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+cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
+0000350868,ITI,"ITERIS, INC.",10-K,2001-07-16,2001-03-31,2001-07-16T04:00:00.000Z,0000931763-01-501040,d10k.txt,ODETICS FORM 10-K FOR PERIOD ENDING 03/31/01,255885,0,0,https://www.sec.gov/Archives/edgar/data/350868/000093176301501040/d10k.txt,https://www.sec.gov/Archives/edgar/data/350868/000093176301501040/,2000,2000,1

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+ITEM 1. BUSINESS
+General
+Odetics, Inc. was founded in 1969 to supply digital recorders for use in the
+United States space program. We pioneered new designs and standards for digital
+magnetic tape recorders offering high reliability and enhanced performance in
+the adverse environment attendant to space flight. In the 1970s, we broadened
+our information automation product line to include time-lapse videocassette
+recorders for commercial security and surveillance applications, and entered
+the business of manufacturing telecom network synchronization products. Through
+our Gyyr division, we became a leading supplier of time-lapse videotape
+cassette recorders, digital image processing modules and related products used
+in security and surveillance systems. We incorporated our Gyyr division in
+1997, forming a wholly-owned subsidiary, Gyyr Incorporated. In October 1997, we
+expanded Gyyr by acquiring Intelligent Controls Inc., a manufacturer of access
+control products specializing in PC based, remote site and fiber optic
+communications. In December 1999, we acquired the Security Products Division of
+Digital Systems Processing, Inc., which expanded our product line to include
+digital time-lapse recording based on hard disk drive technology.
+Beginning in the late 1970s, we developed and manufactured telecom
+synchronization products in our Communications division. We incorporated our
+Communications division in fiscal 1999 as our wholly-owned subsidiary, Zyfer,
+Inc., as part of our business expansion to develop products for secured
+communications over the Internet.
+Leveraging our expertise in video image processing, we entered into the
+intelligent transportation system ("ITS") business with the introduction of a
+video-based vehicle detection system in 1993. In June 1997, we acquired certain
+assets comprising the Transportation Systems business from Rockwell
+International, creating our ITS division, which expanded our offerings to
+include advanced traffic management systems and advanced traveler information
+systems. We incorporated our ITS division in 1998 as Odetics ITS, Inc. In
+October 1998, we broadened our systems offerings by acquiring Meyer, Mohaddes
+Associates, Inc. In January 2000, we reincorporated Odetics ITS in Delaware and
+changed its name to Iteris, Inc. Meyer, Mohaddes Associates, Inc. currently
+operates as a wholly-owned subsidiary of Iteris, Inc.
+In the early 1980s, we developed the technical expertise to apply automation
+to new commercial applications and established our Odetics Broadcast division.
+We incorporated our Odetics Broadcast division in 1999 as Broadcast, Inc.
+Broadcast develops and manufactures broadcast automation control systems. The
+success of our video tape libraries led us to pursue new applications for
+information automation technologies. In 1991, we introduced an automated tape
+handling subsystem for integration into tape libraries designed for midrange
+computers and client/server networks. In January 1993, we formed a separate
+subsidiary, ATL Products, Inc., to pursue the market for automated tape
+libraries. In March 1997, ATL completed an initial public offering of 1,650,000
+shares of its Class A common stock. We distributed our remaining 82.9% interest
+in ATL to our stockholders in a tax-free distribution in October 1997.
+1
+Today, Odetics serves as a developer of technology-oriented companies, each
+with its own marketplace, customers and products. These operations share a
+common corporate overhead for support for facilities, human resources, benefits
+and certain accounting, finance and executive management services. We are
+pursuing a business strategy to develop each of these business units with the
+ultimate goal of monetizing them for the benefit of our stockholders. While our
+strategy also embodies the tax-free spin-off of our developed companies to our
+stockholders, we cannot assure that we will be able to spin-off any of these
+companies in the near future, if at all.
+We currently define our business segments as video products, telecom
+products and ITS. Our video products segment includes our Broadcast subsidiary
+and our Gyyr subsidiary. Our telecom products segment includes our Zyfer
+subsidiary and our Mariner Networks subsidiary. Our ITS segment consists of our
+Iteris subsidiary. For more information concerning our business segments,
+please see Note 13 of Notes to Consolidated Financial Statements.
+Video Products
+Broadcast, Inc.
+Broadcast develops systems to automate the storage and scheduling of
+commercials, news stories and other television programming recorded on
+videotape and video server storage systems. We believe that enhanced
+operational efficiencies are a principal factor underlying the automation of
+broadcast television stations and satellite uplink operations as the industry
+transitions to digital television. During fiscal 2001, Broadcast began
+transitioning its focus from a hardware-based business to a product offering
+based on proprietary software solutions for broadband video content management
+and delivery to serve broadcast and cable operations.
+We offer software to form powerful integrated systems, including our
+AIRO(TM) automation system. Multi-channel presentation systems, which integrate
+the complete line of our hardware with commonly available broadcast quality
+video disk recorders, are quickly becoming the core business of Broadcast.
+Broadcast is focused on video asset management, including desktop video
+browsing using a network PC architecture, which can be extended to wide area
+network applications and Internet applications.
+Sales, Marketing and Principal Customers. Broadcast sells directly to
+broadcast television stations, satellite uplink operations, and other broadcast
+television and cable television system operators. The sales and marketing
+management for Broadcast is located at our principal facilities in Anaheim,
+California. Broadcast maintains a dedicated field sales force of three persons
+operating in three U.S. sales regions and Canada, and a sales manager for Latin
+America, Europe and Asia. Broadcast also utilizes additional independent
+representative organizations to promote its products in various other foreign
+markets.
+The customers of Broadcast include major television networks such as Fox,
+the Canadian Broadcasting Corporation, CNBC, Euronews, Televisa, Measat
+Broadcast Network Systems, NBC, the PBS Network, Group W Satellite
+Communications, Asia Broadcast Centre, Univision and over 100 independent and
+network-affiliated television stations. Broadcast currently has systems
+installed in over 40 countries.
+Manufacturing and Materials. Broadcast maintains a dedicated manufacturing
+operation located within our Anaheim, California facilities. Our AIRO products
+are serviced primarily in a facility located in Austin, Texas. At our Anaheim
+facility, Broadcast maintains infrastructure to support production and
+inventory control, purchasing, quality assurance, manufacturing and
+engineering.
+Broadcast purchases video servers from Grass Valley Group, Leitch and
+Pinnacle Systems and video switching, conversion and monitoring equipment from
+Grass Valley Group. Broadcast also purchases cabinets and other fabricated
+parts and components from other third party suppliers.
+2
+Gyyr Incorporated
+Gyyr produces analog and digital video products and access control systems
+that meet the security and surveillance needs for a variety of markets
+including banking, commercial/industrial and retail. Gyyr currently operates
+two divisions, Gyyr GCTV Products and Gyyr Electronic Access Controls. Gyyr
+GCTV Products develops and manufactures analog and digital video products and
+focuses on developing innovative solutions for digital storage assistance based
+video surveillance. Gyyr's time-lapse VCRs are installed in automated teller
+machines and retail point of sale systems to record transaction information in
+an effort to deter and address incidents of theft and other crimes. Gyyr
+Electronic Access Controls develops and manufactures enterprise security
+management systems and focuses on developing network-based access control
+products. Gyyr's access control systems offer managed access and monitoring of
+public, private and high security facilities. Customer demand for more
+sophisticated capabilities and integration due to digital technology has also
+contributed to the recent growth in the market for Gyyr's products. Gyyr's
+strategy is to provide complete software-based system integration of digital
+security devices over a variety of network topologies and the Internet. Recent
+additions to Gyyr's product offerings include network and Internet-based video
+and device control, and video multiplexing and digital recording. In December
+1999, we expanded our product line to include the DVMS family of digital time-
+lapse recorders based on hard disk drive architecture. This product line
+expansion was the result of our acquisition of the Security Products Division
+of Digital Systems Processing, Inc. We sell our products as individual devices
+as well as components of fully-integrated network security control systems.
+Sales, Marketing and Principal Customers. Gyyr markets and sells its
+products through three established channels: OEMs, independent distributors and
+system integrators. Gyyr personnel located at our principal facilities and
+sales offices throughout the world oversee approximately 1,000 of these channel
+partners. Gyyr has a business development and service organization located at
+our Odetics Europe Limited subsidiary. Through January 2000, Odetics Europe
+Limited assisted Gyyr with management in the development of European, Middle
+East and African markets. Commencing in January 2000, Gyyr formed Gyyr Europe
+Limited to succeed Odetics Europe Limited in its support services. Its Asian
+sales and marketing activities are managed from our Anaheim, California
+facilities. Gyyr's principal customers include major security equipment
+companies such as Diebold, Inc., ADT Security Systems, Inc., Honeywell, Inc.,
+Mosler, Inc., Hamilton Safe and ADI.
+Manufacturing and Materials. Gyyr maintains a dedicated manufacturing area
+located within our principal facilities in Anaheim, California. Gyyr primarily
+uses continuous demand flow techniques in its assembly lines. Gyyr maintains
+infrastructure to support production and inventory control, purchasing, quality
+assurance and manufacturing engineering.
+Gyyr purchases substantially all of its VCRs through Nissei Sangyo America,
+the United States distribution affiliate of Hitachi, Ltd., into which we
+incorporate certain value-added features. As a result of its reliance on
+Hitachi, Ltd, Gyyr is vulnerable to Hitachi's actions, which might necessitate
+changes in the design or manufacturing of Gyyr's products. While other
+suppliers are available who can manufacture VCRs suitable for use in Gyyr's
+products, we would be required to make changes in our product design or
+manufacturing methods to accommodate other VCRs, and Gyyr could experience
+delays or interruptions in supply while these changes are incorporated or a new
+supplier is procured.
+Telecom Products
+Zyfer, Inc.
+We incorporated our Communications division in 1999 as Zyfer, Inc. Zyfer
+develops and manufactures telecom network synchronization products and provides
+service support for space borne digital data recorders. Our telecom network
+synchronization products synchronize communications for data security, timing
+networks and wireless communications systems. These products are based on GPS
+and oscillator technologies and are sold for new applications in wireless
+networks and satellite communications for both commercial and government
+customers. Significant customers of Zyfer include the U.S. government,
+government subcontractors and LGIC of Korea.
+3
+Zyfer has developed a new class of encryption products for securing
+enterprise wide communications. These products provide transparent security to
+users and system administrators. Transparency results from the elimination of
+traditional key exchange and key management requirements and from our ability
+to encrypt and decrypt at high data rates.
+The space borne digital recorders serviced by Zyfer are employed in
+satellite programs for space research, earth resource and environmental
+observation and weather monitoring, as well as global surveillance and
+classified government programs.
+Sales, Marketing and Principal Customers. Zyfer conducts its selling and
+marketing activities directly from our principal facilities in Anaheim,
+California. Zyfer also sells its telecom synchronization products primarily
+through manufacturers' representatives.
+Manufacturing and Materials. Zyfer's manufacturing processes are ISO
+certified. Most of its manufacturing processes consist of final assembly and
+test. Zyfer outsources board assembly and some preliminary fabrication
+processes.
+Mariner Networks, Inc.
+Mariner Networks, Inc. has developed and manufactures a family of multi-
+service access devices that enable branch offices to cost effectively combine
+their separate voice, video and data networks onto a single wide area transport
+network. The Dexter(R) product family provides wire speed transport of most
+data traffic types. Mariner Networks' products include ATM, frame relay and
+voice subsystems for handling intranet, data, voice and video traffic.
+Sales, Marketing and Principal Customers. Mariner Networks sells its
+products through its direct sales organization and resellers in North America
+and in Europe. Mariner Networks maintains sales offices at our facilities in
+Anaheim, California and maintains a European subsidiary, Mariner Networks
+Europe Ltd., which occupies space within Odetics Europe Limited in the United
+Kingdom.
+Manufacturing and Materials. Mariner Networks' manufacturing processes are
+ISO 9000 certified and consist primarily of final assembly and test. Mariner
+Networks currently outsources circuit board assembly and some fabrication
+processes.
+ITS Products
+Iteris, Inc.
+Iteris, Inc. designs, develops, markets and implements software-based
+solutions that improve the safety and efficiency of vehicle transportation.
+Using its proprietary software and ITS industry expertise, Iteris provides
+video sensor systems and transportation management and traveler information
+systems for the ITS industry. The ITS industry is comprised of companies
+applying a variety of technologies to enable the safe and efficient movement of
+people and goods. Iteris uses its outdoor image recognition software expertise
+to develop proprietary algorithms for video sensor systems that improve vehicle
+safety and the flow of traffic. Our knowledge of the ITS industry enables
+Iteris to design and implement transportation solutions that help public
+agencies reduce traffic congestion and provide greater access to traveler
+information.
+Iteris' proprietary image recognition systems include AutoVue and Vantage.
+AutoVue is a small windshield mounted sensor that utilizes proprietary software
+to detect and warn drivers of unintended lane departures. Through new software
+development, Iteris is expanding the AutoVue platform to incorporate additional
+safety and convenience features. Vantage is a video vehicle sensing system that
+detects the presence of vehicles at signalized intersections enabling a more
+efficient allocation of green signal time.
+Iteris, Inc. designs, develops and implements software-based systems that
+integrate sensors, video surveillance, computers and advanced communications
+equipment enabling public agencies to monitor, control
+4
+and direct traffic flow, assist in the quick dispatch of emergency crews and
+distribute real-time information about traffic conditions.
+Sales, Marketing and Principal Customers. Iteris markets and sells its
+transportation management systems and services directly to government agencies
+pursuant to negotiated contracts which involve competitive bidding and specific
+qualification requirements. Sales of Iteris' systems generally involve long
+lead times and require extensive specification development, evaluation and
+price negotiations.
+Iteris sells its Vantage vehicle detection systems primarily through
+indirect sales channels comprised of independent dealers in the United States
+and Canada who sell integrated solutions and related products to the traffic
+intersection market. The independent dealers for Iteris are primarily
+responsible for sales, installation and support of Vantage systems. These
+dealers maintain an inventory of demonstration traffic products including the
+Vantage vehicle detection systems and sell directly to government agencies and
+installation contractors. These dealers often have long-term arrangements with
+the government agencies in their territory for the supply of various products
+for the construction and renovation of traffic intersections. Iteris holds
+technical training classes for its dealers and maintains a full-time staff of
+customer support technicians to provide technical assistance when needed.
+The marketing strategy for AutoVue is to establish it as the leading
+platform for in vehicle video sensing for trucks and passenger cars. AutoVue is
+sold directly by Iteris to vehicle manufacturers. Iteris currently has a direct
+sales force of two product managers, and intends to expand its sales force in
+the future to include engineers and product managers who will be responsible
+for sales and customer service to specific vehicle manufacturers. Since its
+target customer base is well known, Iteris currently does not plan to engage in
+broad-scale marketing campaigns.
+Manufacturing and Materials. Iteris designs, assembles and tests the
+components of its Vantage systems in approximately 5,000 square feet of space
+at our Anaheim facility. Production equipment consists of assembly lines and
+test apparatus for final assembly and testing of the manufactured product.
+Production volume is based upon quarterly forecasts that Iteris readjusts on a
+monthly basis to control inventory. Iteris subcontracts the manufacture of its
+AutoVue systems to two manufacturers. We anticipate these manufacturers will be
+able to produce unit volume sufficient to support sales to heavy truck
+manufacturers. Iteris intends to engage additional manufacturers with expertise
+in high volume production to produce higher volumes for light and medium trucks
+and passenger cars. Iteris does not manufacture any of the hardware used in the
+transportation management and traveler information systems that it designs and
+implements. The production facility for Iteris is ISO 9001 certified.
+Customer Support and Services
+Each of our business units is responsible for its own customer support and
+service organizations. We provide warranty service for each of our product
+lines, as well as follow-up service and support, for which we typically charge
+separately. We also offer separate software maintenance agreements to our
+customers. We view customer support services as a critical competitive factor
+as well as a revenue source.
+Backlog
+Our backlog of unfulfilled firm orders was approximately $31.0 million as of
+March 31, 2001 and approximately $27.3 million as of March 31, 2000.
+Approximately 70% of our backlog at March 31, 2000 was recognized as revenues
+in fiscal 2001, and approximately 68% of our backlog at March 31, 2001 is
+expected to be recognized as revenues in fiscal 2002. Pursuant to the customary
+terms of our agreements with government contractors and other customers,
+customers can generally cancel or reschedule orders with little or no
+penalties. Lead times for the release of purchase orders depend upon the
+scheduling and forecasting practices of our individual customers, which also
+can affect the timing of the conversion of our backlog into revenues. For these
+reasons, among others, our backlog at a particular date may not be indicative
+of our future revenues.
+5
+Product Development
+Each of our business units directs and staffs its own product development
+activities. Most of our development activities are conducted at our principal
+facilities in Anaheim, California. Mariner Networks also maintains a
+development team in La Gaude, France.
+Our business units require substantial ongoing research and development
+expenditures and other product development activities. Our company-sponsored
+research and development costs and expenses were approximately $11.2 million in
+fiscal 1999, $16.9 million in fiscal 2000 and $18.8 in fiscal 2001. We expect
+to continue to pursue significant product development programs and incur
+significant research and development expenditures in each of our business
+units.
+Competition
+Our business units generally face significant competition in each of their
+respective markets. Increased competition may result in price reductions,
+reduced gross margins and loss of market share, any of which could have a
+material adverse effect on our business, financial condition and results of
+operations.
+Broadcast's primary competitors include Sony, Harris, Encoda and Probel.
+Sony is a large, international supplier of extensive professional quality
+products, including video tape libraries, for the broadcast television market.
+Harris and Probel principally provide automation control for video libraries
+and disk recorders. Broadcast's systems compete primarily in the arena of
+facility management and enterprise wide automation. We believe that the
+capability of our systems to integrate the broadcast station business systems
+acquisition processes, storage devices and presentation devices under a
+relational data base management system represents a unique and differentiable
+capability.
+As Gyyr expands its product base from time-lapse VCRs to providing
+integrated security systems in CCTV and electronic access control, it will
+compete with a broader set of companies. Major Japanese competitors in Gyyr's
+legacy tape-based time-lapse VCR business include Panasonic, Toshiba, Sony,
+Sanyo, Mitsubishi and JVC. Gyyr also competes with large systems suppliers
+including Sensormatic, Honeywell, Pelco, Ultrak, Ademco and Vicon. In the sale
+of access control systems, Gyyr principally competes with Casi-Rusco,
+Checkpoint, Cardkey and Lenel. Gyyr generally competes based upon its strength
+in the integration of its various component products into systems that provide
+complete solutions through the use of advanced software and networking
+technologies.
+Zyfer's primary competition for network synchronization products is Datum,
+Inc. and TrueTime Inc. Zyfer anticipates that its competition for encryption
+products for secured communications systems will include Cylink Corporation,
+Rainbow Technologies, Inc. and Redcreek Communications Inc. The competition for
+integrated circuits addressing encryption applications include Broadcom
+Corporation, Chrysalis and HiFN.
+Mariner Networks' principal competition includes networking vendors Vina
+Technologies, Accelerated Networks, Marconi and Nortel Networks.
+While we believe that AutoVue is the only commercially-available lane
+departure warning system, potential competitors including Delphi Automotive
+Systems Corporation domestically, NEC Corporation and Hitachi Ltd. in Japan and
+Robert Bosch Gmbh in Europe, which are currently developing video sensor
+technologies for the vehicle industry that could be used for lane departure
+warning systems. In the market for our Vantage vehicle detection systems, we
+compete with both manufacturers of "above ground" video camera detection
+systems, such as Econolite Control Products, Inc., Trafficon, N.V. and the Peek
+Traffic Systems division of Thermo Electron Corporation, and other non-
+intrusive detection devices including microwave, infrared, ultrasonic and
+magnetic detectors, as well as manufacturers and installers of in-pavement
+inductive loop products.
+The transportation management and traveler information systems market is
+highly fragmented and is subject to evolving national and regional quality and
+safety standards. Iteris' competitors vary in number, scope
+6
+and breadth of the products and services they offer. Iteris' competitors in
+advanced transportation management and traveler information systems include
+corporations such as TRW, Inc., Transcore, Lockheed Martin Corporation, PB
+Farradyne Inc., Kimley-Horn and Associates, Inc. and National Engineering
+Technology, Inc. Iteris' competitors in transportation engineering, planning
+and design include major firms such as Parsons Brinkerhoff, Inc. and Parsons
+Transportation Group Inc., as well as many regional engineering firms.
+In general, the markets for the products and services offered by our
+businesses are highly competitive and are characterized by rapidly changing
+technology and evolving standards. Many of our current and prospective
+competitors have longer operating histories, greater name recognition, access
+to larger customer bases and significantly greater financial, technical,
+manufacturing, distribution and marketing resources than us. As a result, they
+may be able to adapt more quickly to new or emerging standards or technologies
+or to devote greater resources to the promotion and sale of their products. It
+is also possible that new competitors or alliances among competitors could
+emerge and rapidly acquire significant market share. We believe that our
+ability to compete effectively in our target markets depends on a number of
+factors, including the success and timing of our new product development, the
+compatibility of our products with a broad range of computing systems, product
+quality and performance, reliability, functionality, price, and service and
+technical support. Our failure to provide services and develop and market
+products that compete successfully with those of other suppliers and
+consultants in our target markets would have a material adverse effect on our
+business, financial condition and results of operations.
+Intellectual Property and Proprietary Rights
+Our ability to compete effectively depends in part on our ability to develop
+and maintain the proprietary aspects of our technology. Our policy is to obtain
+appropriate proprietary rights protection for any potentially significant new
+technology acquired or developed each of our business units. We currently hold
+a number of United States and foreign patents and trademarks, which will expire
+at various dates commencing in 2004. We also have pending a number of United
+States and foreign patent applications relating to certain of our products;
+however, we cannot be certain that any patents will be granted pursuant to
+these applications.
+In addition to patent laws, we rely on copyright and trade secret laws to
+protect our proprietary rights. We attempt to protect our trade secrets and
+other proprietary information through agreements with customers and suppliers,
+proprietary information agreements with our employees and consultants, and
+other similar measures. We cannot be certain that we will be successful in
+protecting our proprietary rights. While we believe our patents, patent
+applications, software and other proprietary know-how have value, changing
+technology makes our future success dependent principally upon our employees'
+technical competence and creative skills for continuing innovation.
+Litigation has been necessary in the past and may be necessary in the future
+to enforce our proprietary rights, to determine the validity and scope of the
+proprietary rights of others, or to defend us against claims of infringement or
+invalidity by others. An adverse outcome in such litigation or similar
+proceedings could subject us to significant liabilities to third parties,
+require disputed rights to be licensed from others or require us to cease
+marketing or using certain products, any of which could have a material adverse
+effect on our business, financial condition and results of operations. In
+addition, the cost of addressing any intellectual property litigation claim,
+both in legal fees and expenses, as well as from the diversion of management's
+resources, regardless of whether the claim is valid, could be significant and
+could have a material adverse effect on our business, financial condition and
+results of operations.
+Employees
+We refer to our employees as associates. As of June 20, 2001, we employed
+442 associates, including 72 associates in general management, administration
+and finance; 65 associates in sales and marketing; 170 associates in product
+development; 105 associates in operations, manufacturing and quality; and
+30 associates in customer service. None of our associates are represented by a
+labor union and we have not experienced a work stoppage.
+7
+We provide centralized support for human resources management for each of
+our business units and subsidiaries. These services include recruiting,
+administration and outplacement.
+Government Regulation
+Our manufacturing operations are subject to various federal, state and local
+laws, including those restricting the discharge of materials into the
+environment. We are not involved in any pending or threatened proceedings which
+would require curtailment of our operations because of such regulations. We
+continue to expend funds in connection with our compliance with applicable
+environmental regulations. These expenditures have not, however, been
+significant in the past, and we do not expect any significant expenditures in
+the near future.
+From time to time, a portion of our work relating to network synchronization
+systems may constitute classified United States government information or may
+be used in classified programs of the United States Government. For this
+purpose, we possess certain relevant security clearances. Our affected
+facilities and operations are also subject to security regulations of the
+United States Government. We believe we are currently in full compliance with
+these regulations.
+8
+RISK FACTORS
+Our business is subject to a number of risks, some of which are discussed
+below. Other risks are presented elsewhere in this report. You should consider
+the following risks carefully in addition to the other information contained in
+this report before purchasing the shares of our common stock. If any of the
+following risks actually occur, they could seriously harm our business,
+financial condition or results of operations. In such case, the trading price
+of our common stock could decline, and you may lose all or part of your
+investment.
+We Have Experienced Substantial Losses and Expect Future Losses. We
+experienced significant operating losses of $49.8 million for the year ended
+March 31, 2001, $38.7 million for the year ended March 31, 2000 and $18.3
+million for the year ended March 31, 1999. In January 2001, we announced the
+reorganization of our business in order to reduce our operating expenses and
+negative cash flow, which included the downsizing of our operations in Gyyr and
+Broadcast, and a 25% reduction in our total work force. We cannot assure you
+that this reorganization will improve our financial performance, or that we
+will be able to achieve profitability on a quarterly or annual basis in the
+future. Most of our expenses are fixed in advance, and we generally are unable
+to reduce our expenses significantly in the short-term to compensate for any
+unexpected delay or decrease in anticipated revenues. As a result, we may
+continue to experience losses, which could cause the market price of our common
+stock to decline.
+We Will Need to Raise Additional Capital in the Future and May Not Be Able
+to Secure Adequate Funds on Terms Acceptable to Us, or at All. Our line of
+credit facility expired on December 31, 2000. While we have received an
+extension on this facility until July 31, 2001, we will need to obtain a new
+line of credit from another lender in the near future. Substantially all of our
+assets have been pledged to our existing lender to secure the outstanding
+indebtedness under this facility ($13.5 million at March 31, 2001). We cannot
+assure you that we will be able to obtain a new line of credit on a timely
+basis, on acceptable terms, or at all. Even if we are able to secure a new line
+of credit, we anticipate that we will need to raise additional capital in the
+near future, either through additional bank borrowings, the monetization of
+certain real property, the divestiture of business units or select assets, or
+other debt or equity financings. These conditions, together with our recurring
+losses, raise substantial doubt about our ability to continue as a going
+concern.
+Our capital requirements will depend on many factors, including:
+. our ability to control costs;
+. increased research and development funding, and required investments in
+our business units;
+. our ability to generate operating income;
+. market acceptance of our products;
+. technological advancements and our competitors' response to our
+products;
+. capital improvements to new and existing facilities;
+. increased sales and marketing expenses;
+. potential acquisitions of businesses and product lines; and
+. additional working capital needs.
+If our capital requirements are materially different from those currently
+planned, we may need additional capital sooner than anticipated. If additional
+funds are raised through the issuance of equity securities, the percentage
+ownership of our stockholders will be reduced and such securities may have
+rights, preferences and privileges senior to our common stock. Additional
+financing may not be available on favorable terms or at all. If adequate funds
+are not available or are not available on acceptable terms, we may be unable to
+develop or enhance our products, expand our sales and marketing programs, take
+advantage of future opportunities or respond to competitive pressures.
+9
+Our Quarterly Operating Results Fluctuate as a Result of Many Factors. Our
+quarterly revenues and operating results have fluctuated and are likely to
+continue to vary from quarter to quarter due to a number of factors, many of
+which are not within our control. Factors that could affect our revenues
+include, among others, the following:
+. our significant investment in research and development for our
+subsidiaries and business units;
+. our ability to control costs;
+. our ability to develop, introduce, market and gain market acceptance of
+new products applications and product enhancements in a timely manner;
+. the size, timing, rescheduling or cancellation of significant customer
+orders;
+. the introduction of new products by competitors;
+. the availability of components used in the manufacture of our products;
+. changes in our pricing policies and the pricing policies by our
+suppliers and competitors, pricing concessions on volume sales, as well
+as increased price competition in general;
+. the long lead times associated with government contracts or required by
+vehicle manufacturers;
+. our success in expanding and implementing our sales and marketing
+programs;
+. the effects of technological changes in our target markets;
+. our relatively small level of backlog at any given time;
+. the mix of sales among our business units;
+. deferrals of customer orders in anticipation of new products,
+applications or product enhancements;
+. the risks inherent in our acquisitions of technologies and businesses;
+. risks and uncertainties associated with our international business;
+. currency fluctuations and our ability to get currency out of certain
+foreign countries; and
+. general economic and market conditions.
+In addition, our sales in any quarter may consist of a relatively small
+number of large customer orders. As a result, the timing of a small number of
+orders may impact our quarter to quarter results. The loss of or a substantial
+reduction in orders from any significant customer could seriously harm our
+business, financial condition and results of operations.
+Due to all of the factors listed above and other risks discussed in this
+report, our future operating results could be below the expectations of
+securities analysts or investors. If that happens, the trading price of our
+common stock could decline. As a result of these quarterly variations, you
+should not rely on quarter-to-quarter comparisons of our operating results as
+an indication of our future performance.
+Our Operating Strategy for Developing Companies is Expensive and May Not Be
+Successful. Our business strategy entails intensive business development
+activities, which are expensive and highly risky. The goal of this strategy is
+to develop companies that can be spun-off to our stockholders. This strategy
+has in the past required us to make significant investments in our business
+units, both for research and development, and also to develop a separate
+infrastructure for certain of our business units, sufficient to allow the unit
+to function as an independent public company. We expect to continue to invest
+in the development of certain of our business units with the goal of obtaining
+additional capital to support further investment and eventually completing
+additional public offerings. We may not recognize the benefits of this
+investment for a significant
+10
+period of time, if at all. Our ability to complete private financings or an
+initial public offering of any of our business units and/or spin-off our
+interest to our stockholders will depend upon many factors, including:
+. the overall performance and results of operations of the particular
+business unit;
+. the potential market for our business unit;
+. our ability to assemble and retain a broad, qualified management team
+for the business unit;
+. our financial position and cash requirements;
+. the business unit's customer base and product line;
+. the current tax treatment of spin-off transactions and our ability to
+obtain favorable determination letters from the Internal Revenue
+Service; and
+. general economic and market conditions, including the receptiveness of
+the stock markets to initial public offerings.
+We may not be able to complete a successful private or public offering or
+spin-off of any of our business units in the near future, or at all. During
+fiscal 2001, we attempted to complete the initial public offering of Iteris. We
+withdrew the offering due to adverse market conditions. Even if we do complete
+additional public offerings, we may decide not to spin-off a particular
+business unit, or to delay the spin-off until a later date.
+We Must Keep Pace with Rapid Technological Change to Remain Competitive. Our
+target markets are in general characterized by the following factors:
+. rapid technological advances;
+. downward price pressure in the marketplace as technologies mature;
+. changes in customer requirements;
+. frequent new product introductions and enhancements; and
+. evolving industry standards and changes in the regulatory environment.
+Our future success will depend upon our ability to anticipate and adapt to
+changes in technology and industry standards, and to effectively develop,
+introduce, market and gain broad acceptance of new products and product
+enhancements incorporating the latest technological advancements.
+We believe that we must continue to make substantial investments to support
+ongoing research and development in order to remain competitive. We need to
+continue to develop and introduce new products that incorporate the latest
+technological advancements in hardware, storage media, operating system
+software and applications software in response to evolving customer
+requirements. Our business and results of operations could be adversely
+affected if we do not anticipate or respond adequately to technological
+developments or changing customer requirements. We cannot assure you that any
+such investments in research and development will lead to any corresponding
+increase in revenue.
+Our Future Success Depends on the Successful Development and Market
+Acceptance of New Products. We believe our revenue growth and future operating
+results will depend on our ability to complete development of new products and
+enhancements, introduce these products in a timely, cost-effective manner,
+achieve broad market acceptance of these products and enhancements, and reduce
+our product costs. We may not be able to introduce any new products or any
+enhancements to our existing products on a timely basis, or at all. In
+addition, the introduction of any new products could adversely affect the sales
+of our certain of our existing products.
+Our future success will also depend in part on the success of several
+recently introduced products including DVMS, our family of digital time-lapse
+recorders; AutoVue, our lane departure warning system; and Dexter, our multi-
+service access device.
+11
+Market acceptance of our new products depends upon many factors, including
+our ability to accurately predict market requirements and evolving industry
+standards, our ability to resolve technical challenges in a timely and cost-
+effective manner and achieve manufacturing efficiencies, the perceived
+advantages of our new products over traditional products and the marketing
+capabilities of our independent distributors and strategic partners. Our
+business and results of operations could be seriously harmed by any significant
+delays in our new product development. We have experienced delays in the past
+in the introduction of new products, particularly with our Roswell system,
+which we recently discontinued. Certain of our new products could contain
+undetected design faults and software errors or "bugs" when first released by
+us, despite our testing. We may not discover these faults or errors until after
+a product has been installed and used by our customers. Any faults or errors in
+our existing products or in any new products may cause delays in product
+introduction and shipments, require design modifications or harm customer
+relationships, any of which could adversely affect our business and competitive
+position.
+We currently outsource the manufacture of our AutoVue product line to a
+single manufacturer. This manufacturer may not be able to produce sufficient
+quantities of this product in a timely manner or at a reasonable cost, which
+could materially and adversely affect our ability to launch or gain market
+acceptance of AutoVue.
+We Have Significant International Sales and Are Subject to Risks Associated
+with Operating in International Markets. International product sales
+represented approximately 20% of our total net sales and contract revenues for
+the fiscal year ended March 31, 2001, approximately 19% for the fiscal year
+ended March 31, 2000 and approximately 27% for the fiscal year ended March 31,
+1999. International business operations are subject to inherent risks,
+including, among others:
+. unexpected changes in regulatory requirements, tariffs and other trade
+barriers or restrictions;
+. longer accounts receivable payment cycles;
+. difficulties in managing and staffing international operations;
+. potentially adverse tax consequences;
+. the burdens of compliance with a wide variety of foreign laws;
+. import and export license requirements and restrictions of the United
+States and each other country in which we operate;
+. exposure to different legal standards and reduced protection for
+intellectual property rights in some countries;
+. currency fluctuations and restrictions; and
+. political, social and economic instability.
+We believe that international sales will continue to represent a significant
+portion of our revenues, and that continued growth and profitability may
+require further expansion of our international operations. Many of our
+international sales are currently denominated in U.S. dollars. As a result, an
+increase in the relative value of the dollar could make our products more
+expensive and potentially less price competitive in international markets. We
+do not engage in any transactions as a hedge against risks of loss due to
+foreign currency fluctuations.
+Any of these factors may adversely effect our future international sales
+and, consequently, on our business and operating results. Furthermore, as we
+increase our international sales, our total revenues may also be affected to a
+greater extent by seasonal fluctuations resulting from lower sales that
+typically occur during the summer months in Europe and other parts of the
+world.
+We Need to Manage Growth and the Integration of Our Acquisitions. Over the
+past few years, we have expanded our operations and made several substantial
+acquisitions of diverse businesses, including Intelligent
+12
+Controls, Inc., International Media Integration Services, Ltd., Meyer Mohaddes
+Associates, Inc., Viggen Corporation, certain assets of the Transportation
+Systems business of Rockwell International, and the Security Products Division
+of Digital Systems Processing, Inc. A key element of our business strategy
+involves expansion through the acquisition of complementary businesses,
+products and technologies. Acquisitions may require significant capital
+infusions and, in general, acquisitions also involve a number of special risks,
+including:
+. potential disruption of our ongoing business and the diversion of our
+resources and management's attention;
+. the failure to retain or integrate key acquired personnel;
+. the challenge of assimilating diverse business cultures, and the
+difficulties in integrating the operations, technologies and information
+system of the acquired companies;
+. increased costs to improve managerial, operational, financial and
+administrative systems and to eliminate duplicative services;
+. the incurrence of unforeseen obligations or liabilities;
+. potential impairment of relationships with employees or customers as a
+result of changes in management; and
+. increased interest expense and amortization of acquired intangible
+assets.
+Acquisitions may also materially and adversely affect our operating results
+due to large write-offs, contingent liabilities, substantial depreciation,
+deferred compensation charges or goodwill amortization, or other adverse tax or
+audit consequences.
+Our competitors are also soliciting potential acquisition candidates, which
+could both increase the price of any acquisition targets and decrease the
+number of attractive companies available for acquisition. We cannot assure you
+that we will be able to consummate any additional acquisitions, successfully
+integrate any acquisitions or realize the benefits anticipated from any
+acquisition.
+Acquisitions, combined with the expansion of our business units and recent
+growth has placed and is expected to continue to place a significant strain on
+our resources. To accommodate this growth, we anticipate that we will be
+required to implement a variety of new and upgraded operational and financial
+systems, procedures and controls, including the improvement of our accounting
+and other internal management systems. All of these updates will require
+substantial additional expense as well as management effort. Our failure to
+manage growth and integrate our acquisitions successfully could adversely
+affect our business, financial condition and results of operations.
+We Depend on Government Contracts and Subcontracts and Face Additional Risks
+Related to Fixed Price Contracts. A significant portion of the sales by Iteris
+and a portion of our sales by Zyfer were derived from contracts with
+governmental agencies, either as a general contractor, subcontractor or
+supplier. Government contracts represented approximately 25% and 26% of our
+total net sales and contract revenues for the years ended March 31, 2000 and
+2001, respectively. We anticipate that revenue from government contracts will
+continue to increase in the near future. Government business is, in general,
+subject to special risks and challenges, including:
+. long purchase cycles;
+. competitive bidding and qualification requirements;
+. performance bond requirements;
+. delays in funding, budgetary constraints and cut-backs; and
+. milestone requirements and liquidated damage provisions for failure to
+meet contract milestones.
+13
+In addition, a large number of our government contracts are fixed price
+contracts. As a result, we may not be able to recover for any cost overruns.
+These fixed price contracts require us to estimate the total project cost based
+on preliminary projections of the project's requirements. The financial
+viability of any given project depends in large part on our ability to estimate
+these costs accurately and complete the project on a timely basis. In the event
+our costs on these projects exceed the fixed contractual amount, we will be
+required to bear the excess costs. These additional costs adversely affect our
+financial condition and results of operations. Moreover, certain of our
+government contracts are subject to termination or renegotiation at the
+convenience of the government, which could result in a large decline in our net
+sales in any given quarter. Our inability to address any of the foregoing
+concerns or the loss or renegotiation of any material government contract could
+seriously harm our business, financial condition and results of operations.
+The Markets in Which We Operate Are Highly Competitive and Have Many More
+Established Competitors. We compete with numerous other companies in our target
+markets and we expect such competition to increase due to technological
+advancements, industry consolidations and reduced barriers to entry. Increased
+competition is likely to result in price reductions, reduced gross margins and
+loss of market share, any of which could seriously harm our business, financial
+condition and results of operations. Many of our competitors have far greater
+name recognition and greater financial, technological, marketing and customer
+service resources than we do. This may allow them to respond more quickly to
+new or emerging technologies and changes in customer requirements. It may also
+allow them to devote greater resources to the development, promotion, sale and
+support of their products than we can. Recent consolidations of end users,
+distributors and manufacturers in our target markets have exacerbated this
+problem. As a result of the foregoing factors, we may not be able to compete
+effectively in our target markets and competitive pressures could adversely
+affect our business, financial condition and results of operations.
+We Cannot Be Certain of Our Ability to Attract and Retain Key Personnel and
+We Do Not Have Employment Agreements with Any Key Personnel. Due to the
+specialized nature of our business, we are highly dependent on the continued
+service of our executive officers and other key management, engineering and
+technical personnel, particularly Joel Slutzky, our Chief Executive Officer and
+Chairman of the Board, and Gregory A. Miner, our Chief Operating Officer and
+Chief Financial Officer. We do not have any employment contracts with any of
+our officers or key employees. The loss of any of these persons would seriously
+harm our development and marketing efforts, and would adversely affect our
+business. Our success will also depend in large part upon our ability to
+continue to attract, retain and motivate qualified engineering and other highly
+skilled technical personnel. Competition for employees, particularly
+development engineers, is intense. We may not be able to continue to attract
+and retain sufficient numbers of such highly skilled employees. Our inability
+to attract and retain additional key employees or the loss of one or more of
+our current key employees could adversely affect upon our business, financial
+condition and results of operations.
+We May Not be Able to Adequately Protect or Enforce Our Intellectual
+Property Rights. If we are not able to adequately protect or enforce the
+proprietary aspects of our technology, competitors could be able to access our
+proprietary technology and our business, financial condition and results of
+operations will likely be seriously harmed. We currently attempt to protect our
+technology through a combination of patent, copyright, trademark and trade
+secret laws, employee and third party nondisclosure agreements and similar
+means. Despite our efforts, other parties may attempt to disclose, obtain or
+use our technologies or solutions. Our competitors may also be able to
+independently develop products that are substantially equivalent or superior to
+our products or design around our patents. In addition, the laws of some
+foreign countries do not protect our proprietary rights as fully as do the laws
+of the United States. As a result, we may not be able to protect our
+proprietary rights adequately in the United States or abroad.
+From time to time, we have received notices that claim we have infringed
+upon the intellectual property of others. Even if these claims are not valid,
+they could subject us to significant costs. We have engaged in litigation in
+the past, and litigation may be necessary in the future to enforce our
+intellectual property rights or to determine the validity and scope of the
+proprietary rights of others. Litigation may also be necessary to defend
+against claims of infringement or invalidity by others. An adverse outcome in
+litigation or any similar
+14
+proceedings could subject us to significant liabilities to third parties,
+require us to license disputed rights from others or require us to cease
+marketing or using certain products or technologies. We may not be able to
+obtain any licenses on terms acceptable to us, or at all. We also may have to
+indemnify certain customers or strategic partners if it is determined that we
+have infringed upon or misappropriated another party's intellectual property.
+Any of these results could adversely affect on our business, financial
+condition and results of operations. In addition, the cost of addressing any
+intellectual property litigation claim, both in legal fees and expenses, and
+the diversion of management resources, regardless of whether the claim is
+valid, could be significant and could seriously harm our business, financial
+condition and results of operations.
+The Trading Price of Our Common Stock Is Volatile. The trading price of our
+common stock has been subject to wide fluctuations in the past. Since January
+2000, our Class A common stock has traded at prices as low as $1.88 per share
+and as high as $29.44 per share. We may not be able to increase or sustain the
+current market price of our common stock in the future. As such, you may not be
+able to resell your shares of common stock at or above the price you paid for
+them. The market price of our common stock could continue to fluctuate in the
+future in response to various factors, including, but not limited to:
+. quarterly variations in operating results;
+. our ability to control costs and improve cash flow;
+. shortages announced by suppliers;
+. announcements of technological innovations or new products by our
+competitors, customers or us;
+. acquisitions or businesses, products or technologies;
+. changes in pending litigation or new litigation;
+. changes in investor perceptions;
+. our ability to spin-off any business unit;
+. applications or product enhancements by us or by our competitors; and
+. changes in earnings estimates or investment recommendations by
+securities analysts.
+The stock market in general has recently experienced volatility, which has
+particularly affected the market prices of equity securities of many high
+technology companies. This volatility has often been unrelated to the operating
+performance of these companies. These broad market fluctuations may adversely
+affect the market price of our common stock. In the past, companies that have
+experienced volatilities in the market price of their securities have been the
+subject of securities class action litigation. If we were to become the subject
+of a class action lawsuit, it could result in substantial losses and divert
+management's attention and resources from other matters.
+We Are Controlled by Certain of Our Officers and Directors. As of June 21,
+2001, our officers and directors beneficially owned approximately 28% of the
+total combined voting power of the outstanding shares of our Class A common
+stock and Class B common stock. As a result of their stock ownership, our
+management will be able to significantly influence the election of our
+directors and the outcome of corporate actions requiring stockholder approval,
+such as mergers and acquisitions, regardless of how our other stockholders may
+vote. This concentration of voting control may have a significant effect in
+delaying, deferring or preventing a change in our management or change in
+control and may adversely affect the voting or other rights of other holders of
+common stock.
+Our Stock Structure and Certain Anti-Takeover Provisions May Affect the
+Price of Our Common Stock. Certain provisions of our certificate of
+incorporation and our stockholder rights plan could make it difficult for a
+third party to acquire us, even though an acquisition might be beneficial to
+our stockholders. These provisions could limit the price that investors might
+be willing to pay in the future for shares of our common stock. Our Class A
+common stock entitles the holder to one-tenth of one vote per share and our
+15
+Class B common stock entitles the holder to one vote per share. The disparity
+in the voting rights between our common stock, as well as our insiders'
+significant ownership of the Class B common stock, could discourage a proxy
+contest or make it more difficult for a third party to effect a change in our
+management and control. In addition, our Board of Directors is authorized to
+issue, without stockholder approval, up to 2,000,000 shares of preferred stock
+with voting, conversion and other rights and preferences superior to those of
+our common stock, as well as additional shares of Class B common stock. Our
+future issuance of preferred stock or Class B common stock could be used to
+discourage an unsolicited acquisition proposal.
+In March 1998, we adopted a stockholder rights plan and declared a dividend
+of preferred stock purchase rights to our stockholders. In the event a third
+party acquires more than 15% of the outstanding voting control of our company
+or 15% of our outstanding common stock, the holders of these rights will be
+able to purchase the junior participating preferred stock at a substantial
+discount off of the then current market price. The exercise of these rights and
+purchase of a significant amount of stock at below market prices could cause
+substantial dilution to a particular acquiror and discourage the acquiror from
+pursuing our company. The mere existence of a stockholder rights plan often
+delays or makes a merger, tender offer or proxy contest more difficult.
+We Do Not Pay Cash Dividends. We have never paid cash dividends on our
+common stock and do not anticipate paying any cash dividends on either class of
+our common stock in the foreseeable future.
+We May Be Subject to Additional Risks. The risks and uncertainties described
+above are not the only ones facing our company. Additional risks and
+uncertainties not presently known to us or that we currently deem immaterial
+may also adversely affect our business operations.

