1008-00002 · Lumos Analytics Inc · Governance Documents

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CONFIDENTIAL — ATTORNEY WORK PRODUCT

AUDIT COMMITTEE CHARTER

OF THE BOARD OF DIRECTORS

OF LUMOS ANALYTICS INC.

DRAFT — Prepared by Calderwood & Harkness LLP

Calderwood & Harkness LLP Matter No. 1008-00002

To be adopted by the Board of Directors of Lumos Analytics Inc. (the "Company") effective upon the closing of the Company's initial public offering of Class A Common Stock on the Nasdaq Global Select Market.

This Charter was prepared during 2022 in connection with the proposed initial public offering of Class A Common Stock of Lumos Analytics Inc. (SEC Registration Statement on Form S-1, File Number 333-264518). This Charter was never formally adopted by the Board of Directors due to the withdrawal of the Registration Statement on June 15, 2022. This document remains in draft form and has no legal or operative effect.

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I. PURPOSE

The Board of Directors (the "Board") of Lumos Analytics Inc., a Delaware corporation (the "Company"), hereby establishes the Audit Committee of the Board (the "Committee") to assist the Board in fulfilling its corporate governance and oversight responsibilities. The Committee is established by and among the members of the Board and shall operate in accordance with the provisions of this Charter.

The primary purpose of the Committee is to assist the Board in its oversight of:

(a) the integrity of the Company's financial statements and financial reporting process;

(b) the Company's compliance with legal and regulatory requirements applicable to its financial reporting and disclosure obligations;

(c) the qualifications, independence, and performance of the Company's independent registered public accounting firm (the "independent auditor");

(d) the performance of the Company's internal audit function, once established; and

(e) the Company's systems of internal controls over financial reporting and the effectiveness of the Company's disclosure controls and procedures.

In discharging its oversight role, the Committee shall endeavor to maintain free and open communication among the independent auditor, the Company's management, the internal audit function (when established), and the Board. The Committee shall encourage and facilitate the continuous improvement of, and foster adherence to, the Company's accounting policies, procedures, and practices at all levels.

The Committee shall operate in a manner designed to comply with the requirements of Nasdaq Listing Rule 5605(c) and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as well as all other applicable laws, rules, and regulations governing the responsibilities and authority of audit committees of publicly listed companies.

While the Committee has the responsibilities and powers set forth in this Charter, the Committee's role is one of oversight. The members of the Committee are not full-time employees of the Company and may or may not be accountants or auditors by profession, and, in any event, do not serve in such capacity. Consequently, it is not the duty or responsibility of the Committee to conduct "field work" or other types of auditing or accounting reviews or procedures, and each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information and (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board).

II. COMPOSITION

A. Number of Members

The Committee shall consist of no fewer than three (3) members of the Board, each of whom shall satisfy the independence and other qualification requirements set forth in this Section II. The Board shall determine the exact number of Committee members from time to time.

Upon the effectiveness of the Company's Registration Statement on Form S-1 (SEC File Number 333-264518) and the closing of the Company's initial public offering, the initial members of the Committee shall be:

1. Samuel Adebayo (Chair)

2. Diane Ochoa

3. Catherine Mercer

B. Independence Requirements

Each member of the Committee must satisfy all applicable independence requirements, including, without limitation, the following:

(i) Each member must be "independent" as defined in Nasdaq Listing Rule 5605(a)(2), as determined by the Board in its business judgment, and must satisfy the additional independence requirements for audit committee members set forth in Nasdaq Listing Rule 5605(c)(2)(A).

(ii) Each member must satisfy the independence requirements of Rule 10A-3(b)(1) promulgated under the Exchange Act, including the requirement that, in order to be considered independent for purposes of serving on the Committee, a member may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company or any subsidiary thereof, other than in his or her capacity as a member of the Board or any committee of the Board. For the avoidance of doubt, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company, provided that such compensation is not contingent in any way on continued service.

(iii) No member of the Committee may be an "affiliated person" of the Company or any subsidiary thereof, as that term is defined in Rule 10A-3 under the Exchange Act, other than in his or her capacity as a member of the Board or any committee of the Board.

In light of the Company's dual-class capital structure, in which shares of Class B Common Stock held by the Company's co-founders, Priya Subramanian (Chief Executive Officer and Chair of the Board) and Marcus Henley (Chief Technology Officer), carry ten (10) votes per share, the Board shall take particular care in evaluating the independence of each Committee member. Specifically, each member of the Committee must be independent of both the Company's management and the holders of Class B Common Stock, and no member shall have any material relationship with Priya Subramanian, Marcus Henley, or any entity controlled by either of them that would interfere with the exercise of the member's independent judgment in carrying out the responsibilities of a Committee member.

If any member of the Committee ceases to be independent for any reason, such member shall promptly notify the Board, and the Board shall take appropriate action to replace such member in accordance with the requirements of this Charter and applicable law.

C. Financial Literacy and Audit Committee Financial Expert

Each member of the Committee must be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement, at the time of his or her appointment to the Committee, in accordance with Nasdaq Listing Rule 5605(c)(2)(A). The Board shall assess and make a determination regarding the financial literacy of each Committee member at the time of his or her appointment and annually thereafter.

At least one member of the Committee must qualify as an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act. A person shall be deemed to have the attributes of an audit committee financial expert if such person has the following attributes:

(a) an understanding of generally accepted accounting principles ("GAAP") and financial statements;

(b) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;

(c) experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, or experience actively supervising one or more persons engaged in such activities;

(d) an understanding of internal controls over financial reporting; and

(e) an understanding of audit committee functions.

The Board has determined that Samuel Adebayo qualifies as an audit committee financial expert based on his extensive experience as the former Chief Financial Officer of Verdant Software Corp., a publicly listed enterprise software company, where he served from 2014 through 2020 and was responsible for all aspects of financial reporting, internal controls, and audit oversight. The designation of Mr. Adebayo as the Committee's audit committee financial expert shall be disclosed in the Company's Registration Statement on Form S-1 (SEC File Number 333-264518) and in subsequent annual proxy statements filed with the Securities and Exchange Commission (the "SEC"), in accordance with the requirements of Item 407(d)(5) of Regulation S-K.

The designation of a member as an audit committee financial expert shall not impose upon such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the Committee and the Board in the absence of such designation, and shall not affect the duties, obligations, or liabilities of any other member of the Committee or the Board.

D. Appointment and Removal

Members of the Committee shall be appointed by the Board, upon the recommendation of the Nominating and Corporate Governance Committee of the Board (currently chaired by Diane Ochoa), and shall serve at the pleasure of the Board. Each member of the Committee shall serve until his or her successor is duly appointed by the Board, or until his or her earlier resignation, removal, or death.

The Board may remove any member of the Committee at any time, with or without cause, by a resolution adopted by a majority of the Board. Any vacancy on the Committee, whether arising from death, resignation, removal, increase in the number of members, or otherwise, shall be filled by the Board upon the recommendation of the Nominating and Corporate Governance Committee, subject to the independence and qualification requirements set forth in this Section II.

E. Chair. The Board shall designate one member of the Committee to serve as the Chair of the Committee. The initial Chair of the Committee shall be Samuel Adebayo. If the Chair is not present at any meeting of the Committee, the members of the Committee present at such meeting shall select one of their number to act as chair of such meeting.

The Chair shall be responsible for:

(i) presiding at all meetings of the Committee;

(ii) setting the agenda for each meeting of the Committee, in consultation with management, the internal audit function (when established), and the independent auditor;

(iii) ensuring that the Committee fulfills its responsibilities under this Charter;

(iv) reporting regularly to the full Board regarding the activities, findings, and recommendations of the Committee; and

(v) performing such other duties as may be assigned by the Board or the Committee from time to time.

III. MEETINGS

A. Frequency. The Committee shall meet at least four (4) times per fiscal year, and more frequently as circumstances require, as determined by the Chair in consultation with the other members of the Committee. The Committee's meeting schedule shall, to the extent practicable, be coordinated with the Company's quarterly financial reporting cycle so as to permit timely review of the Company's quarterly and annual financial statements and related disclosures.

