What changed in this filing

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Item 9A. Controls and Procedures

2024-03-21 compared with 2023-03-24 · 107 added, 163 removed, 388 unchanged (41% of the section changed)

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OTHER INFORMATION.

During the quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K .

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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The names, ages, business experience (for at least the past five years) and positions of our directors and executive officers as of December 31, 2023, are set out below.

Our Board of Directors consisted of seven members at such date.

Our Board of Directors consisted of six members at such date.

All directors serve until the next annual meeting of shareholders or until their successors are elected or appointed and qualified.

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Chief Executive Officer and Director

Chief Operating Officer

Andrew Williamson

Chief Financial Officer

Chief Operating Officer

Chairman of the Board and Director

Tracy Stephens

Stephen Finlayson

Jason Stankowski

Nicola Maddox

Biographies of Corporate Directors and Executive Officers.

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We believe that Mr.

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.

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

Clanton has served as our chief operating officer since January 2017.

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He holds a MBA and a BS in Petroleum Engineering from Texas A&M University.

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.

Lovoi has been chairman of our board of directors since July 2013.

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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.

Jacob Roorda .

Roorda has been a director of the Company since March 2016.

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 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.

He was the Chief Executive Officer of Todd Energy Canada Ltd.

from January 2015 to November 2016.

None of these positions are, or have ever been, with companies affiliated with the Company.

He has been certified as a Professional Engineer by the Association of Professional Engineers and Geoscientists of Alberta since 1981.

We believe that Mr.

Roorda is qualified to serve as a member of our board of directors as a result of his experience in the natural gas and oil industry, including his natural gas and oil business development and engineering experience, and his financial industry experience.

Tracy Stephens.

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Stephens is qualified to serve as a member of our board of directors as a result of his extensive experience with public companies.

Stephen Finlayson .

Finlayson has been a director since May 2019.

He resigned from the audit committee and became a member of the Compensation, Nominating and Corporate Governance Committee in January 2021.

Finlayson founded and is currently Chairman of Applied Manufacturing Technologies (AMT), an independent international consulting and project services company.

Prior to founding AMT, Mr.

Finlayson headed Aspen Tech’s professional services organization serving global customers in the hydrocarbon industries.

Aspen Tech, a public company, trades under the symbol AZPN on the NASDAQ.

Finlayson, Aspen’s professional services organization delivered over 50% of company revenues.

With his extensive experience in the hydrocarbon industries both in public and private companies we believe that Mr.

Finlayson is qualified to serve as a member of our board of directors.

Jason Stankowski .

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He became designated as a Chartered Financial Analyst in 2003.

We believe that Mr.

Stankowski is qualified to serve as a member of our board of directors based on his corporate finance and experience in public equity markets.

Winn has been a director and member of the Audit Committee since January 2021.

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Winn served as a Director for PricewaterhouseCoopers LLP and previously as a Partner with Arthur Andersen LLP.

We believe that Mr.

Winn is qualified to serve as a member of our board of directors because of his experience in public accounting and public company reporting.

Nicola Maddox.

Maddox has over forty years’ experience in the oil and gas industry.

After receiving her BA in Communications, she was employed by Exxon Minerals starting as an Associate Landman eventually ending in Executive Management positions starting in 1993.

She was a co-founder of Centurion Exploration Company in 2004, initially serving as an EVP and then becoming its President, CEO and Chairman of the Board from 2007 to 2009.

At Merlon International, LLC, Ms.

Maddox was SVP in charge of its Texas subsidiary.

She advanced to EVP and ultimately President after Merlon sold its Egyptian subsidiary in 2019.

Since 2022, she has been a self-employed energy advisor specializing in contract analysis, strategic planning, and negotiation strategies.

We believe that Ms.

Maddox is qualified to serve as a member of our board of directors because of his significant industry experience in upstream oil and gas.

Corporate Governance Practices and Policies

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In addition, the Board monitors and considers for implementation the corporate governance standards that are proposed by various Canadian regulatory authorities or that are published by various non-regulatory organizations in Canada.