raw/filings/0000350868/2000/0000931763-01-501040/item13.txt

@@ -0,0 +1,4 @@
+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
+The information under the heading "Certain Transactions," appearing in our
+proxy statement, is incorporated herein by reference.
+26

raw/filings/0000350868/2000/0000931763-01-501040/rp_note.txt

@@ -0,0 +1,6 @@
+5. Related Party Transaction
+In July 1999, the Company sold an option to an investment company controlled
+by certain officers and shareholders of the Company, for an aggregate purchase
+price of $5.0 million to purchase certain real property of Odetics. In August
+2000 the Company repurchased the option for $5.6 million which represented the
+original purchase price plus accrued interest.

raw/filings/0000350868/2001/0001017062-02-001321/filing_metadata.csv

@@ -0,0 +1,2 @@
+cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
+0000350868,ITI,"ITERIS, INC.",10-K,2002-07-01,2002-03-31,2002-07-01T21:19:28.000Z,0001017062-02-001321,d10k.txt,"ODETICS, INC. FORM 10-K",242610,0,0,https://www.sec.gov/Archives/edgar/data/350868/000101706202001321/d10k.txt,https://www.sec.gov/Archives/edgar/data/350868/000101706202001321/,2001,2001,1

raw/filings/0000350868/2001/0001017062-02-001321/item1.txt

@@ -0,0 +1,854 @@
+ITEM 1. BUSINESS
+General
+Odetics, Inc. provides products, systems, and services that control and
+manage the use of public roadways, secure access to public and private
+facilities, and secure the delivery of digital communications. Our company was
+founded in 1969 to supply digital recorders for use in the United States space
+program. We pioneered new designs and standards for digital magnetic tape
+recorders offering high reliability and enhanced performance in the adverse
+environment attendant to space flight. In the 1970s, we broadened our
+information automation product line to include time-lapse videocassette
+recorders for commercial security and surveillance applications, and entered the
+business of manufacturing telecom network synchronization products. Through our
+Gyyr Incorporated subsidiary, we became a leading supplier of time-lapse
+videotape cassette recorders, and we pioneered new products incorporating
+digital video technologies and related CCTV products used in security and
+surveillance systems. In April 2001, we sold Gyyr's Vortex Dome and Quarterback
+Controller product lines. Then in September 2001, we sold the assets of our CCTV
+product line, and changed the name of our Gyyr subsidiary to MAXxess Systems
+Inc. to continue to pursue the security market with electronic access control
+products and systems.
+Beginning in the late 1970s, we developed and manufactured telecom
+synchronization products in our Communications division. We incorporated our
+Communications division in fiscal 1999 as our wholly-owned subsidiary, Zyfer,
+Inc., as part of our business expansion to develop products focused on the
+security aspects of data traffic over ground and satellite links, and network
+communications.
+Leveraging our expertise in video image processing, we entered into the
+intelligent transportation system ("ITS") business with the introduction of a
+video-based vehicle detection system in 1993. In June 1997, we acquired certain
+assets comprising the Transportation Systems business from Rockwell
+International, creating our ITS division, which expanded our offerings to
+include advanced traffic management systems and advanced traveler information
+systems. We incorporated our ITS division in 1998 as Odetics ITS, Inc. In
+October 1998, we broadened our systems offerings by acquiring Meyer, Mohaddes
+Associates, Inc. In January 2000, we reincorporated Odetics ITS in Delaware and
+changed its name to Iteris, Inc. Odetics currently owns 78.2% of the outstanding
+common stock of Iteris or 62.7% as calculated for the preferred stock conversion
+equivalent. Meyer, Mohaddes Associates, Inc. currently operates as a
+wholly-owned subsidiary of Iteris, Inc.
+In the early 1980s, we developed the technical expertise to apply
+automation to new commercial applications and established our Odetics Broadcast
+division. We incorporated our Odetics Broadcast division in 1999 as Broadcast,
+Inc. Broadcast is a supplier of content management and delivery solutions for
+the television, cable and satellite industries. The success of our video tape
+libraries led us to pursue new applications for information automation
+technologies. In 1991, we introduced an automated tape handling subsystem for
+integration into tape libraries designed for midrange computers and
+client/server networks. In January 1993, we formed a separate subsidiary, ATL
+Products, Inc., to pursue the market for automated tape libraries. In March
+1997, ATL completed an initial public offering of 1,650,000 shares of its Class
+A common stock. We distributed our remaining 82.9% interest in ATL to our
+stockholders in a tax-free distribution in October 1997.
+1
+Odetics has a unique mix of competencies in outdoor image processing,
+high-speed security processing, precision timing and synchronization, and data
+management. We have a unique identity within each of our vertical markets that
+we address, and our business is organizationally structured so that our
+management teams and technical competencies are in alignment with each area of
+market focus. Our business units share a common overhead structure for
+facilities, human resources, benefits and certain accounting, finance and
+management services.
+We currently define our business segments as video products, telecom
+products and ITS. Our video products segment includes our Broadcast subsidiary
+and our MAXxess subsidiary. Our telecom products segment consists of our Zyfer
+subsidiary. Our ITS segment consists of our Iteris subsidiary. For more
+information concerning our business segments, please see Note [14] of Notes to
+Consolidated Financial Statements.
+Video Products
+Broadcast, Inc.
+Broadcast is a supplier of content management and delivery solutions for
+the television, cable and satellite industries. Broadcast's systems automate the
+storage and scheduling of commercials, news stories and other television
+programming recorded on video server storage systems and videotape. We believe
+that enhanced operational efficiencies are a principal factor underlying the
+automation of broadcast television stations and satellite uplink operations as
+the industry transitions to digital television. The Broadcast product offering
+is based on proprietary software solutions for broadband video content
+management and delivery to serve broadcast and cable operations. The AIRO(TM)
+suite of products is Broadcast's content management and delivery solution that
+is designed to automate the on-air operations of television and cable
+broadcasters.
+Sales, Marketing and Principal Customers. Broadcast sells directly to
+broadcast television stations, satellite uplink operations, and other broadcast
+television and cable television system operators. The sales and marketing
+management for Broadcast is located at our principal facilities in Anaheim,
+California. Broadcast maintains a dedicated field sales force of four persons
+operating in four sales regions in North America, and two sales managers for
+Latin America and Europe. Broadcast also utilizes additional independent
+representative organizations to promote its products in various other foreign
+markets. During the year ended March 31, 2002, Broadcast implemented indirect
+sales channels consisting of system integrators, value added resellers and
+system distributors.
+The customers of Broadcast include major television networks such as Fox,
+Nickelodeon, CNBC, Televisa, Measat Broadcast Network Systems, NBC, the PBS
+Network, Group W Satellite Communications, Asia Broadcast Centre, Univision and
+over 250 independent and network-affiliated television stations. Broadcast
+currently has systems installed in over 40 countries.
+Manufacturing and Materials. Within our Anaheim facilities, Broadcast
+maintains a dedicated manufacturing operation as well as infrastructure to
+support production and inventory control, purchasing, quality assurance and
+manufacturing. Our AIRO products are serviced primarily in a facility located in
+Austin, Texas.
+Broadcast purchases video servers from Grass Valley Group, Leitch and
+Pinnacle Systems and purchases video switching, conversion and monitoring
+equipment from Grass Valley Group and Leitch. Broadcast also purchases cabinets
+and other fabricated parts and components from other third party suppliers.
+MAXxess Systems Inc.
+MAXxess Systems produces enterprise security management systems and
+electronic access control systems that meet the facility security needs of
+institutional, commercial, industrial and retail users. MAXxess sells a full
+line of electronic access control products consisting of software, hardware and
+digital video badging technologies. During the year ended March 31, 2002,
+MAXxess introduced its Environmental Security Systems that integrate its base
+AXxess 202 system with new detection technologies for toxic chemicals, gases and
+narcotics, in addition to video-based detection of smoke and unauthorized
+vehicles. MAXxess believes that its Environmental Security Systems provide
+enhanced levels of monitoring, control and detection that will be required in
+public facilities including buildings, airports, ports and for other high value
+assets.
+2
+Sales, Marketing and Principal Customers. MAXxess markets and sells its
+products globally through a network of system integrators. In the United States,
+MAXxess has three regional sales managers who oversee three geographical regions
+and manage the integrators. MAXxess operates a full service branch office in
+Windsor U.K. which serves the sales needs of the EMEA region. The Windsor office
+also provides local product availability and technical support for the region.
+Manufacturing and Materials. MAXxess maintains a dedicated manufacturing
+area located within our principal facilities in Anaheim, California. MAXxess
+maintains infrastructure to support production and inventory control,
+purchasing, quality assurance and manufacturing engineering at our Anaheim
+facilities.
+Telecom Products - Zyfer, Inc.
+Zyfer designs, develops and manufactures precision time and synchronization
+systems and products for network communications, computer networks and military
+command and control applications. Zyfer is under subcontract to provide NASA
+service support for space-borne digital data recorders. The space-borne digital
+recorders serviced by Zyfer used in on-board recording of flight systems for the
+U.S. Space Shuttle program.
+Zyfer's synchronization systems are based on GPS and oscillator
+technologies and are sold for applications in wireless networks and satellite
+communications for both commercial and government consumers. Significant
+customers of Zyfer include the U.S. government, government subcontractors and
+OEM suppliers to wireless carriers.
+Zyfer has developed a Gigabit network security processor called the
+SKP-100S. This product, anticipated to be the first of a family of products, is
+built around a proprietary network security processor technology called
+StealthKey. Typical applications are for network security, specifically storage
+area networks. Zyfer believes that the StealthKey technology has key performance
+advantages including automatic and transparent key generation, ease of
+implementation, and the ability to operate at wire speed.
+Sales, Marketing and Principal Customers. Zyfer conducts its selling and
+marketing activities directly from our principal facilities in Anaheim,
+California, and sells its synchronization products primarily through
+manufacturers' representatives.
+Manufacturing and Materials. Zyfer's manufacturing processes are ISO 9001
+certified. Most of its manufacturing processes consist of final assembly and
+test, which are conducted at our Anaheim, California facilities. Zyfer
+outsources board assembly and some preliminary fabrication processes.
+ITS Products - Iteris, Inc.
+Iteris, Inc. designs, develops, markets and implements sensors and systems
+for surface transportation. Using its proprietary software and ITS industry
+expertise, Iteris provides video sensor systems and transportation management
+and traveler information systems for the ITS industry. The ITS industry is
+comprised of companies applying a variety of technologies to enable the safe and
+efficient movement of people and goods. Iteris uses its outdoor image
+recognition software expertise to develop proprietary algorithms for video
+sensor systems that improve vehicle safety and the flow of traffic. Our
+knowledge of the ITS industry enables Iteris to design and implement
+transportation solutions that help public agencies reduce traffic congestion and
+provide greater access to traveler information.
+Iteris' proprietary image recognition systems include AutoVue and Vantage.
+AutoVue is a small windshield mounted sensor that utilizes proprietary software
+to detect and warn drivers of unintended lane departures. Iteris believes that
+AutoVue is a broad sensor platform that, through additional software
+development, may be expanded to incorporate additional safety and convenience
+features. Vantage is a video vehicle sensing system that detects the presence of
+vehicles at signalized intersections enabling a more efficient allocation of
+green signal time.
+Iteris' transportation management systems services business designs,
+develops and implements software-based systems that integrate sensors, video
+surveillance, computers and advanced communications equipment enabling public
+agencies to monitor, control and direct traffic flow, assist in the quick
+dispatch of emergency crews and distribute real-time information about traffic
+conditions.
+3
+Sales, Marketing and Principal Customers. Iteris markets and sells its
+transportation management systems and services directly to government agencies
+pursuant to negotiated contracts that involve competitive bidding and specific
+qualification requirements. Sales of Iteris' systems contracts generally involve
+long lead times and require extensive specification development, evaluation and
+price negotiations.
+Iteris sells its Vantage vehicle detection systems primarily through
+indirect sales channels comprised of independent dealers in the United States
+and Canada who sell integrated solutions and related products to the traffic
+intersection market. The independent dealers for Iteris are primarily
+responsible for sales, installation and support of Vantage systems. These
+dealers maintain an inventory of demonstration traffic products including the
+Vantage vehicle detection systems and sell directly to government agencies and
+installation contractors. These dealers often have long-term arrangements with
+the government agencies in their territory for the supply of various products
+for the construction and renovation of traffic intersections. Iteris holds
+technical training classes for its dealers and maintains a full-time staff of
+customer support technicians to provide technical assistance when needed.
+The marketing strategy for AutoVue is to establish it as the leading
+platform for in vehicle video sensing for trucks and passenger cars. AutoVue is
+sold directly by Iteris to vehicle manufacturers and major automotive suppliers.
+Iteris currently has a direct sales force for AutoVue consisting of two product
+managers. Product managers are supported by project and applications engineers
+who are responsible for applications and customer support.
+Manufacturing and Materials. Iteris designs, assembles and tests the
+components of its Vantage systems in approximately 6,000 square feet of space at
+our Anaheim facility. Production equipment consists of assembly lines and test
+apparatus for final assembly and testing of the manufactured product. Production
+volume is based upon quarterly forecasts that Iteris readjusts on a monthly
+basis to control inventory. Iteris subcontracts the manufacture of its AutoVue
+systems to one manufacturer. Iteris intends to engage additional manufacturers
+with expertise in high volume production to produce higher volumes for light and
+medium trucks and passenger cars. Iteris does not manufacture any of the
+hardware used in the transportation management and traveler information systems
+that it designs and implements. The production facility for Iteris is ISO 9001
+certified.
+Customer Support and Services
+Each of our business units is responsible for its own customer support and
+service organizations. We provide warranty service for each of our product
+lines, as well as follow-up service and support, for which we typically charge
+separately. We also offer separate software maintenance agreements to our
+customers. We view customer support services as a critical competitive factor as
+well as a revenue source.
+Backlog
+Our backlog of unfulfilled firm orders was approximately $42.7 million as
+of March 31, 2002 and was approximately $31.0 million as of March 31, 2001.
+Approximately 68% of our backlog at March 31, 2001 was recognized as revenues in
+the fiscal year ended March 31, 2002, and approximately 67% of our backlog at
+March 31, 2002 is expected to be recognized as revenues in the fiscal year ended
+March 31, 2003. Pursuant to the customary terms of our agreements with
+government contractors and other customers, customers can generally cancel or
+reschedule orders with little or no penalties. Lead times for the release of
+purchase orders depend upon the scheduling and forecasting practices of our
+individual customers, which also can affect the timing of the conversion of our
+backlog into revenues. For these reasons, among others, our backlog at a
+particular date may not be indicative of our future revenues.
+Product Development
+Each of our business units directs and staffs its own product development
+activities. Most of our development activities are conducted at our principal
+facilities in Anaheim, California. Our business units have historically required
+substantial ongoing research and development expenditures and other product
+development activities. Our company-sponsored research and development costs and
+expenses were approximately $13.0 million in fiscal 2000, $13.8 million in
+fiscal 2001 and $8.1 million in fiscal 2002. We expect to continue to pursue
+significant product development programs and incur significant research and
+development expenditures in each of our business units.
+4
+Competition
+Our business units generally face significant competition in each of their
+respective markets. Increased competition may result in price reductions,
+reduced gross margins and loss of market share, any of which could have a
+material adverse effect on our business, financial condition and results of
+operations.
+Broadcast's primary competitors include Sony, Harris, Encoda and Probel.
+Sony is a large, international supplier of extensive professional quality
+products. Harris and Probel principally provide automation control for video
+libraries and disk recorders. Broadcast's systems compete primarily in the arena
+of facility management and enterprise wide automation. We believe that the
+capability of our systems to integrate the broadcast station business systems
+acquisition processes, storage devices and presentation devices under a
+relational database management system represents a unique and differentiable
+capability.
+MAXxess principally competes with Casi-Rusco, Checkpoint, Cardkey, Lenel
+and Northern Computers in the sale of access control systems. MAXxess generally
+competes on the basis of its distributed processing system architecture, an open
+system that readily integrates other security subsystems and new detection
+capabilities, and a superior operator interface.
+Zyfer's primary competition for network synchronization products is Datum,
+Inc. and TrueTime Inc.
+While we believe that AutoVue is the only commercially-available lane
+departure warning system, potential competitors of Iteris include Delphi
+Automotive Systems Corporation domestically, NEC Corporation and Hitachi Ltd. in
+Japan and Robert Bosch Gmbh in Europe, which are currently developing video
+sensor technologies for the vehicle industry that could be used for lane
+departure warning systems. In the market for our Vantage vehicle detection
+systems, Iteris competes with manufacturers of both "above ground" video camera
+detection systems, such as Econolite Control Products, Inc., Trafficon, N.V. and
+the Peek Traffic Systems, and other non-intrusive detection devices including
+microwave, infrared, ultrasonic and magnetic detectors, as well as manufacturers
+and installers of in-pavement inductive loop products.
+The transportation management and traveler information systems market is
+highly fragmented and is subject to evolving national and regional quality and
+safety standards. Iteris' competitors vary in number, scope and breadth of the
+products and services they offer. Iteris' competitors in advanced transportation
+management and traveler information systems include corporations such as
+Transcore, Lockheed Martin Corporation, PB Farradyne Inc., Kimley-Horn and
+Associates, Inc. and National Engineering Technology, Inc. Iteris' competitors
+in transportation engineering, planning and design include major firms such as
+Parsons Brinkerhoff, Inc. and Parsons Transportation Group Inc., as well as many
+regional engineering firms.
+In general, the markets for the products and services offered by our
+businesses are highly competitive and are characterized by rapidly changing
+technology and evolving standards. Many of our current and prospective
+competitors have longer operating histories, greater name recognition, access to
+larger customer bases and significantly greater financial, technical,
+manufacturing, distribution and marketing resources than us. As a result, they
+may be able to adapt more quickly to new or emerging standards or technologies
+or to devote greater resources to the promotion and sale of their products. It
+is also possible that new competitors or alliances among competitors could
+emerge and rapidly acquire significant market share. We believe that our ability
+to compete effectively in our target markets depends on a number of factors,
+including the success and timing of our new product development, the
+compatibility of our products with a broad range of computing systems, product
+quality and performance, reliability, functionality, price, and service and
+technical support. Our failure to provide services and develop and market
+products that compete successfully with those of other suppliers and consultants
+in our target markets would have a material adverse effect on our business,
+financial condition and results of operations.
+Intellectual Property and Proprietary Rights
+Our ability to compete effectively depends in part on our ability to
+develop and maintain the proprietary aspects of our technology. Our policy is to
+obtain appropriate proprietary rights protection for any potentially significant
+new technology acquired or developed each of our business units. We currently
+hold a number of United States and foreign patents and trademarks, which will
+expire at various dates commencing in 2004. We also have pending a number of
+United States and foreign patent applications relating to certain of our
+products; however, we cannot be certain that any patents will be granted
+pursuant to these applications.
+5
+In addition to patent laws, we rely on copyright and trade secret laws to
+protect our proprietary rights. We attempt to protect our trade secrets and
+other proprietary information through agreements with customers and suppliers,
+proprietary information agreements with our employees and consultants, and other
+similar measures. We cannot be certain that we will be successful in protecting
+our proprietary rights. While we believe our patents, patent applications,
+software and other proprietary know-how have value, changing technology makes
+our future success dependent principally upon our employees' technical
+competence and creative skills for continuing innovation.
+Litigation has been necessary in the past and may be necessary in the
+future to enforce our proprietary rights, to determine the validity and scope of
+the proprietary rights of others, or to defend us against claims of infringement
+or invalidity by others. An adverse outcome in such litigation or similar
+proceedings could subject us to significant liabilities to third parties,
+require disputed rights to be licensed from others or require us to cease
+marketing or using certain products, any of which could have a material adverse
+effect on our business, financial condition and results of operations. In
+addition, the cost of addressing any intellectual property litigation claim,
+both in legal fees and expenses, as well as from the diversion of management's
+resources, regardless of whether the claim is valid, could be significant and
+could have a material adverse effect on our business, financial condition and
+results of operations.
+Employees
+We refer to our employees as associates. As of June 17, 2002, Odetics and
+its subsidiaries employed an aggregate of 315 associates, including 77
+associates in general management, administration and finance; 36 associates in
+sales and marketing; 132 associates in product development; 58 associates in
+operations, manufacturing and quality; and 12 associates in customer service.
+None of our associates are represented by a labor union, and we have never
+experienced a work stoppage.
+We provide centralized support for human resources management for each of
+our business units and subsidiaries. These services include recruiting,
+administration and outplacement.
+Government Regulation
+Our manufacturing operations are subject to various federal, state and
+local laws, including those restricting the discharge of materials into the
+environment. We are not involved in any pending or threatened proceedings which
+would require curtailment of our operations because of such regulations. We
+continue to expend funds in connection with our compliance with applicable
+environmental regulations. These expenditures have not, however, been
+significant in the past, and we do not expect any significant expenditures in
+the near future.
+From time to time, a portion of our work relating to network
+synchronization systems may constitute classified United States government
+information or may be used in classified programs of the United States
+Government. For this purpose, we possess certain relevant security clearances.
+Our affected facilities and operations are also subject to security regulations
+of the United States Government. We believe we are currently in full compliance
+with these regulations.
+6
+RISK FACTORS
+Before deciding to invest in Odetics or to maintain or increase your
+investment, you should carefully consider the risks described below, in addition
+to the other information contained in this report and in our other filings with
+the SEC, including our reports on Forms 10-Q and 8-K. The risks and
+uncertainties described below are not the only ones facing us. Additional risks
+and uncertainties not presently known to us or that we currently deem immaterial
+may also affect our business operations. If any of these risks actually occur,
+our business, financial condition or results of operations could be seriously
+harmed. In that event, the market price for our common stock could decline and
+you may lose all or part of your investment.
+We Have Experienced Substantial Losses and Expect Future Losses. We
+experienced operating losses of $10.8 million the year ended March 31, 2002,
+$37.9 million for the year ended March 31, 2001 and $32.9 million for the year
+ended March 31, 2000. In the quarter ended September 30, 2001, we downsized our
+business in connection with our sale of the Gyyr CCTV Products division and the
+discontinuation of the business of our Mariner Networks subsidiary and the
+reorganization of our European operations. We cannot assure you that our efforts
+to downsize our operations will improve our financial performance, or that we
+will be able to achieve profitability on a quarterly or annual basis in the
+future. Most of our expenses are fixed in advance, and we generally are unable
+to reduce our expenses significantly in the short-term to compensate for any
+unexpected delay or decrease in anticipated revenues. As a result, we may
+continue to experience losses, which would make it difficult to fund our
+operations and achieve our business plan, and could cause the market price of
+our common stock to decline.
+We Will Need to Raise Additional Capital in the Future and May Not Be Able
+to Secure Adequate Funds on Terms Acceptable to Us, or at All. We have generated
+significant net losses in recent periods, and have experienced negative cash
+flows from operations in the amount of $18.2 million for the year ended March
+31, 2002 and $20.1 million for the year ended March 31, 2001. Although we
+completed the sale of our Anaheim, California property in May 2002, the majority
+of the proceeds of such sale were used to repay outstanding short-term
+indebtedness. We anticipate that we will need to raise additional capital in the
+future. Our Iteris subsidiary currently maintains a line of credit with a
+maximum availability of $5.0 million, which expires in August 2004.
+Substantially all of the assets of Iteris have been pledged to the lender to
+secure the outstanding indebtedness under this facility (although there were no
+amounts outstanding under the line of credit at June 21, 2002). Even though we
+retired the Odetics line of credit in the quarter ended December 31, 2001, we
+also incurred cash obligations in the amount of $3.0 million payable over the
+next seven months related to the discontinuation of Mariner Networks and the
+reorganization of our European operations. We plan to raise additional capital
+in the near future, either through bank borrowings, other debt or equity
+financings, or the divestiture of business units or select assets. We cannot
+assure you that any additional capital will be available on a timely basis, on
+acceptable terms, or at all. These conditions, together with our recurring
+losses and cash requirements, raise substantial doubt about our ability to
+continue as a going concern.
+Our capital requirements will depend on many factors, including:
+. our ability to control costs;
+. market acceptance of our products and the overall level of sales of our
+products;
+. our ability to generate operating income;
+. increased research and development funding, and required investments in
+our business units;
+. increased sales and marketing expenses;
+. technological advancements and our competitors' response to our
+products;
+. capital improvements to new and existing facilities;
+. potential acquisitions of businesses and product lines;
+. our relationships with customers and suppliers; and
+7
+. general economic conditions including the effects of the current
+economic slowdown and international conflicts.
+If our capital requirements are materially different from those currently
+planned, we may need additional capital sooner than anticipated. If additional
+funds are raised through the issuance of equity or convertible debt securities,
+the percentage ownership of our stockholders will be reduced and such securities
+may have rights, preferences and privileges senior to our common stock.
+Additional financing may not be available on favorable terms or at all. If
+adequate funds are not available or are not available on acceptable terms, we
+may be unable to continue our operations as planned, develop or enhance our
+products, expand our sales and marketing programs, take advantage of future
+opportunities or respond to competitive pressures.
+The Trading Price of Our Common Stock Is Volatile. The trading price of our
+common stock has been subject to wide fluctuations in the past. Since January
+2000, our common stock has traded at prices as low as $1.27 per share and as
+high as $29.44 per share. In April 2002, because we failed to meet the minimum
+stockholder's equity requirement for continued listing on the Nasdaq National
+Market, both our Class A common stock and Class B common stock were delisted
+from the Nasdaq National Market and subsequently approved for listing on the
+Nasdaq SmallCap Market. If our stock price continues to decline or declines
+below $1.00 per share for a period of time, our common stock could be subject to
+delisting from the Nasdaq SmallCap Market and there may not be a market for our
+stock. We may not be able to increase or sustain the current market price of our
+common stock in the future. As such, you may not be able to resell your shares
+of common stock at or above the price you paid for them. The market price of our
+common stock could continue to fluctuate in the future in response to various
+factors, including, but not limited to:
+. quarterly variations in operating results;
+. our ability to control costs and improve cash flow;
+. shortages announced by suppliers;
+. announcements of technological innovations or new products by our
+competitors, customers or us;
+. acquisitions or businesses, products or technologies;
+. changes in pending litigation or new litigation;
+. changes in investor perceptions;
+. our ability to spin-off any business unit;
+. applications or product enhancements by us or by our competitors; and
+. changes in earnings estimates or investment recommendations by
+securities analysts.
+The stock market in general has recently experienced volatility, which has
+particularly affected the market prices of equity securities of many high
+technology companies. This volatility has often been unrelated to the operating
+performance of these companies. These broad market fluctuations may adversely
+affect the market price of our common stock. In the past, companies that have
+experienced volatility in the market price of their securities have been the
+subject of securities class action litigation. If we were to become the subject
+of a class action lawsuit, it could result in substantial losses and divert
+management's attention and resources from other matters.
+We Depend on Government Contracts and Subcontracts and Face Additional
+Risks Related to Fixed Price Contracts. A significant portion of the sales by
+Iteris and a portion of our sales by Zyfer were derived from contracts with
+governmental agencies, either as a general contractor, subcontractor or
+supplier. Government contracts represented approximately 24%, 26% and 38% of our
+total net sales and contract revenues for the years ended March 31, 2000, 2001
+and 2002, respectively. We anticipate that revenue from government contracts
+will continue to increase in the near future. Government business is, in
+general, subject to special risks and challenges, including:
+8
+. long purchase cycles or approval processes;
+. competitive bidding and qualification requirements;
+. performance bond requirements;
+. changes in government policies and political agendas;
+. delays in funding, budgetary constraints and cut-backs; and
+. milestone requirements and liquidated damage provisions for failure to
+meet contract milestones.
+In addition, a large number of our government contracts are fixed price
+contracts. As a result, we may not be able to recover for any cost overruns.
+These fixed price contracts require us to estimate the total project cost based
+on preliminary projections of the project's requirements. The financial
+viability of any given project depends in large part on our ability to estimate
+these costs accurately and complete the project on a timely basis. In the event
+our costs on these projects exceed the fixed contractual amount, we will be
+required to bear the excess costs. These additional costs adversely affect our
+financial condition and results of operations. Moreover, certain of our
+government contracts are subject to termination or renegotiation at the
+convenience of the government, which could result in a large decline in our net
+sales in any given quarter. Our inability to address any of the foregoing
+concerns or the loss or renegotiation of any material government contract could
+seriously harm our business, financial condition and results of operations.
+We are Exposed to the Risks Associated with the Recent Worldwide Economic
+Slowdown and Related Uncertainties. Concerns about inflation, decreased consumer
+confidence, reduced corporate profits and capital spending, and recent
+international conflicts and terrorist and military actions have resulted in a
+downturn in worldwide economic conditions, particularly in the United States. As
+a result of these unfavorable economic conditions, we have experienced a
+slowdown in customer orders, cancellations and rescheduling of backlog and
+higher overhead costs. In addition, recent political and social turmoil related
+to international conflicts and terrorist acts can be expected to put further
+pressure on economic conditions in the U.S. and worldwide. These political,
+social and economic conditions make it extremely difficult for our customers,
+our suppliers and us to accurately forecast and plan future business activities.
+If such conditions continue or worsen, our business, financial condition and
+results of operations will likely be materially and adversely affected.
+Our Quarterly Operating Results Fluctuate as a Result of Many Factors. Our
+quarterly revenues and operating results have fluctuated and are likely to
+continue to vary from quarter to quarter due to a number of factors, many of
+which are not within our control. Factors that could affect our revenues
+include, among others, the following:
+. our ability to raise additional capital;
+. our significant investment in research and development for our
+subsidiaries and business units;
+. our ability to control costs;
+. international conflicts and acts of terrorism;
+. our ability to develop, introduce, market and gain market acceptance of
+new products applications and product enhancements in a timely manner;
+. the size, timing, rescheduling or cancellation of significant customer
+orders;
+. the introduction of new products by competitors;
+. the availability of components used in the manufacture of our products;
+. changes in our pricing policies and the pricing policies by our
+suppliers and competitors, pricing concessions on volume sales, as well
+as increased price competition in general;
+9
+. the long lead times associated with government contracts or required by
+vehicle manufacturers;
+. our success in expanding and implementing our sales and marketing
+programs;
+. the effects of technological changes in our target markets;
+. our relatively small level of backlog at any given time;
+. the mix of sales among our business units;
+. deferrals of customer orders in anticipation of new products,
+applications or product enhancements;
+. the risks inherent in our acquisitions of technologies and businesses;
+. risks and uncertainties associated with our international business;
+. currency fluctuations and our ability to get currency out of certain
+foreign countries; and
+. general economic and political conditions.
+In addition, our sales in any quarter may consist of a relatively small
+number of large customer orders. As a result, the timing of a small number of
+orders may impact our quarter-to-quarter results. The loss of or a substantial
+reduction in orders from any significant customer could seriously harm our
+business, financial condition and results of operations.
+Due to all of the factors listed above and other risks discussed in this
+report, our future operating results could be below the expectations of
+securities analysts or investors. If that happens, the trading price of our
+common stock could decline. As a result of these quarterly variations, you
+should not rely on quarter-to-quarter comparisons of our operating results as an
+indication of our future performance.
+Our Operating Strategy for Developing Companies is Expensive and May Not Be
+Successful. Our business strategy historically has required us to make
+significant investments in our business units. These investments are expensive
+and require the commitment of significant time and resources. We expect to
+continue to invest in the development of certain of our business units with the
+goal of achieving profitability in each of our business units, and to a lesser
+extent, to monetize those business units for the benefit of our stockholders
+through an initial public offering, spin-off or sale to a strategic buyer. We
+may not recognize the benefits of this investment for a significant period of
+time, if at all. Our ability to achieve profitability in any business unit, to
+complete any private or public offerings of securities by any of our business
+units, and/or to spin-off our interest in the business unit to our stockholders
+will depend upon many factors, including:
+. the overall performance and results of operations of the particular
+business unit;
+. the potential market for our business unit;
+. our ability to assemble and retain a qualified management team for the
+business unit;
+. our financial position and cash requirements;
+. the business unit's customer base and product line;
+. the current tax treatment of spin-off and sale transactions, and our
+ability to obtain favorable determination letters from the Internal
+Revenue Service; and
+. general economic and market conditions, including the receptiveness of
+the stock markets to initial public offerings and private placements.
+We may not be able to achieve profitability in our business units, to
+complete a successful private or public offering or to spin-off of any of our
+business units in the near future, or at all. During fiscal 2001, we attempted
+to complete the initial public offering of Iteris, but withdrew the offering due
+to adverse market conditions. Even if we
+10
+are able to achieve profitability and the market is receptive to public
+offerings, we may decide not to complete any further offerings, spin-off a
+particular business unit, or delay the spin-off until a later date.
+We Must Keep Pace with Rapid Technological Change to Remain Competitive.
+Our target markets are in general characterized by the following factors:
+. rapid technological advances;
+. downward price pressure in the marketplace as technologies mature;
+. changes in customer requirements;
+. frequent new product introductions and enhancements; and
+. evolving industry standards and changes in the regulatory environment.
+Our future success will depend upon our ability to anticipate and adapt to
+changes in technology and industry standards, and to effectively develop,
+introduce, market and gain broad acceptance of new products and product
+enhancements incorporating the latest technological advancements.
+We believe that we must continue to make substantial investments to support
+ongoing research and development in order to remain competitive. We need to
+continue to develop and introduce new products that incorporate the latest
+technological advancements in hardware, storage media, operating system software
+and applications software in response to evolving customer requirements. Our
+business and results of operations could be adversely affected if we do not
+anticipate or respond adequately to technological developments or changing
+customer requirements. We cannot assure you that any such investments in
+research and development will lead to any corresponding increase in revenue.
+Our Future Success Depends on the Successful Development and Market
+Acceptance of New Products. We believe our revenue growth and future operating
+results will depend on our ability to complete development of new products and
+enhancements, introduce these products in a timely, cost-effective manner,
+achieve broad market acceptance of these products and enhancements, and reduce
+our product costs. We may not be able to introduce any new products or any
+enhancements to our existing products on a timely basis, or at all. In addition,
+the introduction of any new products could adversely affect the sales of our
+certain of our existing products.
+Our future success will also depend in part on the success of several
+recently introduced products including CommSync II, a Zyfer solution for secure,
+high speed, point-to-point communications; AutoVue, our lane departure warning
+system; and AIRO 9.0, our broadcast automation solution. Market acceptance of
+our new products depends upon many factors, including our ability to accurately
+predict market requirements and evolving industry standards, our ability to
+resolve technical challenges in a timely and cost-effective manner and achieve
+manufacturing efficiencies, the perceived advantages of our new products over
+traditional products and the marketing capabilities of our independent
+distributors and strategic partners. Our business and results of operations
+could be seriously harmed by any significant delays in our new product
+development. Certain of our new products could contain undetected design faults
+and software errors or "bugs" when first released by us, despite our testing. We
+may not discover these faults or errors until after a product has been installed
+and used by our customers. Any faults or errors in our existing products or in
+any new products may cause delays in product introduction and shipments, require
+design modifications or harm customer relationships, any of which could
+adversely affect our business and competitive position.
+Iteris currently outsources the manufacture of its AutoVue product line to
+a single manufacturer. This manufacturer may not be able to produce sufficient
+quantities of this product in a timely manner or at a reasonable cost, which
+could materially and adversely affect our ability to launch or gain market
+acceptance of AutoVue.
+We Have Significant International Sales and Are Subject to Risks Associated
+with Operating in International Markets. International sales represented 10% of
+our net sales and contract revenues for the fiscal year ended March 31, 2002,
+20% for the fiscal year ended March 31, 2001, and 20% for the fiscal year ended
+March 31, 2000. During the fiscal year ended March 31, 2002, we reorganized our
+European operations, which included the discontinuation of our Odetics Europe
+Ltd., MAXxess Europe Ltd., Mariner France and Mariner Europe Ltd.
+11
+operations, and the transition of our Broadcast and MAXxess international
+operations to branch office operations with the intent of lowering our
+international costs. This reorganization may result in significantly lower
+international sales in future periods and unanticipated liabilities related to
+the closures and we may not achieve the anticipated cost savings. We may also
+face challenges in managing and transitioning our international operations due
+to our limited experience operating through branch offices. In addition, the
+recent terrorist attacks in the United States and heightened security may
+adversely impact our international sales and could make our international
+operations more expensive.
+International business operations are also subject to other inherent risks,
+including, among others:
+. unexpected changes in regulatory requirements, tariffs and other trade
+barriers or restrictions;
+. longer accounts receivable payment cycles;
+. difficulties in managing and staffing international operations;
+. potentially adverse tax consequences;
+. the burdens of compliance with a wide variety of foreign laws;
+. import and export license requirements and restrictions of the United
+States and each other country in which we operate;
+. exposure to different legal standards and reduced protection for
+intellectual property rights in some countries;
+. currency fluctuations and restrictions; and
+. political, social and economic instability.
+We believe that international sales will continue to represent a
+significant portion of our revenues, and that continued growth and profitability
+may require further expansion of our international operations. Nearly all of our
+international sales from this point on are denominated in U.S. dollars. As a
+result, an increase in the relative value of the dollar could make our products
+more expensive and potentially less price competitive in international markets.
+We do not engage in any transactions as a hedge against risks of loss due to
+foreign currency fluctuations.
+Any of the factors mentioned above may adversely effect our future
+international sales and, consequently, effect our business, financial condition
+and operating results. Furthermore, as we increase our international sales, our
+total revenues may also be affected to a greater extent by seasonal fluctuations
+resulting from lower sales that typically occur during the summer months in
+Europe and other parts of the world.
+We Need to Manage Operations and the Integration of Our Acquisitions. Over
+the past few years, we have expanded our operations and made several substantial
+acquisitions of diverse businesses, including Intelligent Controls, Inc.,
+International Media Integration Services, Ltd., Meyer Mohaddes Associates, Inc.,
+Viggen Corporation, and certain assets of the Transportation Systems business of
+Rockwell International. We may engage in acquisitions of complementary
+businesses, products and technologies. Acquisitions may require significant
+capital infusions and, in general, acquisitions also involve a number of special
+risks, including:
+. potential disruption of our ongoing business and the diversion of our
+resources and management's attention;
+. the failure to retain or integrate key acquired personnel;
+. the challenge of assimilating diverse business cultures, and the
+difficulties in integrating the operations, technologies and
+information system of the acquired companies;
+. increased costs to improve managerial, operational, financial and
+administrative systems and to eliminate duplicative services;
+12
+. the incurrence of unforeseen obligations or liabilities;
+. potential impairment of relationships with employees or customers as a
+result of changes in management; and
+. increased interest expense and amortization of acquired intangible
+assets.
+Acquisitions may also materially and adversely affect our operating results
+due to large write-offs, contingent liabilities, substantial depreciation,
+deferred compensation charges or goodwill amortization, or other adverse tax or
+audit consequences. Our failure to manage growth and integrate our acquisitions
+successfully could adversely affect our business, financial condition and
+results of operations.
+Our competitors are also soliciting potential acquisition candidates, which
+could both increase the price of any acquisition targets and decrease the number
+of attractive companies available for acquisition. We cannot assure you that we
+will be able to consummate any additional acquisitions, successfully integrate
+any acquisitions or realize the benefits anticipated from any acquisition.
+The Markets in Which We Operate Are Highly Competitive and Have Many More
+Established Competitors. We compete with numerous other companies in our target
+markets and we expect such competition to increase due to technological
+advancements, industry consolidations and reduced barriers to entry. Increased
+competition is likely to result in price reductions, reduced gross margins and
+loss of market share, any of which could seriously harm our business, financial
+condition and results of operations. Many of our competitors have far greater
+name recognition and greater financial, technological, marketing and customer
+service resources than we do. This may allow them to respond more quickly to new
+or emerging technologies and changes in customer requirements. It may also allow
+them to devote greater resources to the development, promotion, sale and support
+of their products than we can. Recent consolidations of end users, distributors
+and manufacturers in our target markets have exacerbated this problem. As a
+result of the foregoing factors, we may not be able to compete effectively in
+our target markets and competitive pressures could adversely affect our
+business, financial condition and results of operations.
+We Cannot Be Certain of Our Ability to Attract and Retain Key Personnel and
+We Do Not Have Employment Agreements with Any Key Personnel. Due to the
+specialized nature of our business, we are highly dependent on the continued
+service of our executive officers and other key management, engineering and
+technical personnel, particularly Joel Slutzky, our Chairman of the Board, who
+recently retired as our Chief Executive Officer, and Gregory A. Miner, our Chief
+Executive Officer and Chief Financial Officer. The leadership transition between
+Mr. Slutzky and Mr. Miner could adversely affect our business. We do not have
+any employment contracts with any of our officers or key employees. The loss of
+any of these individuals could adversely affect our business, financial
+condition or results of operations.
+Our success will also depend in large part upon our ability to continue to
+attract, retain and motivate qualified engineering and other highly skilled
+technical personnel. Competition for employees, particularly development
+engineers, is intense. We may not be able to continue to attract and retain
+sufficient numbers of such highly skilled employees. Our inability to attract
+and retain additional key employees or the loss of one or more of our current
+key employees could adversely affect upon our business, financial condition and
+results of operations.
+We May Not be Able to Adequately Protect or Enforce Our Intellectual
+Property Rights. If we are not able to adequately protect or enforce the
+proprietary aspects of our technology, competitors could be able to access our
+proprietary technology and our business, financial condition and results of
+operations will likely be seriously harmed. We currently attempt to protect our
+technology through a combination of patent, copyright, trademark and trade
+secret laws, employee and third party nondisclosure agreements and similar
+means. Despite our efforts, other parties may attempt to disclose, obtain or use
+our technologies or solutions. Our competitors may also be able to independently
+develop products that are substantially equivalent or superior to our products
+or design around our patents. In addition, the laws of some foreign countries do
+not protect our proprietary rights as fully as do the laws of the United States.
+As a result, we may not be able to protect our proprietary rights adequately in
+the United States or abroad.
+From time to time, we have received notices that claim we have infringed
+upon the intellectual property of others. Even if these claims are not valid,
+they could subject us to significant costs. We have engaged in litigation in the
+past, and litigation may be necessary in the future to enforce our intellectual
+property rights or to determine
+13
+the validity and scope of the proprietary rights of others. Litigation may also
+be necessary to defend against claims of infringement or invalidity by others.
+An adverse outcome in litigation or any similar proceedings could subject us to
+significant liabilities to third parties, require us to license disputed rights
+from others or require us to cease marketing or using certain products or
+technologies. We may not be able to obtain any licenses on terms acceptable to
+us, or at all. We also may have to indemnify certain customers or strategic
+partners if it is determined that we have infringed upon or misappropriated
+another party's intellectual property. Any of these results could adversely
+affect on our business, financial condition and results of operations. In
+addition, the cost of addressing any intellectual property litigation claim,
+both in legal fees and expenses, and the diversion of management resources,
+regardless of whether the claim is valid, could be significant and could
+seriously harm our business, financial condition and results of operations.
+We Are Controlled by Certain of Our Officers and Directors. As of June 21,
+2002, our officers and directors beneficially owned approximately 24% of the
+total combined voting power of the outstanding shares of our Class A common
+stock and Class B common stock. As a result of their stock ownership, our
+management will be able to significantly influence the election of our directors
+and the outcome of corporate actions requiring stockholder approval, such as
+mergers and acquisitions, regardless of how our other stockholders may vote.
+This concentration of voting control may have a significant effect in delaying,
+deferring or preventing a change in our management or change in control and may
+adversely affect the voting or other rights of other holders of common stock.
+Our Stock Structure and Certain Anti-Takeover Provisions May Affect the
+Price of Our Common Stock. Certain provisions of our certificate of
+incorporation and our stockholder rights plan could make it difficult for a
+third party to acquire us, even though an acquisition might be beneficial to our
+stockholders. These provisions could limit the price that investors might be
+willing to pay in the future for shares of our common stock. Our Class A common
+stock entitles the holder to one-tenth of one vote per share and our Class B
+common stock entitles the holder to one vote per share. The disparity in the
+voting rights between our common stock, as well as our insiders' significant
+ownership of the Class B common stock, could discourage a proxy contest or make
+it more difficult for a third party to effect a change in our management and
+control. In addition, our Board of Directors is authorized to issue, without
+stockholder approval, up to 2,000,000 shares of preferred stock with voting,
+conversion and other rights and preferences superior to those of our common
+stock, as well as additional shares of Class B common stock. Our future issuance
+of preferred stock or Class B common stock could be used to discourage an
+unsolicited acquisition proposal.
+In March 1998, we adopted a stockholder rights plan and declared a dividend
+of preferred stock purchase rights to our stockholders. In the event a third
+party acquires more than 15% of the outstanding voting control of our company or
+15% of our outstanding common stock, the holders of these rights will be able to
+purchase the junior participating preferred stock at a substantial discount off
+of the then current market price. The exercise of these rights and purchase of a
+significant amount of stock at below market prices could cause substantial
+dilution to a particular acquiror and discourage the acquiror from pursuing our
+company. The mere existence of a stockholder rights plan often delays or makes a
+merger, tender offer or proxy contest more difficult.
+We Do Not Pay Cash Dividends. We have never paid cash dividends on our
+common stock and do not anticipate paying any cash dividends on either class of
+our common stock in the foreseeable future.
+We May Be Subject to Additional Risks. The risks and uncertainties
+described above are not the only ones facing our company. Additional risks and
+uncertainties not presently known to us or that we currently deem immaterial may
+also adversely affect our business operations.

