As Revised on April 26, 2023
I. PURPOSE AND PRINCIPAL DUTIES
The primary purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of RadNet, Inc. (the "Company") is to oversee, on behalf of the Board, the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Committee's principal duties are to:
1. oversee the engagement, qualifications, independence, compensation, retention and performance of the Company's independent auditors and the conduct of the annual independent audit of the Company's financial statements;
2. oversee the integrity of the Company's financial statements and other financial information provided by the Company to its stockholders, any governmental or regulatory body and others;
3. monitor the auditing, accounting and financial reporting processes and systems of internal control that are conducted by the Company's independent auditors, internal audit function and the Company's financial and senior management; and
4. prepare the report of the Audit Committee required by the rules of the Securities and Exchange Commission (the "SEC") to be included in the Company's annual proxy statement.
II. MEMBERSHIP
The Committee shall consist of three or more members of the Board, or such lower number as may be allowed by the listing standards of the NASDAQ Stock Market LLC ("NASDAQ") or such other national securities exchange on which the Company's securities are then listed, as the same may be amended from time to time (the "Listing Standards"). Subject to the requirements of the Listing Standards and the Bylaws of the Company, the members of the Committee shall be appointed by and serve at the discretion of the Board. The Chair of the Committee shall also be appointed by the Board. Committee members may be removed, without cause, by the affirmative vote of the majority of the Board at any time. Any Committee member may resign effective upon giving oral or written notice to the Chairman of the Board, the Corporate Secretary or the Board (unless the notice specifies a later time for the effectiveness of such resignation). Vacancies occurring on the Committee shall be filled by the Board based on nominations by the Nominating and Governance Committee.
Each member of the Committee must (1) be an "independent director" as defined in the Listing Standards, (2) satisfy the independence requirements applicable to Audit Committee members set forth in the rules and regulations promulgated by the SEC, (3) not have participated in the preparation of the financial statements of the Company at any time during the past three years, (4) be free from any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a Committee member, and (5) meet any other requirements imposed by applicable laws, rules, regulations and Listing Standards, subject to any applicable exemptions and transition provisions.
Each member of the Committee shall be able to read and understand financial statements, including the Company's balance sheet, income statement and cash flow statement, and satisfy other similar requirements of the Listing Standards, as in effect from time to time. At least one member of the Committee shall have prior experience in accounting, financial management, financial oversight, requisite professional certification in accounting, or any other comparable experience or background that leads to financial sophistication. In addition, at least one member of the Committee shall qualify as a "financial expert" as defined in Item 407(d)(5)(ii) of SEC Regulation S-K, as it may be modified or supplemented. A Committee member who satisfies this definition of audit committee financial expert will also be presumed to be financially sophisticated.
No director may serve as a member of the Committee if such director serves on the audit committees of more than three public companies (including the Company’s Committee) unless the Board determines that such simultaneous service would not impair the member's ability to serve effectively on the Committee, which determination shall be properly disclosed in the Company's annual proxy statement.
III. MEETINGS AND PROCEDURES
The Audit Committee shall meet in person or virtually at least four times annually, or more frequently as determined appropriate by the Committee. The Committee will regularly report to the Board on significant matters related to the Committee's responsibilities, and as requested by the Board with respect to other matters. The Committee will maintain written minutes of its meetings and will make such minutes available to the Board.
The Chair of the Committee, in consultation with the Committee members and members of management, will determine the frequency and length of Committee meetings and develop the Committee’s agenda. A majority of the members of the Committee shall constitute a quorum and the act of a majority of the members present at a meeting where a quorum is present shall be the act of the Committee. The Committee will otherwise be governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board.
As part of its primary function to foster independent, direct, and open communications between the Committee and the Company’s independent auditors and financial management, the Committee shall meet periodically with members of management and the Company's independent auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately with the Committee.
IV. RESPONSIBILITIES AND AUTHORITY
The following are general guidelines establishing the responsibilities and authority of the Committee, in addition to the purposes set forth above. This list is not intended to be exhaustive, and the Committee may modify the list as appropriate, establishing policies and procedures as required or recommended to meet its purpose and carry out its principal functions and duties.
Retention of Independent Auditor
1. Appoint, compensate, retain, and oversee the work of the Company’s independent auditors (taking into account the vote on stockholder ratification), including the resolution of disagreements between management and the independent auditors regarding financial reporting. The independent auditors shall report directly to the Committee.
2. Approve all audit and permissible non-audit services to be performed for the Company by the independent auditors.
3. On an annual basis, consider the independence, qualifications and performance of the independent auditors. Such consideration of the auditors’ independence shall include obtaining and reviewing a formal written statement from the independent auditors delineating all significant relationships between the independent auditors and the Company and any other items that may be set forth in the applicable requirements of the Public Company Accounting Oversight Board, actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors, and taking appropriate action to oversee the independence of the independent auditors.
4. Periodically review and evaluate the performance of the lead partner of the independent auditors, oversee the required rotation of the lead audit partner responsible for the Company’s audit and discuss with management the timing and process for implementing the rotation of such lead audit partner and the reviewing partner, and consider whether there should be a rotation of the independent auditor firm itself.
Financial Statement and Reporting
5. Review and discuss any items required to be communicated by the independent auditors in accordance with generally accepted auditing standards. These discussions should include, among other things, the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the Company's financial statements, any significant difficulties encountered during the course of the audit and management’s response, including any restrictions on the scope of the independent auditor’s work or on access to requested information, and any significant disagreements with management (including resolution of any such disagreements).
6. Review the Company's annual financial statements and related notes thereto and any reports or other financial information submitted to any governmental body or the public, including any certification, report, analysis, opinion or review rendered by the Company's independent auditors.
7. Review (or cause the Chair of the Committee to review) with the Company's independent auditors and the Company's chief financial officer (and other financial management of the Company, if necessary) each quarterly report on Form 10-Q and all financial statements and related notes thereto (or any successor report thereto under the rules and regulations of the SEC) prior to its filing with the SEC or prior to the public release of the Company's earnings.
8. Review filings made with the SEC and other published documents containing the Company's financial statements and consider whether the information contained in such documents is consistent with the information contained in the Company's financial statements.
9. Include in the Company's statements relating to annual meetings of stockholders at which directors are to be elected (or special meetings or written consents in lieu of such meetings) a report of the Committee that complies with the SEC's regulations for such reports.
Internal Controls over Financial Reporting
10. Provide independent, direct, and open communications among the Company's independent auditors, financial and senior management, and the Board.
11. Periodically consult with the Company's independent auditors out of the presence of management about internal controls and the fullness and accuracy of the Company's financial statements.
12. In consultation with the Company's independent auditors, review the integrity of the Company's financial reporting processes, both internal and external; confer with the independent auditors concerning the scope of their examinations of the books and records of the Company and its subsidiaries; review and approve the independent auditor's annual engagement letter; review and approve the Company's annual audit plans and budgets; direct the special attention of the independent auditors to specific matters or areas deemed by the Committee to be of special significance; and authorize the independent auditors to perform such supplemental reviews or audits as the Committee may deem appropriate.
13. Consider the Company's independent auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting.
14. Consider and approve, if appropriate, major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditors and/or management.
15. Establish regular and separate systems of reporting to the Committee by each of management and the Company's independent auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to the appropriateness of such judgments.
16. Following completion of the Company's annual audit, review separately with each of management and the Company's independent auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information and the nature and extent of any significant changes in accounting principles or the application thereto.
17. Review any significant disagreement among management and the Company's independent auditors in connection with the preparation of the financial statements.
18. Review with the Company's independent auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)
Risk Oversight
19. Inquire of management and the Company's independent auditors about significant financial risks or exposures and assess the steps that management has taken to mitigate such risks to the Company.
20. Establish anonymous reporting procedures for concerns about accounting and auditing matters, including procedures for the treatment of complaints received by the Company regarding accounting, auditing or other federal securities law matters, and confidential submissions by employees of the Company regarding questionable accounting, auditing or other federal securities law matters.
General
21. Annually review, evaluate and assess the Committee's own performance and compliance with this Charter.
22. Annually review this Charter and periodically revise, as determined appropriate by the Committee.
23. Perform any other activities consistent with this Charter, the Company’s Bylaws, the rules and regulations of the Securities and Exchange Commission, the Listing Standards and other governing law, each as in effect from time to time, as the Committee or the Board deems necessary or appropriate.
The Committee can delegate any of its responsibilities to such person or persons, including officers or employees of the Company or any of its members, except to the extent otherwise prohibited by applicable law or the rules and regulations of the SEC or applicable Listing Standards. Any such person to whom the Committee grants such authority shall regularly report to the Committee any actions so taken and the Committee may revoke any such delegation of authority at any time.
V. LIMITATIONS ON AUDIT COMMITTEE RESPONSIBILITIES
Notwithstanding the responsibilities and powers of the Committee set forth in this Charter, the Committee does not have the responsibility of planning or conducting audits of the Company's financial statements or determining whether the Company's financial statements are complete, accurate or prepared in accordance with GAAP. Such responsibilities are those of management and, to the extent of the independent auditors' responsibilities, those of the independent auditors. Each member of the Committee is entitled to rely on the integrity of those persons and organizations within and outside the Company that provide information to the Committee and the accuracy and completeness of the financial and other information provided to the Committee by such persons and organizations absent actual knowledge to the contrary. In addition, the members of the Committee are not independent auditors and the term "review" as used in this Charter is not intended to be interpreted to suggest that the members of the Committee can or should follow the procedures required of auditors performing a review of financial statements.
VI. OUTSIDE ADVISORS
In addition to the independent auditors, the Committee shall have the authority, in its sole discretion, to select, retain and obtain the advice of outside legal counsel and such other advisors as it deems necessary to assist with the execution of its duties and responsibilities as set forth herein. The Committee shall set the compensation, and oversee the work, of outside legal counsel or other advisors. The Company shall provide appropriate funding, as determined by the Committee, for the payment of reasonable compensation to any advisors retained by the Committee. the authority granted herein shall not affect the ability or obligation of the Committee to exercise its own judgment in fulfillment of its duties.
VII. CONSISTENCY WITH CERTIFICATE OF INCORPORATION AND BYLAWS
To the extent that any provision or section of this Charter may be inconsistent with any article, provision or section of the Certificate of Incorporation or Bylaws of the Company, the Certificate of Incorporation or Bylaws, as appropriate, shall fully control.