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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ____________________
Commission File No. 33-64164-A
COCONUT CODE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or jurisdiction of incorporation or organization)
59-2556411
(I.R.S. employer identification No.)
1430 South Federal Highway, Deerfield Beach, Florida 33441
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (954) 481-9331
NOT APPLICABLE
Former name, address and fiscal year if changed since last report
Indicate by check mark whether the 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 such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares of common stock , $.01 par value, of the Registrant issued
and outstanding as of July 31, 1995 was 3,382,325.
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COCONUT CODE, INC.
INDEX TO FORM 10-QSB
Page
Number
------
PART 1 FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance Sheet as of June 30, 1996 3
Statements of Operations - For the
Three Months and Six Months
Ended June 30, 1996 and 1995 4
Statements of Cash Flows - For the
Six Months Ended June 30, 1996
and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7-9
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
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PART 1. FINANCIAL INFORMATION Page 3
COCONUT CODE, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and equivalents $ 28,916
Accounts receivable (net of allowance for doubtful
accounts of $162,377) 357,173
Inventories 24,446
Current portion of finance receivables (net of unearned income
of $9,171 and allowance for doubtful accounts of $27,851) 38,118
Notes receivable (net of allowance for doubtful accounts of $49,000) 44,821
Prepaid expenses 34,113
-----------
Total current assets 527,587
PROPERTY AND EQUIPMENT, at cost (net of accumulated
depreciation of $221,023) 239,371
OTHER ASSETS:
Long-term portion of finance receivables (net of unearned income
of $15,430 and allowance for dountful accounts of $50,654) 23,290
Other assets 2,293
-----------
$ 792,541
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 228,369
Accrued expenses 191,704
Deferred income 124,511
Loans from officers 81,900
Notes payable 66,324
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692,808
LONG-TERM LIABILITY:
Note payable 58,343
STOCKHOLDERS' EQUITY:
Common stock ($.01 par; 10,000,000 shares
authorized, 3,382,325 issued and outstanding) 33,823
Additional paid-in capital 2,792,496
Accumulated deficit (2,784,929)
-----------
41,390
-----------
$ 792,541
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</TABLE>
See notes to consolidated financial statements.
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PART 1. FINANCIAL INFORMATION Page 4
COCONUT CODE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 541,281 $ 591,376 $ 906,473 $ 1,062,873
COST OF SALES 94,868 130,264 $ 168,999 $ 234,147
----------- ----------- ----------- -----------
Gross profit 446,413 461,112 737,474 828,726
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling and marketing 156,298 212,704 335,288 451,697
General and administrative 285,259 225,752 519,542 439,961
Research and development 165,465 103,905 321,236 198,516
Depreciation and amortization 16,500 11,430 32,400 22,860
----------- ----------- ----------- -----------
623,522 553,791 1,208,466 1,113,034
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (177,109) (92,679) (470,992) (284,308)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 43 3,235 650 10,544
Interest expense (9,771) (1,164) (10,904) (1,267)
Other 4,768 11,124 9,006 12,078
----------- ----------- ----------- -----------
(4,960) 13,195 (1,248) 21,355
----------- ----------- ----------- -----------
NET LOSS ($ 182,069) ($ 79,484) ($ 472,240) ($ 262,953)
----------- ----------- ----------- -----------
NET LOSS PER SHARE ($ 0.05) ($ 0.02) ($ 0.14) ($ 0.08)
----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,382,325 3,381,798 3,382,325 3,380,499
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
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PART 1. FINANCIAL INFORMATION Page 5
COCONUT CODE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months
ended June 30,
----------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (472,240) (262,953)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 32,400 22,860
Provision for doubtful accounts 96,000 29,895
Changes in operating assets and liabilities:
Increase in accounts receivable (109,459) (62,398)
Decrease in finance receivables, net 29,757 6,544
Increase in inventories (6,766) (14,273)
Decrease in prepaid expenses 23,218 10,650
Decrease in other assets -- 13,989
Increase in accounts payable 61,902 20,481
Increase in accrued expenses 20,325 17,169
Increase in deferred revenue 24,091 88,994
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Total adjustments 171,468 133,911
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Net cash used in operating activities (300,772) (129,042)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (21,617) (39,277)
Decrease in notes receivable 27,358 42,988
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Net cash provided by investing activities 5,741 3,711
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to related party (7,823) (4,000)
Increase in loans from officers 37,100 --
Proceeds from notes payable 60,400 48,000
Payments on note payable (8,333) --
Net proceeds from issuance of common stock -- 20,400
--------- ---------
Net cash provided by financing activities 81,344 64,400
--------- ---------
Net decrease in cash and cash equivalents (213,687) (60,931)
CASH AND EQUIVALENTS, beginning of period 242,603 473,147
--------- ---------
CASH AND EQUIVALENTS, end of period $ 28,916 $ 412,216
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See notes to consolidated financial statements.
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COCONUT CODE, INC. Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements, the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Certain information and footnote disclosures required by
generally accepted accounting principles for complete financial statements have
been condensed or omitted.
In the opinion of management, the accompanying financial statements include
all adjustments (consisting of only normal recurring adjustments) considered
necessary for a fair presentation of financial condition, results of operations
and cash flows of the Company. The results of operations for the six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the full year. For further information, these financial
statements should be read in conjunction with the Company's 1995 Annual Report
filed as part of the Company's 10-KSB for the year ended December 31, 1995.
2. NET LOSS PER SHARE
Net Loss per share is calculated by dividing net loss by the weighted
average number of shares outstanding during the period. Fully diluted net loss
per share is equivalent to primary net loss per share.
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COCONUT CODE, INC. Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net sales for the six months ended June 30, 1996 were $906,473 compared to
$1,062,873 for the corresponding period in the prior year. The decrease in net
sales of $156,400 was primarily the result of a delay in customer orders in
anticipation of the Company's new Windows(R) based accounting software which was
offcially released to the general public on May 1, 1996. As of June 30, 1996,
the Company had a backlog of orders approximating $808,000, substantially all of
which were scheduled for installation during the third and forth quarters of
1996.
Gross profit for the first half of 1996 was $737,474 versus $828,726 for
the year earlier period. The decrease in gross profit of $91,252 was the direct
result of lower sales in the first six months of 1996 compared to the comparable
1995 period. As a percentage of net sales, gross profit improved to 81.4% from
78.0%, principally due to a greater portion of 1996 sales in higher margin
software products versus TimeWare(R) products.
During the first six months of 1996, operating expenses increased $95,432
versus the same period in 1995. The principal reasons for the increase were the
addition of research and development staff to work on the design and development
of the Company's new Windows(R) based accounting software and an overall
increase in general and administrative expenses, offset in part by lower agent
commissions in 1995 and the elimination of one Agent Sales Manager.
Second Quarter 1996 Compared to Second Quarter 1995
Net sales for the second quarter of 1996 were $541,281 compared to $591,376
for the comparable quarter in 1995. The decrease in net sales of $50,095 was
principally the result of customers delaying order signing in anticipation of
the Company's release of its new Windows(R) based accounting software on May 1,
1996.
Gross profit for the three months ended June 30, 1996 was $446,413 which
represented a decrease of $14,699 versus the corresponding prior year period.
The decrease was primarily the result of lower sales in the 1996 period compared
to 1995. As a percentage of net sales, gross profit was 82.5% in 1996 period
compared to 78.0% in 1995, principally due to a greater portion of sales in
higher margin software products versus TimeWare(R) products.
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COCONUT CODE, INC. Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS (cont'd.)
Second Quarter of 1996 Compared to Second Quarter of 1995 (cont'd.)
Operating expenses for the second quarter of 1996 increased $69,731 over
the 1995 level of $553,791. The principal reasons for the increase were the
addition of research and development staff to work on the Company's new
Windows(R) based accounting software and an overall increase in general
administrative expenses, offset partly by a reduction in selling and marketing
expenses resulting from lower agent commissions in 1996 and the elimination of
one Agent Sales Manager.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had a working capital deficit of $165,221
compared to working capital of $208,208 at December 31, 1995. The decrease of
$373,429 reflects working capital used for operations of the Company.
The Company has a $300,000 line of credit facility with a bank. Advances
under the line bear interest at the prime rate plus one percent interest and are
secured by the Company's accounts receivable and the personal gurantees of three
principal stockholders. In June and August 1996, the Company borrowed $33,000
and $30,000, respectively, under this facility. The line of credit expires on
May 1, 1997.
In January 1995, the Company obtained a $100,000 term loan with a bank. The
loan agreement required interest only payments, at the bank's prime rate plus
one percent, through February 1996, at which time the principal amount
outstanding, $100,000, was converted to a three year term loan bearing interest
at the prime rate plus one percent and requiring 36 equal monthly payments
comprised of principal and interest through March 1999.
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
the growth in fixed-price contracts for the development of custom accounting and
management related software for national and regional restaurant chains,
continuing sales of the Company's DOS based accounting software, and the cash
available from its $300,000 line of credit facility will be sufficient to fund
the Company's activities through the end of the year and will allow the Company
to continue to expand marketing and product distribution.
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COCONUT CODE, INC. Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders during the quarter
ended June 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
None.
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Page 10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned there
unto duly authorized.
COCONUT CODE, INC.
-----------------------------
(Registrant)
Date: August 14, 1996 BY:
Daniel W. Reese III
Vice President & Chief Financial Officer