In addition to its regularly scheduled meetings, the Committee shall meet separately and periodically with each of the following:

(i) Management — to discuss the Company's financial reporting processes, internal controls, and any other matters that the Committee or management deems appropriate;

(ii) Internal audit personnel — once such function has been established, to discuss the scope and results of internal audit activities, the adequacy of the Company's internal controls, and any other matters that the Committee or internal audit personnel deem appropriate; and

(iii) The independent auditor — currently Meridian & Howe LLP (audit engagement partner: Gregory Simmons) — to discuss the scope of the annual audit, the results of the audit examination, any difficulties or disagreements with management encountered during the course of the audit, and any other matters that the Committee or the independent auditor deems appropriate, including those matters required to be discussed by applicable auditing standards.

The Committee may request that any such meetings be held outside the presence of other parties, including members of management, when the Committee deems it necessary or advisable.

B. Quorum and Voting

A majority of the members of the Committee then in office shall constitute a quorum for the transaction of business. Any action of the Committee shall require the affirmative vote of a majority of the members present at a meeting at which a quorum is present. No member of the Committee shall vote by proxy.

The Committee may act by unanimous written consent of all members of the Committee in lieu of a meeting, to the extent permitted by applicable law and the Company's Amended and Restated Bylaws. Any such written consent shall be filed with the minutes of proceedings of the Committee and shall have the same force and effect as a vote taken at a duly called meeting at which a quorum was present.

C. Attendance and Participation

The Committee may invite any director, officer, or employee of the Company, or any representative of the Company's advisors, to attend meetings of the Committee and to provide pertinent information as requested by the Committee. Without limiting the generality of the foregoing, the Committee anticipates that the following individuals will be regular attendees at Committee meetings:

(i) Naomi Feinberg, General Counsel of the Company;

(ii) David Lau, Chief Financial Officer of the Company; and

(iii) Gregory Simmons, audit engagement partner, Meridian & Howe LLP.

Notwithstanding the foregoing, the Committee shall have the authority to exclude any person from all or any portion of any Committee meeting when the Committee determines that such exclusion is necessary or advisable to protect the integrity of the Committee's deliberations, including, without limitation, executive sessions of the Committee without management present.

The independent auditor, currently Meridian & Howe LLP, shall have direct and unrestricted access to the Committee at all times and may communicate directly with the Committee, the Chair, or any individual member at any time, without the need for management approval or involvement.

D. Minutes. The Committee shall maintain written minutes or other records of its meetings, which shall be filed with the minutes of the meetings of the Board. The Chair, or such other person as the Committee may designate, shall be responsible for the preparation and distribution of minutes of each meeting to the members of the Committee and to the Corporate Secretary of the Company. The Committee shall report regularly to the Board on its activities, findings, and recommendations, and shall provide such additional reports to the Board as the Board may request from time to time.

IV. AUTHORITY AND RESOURCES

A. Delegation of Authority

The Committee shall have the following authority, in addition to any other authority granted to the Committee elsewhere in this Charter:

(i) Sole Authority over the Independent Auditor. The Committee shall have the sole authority and direct responsibility to appoint, retain, compensate, evaluate, oversee, and, where appropriate, terminate the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Company. The independent auditor shall report directly to the Committee, and the Committee shall be directly responsible for the oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting). The foregoing authority shall include the sole authority to approve all audit engagement fees and terms.

(ii) Retention of Advisors. The Committee shall have the authority, in its sole discretion and at the Company's expense, to retain, compensate, and terminate independent legal counsel, accounting advisors, consultants, and such other advisors as it deems necessary or appropriate to assist the Committee in fulfilling its responsibilities under this Charter. The Committee shall not be required to obtain the approval of the Board or management prior to retaining or compensating any such advisor.

(iii) Funding. The Company shall provide appropriate funding, as determined by the Committee in its capacity as a committee of the Board, for (a) compensation of the independent auditor for the purpose of rendering or issuing an audit report or performing other audit, review, or attest services for the Company; (b) compensation of any advisors retained by the Committee pursuant to clause (ii) above; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties, in each case as required by Rule 10A-3(b)(2) and Rule 10A-3(b)(5) under the Exchange Act.

B. Access to Information

The Committee shall have full, free, and unrestricted access to all books, records, facilities, and personnel of the Company and its subsidiaries. The Committee may conduct or authorize investigations into any matter within the scope of its responsibilities, and all employees, officers, and directors of the Company are directed to cooperate fully with any request made by the Committee or its authorized representatives. The Committee may retain special legal, accounting, or other consultants to advise the Committee in connection with any such investigation.

Management and the independent auditor shall provide to the Committee, on a timely basis, all information and documents reasonably requested by the Committee or necessary for the Committee to carry out its responsibilities under this Charter.

C. Subcommittees. The Committee may, in its discretion, delegate any of its authority and responsibilities to one or more subcommittees of the Committee or to one or more individual members of the Committee, provided that:

(a) any such delegation is consistent with the Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, applicable provisions of the Delaware General Corporation Law, SEC rules and regulations, and Nasdaq listing standards;

(b) any subcommittee shall consist solely of members of the Committee who satisfy the independence and other qualification requirements set forth in Section II of this Charter; and

(c) any decisions or actions taken by a subcommittee or an individual member pursuant to such delegated authority shall be reported to the full Committee at its next regularly scheduled meeting.

V. RESPONSIBILITIES AND DUTIES

The following is a description of the principal responsibilities and duties of the Committee. This description is set forth as a guide, with the understanding that the Committee may supplement or modify these responsibilities and duties as appropriate in light of changing business, legislative, regulatory, or other conditions. To the extent consistent with this Charter and applicable law, the Committee shall also carry out any additional activities and responsibilities that may be delegated to it from time to time by the Board.

A. Independent Auditor Oversight

1. Appointment, Compensation, Retention, and Oversight. The Committee shall be directly responsible for the appointment, compensation, retention, and oversight of the work of the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Company. The Company's current independent auditor is Meridian & Howe LLP. The independent auditor shall report directly to the Committee.

2. Pre-Approval of Services. The Committee shall pre-approve all auditing services and all permitted non-audit services (including the fees and other terms thereof) to be performed for the Company by the independent auditor, in accordance with applicable SEC regulations. The Committee may establish pre-approval policies and procedures for the engagement of the independent auditor to render non-prohibited services to the Company, provided that such policies and procedures (a) are detailed as to the particular service to be provided, (b) do not include delegation of the Committee's responsibilities to management, and (c) provide that the Committee is informed of each service approved pursuant to such policies and procedures at the next scheduled Committee meeting. The Committee may delegate to the Chair the authority to grant pre-approvals of audit and non-audit services, provided that (i) the fees for any such individual engagement do not exceed a threshold amount to be established by the Committee from time to time and (ii) any such pre-approval is reported to the full Committee at its next regularly scheduled meeting.

3. Independence and Qualifications. The Committee shall evaluate the qualifications, performance, and independence of the independent auditor on at least an annual basis, taking into account the opinions of management and the internal audit function (when established). In connection with such evaluation, the Committee shall:

(a) obtain and review, at least annually, a formal written statement from Meridian & Howe LLP describing (I) the firm's internal quality-control procedures, (II) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues, and (III) all relationships between the independent auditor and the Company, consistent with PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence);

(b) actively engage in a dialogue with Meridian & Howe LLP with respect to any relationships or services that may impact the objectivity and independence of the auditor, and take appropriate action in response to the auditor's report to satisfy itself of the independence of the auditor; and

(c) consider whether the independent auditor should be rotated, taking into account the requirements of applicable law regarding mandatory audit partner rotation and any other relevant factors, including the quality of the auditor's work and the length of the auditor's tenure.

4. Annual Audit Plan. The Committee shall review and discuss the independent auditor's annual audit plan, including the scope, staffing, locations, and general audit approach, as well as the auditor's reliance upon management and the internal audit function (when established), and any changes from the prior year's plan. The Committee shall discuss with the auditor any changes in the audit plan necessitated by developments during the course of the audit.

