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EXHIBIT 99.1
PYRAMID OIL COMPANY
AUDIT COMMITTEE CHARTER
This Charter shall be reviewed as necessary for adequacy by the Audit
Committee and the Board of Directors but no less frequently than annually.
I. PURPOSE
The principal purpose of the Audit Committee is to oversee the integrity
of the Company's accounting and financial reporting processes and the audits
of the Company's financial statements. In particular, the Audit Committee
shall monitor (a) the integrity of the Company's financial statements, (b) the
Company's compliance with legal and regulatory requirements, (c) the
qualifications, independence and performance of the Company's independent
auditors, and (d) the performance of the Company's internal audit function.
The Audit Committee shall also prepare the report required by the Securities
and Exchange Commission (the 'Commission') to be included in the Company's
annual proxy statement.
The Company's independent auditors are ultimately accountable to the
Audit Committee in its capacity as a committee of the Company's Board of
Directors (the Board), and the independent auditors shall report directly to
the Audit Committee. The Audit Committee shall have sole and direct authority
and responsibility to select, hire, oversee, evaluate, approve the
compensation of, and, where appropriate, replace the Company's independent
auditors (subject, if applicable, to stockholder ratification of the selection
of the independent auditors).
In discharging its oversight role, the Audit Committee is granted the
power to investigate any matter brought to its attention with full access to
all books, records, facilities and personnel of the Company and the power to
retain and determine funding for, at the Company's expense, independent legal
counsel, additional independent auditors or other experts and advisors for
this purpose. The Company shall provide the Audit Committee with appropriate
funding to perform its duties, including payment of the Company's independent
auditors and any experts or advisors retained by the Audit Committee.
II. Meetings
The Audit Committee shall meet as often as it deems necessary or
advisable, but not less frequently than quarterly. The Audit Committee shall
meet periodically with the Company's management and its independent auditors
in separate or joint sessions as deemed appropriate by the Audit Committee.
The Audit Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend any meeting of the
Audit Committee or to meet with any members of, or consultants to, the Audit
Committee.
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III. MEMBERSHIP
The Audit Committee shall be appointed by the Board and shall, so long as
the Company is a 'Small Business Filer', be comprised of not fewer than two
members of the Company's Board, each of whom shall meet the independence and
other requirements of the American Stock Exchange, the Securities Exchange Act
of 1934 (the "Exchange Act"), the rules and regulations of the Commission
regarding audit committees, and the rules and regulations of any other
relevant body, including those regarding independence and experience. At such
time as the Company is no longer a 'Small Business Filer', the Audit Committee
shall be comprised of not fewer than three members of the Board. All members
of the Audit Committee shall be able to read and understand fundamental
financial statements. At least one member of the Audit Committee shall be an
audit committee financial expert as defined by the Commission, and, at least
one member of the Audit Committee shall satisfy any applicable financial
sophistication or financial expert requirements of the American Stock
Exchange.
IV. KEY FUNCTIONS AND RESPONSIBILITIES
The following functions shall be the common recurring activities of the
Audit Committee in carrying out its duties. The functions and responsibilities
are set forth as a guide and may be varied from time to time by the Audit
Committee as appropriate under the circumstances.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
1. Review and discuss with management and the Company's independent
auditors the Company's annual audited financial statements, including
disclosures made in management's discussion and analysis, and recommend to the
Board whether the audited financial statements should be included in the
Company's Form 10-KSB.
2. Review and discuss with management and the Company's independent
auditors the Company's quarterly financial statements prior to the filing of
its Form10-QSB, including the results of the independent auditors' review of
the quarterly financial statements.
3. Discuss with management and the Company's independent auditors
significant financial reporting issues and judgments made in connection with
the preparation of the Company's financial statements, including any
significant changes in the Company's selection or application of accounting
principles, the quality and adequacy of the Company's internal controls and
any special steps adopted in light of material deficiencies in such controls.
4. Review and discuss quarterly reports from the independent auditors
on: (a) all critical accounting policies and practices to be used; (b) all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications
of the use of such alternative disclosures and treatments and the treatment
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preferred by the independent auditors; (c) other material written
communications between the independent auditors and management, such as any
management letter or schedule of unadjusted differences; and (d) conformance
with auditing standards.
5. Discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as well
as financial information and earnings guidance provided to analysts and rating
agencies.
6. Discuss with management 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, and discuss with management any off-balance sheet transactions,
arrangements or obligations in which the Company has an interest.
7. Review disclosures made to the Audit Committee by the Company's
CEO and CFO during their certification and disclosure process for reports on
Form 10-KSB and Form 10-QSB about any significant deficiencies in the design
or operation of internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in the
Company's internal controls.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITORS
8. Pre-approve all auditing services, including the annual audit
plan, and permitted non-audit services (including the fees and terms thereof)
to be performed for the Company or for the Audit Committee or Board by the
Company's independent auditors; provided that, to the extent permitted by
Commission regulations, (a) the Audit Committee may delegate such pre-approval
authority to a subcommittee of the Audit Committee that promptly reports all
such approvals to the full Audit Committee, and (b) the Audit Committee may
adopt pre-approval policies and procedures regarding the services to be
rendered by the independent auditors.
9. Meet with the independent auditors prior to the audit to discuss
the planning and staffing of the audit. Discuss with the Company's
independent auditors significant matters relating to the conduct of audits and
attestation reports on management's assessment of internal control over
financial reporting, including any difficulties encountered in the course of
audit work, any restrictions on the scope of activities or access to requested
information, any significant disagreements with management and the adequacy of
the Company's internal control over financial reporting and disclosure
controls and procedures. Discuss with the independent auditors matters
relating to the report of the Audit Committee that is required by Commission
rules to be included in the Company's annual proxy statement. The Audit
Committee shall be responsible for resolving any disagreements between
management and the independent auditors.
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10. Obtain from the Company's independent auditors annually a formal
written statement delineating all relationships between the independent
auditors and the Company; discuss with the independent auditors any such
disclosed relationships and their impact on the independent auditors'
independence; and take or recommend that the Board take appropriate action
regarding the independence of the independent auditors. Ensure the rotation
of the audit partners as required by law, and monitor the Company's hiring of
employees or former employees of the independent auditors to ensure compliance
with applicable law.
11. Obtain and review an annual report by the Company's independent
auditors describing the firm's internal quality-control procedures and any
material issues raised by the most recent internal quality-control review, or
peer review of the firm.
12. Evaluate the qualifications, performance and independence of the
Company's independent auditors, including considering whether the provision of
permitted non-audit services is compatible with maintaining the independent
auditors' independence. The Audit Committee shall present its conclusions with
respect to the independent auditors to the Board at least once each year.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
13. At the conclusion of each audit, obtain from the Company's
independent auditors assurance that the firm is not required to report to the
Company under Section 10A(b) of the Exchange Act any illegal act.
14. Approve or reject proposed related party transactions. Obtain
reports from management that the Company and its employees are in compliance
with applicable legal requirements and the Company's Code of Conduct.
15. 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 accounting or auditing matters.
16. Discuss with management and the Company's independent auditors
any correspondence with regulators or governmental agencies and any published
reports that raise material issues regarding the Company's financial
statements or accounting policies.
17. Discuss with the Company's General Counsel and outside counsel
any legal matters that may have a material impact on the financial statements
or the Company's compliance policies.
18. Meet quarterly.
19. Report regularly to the Board.
20. Perform any other activities consistent with this Charter, the
Company's Bylaws, AMEX rules and governing law and regulations, as the Audit
Committee deems necessary or appropriate.
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21. Maintain minutes of meetings and periodically report to the Board
on significant results of the foregoing activities.
22. Discuss with management and the Board policies with respect to
risk assessment and risk management, and review and discuss with management,
the Board and the Company's independent auditors any annual reports by
management on the Company's internal control over financial reporting that are
required by Commission rules and any related attestation reports that are
required from the independent auditors pursuant to Commission rules.
V. LIMITATION OF AUDIT COMMITTEE'S ROLE
The Audit Committee's role is one of oversight. While the Audit Committee
has the responsibilities and powers set forth in this Charter, it is not the
duty of the Audit Committee to plan or conduct audits or to determine that the
Company's financial statements and disclosures are complete and accurate and
are in accordance with generally accepted accounting principles and applicable
rules and regulations. These are the responsibilities of management and the
Company's independent auditors.