The short answer is, the authors did nothing wrong. The publisher did.
The lessons learned are to wait to submit to startup publishers for the first two years, to avoid one-person shops, and to publish around (have more than one publisher, so that when one collapses (and they all do, eventually) you aren't entirely out in the cold).
Sound advice. The first publisher I went with (in 2007) went under two months after my publication. They took two of my books with them--and 26 other authors. Since then I've been with different publishers and it's worked out.