5. Quality-Control Report. At least annually, the Committee shall obtain and review a report by the independent auditor describing: (a) the firm's internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm; and (c) any steps taken to deal with any such issues. The Committee shall evaluate the independent auditor's qualifications, taking into account such report and any other information known to the Committee.

6. Hiring Policies. The Committee shall establish clear policies regarding the hiring of employees or former employees of the independent auditor by the Company, taking into account the applicable SEC rules and regulations regarding such hiring, including the "cooling-off" periods specified in Rule 2-01(c)(2)(iii)(B) of Regulation S-X.

B. Financial Statements and Disclosure

1. Review of Financial Statements. The Committee shall review and discuss with management and the independent auditor the Company's annual audited financial statements and quarterly unaudited financial statements prior to the filing of such financial statements with the SEC or the public release of earnings. Such review shall include, without limitation:

(a) a discussion of the Company's financial results for the relevant period, including, for reference, the following historical results:

• Fiscal Year 2021 (audited): Total revenue of $187.4 million, representing 58% year-over-year growth from fiscal year 2020 total revenue of $118.6 million; gross margin of 72.3%; net loss of $(41.2) million; Adjusted EBITDA of $(18.7) million; and cash and cash equivalents of $94.3 million as of fiscal year-end.

• First Quarter 2022 (Q1 2022, unaudited): Total revenue of $54.9 million; annual recurring revenue ("ARR") of $219.5 million; and net loss of $(13.8) million.

(b) a discussion of critical accounting policies and estimates, including, without limitation, (I) the Company's revenue recognition policies for software-as-a-service ("SaaS") subscription arrangements, including the allocation of transaction prices in multi-element arrangements, the treatment of professional services and implementation fees, and the timing of revenue recognition in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers; (II) the Company's accounting for stock-based compensation, including the methodology for estimating the fair value of equity awards granted to employees and non-employees; and (III) the treatment of capitalized software development costs, including the criteria for capitalization under ASC Topic 350-40, Internal-Use Software, and the estimated useful lives and amortization methods applied to such costs;

(c) the effect of any off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company's financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses; and

(d) any significant changes in the Company's accounting principles, policies, or practices.

2. Management's Discussion and Analysis. The Committee shall review and discuss the Company's disclosures contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in periodic reports filed with the SEC (including annual reports on Form 10-K and quarterly reports on Form 10-Q) and in the Company's Registration Statement on Form S-1 (SEC File Number 333-264518), to the extent applicable. The Committee shall review such disclosures for consistency with the information known to the Committee from its review of the Company's financial statements and discussions with management and the independent auditor.

3. Auditor Communications. The Committee shall discuss with the independent auditor the matters required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees (and any successor standard), including, without limitation:

(a) any difficulties encountered during the course of the audit work, including any restrictions on the scope of the auditor's activities or access to requested information;

(b) any significant disagreements with management;

(c) the auditor's views about the quality, not just the acceptability, of the Company's accounting principles and financial disclosures as applied in its financial reporting;

(d) any adjustments proposed by the auditor that were not recorded by management, and the reasons therefor;

(e) any communications between the audit team and the firm's national office concerning auditing or accounting issues presented by the engagement; and

(f) any management or internal control letter issued, or proposed to be issued, by the auditor to the Company.

4. Earnings Releases and Guidance. The Committee shall review and discuss with management and the independent auditor (as appropriate) the Company's earnings press releases, financial information, and earnings guidance (if any) provided to analysts and rating agencies, including a review of any non-GAAP financial measures (such as Adjusted EBITDA and ARR) included therein. The Committee shall discuss with management the types of information to be disclosed and the types of presentations to be made, as well as the manner of presentation.

5. Annual and Quarterly Reports. The Committee shall review the Company's annual report on Form 10-K and quarterly reports on Form 10-Q, including the financial statements and related disclosures contained therein, prior to their filing with the SEC.

6. Recommendation Regarding Inclusion of Financial Statements. Based on the Committee's review and discussions described in this Section V.B, the Committee shall recommend to the Board whether the audited financial statements should be included in the Company's annual report on Form 10-K for the applicable fiscal year.

C. Internal Controls and Risk Management

1. Internal Controls over Financial Reporting. The Committee shall review the adequacy and effectiveness of the Company's internal controls over financial reporting on a regular basis, including any significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company's ability to record, process, summarize, and report financial information, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. The Committee shall discuss with management and the independent auditor any significant deficiency or material weakness identified by either management or the independent auditor, and shall review management's plans for remediation of any such deficiency or weakness.

2. Disclosure Controls and Procedures. The Committee shall review the Company's disclosure controls and procedures, including the certifications made by the Chief Executive Officer and the Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.

3. Risk Management. The Committee shall discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including, without limitation:

(a) Customer Concentration Risk. As of the date of this Charter, the Company's ten (10) largest customers represent approximately 34% of annual recurring revenue ("ARR"). The Committee shall monitor the concentration of the Company's revenue base and the risks associated with the potential loss of one or more significant customers.

(b) Credit Facility Risks. The Company maintains a revolving credit facility with Ashford National Bank, with a total commitment amount of $50,000,000, bearing interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points. As of March 31, 2022, approximately $15,000,000 was drawn under this facility. The Committee shall review the terms and conditions of the credit facility, including any financial covenants, and shall monitor the Company's compliance therewith.

(c) Infrastructure Commitment Risks. The Company has entered into a Master Cloud Services Agreement with Brindoval Data Centers LLC, which includes an annual minimum commitment of approximately $8,200,000. The Committee shall review the Company's infrastructure commitments and the risks associated with such long-term contractual obligations.

(d) Cybersecurity and Data Privacy Risks. The Company processes over 2 billion transactions per month across approximately 340 enterprise customers. The Committee shall review the Company's cybersecurity and data privacy risk profile, including the adequacy of the Company's information security policies, incident response plans, and compliance with applicable data privacy laws and regulations.

4. Audit Problems or Difficulties. The Committee shall review and discuss with the independent auditor any audit problems or difficulties encountered during the course of the audit work and management's response thereto, including any restrictions on the scope of the auditor's activities or access to requested information, and any significant disagreements with management.

5. Risk Assessment and Management Policies. The Committee shall discuss the Company's policies with respect to risk assessment and risk management. The Committee shall review and assess the guidelines and policies governing the process by which management assesses and manages the Company's exposure to risk, including the Company's major financial risk exposures, and shall discuss with management the steps that have been taken to monitor and mitigate such exposures.

D. Internal Audit

1. Head of Internal Audit. The Committee shall review and concur with the appointment, replacement, reassignment, or dismissal of the head of the internal audit function, once such function is established. The head of internal audit shall report functionally to the Committee and administratively to the Chief Financial Officer (or such other senior executive as the Committee shall designate).

2. Scope and Organization. The Committee shall review the scope, organization, and staffing of the internal audit function, and shall ensure that such function has adequate resources and appropriate authority to fulfill its responsibilities.

3. Internal Audit Findings. The Committee shall review summaries of findings from completed internal audits and management's responses thereto, including any corrective actions taken or planned. The Committee shall discuss with the head of internal audit any significant issues raised by internal audit activities, including any difficulties encountered by the internal audit function in the course of its work.

4. Establishment of Internal Audit Function. As of the date of preparation of this Charter, the Company does not have a dedicated internal audit function. The Committee acknowledges that the establishment of an internal audit function is an important component of the Company's overall internal control framework. Following the closing of the Company's initial public offering, the Committee shall oversee the establishment of an internal audit function as appropriate for the Company's size, complexity, and risk profile, and shall work with management to develop a timeline and plan for the implementation of such function. Until such time as the internal audit function is established, the Committee shall take appropriate steps to satisfy itself regarding the adequacy of the Company's internal controls through other means, including enhanced oversight of management's assessment of internal controls and coordination with the independent auditor.

E. Compliance and Legal Matters

1. Whistleblower Procedures. The Committee shall establish and oversee procedures for:

(a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and

(b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters,

in each case as required by Rule 10A-3(b)(3) under the Exchange Act. The Committee shall review the procedures on a periodic basis to ensure their continued effectiveness and shall review any significant complaints received through such procedures.

