Audit Committee Charter

Members of the Audit Committee:

Donald Hernandez, Chairman
Scott Mooney

By action of the Committee, the authority to grant preapproval may be delegated to one or more designated members of the Committee who are independent members of the Board, with any such preapproval to be reported to the Committee at its next regularly scheduled meeting.  Approval of non-audit services shall be disclosed in the Corporation’s periodic reports required by Section 13(a) of the Securities Exchange Act of 1934, as amended.

A. Name

There shall be a committee of the Board of Directors (the “Board”) of ProUroCare Medical, Inc. (the “Company”) called the Audit Committee.

B. Purpose of Committee

The primary function of the Audit Committee (the “Committee”) of the Board of Directors of ProUroCare Medical Inc.  is to assist the Board in fulfilling its oversight responsibilities by reviewing:  the financial reports and other financial information provided by the Company to any governmental body or the public; the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Company’s auditing, accounting and financial reporting processes generally.  Consistent with these functions, the Committee should encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels.  The Committee’s primary duties and responsibilities are to:

  • serve as an independent and objective party to oversee the Company’s financial reporting process and internal-control systems;
  • review and appraise the audit of the Company’s financial statements performed by the Company’s independent accountants, who shall report directly to the Committee; and
  • provide an open avenue of communication among the Company’s independent accountants, financial and senior management, and the Board.

C. Committee Membership

The Committee shall be composed of at least two directors appointed by the Board, on the recommendation of the Corporate Governance and Nominating Committee, provided, however, that if the Company’s securities are listed on the Nasdaq Stock Market, as defined in Nasdaq Marketplace Rule 4200, then the Committee shall be composed of at least three directors as determined by the Board.  Each member of the Committee shall be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee.  Furthermore, if the Company’s securities are listed on the Nasdaq Stock Market, each Committee member shall:  (i) be an “independent” director as defined by Nasdaq Marketplace Rule 4200 (subject to any then-current exceptions to such requirement; e.g., Nasdaq Marketplace Rule 4350(d)(2)(B)); (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) promulgated under the Securities Exchange Act of 1934, as amended; (iii) not have participated in the preparation of the Company’s financial statements (or any current subsidiary of the Company) at any time during the past three years; and (iv) have a working familiarity with basic finance and accounting practices, including the ability to read and understand financial statements.  Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or an outside consultant.

The Committee shall endeavor to have, as one of its members, an individual with past employment experience in finance or accounting, or any other comparable experience or background resulting in such member’s financial sophistication (including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities).  In addition, the Committee shall endeavor to have, as one of its members, an individual qualifying as an “audit committee financial expert” in compliance with the criteria established by the United States Securities and Exchange Commission (the “Commission”) and other relevant regulations.  The existence of such audit committee financial expert, including his or her name and whether or not he or she is independent, or the lack of an audit committee financial expert, shall be disclosed in the Company’s periodic filings as required by Section 13(a) of the Securities Exchange Act of 1934, as amended, and the regulations thereunder.

The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board and shall serve until the next annual organizational meeting of the Board or until their successors have been duly elected and qualified.  Unless a chairperson is elected by the Board, the members of the Committee may designate a Committee chairperson by majority vote of the full Committee membership.

D. Committee Operations

The Committee shall meet at least two times annually, or more frequently as circumstances require.  As part of its job to foster open communication, the Committee should meet at least annually with management and the independent accountants in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

E. Responsibilities and Duties

To fulfill its responsibilities and duties, the Committee is expected to:

  1. provide an open avenue of communication between the Company, the independent accountants, and the Board;
  2. review the Committee’s charter at least annually and recommend to the Board any necessary or desirable amendments;
  3. maintain sole authority and responsibility for hiring and firing the independent accountants, and maintain direct responsibility for the appointment, compensation, retention and oversight of the independent accountants’ work, including the resolution of disagreements between management and the auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
  4. assess the effectiveness of the Company’s internal control environment, and evaluate the need for an internal audit function; and discuss with management any significant deficiencies in internal controls that have been identified by the Chief Executive Officer or Chief Financial Officer which could adversely affect the Company’s ability to record, process, summarize or report financial data;
  5. confirm and ensure the independence of the internal audit function and the independent accountants, including considering whether the independent accountant’s performance of permissible non-audit services and the compensation received for such services is compatible with the independent accountant’s independence (in this regard, the Committee shall be responsible for ensuring its receipt from the independent accountant of a formal written statement, consistent with “Standards Board Standard 1,” delineating all relationships between such independent accountant and the Company);
  6. review and preapprove the performance of all audit and non-audit accounting services to be performed by the independent accountant, other than with respect to de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002, to the extent such services are permitted under applicable rules and regulation;
  7. inquire of management and the independent accountants about significant risks or exposures, and assess the steps management has taken to minimize such risk to the Company;
  8. in consultation with the independent accountant, consider the audit scope and plan of the independent accountant;
  9. consider and review with the independent accountant:  (a) the adequacy of the Company’s internal controls, including computerized information system controls and security; and (b) any related significant findings and recommendations of the independent accountant together with management’s responses thereto;
  10. review the following items with management and the independent accountant at the completion of the annual examination, and recommend to the Board whether the financial statements should be included in the annual report on Form 10-K (or Form 10-KSB):
    • the Company’s annual financial statements and related footnotes;
    • the independent accountant’s audit of the financial statements and his or her report thereof;
    • any significant changes required in the independent accountant’s audit plan;
    • any serious difficulties or disputes with management encountered during the course of the audit; and
    • other matters related to the conduct of the audit which are to be communicated to the Committee under SAS numbers 61 and 90;
  11. review with management, and if appropriate, with the independent accountants, the interim financial results that are filed with the Commission or other regulators;
  12. oversee and participate in the Company’s internal controls compliance activities under Sarbanes-Oxley Section 404 (“SOX 404”), including
    1. meeting in a working group each fiscal quarter that includes the Company’s Chief Executive Officer and Chief Financial Officer (such working group to be designated as the “Disclosure Committee”) designed to ensure that disclosures made in annual and quarterly reports filed with the Securities and Exchange Commission adequately describe all material events required to be so disclosed;
    2. establishing a protocol for identifying, reviewing and testing key accounting controls and significant accounts, and performing or supervising such activities independently from Company personnel who perform the related accounting activities, and
    3. engage independent resources to perform and document such tests and reviews as is required to assess and document the Company’s compliance with the requirements of SOX 404;
  13. review with management legal and regulatory matters that may have a material impact on the financial statements, related company compliance policies, and programs and reports received from regulators;
  14. review the Company’s critical accounting policies and estimates, all alternative treatments of financial information within accounting principles generally accepted in the United States of America discussed between the independent accounts and management, and all other material written communications between the independent accounts and management;
  15. review the internal-controls report prepared by management for insertion into the annual report and the independent accountant’s attestation on the assertions of management that are contained in the internal-controls report;
  16. ensure there is a process for the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting and auditing matters;
  17. ensure procedures are established for the receipt, retention and treatment of complaints received by the Company regarding accounting, auditing and internal-accounting controls;
  18. review and approve (with the concurrence of a majority of the disinterested members of the Board) any related party and affiliated-party transactions; and
  19. report Committee actions to the Board with such recommendations as the Committee may deem appropriate.

The Committee shall have the power to conduct or authorize investigations into any matters within the Committee’s scope of responsibilities, as outlined above.  The Committee has the authority to engage and determine funding for outside legal, accounting or other advisors, and to obtain advice and assistance from such outside advisors as deemed appropriate to perform its duties and responsibilities.  The Committee will perform such other functions as assigned by law, the Company’s charter or bylaws, or the Board.