AUDIT COMMITTEE CHARTER

PURPOSE OF THE COMMITTEE

The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Majesco Entertainment Company (the "Company") is to assist the Board's oversight of:

▪ 

the integrity of the Company's financial statements, audit process and financial reporting process,

 

▪ 

the Company's compliance with legal and regulatory requirements,

 

▪ 

the Company's independent auditors' qualifications and independence, and

 

▪ 

the performance of the Company's independent auditors and, when appropriate, the Company's internal audit function;

COMPOSITION OF THE COMMITTEE

The Committee shall consist of three or more directors as determined from time to time by the Nominating and Corporate Governance Committee of the Board and shall hold office until their resignations or until their successors shall be duly elected and qualified. Each member of the Committee shall be qualified to serve on the Committee pursuant to the requirements of the Securities and Exchange Commission ("SEC") and the listing requirements of the Nasdaq Stock Market or any exchange or national quotation system on which the common stock or any other equity securities of the Company are listed and any additional requirements that the Board deems appropriate.

Unless a Chair is elected by the Governance and Nominating Committee, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

At least one member of the Committee must be designated by the Board to be the "audit committee financial expert," as defined by the SEC pursuant to the Sarbanes-Oxley Act of 2002 (the "Act").

MEETINGS OF THE COMMITTEE

The Committee shall meet as often as it determines necessary to carry out its duties and responsibilities, but no less frequently than four times per annum. The Committee, in its discretion, may ask members of management or others to attend its meetings (or portions thereof) and to provide pertinent information as necessary. The Committee shall meet separately on a periodic basis with (i) management, (ii) the senior executive of the Company's internal auditing department or other person responsible for the internal audit function and (iii) the Company's independent auditors, in each case to discuss any matters that the Committee or any of the above persons believe warrant Committee attention.

A majority of the members of the Committee participating in the meeting in person or by telephone or video conference shall constitute a quorum.

The Committee shall maintain minutes of its meetings and records relating to those meetings.

DUTIES AND RESPONSIBILITIES OF THE COMMITTEE

The Committee's responsibility is one of oversight and it recognizes that the Company's management is responsible for the preparation and the integrity of the Company's financial statements and that the outside independent auditors are responsible for auditing those financial statements. Additionally, the Committee recognizes that financial management, including those responsible for internal audit, as well as the outside auditors, have more knowledge and detailed information about the Company than do

 



Committee members; consequently, in carrying out its oversight responsibilities, the Committee is not providing any expert or special assurance as to the Company's financial statements or any professional certification as to the outside auditor's work.

The following shall be the common recurring activities of the Committee in carrying out its oversight function. These activities are set forth as a guide with the understanding that the Committee may diverge from this guide as appropriate to the extent permitted by applicable law or regulation.

        Selection, Evaluation and Oversight of the Independent Auditors

(a) 

Be directly responsible for the appointment, the establishment of fees, the retention and oversight of the work of any public accounting firm ( the "Independent Auditors") engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and each such public accounting firm must report directly to the Committee.

 

(b) 

Review and, in its sole discretion, approve in advance the Company's Independent Auditors' annual engagement letter, including the proposed fees contained therein, as well as all audit and, as provided in the Act and the SEC rules and regulations promulgated thereunder, all permitted non-audit engagements and relationships between the Company and such independent auditors. The Committee may delegate, to one or more designated members of the Committee, the authority to grant such pre-approvals. The decisions of any member to whom such authority is delegated shall be presented to the full Committee at each of its scheduled meetings.

 

(c) 

Review and evaluate the performance of the Company's independent auditors, including their lead partner.

 

(d) 

Obtain at least annually from the Company's independent auditors and review a report describing:

 

(i

the independent auditors' internal quality-control procedures;

 

(ii) 

any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditors, or by any inquiry or investigation by any governmental or professional authority, within the preceding five years, and any steps taken to deal with any such issues;

 

(iii) 

all relationships between the independent auditors and the Company (including a description of each category of services provided by the independent auditors to the Company and a list of the fees billed for each such category); and

 

(iv) 

the independent auditors rotation policies and how they apply to the current engagement.

The Committee should present its conclusions with respect to the above matters, as well as its evaluation of the lead partner of the independent auditors, and its views on whether there should be a rotation of the independent auditors, to the Board.

(e) 

Evaluate the independence of the Company's independent auditors.

        Oversight of Annual Audit and Quarterly Reviews

(f) 

Review and discuss with the independent auditors their annual audit plan, including the timing and scope of audit activities.

 

(g) 

Review with management, the Company's independent auditors and, if appropriate, the senior executive of the Company's internal auditing department, the following:

 

(i

the Company's annual audited financial statements and quarterly financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and any major issues related thereto;

 

(ii) 

the information required to be reported by the independent auditor;

 

(iii) 

major issues regarding accounting principles and financial statements presentations, including any significant changes in the Company's selection or application of accounting principles;

 

(iv) 

significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including the effects of alternative generally accepted accounting principles on the Company's financial statements; and

 



(v) 

the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, if any, on the financial statements of the Company.

