SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COCONUT CODE, INC.
1430 SOUTH FEDERAL HIGHWAY
DEERFIELD BEACH, FLORIDA 33441
(305) 481-9331
FOR FISCAL YEAR ENDED: DECEMBER 31, 1995
COMMISSION FILE NUMBER: 33-64164-A
STATE OF INCORPORATION: FLORIDA
IRS EMPLOYER I.D.: 59-2556411
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
NAME OF EXCHANGE ON
TITLE OF EACH CLASS: WHICH REGISTERED:
NONE NOT APPLICABLE
SECURITIES REGISTERED PURSUANT TO 12 (G) OF THE ACT:
NAME OF EXCHANGE ON
TITLE OF EACH CLASS: WHICH REGISTERED:
COMMON STOCK, PAR VALUE
$.01 PER SHARE NONE
INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS. YES(X) NO( )
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: YES ( ) NO (X)
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF
REGULATION S-B IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PARTS II OR III OF THIS FORM
10-KSB OR ANY AMENDMENT TO THIS FORM 10-KSB. (X)
ISSUER'S REVENUES FOR THE MOST RECENT FISCAL YEAR: $1,986,992
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES COMPUTED BY
REFERENCE TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED
PRICES OF SUCH STOCK, AS OF DECEMBER 31, 1995: NO MARKET EXISTS FOR THE
COMPANY'S COMMON STOCK.
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK AS OF DECEMBER 31,
1995: 3,382,325
Part I.
Item 1. Description of Business
Business Development
Coconut Code, Inc. (the "Company" or "Registrant") was organized under the laws
of the State of Florida on April 30, 1984 to address the growing demand for
quality based business software, specifically for the restaurant industry.
Today, the Company continues to design, develop, market and support software for
the restaurant industry and, also, for the hospitality industry and small
businesses in general. The Company's products have been installed in over 2,000
facilities in the United States, Canada and other international countries.
Business of Issuer
The Registrant currently markets over fifteen products, each of which is a
derivative of the Company's two core products: the Food Service Management
System(TM) (FSMS(R)) and TimeWare(R) System.
The FSMS(R) is a restaurant and hospitality industry specific software
application which is designed to (1) assist the user in increasing profitability
by reducing overhead costs, (2) simplify day-to-day accounting activities, (3)
improve control over inventory and, (4) provide timely reporting of financial
information to management. In addition, the software includes features which
allow it to interface with cash registers and other point-of-sale hardware
thereby eliminating the need to manually input daily sales data and other
related information into the accounting records. The Company offers the software
in configurations to satisfy the needs of all users, from single unit operations
to multi-unit operations which require the reporting of consolidated financial
information.
TimeWare(R), the Company's other core product, is an advanced time and
attendance software application designed to fully automate and improve control
over the entire payroll process. The software is run on a data collection unit
purchased from a major electronics manufacturer and serves as the time clock
into which employees enter information on time-in, breaks and time-out. The
system is designed to provide accurate collection and timely reporting of
employee time and attendance information and can also be used as a communication
tool between employees and management with respect to scheduling employee time
and other maAtters.
The Company also derives revenue from support of its products, principally
FSMS(TM) and TimeWare(R), through on-site consultation at the customer's
facility and through a telephone access program.
Historically, the Company distributed TimeWare(R) through a national dealer
network and FSMS(R) through small, independent dealerships. Because of the
Company's recent success with direct sales and management's belief that dealers,
agents and sales representatives who are supported on a direct basis will
achieve better results than if supported remotely, the Company embarked on a
program to develop and implement a national distribution network. To this end,
the Company opened its first regional sales office in Chicago, Illinois in
February 1993, staffed by an Agent Sales Manager. The principle objectives of
the regional sales office are to market and sell product to national, regional
and major local chains, recruit, train and support independent sales agents and
provide all support services within the region. Also in early 1993, the Company
hired an Agent Sales Manager based in the Grand Rapids, Michigan area, followed
in 1994 by Agent Sales Managers hired in Atlanta, Georgia and Southeast Florida.
In early 1995, the Agent Sales Manager for Southeast Florida left the Company
and the responsibities for this territory were assumed by the Company's Vice
President of Marketing. As of the end of 1995, the Company had approximately 20
sales agents strategically located in the Northeast, Southeast, Midwest,
Southwest and Western United States.
The Company markets its products in the highly competitive software industry
which is characterized by rapid technological advances and, consequently,
product obsolescence. The Company's ability to compete effectively in the
marketplace is highly dependent upon such factors as product features, user
friendliness, technical support and service, product development capabilities
and the marketing and distribution infrastructure.
On May 1, 1996, the Company officially released to the general public the latest
version of its FSMS(R) accounting software. This new software was specifically
designed to run on Microsoft's Windows 95 operating system, N.T. and Windows
3.11 includes many features and enhancements not available in earlier versions
of FSMS(R). While originally scheduled for release in mid to late 1995,
introduction was delayed primarily to include features requested by larger
customers such as labor and production scheduling, labor forecasting and the
built-in ease and flexibility to interface with most popular point-of-sale
systems.
In 1995, the Company embarked on a program to address certain issues that
concern large national and regional restaurant chains such as labor scheduling,
forecasting cooked food requirements, and the reporting of meaningful
information to management covering individual store level operations through
total company performance. Using the Company's leading edge programming
technology known as SDE(TM) (System Development Environment), prototype systems
were designed for presentation to national and regional chains allowing
prospective customers to choose from a wide array of software applications or,
alternatively, working with the Company's research and development staff, design
their own exact fit apllications. For the year ended December 31, 1995, custom
software development revenue approximated $103,000. The Company foresees that
custom development revenue will grow significantly in 1996. As of May 10, 1996,
the Company's backlog included approximately $529,000 of contracts or letters of
commitment for custom software development.
