Codercard Inc. Files for Protection From Creditors

Codercard Inc., a Santa Ana maker of computer security devices, has filed for protection from its creditors in federal bankruptcy court and a top executive said Tuesday that he expects the firm to pay off its debts in two to four months.

The filing under Chapter 11 of the federal bankruptcy act on Friday was precipitated by a petition that sought to force Codercard into liquidation proceedings. Three former employees filed that involuntary bankruptcy petition last month in claiming about $54,000 in back wages.

Chief Executive Officer Ronald Hofer said Codercard will file a reorganization plan with the court within 14 days “which will set out in detail how and who will get paid. This allows us to get control of the situation so we can pay off the creditors.”

Hofer said Codercard has “sufficient resources” to pay its debts, which he said total $1.1 million.

The Santa Ana company has developed and is trying to market a computer security device that uses a plastic card with an embedded microchip that prevents unauthorized access to computers.

Since its founding in 1983 the company has spent more than $5 million on research and development, but sales have been nominal. In fiscal 1988, the company posted total revenue of only $300,000. In the third quarter ended March 31 the company lost $478,379 and posted no sales.

“They have excellent products but no financing,” said Lee Bergquist, formerly vice president for engineering and one of the three ex-employees who filed the bankruptcy petition.

One bright spot for Codercard was a contract valued at $475,000 signed in May with the Australian national telephone company.

Domestically, the company has concentrated on trying to sell its device to federal government agencies, like the super-secret National Security Agency and the Defense Department but has been unable to land any government contracts. The company fired its chief of governmental business operations two months ago.

Hofer remained optimistic about the company’s future saying: “Actually this will help strengthen the company because it is an opportunity to pay off creditors with a combination of cash and shares of Codercard common stock.”