Zetafax had locks for <USERNAME> in the C:\Program Files (x86)\Zetafax Server\USERS\<USERNAME>\Z-DB folder (name of lock file is Zetafax.lok).

From Equisys website:

Cannot read from file: < PATH> \USER.INI

User < UserName> is already logged on - or cannot access < PATH> ZETAFAX.LOK

These errors can also be produced, when the paths entered in step 10 are incorrect, or if the USERS folder is removed from the server before the Zetafax Client can be configured to look in the correct location.

NOTESee http://www.equisys.com/technotes/ZTN1489.htm for more information.

The error I was getting was "User <USERNAME> is already logged on ..." 

Stop the Zetafax Server (either service or console application) - navigate to C:\Program Files (x86)\Zetafax Server\USERS\<USERNAME>\Z-DB folder where <USERNAME> is the name of the user getting the error - Delete the Zetafax.lok file - Start the Zetafax Server service or console application.