The Company believes that its core products, FSMS(R) and TimeWare(R) together
with custom software development, give it a significant competitive advantage
because of software features not offered by competitors, Company support of
these products and, most importantly, the fact that the Company writes and
controls its own code for both FSMS(R) and TimeWare(R).
For the years ended December 31, 1995 and 1994, the Company's expenditures for
research and development approximated $477,000 and $330,000, respectively. The
Company believes that its future success is highly dependent upon its ability to
enhance its current product base in order to maintain technological
competitiveness and satisfy the needs of current and prospective customers, as
well as develop new products which have a synergy with existing products and
demonstrate market potential.
The Company had no single customer which accounted for 10% or more of the
Company's net sales in either 1995 or 1994.
As of December 31, 1995, the Registrant had 31 employees, all of whom were
full-time.
Item 2. Description of Property
The Company's executive and principle administrative, sales, marketing, and
research and development functions are housed in leased office space in
Deerfield Beach, Florida. The office comprises approximately 8,000 square feet,
occupied under a lease which expires on January 31, 1998. The Company's Chicago
sales office consists of an office and conference room available on an as needed
basis under a business identity plan lease which expired on January 31, 1996.
The Company did not renew this lease because most work is being performed at
customers' facilities.
Item 3. Legal Proceedings
The Company is not a party to any legal proceedings, the outcome of which would
have a material adverse impact on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 1995.
Part II.
Item 5. Market for Common Equity and Related Stockholder Matters
There is no public market for the Company's common equity securities.
The approximate number of holders of record of the Company's common stock as of
March 20, 1996 was 233.
The Company has never paid a cash dividend on its common stock and does not now
or in the near future anticipate paying a cash dividend.
Item 6. Management's Discussion and Analysis of Financial Condition
Results of Operations
Net sales for the year ended December 31, 1995 were $1,986,992 representing an
increase of 14.5% when compared to the prior year sales of $1,735,853. The
increase in net sales of $251,139 was attributable to repeat sales to multi-unit
operations, continued growth in sales to single-unit facilities and revenue
derived from the sale of custom software to certain regional and national
fast-food operations. As of December 31, 1995, the Company had a backlog of
orders approximating $266,000, the majority of which were installed in the first
quarter of 1996.
Effective January 1, 1995, the Company began recognizing revenue on its phone
support and hardware maintenance contracts over the life of the contract, which
is generally twelve months. This change was made because of the growing
significance of these contracts to the overall business of the Company and
resulted in the recognition of deferred revenue of $100,420 as of December 31,
1995. Prior to this change there was not a significant difference between the
Company's former cash basis method of recognizing revenue on these contracts and
the Company's current method.
Gross profit for 1995 grew to $1,571,276, representing an improvement of 14.9%,
or $203,636, compared to the prior year. As a percentage of net sales, gross
profit was 79.1% and 78.8% for 1995 and 1994, respectively.
Operating expenses increased $174,690 to $2,273,670 principally due to the
addition of six research and development employees during 1995, and an increase
in general and administrative expenses, offset in part by lower selling and
marketing expenss due to the elimination of one Agent Sales Manager at the
beginning of 1995.
Despite the Company's increases in net sales in 1995 and 1994, net losses of
$668,222 and $677,518, respectively, were incurred in each year and have
contributed to the accumulated deficit of $2,312,689 at December 31, 1995. The
Company expects that the net losses experienced will turnaround with further
increases in net sales.
Liquidity and Capital Resources
At December 31, 1995, the Company's working capital was $208,208 compared to
$798,571 at December 31, 1994. During 1995, net cash used in operations of the
Company was $315,218, with investing activities using net cash of $40,626,
principally for the acquisition of personal computers. Offsetting net cash usage
in operations and investing activities was net cash provided from financing
activities, principally $72,600 in drawdowns on the Company's term loan
facility, loans from certain officers of the Company in the amount of $44,800,
and the sale of $20,400 of common stock of the Company.
The Company has a $300,000 line of credit with a bank. Advances under the line
bear interest at the prime rate plus one percent and are secured by the
Company's accounts receivable and the personal guarantees of three principal
stockholders. No advances were taken under the line during 1995 or 1996. The
line of credit expires on May 1, 1997.
In September 1993, the Company commenced a stock offering for up to 1,000,000
common shares of the Company at a price of $5.10 per share. Proceeds raised in
the offering, which expired in May 1994, approximated $1,352,000, net of
offering costs.
In January 1995, the Company obtained a $100,000 term loan with a bank. The loan
agreement requires interest only payments, at the bank's prime rate plus one
percent, until the principal amount outstanding is converted to a three year
term loan. At December 31, 1995, $72,600 was outstanding under this facility. In
February 1996, the Company borrowed the remaining $27,400. All borrowings under
this facility were used primarily to finance the purchase of computer hardware
for use by the Company's research and development staff in the design of the
Company's new Windows(R) based software. On February 5 1996, the $100,000
balance outstanding was converted to a three year term loan bearing interest at
the prime rate plus one percent and requiring 36 equal monthly payments of
principal and interest through March 1999.
Other than the stock offering, line of credit and term loan facility, the
Company's primary source of funds has been from the sale of products and
services. The Company's negative cash flow and continued net losses are
primarily attributable to an insufficent level of revenue to cover research and
development and other operating expenses.
During 1995 and 1994, the Company's significant capital expenditures were for
upgrading the Company's computers, and research and development associated with
new products and platforms.