2. Legal Matters. The Committee shall review with the Company's General Counsel, Naomi Feinberg, any legal matters (including pending or threatened litigation, regulatory investigations, or compliance matters) that could have a significant impact on the Company's financial statements or financial condition. The Committee shall also review with the General Counsel any material reports or inquiries received from regulators or governmental agencies that relate to the Company's financial reporting, accounting policies, or internal controls.

3. Compliance with Legal and Regulatory Requirements. The Committee shall review the Company's compliance with applicable legal and regulatory requirements, including the Company's obligations under the Securities Act, the Exchange Act, and the rules and regulations promulgated thereunder, as well as the Nasdaq listing standards. The Committee shall also review any correspondence with the SEC, including any SEC comment letters relating to the Company's periodic reports or Registration Statement, and management's responses thereto.

4. Related-Party Transactions. The Committee shall review and approve or ratify any related-party transactions in accordance with the Company's written related-party transaction policy, as adopted by the Board. Without limiting the generality of the foregoing, the Committee shall review any transactions or proposed transactions involving the Company and any of the following parties:

(a) any director, executive officer, or nominee for director of the Company;

(b) any holder of more than 5% of any class of voting securities of the Company, including Velthryn Venture Partners Fund IV, L.P. (holding approximately 21.0% of the Company's fully diluted pre-IPO shares) and Arclight Equity Group Fund VII, L.P. (holding approximately 15.7% of the Company's fully diluted pre-IPO shares);

(d) any entity in which any of the foregoing persons has a direct or indirect material interest.

The Committee shall determine whether such transactions are in, or not inconsistent with, the best interests of the Company and its stockholders.

5. Regulatory and Accounting Initiatives. The Committee shall review the effect of regulatory and accounting initiatives, as well as any significant changes in accounting standards promulgated by the Financial Accounting Standards Board ("FASB"), the SEC, or other regulatory bodies, on the Company's financial statements and disclosures.

6. Code of Business Conduct and Ethics. The Committee shall oversee the Company's code of business conduct and ethics, including reviewing any waiver of or amendment to such code with respect to any director or executive officer of the Company, and shall review any material violations of such code reported to the Committee.

F. Reporting.

1. Audit Committee Report for Proxy Statement. The Committee shall prepare the Audit Committee report required by SEC rules (Item 407(d)(3) of Regulation S-K and Schedule 14A) to be included in the Company's annual proxy statement. Such report shall state, among other things, whether the Committee has (a) reviewed and discussed the audited financial statements with management, (b) discussed with the independent auditor the matters required to be discussed by applicable PCAOB auditing standards, and (c) received the written disclosures and letter from the independent auditor regarding independence required by applicable PCAOB rules, and whether, based on such review and discussions, the Committee has recommended to the Board that the audited financial statements be included in the Company's annual report on Form 10-K.

2. Regular Reporting to the Board. The Committee shall report regularly to the Board regarding the Committee's activities, findings, issues, and recommendations, including a summary of any significant matters discussed at each Committee meeting and any actions taken by the Committee between meetings. Such reports shall be provided at the next regularly scheduled meeting of the Board following each Committee meeting, or more frequently as circumstances require.

3. Issues Regarding Financial Integrity, Compliance, and Auditor Performance. The Committee shall review with the full Board any issues that arise with respect to:

(a) the quality or integrity of the Company's financial statements;

(b) the Company's compliance with legal or regulatory requirements;

(d) the performance of the internal audit function (once established).

The Committee shall make recommendations to the Board with respect to the resolution of any such issues.

VI. ANNUAL PERFORMANCE EVALUATION

The Committee shall conduct an annual self-evaluation of its own performance and the adequacy of this Charter, including a review of whether the Committee has fulfilled its responsibilities as set forth herein. The annual performance evaluation may take such form as the Committee deems appropriate, including a written questionnaire, a discussion among Committee members, or interviews with individual members, and may be conducted by the Committee itself or by an independent third party retained by the Committee.

The Committee shall review and reassess the adequacy of this Charter at least annually and shall recommend any proposed changes to the Board for approval. In connection with such review, the Committee shall consider whether any changes to the Charter are warranted in light of changes in applicable law, regulations, or listing standards, as well as changes in the Company's business, operations, or organizational structure.

The results of the annual self-evaluation shall be reported to the Board, along with any recommendations for improvements in the Committee's processes, procedures, or composition.

VII. LIMITATIONS OF THE COMMITTEE'S ROLE

While the Committee has the responsibilities and powers set forth in this Charter, the Committee's role is fundamentally one of oversight. The Committee recognizes that the Company's management is responsible for the preparation, presentation, and integrity of the Company's financial statements, and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

The independent auditor is responsible for planning and carrying out a proper audit of the Company's annual financial statements in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB"), and for performing timely reviews of the Company's quarterly financial statements prior to the filing of each quarterly report on Form 10-Q.

Nothing in this Charter shall be construed to reduce the responsibilities or liabilities of the Company's management or the independent auditor. In particular, nothing in this Charter shall be construed as implying that the Committee has assumed, or has the authority to assume, management's responsibilities for the preparation of the Company's financial statements or the independent auditor's responsibilities for the audit thereof.

The members of the Committee are not employees of the Company and are not, and do not represent themselves to be, accountants or auditors by profession or experts in the fields of accounting or auditing. It is not the duty or responsibility of the 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 GAAP and applicable rules and regulations. Each member of the Committee shall be entitled to rely on the integrity of those persons within the Company and of the professionals and experts (including the Company's independent auditor and internal auditors) from which the Committee receives information, and the accuracy and completeness of the financial and other information provided to the Committee by such persons, professionals, and experts, absent actual knowledge to the contrary (which shall be promptly reported to the Board).

Nothing in this Charter is intended to, or shall be deemed to, expand applicable standards of liability under federal or state law for directors of the Company, including the members of the Committee.

VIII. EFFECTIVE DATE AND AMENDMENT

This Charter shall become effective upon its adoption by the Board of Directors, which is expected to occur in connection with and contingent upon the closing of the Company's initial public offering of Class A Common Stock on the Nasdaq Global Select Market under the proposed ticker symbol "LMSA."

This Charter may be amended by the Board of Directors at any time, upon recommendation of the Committee. Any amendment to this Charter shall be disclosed as required by applicable law, SEC rules, and Nasdaq listing standards.

A copy of this Charter, as then in effect, shall be posted on the Company's website following the closing of the initial public offering, and shall be made available in print to any stockholder who requests it, in each case in accordance with applicable SEC rules.

ADOPTION AND SIGNATURE

This Audit Committee Charter was approved and adopted by the Board of Directors of Lumos Analytics Inc. on ____, 2022.

LUMOS ANALYTICS INC.

By: ________

Name: Priya Subramanian

Title: Chair of the Board of Directors

Date: ________

ATTESTED:

By: ________

Name: Naomi Feinberg

Title: General Counsel and Corporate Secretary

Date: ________

NOTE: This Audit Committee Charter was prepared by Calderwood & Harkness LLP, as issuer's counsel to Lumos Analytics Inc., in connection with the Company's proposed initial public offering of Class A Common Stock (Registration Statement on Form S-1, SEC File Number 333-264518). Calderwood & Harkness LLP Matter No. 1008-00002. This Charter was never formally adopted by the Board of Directors of Lumos Analytics Inc. due to the withdrawal of the Registration Statement on Form S-1 on June 15, 2022. This document remains in draft form and has no legal or operative effect. No client-attorney relationship is created or implied by the circulation of this document to any person other than Lumos Analytics Inc. and its authorized representatives.

