AUDIT COMITTEE CHARTER
Audit Committee Charter
Adopted: April 2022
The Board of Directors (the “Board”) of SOBRSafe, Inc., a Delaware corporation (“SOBR” or the “Company”), has established and constituted an Audit Committee (the “Committee”) with the authority, responsibility and specific duties as described in this Audit Committee Charter (the “Charter”).
The purpose of the Committee is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. Other such responsibilities delegated to the Committee by the Board include:
- ensuring the integrity of the Company’s financial statements and other published financial information
- ensuring the Company’s compliance with financial and accounting related standards, rules and regulations, and legal and regulatory requirements
- the qualification, selection, appointment, performance assessment and annual recommendation for retention or termination of the Company’s registered, independent public accounting firm, subject to shareholder approval where required
- providing approval for the Company’s annual financial statement audit and quarterly reviews, annual tax services, and the pre-approval of all audit-related and permitted non-audit services, if any, by the Company’s selected independent public accounting firm, and the compensation therefor
- reviewing the design and performance of the Company’s financial reporting function and processes, and internal control environment
- consulting with management and the Company’s independent public accounting firm regarding business management practices and internal control environment of the Company and making recommendations to the Board for improvement of such practices
- reviewing any recommendation for any financial report prepared by the Company that the U.S. Securities Exchange Commission (“SEC”) required to be included, or that the Company otherwise elects to include, in the Company’s reports filed with the SEC
- fulfilling any other duties as directed by the Board.
In addition, the Committee will, when required, prepare or cause to be prepared subject to the Committee’s review and approval, the report of the Committee as required by the rules of the Securities and Exchange Commission (the “SEC”) for inclusion in the Company’s annual proxy statement for the annual meeting of shareholders and/or Form 10-K in accordance with applicable rules.
While the Committee has the oversight, responsibilities and authority set forth in this Charter, members are not employees of the Company and they do not perform, or represent they perform, the functions of management or independent public accounting firms. It is not the duty of the Committee to plan or conduct audits or to perform other accounting procedures. These are the responsibilities of Management and the independent public accounting firm of the Company.
Management is responsible for maintaining appropriate accounting and financial reporting principles, policies, internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The independent public accounting firm is responsible for planning and carrying out a proper audit of the Company’s annual financial statements and of the Company’s internal control over financial reporting and reviewing of the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q and other procedures as agreed with management. It is not the duty or responsibility of this Committee or any of its members to conduct “field work” or perform other types of auditing or accounting reviews or procedures or to set accounting firm independence standards.
Each member of this Committee is entitled to rely on (a) the integrity of those persons and organizations within and outside the Company from which it receives information including the independent public accounting firm, (b) the accuracy of the financial and other information provided to this Committee by such persons or organizations absent actual knowledge to the contrary (which will be reported promptly to the Board), and (c) representations made by Management as to any non-audit services provided by the independent public accountants to the Company.
COMMITTEE MEMBERSHIP, QUALIFICATIONS and SERVICE
The Committee’s membership shall satisfy the following requirements, subject to applicable legal or regulatory requirements:
- The Committee will be comprised of at least three “qualified” members appointed by and serving at the discretion of the Board, upon recommendation from the Nominating Committee, subject to any available exceptions. Committee members may be replaced at any time with or without cause, and at the discretion of the Board, upon recommendation from the Nominating Committee. The identity and qualifications of each Committee member shall be disclosed as required by applicable rules of the SEC or otherwise.
Each member of the Committee will be a Board director and satisfy requirements to be considered “independent”, subject to any available exceptions, as determined in accordance with Rule 10A- 3 of the U.S. Securities Exchange Act of 1934, as amended, the NASDAQ Capital Market Rules (the “NASDAQ Rules”), and any other applicable legal and regulatory authority. If a Committee members is no longer deemed to be “independent,” such circumstances shall be disclosed in accordance with the applicable rule.
- Each member of the Committee must be able to read and understand fundamental financial
statements, including the Company’s balance sheet, income statement, and cash flow statement.
At least one member of the Committee must have past employment experience in finance or
accounting, requisite professional certification in accounting, or other comparable experience or
background which results in the member’s financial sophistication, including being or having been
a chief executive officer, chief financial officer, or other senior official with financial oversight
responsibilities. The identity of the Committee members will be disclosed annually in the
Company’s proxy statement for so long as such disclosure is required by applicable rules of the
SEC or otherwise.
- At least one member of the Committee is required to be an “audit committee financial expert” as
defined in Item 407(d)(5)(ii) of Regulation S-K. A member who satisfies this definition of an audit
committee financial expert will also be presumed to have financial sophistication. The identity of
the audit committee financial expert and their qualification as independent will be disclosed
annually in the Company’s Form 10-K (or its proxy statement if the information is incorporated by
reference) for so long as such disclosure is required by applicable rules of the SEC or otherwise.