The Board has also established a Compensation Committee and Nominating and Corporate Governance Committee and has adopted a Compensation Committee Charter, and Nominating and Corporate Governance Charter to ensure the objectives of NI 58-201 and the NASDAQ Global Market are met.

The Board has also established a Compensation, Nominating and Corporate Governance Committee and has adopted a Compensation, Nominating and Corporate Governance Charter to ensure the objectives of NI 58-201 and the NASDAQ Global Market are met.

Lovoi is the Managing Partner of JVL Advisors, LLC, beneficial owner of 3.46% of our common shares and Chairman of the Board.

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

The Board held eleven meetings during 2023 and thirteen meetings during 2022.

All Board meetings were conducted with open and candid discussions.

As such, the independent directors did not hold any separate meetings, other than Audit and Compensation, Nominating and Corporate Governance Committee meetings that excluded directors who were not independent.

The chairman of the Board is not an independent director.

The independent members of the Board have the ability to meet on their own and are authorized to retain independent financial, legal and other experts as required whenever, in their opinion, matters come before the Board that require an independent analysis by the independent members of the Board.

As such, directors did not hold any separate meetings, other than Audit and Compensation, Nominating and Corporate Governance Committee meetings.

The members of the Board have the ability to meet on their own and are authorized to retain independent financial, legal and other experts as required whenever, in their opinion, matters come before the Board that require an independent analysis by the members of the Board.

The Board intends to hold at least four regular meetings each year, as well as additional meetings as required.

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The Board and CEO do not have a written position description for the CEO;

however, the CEO’s principal duties and responsibilities are planning our strategic direction, providing leadership, acting as our spokesperson, reporting to shareholders, and overseeing our executive management in particular with respect to operations and finance.

The charter for each of the Board committees outlines the duties and responsibilities of the members of each of the committees, including the chair of such committees.

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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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Board Committees

The Board has three committees.

The committees are the Audit Committee, the Compensation, Nominating and Corporate Governance Committee, and the Conflicts Committee.

The Board has two committees.

The committees are the Audit Committee and the Compensation, Nominating and Corporate Governance Committee.

Each committee has been constituted with independent directors.

Audit Committee .

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

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

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 our 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 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 is currently comprised of Tracy Stephens (Chairman), John Lovoi, and Nicola Maddox.

All members of this committee are independent directors.

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

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A copy of such charter can be found on our website at www.epsilonenergyltd.com.

Conflicts Committee .

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

All members are independent directors.

The Conflicts Committee has the power to advise the Board with respect to any matters or issues of concern to the Conflicts Committee in connection with any corporate opportunity and the interests of a related or conflicted party that the Conflicts Committee considers necessary or advisable.

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., 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.

Shareholders may communicate directly with our Board 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 with the Board or any director by calling Ms.

Flores at (281) 670-0002.

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All named executive officers have executed employment contracts with us.

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.

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.

Jason Stabell’s employment agreement is effective from July 1, 2022 and filed in Form 8-K with the SEC on June 24, 2022.

Henry Clanton’s employment agreement is effective from January 4, 2019 and filed in Form 10-12B with the SEC on December 21, 2018.

Andrew Williamson’s employment agreement is effective from July 1, 2022 and filed in Form 8-K with the SEC on June 24, 2022.

EXECUTIVE COMPENSATION.

Summary Compensation Table

Epsilon’s board of directors (the “Board”) adopted the 2020 Equity Incentive Plan (the “2020 Plan”) on July 22, 2020 subject to approval by Epsilon’s shareholders at Epsilon’s 2020 Annual General and Special Meeting of shareholders, which occurred on September 1, 2020 (the “Meeting”).

The Board adopted the 2020 Equity Incentive Plan (the “2020 Plan”) on July 22, 2020 subject to approval by Epsilon’s shareholders at Epsilon’s 2020 Annual General and Special Meeting of shareholders, which occurred on September 1, 2020 (the “Meeting”).

Shareholders approved the 2020 Plan at the Meeting.

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Name and principal

Compensation (4)

Jason Stabell, CEO (1)

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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 was hired as our chief executive officer in July 2022.

