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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 March 31, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 33-64164-A
COCONUT CODE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or jurisdiction of incorporation or organization)
59-2556411
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(I.R.S. employer identification No.)
1430 South Federal Highway, Deerfield Beach, Florida 33441
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (305) 481-9331
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NOT APPLICABLE
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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 May 10, 1996 was 3,382,325.
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<PAGE>
COCONUT CODE, INC.
INDEX TO FORM 10-QSB
PART 1 FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance Sheet as of March 31, 1996
Statements of Operations - For the
Three Months Ended March 31, 1996
and 1995
Statements of Cash Flows - For the
Three Months Ended March 31, 1996
and 1995
Notes to Consolidated Financial Statements
Item 2. 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
Item 6. Exhibits and Reports on Form 8-K
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PART 1. FINANCIAL INFORMATION
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 127,560
Accounts receivable (net of allowance
for doubtful accounts of $97,377) 286,116
Inventories 23,815
Current portion of finance receivables
(net of unearned income of $10,046
and allowance for doubtful accounts
of $22,851) 45,119
Notes receivable (net of allowance for
doubtful accounts of $49,000) 45,496
Prepaid expenses 46,547
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Total current assets 574,653
PROPERTY AND EQUIPMENT, at cost (net of accumulated
depreciation of $204,523) 240,641
OTHER ASSETS:
Long-term portion of finance receivables (net
of unearned income of $16,905 and allowance
for doubtful accounts of $43,654) 36,322
Other assets 2,293
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$ 853,909
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to related party $ 3,323
Accounts payable 161,806
Accrued expenses 183,846
Deferred income 119,875
Loans from officers 61,600
Note payable 33,324
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563,774
LONG-TERM LIABILITY:
Note payable 66,676
STOCKHOLDERS' EQUITY:
Common stock ($.01 par; 10,000,000 shares
authorized, 3,382,325 issued and outstanding) 33,823
Additional paid-in capital 2,792,496
Accumulated deficit (2,602,860)
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223,459
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$ 853,909
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See notes to consolidated financial statements.
<PAGE>
PART 1. FINANCIAL INFORMATION
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended March 31,
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1996 1995
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NET SALES $365,192 $471,497
COST OF SALES 74,131 103,883
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Gross profit 291,061 367,614
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OPERATING EXPENSES:
Selling and marketing 178,990 238,993
General and administrative 234,283 214,209
Research and development 155,771 94,611
Depreciation and amortization 15,900 11,430
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584,944 559,243
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LOSS FROM OPERATIONS (293,883) (191,629)
-------- --------
OTHER INCOME (EXPENSE):
Interest income 607 7,309
Interest expense (1,133) (104)
Other 4,238 955
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3,712 8,160
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NET LOSS ($290,171) ($183,469)
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NET LOSS PER SHARE ($0.09) ($0.05)
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WEIGHTED AVERAGE SHARES OUTSTANDING 3,382,325 3,379,186
========= =========
See notes to consolidated financial statements.
<PAGE>
PART 1. FINANCIAL INFORMATION
COCONUT CODE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three
months ended March 31,
----------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($290,171) ($183,469)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 15,900 11,430
Provision for doubtful accounts 19,000 14,074
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 26,598 (75,256)
Decrease in finance receivables, net 8,052 14,933
Decrease (increase) in inventories 7,537 (16,311)
Decrease (increase) in prepaid expenses 10,784 (7,990)
Decrease in other assets -- 8,681
(Decrease) increase in accounts payable (4,661) 17,306
Increase in accrued expenses and
deferred revenue 31,922 63,331
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Total adjustments 115,132 30,198
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Net cash used in operating activities (175,039) (153,271)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (6,387) (25,043)
Decrease in notes receivable 26,683 22,685
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Net cash used in investing activities 20,296 (2,358)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to related party (4,500) --
Increase in loans from officers 16,800 --
Proceeds from note payable 27,400 34,000
Proceeds from issuance of common stock -- 12,750
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Net cash provided from financing activities 39,700 46,750
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Net decrease in cash (115,043) (108,879)
CASH AND EQUIVALENTS, beginning of period 242,603 473,147
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CASH AND EQUIVALENTS, end of period $ 127,560 $ 364,268
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See notes to consolidated financial statements
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COCONUT CODE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 to the restaurant and
hospitality industry.
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 three month
period ended March 31, 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the first quarter ended March 31, 1996 were $365,192, representing
a decrease of $106,305, or 22.5%, versus the comparable prior year period. The
sales decrease was principally attributable to a delay in customer orders in
anticipation of the Company's new Windows(R) based accounting software which was
officially released to the general public on May 1, 1996. As of March 31, 1996,
the Company had an order backlog of approximately $333,000, substantially all of
which was scheduled for installation during the second quarter of 1996.
Gross profit for the first quarter of 1996 was $291,061 compared to 367,614 for
the year earlier quarter. The decrease in gross profit of $76,553 was the result
of the drop in net sales for the first quarter of 1996. As a percentage of net
sales, gross profit increased to 79.7% from 78.0% primarily due to a larger
portion of 1996 sales in higher margin software products versusTimeWare(R)
hardware products.
During the first quarter of 1996, operating expenses increased $25,701 over the
the first quarter of 1995. The principal reasons for the increase were the
addition of research and development staff to work on the development of the
Company's new Windows(R) based accounting software and an overall increase in
general and administrative expenses, offset in part by a reduction in selling
and marketing expenses caused by lower agent commissions in 1996 and the
elimination of one Agent Sales Manager.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had working capital of $10,879 compared to
$208,208 of working capital at December 31, 1995. The decrease of $197,329
principally results from working capital used in the operations of 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 and are secured by the
Company's accounts receivable and the personal guarantees of three principal
stockholders. No advances are outstanding under the line. 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 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. In February 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 comprised of principal and interest through March 1999.
Other than the 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 attributable to an insufficient
level of revenue to cover research and development and other operating expenses.
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 custom development of accounting and
management related software for national and regional restaurant chains, 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. As of May 10,
1996, the Company had a backlog of orders approximating $1,000,000.
<PAGE>
PART 2. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the first quarter
of 1996.
Item 6. Exhibits and Reports on Form 8-K
None.
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: June 4, 1996 BY: /s/ Daniel W. Reese III
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Daniel W. Reese III
Vice President & Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> jan-01-1996
<PERIOD-END> mar-31-1996
<CASH> $127,560
<SECURITIES> $0
<RECEIVABLES> $413,053
<ALLOWANCES> $212,882
<INVENTORY> $23,815
<CURRENT-ASSETS> $574,653
<PP&E> $240,641
<DEPRECIATION> $204,523
<TOTAL-ASSETS> $853,909
<CURRENT-LIABILITIES> $563,774
<BONDS> $0
$0
$0
<COMMON> $33,823
<OTHER-SE> $0
<TOTAL-LIABILITY-AND-EQUITY> $853,909
<SALES> $365,192
<TOTAL-REVENUES> $365,192
<CGS> $74,131
<TOTAL-COSTS> $74,131
<OTHER-EXPENSES> $584,944
<LOSS-PROVISION> $19,000
<INTEREST-EXPENSE> $1,133
<INCOME-PRETAX> $(290,171)
<INCOME-TAX> $0
<INCOME-CONTINUING> $(290,171)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $(290,171)
<EPS-PRIMARY> $(.09)
<EPS-DILUTED> $(.09)
</TABLE>