- No member of the Committee shall have participated in the preparation of the financial
statements of the Company or any current subsidiary of the Company at any time during the past
- Unless a Chairperson is duly elected by the Board, the members of the Committee shall designate
a Chairperson by a majority vote of the full Audit Committee membership. The Chairperson will
chair and set the agenda for all regular and special meetings of the Committee.
- A member of the Committee may not, other than in his or her capacity as a member of the
Committee, the Board or any other committee established by the Board, receive directly or
indirectly from the Company or any subsidiary thereof any consulting, advisory or other
compensatory fees. Subject to applicable law, a member of the Committee may receive additional
directors’ fees to compensate such member for the significant time and effort expended by such
member to fulfill his or her duties as a Committee member.
- Committee members may serve on multiple Audit Committees provided that simultaneous
service does not impair the member’s independence or ability to serve on the Company’s Audit
Committee as determined by the Board or Committee as deemed appropriate. A Committee
member’s service on multiple Audit Committees and a determination that such service would not
impair the Committee member’s ability to serve may be disclosed as required by applicable rules
of the SEC, NASDAQ or other authorities.
Upon formal approval and adoption of this Charter by the Board, the Committee shall ensure the Charter is disclosed and available through the Company’s annual proxy statement and/or posted on the Company’s website in accordance with applicable rules and regulations. The Committee shall perform an annual review of the Charter to determine its adequacy, evaluate for compliance with rules and regulations of the SEC, NASDAQ or other agencies, and recommend any proposed changes to the Board for approval.
The Committee shall confirm annually those specific risks and responsibilities the Committee shall assume compared to those assumed by the Board and other committees of the Board, ensuring any changes to the risks and responsibilities of the Committee are reflected in the Charter.
The Committee shall be presented with, review and approve all transactions between the Company and related persons for which review and approval prior to execution is required by applicable law or that is required to be disclosed in the Company’s financial statements or SEC filings.
The Committee shall report periodically to the Board regarding the execution of its duties and recommendations, if any are deemed necessary.
The Committee has the authority to adopt such additional procedures and standards it deems necessary or advisable to fulfill its responsibilities.
The Committee has the authority to create, appoint and delegate matters to subcommittees, but no subcommittee will have any final decision-making authority on behalf of the Board or the Committee.
RELIANCE ON EXPERTS AND OUTSIDE ADVISORS, COOPERATION, CONFLICTS AND EXPENSES
Retention of Independent Counsel, Advisors and Experts – The Committee has the authority, in its sole discretion, to retain at the Company’s expense any independent counsel, accountants, advisors and experts as it deems necessary or appropriate to carry out its duties.
Investigations – The Committee has the power, in its sole discretion, to conduct any investigation it deems necessary or appropriate to enable it to carry out its duties.
Access and participation of other parties – The Committee will have unrestricted access to the Company’s employees, independent public accounting firm, internal auditors, internal and external legal counsel, and may require any employee of the Company, or a representative of the Company’s external legal counsel
or independent public accounting firm to attend a meeting of the Committee, or to meet with any members of the Committee or representative of the Committee’s counsel, advisors or experts.
Conflicts – Committee members should adhere to the organization Code of Business Conduct and Ethics, any values and ethics established by the Company. It is the responsibility of the Committee members to disclose any conflict of interest or appearance of a conflict of interest to the Committee. If there is any question as to whether Committee member(s) should recuse themselves from a vote, the Committee should vote to determine whether the member should recuse himself or herself.
Expenses – The Committee shall have sole authority to approve related fees and retention terms for experts and outside advisors, and the Company will provide the Committee with appropriate funding, as determined by the Committee, in its capacity as a committee of the Board, for payment of:
- compensation to the selected independent accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, tax or attest services for the Company;
- compensation to experts and advisors that are engaged to support the Committee in conducting its duties as detailed in this Charter; and
- other administration expenses of the Committee that are necessary or appropriate in carrying out its duties.
Engagement and Work Product of Experts and Outside Advisors – Periodically, the Committee shall report to the Board regarding the work product of these experts and outside advisors along with the status of the engagements, and paid and committed fees for each engagement.
RESPONSIBILITIES AND AUTHORITY
Independent Accounting Firm Selection and Oversight
- Selection and General Oversight
The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent public accounting firm, or any other registered public accounting firm (including resolution of disagreements between Management and the independent public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report and related work, and performing other audit, review or attest services for the Company. The independent public accounting firm and each such other registered public accounting firm must report directly to, and ultimately be accountable to, the Committee.