The Company believes that cash flow generated from the release of its new
Windows(R) based accounting software on May 1, 1996, cash flow resulting from
fixed-price contracts for the custom development of accounting related software
for national and regional restauarant chains, and the $300,000 line of credit
will be sufficient to fund the Company's activities through the end of the year
and will allow the Company to continue expanding marketing and product
distribution. Through the end of the year, the Company expects to add
approximately 10 full-time employees in research and development, sales and
marketing, and administration in order to support the anticipated increase in
revenue coming from sales of the Company's new Windows based software and the
increasing significance of custom software developed for and sold to national
and regional restaurant chains.
Item 7. Financial Statements
See Item 13 for a list of the Company's financial statements and schedules filed
as part of this report.
Item 8. Changes in and Disagreements with Accountants on Accounting
None
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The directors, executive officers and significant employees of the Company are
as follows:
Name Age Position
---- --- --------
John E. Abdo 52 Chairman of the Board
Mark E. Wotell 49 President and Director
Matthew J. Wotell 44 Executive Vice President of
Sales and Director
Christopher L. Wotell 43 Vice President of Marketing
and Director
Eugene J. Wotell 40 Vice President Support
Services and Director
Clement E. Wotell 75 Vice President of Production
and Director Emeritus
Frank J. Abdo 47 Director
J. Kenneth Gulden 55 Director
James W. Rascoe 34 Vice President of Research
and Development
Daniel W. Reese 48 Vice President and Chief
Financial Officer
Business Experience of Directors, Executive Officers and Significant Employees
John E. Abdo has served as Chairman of the Board of the Company since 1991.
Since 1974, Mr. Abdo has been Chairman of the Board and President of Wellington
Construction & Realty, Inc., a real estate development company headquartered in
South Florida, which has built several thousand residential dwelling units as
well as many commercial and industrial properties since 1971. In 1984, he was
elected to the Board of Directors of BankAtlantic, A Federal Savings Bank
("BankAtlantic") and currently serves as Vice Chairman of the Board and Chairman
of its Executive Committee. Since 1985, Mr. Abdo has held the position of
Chairman of the Board and President of BankAtlantic Development Corporation, a
wholly-owned subsidiary of BankAtlantic. In 1987, Mr. Abdo became a member of
the Board of Directors and Vice Chairman of BFC Financial Corporation, the
controlling owner of BankAtlantic Bancorp., Inc. In 1994, Mr. Abdo was elected
to the Board of Directors and named Chairman of BFC Financial Corporation, the
controlling owner of BankAtlantic Bancorp., Inc., and was elected to the Board
of Directors and named Vice Chairman and Chairman of the Executive Committee of
BankAtlantic Bancorp, Inc., the holding company of BankAtlantic. Since 1990, Mr.
Abdo has also been a Director of Benihana National Corporation, the
International Japanese Steakhouse.
Mark E. Wotell was a co-founder of the Company and has served in a variety of
positions since its inception. Since 1988, he has served as President of the
Company and as a Director. Mr. Wotell received a Bachelor of Aeronautical and
Astronautical Engineering degree from Ohio State University in 1970 and did
extensive post graduate work in the field of aerodynamics. He is the son of
Clement E. Wotell and brother of Matthew J. Wotell, Christopher L. Wotell and
Eugene J. Wotell.
Matthew J. Wotell was a co-founder of the Company and has served in a variety of
positions with the Company since its inception in 1984. Since 1988 he has served
as Vice President of Sales (effective September 1, 1994, Executive Vice
President of Sales) and a Director. He is the son of Clement E. Wotell and
Brother of Mark E. Wotell, Christopher L. Wotell and Eugene J. Wotell.
Christopher L. Wotell was a co-founder of the Company and has served in a
variety of positions since its formation in 1984. Since 1988, he has served as
Vice President of Marketing and as a Director. He is the son of Clement E.
Wotell and Brother of Mark E. Wotell, Matthew J. Wotell and Eugene J. Wotell.
Eugene J. Wotell was a co-founder of the Company and has served in a variety of
positions since its inception in 1984. Since 1988 to December 31, 1994, he
served as Vice President of Research and Development. Effective January 1, 1995,
he became Vice President of Support Services responsible for all product
support. He is the son of Clement E. Wotell and brother of Mark E. Wotell,
Christopher L. Wotell and Matthew J. Wotell.
Clement E. Wotell was a co-founder of the Company and has served in a variety of
positions since its inception in 1984. Since 1988, he has served as Vice
President of Production for the Company and as a Director. Effective July 1,
1993, he resigned as a Director of the Company and was designated a non-voting
Director Emeritus. He is the father of Mark E. Wotell, Christopher L. Wotell,
Matthew J. Wotell and Eugene J. Wotell.
Frank J. Abdo has served on the Board of Directors for the Company since 1991.
Mr. Abdo is the Executive Vice President for Wellington Construction & Realty,
Inc., a real estate development company headquartered in South Florida, having
built and developed several thousand residential dwelling units as well as many
commercial and industrial properties since 1971. In 1987, Mr. Abdo was elected
to the Board of Directors of BankAtlantic Development Corporation, a
wholly-owned subsidiary of BankAtlantic. He is the brother of John E. Abdo.
J. Kenneth Gulden has served on the Board of Directors of the Company since
1991. Mr. Gulden is the Chairman of the Board and President of the Cove
Restaurant and Marina, Inc. in Deerfield Beach, Florida and has held such
position since 1976. He was an active member of the Florida Bar until 1989 when
he chose an inactive status.
James W. Rascoe served as Director of Research and Development for the Company
from May 1993 to December 1994. Effective January 1, 1995, he was named Vice
President of Research and Development. Prior to joining the Company, Mr. Rascoe
spent four years as Vice President with Fortis Development Corporation and
approximately two years as President of Innovative Research and Development,
both of which were involved in the research and development of computer software
applications. Mr. Rascoe is married to the daughter of Clement E. Wotell.
