U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22816 / September 26, 2013
Securities and Exchange Commission v. ImageXpres Corporation, et al., Civil Action No. 6:13-cv-6526-DGL (W.D.N.Y.)
On September 25, 2013, the Securities and Exchange Commission filed a complaint in the United States District Court for the Western District of New York against ImageXpres Corporation (“ImageXpres”), a publicly traded microcap company based near Rochester, New York, its President and CEO, John Zankowski and its CFO, Kevin Zankowski. The Commission’s complaint alleges that ImageXpres, John Zankowski and Kevin Zankowski violated the antifraud provisions of the Securities Exchange Act of 1934 (“Exchange Act”) by engaging in a scheme to misrepresent the financial performance of ImageXpres. Through material misstatements in press releases, unaudited financial statements and other public documents, they falsely portrayed ImageXpres as an increasingly profitable small technology company with growing sales when, in fact, it was a failing start-up 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. All three defendants have agreed to a proposed settlement of the Commission’s action on the terms described below.
Specifically, the complaint alleges that over a multi-year period, ImageXpres made numerous materially false and misleading statements about its operations and revenue in the company’s press releases, financial statements and other documents that the Zankowskis prepared and disseminated to the public. Beginning with the year ended December 31, 2008 and continuing through the second quarter of 2011, ImageXpres reported substantial sales revenue and dramatic revenue growth in numerous press releases and financial statements even though it lacked the financial resources to produce on a commercial scale the products that it touted and failed to secure the customer orders that it claimed to have received. For example, ImageXpres reported revenue growth rates in excess of 300 percent during this period for some products in spite of the absence of virtually any bona fide sales of those products. Despite the Zankowskis’ efforts to portray ImageXpres as an increasingly profitable small technology company, ImageXpres is essentially dormant now with little or no capital.
Simultaneous with the filing of the Commission’s complaint, ImageXpres, John Zankowski, and Kevin Zankowski have consented, without admitting or denying the allegations in the complaint, to the entry of final judgments: (i) permanently enjoining each of them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5; (ii) barring John Zankowski and Kevin Zankowski from acting as officers or directors of a public company and from participating in an offering of penny stock; and (iii) imposing civil monetary penalties of $50,000 against John Zankowski and $25,000 against Kevin Zankowski. The proposed settlement is subject to the Court’s approval.
The staff’s investigation was conducted by Charu A. Chandrasekhar, George N. Stepaniuk and Elzbieta Wraga and was supervised by Sanjay Wadhwa.