Audit Committee Policy on Reporting of Accounting, Auditing and Financial Matters

Introduction

SMF Energy Corporation (“SMF”) and its operating subsidiaries, divisions and affiliates is committed to maintaining the highest standards of business conduct and ethics in its accounting standards and disclosures, internal accounting controls and audit practices. This policy (the “Policy”) has been issued by SMF’s audit committee to reflect the Company’s practices and principles of behavior that support this commitment. The Policy is also intended to comply with the obligations of SMF’s audit committee under the Sarbanes-Oxley Act of 2002 and SEC and Nasdaq rules thereunder. It is being provided to each employee as a supplement to the Company’s Code of Business Conduct (the “Code”) and should be read in conjunction with the Code. We expect every employee, officer and director to read and understand the Policy and utilize it appropriately. We also intend that interested third parties with information relating to the Company’s accounting standards and disclosures, internal accounting controls and audit practices consider the Policy and so utilize it.

SMF will not tolerate violations of the Policy and, if an investigation indicates that a violation of the Policy has likely occurred, we will take such action as we believe appropriate under the circumstances. SMF is also committed to taking appropriate action(s) to deter any future Policy violations.

1. Reporting Alleged Violations or Concerns
   If any person reasonably believes that any SMF employee(s) or others acting on behalf of SMF have violated federal or state laws or internal policies relating to accounting standards and disclosures, internal accounting controls and audit practices, he or she may report such potential violation(s) to SMF’s audit committee through any of the following channels:
   
   Anonymous Telephone Hotline
   1-866-ETHICSP (384-4277)
   
   or
   
   S. Lee Terry, Jr., Esq., Securities Counsel
   Davis Graham & Stubbs LLP
   1515 17th Street Suite 500
   Denver, Colorado 80202
   Telephone: 303-892-7484
   Facsimile: 303-893-1379
   
   
   1. Reports of Employee Concerns. An employee concerned about questionable accounting or auditing matters may submit a confidential report describing such concern. An employee report may be submitted anonymously by mail or may be delivered in person, by internal mail, by regular mail or by email, as applicable. If the complaint is written and sent by mail or email, the employee should mark the envelope or email as “confidential and private.” An employee report should be in writing to ensure a clear understanding of the issues raised, but it may be oral. In any event, the report should be as precise and factual as possible rather than speculative or conclusory, including as much specific information as possible. An employee report describing a questionable accounting or auditing matter should be candid and should set forth all of the information that the employee knows regarding the allegation or concern. In addition, all employee reports should contain sufficient corroborating information to support the commencement of an investigation. SMF may, in its reasonable discretion, determine not to commence an investigation if an employee report contains only unspecified or broad allegations of wrongdoing without appropriate factual support.
      
      An employee should feel confident to make these reports or to report any other conduct that constitutes fraud against shareholders, without fear of any form of retaliation. SMF will not tolerate retaliation of any kind by or on behalf of SMF against any employee who, in good faith, makes a report or complaint of, or who assists in the investigation of, any questionable accounting or auditing matter or any other potential violation of federal or state laws. Employees will also be protected from retaliation for any report relating to accounting, internal accounting controls or auditing matters covered by this Policy. SMF will take prompt disciplinary action against any employee who retaliates against any person reporting a potential violation under this Policy, up to and including termination of employment.
      
      Attempts to use this Policy’s procedures to libel, slander or otherwise harm another individual through false accusations, malicious rumors or other irresponsible actions are prohibited and will be treated as violations of this Policy.
      
      SMF is further committed to maintaining the strict confidentiality of the statements and identity of any person reporting a potential violation, to the maximum extent possible consistent with the need to conduct an adequate investigation.
      
      
   2. Other Concerns or Complaints. Any interested person, including employees and non-employees of SMF, is encouraged to report his or her concerns or complaints regarding the Company’s accounting, internal accounting controls or auditing matters. These reports may be directed to any member of the audit committee, legal counsel for the Company or any other representative of SMF. Employees may also utilize the anonymous and confidential procedures described above.
      
      The investigation of matters raised in such report will be conducted in accordance with the procedures described in Section 2, below. The audit committee welcomes all such reports in whatever form and by whatever means they are delivered.
      
      
2. Investigation of Reports
   Any person receiving a report or complaint subject to the Policy shall, at a minimum, inform Securities Counsel for the Company (identified above) of the existence of the report. Securities Counsel for the Company will ensure that the details of any report or complaint relating to (a) accounting standards or disclosures, (b) internal accounting controls, or (c) audit practices are relayed to Securities Counsel or legal counsel to the audit committee. Upon receiving a complaint or report, whether from an employee or another source, Securities Counsel or legal counsel to the audit committee shall advise the chairman of the audit committee of the existence and substance of any colorable complaint or report. Upon receipt of such advice, the chairman of the audit committee shall determine, considering the advice of counsel and counsel’s own independent judgment, whether a reasonable basis exists for commencing an investigation into the complaint or report. To assist in making this determination, the chairman may direct Securities Counsel or legal counsel to the audit committee to conduct an initial, informal inquiry. Other parties may become involved in the inquiry based on their oversight responsibility or expertise. Securities Counsel or legal counsel to the audit committee shall then promptly deliver counsel’s preliminary findings to the chairman and, if appropriate, to the employee or other person who brought the complaint. In addition, at least once each calendar quarter, Securities Counsel or legal counsel to the audit committee shall report to the audit committee on the status of all pending complaints in such detail as the chairman deems reasonable and appropriate.
   