Daniel W. Reese has served as Vice President and Chief Financial Officer since
July 1994. Prior to joining the Company, Mr. Reese spent approximately 13 years
with RJR Nabisco, Inc. where he held a variety of positions, the most recent of
which was Vice President of Finance for the Del Monte Foods Division. Before
joining RJR Nabisco, Mr. Reese worked approximately nine years for Coopers &
Lybrand, Certified Public Accountants.
Item 10. Executive Compensation
The following table sets forth the cash compensation paid with respect to
services rendered in all capacities to the Company during the fiscal year ended
December 31, 1995 to the five most highly compensated executive officers of the
Company whose cash compensation (including bonuses and deferred compensation)
exceeded $60,000 and for all executive officers as a group:
Name of Individual or Capacities in Cash
Number in Group Which Served Compensation (1)
--------------- ------------ ----------------
Mark E. Wotell (2) President $89,145
Christopher L. Wotell (2) Vice President 88,509
Matthew J. Wotell (2) Vice President 84,387
Eugene J. Wotell (2) Vice President 84,387
James W. Rascoe (2) Vice President 83,839
------
All executive officers
as a group (7 persons) $544,267
-------
(1) The table includes all compensation earned by the named individuals and is
gross of any loans made to the Company in 1995 by the listed officers. The
Company does not provide its executive officers with any personal benefits other
than stock options under the Company's 1994 Stock Option Plan.
(2) The Registrant has entered into employment contracts with each of the above
named executive officers. See "Management - Employment and Related Agreements".
Management - Employment and Related Agreements
Each of the executive officers listed in the cash compensation table are parties
to employment and non-compete agreements which expire on July 31, 1998. The
agreements provide for annual salaries of $129,441 for Mark E. Wotell, $108,805
for Christopher L. Wotell, $105,068 for Matthew J. Wotell, $105,068 for Eugene
J. Wotell and for James W. Rascoe a minimum of $70,000 which increases over the
term of the agreement to $100,000. For 1995 and 1994, each executive officer,
except James W. Rascoe, elected to accept a lesser salary than specified in
their respective agreement and also waived their right to be paid the difference
in the future. Additionally, Mr. Rascoe's agreement provides that he will
receive 25,000 shares of the Company's common stock for every $1,000,000 in
sales by the Company of products Mr. Rascoe plans, designs and develops, as
defined in the agreement, up to a maximum of 150,000 shares. Each of the
agreements also include a provision that the executive officer will not engage
in activities in competition with the Company, as defined in the agreements, so
long as their are employees of the Company and for a period of three years
thereafter. The Board of Directors, in their sole discretion, has the authority
to increase at any time the annual salary of any executive officer.
John E. Abdo, Chairman of the Board, is also a party to an agreement with the
Company which expires on July 31, 1998. The agreement provides for minimum
annual compensation of $100,000 for services rendered by him on behalf of the
Company. Mr. Abdo's annual compensation may be increased at any time by the
Board of Directors of the Company in its sole discretion. The agreement further
provides that Mr. Abdo may not engage in certain activities in competition with
the Company, as defined in the agreement, so long as he is an employed by the
Company and for a period of three years thereafter. For 1995 and 1994, the
Chairman of the Board elected to receive no compensation under his agreement and
also waived his right to receive the difference in the future.
Shareholders' Agreement
Mark E. Wotell, Christopher L. Wotell, Matthew J. Wotell, Eugene J. Wotell,
Clement E. Wotell, John E. Abdo and Frank J. Abdo are parties to a Shareholders'
Agreement which provides that each party will take such actions and will vote
their shares so as to cause the Board of Directors of the Company to consist of
ten (10) members, four of whom shall be identified by the above named Wotells
(the "Wotells"), four of whom shall be identified by John E. Abdo and Frank J.
Abdo and two of whom shall be mutually agreed upon by the Wotells and John E.
Abdo and Frank J. Abdo. The terms of the agreement provide that the agreement
will terminate upon the earlier of the closing of a public offering, as defined,
or an agreement to terminate the Shareholders' Agreement by the holders of 80%
of the shares of common stock held by the parties to the agreement.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 20, 1996, the ownership of the
Company's common stock by (a) each person who is known by the Company to own of
record or beneficially own more than five percent (5%) of the Company's
outstanding common stock, (b) each of the Company's directors, officers and
significant employees and (c) all directors, officers and significant employees
as a group.
Number of Shares Percent
Beneficially Owned of Class
------------------ --------
John E. Abdo
1350 N.E. 56th Street
Ft. Lauderdale, FL 33334 1,012,000 29.9.0%
Mark E. Wotell (1) 313,245 9.3
Christopher L. Wotell (1) 313,245 9.3
Matthew J. Wotell (1) 313,245 9.3
Eugene J. Wotell (1) 313,245 9.3
Clement E. Wotell (1) 313,245 9.3
J. Kenneth Gulden
641 S.W. 16th Street
Boca Raton, FL 33486 202,000 6.0
Frank J. Abdo
1350 N.E. 56th Street
Ft. Lauderdale, FL 33334 101,000 3.0
James W. Rascoe (1) 1,000 .0003
Daniel W. Reese (1) 4,000 .001
All Directors, Officers and
Significant Employees as
a Group 2,886,225 85.4
(1) Unless otherwise indicated, the address of each person is c/o Coconut Code,
Inc., 1430 South Federal Highway, Deerfield Beach, Florida 33441.
Item 12. Certain Relationships and Related Transactions
John E. Abdo, Chairman of the Board, and Frank J. Abdo, a Director of the
Company. own a controlling interest in Time Information Systems Inc. ("TIS").
TIS was licensed by the Company to market and support the Company's products. In
January 1992, the principals of TIS decided to discontinue its activities.
