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

Commencing on March 8, 2022, we implemented a plan to repurchase our issued and outstanding common shares and to return capital to our shareholders. We used cash on hand to fund these repurchases. During the year ended December 31, 2022, we repurchased 982,500 common shares of the maximum of 1,183,410 authorized for repurchase and spent $6,234,879 under the plan. The repurchased stock had an average price of $6.32 per share (excluding commissions) and was subsequently retired during the year ended December 31, 2022.

In 2023, we repurchased 190,700 common shares at an average price of $5.82 per share (excluding commissions) before the plan terminated on March 7, 2023.

Commencing on January 1, 2021, we implemented a plan to repurchase our issued and outstanding common shares. The plan terminated on December 31, 2021. We used cash on hand to fund these repurchases. During the year ended December 31, 2021, we repurchased 534,015 common shares of the maximum of 1,193,000 authorized for repurchase and spent $2,423,007 under the plan. The repurchased stock had an average price of $4.51 per share (excluding commissions) and was subsequently retired during the year ended December 31, 2022.

On March 9, 2023, the Board of Directors authorized a new share repurchase program of up to 2,292,644 common shares, representing 10% of the outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $15.0 million. The program is pursuant to a normal course issuer bid and will be conducted in accordance with Rule 10b-18 under the Exchange Act. The program will commence on March 27, 2023 and end on March 26, 2024, unless the maximum amount of common shares is purchased before then or Epsilon provides earlier notice of termination.

(c)

Equity Incentive Plan

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”). Shareholders approved the 2020 Plan at the Meeting. Following Epsilon’s listing on the NASDAQ Global Market, the Board determined that it is in the best interest of the shareholders to approve a new incentive plan that is compliant with U.S. public company equity plan rules and practices that would replace Epsilon’s Amended and Restated 2017 Stock Option Plan (including its predecessors) and the Share Compensation Plan (collectively referred to as the “Predecessor Plans”). No further awards will be granted under the Predecessor Plans.

The 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 2020 Plan, Epsilon is authorized to issue up to 2,000,000 common shares.

Restricted Stock Awards

For the year ended December 31, 2022, 289,231 common shares of Restricted Stock with a weighted average market price at grant date of $6.28 were awarded to the Company’s officers, employees, and board of directors. For the year ended December 31, 2021, 48,000 common shares of Restricted Stock with a weighted average market price at grant date of $5.04 were awarded to the Company’s board of directors. These shares vest over a three or four-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 for the years ended December 31, 2022 and 2021:


	Year ended		Year ended
	December 31, 2022		December 31, 2021
	Number of	Weighted	Number of	Weighted
	Restricted	Average	Restricted	Average
	Shares	Remaining Life	Shares	Remaining Life
	Outstanding	(years)	Outstanding	(years)
Balance non-vested Restricted Stock at beginning of period	166,002	1.38	290,070	1.60
Granted	289,231	1.86	48,000	1.67
Vested	(157,023)	—	(137,668)	—
Forfeited	—	—	(34,400)	—
Balance non-vested Restricted Stock at end of period	298,210	1.74	166,002	1.38

Stock compensation expense for the granted Restricted Stock is recognized over the vesting period. Stock compensation expense recognized during the year ended December 31, 2022 was $776,939 (for the year ended December 31, 2021, $554,249).

At December 31, 2022, the Company had unrecognized stock-based compensation related to these shares of $1,668,564 to be recognized over a weighted average period of 1.55 years.

Performance Share Unit Awards (“PSU”)

The Company grants PSUs, which are paid in stock to certain key employees. The PSUs will vest on the last day of the performance period. The number of PSUs that will ultimately vest is based on two performance targets as follows:

●

The targets for the PSUs are based on (i) the relative total stockholder return (“TSR”) percentile ranking and (ii) the relative cash flow per debt adjusted share – growth (“CFDAS Growth”) percentile ranking of the Company, each as compared to the Company’s peer group as specified in the award agreement during the applicable one-year performance period ending on December 31.

●

Cash Flow per Debt Adjusted Share (“CFDAS”) is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) divided by the sum of the 1) the total debt plus the value of preferred stock minus cash and the amount of dividends paid for the year divided by the share price at the end of the year; and 2) the actual share count at year end.

●

The vesting of each PSU Award will be based 50% on TSR performance and 50% based on CFDAS Growth performance.

●

The recipient of the award must be employed with the Company at the time of vesting.

The number of shares ultimately issued under these awards can range from zero to 200% of target award amounts at the discretion of the Compensation Committee of the Board of Directors. During the year ended December 31, 2022, a total of 31,667 common shares were vested and issued.

The following table summarizes PSUs for the years ended December 31, 2022 and 2021:


	Year ended		Year ended
	December 31, 2022		December 31, 2021
	Number of	Weighted	Number of	Weighted
	Performance	Average	Performance	Average
	Shares	Remaining Life	Shares	Remaining Life
	Outstanding	(years)	Outstanding	(years)
Balance non-vested PSUs at beginning of period	151,500	3.84	193,167	1.60
Granted	—	—	20,834	5.04
Vested	(135,667)	—	(62,501)	—
Balance non-vested PSUs at end of period	15,833	1.00	151,500	3.84

Stock compensation expense for the granted PSUs is recognized over the vesting period. Stock compensation expense recognized during the year ended December 31, 2022 related to PSUs was $244,087 (for the year ended December 31, 2021, $401,835).

At December 31, 2022, the Company had unrecognized stock-based compensation related to these shares of $63,328 to be recognized over a weighted average period of 0.63 years (at December 31, 2021: $310,790 over 1.01 years).

Stock Options

As of December 31, 2022, the Company had outstanding stock options covering 70,000 common shares at an overall average exercise price of $5.03 per common share to directors, officers, and employees of the Company and its subsidiaries. These 70,000 options have a weighted average expected remaining term of approximately 1.05 years.

The following table summarizes stock option activity for the years ended December 31, 2022 and 2021:


	Year ended			Year ended
	December 31, 2022			December 31, 2021
		Weighted				Weighted
	Number of	Average		Number of		Average
	Options	Exercise		Options		Exercise
Exercise price in US$	Outstanding	Price		Outstanding		Price⁽¹⁾
Balance at beginning of period	218,750	$	5.28		245,000	$	5.27
Exercised	(138,750)	$	5.38		(16,250)	$	5.25
Expired/Forfeited	(10,000)	$	5.51		(10,000)	$	5.50
Balance at period-end	70,000	$	5.03		218,750	$	5.28

Exercisable at period-end	70,000	$	5.03		218,750	$	5.28

At December 31, 2022, the Company had unrecognized stock-based compensation related to these options of nil (for the year ended December 31, 2021: nil). The aggregate intrinsic value at December 31, 2022 was $112,000 (at December 31, 2021: nil).

During the years ended December 31, 2022 and 2021, the Company awarded no stock options.

The following table summarizes information for stock options outstanding at December 31, 2022:


					Weighted
			Option		Average
	Number of	Number of	Pricing		Remaining
	Options	Options	Model		Contractual Life
Exercise Price	Outstanding	Exercisable	Valuations		(in years)
As of December 31, 2022
$5.03	70,000	70,000	$	165,185	1.05
Total	70,000	70,000	$	165,185	1.05

The value of the options was recorded as stock-based compensation expense, with an offsetting amount to additional paid-in capital based on the vesting terms. Stock-based compensation for the options, for the years ended December 31, 2022 was nil (for the year ended December 31, 2021: nil).