   Securities Counsel or legal counsel to the audit committee may also, based on counsel’s preliminary investigation, recommend a formal investigation of a report or complaint. In such event, Securities Counsel or legal counsel to the audit committee shall promptly deliver all information received by counsel from the original complainant, together with counsel’s findings, to the entire audit committee. The audit committee will then determine, in its reasonable judgment, whether a reasonable basis exists for commencing a formal investigation into the complaint. If the audit committee or its designee makes such a determination, it shall take the appropriate measures to implement a thorough investigation into the allegations, including assigning investigation oversight powers to appropriate individuals or entities, supervising their investigation and deliberating upon their findings. The audit committee has the authority to retain separate legal counsel or accounting expertise in any investigation as it deems necessary to conduct the investigation in accordance with its charter, this Policy and applicable federal and state rules and regulations. Ultimately, the audit committee, independent of management, is responsible for evaluating, investigating and determining appropriate responses to all complaints relating to accounting standards and disclosures, internal accounting controls and audit practices.
   
   
3. Maintenance of Financial Books, Records, Documents and Accounts; Financial Integrity; Public Reporting
   The integrity of SMF’s financial and accounting data and the ensuing public disclosure depends on the validity, accuracy and completeness of the information supporting the entries and transactions in the Company’s books and records. Therefore, SMF’s corporate and business records must be accurate and complete. The making of false or misleading entries is strictly prohibited. The Company’s records serve as a basis for managing its business and are important in meeting its obligations to customers, suppliers, creditors, employees and others with whom it does business. As a result, it is important that the Company’s books, records and accounts accurately and fairly reflect, in reasonable detail, its assets, liabilities, equity, revenues, costs and expenses, as well as all transactions and changes in assets and liabilities. Accordingly, the audit committee requires that:
   
   
   • no entry be made in the Company’s books and records that intentionally hides or disguises the nature of any transaction or of any of its liabilities or misclassifies any transactions as to accounts or accounting periods;
   • transactions be supported by appropriate documentation and required disclosure in SMF’s financial reporting;
   • the terms of sales and other commercial transactions be reflected accurately in the documentation for those transactions and all such documentation be reflected accurately in the Company’s books and records;
   • employees comply with the Company’s system of internal controls; and
   • no cash or other assets be maintained for any purpose in any unrecorded or “off-the-books” fund.
     
     

SMF’s accounting records are also relied upon to produce reports for management, stockholders and creditors, as well as for governmental agencies. In particular, the Company relies upon its accounting and other business and corporate records in preparing the periodic and current reports that are filed with the SEC. Securities laws require that these reports provide full, fair, accurate, timely and understandable disclosure and fairly present the Company’s financial condition and results of operations. Employees who collect, provide or analyze information for or otherwise contribute in any way in preparing or verifying these reports should strive to ensure that SMF’s financial disclosure is accurate and transparent and that its reports contain all of the information about SMF that would be important to enable stockholders and potential investors to assess the soundness and risks of our business and finances and the quality and integrity of its accounting and disclosures. In addition:

• no employee may take or authorize any action that would cause the Company’s financial records or financial disclosure to fail to comply with generally accepted accounting principles, the rules and regulations of the SEC or other applicable laws, rules and regulations;
• all employees must cooperate fully with the Company’s accounting department, as well as its independent public accountants and counsel, respond to their questions with candor and provide them with complete and accurate information to help ensure that its books and records, as well as its reports filed with the SEC, are accurate and complete; and
• no employee should knowingly make (or cause or encourage any other person to make) any false or misleading statement in any of the Company’s reports filed with the SEC or knowingly omit (or cause or encourage any other person to omit) any information necessary to make the disclosure in any of those reports accurate in all material respects.
  
  

Any employee who becomes aware of any departure from these standards has a responsibility to report his or her knowledge promptly to the audit committee through the procedures described in Section 1.

4. Waivers
   Any waiver of this Policy may be authorized only by the audit committee and will be publicly disclosed as required by applicable laws, rules and regulations.
   
   
5. Retention
   SMF will retain all reports and complaints and other records pertaining to its review and investigation of such matters for a period of at least three (3) years.
   
   
6. Revisions and Updates
   This Policy may be revised, changed or amended at any time by the audit committee. Following any material revisions or updates, an updated version of the Policy will be distributed and will supersede the prior version of the Policy effective upon distribution. We may ask our employees to sign an acknowledgement confirming that he or she has read and understood the revised version of the Policy and agrees to comply with its provisions.

BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS