Audit Committee Charter

The Board of Directors of DayStar Technologies, Inc. (the "Corporation") will annually appoint from its members an Audit Committee. This Charter of the Audit Committee supplements the provisions of Section 3.12 of the Corporation's Bylaws and further defines the role, authority and responsibility of the Audit Committee.

Number of Members and Appointment

The Audit Committee will be composed of at least three independent members of the Board of Directors. Members of the Committee will be appointed annually by the Board of Directors. Vacancies will be filled by the Board of Directors. The Chairman of the Audit Committee will be elected by the Audit Committee, pursuant to the procedures outlined below.

Qualifications of Members

Each member of the Audit Committee will be a Director who, in the judgment of the Board of Directors, is financially literate and possesses the ability to read and understand the fundamental financial statements of the Corporation and its subsidiaries, including balance sheets, income statements and cash flow statements. At least one member of the Audit Committee will, in the judgment of the Board of Directors, have accounting or related financial management expertise, which may include employment experience in finance or accounting, certification in accounting or any other comparable experience, including being, or having been, a chief executive officer or other senior officer of a Corporation with financial oversight responsibilities.

Independence of Members

Members of the Audit Committee will be free from any relationship to the Corporation or its subsidiaries that, in the judgment of the Board of Directors, may interfere with the exercise of their independence from management of the Corporation. Other than in their capacity as members of the Board of Directors, members of the Audit Committee will not be affiliates, officers, or employees of the Corporation or any of its subsidiaries and may not accept from the Corporation or any of its subsidiaries any consulting, advisory or other compensatory fees. Appointments to the Audit Committee will be consistent with standards for determining independence promulgated by the Securities and Exchange Commission and the NASDAQ Stock Market, or such other national securities market as will be the principal market for trading of the Corporation's securities.

Meetings, Quorum, Informal Actions, Minutes

The Audit Committee will meet on a regular basis, at least four times per year. Special meetings may be called by the Chairman of the Audit Committee. A majority of the members of the Audit Committee will constitute a quorum. Concurrence of a majority of the quorum (or, in case a quorum at the time consists of two members of the Committee, both members present) will be required to take formal action of the Audit Committee. Written minutes will be kept for all formal meetings of the Committee.

The Audit Committee will meet separately in executive session, periodically, with each of management, the principal internal auditor of the Corporation and the outside auditing firm.

As permitted by section 141 of the Delaware General Corporation Law, the Audit Committee may act by unanimous written consent, and may conduct meetings via conference telephone or similar communication equipment.

Members of the Audit Committee may meet informally with officers or employees of the Corporation and its subsidiaries and with the Corporation's independent auditors, and may conduct informal inquiries and studies without the necessity of holding a formal meeting. The Audit Committee may delegate to its Chairman or to one or more of its members the responsibility for performing routine functions as, for example, review of press releases announcing results of Corporation operations.

Outside Advisors

The Audit Committee will have the authority to retain such outside counsel, accountants, experts and other advisors as it determines appropriate to assist the Audit Committee in the performance of its functions. The Audit Committee will have sole authority to approve related fees and retention terms.

Responsibilities

The Corporation's independent auditors are ultimately accountable to the Audit Committee. The Audit Committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the Corporation's independent auditors.

The Audit Committee will oversee the independence and performance of the Corporation's independent auditors. The Committee will ensure that the independent auditors periodically submit to the Audit Committee a formal written statement delineating all relationships between the auditors and the Corporation and will engage in an active dialogue with the auditors with respect to any disclosed relationships or services that may impact the auditor's independence or objectivity. The Audit Committee will determine the appropriate action in response to the auditors' report to satisfy itself of the auditors' independence.

The Audit Committee will oversee the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation.

The Audit Committee will annually prepare and submit, for inclusion in management's proxy statement to stockholders in connection with the Corporation's annual meeting of stockholders, a report in conformity with Item 306 of Securities and Exchange Commission Regulation S-B.

Without limiting the generality of the foregoing, the Audit Committee will:

  • Be directly responsible, in its capacity as a committee of the Board, for the appointment, compensation and oversight of the outside auditing firm. In this regard, the Audit Committee will have the sole authority to (a) appoint and retain, (b) determine the funding for, and (c) when appropriate, terminate, the outside auditing firm, which will report directly to the Audit Committee.
  • Approve in advance all audit services to be provided by the outside auditing firm, including any written engagement letters related thereto.
  • Establish policies and procedures for the engagement of the outside auditing firm to provide permissible non-audit services, which will require pre-approval by the Audit Committee of all permissible non-audit services to be provided by the outside auditing firm.
  • Consider, at least annually, the independence of the outside auditing firm, including whether the outside auditing firm's performance of permissible non-audit services is compatible with the auditor's independence; obtain and review a report by the outside auditing firm describing any relationships between the outside auditing firm and the Corporation or any other relationships that may adversely affect the independence of the auditor; discuss with the outside auditing firm any disclosed relationships or services that may impact the objectivity and independence of the auditor; and present to the Board of directors the Audit Committee's conclusions with respect to the independence of the outside auditing firm.
  • Review and discuss with the outside auditing firm: (i) the scope of the audit, the results of the annual audit examination by the auditor and any accompanying management letters, and any difficulties the auditor encountered in the course of their audit work, including any restrictions on the scope of the outside auditing firm's activities or on access to requested information, and any significant disagreements with management; and (ii) any reports of the outside auditing firm with respect to interim periods.
  • Review and discuss with management and the outside auditing firm the annual audited and quarterly unaudited financial statements of the Corporation, including: (i) an analysis of the auditor's judgment as to the quality of the Corporation's accounting principles, setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements; (ii) the Corporation's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including the development, selection and reporting of accounting policies that may be regarded as critical; and (iii) major issues regarding the Corporation's accounting principles and financial statement presentations, including any significant changes in the Corporation's selection or application of accounting principles and financial statement presentations.
  • Recommend to the board based on the review and discussion described above, whether the financial statements should be included in the Annual Report on Form 10-K.
  • Periodically review and discuss the adequacy of the Corporation's internal controls, any significant deficiencies in internal controls, and significant changes in such controls; and review and discuss with the principal internal auditor of the Corporation and such others as the Audit Committee deems appropriate, the scope and results of the internal audit program.
  • Periodically review and discuss the adequacy and effectiveness of the Corporation's disclosure controls and procedures and management reports thereon.
  • Review and discuss with management and the outside auditors any material financial or non-financial arrangements of the Corporation which do not appear on the financial statements of the Corporation.
  • Review and approve any related party transactions involving directors or executive officers of the Corporation.
  • Review, with the General Counsel, material pending legal proceedings involving the Corporation and other contingent liabilities.
  • Establish procedures for receiving and handling complaints regarding accounting, internal accounting controls and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding accounting and auditing matters.
  • Establish policies for the hiring of employees and former employees of the outside auditing firm.
  • Report the Committee's activities to the full Board of Directors on a regular basis.
  • Review and assess the performance of the Audit Committee and the adequacy of this Charter on an annual basis.

      • Committee Resources

      The Audit Committee is authorized to employ the services of such counsel, consultants, experts and personnel, including persons already employed or engaged by the Corporation, as the Committee may deem reasonably necessary to enable it to fully perform its duties and fulfill its responsibilities.

      Approved by the Board of Directors on 10/30/03.