raw/filings/0000350868/2001/0001017062-02-001321/item13.txt

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+ITEM 13. CERTAIN TRANSACTIONS
+The information under the caption "Certain Transactions," appearing in our
+proxy statement, is incorporated herein by reference.

raw/filings/0000350868/2006/0001104659-07-049160/filing_metadata.csv

@@ -0,0 +1,2 @@
+cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
+0000350868,ITI,"ITERIS, INC.",10-K,2007-06-21,2007-03-31,2007-06-21T20:49:58.000Z,0001104659-07-049160,a07-16543_110k.htm,10-K,2070911,0,0,https://www.sec.gov/Archives/edgar/data/350868/000110465907049160/a07-16543_110k.htm,https://www.sec.gov/Archives/edgar/data/350868/000110465907049160/,2006,2006,1

raw/filings/0000350868/2006/0001104659-07-049160/item1.txt

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc.,
+formerly known as Iteris Holdings, Inc., is a leading provider of outdoor
+machine vision systems and sensors that optimize the flow of traffic and
+enhance driver safety. Using proprietary software and Intelligent
+Transportation Systems (“ITS”) industry expertise, we provide video sensor systems,
+transportation management and traveler information systems and other
+engineering and consulting services to the ITS industry. The ITS industry is
+comprised of companies applying a variety of technologies to enable the safe
+and efficient movement of people and goods. We use our outdoor image
+recognition software expertise to develop proprietary algorithms for video
+sensor systems that improve vehicle safety and the flow of traffic. Using our
+knowledge of the ITS industry, we design and implement transportation
+management systems that help public agencies reduce traffic congestion and
+provide greater access to traveler information. 
+We
+were originally incorporated in Delaware in 1987 as Odetics, Inc. and in
+September 2003 changed our name to Iteris Holdings, Inc. to reflect
+our focus on the ITS industry and our capital structure at that time. On
+October 22, 2004, we completed a merger with our majority-owned
+subsidiary, Iteris, Inc. (the “Iteris Subsidiary”), and officially changed
+our corporate name from Iteris Holdings, Inc. to Iteris, Inc. 
+Our proprietary image recognition systems include Vantage and AutoVue.
+Vantage is a video vehicle detection system that detects the presence of
+vehicles on roadways. Vantage systems are used at signalized intersections to
+enable a more efficient allocation of green signal time and are also used for
+incident detection and highway traffic data collection applications. AutoVue
+Lane Departure Warning (“LDW”) systems consist of a small windshield mounted
+sensor that uses proprietary software to detect and warn drivers of unintended
+lane departures. To date, we and our strategic partner have sold approximately
+83,000 production AutoVue LDW systems for use on car and truck platforms in the
+North American and European markets. We believe that our AutoVue LDW technology
+is a broad sensor platform that, through additional software development, may
+be expanded to incorporate additional safety and convenience features. 
+Our transportation management systems business includes transportation
+engineering and consulting services focused on the planning, design,
+development and implementation of software-based systems that integrate
+sensors, video surveillance, computers and advanced communications equipment to
+enable public agencies to monitor, control and direct traffic flow, assist in
+the quick dispatch of emergency crews and distribute real-time information
+about traffic conditions. Our services include planning, design and
+implementation of surface transportation infrastructure systems. We perform analysis and study goods movement,
+commercial vehicle operations, travel demand forecasting and systems
+engineering, and identify mitigation measures to reduce traffic
+congestion. These services and systems
+are primarily sold to local, state and national transportation agencies in the
+United States. Our transportation
+management systems business is largely dependent upon governmental 
+3 
+funding and budgetary issues. The Federal Highway Bill that was passed in
+August 2005 provided for a significant increase in transportation funding over
+the following six years. We believe the
+recent expansion of our transportation management systems business was due in
+part to the passage of the Federal Highway Bill, combined with the expansion of
+transportation funds at state and local agencies throughout the country. 
+We currently
+operate in three reportable segments: Roadway Sensors, Automotive Sensors and
+Transportation Systems. The Roadway Sensors segment includes our Vantage
+vehicle detection systems for traffic intersection control, incident detection
+and certain highway traffic data collection applications. The Automotive Sensors segment is comprised
+of all activities related to our AutoVue LDW systems for vehicle safety. The
+Transportation Systems segment includes transportation engineering and
+consulting services and the development of transportation management and
+traveler information systems for the ITS industry. See Note 12 to the accompanying consolidated
+financial statements for further discussion of our operating segments. 
+Sales, Marketing and Principal Customers 
+We
+sell our Vantage vehicle detection systems through indirect sales channels
+comprised of independent dealers in the United States and Canada who sell
+integrated systems and related products to the traffic management market, as
+well as directly to the traffic management market using a combination of our
+own sales personnel and an outside sales organization. Our independent dealers
+are primarily responsible for sales, installation and support of Vantage
+systems. These dealers maintain an inventory of demonstration traffic products
+from various manufacturers including our Vantage vehicle detection systems and
+sell directly to government agencies and installation contractors. These
+dealers often have long-term arrangements with the government agencies in their
+territory for the supply of various products for the construction and
+renovation of traffic intersections. We hold technical training classes for
+dealers and end users and maintain a full-time staff of customer support
+technicians to provide technical assistance when needed. 
+Our marketing strategy for AutoVue is to establish it as the leading
+platform for in-vehicle video sensing for heavy trucks and passenger cars. We sell AutoVue LDW systems directly to heavy
+truck manufacturers and to U.S. truck fleets, and our AutoVue LDW system is
+currently offered as an option on certain heavy trucks, including
+Mercedes-Benz, MAN, Iveco, DAF, Scania, Freightliner, International and FUSO,
+as well as Neoplan and MAN luxury bus and coach lines. We market the licensing
+of our LDW technology to manufacturers of passenger automobiles through an
+exclusive strategic relationship with Valeo Schalter and Sensuren GmbH (“Valeo”),
+an independent automotive supplier. In connection with this marketing effort,
+we provide specific contract engineering services, technical marketing and
+sales support to Valeo, which to date has enabled the launch of our LDW
+technology on three Infiniti car platforms, the FX, M and Q, where our LDW
+system is offered as part of the technology option package. We plan to continue
+to provide technical marketing and sales support to Valeo in our efforts to win
+new original equipment manufacturer (“OEM”) customers for the passenger car
+market as well as contract engineering services related to the possible launch
+of new platforms that include our AutoVue LDW system. 
+We market and sell our transportation management systems and traveler
+information services directly to government agencies pursuant to negotiated
+contracts that involve competitive bidding and specific qualification
+requirements. Most of our contracts with federal, state and municipal customers
+provide for cancellation or renegotiation at the option of the customer upon
+reasonable notice and fees paid for modification. We use selected members of
+our engineering team divided on a regional basis to serve in sales and business
+development functions. We do not engage in sales of transportation management
+systems and traveler information services outside of the U.S. Sales of our
+transportation management systems contracts generally involve long lead times
+and require extensive specification development, evaluation and price
+negotiations. 
+Our largest
+customer accounted for 12.4% of total net sales and contract revenues in the
+fiscal year ended March 31, 2007 (“Fiscal 2007”). 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in
+our Vantage products. Additionally, we procure certain components from
+qualified suppliers, both globally and locally, and use multi-sourcing
+strategies when technically and economically feasible to mitigate supply risk.
+These subassemblies and components are delivered to our Anaheim facility where
+they go through final assembly and testing prior to shipment to our customers.
+Our manufacturing activities are conducted in approximately 8,000 square feet
+of space at our Anaheim facility. Production volume at our subcontractors is
+based upon quarterly forecasts that we adjust on a monthly basis to control
+inventory. For sales of AutoVue LDW systems to the truck market, we subcontract
+the manufacture of our AutoVue LDW systems to two manufacturers, and our
+internal processes are limited primarily to testing and final verification. For
+AutoVue LDW sales to the passenger car market, we 
+4 
+anticipate that all manufacturing will be done by
+Valeo; however, we plan to continue to provide engineering support to Valeo. We
+currently do not manufacture any of the hardware used in the transportation
+management and traveler information systems that we design and implement. Our
+production facility is currently ISO 9001 certified. 
+Customer
+Support and Services 
+We provide
+warranty service and support for our Vantage and AutoVue products, as well as
+follow-up service and support for which we charge separately. Service revenue
+accounted for less than 1.0% of total net sales and contract revenues for
+Fiscal 2007. We believe customer support is a key competitive factor. 
+Backlog 
+Our backlog of unfulfilled firm orders was approximately $25.7 million
+as of March 31, 2007, which was comprised of $3.5 million related to
+Roadway Sensors, $2.1 million related to Automotive Sensors and $20.1 million
+related to Transportation Systems. Substantially all of the backlog for Roadway
+Sensors and Automotive Sensors is expected to be recognized as revenue in the
+fiscal year ending March 31, 2008 (“Fiscal 2008”), while approximately
+75.0% of Transportation Systems backlog is expected to be recognized as revenue
+in Fiscal 2008. At March 31, 2006, we had backlog of approximately $20.3
+million, which was comprised of $1.5 million related to Roadway Sensors, $3.0
+million related to Automotive Sensors and $15.8 million related to
+Transportation Systems. All backlog as of March 31, 2006 for Roadway Sensors
+and Automotive Sensors was recognized as revenue in Fiscal 2007 while 58.9% of
+March 31, 2006 backlog for Transportation Systems was recognized as revenue in
+Fiscal 2007. Pursuant to the customary terms of our agreements with government
+contractors and other customers, customers can generally cancel or
+reschedule orders with little or no penalties. Lead times for the release
+of purchase orders often depend upon the scheduling and forecasting practices
+of our individual customers, which also can affect the timing of the conversion
+of our backlog into revenues. For these reasons, among others, our backlog at a
+particular date may not be indicative of our future revenues. 
+Product Development 
+Most of our development activities are conducted at our principal
+facilities in Anaheim, California. Our company-sponsored research and
+development costs and expenses were approximately $4.0 million for Fiscal 2007,
+$5.2 million for the fiscal year ended March 31, 2006 (“Fiscal 2006”), and
+$6.2 million for the fiscal year ended March 31, 2005 (“Fiscal 2005”). We
+expect to continue to pursue significant product development programs and incur
+significant research and development expenditures. 
+Competition 
+We generally face significant competition in each of our target
+markets. Increased competition may result in price reductions, reduced gross
+margins and loss of market share, any of which could have a material adverse
+effect on our business, financial condition and results of operations. We
+believe that AutoVue is the only established commercially-available lane
+departure warning system used in the U.S. and in Europe in the heavy truck
+market. Potential competitors of AutoVue include Delphi Automotive Systems
+Corporation, NEC Corporation and Hitachi Ltd. in Japan and Robert Bosch GmbH in
+Europe, as well as Siemens, Continental Tavis, Visteon and Cognex, which could
+be currently developing video sensor technologies for the vehicle industry that
+could be used for lane departure warning systems. In the market for our Vantage
+vehicle detection systems, we compete with manufacturers of other above ground
+video camera detection systems such as Econolite Control Products, Inc.,
+Traficon, N.V., Quixote, and other non-intrusive detection devices including
+microwave, infrared, ultrasonic and magnetic detectors, as well as
+manufacturers and installers of in-pavement inductive loop products. 
+The transportation management and traveler information systems market
+is highly fragmented and is subject to evolving national and regional quality
+and safety standards. Our competitors vary in number, scope and breadth of the
+products and services they offer. Our competitors in advanced transportation
+management and traveler information systems include national corporations such
+as Transcore, Siemens, Telvent Farradyne, Kimley-Horn and Associates, Inc.
+and Delcan. Our competitors in transportation engineering, planning and design
+include major firms such as Parsons Brinkerhoff, Inc., URS, HNTB and
+Parsons Transportation Group, Inc., as well as many smaller regional
+engineering firms. 
+In general, the markets for the products and services we offer are
+highly competitive and are characterized by rapidly changing technology and
+evolving standards. Many of our current and prospective competitors have longer
+operating histories, greater name recognition, access to larger customer bases
+and significantly greater financial, technical, manufacturing, distribution and
+marketing resources than us. As a result, they may be able to adapt more
+quickly to new or emerging standards or technologies or to devote greater
+resources to the promotion and sale of their products. It is also possible that
+new competitors or alliances among competitors could emerge and rapidly acquire
+significant market share. We believe that our ability to compete effectively in
+our target markets will depend on a number of factors, including the success
+and timing of our new product development, the compatibility of our products
+with a broad range of computing systems, product quality and 
+5 
+performance, reliability, functionality, price, and
+service and technical support. Our failure to provide services and develop and
+market products that compete successfully with those of other suppliers and
+consultants in our target markets would have a material adverse effect on our
+business, financial condition and results of operations. 
+Intellectual Property and Proprietary
+Rights 
+Our ability to compete effectively depends in part on our ability to
+develop and maintain the proprietary aspects of our technology. Our policy is
+to obtain appropriate proprietary rights protection for any potentially
+significant new technology acquired or developed by us. We currently hold ten
+U.S. patents, which expire commencing in 2012, and have six U.S.
+patent applications pending relating to our outdoor image processing techniques
+used in our AutoVue systems. Nine of our patents relate specifically to our
+AutoVue technology and provide a basis for enhanced functionality for rain
+sensing and improved performance. We believe that our other patents, while
+important for our technology platforms, are less critical to our near term
+product strategy. We cannot assure you that any new patents will be granted
+pursuant to any outstanding or subsequent applications. 
+In addition to patent laws, we rely on copyright and trade secret laws
+to protect our proprietary rights. We attempt to protect our trade secrets and
+other proprietary information through agreements with customers and suppliers,
+proprietary information agreements with our employees and consultants, and
+other similar measures. We do not have any material licenses or trademarks
+other than those relating to product names. We cannot be certain that we will
+be successful in protecting our proprietary rights. While we believe our
+patents, patent applications, software and other proprietary know-how have
+value, changing technology makes our future success dependent principally upon
+our employees’ technical competence and creative skills for continuing innovation. 
+Litigation may be necessary in the future to enforce our proprietary
+rights, to determine the validity and scope of the proprietary rights of
+others, or to defend us against claims of infringement or invalidity by others.
+An adverse outcome in such litigation or similar proceedings could subject us
+to significant liabilities to third parties, require disputed rights to be
+licensed from others or require us to cease marketing or using certain
+products, any of which could have a material adverse effect on our business,
+financial condition and results of operations. In addition, the cost of
+addressing any intellectual property litigation claim, both in legal fees and
+expenses, as well as from the diversion of management’s resources, regardless
+of whether the claim is valid, could be significant and could have a material
+adverse effect on our business, financial condition and results of operations. 
+Employees 
+We refer to our employees as associates. As of June 5, 2007, we
+employed an aggregate of 237 associates, including 57 associates in general
+management, administration and finance; 31 associates in sales and marketing;
+113 associates in engineering and product development; 25 associates in
+operations, manufacturing and quality; and 11 associates in customer service.
+None of our associates are represented by a labor union, and we have never
+experienced a work stoppage. 
+Government Regulation 
+Our manufacturing operations are subject to various federal, state and
+local laws and regulations, including those restricting the discharge of
+materials into the environment. We are not involved in any pending or, to our
+knowledge, threatened governmental proceedings, which would require curtailment
+of our operations because of such laws and regulations. We continue to expend
+funds in connection with our compliance with applicable environmental
+regulations. These expenditures have not, however, been significant in the
+past, and we do not expect any significant expenditure in the near future.
+Currently, compliance with foreign laws has not had a material impact on our
+business and is not expected to have a material impact in the near future. 
+6

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+ITEM 13. CERTAIN
+RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+The information
+under the captions “Corporate Governance – Director Independence” and “Certain
+Transactions,” appearing in our proxy statement for the 2007 Annual Meeting of
+Stockholders, is incorporated herein by reference.

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+ITEM 9A. CONTROLS AND PROCEDURES 
+Evaluation of Disclosure Controls and
+Procedures 
+As of the end of
+the period covered by this report, we carried out an evaluation, under the
+supervision and with the participation of our management, including our Chief
+Executive Officer and our Chief Financial Officer, of the effectiveness of the
+design and operation of our disclosure controls and procedures, as such term is
+defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that
+evaluation, the Chief Executive Officer and Chief Financial Officer concluded
+that our disclosure controls and procedures are effective to ensure that
+information required to be disclosed by us in the reports that we file or
+submit under the Exchange Act is recorded, processed, summarized and reported
+within the time periods specified in the Securities and Exchange Commission’s
+rules and forms and are effective in ensuring that information required to be
+disclosed by us in the reports that we file or submit under the Exchange Act is
+accumulated and communicated to our management, including our Chief Executive
+Officer and Chief Financial Officer, as appropriate, to allow timely decisions
+regarding required disclosure. In designing and evaluating the disclosure
+controls and procedures, our management recognized that any controls and
+procedures, no matter how well designed and operated, can provide only
+reasonable assurance of achieving the desired control objectives. Our
+management necessarily applied its judgment in evaluating the cost-benefit
+relationship of such controls and procedures. 
+Changes in Internal Controls 
+During the most recent
+completed fiscal quarter covered by this report, there has been no change in
+our internal controls over financial reporting (as defined in Rules 13a-15(f) and
+15d-15(f) under the Securities Exchange Act of 1934) that has materially
+affected, or is reasonably likely to materially affect, our internal controls
+over financial reporting. 
+Effective April 1, 2006,
+we implemented a new enterprise resource planning system that we believe has
+not resulted in any material changes in our internal controls over financial
+reporting.

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+0000350868,ITI,"ITERIS, INC.",10-K,2009-06-12,2009-03-31,2009-06-12T15:51:16.000Z,0001104659-09-037935,a09-11714_110k.htm,10-K,2043564,0,0,https://www.sec.gov/Archives/edgar/data/350868/000110465909037935/a09-11714_110k.htm,https://www.sec.gov/Archives/edgar/data/350868/000110465909037935/,2008,2008,1

