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Item 9A. Controls and Procedures

2023-03-24 compared with 2022-03-24 · 131 added, 160 removed, 420 unchanged (41% of the section changed)

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Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for Epsilon as such term is defined in the Securities Exchange Act of 1934.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for Epsilon as such term is defined in the Exchange Act.

Our internal control structure is designed to provide reasonable assurance that assets are safeguarded and that transactions are properly executed and recorded.

The internal control structure includes, among other things, established policies and procedures, the selection and training of qualified personnel as well as management oversight.

With the participation of our management, we performed an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

Based upon our evaluation under the 2013 Framework, we have concluded that as of December 31, 2021 our disclosure controls and procedures were effective.

Based upon our evaluation under the 2013 Framework, we have concluded that as of December 31, 2022 our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Management's report was not subject to attestation by Epsilon’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit Epsilon to provide only management's report in this Annual Report.

Management's report was not subject to attestation by Epsilon’s independent registered public accounting firm pursuant to rules of the SEC that permit Epsilon to provide only management's report in this Annual Report.

We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this Annual Report.

Remediation of Material Weakness

As of September 30, 2021 our disclosure controls and procedures were not effective as of such date as a result of a material weakness in our internal control over financial reporting related to the reporting of hedge losses and the related review control as of September 30, 2021.

Our management implemented a remediation plan to address the operating effectiveness control deficiencies that led to the material weakness described above.

Management’s plan of remediation included incremental training with accounting software client support team, additional month end review utilizing various reporting tools, and increased communication with operations regarding monthly commodity activity.

We believe the remediation to be complete.

Changes in Internal Control Over Financial Reporting

Other than the remediation efforts discussed above, there have been no significant changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no significant changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION.

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers.

The names, ages, business experience (for at least the past five years) and positions of our directors and executive officers as of December 31, 2022, are set out below.

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The Board of Directors appoints the executive officers annually.

Director or Executive Officer

Directors and Executive Officers

Position with us

Jason Stabell

Chief Executive Officer and Director

Andrew Williamson

Chief Financial Officer

Henry Clanton

Chief Operating Officer

Chairman of the Board and Director

Matt Dougherty

Director (resigned January 29, 2021)

Tracy Stephens

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Jason Stankowski

Director (as of January 29, 2021)

Biographies of Corporate Directors and Executive Officers.

Michael Raleigh.

Raleigh has served as chief executive officer and a director for Epsilon Energy Ltd.

Jason Stabell.

Stabell has served as chief executive officer and a director for Epsilon Energy Ltd.

since July 2022.

Before becoming chief executive officer at Epsilon Energy Ltd., he acted in various positions in the global natural gas and oil business for 35 years, primarily holding positions in the areas of reservoir development strategy, property valuations, completions and production.

He has also been managing investments with Domain Energy Advisors since January 2005.

He has worked in the energy industry since 1998 with a focus on upstream E&P.

Most recently he served as President and CEO of Merlon International, LLC, a privately held company with assets in the Western Desert of Egypt and US Gulf Coast which was sold in 2019 to a publicly listed UK company where he served as an advisor until 2021.

Previously, he served as CFO and ultimately President of privately held Merlon Petroleum Company, which had assets in the US Gulf Coast and Egypt and was sold in 2006.

He has a BA in Economics from Williams College.

We believe that Mr.

Raleigh is qualified to serve as a member of our board of directors as a result of his background in engineering, including reserve, acquisitions and valuation engineering, and his experience in the development and appraisal of natural gas and oil fields.

Raleigh received a Bachelor of Science degree in Chemical Engineering from Queens University in Canada and received his Master of Business Administration degree from the University of Colorado.

Bond has served as our chief financial officer since January 2012.

He has served as the chief financial officer of Epsilon Energy USA and Epsilon Energy Midstream since January 2012.

He has also been serving as the chief financial officer of Dewey Energy Holdings and Dewey Energy GP since March 2017.

Bond’s financial career spans over 30 years with extensive management and natural gas and oil experience domestically and internationally.

Bond holds a Master of Business Administration from the University of Tulsa and a Bachelor of Science in Accounting from the University of Arkansas.

Stabell is qualified to serve a s a member of our board of directors as a result of his experience in the natural gas and oil industry.

Andrew Williamson .

Williamson has served as our chief financial officer since July 2022.

He has spent his entire career in the energy business.

From 2012 to early 2019, he served as Corporate Development Manager then Vice President Finance (CFO) of Merlon International, LLC.

More recently, he served as the Corporate Strategy Manager for Petrosantander Inc.

Williamson started his career in management consulting advising energy clients on transaction due diligence, growth strategy, and cost reduction.

He has a BBA in Finance and a BA in Political Science from Southern Methodist University.

Clanton has served as our chief operating officer since January 2018.

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Lovoi is qualified to serve as a member of our board of directors as a result of his background in investment banking, equity research, and asset management, with an emphasis on the global natural gas and oil practice.

Matthew Dougherty .

Dougherty has been a director since July 2013 and serves as Chair of the Compensation, Nominating and Governing Committee.

He is a Managing Director and Partner at Advisory Research, Inc., an investment management firm, where he oversees the firm’s investments in the energy sector.

He has served as the Portfolio Manager of the Advisory Research Energy Fund, LP since 2005.

We believe that Mr.

Dougherty is qualified to serve as a member of our board of directors because of his background in the finance and the energy industry, including natural gas and oil producers.

Ryan Roebuck .

Roebuck resigned January 21, 2021.

Jacob Roorda .

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He has also been a member of our Audit Committee since March 2016, and the chair of our Conflicts Committee since February 2018.

Roorda has been a director of PetroShale Inc., a Bakken focused oil and natural gas producer, since 2012 and currently serves on the Reserves Committee of PetroShale Inc.

Roorda was the President and CEO of PetroShale Inc.

Roorda has been a director of Lucero Energy Corp., a Bakken focused oil and natural gas producer, since 2012 and currently serves on the Reserves Committee of Lucero Energy Corp.

Roorda was the President and CEO of Lucero Energy Corp.

until February 2022.

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Lovoi is the Managing Partner of JVL Advisors, LLC, beneficial owner of 7.79% of our common shares and Chairman of the Board.

Raleigh is our Chief Executive Officer and a member of JVL Advisors, LLC.

The Board held seven meetings during 2021 and thirteen meetings during 2020.

The Board held nineteen meetings during 2022 and seven meetings during 2021.

All Board meetings were conducted with open and candid discussions.

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Our Code of Ethics and Whistleblower Policy are available on our website at http://www.epsilonenergyltd.com/.

Each director is expected to disclose all actual or potential conflicts

of interest and refrain from voting on matters in which such director has a conflict of interest.

Each director is expected to disclose all actual or potential conflicts of interest and refrain from voting on matters in which such director has a conflict of interest.

In addition, a director must recuse himself from any discussion or decision on any matter of which the director is precluded from voting as a result of a conflict of interest.

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National Instrument 52-110 adopted by the Canadian securities administrators, the listing standards of the Toronto Stock Exchange and the listing standards of the NASDAQ Global Market require the Audit Committee to establish formal procedures for (a) the receipt, retention, and treatment of complaints received by us and our subsidiaries regarding accounting, internal accounting controls, or auditing matters and (b) the confidential, anonymous submission by our consultants or employees of concerns regarding questionable accounting or auditing matters.

We are committed to achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices.

We are committed to

achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices.

In addition, we post on our website all disclosures that are required by law or the listing standards of the NASDAQ Global Market concerning any amendments to, or waivers from, any provision of the code.

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The Audit Committee currently consists of David Winn (Chairman), Jacob Roorda, and Jason Stankowski.

Ryan Roebuck and Stephen Finlayson resigned from this committee in January 2021.

All members of the Audit Committee are independent and financially literate under the applicable rules and regulations of the SEC and the NASDAQ Global Market.

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The Audit Committee questions the external auditors independently of management and reviews a written statement of its independence.

The Audit Committee must be satisfied that adequate procedures are in place for the review of our public disclosure of financial information extracted or derived from its consolidated financial statements and it periodically assesses the adequacy of those procedures.

The Audit Committee must be satisfied that adequate procedures are in place for the review of our public disclosure of financial information extracted or derived from its consolidated financial

statements and it periodically assesses the adequacy of those procedures.

The Audit Committee must approve or pre-approve, as applicable, any non-audit services to be provided to us by the external auditors.

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Compensation, Nominating and Corporate Governance Committee .

The Compensation, Nominating and Corporate Governance Committee currently comprises Matthew Dougherty (chairman), Tracy Stephens and Stephen Finlayson.

