6. Shareholders’ Equity

(a)Authorized Shares

The Company is authorized to issue an unlimited number of Common Shares with no par value and an unlimited number of Preferred Shares with no par value.

(b)Purchases of Equity Shares

Normal Course Issuer Bid

On February 18, 2026, the Board authorized a new share repurchase program of up to 3,014,986 common shares, representing 10% of the outstanding common shares of the Company at such time, for an aggregate purchase price of not more than US $15.0 million. The program commenced on February 19, 2026 and is set to expire February 18, 2027, unless the maximum amount of common shares is purchased before then or the Board approves earlier termination.

On February 12, 2025, the Board authorized a new share repurchase program of up to 2,200,876 common shares, representing 10% of the current outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $13.0 million. The program commenced on February 12, 2025 and expired on February 11, 2026.

During the three and six months ended June 30, 2026 and 2025, no shares were repurchased under the new or previous share repurchase program.  

(c)Issuance of Equity Shares

On June 18, 2026, Epsilon Energy Ltd. (the “Company”) entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”), under which the Company may, from time to time, sell common shares of the Company, no par value, having an aggregate offering price of up to $15,000,000 (“Shares”) in “at the market” offerings through or to the Agent, as sales agent and/or principal. Sales can be made by any method deemed an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act or through privately negotiated transactions. Sales of the Shares, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent.

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              No shares have been sold under the Sales Agreement through the date of this filing.

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(d)Equity Incentive Plan

The Board adopted the amended 2020 Equity Incentive Plan (the “2020 Plan”) on April 8, 2026 subject to approval by Epsilon’s shareholders at Epsilon’s 2026 Annual General and Special Meeting of shareholders, which occurred on May 20, 2026 (the “Meeting”). Shareholders approved the 2020 Plan, as amended, at the Meeting.  

The amended 2020 Plan provides for incentive compensation in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards. Under the amended 2020 Plan, Epsilon is authorized to issue up to 2,140,637 Common Shares.

Restricted Stock

For the six months ended June 30, 2026, no restricted common shares were awarded to the Company’s Board of Directors and employees. For the year ended December 31, 2025, 488,283 restricted common shares with a weighted average grant date fair value of $4.78 were awarded to the Company’s management, employees, and Board of Directors. These shares vest over a three-year period, with an equal number of shares being issued per period on the anniversary of the award resolution. The vesting of the shares is contingent on the individuals’ continued employment or service. The Company determined the fair value of the granted Restricted Stock based on the market price of the common shares of the Company on the date of grant.

The following table summarizes restricted stock activity for the six months ended June 30, 2026, and the year ended December 31, 2025:

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Stock compensation expense for the granted Restricted Stock is recognized over the vesting period. Stock compensation expense recognized during the three and six months ended June 30, 2026 was $547,527 and $1,095,054, respectively (for the three and six months ended June 30, 2025 was $385,838 and $771,676, respectively).

As of June 30, 2026, the Company had unrecognized stock-based compensation related to these shares of $3,051,172 to be recognized over a weighted average period of 1.21 years (at December 31, 2025: $4,146,227 over 1.37 years).

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(e)Dividends

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On March 3, 2026 and June 1, 2026, the Board declared a quarterly dividend of $0.0625 per common share (annualized $0.25 per common share) totaling in aggregate approximately $1.9 million and $3.8 million that was paid during the three and six months ended June 30, 2026, respectively.