and expense allocations for regulatory rate build-up purposes are properly documented and in compliance to the rules of such regulatory agencies.