Ryan Roebuck resigned from this committee in January 2021.

All three members of this committee are independent directors.

Before July 2013, we had separate compensation committee and nominating and corporate governance committee.

Both committees’ mandates were approved by the Board on December 10, 2009.

In July 2013, the Board consolidated the functions of the two committees for efficiency purposes.

The Compensation, Nominating and Corporate Governance Committee is currently comprised of Tracy Stephens (Chairman), John Lovoi, and Stephen Finlayson.

Stephens and Mr.

Finlayson are independent directors.

Lovoi is not an independent director.

The Compensation, Nominating and Corporate Governance Committee’s mandate is to:

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Conflicts Committee .

The Conflicts Committee currently comprises Jacob Roorda (Committee Chairman), Tracy Stephens and Stephen Finlayson.

Ryan Roebuck resigned from this committee in January 2021.

The Conflicts Committee currently consists of Jacob Roorda (Chairman), Tracy Stephens and Stephen Finlayson.

All members are independent directors.

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Communications to the Board

Shareholders may communicate directly with our Board of Directors or any director by writing to the board or a director in care of the corporate secretary at Epsilon Energy Ltd., 16945 Northchase Drive, Suite 1610, Houston, Texas 77060, or by faxing their written communication to AeRayna Flores at (281) 668-0985.

Shareholders may communicate directly with our Board of Directors or any director by writing to the board or a director in care of the corporate secretary at Epsilon Energy Ltd., 500 Dallas Street, Suite 1250, Houston, Texas 77002, or by faxing their written communication to AeRayna Flores at (281) 668-0985.

Shareholders may also communicate to the Board of Directors or any director by calling Ms.

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All named executive officers have executed employment contracts with us.

Michael Raleigh’s employment contract calls for a base pay of $150,000 per year and an equity award in an amount having a value equal to at least one time his base pay.

The contract also contains provisions for severance payments equal to twelve months of current annual salary in the event that a change of control occurred.

The Board appointed Jason Stabell to serve as CEO of the Company and as a member of the Board beginning on July 1, 2022 (the (“Stabell Effective Date”).

In connection with Mr.

Stabell’s appointment, the Company entered into an Executive Employment Agreement with Mr.

Stabell (the “Stabell Employment Agreement”), effective July 1, 2022.

Pursuant to the Stabell Employment Agreement, the Company and Mr.

Stabell have agreed that Mr.

Stabell will serve as CEO on an “at-will” basis for an annual base salary of $300,000.

In addition to his base salary, Mr.

Stabell will be eligible to receive an annual incentive bonus targeted at $200,000 for achieving performance goals established by the Compensation Committee of the Board in its sole discretion for the then current calendar year.

Additionally, Mr.

Stabell will be eligible for equity awards in the form of Restricted Stock Units (“RSUs”) with a grant date value of $600,000.

The RSUs shall vest over a four-year period beginning on the Stabell Effective Date as follows:

twenty-five percent (25%) of the RSUs on the first anniversary of the Stabell Effective Date, and an additional 6.25% of the RSUs vesting on the first day of each subsequent quarter, with full vesting on July 1, 2026, provided that Mr.

Stabell is employed by the Company on each such vesting date.

All outstanding RSUs shall vest at target upon a “Change in Control,” as defined in the Equity Plan, provided Mr.

Stabell then remains employed by the Company.

Stabell will be entitled to participate in all applicable Company benefit plans, programs, or arrangements that the Company may offer to its executives generally, from time to time, and as may be amended from time to time.

Participation will be subject to the terms of the applicable plan documents and generally applicable Company policies, as may be in effect from time to time, and any other restrictions or limitations imposed by law.

Stabell is terminated by the Company without cause or resigns for Good Reason (as defined in the Stabell Employment Agreement), he will be entitled to a severance payment equal to twenty-four (24) months’ salary and the pro-rated target bonus for the year in which the termination takes place.

Henry Clanton’s employment contract calls for a base pay of $250,000 per year.

Lane Bond’s employment contract calls for a base pay of $200,000 per year and contains provisions for severance payments equal to six months of current annual salary in the event that a change of control occurred.

The Board appointed Andrew Williamson to serve as CFO of the Company beginning on July 1, 2022 (the “Williamson Effective Date”).

In connection with Mr.

Williamson’s appointment, the Company entered into an Executive Employment Agreement with Mr.

Williamson (the “Williamson Employment Agreement”), effective July 1, 2022.

Pursuant to the Williamson Employment Agreement, the Company and Mr.

Williamson have agreed that Mr.

Williamson will serve as CFO on an “at-will” basis for an annual base salary of $230,000.

In addition to his base salary, Mr.

Williamson will be eligible to receive an annual incentive bonus targeted at $150,000 for achieving performance goals established by the Compensation Committee of the Board in its sole discretion for the then current calendar year.

Additionally, Mr.

Williamson will be eligible for equity awards with a grant date value of $250,000.

The RSUs shall vest over a four-year period beginning on the Williamson Effective Date as follows:

twenty-five percent (25%) of the RSUs on the first anniversary of the Williamson Effective Date, and an additional 6.25% of the RSUs vesting on the first day of each subsequent quarter, with full vesting on July 1, 2026, provided that Mr.

Williamson is employed by the Company on each such vesting date.

All outstanding RSUs shall vest at target upon a “Change in Control,” as defined in the Equity Plan, provided Mr.

Williamson then remains employed by the Company.

Williamson will be entitled to participate in all applicable Company benefit plans, programs, or arrangements that the Company may offer to its executives generally, from time to time, and as may be amended from time to time.

Williamson is terminated by the Company without cause or resigns for Good Reason (as defined in the Williamson Employment Agreement), he will be entitled to a severance payment equal to twenty-four (24) months’ salary and the pro-rated target bonus for the year in which the termination takes place.

EXECUTIVE COMPENSATION.

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No further awards will be granted under the Predecessor Plans.

The following table sets out information concerning the compensation paid to our principal executive officer and our two most highly compensated executive officers other than our principal executive officer, or our named executive

officers for the two years ended December 31, 2021 and 2020.

Compensation amounts in the following table are in U.S.

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Name and principal

Director Fees

Michael Raleigh, CEO (1)

Henry Clanton, COO (2)

Lane Bond, CFO (3)

Raleigh worked through 2020 without a salary;

however, he was granted a bonus in 2020 and the following equity awards in 2021, 2020 and 2019.

Beginning in January 2021, Mr.

Raleigh’s base salary is $150,000.

2021—PSU award of 20,834 common shares under the 2020 Plan valued at $5.04 per share, market price on the grant date, August 25, 2021, which vested immediately.

This award was based on the 2020 TSR Performance results meeting the 200% target award amount.

2020—Restricted stock award of 46,500 common shares under the 2020 Plan valued at $3.71 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

Vested shares will be awarded on the anniversary date for each of the next three years, so long as Mr.

Raleigh is still employed.

PSU award with a target share count of 125,000 under the 2020 Plan valued at $3.22 per share, market price on the grant date, September 1, 2020.

Of these shares.

20,833 vested immediately, on September 1, 2020, 41,667 vest at December 31, 2020 and 2021, and the remaining 20,833 vest at December 31, 2022.

The vesting shares earned are based on certain terms, target formulas, and relative peer group performance, and Mr.

Raleigh’s continued employment.

The number of shares ultimately issued under these awards can range from zero to 200% of target award amounts.

PSU award with target share count of 41,500 under the 2020 Plan valued at $3.71 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

The vesting shares earned are based on certain terms, target formulas, and relative peer group performance, and Mr.

Raleigh’s continued employment.

The number of shares ultimately issued under these awards can range from zero to 200% of target award amounts.

2019—Share award of 57,500 common shares under the Share Compensation Plan valued at $3.30 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

Vested shares will be awarded on the anniversary date for each of the next three years, so long as Mr.

Raleigh is still employed.

Henry Clanton was hired as our chief operating officer in January 2018 with a base salary of US$250,000.

2020— PSU award with target share count of 17,500 under the 2020 Plan valued at $3.71 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

The vesting shares earned are based on certain terms, target formulas, and relative peer group performance, and Mr.

Clanton’s continued employment.

The number of shares ultimately issued under these awards can range from zero to 200% of target award amounts.

2019— Share award of 17,500 common shares under the Share Compensation Plan valued at $3.30 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

Vested shares will be awarded on the anniversary date for each of the next three years, so long as Mr.

Jason Stabell, CEO (1)

Clanton, COO (2)

Andrew Williamson, CFO (3)

Stabell was hired as our chief executive officer in July 2022 with an annual base salary of US$300,000.