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+ITEM 1. BUSINESS 
+Overview 
+We are a leader in the
+traffic management market focused on the development and application of
+advanced technologies that reduce traffic congestion and improve the safety of
+surface transportation systems infrastructure. As an added benefit, our
+products and services minimize the environmental impact of traffic congestion.
+By combining outdoor image processing, traffic engineering and information
+technology, we offer a broad range of Intelligent Transportation Systems (“ITS”)
+and driver safety solutions to customers worldwide. 
+We
+were originally incorporated in Delaware in 1987. Our principal executive offices are located
+at 1700 Carnegie Avenue, Santa Ana, California 92705, and our telephone number
+at that location is (949) 270-9400. Our
+Internet website address is www.iteris.com. 
+Our annual reports on Form 10-K, quarterly reports on Form 10-Q
+and current reports on Form 8-K, together with amendments to these
+reports, are available on the “Investors” section of our website, free of
+charge, as soon as reasonably practicable after such material is electronically
+filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The inclusion of our website address in this
+report does not include or incorporate by reference into this report any
+information on our website. 
+We
+currently operate in three reportable segments: Roadway Sensors, Vehicle
+Sensors and Transportation Systems. The Roadway Sensors segment includes our
+Vantage and VersiCam vehicle detection systems for traffic
+intersection control, incident detection and certain highway traffic data
+collection applications. The Vehicle Sensors segment includes our AutoVue Lane
+Departure Warning (“LDW”) system and is comprised of all activities related to
+vehicle safety. The Transportation Systems segment includes transportation
+engineering and consulting services, and the development of transportation
+management and traveler information systems for the ITS industry. See Note 8 of
+the accompanying consolidated financial statements for further details on our
+reportable segments. 
+Our Roadway Sensors
+segment product line uses advanced image processing technology to capture and
+analyze video images through sophisticated algorithms, enabling vehicle
+detection and transmission of both video images and data using a wide range of
+communication technologies. Our Vantage
+video detection systems detect vehicle presence, count, speed, occupancy and
+other traffic data used in traffic management systems. This gives traffic managers the ability to
+mitigate roadway congestion by modifying traffic signal timing or detecting
+incidents quickly. VersiCam, our
+integrated camera and processor video detection system, is a cost-efficient
+video detection system for smaller intersections that require only a few
+detection points. Vantage video
+detection systems have been deployed by hundreds of agencies and are currently
+sold through a network of independent dealers in the United States, Asia, Latin
+America, Europe and the Middle East. 
+Our Vehicle Sensors
+segment addresses the leading cause of roadway fatalities: rear-end, lane change, and roadway departure
+accidents. According to the National
+Highway Traffic Safety Administration, these three crash types result in about
+27,500 of the U.S.’s 42,000 annual traffic fatalities and contribute to a
+considerable economic loss due to injuries, property damage, and decreased
+productivity. 
+2 
+Table of Contents 
+Our Vehicle Sensors
+segment developed the world’s first production LDW system and offers a proven
+system that is available as an original equipment manufacturer (“OEM”) and
+aftermarket option on heavy trucks worldwide and as an OEM option in passenger
+cars. Our LDW products utilize video
+detection images to detect when a vehicle begins to approach an unintended lane
+change. When this occurs, the unit
+automatically emits a distinctive rumble strip or other audible warning sound,
+alerting the driver to make a correction. 
+To date, we have sold approximately 69,000 LDW systems into the heavy
+truck market in Europe, North America and Asia. 
+Our LDW systems are currently qualified as an option on certain heavy
+trucks, including Mercedes-Benz, MAN, Iveco, DAF, Scania, Freightliner and
+FUSO, as well as Neoplan and MAN luxury bus and coach lines. In North America,
+our LDW systems are sold primarily to truck fleets, and to date, 74 U.S. heavy
+truck fleets have selected our LDW systems, with a combined fleet size
+estimated at 58,000 vehicles. Additionally,
+we have licensed our LDW technology to our strategic partner, Valeo Schalter
+and Sensuren GmbH (“Valeo”), an independent automotive supplier, resulting in
+sales to date of approximately 69,000 LDW systems for passenger cars. 
+In addition to our LDW
+systems, we expanded our Vehicle Sensors portfolio in August 2008 with
+newly developed technologies such as radar based Forward Collision Warning (“FCW”)
+and Blind Spot Warning (“BSW”) systems for the North American truck
+market. We also introduced Safety Direct
+in March 2008, which is a system that reports real-time driver performance
+data captured by our LDW system and that has the ability to relay this
+information directly to fleet operators through integration with the truck’s
+existing fleet communications system. We
+offer the FCW and BSW features through the resale of Delphi’s radar based
+systems, for which we are the exclusive North American dealer, while Safety
+Direct was internally developed. These new products, together with our LDW
+products, combine to create a broad suite of active safety driver assistance
+features that help to reduce the number of motor vehicle crashes and the
+severity of crash-related injuries. 
+Our Transportation
+Systems segment includes transportation engineering and consulting services
+focused on the planning, design, development and implementation of
+software-based systems that integrate sensors, video surveillance, computers
+and advanced communications equipment to enable public agencies to monitor,
+control and direct traffic flow, assist in the quick dispatch of emergency
+crews and distribute real-time information about traffic conditions. Our
+services include planning, design and implementation of surface transportation
+infrastructure systems. We perform
+analysis and study goods movement, commercial vehicle operations, travel demand
+forecasting and systems engineering, and identify mitigation measures to reduce
+traffic congestion. These services and
+systems are primarily sold to local, state and national transportation agencies
+in the United States. Our Transportation
+Systems segment is largely dependent upon governmental funding and budgetary
+issues. 
+Sales,
+Marketing and Principal Customers 
+We
+sell our Roadway Sensors products through indirect sales channels comprised of
+independent dealers in the United States and Canada who sell integrated systems
+and related products to the traffic management market, as well as directly to
+the traffic management market using a combination of our own sales personnel
+and an outside sales organization. Our independent dealers are primarily
+responsible for sales, installation and support of these products. These
+dealers maintain an inventory of demonstration traffic products from various
+manufacturers including our vehicle detection systems and sell directly to
+government agencies and installation contractors. These dealers often have
+long-term arrangements with the government agencies in their territory for the
+supply of various products for the construction and renovation of traffic
+intersections. We hold technical training classes for dealers and end users and
+maintain a full-time staff of customer support technicians to provide technical
+assistance when needed. 
+Our marketing strategy
+for our Vehicle Sensors segment is to establish our LDW products as the leading
+platform for in-vehicle video sensing for heavy trucks and passenger cars. We sell LDW systems directly to heavy truck
+manufacturers and to U.S. truck fleets, and our LDW system is currently offered
+as an option on certain heavy trucks, including Mercedes-Benz, MAN, Iveco, DAF,
+Scania, Freightliner and FUSO, as well as Neoplan and MAN luxury bus and coach
+lines. We market the licensing of our LDW technology to manufacturers of
+passenger automobiles through an exclusive strategic relationship with Valeo.
+In connection with this marketing effort, we provide specific contract
+engineering services, technical marketing and sales support to Valeo, which to
+date has enabled the launch of our LDW technology on three Infiniti car
+platforms. We plan to continue to provide technical marketing and sales support
+to Valeo in our efforts to win new OEM customers for the passenger car market
+as well as contract engineering services related to the possible launch of new
+platforms that include our LDW system. 
+We market and sell our
+Transportation Systems services directly to government agencies pursuant to
+negotiated contracts that involve competitive bidding and specific
+qualification requirements. Most of our Transportation Systems contracts are
+with federal, state and municipal customers and generally provide for
+cancellation or renegotiation at the option of the customer upon reasonable
+notice and fees paid for modification. We use selected members of our
+engineering team divided on a regional basis to serve in sales and business development
+functions. We have historically not engaged in sales of transportation
+management systems and traveler information services outside of the U.S., but
+may do so in the future. Our Transportation Systems contracts generally involve
+long lead times and require extensive specification development, evaluation and
+price negotiations. 
+A large portion of our
+revenues are derived from sales to federal, state and local government
+agencies. We currently have a diverse
+customer base with no individual customer representing greater than 10% of our
+total net sales and contract revenues in the fiscal year ended March 31,
+2009 (“Fiscal 2009”) or the fiscal year ended March 31, 2008 (“Fiscal 2008”).
+Also refer to Note 8 of Notes to Consolidated Financial Statements, included
+in Part IV, Item 15 of this report. 
+3 
+Table of Contents 
+Manufacturing
+and Materials 
+We use contract
+manufacturers to build subassemblies that are used in our sensors products.
+Additionally, we procure certain components from qualified suppliers, both
+globally and locally, and generally use multi-sourcing strategies when
+technically and economically feasible to mitigate supply risk. These
+subassemblies and components are delivered to our Santa Ana facility where they
+go through final assembly and testing prior to shipment to our customers.
+Certain of our key suppliers include SMS Technologies, Inc., Hitachi
+American Ltd-UB and Total Electronics LLC. Our manufacturing activities are
+conducted in approximately 9,000 square feet of space at our Santa Ana,
+California facility. Production volume at our subcontractors is based upon
+quarterly forecasts that we adjust on a monthly basis to control inventory
+levels. For LDW products sales to the passenger car market, all manufacturing
+has been and is expected to be performed by Valeo; however, we plan to continue
+to provide engineering support to Valeo. We currently do not manufacture any of
+the hardware used in the transportation management and traveler information
+systems that we design and implement. Our production facility is currently ISO
+9001 certified. 
+Customer
+Support and Services 
+We provide warranty
+service and support for our products, as well as follow-up service and support
+for which we charge separately. Service revenue accounted for less than 1.0% of
+total net sales and contract revenues for Fiscal 2009. We believe customer
+support is a key competitive factor. 
+Backlog 
+Our backlog of
+unfulfilled firm orders was approximately $36.3 million as of March 31,
+2009, which was comprised of $1.0 million related to Roadway Sensors, $800,000
+related to Vehicle Sensors and $34.5 million related to Transportation Systems.
+Substantially all of the backlog for Roadway Sensors and Vehicle Sensors is
+expected to be recognized as revenue in the fiscal year ending March 31,
+2010 (“Fiscal 2010”), while approximately 75% of Transportation Systems backlog
+is expected to be recognized as revenue in Fiscal 2010. At March 31, 2008,
+we had backlog of approximately $26.8 million, which was comprised of $900,000
+related to Roadway Sensors, $1.3 million related to Vehicle Sensors and $24.6
+million related to Transportation Systems. All backlog as of March 31,
+2008 for Roadway Sensors and Vehicle Sensors was recognized as revenue in
+Fiscal 2009 while approximately 65% of our March 31, 2008 backlog for
+Transportation Systems was recognized as revenue in Fiscal 2009. Pursuant to
+the customary terms of our agreements with government contractors and other
+customers, customers can generally cancel or reschedule orders with little
+or no penalties. Lead times for the release of purchase orders often depend
+upon the scheduling and forecasting practices of our individual customers,
+which also can affect the timing of the conversion of our backlog into
+revenues. For these reasons, among others, our backlog at a particular date may
+not be indicative of our future revenues, in particular for Roadway Sensors and
+Vehicle Sensors. 
+Product
+Development 
+Most of our development
+activities are conducted at our principal facilities in Santa Ana, California.
+Our company-sponsored research and development costs and expenses were
+approximately $4.0 million for Fiscal 2009, $3.6 million for Fiscal 2008, and
+$4.0 million for the fiscal year ended March 31, 2007 (“Fiscal 2007”). We
+expect to continue to pursue certain product development programs and incur
+research and development expenditures. 
+Competition 
+We generally face significant
+competition in each of our target markets. Increased competition may result in
+price reductions, reduced gross margins and loss of market share, any of which
+could have a material adverse effect on our business, financial condition and
+results of operations. While our LDW products have historically been the only
+established commercially-available LDW system used in the U.S. and in Europe in
+the heavy truck market, we have recently experienced increased competition from
+new competitors in this market. We consider competitors in this market to
+include Delphi Automotive Systems Corporation, NEC Corporation and Hitachi Ltd.
+in Japan and Robert Bosch GmbH in Europe, Continental Tavis, Visteon and
+Takata, which currently have developed or are developing video sensor
+technologies for the vehicle industry that could be used for lane departure
+warning systems. In the market for our Roadway Sensors vehicle detection
+products, we compete with manufacturers of other above ground video camera
+detection systems such as Econolite Control Products, Inc., Traficon,
+N.V., and other non-intrusive detection devices including microwave, infrared,
+ultrasonic and magnetic detectors, as well as manufacturers and installers of
+in-pavement inductive loop products. 
+The Transportation
+Systems market is highly fragmented and is subject to evolving national and
+regional quality and safety standards. Our competitors vary in number, scope
+and breadth of the products and services they offer. Our competitors in
+advanced Transportation Systems include national corporations such as
+Transcore, Siemens, Telvent Farradyne, Kimley-Horn and Associates, Inc.
+and Delcan. Our competitors in transportation engineering, planning and design
+include major firms such as Parsons Brinkerhoff, Inc., URS, HNTB and
+Parsons Transportation Group, Inc., as well as many smaller regional
+engineering firms. 
+4 
+Table of Contents 
+In general, the markets
+for the products and services we offer are highly competitive and are
+characterized by rapidly changing technology and evolving standards. Many of
+our current and prospective competitors have longer operating histories,
+greater name recognition, access to larger customer bases and significantly
+greater financial, technical, manufacturing, distribution and marketing
+resources than us. As a result, they may be able to adapt more quickly to new
+or emerging standards or technologies or to devote greater resources to the
+promotion and sale of their products. It is also possible that new competitors
+or alliances among competitors could emerge and rapidly acquire significant
+market share. We believe that our ability to compete effectively in our target
+markets will depend on a number of factors, including the success and timing of
+our new product development, the compatibility of our products with a broad
+range of computing systems, product quality and performance, reliability,
+functionality, price and service and technical support. Our failure to provide
+services and develop and market products that compete successfully with those
+of other suppliers and consultants in our target markets would have a material
+adverse effect on our business, financial condition and results of operations. 
+Intellectual
+Property and Proprietary Rights 
+Our ability to compete
+effectively depends in part on our ability to develop and maintain the
+proprietary aspects of our technology. Our policy is to obtain appropriate
+proprietary rights protection for any potentially significant new technology
+acquired or developed by us. We currently hold ten U.S. patents, which expire
+commencing in 2012, relating to our outdoor image processing techniques used in
+our AutoVue LDW systems. Nine of our patents relate specifically to our LDW
+technology and provide a basis for enhanced functionality for rain sensing and
+improved performance. We believe that our other patent, while important for our
+technology platforms, is less critical to our near term product strategy. In April 2009, we acquired the rights to
+U.S., Canadian, and European Community patent applications for an Electronic
+Traffic Monitor that is related to new products in our Roadway Sensors
+businesses (also refer to Note 10 of Notes to Consolidated Financial
+Statements, included in Part IV, Item 15 of this report). We cannot
+assure you that any new patents will be granted pursuant to these or subsequent
+applications. 
+In addition to patent
+laws, we rely on copyright and trade secret laws to protect our proprietary
+rights. We attempt to protect our trade secrets and other proprietary
+information through agreements with customers and suppliers, proprietary
+information agreements with our employees and consultants, and other similar
+measures. We do not have any material licenses or trademarks other than those
+relating to product names. We cannot be certain that we will be successful in
+protecting our proprietary rights. While we believe our patents, patent
+applications, software and other proprietary know-how have value, changing
+technology makes our future success dependent principally upon our employees’
+technical competence and creative skills for continuing innovation. 
+Litigation may be
+necessary in the future to enforce our proprietary rights, to determine the
+validity and scope of the proprietary rights of others, or to defend us against
+claims of infringement or invalidity by others. An adverse outcome in such
+litigation or similar proceedings could subject us to significant liabilities
+to third parties, require disputed rights to be licensed from others or require
+us to cease marketing or using certain products, any of which could have a
+material adverse effect on our business, financial condition and results of
+operations. In addition, the cost of addressing any intellectual property
+litigation claim, both in legal fees and expenses, as well as from the
+diversion of management’s resources, regardless of whether the claim is valid,
+could be significant and could have a material adverse effect on our business,
+financial condition and results of operations. 
+Employees 
+We refer to our employees
+as associates. As of June 1, 2009, we employed an aggregate of 242
+associates, including 55 associates in general management, administration and
+finance; 22 associates in sales and marketing; 132 associates in engineering
+and product development; 20 associates in operations, manufacturing and
+quality; and 13 associates in customer service. None of our associates are
+represented by a labor union, and we have never experienced a work stoppage. 
+Government
+Regulation 
+Our manufacturing
+operations are subject to various federal, state and local laws and
+regulations, including those restricting the discharge of materials into the
+environment. We are not involved in any pending or, to our knowledge,
+threatened governmental proceedings, which would require curtailment of our
+operations because of such laws and regulations. We continue to expend funds in
+connection with our compliance with applicable environmental regulations. These
+expenditures have not, however, been significant in the past, and we do not
+expect any significant expenditure in the near future. Currently, compliance
+with foreign laws has not had a material impact on our business and is not expected
+to have a material impact in the near future.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
+DIRECTOR INDEPENDENCE 
+The information under the
+captions “Corporate Governance — Director Independence” and “Certain
+Transactions,” appearing in our proxy statement for the 2009 Annual Meeting of
+Stockholders, is incorporated herein by reference. 
+28 
+Table of Contents

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+ITEM 9A. CONTROLS AND PROCEDURES 
+(a) Evaluation of disclosure controls and
+procedures. In accordance with Rule 13a-15(b) of
+the Securities Exchange Act of 1934, as of the end of the period covered by
+this Annual Report on Form 10-K, management evaluated, with the
+participation of the our President and Chief Executive Officer and the Chief
+Financial Officer, the effectiveness of the design and operation of our
+disclosure controls and procedures (as defined in Rule 13a-15(e) under
+the Exchange Act). Based upon their evaluation of these disclosure controls and
+procedures, the President and Chief Executive Officer and the Chief Financial
+Officer have concluded that our disclosure controls and procedures were
+effective as of the date of such evaluation in ensuring that information
+required to be disclosed in our Exchange Act reports is (1) recorded,
+processed, summarized and reported in a timely manner, and (2) accumulated
+and communicated to management, including the Company’s President and Chief
+Executive Officer and the Chief Financial Officer, as appropriate, to allow
+timely decisions regarding required disclosure. 
+(b) 
+Changes in internal control. There was no
+change in our internal control over financial reporting that occurred during
+the period covered by this Annual Report on Form 10-K that has materially
+affected, or is reasonably likely to materially affect, our internal control
+over financial reporting. 
+Inherent Limitations on Internal
+Control 
+A control system, no
+matter how well conceived and operated, can provide only reasonable, not
+absolute, assurance that the objectives of the control system are met. Further,
+the benefits of controls must be considered relative to their costs. Because of
+the inherent limitations in all control systems, no evaluation of controls can
+provide absolute assurance that all control issues and instances of management
+override or improper acts, if any, have been detected. These inherent
+limitations include the realities that judgments in decision making can be
+faulty, and that breakdowns can occur because of simple errors. Additionally,
+controls can be circumvented by the individual acts of some persons, by
+collusion of two or more people, or by management override of the control. The
+design of any system of controls is also based in part upon certain assumptions
+about the likelihood of future events, and there can be no assurance that any
+design will succeed in achieving its stated goals under all potential future
+conditions. Because of the inherent limitations in a cost-effective control
+system, misstatements due to management override, error or improper acts may
+occur and not be detected. Any resulting misstatement or loss may have an
+adverse and material effect on our business, financial condition and results of
+operations. 
+27 
+Table of Contents 
+Management’s Report on Internal
+Control Over Financial Reporting 
+Our management is
+responsible for establishing and maintaining adequate internal control over
+financial reporting. Our internal control system was designed to provide
+reasonable assurance to management and the board of directors regarding the
+effectiveness of our internal control processes over the preparation and fair
+presentation of published financial statements. 
+We have assessed the
+effectiveness of our internal controls over financial reporting as of March 31,
+2009. In making this assessment, we used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
+Internal Control—Integrated Framework. Based on our assessment, we believe
+that, as of March 31, 2009, our internal control over financial reporting
+is effective based on those criteria. 
+This annual report does
+not include an attestation report of our independent registered public
+accounting firm regarding internal control over financial reporting. Management’s
+report was not subject to attestation by our independent registered public
+accounting firm pursuant to the rules of the Securities and Exchange
+Commission that permit us to provide only management’s report in this annual
+report.

