It would make sense for them to allow you to reapply as a late applicant (with all the disadvantages of being a late applicant) because you've had such a significant change since applying. That would set a dangerous precedent though: "I added one more feature to my demo! It's a significant change, so I can reapply!"
But that wouldn't be a huge deal since they only skim the late apps anyway. And for reapplying, the first question could be "What has changed since your on time application?" They could then very quickly reject people without a good reason to reapply.
Aha! Yes, I'm sure that's what happened.
So the short-listing stage is competitive, but the final accept/reject is based solely on the individual merits?