2022—Share award of 97,560 common shares under the 2020 Plan valued at $6.15 per share, market price on the grant date, July 1, 2022.

The RSU’s vest over a four-year period with 25% vesting on the first anniversary of Mr.

Stabell’s effective date and an additional 6.25% vesting on the first day of each subsequent quarter, with full vesting on July 1, 2026 so long as Mr.

Stabell is still employed.

Henry Clanton was hired as our chief operating officer in January 2018, His current base salary of US$262,500.

2022— Share award of 12,825 under the 2020 Plan valued at $6.33 per share, market price on the grant date, April 6, 2022, and a share award of 13,877 under the 2020 Plan valued at $6.63 per share, market price on the grant date, December 31, 2022, both of which vest evenly over a three year period, so long as Mr.

Clanton is still employed.

Lane Bond was hired as our chief financial officer in January 2012.

His current base salary is $200,000.

2019— Share award of 12,500 common shares under the Share Compensation Plan valued at $3.30 per share, market price on the grant date, December 31, 2020, which vest evenly over a three year period.

Vested shares will be awarded on the anniversary date for each of the next three years, so long as Mr.

Bond is still employed.

Andrew Williamson was hired as our chief financial officer in July 2022 with a base salary of US$230,000.

2022— Share award of 40,650 common shares under the 2020 Plan valued at $6.15 per share, market price on the grant date, July 1, 2022.

The RSU’s vest over a four-year period with 25% vesting on the first anniversary of Mr.

Williamson’s effective date and an additional 6.25% vesting on the first day of each subsequent quarter, with full vesting on July 1, 2026 so long as Mr.

Williamson is still employed.

Description of the 2020 Equity Incentive Plan (the “2020 Plan”)

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Equity share options under Amended and Restated 2017 Stock Option Plan

Common shares under Amended and Restated 2017 Stock Option Plan

Common shares under 2020 Equity Incentive Plan

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not Paid Out or

Michael Raleigh

Henry Clanton

Jason Stabell

Andrew Williamson

Incentive Plan Awards—Value Vested or Earned for Named Executive Officers

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During the Year

Michael Raleigh

Henry Clanton

We have adopted the 2020 Plan as an incentive-based share award plan applicable to all named executive officers and employees.

Termination and Change of Control Benefits

All of our named executive officers have entered into employment contracts with us.

Michael Raleigh’s employment contract calls for a base pay of $150,000 per year and an equity award in an amount having a value equal to at least one time his base pay.

The contract also contains provisions for severance payments equal to twelve months of current annual salary in the event that a change of control occurred.

Lane Bond’s employment contract calls for a base pay of US$200,000 per year and contains provisions for severance payments equal to six months of current annual salary amount in the event of a change of control.

Henry Clanton’s employment contract calls for a base pay of US$250,000 per year.

Change of control is defined as any event whereby any person acquires at least 50% of The Company’s stock or if a group of shareholders causes at least 50% of the board members to change.

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Option ‑ Based

Matthew Dougherty*

Stephen Finlayson

Tracy Stephens

Jason Standowski

Jason Stankowski

Lovoi, who is not independent, only receives share-based awards for his service as a board member.

Dougherty have chosen not to receive any payment for his service as a board member.

On a biannual basis, we compensate each director for services rendered (unless a director elects not to receive payment) and reimburse reasonable out-of-pocket travel expenses when incurred.

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Tracy Stephens

Jason Standowski

Jason Stankowski

The values of incentive plan awards that were vested or earned during the year ended December 31, 2022 are as follows:

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Tracy Stephens

Jason Stankowski

Directors and Officers Liability Insurance

We maintain directors’ and officers’ liability insurance for the protection of our directors and officers against liability incurred by them in their capacities as our directors and officers.

The policy provides an aggregate limit of liability

of $30,000,000 with a deductible to us of $25,000 per loss.

The policy provides an aggregate limit of liability of $30,000,000 with a deductible to us of $25,000 per loss.

The annual premium for the Directors’ and Officers’ liability insurance is about $350,000 and is renewed annually.

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To our knowledge, each person named in the table has sole voting and investment power with respect to the common shares identified as beneficially owned.

Unless otherwise indicated, the address of each of the individuals named below is c/o Epsilon Energy Ltd., 16945 Northchase Drive, Suite 1610, Houston, Texas 77060.

