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Audit Committee Charter

Purpose:

The purpose of the Audit Committee of the Board of Directors of Microfluidics International Corporation (the “Company”) shall be to:

  • Oversee the integrity of the Company’s financial statements and the accounting and financial reporting processes of the Company and audits of the financial statements of the Company; 
  • Oversee the Company’s compliance with legal and regulatory requirements;
  • Oversee the independent auditor’s qualifications, independence and performance; and 
  • Oversee the Company’s systems of disclosure controls and procedures, internal controls over financial reporting, and compliance with the Company’s Code of Business Conduct and Ethics adopted by the Company. 

The Audit Committee has the authority to conduct investigations into any matters within its scope of responsibility and obtain advice and assistance from outside legal, accounting, or other advisors, as necessary to perform its duties and responsibilities.  The Company will provide appropriate funding, as determined by the Audit Committee, for compensation to the independent auditor, to any advisers that the Audit Committee chooses to engage, and for payment of ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

Notwithstanding the responsibilities and powers of the Audit Committee set forth in this charter, the Audit Committee does not have the responsibility of planning or conducting the audits of the Company’s financial statements or determining whether the Company’s financial statements are complete, accurate and in accordance with GAAP.  Such responsibilities are the duty of management and, to the extent of the independent auditor’s audit responsibilities, the independent auditor.

Membership:

The Audit Committee members will be appointed by, and will serve at the discretion of, the Board of Directors. Except as otherwise permitted by NYSE Amex Audit Committee requirements or the listing standards of another national securities exchange as adopted by the Board, the Audit Committee will consist of at least three members of the Board of Directors.  Members of the Audit Committee must meet the following criteria (as well as any criteria required by the SEC):

  • Each member will be an independent director, as defined in (i) NYSE Amex Company Listing Manual Section 803B(2), or such other listing standards of a national securities exchange for independent audit committee members as the Board may adopt and (ii) the rules of the SEC; 
  • Each member will be able to read and understand fundamental financial statements, in accordance with the NYSE Amex Audit Committee requirements, or such other listing standards of a national securities exchange for audit committee requirements as the Board may adopt; and 
  • At least one member will have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background, which results in the individual’s financial sophistication, including a current or past position as a principal financial officer or other senior officer with financial oversight responsibilities.  Unless otherwise determined by the Board (in which case disclosure of such determination shall be made in the Company’s annual report filed with the SEC), at least one member of the Audit Committee shall be an “audit committee financial expert” (as defined by applicable SEC rules).

Responsibilities:

The responsibilities of the Audit Committee shall include:

