NNVC's (and other company's) "derivative effect of certain warrants and debentures" aren't the same things as the "derivative and hedging contracts" that you're asking about....which usually refer to investment vehicles based on asset values and futures and other things that are over my head.
The derivative effect of certain warrants and debentures refers to a company's requirement to account for the change in value of certain obligations, typically based on the company's share price.
If a warrant is outstanding the company has an obligation to issue a share if that warrant is exercised at its fixed exercise price. If the Compan'y share price changes from one accounting period to the next (it always does), then the value of the warrant goes up or down with it, hence one has to account for the "derivative effect of certain warrants and debentures" by recording that change in value. The concept is easy...there's an obligation to adjust the theoretical value of the warrant, which is an obligation of the Company (typically appearing on the Balance Sheet as "Derivative Liability"), as the share price changes in the open market...the accounting's a nightmare. It involves accounting for the term of the warrant (how much time until it expires), prevailing interest rates and climate conditions :o)
Once upon a time warrants and weren't accounted for accounted for until they were exercised. Abuses were rampant and regulators created a monster by requiring a company to recognize the value of the warrant immediately and on an ongoing basis versus pretending that they didn't exist until they were exercised. It had to be done but the methodology is ugly.
We know that Boniuk held some warrants/options that were attached to a few of his investments and there may have been others. Those goofy Preferred A shares may even have a value that requires adjustment at the end of every accounting period.
"Derivative" in this case simply means "based on the share price".
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