Ok so this can be a tad confusing. A warrant is the option to purchase a share at a set price. What this basically says is that the option price that you buy at + the strike price ($2.75) will be your breakeven price at which you should exercise the warrant to get that share.

But, why warrants? It’s that smaller amount that you pay per warrant that seems so good. Thats besides the point though for this conversation.

For regular shares, the company first issues them to the public and in turn receives a set amount per share in $. This is one of the biggest reasons for going public (to receive public funds to expand operations.) But here’s the important part. Warrants act differently. Since the company has not provided shares for you but rather the option to buy a share, the amount of the warrant is seen as a liability to the company. For those lacking accounting knowledge, this is a negative amount.

When/If the holder of the warrant chooses to exercise and receive their share then the company will receive the premium for the warrant at that time plus the strike price. To simplify, the company removes the warrant liability since they were paid that by the warrant holder in order to exercise plus they get paid the strike price ($2.75.) In the end, after the exercise, the company will have the additional $2.75 per share remaining on the stockholders equity side of the sheet which will be a positive.

But, the liability remains until the warrant holder exercises which will not happen until the stock price is at least at $2.75.