Place the coconut in a small skillet over medium low heat.
Toast, tossing often, until golden brown, about 4-5 minutes. Watch carefully so it doesn't burn.
Combine the milk, coconut milk, semi sweet chocolate chips, sugar, cocoa powder, vanilla extract, and coconut extract to a large saucepan over medium heat.
Whisk occasionally until thoroughly heated through.
Pour the hot chocolate into mugs then top with whipped cream and toasted coconut.
Serve immediately. Enjoy.