Subsequently, the Company purchased the inventory and equipment of TIS at its
fair market value (approximately $30,000) and agreed to pay TIS, or it
assignees, a 10% commission based on sales (net of costs) resulting from
customer introductions made by TIS up to a maximum of $50,000. Through December
31, 1995, the Company has paid $21,825 in commissions based on such agreement.
For 1995 and 1994, the Company was charged $18,000 each year for rent pertaining
a portion of office space occupied off-site of Company facilities by the
Company's Chairman.
In July 1990, the Company agreed to pay James W. Rascoe $100,000 for the
development of the software program which runs the Company's TimeWare(R) system.
Amounts earned are payable monthly on the basis of 10% of the net proceeds
received by the Company from TimeWare(R) sales. The balance remaining payable at
December 31, 1995 was $7,823. Mr. Rascoe is married to the daughter of Clement
E. Wotell. Mr. Rascoe became an employee of the Company on May 10, 1993 and is
currently Vice President of Research and Development.
The Company entered into an agreement with Benihana National Corporation and
Benihana of Tokyo pursuant to which the Company agreed to develop and install
customized versions of the Company's Food Service Management System (FSMS(TM))
in several Benihana restaurants. The development and installations were
completed in June 1992. Pursuant to the agreement, the Company received $120,000
in the form of cash and notes. John E. Abdo, the Company's Chairman of the
Board, is also a director of Benihana National Corporation.
The Company believes that all of the transactions between the Company and its
officers, directors and affiliates of the Company were on terms no less
favorable than could have been obtained on an arms-length basis from unrelated
third parties.
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this Form 10-KSB:
1. Financial Statements
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended December 31, 1995
and 1994
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1995
and 1994
Notes to Consolidated Financial Statements
2. Exhibits
Exhibits marked with an asterisk are filed herewith. The remainder of the
exhibits have heretofore been filed with the Commission and are
incorporated by reference.
Exhibit No. Description
3.1 Articles of Incorporation of the Registrant
3.2 Bylaws of the Registrant
3.3 Copy of Shareholders' Agreement
3.5 Form of Warrant Certificate
6.1 Form of Employment Agreement between the
Registrant and John E. Abdo
6.2 Form of Employment Agreement between the
Registrant and Mark E. Wotell
6.3 Form of Employment Agreement between the
Registrant and Christopher L. Wotell
6.4 Form of Employment Agreement between the
Registrant and Eugene J. Wotell
6.5 Form of Employment Agreement between the
Registrant and Matthew J. Wotell
6.6 Form of Employment Agreement between the
Registrant and Clement E. Wotell
6.7 Form of Employment Agreement between the
Registrant and James W. Rascoe
23.1* Consent of Arthur Andersen LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-KSB, into the Company's
previously filed Registration Statement File No. 33-64164A.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 10, 1996.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, there unto duly authorized.
Coconut Code, Inc. (Registrant)
By: /s/ Daniel W. Reese
Daniel W. Reese, Vice President
and Chief Financial Officer
June 4, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of April 14, 1996.
John E. Abdo /s/ John E. Abdo
Chairman of the Board and Director
Mark E. Wotell /s/ Mark E. Wotell
President and Director
Christopher L. Wotell /s/ Christopher L. Wotell
Vice President of Marketing,
Secretary and Director
Matthew J. Wotell /s/ Matthew J. Wotell
Executive Vice President of Sales
and Director
Eugene J. Wotell /s/ Eugene J. Wotell
Vice President of Support Services
and Director
Clement E. Wotell /s/ Clement E. Wotell
Vice President of Production
and Director Emeritus
Frank J. Abdo /s/ Frank J. Abdo
Director
J, Kenneth Gulden /s/ J. Kenneth Gulden
Director
<PAGE>
COCONUT CODE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Management of Coconut Code, Inc.:
We have audited the accompanying consolidated balance sheets of Coconut Code,
Inc. (a Florida corporation) and subsidiary as of December 31, 1995 and 1994,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coconut Code, Inc. and
subsidiary as of December 31, 1995 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 22, 1996.
<PAGE>
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 242,603 $ 473,147
Accounts receivable (net of allowance for doubtful
accounts of $92,377 and $66,250 at December 31, 1995 and 1994, respectively) 317,714 261,660
Inventories 31,352 47,139
Current portion of finance receivables (net of unearned lease income of
$11,646 and $21,570 at December 31, 1995 and 1994, respectively,
and allowance for doubtful accounts of $15,851 at December 31, 1995) 50,518 98,645
Notes receivable (net of allowance of $49,000 at December 31, 1995
and 1994, respectively) 72,179 115,453
Prepaid expenses 57,331 98,076
----------- -----------
Total current assets 771,697 1,094,120
PROPERTY AND EQUIPMENT, at cost (net of accumulated depreciation of
$188,623 and $133,200 at December 31, 1995 and 1994, respectively) 250,154 211,181
OTHER ASSETS:
Long-term portion of finance receivables (net of unearned lease income of
$18,105 and $14,097 at December 31, 1995 and 1994, respectively,
and allowance for doubtful accounts of $36,654 at December 31, 1995) 52,975 102,592
Notes receivable -- 30,496
Other assets 2,293 18,935
----------- -----------
$ 1,077,119 $ 1,457,324
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to related party $ 7,823 $ 20,000
Accounts payable 166,467 142,513
Accrued expenses 271,799 133,036
Loans from officers 44,800 --
Note payable 72,600 --
----------- -----------
Total current liabilities 563,489 295,549
LONG-TERM LIABILITY: Due to related party -- 323
COMMITMENTS (Note 11)
STOCKHOLDERS' EQUITY:
Common stock ($.01 par, 10,000,000 shares authorized,
3,382,325 and 3,378,325 issued and outstanding at
December 31, 1995 and 1994, respectively) 33,823 33,783
Additional paid-in capital 2,792,496 2,772,136
Accumulated deficit (2,312,689) (1,644,467)
----------- -----------
513,630 1,161,452
----------- -----------
$ 1,077,119 $ 1,457,324
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
NET SALES $ 1,986,992 $ 1,735,853
COST OF SALES 415,716 368,213
----------- -----------
Gross profit 1,571,276 1,367,640
----------- -----------
OPERATING EXPENSES:
Selling and marketing 847,719 1,017,295
General and administrative 893,196 706,106
Research and development 477,332 329,746
Depreciation and amortization 55,423 45,833
----------- -----------
2,273,670 2,098,980
----------- -----------
LOSS FROM OPERATIONS (702,394) (731,340)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 14,866 40,416
Interest expense (10,150) (1,996)
Other 29,456 15,402
----------- -----------
34,172 53,822
----------- -----------
NET LOSS $ (668,222) $ (677,518)
=========== ===========
NET LOSS PER SHARE (Primary and fully diluted) $ (0.20) $ (0.20)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 3,381,420 3,359,073
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these statements of operations.
<PAGE>
<TABLE>
<CAPTION>
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHAMGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Common Stock Additional Total
--------------------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
--------------- --------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 3,283,425 $32,834 $2,353,136 ($966,949) $1,419,021
Shares issued through SB-1
public offering 94,900 949 483,041 - 483,990
Offering costs - - (64,041) - (64,041)
Net loss for year - - - (677,518) (677,518)
--------------- --------------- ----------------- ----------------- ---------------
BALANCE, December 31, 1994 3,378,325 33,783 2,772,136 (1,644,467) 1,161,452
Net loss for year - - - (668,222) (668,222)
Shares issued 4,000 40 20,360 - 20,400
--------------- --------------- ----------------- ----------------- ---------------
BALANCE, December 31, 1995 3,382,325 $33,823 $2,792,496 ($2,312,689) $513,630
=============== =============== ================= ================= ===============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements of changes in stockholders' equity.
<PAGE>
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (668,222) $ (677,518)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 55,423 45,833
Provision for doubtful accounts 120,767 57,886
Changes in operating assets and liabilities:
Increase in accounts receivable (104,316) (129,891)
Decrease (increase) in finance
receivables, net 45,239 (66,098)
Decrease (increase) in inventories 15,787 (11,121)
Decrease (increase) in prepaid expenses 40,745 (14,743)
Decrease (increase) in other assets 16,642 (12,464)
Increase in accounts payable 23,954 36,788
Increase in accrued expenses 138,763 73,616
----------- -----------
Total adjustments 353,004 (20,194)
----------- -----------
Net cash used in operating activities (315,218) (697,712)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (94,396) (115,066)
Decrease in notes receivable 53,770 69,237
----------- -----------
Net cash used in financing activities (40,626) (45,829)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to related party (12,500) (12,893)
Increase in loans from officers 44,800 --
Proceeds from (repayment of) note payable 72,600 (172,000)
Proceeds from issuance of common stock 20,400 483,990
Stock issuance costs -- (64,041)
----------- -----------
Net cash provided from financing activities 125,300 235,056
----------- -----------
Net decrease in cash (230,544) (508,485)
CASH AND CASH EQUIVALENTS , beginning of year 473,147 981,632
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 242,603 $ 473,147
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 9,549 $ 2,969
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these statements of cash flows.
<PAGE>
COCONUT CODE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) ORGANIZATION:
Coconut Code, Inc. (the "Company") was organized as a Florida corporation on
April 30, 1984. The Company's principal business is to develop, market and
support accounting and management software primarily for the restaurant and
hospitality industry. The Company owns 100% of the outstanding stock of Software
Leasing Company ("SLC") whose sole business purpose is to lease software to
customers of the Company.
The Company markets its products in the highly competitive software industry
which is characterized by rapid technological changes and, consequently, product
obsolescence could have an adverse effect on the Company's financial condition
and results of operations. The Company believes that its core products give it a
competitive advantage because of product features not offered by competitors
and, most importantly, that the Company owns and controls its own code for these
products.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates in the Preparation of Financial Statements-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of Consolidation-
All significant intercompany accounts and transactions have been eliminated upon
consolidation.
Cash Equivalents-
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories-
Inventories primarily consist of computer hardware, a component of the Company's
time and attendance system, and are stated at the lower of cost (first-in,
first-out) or market.
Leases Receivable-
All of SLC's leases qualify as direct finance sales-type leases under Statement
of Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases". The
Company records, on its consolidated balance sheet, the future minimum lease
payments reduced by the unearned lease income. The unearned lease income is
recorded as revenue to reflect a constant periodic rate of return on the net
investment over the term of the leases, which range from 2 to 5 years. The
interest rates on these leases range from approximately 8% to 16%.
Property and Equipment-
Property and equipment are stated at cost. Depreciation is charged to operations
over the estimated useful lives of the related assets and is computed using the
straight-line method.
The estimated useful lives of property and equipment are as follows:
Years
-----
Computer equipment 5
Office equipment 5-7
Leasehold improvements 5
Income Taxes-
Deferred tax assets and liabilities reflect the future tax consequences of the
differences between the financial reporting and tax bases of assets and
liabilities using tax rates in effect for the year in which differences are
expected to reverse. Future tax benefits, such as net operating loss
carryforwards, are recognized to the extent that realization of such benefits is
more likely than not.
In 1995 and 1994, the Company generated loss carryforwards for both book and tax
purposes. At December 31, 1995 the available tax loss carryforward is
approximately $1,620,000 and expires during 2009 and 2010. Because realization
of the net operating loss carryforward is not more likely than not, a valuation
allowance in the same amount has been established and, accordingly, no deferred
tax asset is reflected in the accompanying consolidated balance sheet.
