Beat together the softened butter, cream cheese and sugar, then stir in both extracts and egg yolk.
In a separate bowl, mix together flour, baking powder and salt. Add the flour mixture to the butter mixture and stir to make a soft dough.
Stir half of the coconut into the dough, then cover and chill for about an hour or until it is firm enough to shape.
Preheat oven to 350 degrees F.
Shape dough into about 60 little balls (a little smaller than an inch in diameter), then roll in remaining coconut. Arrange on ungreased or parchment lined baking sheet and bake for 10 to 12 minutes.
Meanwhile, have the candy ready to go.
Remove cookies from oven and place Hershey’s Kiss in the center. Let cool completely.