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+ITEM 1. BUSINESS 
+Overview 
+We are a leader in the
+traffic management market focused on the development and application of
+advanced technologies that reduce traffic congestion and improve the safety of
+surface transportation systems infrastructure. Additionally, we believe that
+our products and services, as well as sound traffic management, minimize the
+environmental impact of traffic congestion. By combining outdoor image
+processing, traffic engineering and information technology, we offer a broad
+range of Intelligent Transportation Systems (“ITS”) and driver safety solutions
+to customers worldwide. 
+We were originally incorporated in Delaware in 1987.
+Our principal executive offices are located at 1700 Carnegie Avenue, Santa Ana,
+California 92705, and our telephone number at that location is (949) 270-9400.
+Our Internet website address is www.iteris.com. Our annual reports on Form 10-K,
+quarterly reports on Form 10-Q and current reports on Form 8-K,
+together with amendments to these reports, are available on the “Investors”
+section of our website, free of charge, as soon as reasonably practicable after
+such material is electronically filed with, or furnished to, the Securities and
+Exchange Commission (“SEC”). The inclusion of our website address in this
+report does not include or incorporate by reference into this report any
+information on our website. 
+Products
+and Services 
+We currently operate in
+three reportable segments: Roadway Sensors, Vehicle Sensors and Transportation
+Systems. The Roadway Sensors segment includes, among other products, our
+Vantage, Versicam and Pico vehicle detection systems for traffic
+intersection control, incident detection and certain highway traffic data
+collection applications. The Vehicle Sensors segment includes our lane
+departure warning (“LDW”) products, including our AutoVue LDW system, and is
+comprised of all activities related to in-vehicle safety. The Transportation
+Systems segment includes transportation engineering and consulting services,
+and the development of transportation management and traveler information
+systems for the ITS industry. See Note 10 of Notes to Consolidated Financial
+Statements, included in Part IV, Item 15 of this report, for further
+details on our reportable segments. 
+Roadway Sensors. Our Roadway Sensors segment product line
+uses advanced image processing technology to capture and analyze video images
+through sophisticated algorithms, enabling vehicle detection and transmission
+of both video images and data using a wide range of communication technologies.
+Our Vantage video detection systems detect vehicle presence, count, speed,
+occupancy and other traffic data used in traffic management systems. Our
+Vantage systems give traffic managers the ability to mitigate roadway
+congestion by modifying traffic signal timing or detecting incidents quickly.
+Our VantageView software supplements our Vantage video detection systems by
+providing an integrated platform to manage and “see” video detection assets
+remotely over a network connection. Vantage video detection systems have been
+deployed by hundreds of agencies and are currently sold through a network of
+independent dealers in the United States (“U.S.”), Asia, Latin America, Europe
+and the Middle East. VersiCam, our integrated camera and processor video
+detection system, is a cost-efficient video detection system for smaller
+intersections that require only a few detection points. In December 2009,
+we introduced Pico, a compact video detection system that delivers superior
+vehicle detection in a small and economical framework, and was developed
+primarily to address international video detection needs. We anticipate that
+future growth domestically and internationally, particularly in developing
+countries, will be dependent in part on the continued adoption of above-ground
+video detection technologies, instead of in-pavement loop technology, to manage
+traffic. 
+2 
+Table of Contents 
+Our Roadway Sensors
+product line also includes the Abacus family of products, which has been
+designed with a blend of artificial intelligence and video detection algorithms
+that allow either fixed or pan-tilt-zoom cameras to be used for data collection
+and incident detection. Our Abacus products take advantage of the large number
+of existing installed closed-circuit television video feeds monitoring
+roadways, tunnels and bridges and at signalized intersections. This flexibility
+of using a broad range of cameras with an appropriate perspective allows for
+accurate data collection without the set-up and calibration required with other
+systems. 
+Vehicle Sensors. Our Vehicle Sensors segment addresses
+the leading causes of roadway fatalities: lane change, roadway departure and
+rear-end collision accidents. According to the National Highway Traffic Safety
+Administration (“NHTSA”), these three crash types result in more than 60% of
+the U.S.’s annual traffic fatalities and contribute to a considerable economic
+loss due to injuries, property damage, and decreased productivity. Early
+estimates by the NHTSA of motor vehicle traffic fatalities in 2009 were
+approximately 34,000. 
+We
+developed the world’s first production LDW system and offer a proven system
+that is available as an original equipment manufacturer (“OEM”) and aftermarket
+option on heavy trucks worldwide and as an option in certain passenger cars.
+Our LDW products utilize video detection images to detect when a vehicle begins
+to drift toward an unintended lane change. When this occurs, the unit
+automatically emits a distinctive rumble strip or other audible warning sound,
+alerting the driver to make a correction. To date, we have sold approximately
+79,000 LDW systems into the heavy truck market in Europe, North America and
+Asia. Our LDW systems are currently qualified as an option on certain heavy
+trucks, including Mercedes-Benz, MAN, Iveco, DAF, Scania, Freightliner and
+FUSO, as well as Neoplan and MAN luxury bus and coach lines. In North America,
+our LDW systems are sold primarily to truck fleets. 
+In March 2009,
+the European Union (“EU”) approved a mandate that sets better standards to
+improve road safety in Europe. The new mandated rules for safety
+technology includes systems such as electronic stability control, advanced
+emergency braking and LDW systems to be compulsory on heavy-duty trucks and
+buses to further reduce accident risks. LDW systems are expected to
+be mandatory in Europe on all new heavy truck models beginning in
+2013. We believe that in order for the 2013 EU mandate
+for active safety systems to have a positive impact on our sales, we need to
+establish long-term supplier agreements with our European OEM heavy truck
+customers. To date we have agreements to supply certain of our European heavy
+truck customers through 2012 and we are actively working on agreements with
+other heavy truck OEMs that extend through 2013 and beyond in order to meet the
+anticipated increase in demand. However, we cannot assure you that our efforts
+will be successful or that the expected increase in demand will occur. We believe that
+the expected 2013 EU mandate for LDW and other active safety systems, and an
+increasing overall awareness of the potential benefits of LDW, helps validate
+the long-term market opportunity for LDW systems in commercial vehicles. Additionally, in North America we plan to develop
+partnerships with other manufacturers and suppliers of safety devices for heavy
+trucks to jointly sell our LDW systems and provide our SafetyDirect software
+tool to North American trucking fleets. 
+We
+have entered into an exclusive license of our LDW technology to our strategic
+partner, Valeo Schalter and Sensuren GmbH (“Valeo”), for the passenger car
+market, resulting in sales to date of approximately 79,300 LDW systems for
+passenger cars. We and our partner have recently experienced a greater degree
+of competition in the passenger car market as several passenger car OEMs have
+introduced vehicle platforms with competing LDW systems. However, Valeo continues
+to pursue opportunities in the passenger car market. 
+In addition to our LDW systems, our Vehicle Sensors
+portfolio includes radar-based Forward Collision Warning (“FCW”) and Blind Spot
+Warning (“BSW”) systems for the North American truck market. We offer the FCW
+and BSW features through the resale of Delphi’s radar based systems, for which
+we are the exclusive North American dealer. Our portfolio also includes our
+internally-developed SafetyDirect software system, which can provide a single
+point of access to monitor and synchronize driver performance data on braking,
+stability control, following distances, and lane departure warnings for
+individual drivers as well as entire fleets. SafetyDirect uses information
+transmitted from the vehicle by the fleet’s onboard mobile communications
+system to provide fleet operators with a comprehensive view of the entire
+fleet, as well as the ability to drill down to detailed information on
+individual drivers and events. These products, together with our LDW products,
+combine to create a broad suite of active safety driver assistance features
+designed to help reduce the number of motor vehicle crashes and the severity of
+crash-related injuries. 
+Transportation Systems. Our Transportation Systems segment
+includes transportation engineering and consulting services focused on the
+planning, design, development and implementation of software-based systems that
+integrate sensors, video surveillance, computers and advanced communications
+equipment to enable public agencies to monitor, control and direct traffic
+flow, assist in the quick dispatch of emergency crews and distribute real-time
+information about traffic conditions. Our services include planning, design and
+implementation of surface transportation infrastructure systems. We perform
+analysis and study goods movement, commercial vehicle operations, travel demand
+forecasting and systems engineering, and identify mitigation measures to 
+3 
+Table of Contents 
+reduce traffic
+congestion. These services and systems have historically been primarily sold to
+local, state and national transportation agencies in the U.S.; however, during
+the fiscal year ended March 31, 2010 (“Fiscal 2010”), we began work on our
+first overseas contracts in Abu Dhabi and Dubai, and plan to continue to pursue
+additional international business. Our Transportation Systems segment is
+largely dependent upon governmental funding, and is affected by state and local
+budgetary issues. 
+Sales,
+Marketing and Principal Customers 
+We sell our Roadway
+Sensors products through indirect sales channels comprised of a strong network
+of independent dealers in the U.S. and Canada who sell integrated systems and
+related products to the traffic management market, as well as directly to the
+traffic management market using a combination of our own sales personnel and an
+outside sales organization. Our independent dealers are well-trained in, and
+primarily responsible for, sales, installation, set-up and support of our
+products, and maintain an inventory of demonstration traffic products from
+various manufacturers including our vehicle detection systems and sell directly
+to government agencies and installation contractors. These dealers often have
+long-term arrangements with local government agencies in their respective
+territories for the supply of various products for the construction and
+renovation of traffic intersections, and are generally well-known suppliers of
+high-quality ITS products to the traffic management market. We periodically
+hold technical training classes for our dealers and end users and maintain a
+full-time expert staff of customer support technicians throughout the U.S. to
+provide technical assistance when needed. When appropriate, we have the ability
+to modify or make changes to our dealer network to best suit the needs of the
+market and our customer base. In the states where we sell direct, we use our
+own expert staff to sell, oversee installations and set-up issues and support
+our products. 
+Our marketing strategy
+for our Vehicle Sensors segment is to establish our LDW products as the leading
+platform for in-vehicle video sensing for heavy trucks and passenger cars. We
+sell LDW systems directly to heavy truck manufacturers and to U.S. truck
+fleets, and our LDW system is currently offered as an option on certain heavy
+trucks, including Mercedes-Benz, MAN, Iveco, DAF, Scania, Freightliner and
+FUSO, as well as Neoplan and MAN luxury bus and coach lines. We market the
+licensing of our LDW technology to manufacturers of passenger automobiles
+through an exclusive strategic relationship with Valeo. In connection with this
+marketing effort, we provide specific contract engineering services, technical
+marketing and sales support to Valeo, which to date has enabled the launch of
+our LDW technology on three Infiniti car platforms, with a fourth platform
+expected in the summer of 2010. We plan to continue to provide technical
+marketing and sales support to Valeo in our efforts to win new OEM customers
+for the passenger car market, as well as contract engineering services related
+to the possible launch of new platforms that include our LDW system. 
+We market and sell our
+Transportation Systems services directly to government agencies pursuant to
+negotiated contracts that involve competitive bidding and specific
+qualification requirements. Most of our Transportation Systems contracts are
+with federal, state and municipal customers and generally provide for
+cancellation or renegotiation at the option of the customer upon reasonable
+notice and fees paid for modification. We use selected members of our
+engineering team on a regional basis to serve in sales and business development
+functions. Our Transportation Systems contracts generally involve long lead
+times and require extensive specification development, evaluation and price
+negotiations. 
+A large portion of our
+revenues are derived from sales to federal, state and local government
+agencies. We currently have a diverse customer base with no individual customer
+representing greater than 10% of our total net sales and contract revenues in
+Fiscal 2010, or in the fiscal years ended March 31, 2009 (“Fiscal 2009”)
+and March 31, 2008 (“Fiscal 2008”). Also refer to Note 10 of Notes to
+Consolidated Financial Statements, included in Part IV, Item 15 of
+this report. 
+Manufacturing and Materials 
+We use contract
+manufacturers to build subassemblies that are used in our sensors products.
+Additionally, we procure certain components from qualified suppliers, both
+globally and locally, and generally use multi-sourcing strategies when
+technically and economically feasible to mitigate supply risk. These
+subassemblies and components are delivered to our Santa Ana, California facility
+where they go through final assembly and testing prior to shipment to our
+customers. Certain of our key suppliers include CTS Electronics Manufacturing
+Solutions, Inc., SMS Technologies, Inc., Total Electronics LLC and
+Hitachi American Ltd-UB. Our manufacturing activities are conducted in
+approximately 9,000 square feet of space at our Santa Ana facility. Production
+volume at our subcontractors is based upon quarterly forecasts that we
+generally adjust on a monthly basis to control inventory levels. For LDW
+products sales to the passenger car market, all manufacturing has been and is
+expected to be performed by Valeo; however, we plan to continue to provide
+engineering support to Valeo. We typically do not manufacture any of the
+hardware used in the transportation management and traveler information systems
+that we design and implement. Our production facility is currently ISO 9001
+certified. 
+Customer
+Support and Services 
+We provide warranty
+service and support for our products, as well as follow-up service and support
+for which we charge separately. Such service revenue accounted for less than
+1.0% of total net sales and contract revenues for each of Fiscal 2010 and
+Fiscal 2009. We believe customer support is a key competitive factor. 
+4 
+Table of Contents 
+Backlog 
+Our total backlog of
+unfulfilled firm orders was approximately $30.6 million as of March 31,
+2010, which was comprised of $1.6 million related to Roadway Sensors, $600,000
+related to Vehicle Sensors and $28.4 million related to Transportation Systems.
+Substantially all of the backlog for Roadway Sensors and Vehicle Sensors is
+expected to be recognized as revenue in the fiscal year ending March 31,
+2011 (“Fiscal 2011”). We have historically recognized in the subsequent fiscal
+year between 50% to 70% of our fiscal year end Transportation Systems backlog,
+and currently expect that trend to continue for Fiscal 2011. The timing and
+realization of this backlog is subject to the inherent uncertainties of doing
+business with federal, state and local governments, particularly in view of
+budgetary constraints, cut-backs and other delays or reallocations of funding
+that these entities typically face. 
+Pursuant to the customary
+terms of our agreements with government contractors and other customers,
+customers can generally cancel or reschedule orders with little or no
+penalties. Lead times for the release of purchase orders often depend upon the
+scheduling and forecasting practices of our individual customers, which also
+can affect the timing of the conversion of our backlog into revenues. For these
+reasons, among others, our backlog at a particular date may not be indicative
+of our future revenues, in particular for our Roadway Sensors and Vehicle
+Sensors segments. 
+Product
+Development 
+Most of our product
+development activities are conducted at our principal facilities in Santa Ana.
+Our research and development costs and expenses were approximately $3.7 million
+for Fiscal 2010, $4.0 million for Fiscal 2009 and $3.6 million for Fiscal 2008.
+We expect to continue to pursue various product development programs and incur
+research and development expenditures in future periods. 
+We
+believe our engineering and product development capabilities are a competitive
+strength. We strive to continue to develop new products to meet the needs of
+the ever-changing ITS market as well as enhance and refine our existing product
+lines. Within the last twelve months we have introduced our VersiCam and
+VersiCam wireless products, Pico, Abacus and our new RZ-4 Advanced camera, as
+well as our RZ-4 Advanced Wide Dynamic Range camera, which significantly
+improves video detection performance in certain harsh lighting conditions. We
+believe that developing new offerings across our segments and enhancing,
+refining and marketing our existing products is a key component of strong
+organic growth and profitability. 
+Competition 
+We generally face
+significant competition in each of our target markets. Increased competition
+may result in price reductions, reduced gross margins and loss of market share,
+any of which could have a material adverse effect on our business, financial
+condition and results of operations. 
+In the market for our
+Roadway Sensors vehicle detection products, we compete with manufacturers and
+distributors of other above ground video camera detection systems such as Peek
+Traffic Corporation, Wavetronix LLC, Econolite Control Products, Inc.,
+Traficon, N.V., Image Sensing Systems, Inc. and other non-intrusive
+detection devices including microwave, infrared, ultrasonic and magnetic
+detectors, as well as manufacturers and installers of in-pavement inductive
+loop products, which have historically, and currently continue to be, the
+predominant detection system in this market. 
+In the market for our
+Vehicle Sensors systems, we believe that as a result of the expected 2013
+European mandate for LDW and other active safety systems, and an overall
+awareness of the potential benefits of LDW, that we will experience an even
+higher degree of competition from a variety of tier-one OEM suppliers and other
+potential market entrants, worldwide. Additionally, we and our strategic
+partner (Valeo) have recently experienced a greater degree of competition in
+the passenger car market as several passenger car OEMs have introduced vehicle
+platforms with competing LDW systems. We consider competitors in this market to
+include Delphi Automotive Systems Corporation, NEC Corporation and Hitachi Ltd.
+in Japan and Robert Bosch GmbH in Europe, Continental Tavis, Visteon and
+Takata, all of which currently have developed or are developing video sensor
+technologies for the vehicle industry that could be used for lane departure
+warning systems. 
+The Transportation
+Systems market is highly fragmented and is subject to evolving national and
+regional quality and safety standards. Our competitors vary in number, scope
+and breadth of the products and services they offer. Our competitors in
+advanced Transportation Systems include national corporations such as
+Transcore, Siemens, Telvent Farradyne, Kimley-Horn and Associates, Inc.
+and Delcan. Our competitors in transportation engineering, planning and design
+include major firms such as Parsons Brinkerhoff, Inc., URS, HNTB and
+Parsons Transportation Group, Inc., as well as many smaller regional
+engineering firms. 
+5 
+Table of Contents 
+In general, the markets
+for the products and services we offer are highly competitive and are
+characterized by rapidly changing technology and evolving standards. Many of
+our current and prospective competitors have longer operating histories,
+greater name recognition, access to larger customer bases and significantly
+greater financial, technical, manufacturing, distribution and marketing
+resources than us. As a result, they may be able to adapt more quickly to new
+or emerging standards or technologies or to devote greater resources to the
+promotion and sale of their products. It is also possible that new competitors
+or alliances among competitors could emerge and rapidly acquire significant
+market share. We believe that our ability to compete effectively in our target
+markets will depend on a number of factors, including the success and timing of
+our new product development, the compatibility of our products with a broad
+range of computing systems, product quality and performance, reliability,
+functionality, price and service and technical support. Our failure to provide
+services and develop and market products that compete successfully with those
+of other suppliers and consultants in our target markets would have a material
+adverse effect on our business, financial condition and results of operations. 
+Intellectual
+Property and Proprietary Rights 
+Our ability to compete
+effectively depends in part on our ability to develop and maintain the
+proprietary aspects of our technology. Our policy is to obtain appropriate
+proprietary rights protection for any potentially significant new technology
+acquired or developed by us. We currently hold ten U.S. patents, which expire
+commencing in 2012, relating to our outdoor image processing techniques used in
+our AutoVue LDW systems. Nine of these patents relate specifically to our LDW
+technology and provide a basis for enhanced functionality for rain sensing and
+improved performance. Our other U.S. patent was issued for an Electronic
+Traffic Monitor related to our Abacus product in the Roadway Sensors segment.
+We also have pending patent applications in Canada and the European Community
+for the Electronic Traffic Monitor. We cannot assure you that any new patents
+will be granted pursuant to these or subsequent applications. 
+In addition to patent
+laws, we rely on copyright and trade secret laws to protect our proprietary
+rights. We attempt to protect our trade secrets and other proprietary
+information through agreements with customers and suppliers, proprietary
+information agreements with our employees and consultants, and other similar
+measures. We do not have any material licenses or trademarks other than those
+relating to product names. We cannot be certain that we will be successful in
+protecting our proprietary rights. While we believe our patents, patent
+applications, software and other proprietary know-how have value, changing
+technology makes our future success dependent principally upon our employees’
+technical competence and creative skills for continuing innovation. 
+Litigation may be
+necessary in the future to enforce our proprietary rights, to determine the
+validity and scope of the proprietary rights of others, or to defend us against
+claims of infringement or invalidity by others. An adverse outcome in such
+litigation or similar proceedings could subject us to significant liabilities
+to third parties, require disputed rights to be licensed from others or require
+us to cease marketing or using certain products, any of which could have a
+material adverse effect on our business, financial condition and results of
+operations. In addition, the cost of addressing any intellectual property
+litigation claim, both in legal fees and expenses, as well as from the
+diversion of management’s resources, regardless of whether the claim is valid,
+could be significant and could have a material adverse effect on our business,
+financial condition and results of operations. 
+Employees 
+We refer to our employees
+as associates. As of May 7, 2010, we employed an aggregate of 221
+associates, including 53 associates in general management, administration and
+finance; 25 associates in sales and marketing; 116 associates in engineering
+and product development; 18 associates in operations, manufacturing and
+quality; and 9 associates in customer service. None of our associates are
+represented by a labor union, and we have never experienced a work stoppage. 
+Government
+Regulation 
+Our manufacturing
+operations are subject to various federal, state and local laws and
+regulations, including those restricting the discharge of materials into the
+environment. We are not involved in any pending or, to our knowledge,
+threatened governmental proceedings, which would require curtailment of our
+operations because of such laws and regulations. We continue to expend funds in
+connection with our compliance with applicable environmental regulations. These
+expenditures have not, however, been significant in the past, and we do not
+expect any significant expenditure in the near future. Currently, compliance
+with foreign laws has not had a material impact on our business and is not
+expected to have a material impact in the near future.

raw/filings/0000350868/2009/0001104659-10-029895/item13.txt

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
+DIRECTOR INDEPENDENCE 
+The information under the
+captions “Corporate Governance — Director Independence” and “Certain
+Transactions,” appearing in our proxy statement for the 2010 Annual Meeting of
+Stockholders, is incorporated herein by reference.

raw/filings/0000350868/2009/0001104659-10-029895/item9a.txt

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+ITEM 9A(T). CONTROLS AND PROCEDURES 
+(a) Evaluation of
+disclosure controls and procedures. In accordance with Rule 13a-15(b) of the
+Securities Exchange Act of 1934, as of the end of the period covered by this
+Annual Report on Form 10-K, management evaluated, with the participation
+of the our President and Chief Executive Officer and the Chief Financial
+Officer, the effectiveness of the design and operation of our disclosure
+controls and procedures (as defined in Rule 13a-15(e) under the
+Exchange Act). Based upon their evaluation of these disclosure controls and
+procedures, the President and Chief Executive Officer and the Chief Financial
+Officer have concluded that our disclosure controls and procedures were
+effective as of the date of such evaluation in ensuring that information
+required to be disclosed in our Exchange Act reports is (1) recorded,
+processed, summarized and reported in a timely manner, and (2) accumulated
+and communicated to management, including the Company’s President and Chief
+Executive Officer and the Chief Financial Officer, as appropriate, to allow
+timely decisions regarding required disclosure. 
+(b) 
+Changes in internal control. There was no
+change in our internal control over financial reporting that occurred during
+the period covered by this Annual Report on Form 10-K that has materially
+affected, or is reasonably likely to materially affect, our internal control
+over financial reporting. 
+Inherent
+Limitations on Internal Control 
+A
+control system, no matter how well conceived and operated, can provide only
+reasonable, not absolute, assurance that the objectives of the control system
+are met. Further, the benefits of controls must be considered relative to their
+costs. Because of the inherent limitations in all control systems, no
+evaluation of controls can provide absolute assurance that all control issues
+and instances of management override or improper acts, if any, have been
+detected. These inherent limitations include the realities that judgments in
+decision making can be faulty, and that breakdowns can occur because of simple
+errors. Additionally, controls can be circumvented by the individual acts of
+some persons, by collusion of two or more people, or by management override of
+the control. The design of any system of controls is also based in part upon
+certain assumptions about the likelihood of future events, and there can be no
+assurance that any design will succeed in achieving its stated goals under all
+potential future conditions. Because of the inherent limitations in a
+cost-effective control system, misstatements due to management override, error
+or improper acts may occur and not be detected. Any resulting misstatement or
+loss may have an adverse and material effect on our business, financial
+condition and results of operations. 
+Management’s Report on Internal
+Control Over Financial Reporting 
+Our management is
+responsible for establishing and maintaining adequate internal control over
+financial reporting. Our internal control system was designed to provide
+reasonable assurance to management and the board of directors regarding the
+effectiveness of our internal control processes over the preparation and fair
+presentation of published financial statements. 
+We have assessed the
+effectiveness of our internal controls over financial reporting as of March 31,
+2010. In making this assessment, we used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
+Internal Control—Integrated Framework. Based on our assessment, we believe
+that, as of March 31, 2010, our internal control over financial reporting
+is effective based on those criteria. 
+This annual report does not include an attestation
+report of our independent registered public accounting firm regarding internal
+control over financial reporting. Management’s report was not subject to
+attestation by our independent registered public accounting firm pursuant to
+the rules of the SEC that permit us to provide only management’s report in
+this annual report.

raw/filings/0000350868/2013/0001047469-14-007351/filing_metadata.csv

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+cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
+0000350868,ITI,"ITERIS, INC.",10-K,2014-09-04,2014-03-31,2014-09-03T22:18:39.000Z,0001047469-14-007351,a2221256z10-k.htm,10-K,11369516,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746914007351/a2221256z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746914007351/,2013,2013,1