Revenue Recognition-
Revenue from software and hardware sales is recognized when the product is
installed by Company authorized personnel at the customer's facility. Sales of
product to dealers who resell to their customers is recognized as revenue upon
shipment to the dealer.
Revenue on fixed fee software development contracts is recognized using the
percentage-of-completion method.
Effective January 1, 1995, the Company began recognizing revenue on its phone
support and hardware maintenance contracts over the life of the contract which
is generally twelve months. This change was made because of the growing
significance of these contracts to the overall business of the Company and
resulted in the recognition of deferred revenue of $100,420 as of December 31,
1995. Prior to this change there was not a significant difference between the
Company's former cash basis method of recognizing revenue on these contracts and
the Company's current method.
Research and Development-
Research and development costs are expensed as incurred. These costs primarily
consist of wages paid to employees for the development of the Company's
software.
Accounting Pronouncements-
In March 1995, The Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", which requires adoption in fiscal 1996. SFAS No. 121
establishes accounting standards for the impairment of long-lived assets and
certain identifiable intangibles to be disposed of. The Company believes the
adoption of SFAS No. 121 will not have a material effect on the Company's
financial condition or results of operations.
In October 1995, The Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation", which requires adoption in fiscal
1996. SFAS No. 123 requires that the Company's financial statements include
certain disclosures about stock-based employee compensation arrangements and
permits the adoption of a change in accounting for such arrangements. Changes in
accounting for stock-based compensation are optional, and the Company plans to
adopt only the disclosure requirements in 1996.
Reclassifications-
Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 presentation.
(3) NOTES RECEIVABLE:
The Company has notes receivable from certain customers and related parties as
discussed in Note 7. The notes bear interest ranging from 8% to 10% and require
payments through 1996 in the aggregate principal amount of $121,179.
(4) FINANCE RECEIVABLES:
Future minimum rentals on finance receivables consist of the following at
December 31, 1995:
1996 $ 78,015
1997 53,441
1998 13,521
1999 40,772
------
185,749
Less: Unearned lease income (29,751)
-------
Leases receivable 155,998
Less: Allowance for doubtful
accounts (52,505)
-------
Leases receivable, net $103,493
========
(5) PREPAID EXPENSES:
Prepaid expenses consist of the following at December 31, 1995 and 1994:
1995 1994
---- ----
Prepaid rent $15,718 $26,951
Brochures, videos and information booklets 4,078 21,846
Prepaid sales agent commissions 13,038 12,847
Other prepaid expenses 24,497 36,432
------ ------
$57,331 $98,076
======= =======
(6) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1995 and 1994:
1995 1994
--------- ---------
Computer equipment $ 317,555 $ 233,263
Office equipment 101,171 91,067
Leasehold improvements 20,051 20,051
--------- ---------
438,777 344,381
Less: Accumulated depreciation (188,623) (133,200)
--------- ---------
$ 250,154 $ 211,181
========= =========
(7) ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31, 1995 and 1994:
1995 1994
---- ----
Deferred revenue $100,420 $ --
Wages 54,942 49,270
State, local and payroll taxes 94,310 52,968
Commissions 6,526 13,621
Other accrued expenses 15,601 17,177
-------- --------
$271,799 $133,036
======== ========
(8) RELATED PARTY TRANSACTIONS:
In July of 1990, the Company agreed to pay a relative of certain stockholders
and officers of the Company $100,000 for the development of the Company's
TimeWare(R) software program. The agreement provides for payments to be made
from ten percent (10%) of the net proceeds received by the Company from the sale
of each TimeWare(R) package in any given month. At December 31, 1995 and 1994,
the remaining balance outstanding was $7,823 and $20,323, respectively.
Included in the notes receivable balance are three notes from employees. Two of
these notes, in the amounts of $6,908 and $2,850, bear interest at 8% with
repayment being made through payroll and commission deductions. The third note,
in the amount of $16,000, is due on demand and bears interest at 18%.
The Company's Chairman of the Board together with another director of the
Company own a controlling interest in Time Information Systems, Inc. ("TIS"),
which was licensed by the Company to market and support the Company's products.
In 1992, TIS discontinued its activities and, subsequently, the Company
purchased TIS's inventory and equipment at fair market value (approximately
$30,000) and agreed to pay TIS a 10% commission on sales (net of cost) resulting
from customer introductions made by TIS up to a maximum of $50,000. Through
December 31, 1995, the Company has paid $21,825 in commissions based on such
agreement.
Under an agreement entered into with Benihana National Corporation and Benihana
of Tokyo, the Company developed and installed, in June 1992, several customized
versions of the Company's back office accounting software in Benihana
restaurants. Pursuant to the agreement, the Company received $120,000 in the
form of cash and notes. At December 31, 1995, $24,340 is outstanding on the
notes. The Company's Chairman of the Board is also a director of Benihana
National Corporation.
For 1995 and 1994, the Company was charged $18,000 each year for rent pertaining
to a portion of office space occupied off-site of Company facilities by the
Company's Chairman.
During 1995, certain officers of the Company loaned $44,800 to the Company for
working capital requirements. These loans bear interest at 12% and are repayable
prior to December 31, 1996.
(9) BORROWINGS:
The Company has a $300,000 line of credit with a bank. The line of credit
expires on May 1, 1997. Advances under the line bear interest at the prime rate
plus one percent and are secured by the Company's accounts receivable and the
personal guarantees of three of the Company's principal stockholders. No
advances have been taken under this line of credit.
On January 30, 1995, the Company obtained a $100,000 term loan with a bank. The
loan arrangement requires interest only payments, at the prime rate plus one
percent, until the principal amount outstanding is converted to a three year
term loan.