His current base salary is $311,000.

2023—Share award of 108,465 common shares valued at $5.08 per share, market price on the grant date of December 31, 2023, which vests evenly over a three year period.

Share award of 56,180 common shares valued at $5.34 per share, market price on the grant date of July 1, 2023.

This stub grant, although awarded in 2023, was based on 2022 performance.

The grant vests evenly over a three year period.

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

This grant was awarded up-front on the employment effective date as part of the employment agreement.

The grant vests over a four-year period with 25% vesting on the first anniversary 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.

Henry Clanton was hired as our chief operating officer in January 2018.

His current base salary of $272,000.

2023—Share award of 18,111 common shares valued at $5.08 per share, market price on the grant date of December 31, 2023, which vest evenly over a three year period.

2022— Share award of 12,825 common shares valued at $6.33 per share, market price on the grant date, April 6, 2022, and a share award of 13,877 common shares 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.

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.

Andrew Williamson was hired as our chief financial officer in July 2022.

His current base salary is $239,000.

2023—Share award of 45,276 valued at $5.08 per share, market price on the grant date of December 31, 2023, which grants vest evenly over a three year period.

Share award of 23,409 common shares valued at $5.34 per share, market price on the grant date of July 1, 2023.

This stub grant, although awarded in 2023, was based on 2022 performance.

The grant vests evenly over a three year period.

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

This grant was awarded up-front on the employment effective date as part of the employment agreement.

Williamson is still employed.

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

(4) As a Company policy, Epsilon matches on 401K contributions up to 5%.

Description of the 2020 Equity Incentive Plan

The 2020 Plan was approved by the Board on July 22, 2020 and shareholders on September 1, 2020 as a replacement of our Amended and Restated 2017 Stock Option Plan and the Share Compensation Plan.

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As of December 31, 2023, 234,834 performance stock units (“PSUs”), and 807,677 time-based restricted shares were outstanding, leaving 957,489 shares available to be granted under the 2020 Plan.

If the shares granted under the 2020 Plan expire or terminate for any reason without having been issued, they again become available for grant under the 2020 Plan.

If the shares granted under the 2020 Plan expire or terminate for any reason without having been issued or are forfeited, they again become available for grant under the 2020 Plan.

Shares granted under the 2020 Plan are not transferable or assignable other than by will or other testamentary instrument or the laws of succession.

In the event we undergo a change of control by a reorganization, acquisition, amalgamation or merger (or a plan or arrangement in connection with any of these) with respect to which all or substantially all of the persons who were the beneficial owners of the common shares immediately prior to such transaction do not, following such transaction, beneficially own, directly or indirectly more than 50% of the resulting voting power, a sale of all, or substantially all, of the Company’s assets, or the liquidation, dissolution or winding-up of the Company, outstanding awards shall be subject to the definitive agreement entered into by the Company in connection with the change of control.

If an award holder resigns from the Company or is terminated by the Company (with or without cause), unvested shares will immediately be forfeited.

At December 31, 2023, we were authorized to issue equity securities as follows:

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During the Year

Jason Stabell

Andrew Williamson

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

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Incentive Plan

Option ‑ Based

Stephen Finlayson

Tracy Stephens

Jason Stankowski

Lovoi, who is not independent, only receives share-based awards 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.

As of May 1, 2017, board member compensation is fixed at an annual fee of Cdn$80,000.

Cdn$40,000 is paid in cash semi-annually in July and January and Cdn$40,000 paid as a share-based award.

Nicola Maddox

On a quarterly 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.

As of January 1, 2023, board member compensation is fixed at an annual fee of $55,000 paid in cash quarterly and $65,000 as a share-based award valued at the prior year-end share price (vesting evenly over a three year period).

The chairman of the board receives an additional $40,000 annual cash fee, the chairman of the audit committee receives an

additional $15,000 annual cash fee, and the chairman of the compensation, nominating, and corporate governance committee receives an additional $10,000 annual cash fee.

Incentive Plan Awards—Value Vested or Earned During the Year for Directors (Other Than Named Executive Officers)

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not Paid Out or

Stephen Finlayson

Tracy Stephens

Jason Stankowski

Nicola Maddox

The values of incentive plan awards that were vested or earned during the year ended December 31, 2023 are as follows:

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During the Year

Stephen Finlayson

Tracy Stephens

Jason Stankowski

Nicola Maddox

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

The policy provides an aggregate limit of liability of $35,000,000 with a retention held by the Company of $1,500,000.

The current annual premium for the Directors’ and Officers’ liability insurance is approximately $375,000 and is re-bid annually.

The premium is not allocated between Directors and Officers as separate groups.

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Palo Duro Energy Fund, LP (1)

JVL Advisors, LLC (2)

Solas Capital Management LLC (2)

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Henry Clanton (4)

Andrew Williamson (5)

John Lovoi (6)

Stephen Finlayson (7)

Jacob Roorda (8)

Tracy Stephens (7)

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Jason Stankowski (9)

Nicola Maddox (10)

All executive officers and directors as a group (8 persons) (11)

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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.

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

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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).

(4) Includes 30,000 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 20, 2024.

Clanton is our chief operating officer.

Williamson is our chief financial officer.

(6) Includes the shares held by JVL.

Lovoi is the chairman 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.

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

(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).

Maddox is a member of our board of directors.

(11) Includes 30,000 shares issuable upon the exercise (at exercise price of $5.03) of options exercisable within 60 days of March 20, 2024.

Changes in Control.

We do not know of any arrangement, the operation of which may at a subsequent date result in a change in control of us.

Securities Authorized For Issuance under Equity Compensation Plans

The information required by Item 201 of Regulation S-K in “Item 1.

Business – Market for Our Common Equity and Related Stockholder Matters.”

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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Independence of the Board of Directors

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

Our Board has determined that Messrs.

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.

Pursuant to its review, the Board determined that with respect to each of its current members other than John Lovoi and Michael Raleigh, there are no disqualifying factors with respect to director independence enumerated in the listing standards of NASDAQ or any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each such member is an “independent director” as defined in the listing standards of NASDAQ.

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

Our Board has determined that John Lovoi, Tracy Stephens, Jason Stankowski, David Winn, and Nicola Maddox 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, considering all relevant facts and circumstances, including the director’s other commercial, accounting, legal, banking, consulting, charitable and familial relationships.

Pursuant to its review, the Board determined that with respect to each of its current members, there are no disqualifying factors with respect to director independence enumerated in the listing standards of NASDAQ or any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each such member is an “independent director” as defined in the listing standards of NASDAQ.

Indemnification of Officers and Directors

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").

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").

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.

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The ABCA provides that we may not purchase insurance for the benefit of an Indemnified Person against a liability that relates to the person's failure to act honestly and in good faith with a view to our best interests.

Our by-laws provide that, subject to the ABCA, the Indemnified Persons shall be indemnified against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by such person in respect of any civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, if the Indemnification Conditions are satisfied.

reason of being or having been a director or officer of the Company or such body corporate, if the Indemnification Conditions are satisfied.

In addition, pursuant to our by-laws, we may indemnify such person in such other circumstances as the ABCA or law permits.

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PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following table summarizes fees billed to us for fiscal 2022 and for fiscal 2021 by our principal auditors, BDO USA, LLP:

The following table summarizes fees billed to us for fiscal 2023 and for fiscal 2022 by our principal auditors, BDO USA, P.C.:

Audit of financial statements

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Financial Statement Schedules:

There are no Financial Statement Schedules included with this filing for the reason that they are not required.

Articles of Incorporation of Epsilon Energy Ltd (incorporated by reference to Exhibit 3.1 of Form 10, File No.

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001-38770, filed on March 18, 2020)

Credit Agreement, dated as of July 29, 2013, by and among Epsilon Energy USA Inc., the lenders from time to time party thereto, Texas Capital Bank, National Association (“TCB”), as the administrative agent, swing line lender and letter of credit issuer, and TCB as the sole lead arranger and sole book runner (incorporated by reference to Exhibit 10.1 of Form 10, File No.