Unless otherwise indicated, the address of each of the individuals named below is c/o Epsilon Energy Ltd., 500 Dallas, Suite 1250, Houston, Texas 77002.

Percentage of

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5% Stockholders

Advisory Research, Inc.

Palo Duro Energy Fund, LP (1)

JVL Advisors, LLC (2)

azValor Asset Management SGIIC SA (3)

Paragon Associates (4)

Solas Capital Management LLC (3)

Named Executive Officers and Directors

Matthew Dougherty (6)

Jacob Roorda (7)

Bruce Lane Bond (8)

Jason Stabell (4)

Henry Clanton (5)

John Lovoi (6)

Tracy Stephens (10)

Stephen Finlayson (7)

Jacob Roorda (8)

Tracy Stephens (9)

David Winn (10)

Jason Stankowski (11)

Henry Clanton (13)

Michael Raleigh (14)

All executive officers and directors as a group (8 persons) (12)

Indicates beneficial ownership of less than 5% of outstanding shares.

(1) The address of Advisory Research, Inc., or ARI, is 180 North Stetson Avenue, Suite 5500, Chicago, Illinois 60601.

Advisory Research, Inc.

(“ARI”) is the general partner of Advisory Research Energy Fund, L.P., the direct beneficial holder of the common shares, as reported on a Schedule 13G filed with the SEC on February 16, 2021.

(1) The address of Palo Duro Energy Fund, LP, or Palo Duro is 311 S.

Wacker Drive, Suite 1250, Chicago, Illinois 60606.

Matthew Dougherty is the managing partner of Palo Duro and exercises the voting and dispositive power with respect to the common shares held by Palo Duro.

(2) The address of JVL Advisors, LLC, or JVL, is 10000 Memorial Drive, Houston, Texas 77024.

John Lovoi, the chairman of our board of directors, and the managing partner of JVL, exercises the voting and dispositive power with respect to the common shares held by JVL.

(3) The address of azValor Asset Management SGIIC SA, or azValor, is Paseo de la Castellana 10, 3rd, Madrid, 28046, Spain.

Alvaro Guzmàn de Làzaro, Chief Investment Officer at azValor, exercises the voting and dispositive power with respect to the common shares held by azValor.

(4) The address of Paragon Associates and Paragon Associates II Joint Venture is 500 Crescent Court, Suite 260, Dallas, Texas 75201.

Bradbury Dyer III is the managing partner of Paragon Associates Joint Venture and exercises the voting and dispositive power with respect to the common shares held by Paragon Associates Joint Venture.

(3) The address of Solas Capital Management, LLC is 405 Park Avenue, New York, NY 10022.

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All of the securities reported are owned by advisory clients of Solas, none of which is a beneficial owner of more than 5% as of July 14, 2020.

(6) Includes 97,650 shares held by Mr.

Dougherty individually.

Dougherty is a member of our board of directors.

Roorda is a member of our board of directors.

Includes 25,000 shares held by Mr.

Roorda’s spouse, and 12.500 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 25, 2021.

(8) Includes 50,000 shares issuable upon the exercise (at exercise price of $5.03-$5.51) of options exercisable within 60 days of March 25, 2021.

Bond is our chief financial officer.

Stabell is our chief executive officer and a member of our board of directors.

(5) Includes 30,000 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 25, 2021 (not yet expired).

Clanton is our chief operating officer.

(6) Includes the shares held by JVL.

Includes 10,000 shares issuable upon the exercise (at exercise price of $5.51) of options held by Mr.

Lovoi and exercisable within 60 days of March 25, 2021.

Lovoi is the chairman of our board of directors.

Stephens is a member of our board of directors.

Finlayson is a member of our board of directors.

Roorda is a member of our board of directors.

Includes 25,000 shares held by Mr.

Roorda’s spouse, and 12.500 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 25, 2021 (not yet expired).

Stephens is a member of our board of directors.

Winn is a member of our board of directors.

Stankowski is a member of our board of directors and a partner and portfolio manager for Clayton Partners, LLC.

(13) Includes 30,000 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 25, 2021.

Clanton is our chief operating officer.

(14) Includes 50,000 shares issuable upon the exercise (at exercise price of $5.51) of options exercisable within 60 days of March 25, 2021.

Raleigh is our chief executive officer and a member of our board of directors.

