A Fairport father and son have agreed to settle a Securities and Exchange Commission lawsuit alleging fraudulent reporting by their printing company, promising to bow out of the penny stock market.
ImageXpres Corp., a publicly traded microcap printing firm run by CEO John Zankowski, 68, and his son Kevin, 42, chief financial officer, lists digital printing, signs and banners, custom window treatments and iPad-run smart kiosks among the products and services it sells.
According to claims by the SEC in a lawsuit filed Sept. 25 in U.S. District Court in Rochester, the firm consistently has lied, claiming capabilities far beyond its meager resources and revenues far in excess of its actual sales.
The Zankowskis agreed to settle the case on the day the suit was filed, the SEC said in a statement a day later.
John and Kevin Zankowski "falsely portrayed ImageXpres as an increasingly profitable small technology company with growing sales when in fact it was a failing startup venture that had little revenue and lacked the financial means to commercially produce the digital products it claimed to be selling to national retail customers," SEC officials said in the statement.
In addition to penalties of $50,000 imposed on John Zankowski and $25,000 on Kevin Zankowski, the settlement calls for the pair to abide by securities law provisions against fraud and stock manipulation and to accept a ban prohibiting them from acting as officers or directors of a public company and from participating in an offering of penny stock.
The settlement-agreed to by the Zankowskis with no admission or denial of wrongdoing-is subject to court approval.
In the SEC's court complaint, the regulatory agency's lawyers accuse the Zankowskis of running a fraudulent scheme meant to boost ImageXpres' stock price, fool investors and induce markets to upgrade the company's status.
The pair consistently lied about their company's sales and prospects and knew information they were putting out was not true, SEC attorneys maintain in the filing.
Over a three-year period, ImageXpres "issued a string of unaudited financial statements and press releases ... that conveyed a completely false impression of (its) operations and financial performance," SEC lawyers alleged.
The SEC indicates ImageXpres declared revenues of more than $2 million in 2010, crediting sales of its SmartKiosk Systems for nearly half of the total after trumpeting fictitious SmartKiosk deals in press releases.
Despite that claim, the SEC asserts in court papers, the Fairport firm had contracted for no more than a dozen of the SmartKiosk devices, and only a few prototypes had been made over the previous seven years. According to the SEC, the firm sold none of the digital devices from 2008 to 2011.
From 2009 to 2011, ImageXpres issued a series of press releases claiming it was delivering SmartKiosk units to retail customers and that sales were running ahead of plan, although the company actually sold no units to end users, SEC attorneys allege.
The SEC complaint also alleges that ImageXpres instead cut a deal with a related company controlled by Kevin Zankowski that was supposed sell to end users and then falsely booked the essentially fictitious sales as ImageXpres revenues.
Other supposed ImageXpres ventures, including an iPhone application called Surg-i-Scan and a photo uploading website, FreePrintze.com, that was supposed to be reaping healthy advertising revenues, were also falsely portrayed by the Zankowskis as generating revenue for ImageXpres when they brought in little or no money, the SEC claims.
ImageXpres shares are publicly traded under the symbol IMJX in off-exchange trading of over-the-counter stock. John and Kevin Zankowski each own more than 5 percent of ImageXpres and together control some 25 percent of the company's shares, the court complaint states.
A notice on the website of OTC Markets Group Inc. states that the over-the-counter stock firm has marked ImageXpres shares with a buyer-beware warning and it no longer shows quotes of the Fairport firm's share price.
According to Yahoo Finance, ImageXpres shares have for several years consistently traded for no more than a few pennies a share and are currently fetching less than a penny.
The Zankowskis did not respond to a request for comment.
10/4/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.