CONFIDENTIAL — ATTORNEY WORK PRODUCT
AUDIT COMMITTEE CHARTER
OF THE BOARD OF DIRECTORS
OF LUMOS ANALYTICS INC.
DRAFT — Prepared by Calderwood & Harkness LLP
Calderwood & Harkness LLP Matter No. 1008-00002
To be adopted by the Board of Directors of Lumos Analytics Inc. (the "Company") effective upon the closing of the Company's initial public offering of Class A Common Stock on the Nasdaq Global Select Market.
This Charter was prepared during 2022 in connection with the proposed initial public offering of Class A Common Stock of Lumos Analytics Inc. (SEC Registration Statement on Form S-1, File Number 333-264518). This Charter was never formally adopted by the Board of Directors due to the withdrawal of the Registration Statement on June 15, 2022. This document remains in draft form and has no legal or operative effect.
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I. PURPOSE
The Board of Directors (the "Board") of Lumos Analytics Inc., a Delaware corporation (the "Company"), hereby establishes the Audit Committee of the Board (the "Committee") to assist the Board in fulfilling its corporate governance and oversight responsibilities. The Committee is established by and among the members of the Board and shall operate in accordance with the provisions of this Charter.
The primary purpose of the Committee is to assist the Board in its oversight of:
(a) the integrity of the Company's financial statements and financial reporting process;
(b) the Company's compliance with legal and regulatory requirements applicable to its financial reporting and disclosure obligations;
(c) the qualifications, independence, and performance of the Company's independent registered public accounting firm (the "independent auditor");
(d) the performance of the Company's internal audit function, once established; and
(e) the Company's systems of internal controls over financial reporting and the effectiveness of the Company's disclosure controls and procedures.
In discharging its oversight role, the Committee shall endeavor to maintain free and open communication among the independent auditor, the Company's management, the internal audit function (when established), and the Board. The Committee shall encourage and facilitate the continuous improvement of, and foster adherence to, the Company's accounting policies, procedures, and practices at all levels.
The Committee shall operate in a manner designed to comply with the requirements of Nasdaq Listing Rule 5605(c) and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as well as all other applicable laws, rules, and regulations governing the responsibilities and authority of audit committees of publicly listed companies.
While the Committee has the responsibilities and powers set forth in this Charter, the Committee's role is one of oversight. The members of the Committee are not full-time employees of the Company and may or may not be accountants or auditors by profession, and, in any event, do not serve in such capacity. Consequently, it is not the duty or responsibility of the Committee to conduct "field work" or other types of auditing or accounting reviews or procedures, and each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information and (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board).
II. COMPOSITION
A. Number of Members
The Committee shall consist of no fewer than three (3) members of the Board, each of whom shall satisfy the independence and other qualification requirements set forth in this Section II. The Board shall determine the exact number of Committee members from time to time.
Upon the effectiveness of the Company's Registration Statement on Form S-1 (SEC File Number 333-264518) and the closing of the Company's initial public offering, the initial members of the Committee shall be:
1.  Samuel Adebayo (Chair)
2.  Diane Ochoa
3.  Catherine Mercer
B. Independence Requirements
Each member of the Committee must satisfy all applicable independence requirements, including, without limitation, the following:
(i) Each member must be "independent" as defined in Nasdaq Listing Rule 5605(a)(2), as determined by the Board in its business judgment, and must satisfy the additional independence requirements for audit committee members set forth in Nasdaq Listing Rule 5605(c)(2)(A).
(ii) Each member must satisfy the independence requirements of Rule 10A-3(b)(1) promulgated under the Exchange Act, including the requirement that, in order to be considered independent for purposes of serving on the Committee, a member may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company or any subsidiary thereof, other than in his or her capacity as a member of the Board or any committee of the Board. For the avoidance of doubt, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company, provided that such compensation is not contingent in any way on continued service.
(iii) No member of the Committee may be an "affiliated person" of the Company or any subsidiary thereof, as that term is defined in Rule 10A-3 under the Exchange Act, other than in his or her capacity as a member of the Board or any committee of the Board.
In light of the Company's dual-class capital structure, in which shares of Class B Common Stock held by the Company's co-founders, Priya Subramanian (Chief Executive Officer and Chair of the Board) and Marcus Henley (Chief Technology Officer), carry ten (10) votes per share, the Board shall take particular care in evaluating the independence of each Committee member. Specifically, each member of the Committee must be independent of both the Company's management and the holders of Class B Common Stock, and no member shall have any material relationship with Priya Subramanian, Marcus Henley, or any entity controlled by either of them that would interfere with the exercise of the member's independent judgment in carrying out the responsibilities of a Committee member.
If any member of the Committee ceases to be independent for any reason, such member shall promptly notify the Board, and the Board shall take appropriate action to replace such member in accordance with the requirements of this Charter and applicable law.
C. Financial Literacy and Audit Committee Financial Expert
Each member of the Committee must be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement, at the time of his or her appointment to the Committee, in accordance with Nasdaq Listing Rule 5605(c)(2)(A). The Board shall assess and make a determination regarding the financial literacy of each Committee member at the time of his or her appointment and annually thereafter.
At least one member of the Committee must qualify as an "audit committee financial expert" as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act. A person shall be deemed to have the attributes of an audit committee financial expert if such person has the following attributes:
(a) an understanding of generally accepted accounting principles ("GAAP") and financial statements;
(b) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
(c) experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company's financial statements, or experience actively supervising one or more persons engaged in such activities;
(d) an understanding of internal controls over financial reporting; and
(e) an understanding of audit committee functions.
The Board has determined that Samuel Adebayo qualifies as an audit committee financial expert based on his extensive experience as the former Chief Financial Officer of Verdant Software Corp., a publicly listed enterprise software company, where he served from 2014 through 2020 and was responsible for all aspects of financial reporting, internal controls, and audit oversight. The designation of Mr. Adebayo as the Committee's audit committee financial expert shall be disclosed in the Company's Registration Statement on Form S-1 (SEC File Number 333-264518) and in subsequent annual proxy statements filed with the Securities and Exchange Commission (the "SEC"), in accordance with the requirements of Item 407(d)(5) of Regulation S-K.
The designation of a member as an audit committee financial expert shall not impose upon such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the Committee and the Board in the absence of such designation, and shall not affect the duties, obligations, or liabilities of any other member of the Committee or the Board.
D. Appointment and Removal
Members of the Committee shall be appointed by the Board, upon the recommendation of the Nominating and Corporate Governance Committee of the Board (currently chaired by Diane Ochoa), and shall serve at the pleasure of the Board. Each member of the Committee shall serve until his or her successor is duly appointed by the Board, or until his or her earlier resignation, removal, or death.
The Board may remove any member of the Committee at any time, with or without cause, by a resolution adopted by a majority of the Board. Any vacancy on the Committee, whether arising from death, resignation, removal, increase in the number of members, or otherwise, shall be filled by the Board upon the recommendation of the Nominating and Corporate Governance Committee, subject to the independence and qualification requirements set forth in this Section II.
E. Chair.  The Board shall designate one member of the Committee to serve as the Chair of the Committee. The initial Chair of the Committee shall be Samuel Adebayo. If the Chair is not present at any meeting of the Committee, the members of the Committee present at such meeting shall select one of their number to act as chair of such meeting.
The Chair shall be responsible for:
(i) presiding at all meetings of the Committee;
(ii) setting the agenda for each meeting of the Committee, in consultation with management, the internal audit function (when established), and the independent auditor;
(iii) ensuring that the Committee fulfills its responsibilities under this Charter;
(iv) reporting regularly to the full Board regarding the activities, findings, and recommendations of the Committee; and
(v) performing such other duties as may be assigned by the Board or the Committee from time to time.
III. MEETINGS
A. Frequency.  The Committee shall meet at least four (4) times per fiscal year, and more frequently as circumstances require, as determined by the Chair in consultation with the other members of the Committee. The Committee's meeting schedule shall, to the extent practicable, be coordinated with the Company's quarterly financial reporting cycle so as to permit timely review of the Company's quarterly and annual financial statements and related disclosures.
In addition to its regularly scheduled meetings, the Committee shall meet separately and periodically with each of the following:
(i) Management — to discuss the Company's financial reporting processes, internal controls, and any other matters that the Committee or management deems appropriate;
(ii) Internal audit personnel — once such function has been established, to discuss the scope and results of internal audit activities, the adequacy of the Company's internal controls, and any other matters that the Committee or internal audit personnel deem appropriate; and
(iii) The independent auditor — currently Meridian & Howe LLP (audit engagement partner: Gregory Simmons) — to discuss the scope of the annual audit, the results of the audit examination, any difficulties or disagreements with management encountered during the course of the audit, and any other matters that the Committee or the independent auditor deems appropriate, including those matters required to be discussed by applicable auditing standards.
The Committee may request that any such meetings be held outside the presence of other parties, including members of management, when the Committee deems it necessary or advisable.
B. Quorum and Voting
A majority of the members of the Committee then in office shall constitute a quorum for the transaction of business. Any action of the Committee shall require the affirmative vote of a majority of the members present at a meeting at which a quorum is present. No member of the Committee shall vote by proxy.
The Committee may act by unanimous written consent of all members of the Committee in lieu of a meeting, to the extent permitted by applicable law and the Company's Amended and Restated Bylaws. Any such written consent shall be filed with the minutes of proceedings of the Committee and shall have the same force and effect as a vote taken at a duly called meeting at which a quorum was present.
C. Attendance and Participation
The Committee may invite any director, officer, or employee of the Company, or any representative of the Company's advisors, to attend meetings of the Committee and to provide pertinent information as requested by the Committee. Without limiting the generality of the foregoing, the Committee anticipates that the following individuals will be regular attendees at Committee meetings:
(i) Naomi Feinberg, General Counsel of the Company;
(ii) David Lau, Chief Financial Officer of the Company; and
(iii) Gregory Simmons, audit engagement partner, Meridian & Howe LLP.
Notwithstanding the foregoing, the Committee shall have the authority to exclude any person from all or any portion of any Committee meeting when the Committee determines that such exclusion is necessary or advisable to protect the integrity of the Committee's deliberations, including, without limitation, executive sessions of the Committee without management present.
The independent auditor, currently Meridian & Howe LLP, shall have direct and unrestricted access to the Committee at all times and may communicate directly with the Committee, the Chair, or any individual member at any time, without the need for management approval or involvement.
D. Minutes.  The Committee shall maintain written minutes or other records of its meetings, which shall be filed with the minutes of the meetings of the Board. The Chair, or such other person as the Committee may designate, shall be responsible for the preparation and distribution of minutes of each meeting to the members of the Committee and to the Corporate Secretary of the Company. The Committee shall report regularly to the Board on its activities, findings, and recommendations, and shall provide such additional reports to the Board as the Board may request from time to time.
IV. AUTHORITY AND RESOURCES
A. Delegation of Authority
The Committee shall have the following authority, in addition to any other authority granted to the Committee elsewhere in this Charter:
(i) Sole Authority over the Independent Auditor. The Committee shall have the sole authority and direct responsibility to appoint, retain, compensate, evaluate, oversee, and, where appropriate, terminate the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Company. The independent auditor shall report directly to the Committee, and the Committee shall be directly responsible for the oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting). The foregoing authority shall include the sole authority to approve all audit engagement fees and terms.
(ii) Retention of Advisors. The Committee shall have the authority, in its sole discretion and at the Company's expense, to retain, compensate, and terminate independent legal counsel, accounting advisors, consultants, and such other advisors as it deems necessary or appropriate to assist the Committee in fulfilling its responsibilities under this Charter. The Committee shall not be required to obtain the approval of the Board or management prior to retaining or compensating any such advisor.
(iii) Funding. The Company shall provide appropriate funding, as determined by the Committee in its capacity as a committee of the Board, for (a) compensation of the independent auditor for the purpose of rendering or issuing an audit report or performing other audit, review, or attest services for the Company; (b) compensation of any advisors retained by the Committee pursuant to clause (ii) above; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties, in each case as required by Rule 10A-3(b)(2) and Rule 10A-3(b)(5) under the Exchange Act.
B. Access to Information
The Committee shall have full, free, and unrestricted access to all books, records, facilities, and personnel of the Company and its subsidiaries. The Committee may conduct or authorize investigations into any matter within the scope of its responsibilities, and all employees, officers, and directors of the Company are directed to cooperate fully with any request made by the Committee or its authorized representatives. The Committee may retain special legal, accounting, or other consultants to advise the Committee in connection with any such investigation.
Management and the independent auditor shall provide to the Committee, on a timely basis, all information and documents reasonably requested by the Committee or necessary for the Committee to carry out its responsibilities under this Charter.
C. Subcommittees.  The Committee may, in its discretion, delegate any of its authority and responsibilities to one or more subcommittees of the Committee or to one or more individual members of the Committee, provided that:
(a) any such delegation is consistent with the Company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, applicable provisions of the Delaware General Corporation Law, SEC rules and regulations, and Nasdaq listing standards;
(b) any subcommittee shall consist solely of members of the Committee who satisfy the independence and other qualification requirements set forth in Section II of this Charter; and
(c) any decisions or actions taken by a subcommittee or an individual member pursuant to such delegated authority shall be reported to the full Committee at its next regularly scheduled meeting.
V. RESPONSIBILITIES AND DUTIES
The following is a description of the principal responsibilities and duties of the Committee. This description is set forth as a guide, with the understanding that the Committee may supplement or modify these responsibilities and duties as appropriate in light of changing business, legislative, regulatory, or other conditions. To the extent consistent with this Charter and applicable law, the Committee shall also carry out any additional activities and responsibilities that may be delegated to it from time to time by the Board.
A. Independent Auditor Oversight
1.  Appointment, Compensation, Retention, and Oversight. The Committee shall be directly responsible for the appointment, compensation, retention, and oversight of the work of the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Company. The Company's current independent auditor is Meridian & Howe LLP. The independent auditor shall report directly to the Committee.
2.  Pre-Approval of Services. The Committee shall pre-approve all auditing services and all permitted non-audit services (including the fees and other terms thereof) to be performed for the Company by the independent auditor, in accordance with applicable SEC regulations. The Committee may establish pre-approval policies and procedures for the engagement of the independent auditor to render non-prohibited services to the Company, provided that such policies and procedures (a) are detailed as to the particular service to be provided, (b) do not include delegation of the Committee's responsibilities to management, and (c) provide that the Committee is informed of each service approved pursuant to such policies and procedures at the next scheduled Committee meeting. The Committee may delegate to the Chair the authority to grant pre-approvals of audit and non-audit services, provided that (i) the fees for any such individual engagement do not exceed a threshold amount to be established by the Committee from time to time and (ii) any such pre-approval is reported to the full Committee at its next regularly scheduled meeting.
3.  Independence and Qualifications. The Committee shall evaluate the qualifications, performance, and independence of the independent auditor on at least an annual basis, taking into account the opinions of management and the internal audit function (when established). In connection with such evaluation, the Committee shall:
(a) obtain and review, at least annually, a formal written statement from Meridian & Howe LLP describing (I) the firm's internal quality-control procedures, (II) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues, and (III) all relationships between the independent auditor and the Company, consistent with PCAOB Rule 3526 (Communication with Audit Committees Concerning Independence);
(b) actively engage in a dialogue with Meridian & Howe LLP with respect to any relationships or services that may impact the objectivity and independence of the auditor, and take appropriate action in response to the auditor's report to satisfy itself of the independence of the auditor; and
(c) consider whether the independent auditor should be rotated, taking into account the requirements of applicable law regarding mandatory audit partner rotation and any other relevant factors, including the quality of the auditor's work and the length of the auditor's tenure.
4.  Annual Audit Plan. The Committee shall review and discuss the independent auditor's annual audit plan, including the scope, staffing, locations, and general audit approach, as well as the auditor's reliance upon management and the internal audit function (when established), and any changes from the prior year's plan. The Committee shall discuss with the auditor any changes in the audit plan necessitated by developments during the course of the audit.
5.  Quality-Control Report. At least annually, the Committee shall obtain and review a report by the independent auditor describing: (a) the firm's internal quality-control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm; and (c) any steps taken to deal with any such issues. The Committee shall evaluate the independent auditor's qualifications, taking into account such report and any other information known to the Committee.
6.  Hiring Policies. The Committee shall establish clear policies regarding the hiring of employees or former employees of the independent auditor by the Company, taking into account the applicable SEC rules and regulations regarding such hiring, including the "cooling-off" periods specified in Rule 2-01(c)(2)(iii)(B) of Regulation S-X.
B. Financial Statements and Disclosure
1.  Review of Financial Statements. The Committee shall review and discuss with management and the independent auditor the Company's annual audited financial statements and quarterly unaudited financial statements prior to the filing of such financial statements with the SEC or the public release of earnings. Such review shall include, without limitation:
(a) a discussion of the Company's financial results for the relevant period, including, for reference, the following historical results:
•  Fiscal Year 2021 (audited): Total revenue of $187.4 million, representing 58% year-over-year growth from fiscal year 2020 total revenue of $118.6 million; gross margin of 72.3%; net loss of $(41.2) million; Adjusted EBITDA of $(18.7) million; and cash and cash equivalents of $94.3 million as of fiscal year-end.
•  First Quarter 2022 (Q1 2022, unaudited): Total revenue of $54.9 million; annual recurring revenue ("ARR") of $219.5 million; and net loss of $(13.8) million.
(b) a discussion of critical accounting policies and estimates, including, without limitation, (I) the Company's revenue recognition policies for software-as-a-service ("SaaS") subscription arrangements, including the allocation of transaction prices in multi-element arrangements, the treatment of professional services and implementation fees, and the timing of revenue recognition in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers; (II) the Company's accounting for stock-based compensation, including the methodology for estimating the fair value of equity awards granted to employees and non-employees; and (III) the treatment of capitalized software development costs, including the criteria for capitalization under ASC Topic 350-40, Internal-Use Software, and the estimated useful lives and amortization methods applied to such costs;
(c) the effect of any off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company's financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses; and
(d) any significant changes in the Company's accounting principles, policies, or practices.
2.  Management's Discussion and Analysis. The Committee shall review and discuss the Company's disclosures contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in periodic reports filed with the SEC (including annual reports on Form 10-K and quarterly reports on Form 10-Q) and in the Company's Registration Statement on Form S-1 (SEC File Number 333-264518), to the extent applicable. The Committee shall review such disclosures for consistency with the information known to the Committee from its review of the Company's financial statements and discussions with management and the independent auditor.
3.  Auditor Communications. The Committee shall discuss with the independent auditor the matters required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees (and any successor standard), including, without limitation:
(a) any difficulties encountered during the course of the audit work, including any restrictions on the scope of the auditor's activities or access to requested information;
(b) any significant disagreements with management;
(c) the auditor's views about the quality, not just the acceptability, of the Company's accounting principles and financial disclosures as applied in its financial reporting;
(d) any adjustments proposed by the auditor that were not recorded by management, and the reasons therefor;
(e) any communications between the audit team and the firm's national office concerning auditing or accounting issues presented by the engagement; and
(f) any management or internal control letter issued, or proposed to be issued, by the auditor to the Company.
4.  Earnings Releases and Guidance. The Committee shall review and discuss with management and the independent auditor (as appropriate) the Company's earnings press releases, financial information, and earnings guidance (if any) provided to analysts and rating agencies, including a review of any non-GAAP financial measures (such as Adjusted EBITDA and ARR) included therein. The Committee shall discuss with management the types of information to be disclosed and the types of presentations to be made, as well as the manner of presentation.
5.  Annual and Quarterly Reports. The Committee shall review the Company's annual report on Form 10-K and quarterly reports on Form 10-Q, including the financial statements and related disclosures contained therein, prior to their filing with the SEC.
6.  Recommendation Regarding Inclusion of Financial Statements. Based on the Committee's review and discussions described in this Section V.B, the Committee shall recommend to the Board whether the audited financial statements should be included in the Company's annual report on Form 10-K for the applicable fiscal year.
C. Internal Controls and Risk Management
1.  Internal Controls over Financial Reporting. The Committee shall review the adequacy and effectiveness of the Company's internal controls over financial reporting on a regular basis, including any significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company's ability to record, process, summarize, and report financial information, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. The Committee shall discuss with management and the independent auditor any significant deficiency or material weakness identified by either management or the independent auditor, and shall review management's plans for remediation of any such deficiency or weakness.
2.  Disclosure Controls and Procedures. The Committee shall review the Company's disclosure controls and procedures, including the certifications made by the Chief Executive Officer and the Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.
3.  Risk Management. The Committee shall discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including, without limitation:
(a) Customer Concentration Risk. As of the date of this Charter, the Company's ten (10) largest customers represent approximately 34% of annual recurring revenue ("ARR"). The Committee shall monitor the concentration of the Company's revenue base and the risks associated with the potential loss of one or more significant customers.
(b) Credit Facility Risks. The Company maintains a revolving credit facility with Ashford National Bank, with a total commitment amount of $50,000,000, bearing interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points. As of March 31, 2022, approximately $15,000,000 was drawn under this facility. The Committee shall review the terms and conditions of the credit facility, including any financial covenants, and shall monitor the Company's compliance therewith.
(c) Infrastructure Commitment Risks. The Company has entered into a Master Cloud Services Agreement with Brindoval Data Centers LLC, which includes an annual minimum commitment of approximately $8,200,000. The Committee shall review the Company's infrastructure commitments and the risks associated with such long-term contractual obligations.
(d) Cybersecurity and Data Privacy Risks. The Company processes over 2 billion transactions per month across approximately 340 enterprise customers. The Committee shall review the Company's cybersecurity and data privacy risk profile, including the adequacy of the Company's information security policies, incident response plans, and compliance with applicable data privacy laws and regulations.
4.  Audit Problems or Difficulties. The Committee shall review and discuss with the independent auditor any audit problems or difficulties encountered during the course of the audit work and management's response thereto, including any restrictions on the scope of the auditor's activities or access to requested information, and any significant disagreements with management.
5.  Risk Assessment and Management Policies. The Committee shall discuss the Company's policies with respect to risk assessment and risk management. The Committee shall review and assess the guidelines and policies governing the process by which management assesses and manages the Company's exposure to risk, including the Company's major financial risk exposures, and shall discuss with management the steps that have been taken to monitor and mitigate such exposures.
D. Internal Audit
1.  Head of Internal Audit. The Committee shall review and concur with the appointment, replacement, reassignment, or dismissal of the head of the internal audit function, once such function is established. The head of internal audit shall report functionally to the Committee and administratively to the Chief Financial Officer (or such other senior executive as the Committee shall designate).
2.  Scope and Organization. The Committee shall review the scope, organization, and staffing of the internal audit function, and shall ensure that such function has adequate resources and appropriate authority to fulfill its responsibilities.
3.  Internal Audit Findings. The Committee shall review summaries of findings from completed internal audits and management's responses thereto, including any corrective actions taken or planned. The Committee shall discuss with the head of internal audit any significant issues raised by internal audit activities, including any difficulties encountered by the internal audit function in the course of its work.
4.  Establishment of Internal Audit Function. As of the date of preparation of this Charter, the Company does not have a dedicated internal audit function. The Committee acknowledges that the establishment of an internal audit function is an important component of the Company's overall internal control framework. Following the closing of the Company's initial public offering, the Committee shall oversee the establishment of an internal audit function as appropriate for the Company's size, complexity, and risk profile, and shall work with management to develop a timeline and plan for the implementation of such function. Until such time as the internal audit function is established, the Committee shall take appropriate steps to satisfy itself regarding the adequacy of the Company's internal controls through other means, including enhanced oversight of management's assessment of internal controls and coordination with the independent auditor.
E. Compliance and Legal Matters
1.  Whistleblower Procedures. The Committee shall establish and oversee procedures for:
(a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
(b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters,
in each case as required by Rule 10A-3(b)(3) under the Exchange Act. The Committee shall review the procedures on a periodic basis to ensure their continued effectiveness and shall review any significant complaints received through such procedures.
2.  Legal Matters. The Committee shall review with the Company's General Counsel, Naomi Feinberg, any legal matters (including pending or threatened litigation, regulatory investigations, or compliance matters) that could have a significant impact on the Company's financial statements or financial condition. The Committee shall also review with the General Counsel any material reports or inquiries received from regulators or governmental agencies that relate to the Company's financial reporting, accounting policies, or internal controls.
3.  Compliance with Legal and Regulatory Requirements. The Committee shall review the Company's compliance with applicable legal and regulatory requirements, including the Company's obligations under the Securities Act, the Exchange Act, and the rules and regulations promulgated thereunder, as well as the Nasdaq listing standards. The Committee shall also review any correspondence with the SEC, including any SEC comment letters relating to the Company's periodic reports or Registration Statement, and management's responses thereto.
4.  Related-Party Transactions. The Committee shall review and approve or ratify any related-party transactions in accordance with the Company's written related-party transaction policy, as adopted by the Board. Without limiting the generality of the foregoing, the Committee shall review any transactions or proposed transactions involving the Company and any of the following parties:
(a) any director, executive officer, or nominee for director of the Company;
(b) any holder of more than 5% of any class of voting securities of the Company, including Velthryn Venture Partners Fund IV, L.P. (holding approximately 21.0% of the Company's fully diluted pre-IPO shares) and Arclight Equity Group Fund VII, L.P. (holding approximately 15.7% of the Company's fully diluted pre-IPO shares);
(c) any immediate family member of any of the foregoing persons; and
(d) any entity in which any of the foregoing persons has a direct or indirect material interest.
The Committee shall determine whether such transactions are in, or not inconsistent with, the best interests of the Company and its stockholders.
5.  Regulatory and Accounting Initiatives. The Committee shall review the effect of regulatory and accounting initiatives, as well as any significant changes in accounting standards promulgated by the Financial Accounting Standards Board ("FASB"), the SEC, or other regulatory bodies, on the Company's financial statements and disclosures.
6.  Code of Business Conduct and Ethics. The Committee shall oversee the Company's code of business conduct and ethics, including reviewing any waiver of or amendment to such code with respect to any director or executive officer of the Company, and shall review any material violations of such code reported to the Committee.
F. Reporting.  
1.  Audit Committee Report for Proxy Statement. The Committee shall prepare the Audit Committee report required by SEC rules (Item 407(d)(3) of Regulation S-K and Schedule 14A) to be included in the Company's annual proxy statement. Such report shall state, among other things, whether the Committee has (a) reviewed and discussed the audited financial statements with management, (b) discussed with the independent auditor the matters required to be discussed by applicable PCAOB auditing standards, and (c) received the written disclosures and letter from the independent auditor regarding independence required by applicable PCAOB rules, and whether, based on such review and discussions, the Committee has recommended to the Board that the audited financial statements be included in the Company's annual report on Form 10-K.
2.  Regular Reporting to the Board. The Committee shall report regularly to the Board regarding the Committee's activities, findings, issues, and recommendations, including a summary of any significant matters discussed at each Committee meeting and any actions taken by the Committee between meetings. Such reports shall be provided at the next regularly scheduled meeting of the Board following each Committee meeting, or more frequently as circumstances require.
3.  Issues Regarding Financial Integrity, Compliance, and Auditor Performance. The Committee shall review with the full Board any issues that arise with respect to:
(a) the quality or integrity of the Company's financial statements;
(b) the Company's compliance with legal or regulatory requirements;
(c) the performance and independence of the independent auditor; or
(d) the performance of the internal audit function (once established).
The Committee shall make recommendations to the Board with respect to the resolution of any such issues.
VI. ANNUAL PERFORMANCE EVALUATION
The Committee shall conduct an annual self-evaluation of its own performance and the adequacy of this Charter, including a review of whether the Committee has fulfilled its responsibilities as set forth herein. The annual performance evaluation may take such form as the Committee deems appropriate, including a written questionnaire, a discussion among Committee members, or interviews with individual members, and may be conducted by the Committee itself or by an independent third party retained by the Committee.
The Committee shall review and reassess the adequacy of this Charter at least annually and shall recommend any proposed changes to the Board for approval. In connection with such review, the Committee shall consider whether any changes to the Charter are warranted in light of changes in applicable law, regulations, or listing standards, as well as changes in the Company's business, operations, or organizational structure.
The results of the annual self-evaluation shall be reported to the Board, along with any recommendations for improvements in the Committee's processes, procedures, or composition.
VII. LIMITATIONS OF THE COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this Charter, the Committee's role is fundamentally one of oversight. The Committee recognizes that the Company's management is responsible for the preparation, presentation, and integrity of the Company's financial statements, and for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.
The independent auditor is responsible for planning and carrying out a proper audit of the Company's annual financial statements in accordance with the standards of the Public Company Accounting Oversight Board ("PCAOB"), and for performing timely reviews of the Company's quarterly financial statements prior to the filing of each quarterly report on Form 10-Q.
Nothing in this Charter shall be construed to reduce the responsibilities or liabilities of the Company's management or the independent auditor. In particular, nothing in this Charter shall be construed as implying that the Committee has assumed, or has the authority to assume, management's responsibilities for the preparation of the Company's financial statements or the independent auditor's responsibilities for the audit thereof.
The members of the Committee are not employees of the Company and are not, and do not represent themselves to be, accountants or auditors by profession or experts in the fields of accounting or auditing. It is not the duty or responsibility of the 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 GAAP and applicable rules and regulations. Each member of the Committee shall be entitled to rely on the integrity of those persons within the Company and of the professionals and experts (including the Company's independent auditor and internal auditors) from which the Committee receives information, and the accuracy and completeness of the financial and other information provided to the Committee by such persons, professionals, and experts, absent actual knowledge to the contrary (which shall be promptly reported to the Board).
Nothing in this Charter is intended to, or shall be deemed to, expand applicable standards of liability under federal or state law for directors of the Company, including the members of the Committee.
VIII. EFFECTIVE DATE AND AMENDMENT
This Charter shall become effective upon its adoption by the Board of Directors, which is expected to occur in connection with and contingent upon the closing of the Company's initial public offering of Class A Common Stock on the Nasdaq Global Select Market under the proposed ticker symbol "LMSA."
This Charter may be amended by the Board of Directors at any time, upon recommendation of the Committee. Any amendment to this Charter shall be disclosed as required by applicable law, SEC rules, and Nasdaq listing standards.
A copy of this Charter, as then in effect, shall be posted on the Company's website following the closing of the initial public offering, and shall be made available in print to any stockholder who requests it, in each case in accordance with applicable SEC rules.
ADOPTION AND SIGNATURE
This Audit Committee Charter was approved and adopted by the Board of Directors of Lumos Analytics Inc. on ____, 2022.
LUMOS ANALYTICS INC.
By: ________
Name: Priya Subramanian
Title: Chair of the Board of Directors
Date: ________
ATTESTED:
By: ________
Name: Naomi Feinberg
Title: General Counsel and Corporate Secretary
Date: ________
NOTE: This Audit Committee Charter was prepared by Calderwood & Harkness LLP, as issuer's counsel to Lumos Analytics Inc., in connection with the Company's proposed initial public offering of Class A Common Stock (Registration Statement on Form S-1, SEC File Number 333-264518). Calderwood & Harkness LLP Matter No. 1008-00002. This Charter was never formally adopted by the Board of Directors of Lumos Analytics Inc. due to the withdrawal of the Registration Statement on Form S-1 on June 15, 2022. This document remains in draft form and has no legal or operative effect. No client-attorney relationship is created or implied by the circulation of this document to any person other than Lumos Analytics Inc. and its authorized representatives.

CONFIDENTIAL — ATTORNEY WORK PRODUCT

AUDIT COMMITTEE CHARTER

OF THE BOARD OF DIRECTORS

OF LUMOS ANALYTICS INC.

I. PURPOSE

II. COMPOSITION

III. MEETINGS

IV. AUTHORITY AND RESOURCES

V. RESPONSIBILITIES AND DUTIES

VI. ANNUAL PERFORMANCE EVALUATION

VII. LIMITATIONS OF THE COMMITTEE'S ROLE

VIII. EFFECTIVE DATE AND AMENDMENT

ADOPTION AND SIGNATURE

LUMOS ANALYTICS INC.

ATTESTED:

Record

Parties

Dates

Amounts