- Statement from Independent Public Accountants
Obtain and review from the independent public accounting firm at least annually a formal written statement or report that describes: (a) the independent public accounting firm’s internal quality control procedures, (b) any issues raised by the most recent internal quality control review, peer review, or Public Company Accounting Oversight Board (PCAOB) review or inspection of the independent public accounting firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the independent public accounting firm, and any steps taken to deal with any such issues; and (c) all relationships between the independent public accounting firm and the
Company or any of its subsidiaries. The Committee shall discuss with the independent public accounting firm this report and any relationships or services that may impact the objectivity and independence of the auditors.
- Pre-Approval of Audit and Non-Audit Services
Pre-approve all audit, audit related services and all permitted non-audit and tax services (other than those determined to be de minimis exceptions described in Section 10A(i)(1)(B) of the Exchange Act) to be performed by the independent public accounting firm. Such pre-approval can be given as part of the Committee’s approval of the scope of the engagement of the independent public accounting firm or on an individual basis. The pre-approval of non-auditing services can be delegated by the Committee to one or more of its members, but the decision must be presented to the full Committee for final approval. The Committee will ensure its final approval of non-audit ervices is disclosed to investors in periodic reports required by Section 13(a) of the Exchange Act. The independent public accounting firm will not be retained to perform the prohibited non-audit functions attached hereto as Exhibit A. The Committee may, in accordance with applicable laws and regulations, establish preapproval policies and procedures for the engagement of the independent public accounting firm to render services to the Company, including delegation of authority to its Chairperson. The pre-approval of audit, audit related and all permitted non-audit services may be carried out with input from, but not as a delegation of its authority, to financial management of the Company.
- Scope of Audit and Reviews
Review, evaluate and approve the annual engagement proposal of the independent public accounting firm, including the proposed scope, and approach of the annual audit and quarterly reviews.
- Required Disclosures
Ensure the name of the principle independent public accounting firm selected for shareholder approval is included with the annual proxy statement including (a) changes in and disagreements with the independent public accounting firm during the two most recent fiscal years or any subsequent interim period, (b) whether the independent accounting firm will be present at the annual shareholders meeting to make a statement and/or answer questions, and (c) provide
information regarding fees paid to the independent accounting firm for each of the two most recent fiscal years may by the Company broken out by audit, audit related, tax and other services provided.
- Disagreements with Management
Review and resolve and disagreements between Management and the independent public accounting firm including any audit issues or difficulties the independent public accounting firm may have encountered and Management’s responses, including: (a) any restrictions on the scope
of activities or access to requested information; (b) any recommendations made by the independent public accounting firm as a result of the audit; (c) any significant disagreements with Management; (d) any accounting adjustments that were noted or proposed by the independent
public accounting firm but were “passed on” as immaterial or otherwise; (e) any communications between the audit team and the independent public accounting firm’s national office respecting auditing or accounting issues presented by the engagement; (f) any “management” or “internal
control” letter issued, or proposed to be issued, by the independent public accounting firm to the Company; and (g) the responsibilities, budget and staffing of the Company’s internal audit function.
- Review of the Independent Public Accounting Firm
At least annually, evaluate the independent public accounting firm’s qualifications, performance and independence, including a review and evaluation of the lead partner and senior members of the of the independent public accounting firm’s team. The Committee shall obtain and include the opinions of Management in its evaluation and resent conclusions with respect to the independent public accounting firm to the full Board.
Ensure that the lead or coordinating audit partner having primary responsibility for the audit or review, and the concurring or reviewing audit partner of the independent public accounting firm rotate at least every five years and that other audit partners (as defined by the SEC) rotate at least every seven years in accordance with rules promulgated by the SEC. The Committee shall consider whether there should also be a regular rotation of the selected independent public accountingfirm.
Obtain and review a formal written statement from the independent public accounting firm on a periodic basis delineating all relationships between the independent auditing firm and the Company, discuss with the independent auditor any disclosed relationships or services that may impact the objectivity and independence of the independent auditing firm. The Committee shall take, or recommend that the Board of Directors take appropriate action to oversee the
independence of the independent public accounting firm.
- Communications by the Independent Public Accounting Firm
Ensure communication requirements to be made by the independent public accounting firm to the Committee and/or Company are made, including all deficiencies and material weaknesses identified during the annual audit with respect to internal controls and external financial reporting, are disclosed and discussed prior to issuance of the annual audit opinion. Ensure communication requirements and responsibilities of the independent public accounting
firm are satisfied with respect to general oversight, strategy, planning, procedures and review of related party transactions under PCAOB audit standards, rules and regulations are adhered to.
- Independent Public Accounting Firm Fees and Compensation
Review the independent public accounting firm’s written submission to the Company of annual fees billed, and oversee the Company’s provision for appropriate funding, as determined by the Committee, for payment of compensation to the independent public accounting firm for the purpose of preparing or issuing an audit report or performing other audit, review or attest services.
