Contract analysis

I. Executive Summary and Purpose A. Purpose This memorandum has been prepared by the Tax Group of Calderwood & Harkness LLP to analyze the principal federal and state income tax implications arising from the proposed initial public offering (the "IPO") of Class A Common Stock of Lumos Analytics Inc. ("Lumos," the "Company," or the "Issuer") on the Nasdaq Global Select Market. Lumos is a Delaware C-corporation headqua

II. Background: Capital Structure and Recapitalization

II.A. Pre-IPO Capital Structure The following description of the Company's pre-IPO capital structure is based upon the Company's Amended and Restated Certificate of Incorporation currently in effect, the draft Registration Statement on Form S-1, stockholder agreements, and the capitalization table prepared by Brendan Walsh in November 2021 (see Appendix A for the complete capitalization table).

1. Authorized Capital Stock As of the date of this memorandum, the Company's certificate of incorporation authorizes the issuance of up to 500,000,000 shares of common stock, par value $0.0001 per share, and such additional shares of preferred stock as have been designated pursuant to the various certificates of designation filed in connection with each preferred stock financing. The Company does not currently have a

2. Class B Common Stock (Founders) The Company's two co-founders hold the entirety of the outstanding common stock of the Company as of the date hereof, which will be reclassified as Class B Common Stock (ten votes per share) upon the effectiveness of the IPO. The Class B Common Stock holdings are as follows: These shares were issued to the founders in connection with the formation of the Company in 2016 and are curr

3. Preferred Stock Outstanding (Series A Through Series D) The Company has completed four rounds of preferred stock financing since its incorporation. The aggregate number of shares of preferred stock outstanding is 62,400,000 shares, consisting of the following series: The Series D round closed at a price per share of $12.50, implying a post-money valuation of approximately $1.478 billion. Ridgeline Capital Partners

4. Employee Stock Option Pool The Company's 2016 Stock Incentive Plan (the "2016 Plan") authorizes the issuance of up to 14,800,000 shares of common stock pursuant to stock option grants and other equity awards. As of December 31, 2021, there are 11,300,000 options outstanding under the 2016 Plan, with a weighted-average exercise price ("WAEP") of $4.82 per share. The remaining 3,500,000 shares are available for futu

5. Fully Diluted Pre-IPO Share Count On a fully diluted basis (including all outstanding common stock, all outstanding preferred stock on an as-converted basis, and all outstanding stock options), the Company has approximately 118,200,000 shares outstanding as of the date of this memorandum, calculated as follows: We note that the fully diluted share count is approximately 118.2 million shares and that additional dil

II.B. IPO Recapitalization Transactions In connection with the IPO, the Company will effect the following recapitalization transactions, all of which are described in the draft Registration Statement and are conditioned upon the effectiveness of the Registration Statement:

1. Automatic Conversion of Preferred Stock Upon the closing of the IPO, all 62,400,000 shares of outstanding Series A through Series D Preferred Stock will automatically convert into shares of Class A Common Stock on a one-for-one basis (subject to any applicable anti-dilution adjustments, none of which are expected to be triggered). This automatic conversion is mandated by the terms of the applicable certificates of

2. Establishment of Dual-Class Structure Concurrently with the IPO, the Company will adopt an Amended and Restated Certificate of Incorporation (the "Restated Certificate") that establishes a dual-class common stock structure: (a) Class A Common Stock (one vote per share): Issued to public investors in the IPO, to converting preferred stockholders, and in connection with the exercise of stock options. (b) Class B Com

3. Sunset Provision The Restated Certificate includes a sunset provision pursuant to which all outstanding shares of Class B Common Stock will automatically convert into shares of Class A Common Stock on a one-for-one basis upon the earliest to occur of: (i) the seventh anniversary of the closing of the IPO; (ii) the transfer of any share of Class B Common Stock to any person or entity that is not a "Permitted Transf

4. Post-IPO Capitalization Summary Following the consummation of the IPO (assuming no exercise of the overallotment option and no exercise of stock options), the Company's outstanding shares of common stock will be approximately as follows: Note: The approximately 27,300,000 shares of Class A Common Stock from existing non-founder common stock includes shares held by investors and employees who previously received co

5. Post-IPO Voting Power The dual-class structure will result in the following approximate voting power distribution: • Class B Common Stock (founders): 28,500,000 shares × 10 votes per share = 285,000,000 votes • Class A Common Stock: ~102,641,176 shares × 1 vote per share = ~102,641,176 votes • Total votes: ~387,641,176 • Founders' voting percentage: 285,000,000 / 387,641,176 ≈ 73.5% The founders will collectively

III. Section 351 Analysis — Issuance of Primary Shares

III.A. Applicability of Section 351

Section 351(a) of the Code provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and if, immediately after the exchange, such person or persons are in "control" of the corporation. For purposes of Section 351, "control" is defined by reference to Section 368(c) as ownership of stock possessing at least 80%

2. Application to a Typical IPO In a typical initial public offering, public investors transfer cash (which constitutes "property" for Section 351 purposes) to the issuer in exchange for newly issued shares of stock. Theoretically, this transaction could be characterized as a Section 351 exchange. However, in practice, Section 351 is rarely applicable to an IPO for two principal reasons: First, in a firm-commitment u

3. Analysis Specific to the Lumos IPO The Lumos IPO is structured as a firm-commitment underwriting led by Pinnacle Securities LLC. Under the terms of the underwriting agreement, Pinnacle Securities and the other underwriters will purchase 12,941,176 shares of Class A Common Stock directly from the Company at the public offering price less the underwriting discount, and will then resell those shares to the investing

4. Conclusion. Section 351 is not expected to apply to the primary issuance of Class A Common Stock in the IPO. No adverse federal income tax consequences are expected to arise for the Company from the issuance of primary shares. The Company will receive gross proceeds of approximately $220,000,000 (approximately $205,700,000 net of the underwriting discount of approximately $14,300,000). These proceeds are not taxab

III.B. Tax Basis and Holding Period for New Shares

1. Public Investors Each public investor who purchases shares of Class A Common Stock in the IPO will have a tax basis in such shares equal to the purchase price paid (i.e., between $16.00 and $18.00 per share, depending on the final pricing determined at the time of the offering). The holding period for such shares will begin on the date of purchase (i.e., the settlement date of the IPO). Public investors should con

2. The Company As noted above, the Company will not recognize gain or loss upon the issuance of the primary shares. The Company's receipt of IPO proceeds will increase its additional paid-in capital on its balance sheet and will increase its cash and cash equivalents. No adjustment to the Company's tax basis in its assets or tax attributes results from the primary share issuance.

IV. Section 368(a)(1)(E) Analysis — Recapitalization

IV.A. Conversion of Preferred Stock to Class A Common Stock

1. Characterization of the Transaction Upon the effectiveness of the IPO, all 62,400,000 outstanding shares of Series A through Series D Preferred Stock will automatically convert into shares of Class A Common Stock on a one-for-one basis. For federal income tax purposes, this conversion constitutes an exchange by each preferred stockholder of shares of preferred stock of the Company for shares of common stock of the

2. Requirements for a Tax-Free Recapitalization A "recapitalization" is defined under Section 368(a)(1)(E) as a "reorganization" for purposes of the Code's non-recognition provisions. Although the Code does not define the term "recapitalization" with specificity, the Treasury Regulations, case law, and IRS guidance establish that a recapitalization involves a reshuffling of the capital structure of a single corporati

3. Analysis. The Series A through Series D Preferred Stock constitutes "stock" for federal income tax purposes. Although preferred stock with certain debt-like features can in some circumstances be treated as debt rather than equity (under the principles of Mixon v. United States, 464 F.2d 394 (5th Cir. 1972), and related authority), the Lumos preferred stock has standard venture capital features — liquidation prefer

4. Conclusion. The automatic conversion of 62,400,000 shares of Series A through Series D Preferred Stock into shares of Class A Common Stock upon the effectiveness of the IPO should qualify as a tax-free recapitalization under Section 368(a)(1)(E) of the Code. No gain or loss should be recognized by the converting stockholders, including Velthryn Venture Partners Fund IV, L.P., Arclight Equity Group Fund VII, L.P.,

5. Basis and Holding Period Basis. Under Section 358(a)(1), each converting stockholder will take a "substituted basis" in the Class A Common Stock received equal to the stockholder's adjusted tax basis in the surrendered preferred stock. For example, a Series A holder who acquired shares at $1.96 per share will have a basis of $1.96 per share in the Class A Common Stock received upon conversion, and a Series D holde

IV.B. Dual-Class Reclassification

1. Characterization of the Transaction In connection with the adoption of the Restated Certificate, the existing common stock held by the founders (28,500,000 shares) will be reclassified and redesignated as Class B Common Stock carrying ten votes per share. This reclassification constitutes an exchange by the founders of their existing common stock for a new class of common stock (Class B) of the same corporation.

2. Analysis. Like the preferred-to-common conversion, the reclassification of the founders' common stock as Class B Common Stock constitutes a recapitalization under Section 368(a)(1)(E). The transaction involves an exchange of stock of the Company for a different class of stock of the same Company. The only substantive change is the creation of a differential voting right — Class B shares carry ten votes per share,

3. Potential Issue: Constructive Distribution From Voting Differential A potential concern arises from the fact that the founders' shares will carry enhanced voting rights (ten votes per share) relative to the Class A shares held by other stockholders. One could argue that the enhancement of the founders' voting power constitutes a disproportionate benefit that should be treated as a constructive distribution or cons

4. Conclusion. The dual-class reclassification should qualify as a tax-free recapitalization under Section 368(a)(1)(E). No taxable event is expected for Priya Subramanian or Marcus Henley. The founders will take a substituted basis in their Class B Common Stock equal to their basis in the surrendered common stock, and their holding period will tack.