(15) Includes 152,500 shares issuable upon the exercise (at exercise price of $5.03-$5.51) of options exercisable within 60 days of March 25, 2021.

(12) Includes 42,500 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 25, 2021 (not yet expired).

Changes in Control.

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Independence of the Board of Directors

The Board is currently composed of eight directors who provide us with a wide diversity of business experience.

The Board is currently composed of seven directors who provide us with a wide diversity of business experience.

Our Board has determined that Messrs.

Matthew Dougherty, Jacob Roorda, Tracy Stephens, Stephen Finlayson, Jason Stankowski (as of January 21, 2021) and David Winn (as of January 21, 2021) are independent in accordance with

the listing requirements of the NASDAQ Global Market, representing over 50% of the Board.

Jacob Roorda, Tracy Stephens, Stephen Finlayson, Jason Stankowski and David Winn are independent in accordance with the listing requirements of the NASDAQ Global Market, representing over 50% of the Board.

Our Board conducted its independence analysis for each of its current members other than John Lovoi and Michael Raleigh, considering all relevant facts and circumstances, including the director’s other commercial, accounting, legal, banking, consulting, charitable and familial relationships.

1 unchanged sentence

Indemnification of Officers and Directors

Under Section 124 of the Business Corporations Act (Alberta) (the "ABCA"), except in respect of an action by or on behalf of us or body corporate to procure a judgment in our favor, we may indemnify a current or former director or officer or a person who acts or acted at our request as a director or officer of a body corporate of which we are or were a shareholder or creditor and the heirs and legal representatives of any such persons (collectively, "Indemnified Persons") against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by any such Indemnified Person in respect of any civil, criminal or administrative actions or proceedings to which the director or officer is made a party by reason of being or having been our director or officer, if (i) the director or officer acted honestly and in good faith with a view to our best interests, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that such director's or officer's conduct was lawful (collectively, the "Indemnification Conditions").

against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by any such Indemnified Person in respect of any civil, criminal or administrative actions or proceedings to which the director or officer is made a party by reason of being or having been our director or officer, if (i) the director or officer acted honestly and in good faith with a view to our best interests, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that such director's or officer's conduct was lawful (collectively, the "Indemnification Conditions").

Notwithstanding the foregoing, the ABCA provides that an Indemnified Person is entitled to indemnity from us in respect of all costs, charges and expenses reasonably incurred by the person in connection with the defense of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been our director or officer, if the person seeking indemnity (i) was substantially successful on the merits in the person's defense of the action or proceeding, (ii) fulfills the Indemnification Conditions, and (iii) is fairly and reasonably entitled to indemnity.

14 unchanged sentences

Audit of financial statements

Audit related fees

Total Audit Fees

31 unchanged sentences

001-38770, filed on March 29, 2019)

Lane Bond Offer Letter (incorporated by reference to Exhibit 10.6 of Form 10, File No.

001-38770, filed on December 21, 2018)

Sixth Amendment to Credit Agreement, effective as of January 7, 2019

Seventh Amendment to Credit Agreement, effective as of January 7, 2019

Eighth Amendment to Credit Agreement, effective as of January 7, 2019

Ninth Amendment to Credit Agreement, effective as of January 7, 2019

Henry Clanton Offer Letter (incorporated by reference to Exhibit 10.7 of Form 10, File No.

9 unchanged sentences

001-38770, filed on December 21, 2018)

M ichael Raleigh Executive Employment Agreement (incorporated by reference to Exhibit 10.1 of Form 8-K, File No.

001-38770, filed on February 2, 2021)

Jason Stabell Executive Employment Agreement (incorporated by reference to Exhibit 10.1 of Form 8-K, File No.

001-38770, filed on June 24, 2022)

Andrew Williamson Executive Employment Agreement (incorporated by reference to Exhibit 10.1 of Form 8-K, File No.

001-38770, filed on June 24, 2022)

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of Form 10, File No.

19 unchanged sentences

Epsilon Energy Ltd .

Andrew Williamson

Chief Financial Officer

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated:

/s/ Michael Raleigh

/s/ Jason Stabell

Chief Executive Officer and Director

2 unchanged sentences

(Principal Executive Officer)

Andrew Williamson

Chief Financial Officer

4 unchanged sentences

March 23, 2023

/s/ Matthew Dougherty

March 23, 2022

Matthew Dougherty

/s/ Stephen Finlayson

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures