Maui software company’s fall was sudden, swift

Poof!

A once ginormous value for a small Maui software company has vanished after the firm named Code Rebel Corp. filed for bankruptcy last week in a Delaware court.

Just 12 months ago the Kahului-based company was celebrating an initial public sale of 1 million stock shares for $5 apiece, which drew rabid interest from investors who bid up the price of Code Rebel shares to $38.80 in June and in turn allowed the company to sell more stock for an even bigger windfall and buy a Texas consulting company for $9 million three months later.

Never mind that at the time Code Rebel, which made and licensed software connecting PC and Mac computer systems, had two full-time employees, some part-time workers and produced a $679,942 net loss on $223,453 of revenue in 2014.

At the time of the stock sale, the value of Code Rebel’s nearly 14 million shares, most of which were still held by the company, was more than $500 million.

Now Code Rebel figures its assets are worth less than $50,000.

The company filed for Chapter 7 bankruptcy, which entails liquidating assets under the direction of a court-appointed trustee.

Code Rebel said that its debts total about $860,000.

Investors who bought shares of Code Rebel stock are not creditors. They were equity investors who now own virtually worthless stakes in the company.

The decimation of Code Rebel happened over the past three weeks, though there were indicators of possible big trouble in March when the company said it was not able to publish financial results for last year on time.

In the announcement about the delay, the company estimated that its net loss for last year was $2.4 million. But in the late financial report issued in April, the actual loss was $3.6 million.

On May 6 the U.S. Securities and Exchange Commission froze trading in Code Rebel stock, which was at $2.16 per share, and said there appeared to be a “lack of accurate information” about the stock “because of questions regarding the accuracy of statements” in three financial reports the company filed since its May 2015 initial public offering.

On May 9 Code Rebel’s president, Thomas Moreno, resigned.

Then on May 17 a tentative agreement made in March for Denver-based software company Aegis Identity Software Inc. to merge with and take over Code Rebel was called off by Aegis.

The next day, May 18, Code Rebel filed for Chapter 7.

“No viable options remained for continuing operations,” the company said in a filing with the SEC.

Code Rebel stock resumed trading Monday and closed at 5 cents a share. On Thursday the stock’s closing price had fluttered up to 15 cents.

Among tangible assets held by the company are checking accounts containing $28,721 and computer equipment valued at $13,491.

The company indicated in the filing that it might be possible to recover $500,000 paid to Aegis in January. The company also listed $1.3 million in potential contract claims, including a $670,371 claim against Moreno, that could be pursued to pay creditors.

The Chapter 7 filing was made in U.S. Bankruptcy Court in Delaware and was signed by CEO Arben Kane, who founded Code Rebel in 2007 and was previously known as Arben Kryeziu.

Shortly after the initial public stock sale last year, Kane proclaimed in an interview on the set of the Fox Business Network show “Making Money” that Code Rebel was “on the cusp” of being profitable. Kane resigned from the company along with all other officers and board directors May 18.