- Meet periodically with the Company’s independent public accounting firm in separate executive sessions reporting any information or determinations to the Board.
Financial Reporting – The Committee shall review and discuss the following with Management, internal auditors and the independent public accounting firm, as applicable:
- Annual and Quarterly Financials
Review and discuss with Management and the independent public accounting firm the Company’s annual audited and quarterly reviewed financial statements, including (a) analyses of Management and/or the independent public accounting firm, any significant financial reporting issues or judgements made in connection with the preparation of the financial statements, (b) issues regarding the Company’s the selection and disclosure of the accounting principles and financial statement presentation, and (c) the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and associated filings, prior to the release of such information. Recommend to the Board whether the respective financial statements and related disclosures should be included in the annual report, and forms 10-K and 10-Q’s.
- Independent Audit and Quarterly Reviews
Review and discuss with the independent public accounting firm the scope of the annual audit and quarterly reviews, the results of the independent annual audit and quarterly reviews, and the independent public accounting firm’s management letters and opinion on the respective financial statements.
- Reports and Certifications
Provide reports and related certifications regarding internal controls over financial reporting and related disclosure.
- Accounting Principles
Review with Management and the independent public accounting firm (a) all critical accounting principles applied in financial reporting, including any material changes in the selection or application of accounting principles followed in prior years; (b) any items required to be communicated by the independent public accounting firm in accordance with generally accepted auditing standards or other legal or regulatory requirements; and (c) analyses prepared by management and/or the independent accounting firm setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
- Regulatory Developments
Review with Management and the independent public accounting firm the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, if applicable, on the Company’s financial statements.
Financial Reporting Internal Controls and Processes
Review and discuss with the independent public accounting firm: (a) all critical accounting policies and practices to be used in the audit; (b) all alternative treatments of financial information within GAAP that have been discussed with Management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent public accounting firm; and (c) all other material written communications between the independent public accounting firm and Management, including any management letter or schedule of unadjusted differences
Enforcement of Key Company Policies
1. Committee Report
Prepare an annual report included in the Company’s proxy statement as required by the proxy rules issued or enforced by the SEC to the Exchange Act of 1934.
Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable financial transactions, accounting or auditing matters. The foregoing is specifically addressed via the Company’s Whistleblower Program wherein the Committee will review and reassess the adequacy of the Whistleblower Program at least annually, and recommend any proposed changes to the Board, as considered appropriate.
3. Tax Compliance
Review the Company’s tax compliance plan and tax filing procedures with appropriate person(s) responsible for such filings
4. Whistle Blower Policy
Review and assess the adequacy of the Whistle Blower Policy at least annually to ensure the effectiveness of the procedures thereunder and recommend any proposed changes to the Board as considered appropriate.
The Committee will hold regular meetings, either in person or electronically, at least four times annually in conjunction with the filing of annual and quarterly financial reporting requirements. The Committee will also conduct special meetings, to be called by the Committee Chairperson, as it determines necessary and appropriate in addition to regular meetings. At the request of any two members of the Committee, a special meeting of the Committee will be held promptly.
A majority of the Committee will constitute a quorum for the transaction of business. The action of a majority of those present at a meeting, at which a quorum is present, will be the act of the Committee. The Committee will keep a record of its actions and proceedings and report to the full Board as necessary and appropriate.
The Committee will meet periodically, in separate executive session with (a) the Chief Financial Officer (b) members of Management, (c) general legal counsel, and (d) the independent public accounting firm accountants, to discuss any matters that the Committee or any of such persons believes should be discussed in the interest of fulfilling the purpose, responsibility and authority of the Committee or any of such persons.
The Committee will maintain written minutes of its meetings, which are to be filed in conjunction with the meetings of the Board of Directors.
DISCLOSURE OF THE ADOPTED AUDIT COMMITTEE CHARTER
This “adopted” Charter will be made available in accordance with the aforementioned responsibilities, rules and regulations.
Adopted by Resolution by the Board of Directors
Prohibited Non-Audit Services
1. Bookkeeping or other services related to the accounting records or financial statements of the Company;
2. Financial information systems design and implementation;
3. Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
4. Actuarial services;
5. Internal audit outsourcing services;
6. Management functions or human resources;
7. Broker or dealer, investment advisor, or investment banking services;
8. Legal services and expert services unrelated to the audit; and
9. Any other services that the PCAOB to be formed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 determines, by regulation, is impermissible
If you have any questions about this Whistleblower Policy, please contact us at:
SOBRsafe™ | Touch-Based, Preventative Alcohol Detection
6400S Fiddlers Green Circle, Suite 1400, Greenwood Village, CO 80111
Phone: 1. 844.SOBRsafe (762.7723)