I am familiar with derivatives (its all about risk

I am familiar with derivatives (its all about risk management).  You will see them on larger companies' Balance Sheet and Income Statement.   I can't ever recall seeing any type of derivatives at the penny stock level.

Because the company will be entering the European market starting in 2014, it is possibly the company was hedging against a strengthening Euro. 

For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change.

The derivative (in this case) has been recorded as both a Liability and recognized as negative earnings.  It's also been recorded on Statement of Cash Flows.

Fair Value Hedge

For a derivative designated as hedging the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (referred to as a fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to reflect in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value.

Foreign Currency Hedge

For a derivative designated as hedging the foreign currency exposure of a net investment in a foreign operation, the gain or loss is reported in other comprehensive income (outside earnings) as part of the cumulative translation adjustment. The accounting for a fair value hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of an unrecognized firm commitment or an available-for-sale security. Similarly, the accounting for a cash flow hedge described above applies to a derivative designated as a hedge of the foreign currency exposure of a foreign-currency-denominated forecasted transaction.

Going to look into it.

GLTA