At December 31, 1995, $72,600 was outstanding under this facility. In February
1996, the Company borrowed the remaining $27,400. All borrowings under this
facility were used primarily to finance the purchase of computer hardware for
use by the Company's research and development staff in the design of its new
Windows(R) based software. In March 1996, the $100,000 balance outstanding under
this facility was converted to a three year term loan requiring 36 equal monthly
payments comprised of principal and interest through March 1999.
(10) STOCKHOLDERS' EQUITY:
In September 1993, the Company commenced an SB-1 public offering for up to
10,000 units at $510 per unit. Each unit consisted of 100 shares of $.01 par
value common stock with restricted transferability and twenty-five redeemable
warrants to purchase twenty-five shares of common stock. Each warrant entitles
the holder to purchase, during the three year period commencing on the
distribution date of the units, as defined in the Prospectus, one share of
common stock at a per share price of $6.50. If the Company completes another
public offering, as defined in the Prospectus, the Company may redeem the
warrants at $.01 per warrant at any time prior to September 1996 upon 30 days
notice to holders.
The offering expired in May 1994. During 1994, the Company sold 949 units
resulting in proceeds to the Company of $419,949, net of related offering costs.
In 1995, the Company sold 4,000 shares of common stock to private investors
resulting in proceeds to the Company of $20,400.
(11) STOCK OPTIONS:
In October 1994, the stockholders of the Company approved the 1994 Stock Option
Plan (the "Plan") under which an aggregate of 330,000 common shares are
available for issuance. Under the Plan, incentive stock options and nonqualified
stock options may be granted to purchase common shares at exercise prices not
less than fair market value at the date of grant. Incentive stock options are
available for grant only to employees of the Company, while nonqualified options
may be granted to both employees and certain nonemployees of the Company. The
terms of each option agreement are determined by the Board of Directors.
On November 15, 1995 and December 22, 1994, 165,250 and 152,200 options were
granted at an option price of $7.75 and $5.10 per share, respectively. Each
option under the November 15, 1995 grant becomes fully exercisable five years
from the date of grant with all unexercised options expiring not later than ten
years from the date of grant.
Under the December 22, 1994 grant, options become exercisable over a three year
period commencing on December 22, 1997 with all unexercised options expiring not
later than ten years from the date of grant. At December 31, 1995, 311,750
shares were outstanding, none were exercisable and 18,250 shares were available
for future grant.
(12) COMMITMENTS:
The Company leases its Florida office space and also maintains an office in
Chicago pursuant to operating leases, both of which require fixed monthly rental
payments, plus certain operating costs. Rent expense for 1995 and 1994 was
$78,816 and $81,914, respectively. On April 1, 1996, the Company renewed its
lease for its Florida office space through January 31, 1998.
At December 31, 1995, the future minimum rental payments under operating leases
was as follows:
Year Amount
---- ------
1996 $39,700
The members of the Wotell family and the Company's Vice President of Research
and Development, a relative of the Wotell family, are parties to employment and
non-compete agreements with the Company. The agreements provide for minimum
annual salaries of $129,441 for Mark E. Wotell, $108,805 for Christopher L.
Wotell, $105,068 for Matthew J. Wotell, $105,068 for Eugene J. Wotell, $82,267
for Clement E. Wotell and a minimum annual salary of $70,000 increasing to
$100,000 by July 31, 1998 for the Vice President of Research and Development.
Additionally, the Vice President of Research and Development's agreement
provides that he will receive 25,000 shares of the Company's common stock for
every $1,000,000 in sales by the Company of products he plans, designs and
develops, as defined in the agreement, up to a maximum of 150,000 shares. The
annual compensation of each of the parties to the employment and non-compete
agreements may be increased at any time by the Board of Directors at its sole
discretion. For 1995 and 1994, each of the parties to the employment and
non-compete agreements elected to accept annual compensation less than the
amount specified in their respective agreement and also waived their right to
receive the difference in the future. The agreements further provide that each
party to the agreement may not compete with the Company so long as such party is
employed by the Company and for a period of three years thereafter.
The Company's Chairman of the Board is also a party to an agreement with the
Company which expires on July 31, 1998. The agreement provides for minimum
annual compensation of $100,000 for consulting services rendered to the Company.
The annual compensation of the Chairman may be increased at any time by the
Company's Board of Directors at its sole discretion. For 1995 and 1994, the
Chairman of the Board elected to receive no compensation under his consulting
agreement and also waived his right to receive the difference in the future.
(13) BACKLOG:
At December 31, 1995, the Company had a backlog of orders approximating
$266,000, the majority of which was scheduled for installation in early 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000908181
<NAME> coconut code, inc.
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1995
<PERIOD-START> jan-01-1995
<PERIOD-END> dec-31-1995
<CASH> $242,603
<SECURITIES> $0
<RECEIVABLES> $493,386
<ALLOWANCES> $193,882
<INVENTORY> $31,352
<CURRENT-ASSETS> $771,697
<PP&E> $438,777
<DEPRECIATION> $188,623
<TOTAL-ASSETS> $1,077,119
<CURRENT-LIABILITIES> $563,489
<BONDS> $0
$0
$0
<COMMON> $33,823
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $1,077,119
<SALES> $1,986,992
<TOTAL-REVENUES> $1,986,992
<CGS> $415,716
<TOTAL-COSTS> $415,716
<OTHER-EXPENSES> $2,273,670
<LOSS-PROVISION> $120,767
<INTEREST-EXPENSE> $10,150
<INCOME-PRETAX> $(668,222)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(668,222)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(668,222)
<EPS-PRIMARY> $(.20)
<EPS-DILUTED> $(.20)
</TABLE>