  • Appointing, retaining, compensating and overseeing the work of the independent auditors (including resolving disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; 
  • In consultation with the independent auditor, reviewing the integrity of the Company’s financial reporting processes;
  • Reviewing and meeting periodically with the Company’s management and the independent auditors to review and discuss the adequacy and effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting, including any significant deficiencies and significant changes in internal controls, and to review and discuss before release the disclosures regarding management’s certification regarding disclosure controls and procedures and internal controls over financial reporting required under SEC rules to be contained in the Company’s periodic filings and the attestations or reports by the independent auditors relating to such internal controls over financial reporting; 
  • Pre-approving audit and permissible non-audit services provided to the Company by the independent auditors (or subsequently approving non-audit services in those circumstances where a subsequent approval is necessary and permissible). In this regard, the Audit Committee shall have the sole authority to approve the hiring and firing of the independent auditors, all audit engagement fees and terms and all non-audit engagements, as may be permissible, with the independent auditors; 
  • Reviewing and providing guidance with respect to the external audit and the Company’s relationship with its independent auditors by: (i) reviewing the independent auditors’ proposed audit scope, approach and independence; (ii) obtaining on a periodic basis the written disclosures and the letter from the independent auditor’s required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, and discussing with the independent auditor, the independent auditor’s independence; (iii) discussing with the Company’s independent auditors the financial statements and audit findings, including any significant adjustments, management judgments and accounting estimates, significant new accounting policies and disagreements with management and any other matters described in SAS No. 61 (Codification of Statements on Auditing Standards AU§ 380, as adopted by the Public Company Accounting Oversight Board in Rule 3200T), as may be modified or supplemented; and (iv) reviewing reports submitted to the Audit Committee by the independent auditors in accordance with the applicable SEC requirements; 
  • Reviewing and discussing with the independent auditor on a timely basis: (i) all critical accounting polices and practices; (ii) all alternative treatments of financial information within GAAP related to material items that have been discussed with management, ramification of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and (iii) other material written communications between the independent auditor and management, including the management letter and schedule of unadjusted differences;
  • Reviewing and discussing with management and the independent auditors the annual audited financial statements and quarterly unaudited financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” prior to filing the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, respectively, with the SEC; 
  • Reviewing before release the unaudited quarterly operating results in the Company’s quarterly earnings release, paying particular attention to any pro forma or adjusted non-GAAP information; 
  • Directing the Company’s independent auditors to review before filing with the SEC the Company’s interim financial statements included in Quarterly Reports on Form 10-Q, using professional standards and procedures for conducting such reviews; 
  • Recommending to the Board whether the financial statements should be included in the Company’s annual report on Form 10-K;
  • Preparing an annual audit committee report as required by Rule 407(d) of Regulation S-K of the Exchange Act for inclusion in the Company’s proxy statement for its annual meeting in accordance with the rules and regulations of the SEC;
  • At least annually, evaluating the independent auditor’s qualifications, performance and independence, including obtaining and reviewing a report by the independent auditor describing: (i) the independent auditor’s internal quality control procedures; and (ii) any material issues raised by the most recent internal review or peer review, or by any inquiry or investigation conducted by governmental or professional authorities during the preceding five years with respect to independent audits carried out by the independent auditor and any steps taken to deal with such issues.  Additionally, the Audit Committee will review the experience and qualifications of the lead partner each year and determine that all partner rotation requirements have been met.
  • Overseeing compliance with the requirements of the SEC for disclosure of auditor’s services and audit committee members, member qualifications and activities; 
  • Conducting a post-audit review of the financial statements and audit findings, including any significant suggestions for improvements provided to management by the independent auditors; 
  • Reviewing, approving and monitoring the Company’s Code of Business Conduct and Ethics for its officers and directors;
  • Reviewing, with the Company’s counsel, legal compliance and legal matters that could have a significant impact on the Company’s financial statements; 
  • Reviewing and discussing policies with respect to risk assessment and risk management, including appropriate guidelines and policies to govern the process as well as to the Company’s major financial exposures and the steps management has undertaken to control them; 
  • Overseeing and reviewing the Company’s policies regarding information technology and management information systems; 
  • If necessary, instituting special investigations with full access to all books, records, facilities and personnel of the Company; 
  • As appropriate, obtaining advice and assistance from outside legal, accounting or other advisors; 
  • Reviewing and approving in advance any proposed related party transactions; 
  • Reviewing this charter at least annually and recommending to the Board any necessary amendments; and 
  • Establishing procedures for receiving, retaining and treating complaints received by the Company regarding accounting, internal accounting controls or auditing matters and procedures for the confidential anonymous submission by employees of concerns regarding questionable accounting or auditing matters. 

Meetings:

The Audit Committee will meet at least quarterly.  The Audit Committee may establish its own schedule, which it will provide to the Board of Directors in advance. The Audit Committee will meet separately with the Chief Executive Officer and separately with the Chief Financial Officer of the Company at such times as are appropriate to review the financial affairs of the Company. The Audit Committee will meet separately with the independent auditors of the Company, at such times as it deems appropriate, but not less than quarterly, to fulfill the responsibilities of the Audit Committee under this Charter.

Minutes:

The Audit Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board of Directors.

Reports:

In addition to preparing the report required by Item 407(d) of Regulation S-K of the Exchange Act ( or any successor provision) promulgated by the SEC to be included in the Company’s proxy statement, the Audit Committee will summarize its examinations and recommendations to the Board of Directors as may be appropriate, consistent with the Audit Committee’s charter.

Compensation:

Members of the Audit Committee shall receive such fees, if any, for their service as Audit Committee members as may be determined by the Board of Directors in its sole discretion. Such fees may include retainers or per meeting fees. Fees may be paid in such form of consideration as is determined by the Board of Directors.

Members of the Audit Committee may not receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company, except the fees that they receive in his or her capacity as a member of the Board of Directors or any committee thereof.

Delegation of Authority:

The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to pre-approve audit and permissible non-audit services, provided such pre-approval decision is presented to the full Audit Committee at its next scheduled meeting.

 

(Adopted by the Board of Directors at a meeting held on June 16, 2010)