IV.C. Implications for Selling Stockholders

1. Secondary Offering Component In addition to the primary shares offered by the Company, the IPO includes a secondary component in which certain existing stockholders will sell shares of Class A Common Stock to the public: • Velthryn Venture Partners Fund IV, L.P.: Selling up to 2,000,000 shares of Class A Common Stock. These shares will be received by Velthryn upon the automatic conversion of its Series C and Serie

2. Tax Consequences of Secondary Sales The sale of shares by Velthryn and Arclight in the secondary component of the IPO is a taxable event. Each selling stockholder will recognize capital gain (or, theoretically, capital loss) equal to the difference between the sale price per share and the selling stockholder's adjusted tax basis in the shares sold.

3. Character of Gain The character of the gain — long-term or short-term — depends on the selling stockholder's holding period in the shares sold. Because the conversion of preferred stock to Class A Common Stock qualifies as a tax-free recapitalization (as discussed in Part IV.A above), the holding period of the Class A Common Stock includes the holding period of the surrendered preferred stock. All series of Lumos

4. Tax Basis for Selling Stockholders The adjusted tax basis for each selling stockholder is the substituted basis from the preferred stock conversion — generally, the original investment cost per share paid in the applicable preferred series. For example: • Velthryn's Series C shares: basis of approximately $7.20 per share • Velthryn's Series D shares: basis of approximately $12.50 per share • Arclight's Series B sh

5. Company Consequences The Company will not receive any proceeds from the sale of secondary shares and will not recognize any gain, loss, or income in connection with the secondary component of the IPO.

V. Qualified Small Business Stock (QSBS) — Section 1202 Analysis

V.A. Overview of Section 1202 Benefits

Section 1202 of the Code provides a significant tax benefit for eligible holders of "qualified small business stock" ("QSBS"): a partial or complete exclusion from federal income tax on gain from the sale or exchange of QSBS that has been held for more than five years. The exclusion percentage depends on the date the QSBS was acquired: • 50% exclusion for stock acquired after August 10, 1993 and before February 18, 2

2. Per-Issuer Gain Exclusion Limit The amount of gain eligible for the Section 1202 exclusion is limited, on a per-issuer basis, to the greater of: (a) $10,000,000 ($10 million), reduced by the aggregate amount of gain excluded with respect to prior sales of the same issuer's QSBS; or (b) ten times the taxpayer's adjusted basis in the QSBS disposed of during the taxable year. For founders and early investors with low

3. Significance for Lumos Stockholders The potential availability of the Section 1202 exclusion is a matter of significant financial consequence for Lumos's founders, early investors, and employees. If founders Priya Subramanian and Marcus Henley are able to exclude 100% of federal capital gains tax on the sale of their Lumos shares (after holding for five or more years), the tax savings could be substantial, given t

V.B. QSBS Eligibility Requirements — Application to Lumos To qualify as QSBS, stock must satisfy several requirements at the time of issuance and on an ongoing basis. We analyze each requirement below as applied to Lumos.

1. Domestic C-Corporation Requirement

Section 1202(c)(1) requires that the issuer be a "domestic corporation" that is a "C corporation" during substantially all of the taxpayer's holding period for the stock. Lumos is a corporation organized under the laws of the State of Delaware, a domestic jurisdiction, and has been taxed as a C-corporation since its incorporation on March 14, 2016. The Company has never elected S-corporation status and has not been t

2. Active Business Requirement Under Section 1202(e), at least 80% of the corporation's assets (by value) must be used in the active conduct of one or more "qualified trades or businesses." Certain trades or businesses are excluded from qualifying, including: • Any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing

3. Original Issuance Requirement

Section 1202(c)(1)(B) requires that the stock be acquired by the taxpayer at original issuance (directly or through an underwriter) in exchange for money, other property (not including stock), or as compensation for services. This requirement is satisfied for: • Founders (Subramanian and Henley): Stock issued directly by the Company in 2016 in exchange for cash and/or services. • Series A–D Investors: Stock purchased

4. Aggregate Gross Assets Test (the "$50 Million Test")

Section 1202(d)(1) provides that a corporation is a "qualified small business" only if its aggregate gross assets at all times from the date of the corporation's incorporation through the date of the stock issuance in question (and immediately after the issuance, taking into account amounts received in the issuance) do not exceed $50,000,000. For purposes of this test, "aggregate gross assets" means the amount of cas

5. Conclusion on QSBS Eligibility by Stockholder Category Based on the foregoing analysis, the QSBS eligibility of Lumos stock varies by stockholder category: Practical Impact: • Ridgeline Capital Partners Fund II, L.P. (Series A investor, 9,200,000 shares acquired June 2018): May hold QSBS. However, Ridgeline is a limited partnership, and the Section 1202 exclusion is available only to non-corporate taxpayers. The e

V.C. Effect of the IPO on Existing QSBS Status

1. Key Question A critical question for eligible QSBS holders is whether the IPO — and in particular, the recapitalization transactions occurring in connection with the IPO — causes previously issued QSBS to lose its qualification.

2. IPO Does Not Destroy Existing QSBS Status The IPO itself does not cause existing QSBS to cease being QSBS. Section 1202 does not require that the issuer remain a private company or that the stock remain unlisted on a national securities exchange. As long as the Company continues to satisfy the active business requirement and other ongoing conditions after the IPO, existing QSBS retains its qualification. The aggre