 

(h) 

Resolve all disagreements between the Company's independent auditors and management regarding financial reporting;

 

(i

Review on a regular basis with the Company's independent auditors any problems or difficulties encountered by the independent auditors in the course of any audit work, including management's response with respect thereto, any restrictions on the scope of the Independent Auditor's activities or on access to requested information, and any significant disagreements with management. In connection therewith, the Committee should review with the independent auditors the following:

 

(i

any accounting adjustments that were noted or proposed by the independent auditors but were rejected by management (as immaterial or otherwise);

 

(ii) 

any communications between the audit team and the Independent Auditor's technical partner or national office respecting auditing or accounting issues presented by the engagement; and

 

(iii) 

any "management" or "internal control" letter issued, or propose to be issued, by the independent auditors to the Company.

        Oversight of the Financial Reporting Process and Internal Controls

(j) 

Review:

 

(i

the adequacy and effectiveness of the Company's accounting and internal control policies and procedures on a regular basis, including the activities, organizational structure and resources of the Company's internal audit function, through inquiry and discussions with the Company's independent auditors, management and, if appropriate, senior executives in the Company's internal auditing department;

 

(ii) 

the yearly report prepared by management, and attested to by the Company's independent auditors, assessing the effectiveness of the Company's internal control over financial reporting and stating management's responsibility for establishing and maintaining adequate internal control over financial reporting prior to its inclusion in the Company's Annual Report on Form 10-K.

 

(k) 

Review with the chief executive officer, chief financial officer and independent auditors, periodically, the following:

 

(i

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

 

(ii) 

any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

 

(l) 

Discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company, including, if appropriate, the internal auditing department, assess and manage the Company's exposure to risk, as well as the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.

 

(m) 

Review with management the Company's administrative, operational and accounting internal controls, including any special audit steps adopted in light of the discovery of material control deficiencies.

 

(n) 

Receive periodic reports from the Company's independent auditors, management and, if appropriate, senior executive of the Company's internal auditing department to assess the impact on the Company of significant accounting or financial reporting developments that may have a bearing on the Company.

 

(o) 

Review and discuss with the independent auditors the results of the year-end audit of the Company, including any comments or recommendations of the Company's independent auditors and, based on such review and discussions and on such other considerations as it determines appropriate, recommend to the Board whether the Company's financial statements should be included in the Annual Report on Form 10-K.

 

(p) 

Establish and maintain free and open means of communication between and among the Committee, the Company's independent auditors, the Company's internal auditing department, if appropriate, and management, including providing such parties with appropriate opportunities to meet separately and privately with the Committee on a periodic basis.

 

(q) 

Review the type and presentation of information to be included in the Company's earnings press releases as well as financial information and earnings guidance provided by the Company to analysts and, if applicable, rating agencies (which review may be done generally (i.e., discussion of the types of information to be disclosed and type of presentations to be made), and the Committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance.

        Miscellaneous

(r) 

Establish clear hiring policies by the Company for employees or former employees of the Company's independent auditors.

 

(s) 

Meet periodically with internal counsel, and outside counsel when appropriate, to review legal and regulatory matters, including (i) any matters that may have a material impact on the financial statements of the Company and (ii) any matters involving potential or ongoing material violations of law or breaches of fiduciary duty by the Company or any of its directors, officers, employees or agents or breaches of fiduciary duty to the Company.

 

(t) 

Prepare the report required by the rules of the SEC to be included in the Company's annual proxy statement.

 

(u) 

Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

 

(v) 

Secure independent expert advice to the extent the Committee determines it to be appropriate, including retaining, with or without Board approval, independent counsel, accountants, consultants or others, to assist the Committee in fulfilling its duties and responsibilities, the cost of such independent expert advisors to be borne by the Company.

 

(w) 

Report regularly to the Board on its activities, as appropriate. In connection therewith, the Committee should review with the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors, or the performance of the internal audit function.

 

(x) 

Perform such additional activities, and consider such other matters, within the scope of its responsibilities, as the Committee or the Board deems necessary or appropriate.

EVALUATION OF THE COMMITTEE

The Committee shall, on an annual basis, evaluate its performance. The evaluation shall address all matters that the Committee considers relevant to its performance, including a review and assessment of the adequacy of this Charter, and shall be conducted in such manner as the Committee deems appropriate.

The Committee shall deliver to the Board, or the appropriate committee of the Board, a report, which may be oral, setting forth the results of its evaluation, including any recommended amendments to this Charter.

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Nothing contained in this Charter is intended to create, or should be construed as creating, any responsibility or liability of the members of the Committee, except to the extent otherwise provided under applicable federal or state law.