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+ITEM 1. BUSINESS 
+Overview 
+We are a leading provider of intelligent information solutions for the traffic management market. We are focused on the development and
+application of advanced technologies and software-based information systems that reduce traffic congestion, provide measurement, management and predictive traffic analytics and improve the safety of
+surface transportation systems infrastructure. We also believe our products, services and solutions, in conjunction with sound traffic management, minimize the environmental impact of traffic
+congestion. By combining our unique intellectual property, products, decades of experience in traffic management, hyper-local weather solutions and information technologies, we offer a broad range of
+Intelligent Transportation Systems ("ITS") solutions to customers throughout the U.S. and internationally. 
+We
+were originally incorporated in Delaware in 1987. Our principal executive offices are located at 1700 Carnegie Avenue, Santa Ana, California 92705, and our telephone number at that
+location is (949) 270-9400. Our Internet website address is www.iteris.com. The inclusion of our website address in this report does not include or incorporate by reference into this
+report any information on, or accessible through, our website. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, together with
+amendments to these reports, are available on the "Investors" section of our website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished
+to, the Securities and Exchange Commission ("SEC"). 
+Products and Services 
+We currently operate in three reportable segments: Roadway Sensors, Transportation Systems and iPerform. The Roadway Sensors segment
+includes, among other products, our Vantage, VantageNext, VersiCam, Vantage Vector, SmartCycle, SmartSpan, P10, P100 and Abacus vehicle detection systems for traffic intersection control, incident
+detection and certain highway traffic data collection applications. 
+2 
+Table of Contents 
+The
+Transportation Systems segment includes transportation engineering and consulting services, and the development of transportation management and traveler information systems for the ITS industry.
+The iPerform segment includes our transportation performance measurement and information management solutions. The iPerform performance measurement solutions leverage its real-time data collection,
+diagnostic, fusion and warehousing platform to aggregate and compute performance measurements. This segment also offers our weather related ClearPath Weather management tools that allow users to
+create solutions to meet roadway maintenance decision needs. See Note 13 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this report, for further
+details on our reportable segments. 
+Roadway Sensors 
+Our Roadway Sensors segment product line uses advanced image processing technology to capture and analyze video images through
+sophisticated algorithms, enabling vehicle detection and transmission of both video images and data using various communication technologies. 
+• Our Vantage and VantageNext video detection systems detect vehicle presence at intersections, as well as vehicle count,
+speed and other traffic data used in traffic management systems. Vantage video detection systems typically include up to four of our RZ-4 advanced cameras or our RZ-4 advanced wide dynamic range
+cameras and an EdgeConnect processor. Our Vantage systems give traffic managers the ability to mitigate roadway congestion by modifying traffic signal timing or detecting incidents quickly. Our
+VantageView software supplements our Vantage video detection systems by providing an integrated platform to manage and "see" video detection assets remotely over a network connection. 
+• Our Vantage Vector product is an all-in-one vehicle detection sensor with a wide range of capabilities, including stop
+bar detection, advanced-zone detection and sensing, which enable advanced safety and adaptive control applications. It includes all the proven benefits of Iteris video detection, including high
+accuracy, high availability remote viewing of video images, no trenching or pavement cutting for installation, bicycle detection capability and high precision for dilemma zone detection, by
+integrating the video field-of-view with radar sensing. Enhanced information includes the number of vehicles, speed and distance in user configurable zones that can be used for special applications. 
+• Our SmartSpan product uses proprietary dynamic zone stabilization algorithms and provides accurate and cost effective
+advance detection and stop-bar detection of vehicles at intersections equipped with span wire mounted signal lights. SmartSpan can be mounted on the same span wires holding the traffic signal without
+sacrificing detection accuracy. 
+• Our Vantage systems equipped with SmartCycle can effectively differentiate between bicycles and other vehicles with a
+single video detection camera, enabling more efficient signalized intersections and maximized traffic throughput. Agencies using bicycle timing can now benefit from bicycle-specific virtual detection
+zones that can be placed anywhere within the approaching traffic lanes, eliminating the need for separate bicycle-only detection systems. 
+• VersiCam, our integrated camera and processor video detection system, is a cost-efficient video detection system for
+smaller intersections that require only a few detection points. 
+• P10 and P100 (formerly, Pico), our compact video detection system, was developed primarily to address international video
+detection needs, and was designed for easy installation and configuration. 
+• Our Abacus products take advantage of the large number of existing installed closed-circuit television video feeds
+designed to monitor roadways, signalized intersections, tunnels and bridges 
+3 
+Table of Contents 
+to
+allow for data collection and incident detection without the set-up and calibration generally required with other systems. 
+We
+believe that future growth domestically and internationally, particularly in developing countries, will be dependent in part on the continued adoption of above-ground video detection
+technologies, instead of traditional in-pavement loop technology, to manage traffic. 
+We
+have historically experienced seasonality, particularly with respect to our Roadway Sensors revenues in our third and fourth fiscal quarters due to reductions in road construction and
+repairs during the winter months related to inclement weather conditions. 
+Transportation Systems 
+Our Transportation Systems segment includes transportation engineering and consulting services focused on the planning, design,
+development and implementation of software-based systems that integrate sensors, video surveillance, computers and advanced communications equipment to enable public agencies to monitor, control and
+direct traffic flow, assist in the quick dispatch of emergency crews and distribute real-time information about traffic conditions. Our services include planning, design and implementation of surface
+transportation infrastructure systems. We perform analysis and study goods movement, study commercial vehicle operations, provide travel demand forecasting and systems engineering, and identify
+mitigation measures to reduce traffic congestion. 
+Our
+Transportation Systems segment is largely dependent upon governmental funding and is affected by state and local budgetary issues. The current federal highway bill, which provides
+federal funding for highway, transit, safety and related transportation programs, will expire at the end of September 2014. The President signed a federal highway funding bill to keep the current
+federal highway bill operational until May of 2015. We expect the extension to encourage government agencies to include ITS technologies in transportation infrastructure projects to a greater degree
+than in previous legislation. In addition, various other funding mechanisms exist to support transportation infrastructure and related projects. These include bonds, dedicated sales and gas tax
+measures and other alternative funding sources. We believe the overall expansion of our Transportation Systems segment in the future will at least in part be dependent on the federal government's use
+of funds under the federal highway bill.
+Delays in the release of funding may prolong uncertainty regarding the allotment of transportation funds in federal, state and local budgets. We believe that prolonged uncertainty has adversely
+impacted in the past, and may adversely impact in the future, our Transportation Systems revenues and our overall financial performance in future periods. 
+iPerform 
+Our iPerform segment, formed during the first quarter of our fiscal year ended March 31, 2013 ("Fiscal 2013"), includes our
+performance measurement and information management solutions, including all of the operations of Berkeley Transportation Systems, Inc. ("BTS"), which we acquired in November 2011. BTS
+specializes in transportation performance measurement. The BTS performance measurement system leverages its real-time data collection, diagnostic, fusion and warehousing platform to aggregate and
+compute performance measurements. During the fiscal year ended March 31, 2012 ("Fiscal 2012"), we began the development of iPeMS (formerly, IterisPeMS). iPeMS is a state-of-the-art information
+management software suite that utilizes a wide range of data resources and analytical techniques to determine current and future traffic patterns, permitting the effective performance analysis and
+management of traffic infrastructure resources. This information can then be analyzed by traffic professionals to measure how a transportation network is performing and to identify potential areas of
+improvement. iPeMS is also capable of providing users with predictive traffic analytics and easy-to-use visualization and animation features based on historical traffic conditions. 
+4 
+Table of Contents 
+The
+iPerform segment also includes the operations of Meridian Environmental Technology, Inc. ("MET"), which we acquired in January 2011. MET specializes in 511/ advanced traveler
+information systems as well as ClearPath Weather management tools that allow users to create solutions to meet roadway maintenance decision needs. With the addition of MET, we have experienced
+seasonality particularly related to certain ClearPath Weather services in our first and second fiscal quarters, mainly because ClearPath Weather services are generally not required in the summer
+months when weather conditions are typically less severe. 
+iPerform
+is a market leader in performance management solutions for federal and state organizations. We intend to use our strong brand and deep experience in the traffic management
+market, as well as our market-specific intellectual property, to expand our leadership in data aggregation and analytics. By increasing investments in both technical and market development, we plan to
+focus on expanding the scope of our public sector solutions into the commercial marketplace. 
+Going
+forward, iPerform's solutions are expected to include incident management applications, arterial solutions, predictive traffic, and weather-based data and analytics for both public
+and commercial markets. We plan to fund these investments through internally generated cash flow from our Roadway Sensors and Transportation Systems operating segments, as well as revenues from our
+iPerform segment and our available cash if necessary. 
+Sales, Marketing and Principal Customers 
+We sell our Roadway Sensors products through direct and indirect sales channels. In the territories where we sell direct, we use a
+combination of our own sales personnel and an outside sales organization to sell, oversee installations and set-up issues and support our products. Our indirect sales channels are comprised of a
+network of independent dealers in the U.S. and certain foreign locations, who sell integrated systems and related products to the traffic management market. Our independent dealers are trained in, and
+primarily responsible for, sales, installation, set-up and support of our products, maintain an inventory of demonstration traffic products from various manufacturers and sell directly to government
+agencies and installation contractors. These dealers often have long-term arrangements with local government agencies in their respective territories for the supply of various products for the
+construction and renovation of traffic intersections, and are generally well-known suppliers of high-quality ITS products to the traffic management market. We periodically hold technical training
+classes for our dealers and end users and maintain a full-time staff of customer support technicians throughout the U.S. to provide technical assistance when needed. When appropriate, we have the
+ability to modify or make changes to our dealer network to accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions and iPerform solutions directly to government agencies pursuant to negotiated contracts that involve competitive
+bidding and specific qualification requirements. Most of our contracts are with federal, state and municipal customers and generally provide for cancellation or renegotiation at the option of the
+customer upon reasonable notice and fees paid for modification. We generally use selected members of our engineering, science and information technology teams on a regional basis to serve in sales and
+business development functions. Our contracts generally involve long lead times and require extensive specification development, evaluation and price negotiations. Additionally, we plan to focus on
+expanding the scope of our iPerform public sector solutions to sell into the commercial marketplace. 
+A
+large portion of our revenues are derived from sales to federal, state and local government agencies. We currently have, and historically have had, a diverse customer base. For our
+fiscal year ended March 31, 2014 ("Fiscal 2014"), one individual customer represented approximately 11% of our total revenues and no other individual customer represented greater than 10% of
+our total revenues. For Fiscal 2013, one individual customer represented approximately 13% of our total revenues and no 
+5 
+Table of Contents 
+other
+individual customer represented greater than 10% of our total revenues. For Fiscal 2012, no individual customer represented greater than 10% of our total revenues. Also refer to Note 13
+of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this report. 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in our Roadway Sensors products. Additionally, we procure certain
+components from qualified suppliers, both locally and globally, and generally use multi-sourcing strategies when technically and economically feasible to mitigate supply risk. These subassemblies and
+components are typically delivered to our Santa Ana, California facility where they go through final assembly and testing prior to shipment to our customers. Our key suppliers include CTS Electronics
+Manufacturing Solutions, Inc., Sony Electronics, Inc. and LG Electronics, Inc. Our manufacturing activities are conducted in approximately 9,000 square feet of space at our Santa
+Ana facility. Production volume at our subcontractors is based upon quarterly forecasts that we generally adjust on a monthly basis to control inventory levels. We typically do not manufacture any of
+the hardware used in the transportation management and traveler information systems that we design and implement. Our production facility is currently ISO 9001 certified. 
+Customer Support and Services 
+We provide warranty service and support for our products, as well as follow-up service and support for which we charge separately. Such
+service revenue was not a material portion of our total revenues for each of Fiscal 2014, Fiscal 2013 and Fiscal 2012. We believe customer support is a key competitive factor. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $35.6 million as of March 31, 2014, which included
+$27.6 million related to Transportation Systems. Substantially the entire backlog for Roadway Sensors is expected to be recognized as revenue in the
+fiscal year ending March 31, 2015 ("Fiscal 2015"). In the past three fiscal years, we have recognized approximately 50% to 70% of our Transportation Systems backlog as of the end of a fiscal
+year in the subsequent fiscal year, and currently expect that trend to continue for the near future for both Transportation Systems and iPerform. 
+At
+March 31, 2013, we had backlog of approximately $38.6 million, which included $32.2 million related to Transportation Systems. 
+The
+timing and realization of our backlog is subject to the inherent uncertainties of doing business with federal, state and local governments, particularly in view of budgetary
+constraints, cut-backs and other delays or reallocations of funding that these entities typically face. 
+In
+addition, pursuant to the customary terms of our agreements with government contractors and other customers, our customers can generally cancel or reschedule orders with little or no
+penalties. Lead times for the release of purchase orders often depend upon the scheduling and forecasting practices of our individual customers, which also can affect the timing of the conversion of
+our backlog into revenues. For these reasons, among others, our backlog at a particular date may not be indicative of our future revenues, in particular for our Roadway Sensors segment. 
+Product Development 
+Most of our product development activities are conducted at our principal facilities in Santa Ana, California. Our research and
+development costs and expenses were approximately $4.0 million for Fiscal 2014, $3.1 million for Fiscal 2013 and $3.2 million for Fiscal 2012. We expect to continue to 
+6 
+Table of Contents 
+pursue
+various product development programs and incur research and development expenditures in future periods. 
+We
+believe our engineering and product development capabilities are a competitive strength. We strive to continue to develop new products to meet the needs of the ever-changing ITS
+market as well as enhance and refine our existing product lines. Since 2008, our Roadway Sensors segment has
+introduced our VantageNext, Vantage Vector, VersiCam and VersiCam wireless products, P10, P100, RZ-4 advanced camera and our RZ-4 advanced wide dynamic range camera, which significantly improve video
+detection performance in certain harsh lighting conditions, as well as upgrades to our Abacus and VantageView products. Additionally, during Fiscal 2012, we began development of our software based
+iPeMS performance measurement system, which continued through Fiscal 2014 and will continue during Fiscal 2015. We also plan to focus our development efforts on our ClearPath Weather and ClearPath
+Agriculture products. We believe that developing new offerings across our segments and enhancing, refining and marketing our existing products is a key component of strong organic growth and
+profitability. 
+Competition 
+We generally face significant competition in each of our target markets. Increased competition may result in price reductions, reduced
+gross margins and loss of market share, any of which could have a material adverse effect on our business, financial condition and results of operations. 
+In
+the market for our Roadway Sensors vehicle detection products, we compete with manufacturers and distributors of other above ground video camera detection systems and other
+non-intrusive detection devices, including microwave, infrared, radar, ultrasonic and magnetic detectors, as well as manufacturers and installers of in-pavement inductive loop products, which have
+historically, and currently continue to be, the predominant detection system in this market. 
+The
+markets in which our Transportation Systems segment operates is highly fragmented and subject to evolving national and regional quality, operations and safety standards. Our
+competitors vary in number, scope and breadth of the products and services they offer. Our competitors in advanced Transportation Systems include national corporations that generally offer expertise
+in traveler information, integration and transportation management. Our competitors in transportation engineering, planning and design include major regional firms, as well as many smaller local
+engineering firms. 
+The
+markets in which our iPeform segment operates vary from public sector customers who focus on performance measurement systems to help measure and manage the effectiveness of their
+transportation systems to commercial sector customers who ingest and disseminate traffic and weather related data, information and analytics through various consumer outlets. Our competitors vary in
+number, scope and breadth of the products and services they offer. In the public sector, we compete with some of the same transportation engineering, planning and design firms that also compete with
+our Transportation Systems segment. In the commercial sector, we compete with a variety of entities that currently provide traffic and/or weather related data to that market. 
+In
+general, the markets for the products and services we offer are highly competitive and are characterized by rapidly changing technology and evolving standards. Many of our current and
+prospective competitors have longer operating histories, greater name recognition, access to larger customer bases and significantly greater financial, technical, manufacturing, distribution and
+marketing resources than us. As a result, they may be able to adapt more quickly to new or emerging standards or technologies or to devote greater resources to the promotion and sale of their
+products. It is also possible that new competitors or alliances among competitors could emerge and rapidly acquire significant market share. We believe that our ability to compete effectively in our
+target markets will depend on a number of factors, including the success and timing of our new product development, the 
+7 
+Table of Contents 
+compatibility
+of our products with a broad range of computing systems, product quality and performance, reliability, functionality, price and service and technical support. Our failure to provide
+services and develop and market products that compete successfully with those of other suppliers and consultants in our target markets would have a material adverse effect on our business, financial
+condition and results of operations. 
+Intellectual Property and Proprietary Rights 
+Our ability to compete effectively depends in part on our ability to develop and maintain the proprietary aspects of our technology.
+Our policy is to obtain appropriate proprietary rights protection for any potentially significant new technology acquired or developed by us. We currently hold three U.S. patents, four foreign patent
+applications, six patent applications in the United States ("U.S."), and eight provisional patent filings. One U.S. patent, which expires in May 2019, is for general technology related to CMOS
+sensors. Two U.S. patents, which expire between 2014 and 2029, three foreign patent applications, three U.S. patent applications, and one provisional patent filing relate specifically to our Roadway
+Sensors technology. One pending foreign patent, three U.S. patent applications, and seven provisional patent filings relate specifically to our iPerform technology. We cannot be certain that any new
+patents will be granted pursuant to these or subsequent patent applications or provisional patent filings. 
+In
+addition to patent laws, we rely on copyright and trade secret laws to protect our proprietary rights. We attempt to protect our trade secrets and other proprietary information
+through agreements with customers and suppliers, proprietary information agreements with our employees and consultants, and other similar measures. We do not have any material licenses or trademarks
+other than those relating to product names. We cannot be certain that we will be successful in protecting our proprietary rights. While we believe our patents, patent applications, software and other
+proprietary know-how have value; changing technology makes our future success dependent principally upon our ability to successfully achieve continuing innovation. 
+Litigation
+may be necessary in the future to enforce our proprietary rights, to determine the validity and scope of the proprietary rights of others, or to defend us against claims of
+infringement or invalidity by others. An adverse outcome in such litigation or similar proceedings could subject us to significant liabilities to third parties, require disputed rights to be licensed
+from others or require us to cease marketing or using certain products, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition,
+the cost of addressing any intellectual property litigation claim, both in legal fees and expenses, as well as from the diversion of management's resources, regardless of whether the claim is valid,
+could be significant and could have a material adverse effect on our business, financial condition and results of operations. 
+Employees 
+We refer to our employees as associates. As of March 31, 2014, we employed a total of 266 associates (of which 239 are
+full-time), including 56 associates in general management, administration and finance; 26 associates in sales and marketing; 154 associates in engineering and product development;
+14 associates in operations, manufacturing and quality assurance; and 16 associates in customer service. None of our associates are represented by a labor union, and we have never
+experienced a work stoppage. We believe our relations with our associates are good. 
+Government Regulation 
+Our manufacturing operations are subject to various federal, state and local laws and regulations, including those restricting the
+discharge of materials into the environment. We are not involved in any pending or, to our knowledge, threatened governmental proceedings, which would require curtailment 
+8 
+Table of Contents 
+of
+our operations because of such laws and regulations. We continue to expend funds in connection with our compliance with applicable environmental regulations. These expenditures have not, however,
+been significant in the past, and we do not expect any significant expenditure in the near future. Currently, compliance with foreign laws has not had a material impact on our business and is not
+expected to have a material impact in the near future.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+Certain Transactions 
+Since April 1, 2012, other than the agreements and transactions described in Part III, Item 11 and the
+transactions described below, there has not been, nor is there any proposed transaction, where we (or any of our subsidiaries) were or will be a party in which the amount involved exceeded or will
+exceed the lesser of $120,000 or the average of our total assets at year end for the last two fiscal years and in which any director, executive officer, holder of more than 5% of any class of our
+voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. 
+We
+previously subleased office space to Maxxess Systems, Inc. ("Maxxess"), one of our former subsidiaries that we sold in September 2003 and is currently owned by an investor
+group that includes
+Mr. Daly, a current director of Iteris and the Chief Executive Officer of Maxxess, and Joel Slutzky, a former director of Iteris. The sublease terminated in September 2007, at which time
+Maxxess owed us an aggregate of $274,000 related to this sublease and certain ancillary corporate services that we provided to Maxxess. In August 2009, Maxxess executed a promissory note payable to us
+for $274,000. The promissory note accrued interest at a rate of 6% per annum, compounded annually, with such interest to be paid annually on the first business day of each calendar year. Payments
+under the note may be made in bona fide services rendered by Maxxess to us to the extent such services and amounts are pre-approved in writing by us. All amounts outstanding under the note was to
+become due and payable on the earliest of (i) August 10, 2014, (ii) a change of control in Maxxess, or (iii) a financing by Maxxess resulting in gross proceeds of at least
+$10 million. 
+On
+July 23, 2013, the promissory note with Maxxess was amended and restated. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with
+accrued interest to 
+51 
+Table of Contents 
+be
+paid quarterly on the first business day of each calendar quarter. Payments under the amended and restated note may only be made in cash and all amounts outstanding will become due and payable on
+the earliest of (i) August 10, 2016, (ii) a change of control in Maxxess or (iii) a financing by Maxxess resulting in gross proceeds of at least $10 million. As of
+March 31, 2014 and as of August 15, 2014, approximately $259,000 of the original principal balance was outstanding and payable to us. During each of Fiscal 2013 and Fiscal 2014, interest
+payments totaling approximately $16,000 were made by Maxxess. We have previously fully reserved for amounts owed to us by Maxxess and all outstanding principal remains fully reserved. 
+Director Independence 
+The Board of Directors has determined that each of Messrs. Char, Daly, Miner, Mooney, Thomas and Williams satisfies the
+requirements for "independence" under the listing standards of NYSE MKT.

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+ITEM 9A. CONTROLS AND PROCEDURES 
+(a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as
+amended
+(the "Exchange Act"), as of the end of the period covered by this Annual Report on Form 10-K, management evaluated, with the participation of our President and Chief Executive Officer and our
+Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their
+evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were not
+effective as of March 31, 2014 because of a material weakness in our internal controls over financial reporting ("ICFR") as described below. 
+(b) Material weakness in ICFR. A material weakness is a deficiency, or combination of deficiencies, in ICFR, such that there is a
+reasonable
+possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following
+significant deficiencies that constitute a material weakness in our ICFR as of March 31, 2014: 
+37 
+Table of Contents 
+• The Company has not designed appropriate internal controls to analyze each consulting contract to determine if it should
+be accounted for in accordance with contract accounting (FASB Accounting Standards Codification ("ASC") 605-35, Construction-Type and Production-Type
+Contracts ) or as a multiple element arrangement (ASC 605-25, Revenue Recognition: Multiple-Element Arrangements ) and the proper
+revenue recognition policy to apply. 
+• The Company has not consistently evaluated how an arrangement or a contract should be bifurcated into separate elements
+or how separate elements within such arrangements are properly combined in accordance with GAAP. 
+• The Company has not designed sufficient controls to consider the impact of software elements and if such elements result
+in the arrangement or portions of the arrangement to be software elements to be accounted for in accordance with ASC 985-605, Software: Revenue
+Recognition . 
+(c) Plan for remediation of material weakness. Management is actively engaged in the planning for, and implementation of, remediation
+efforts to
+address the material weakness identified above. Management has or intends to take the following actions to address the material weakness: 
+• Management has created a new position (Director, Revenue Recognition) to perform the proper analysis for multiple element
+contracts, software elements, construction accounting, and other technical accounting issues. 
+• Management began implementing processes and controls during the first quarter of Fiscal 2015 to evaluate multiple
+deliverable arrangements to ensure revenue is recognized and accounted for in accordance with GAAP. 
+• Management has performed a detailed review of revenues resulting from contracts as of March 31, 2014 and recorded
+the necessary adjustments. 
+(d) Changes in internal control. Except as discussed above, there was no change in our internal control over financial reporting that
+occurred during
+the fourth quarter of Fiscal 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 
+Inherent Limitations on Internal Control 
+A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
+of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
+provide absolute assurance that all control issues and instances of management override or improper acts, if any, have been detected. These inherent limitations include the realities that judgments in
+decision making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
+people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no
+assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to
+management override, error or improper acts may occur and not be detected. Any resulting misstatement or loss may have an adverse and material effect on our business, financial condition and results
+of operations. 
+Management's Report on Internal Control Over Financial Reporting 
+Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control
+system was designed to provide reasonable assurance to 
+38 
+Table of Contents 
+management
+and our Board of Directors regarding the effectiveness of our internal control processes over the preparation and fair presentation of published financial statements. 
+We
+have assessed the effectiveness of our internal controls over financial reporting as of March 31, 2014. In making this assessment, we used the criteria set forth by the
+Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2006) . Based on our assessment,
+we believe that, as of March 31, 2014, our internal control over financial reporting was not effective due to a material weakness related to our controls over the accounting for consulting
+services revenues. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a
+material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. 
+This
+annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Such a report is not
+required pursuant to the rules of the SEC applicable to smaller reporting companies.

raw/filings/0000350868/2013/0001047469-14-007351/rpt_disclosure.txt

@@ -0,0 +1,28 @@
+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+Certain Transactions 
+Since April 1, 2012, other than the agreements and transactions described in Part III, Item 11 and the
+transactions described below, there has not been, nor is there any proposed transaction, where we (or any of our subsidiaries) were or will be a party in which the amount involved exceeded or will
+exceed the lesser of $120,000 or the average of our total assets at year end for the last two fiscal years and in which any director, executive officer, holder of more than 5% of any class of our
+voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. 
+We
+previously subleased office space to Maxxess Systems, Inc. ("Maxxess"), one of our former subsidiaries that we sold in September 2003 and is currently owned by an investor
+group that includes
+Mr. Daly, a current director of Iteris and the Chief Executive Officer of Maxxess, and Joel Slutzky, a former director of Iteris. The sublease terminated in September 2007, at which time
+Maxxess owed us an aggregate of $274,000 related to this sublease and certain ancillary corporate services that we provided to Maxxess. In August 2009, Maxxess executed a promissory note payable to us
+for $274,000. The promissory note accrued interest at a rate of 6% per annum, compounded annually, with such interest to be paid annually on the first business day of each calendar year. Payments
+under the note may be made in bona fide services rendered by Maxxess to us to the extent such services and amounts are pre-approved in writing by us. All amounts outstanding under the note was to
+become due and payable on the earliest of (i) August 10, 2014, (ii) a change of control in Maxxess, or (iii) a financing by Maxxess resulting in gross proceeds of at least
+$10 million. 
+On
+July 23, 2013, the promissory note with Maxxess was amended and restated. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with
+accrued interest to 
+51 
+Table of Contents 
+be
+paid quarterly on the first business day of each calendar quarter. Payments under the amended and restated note may only be made in cash and all amounts outstanding will become due and payable on
+the earliest of (i) August 10, 2016, (ii) a change of control in Maxxess or (iii) a financing by Maxxess resulting in gross proceeds of at least $10 million. As of
+March 31, 2014 and as of August 15, 2014, approximately $259,000 of the original principal balance was outstanding and payable to us. During each of Fiscal 2013 and Fiscal 2014, interest
+payments totaling approximately $16,000 were made by Maxxess. We have previously fully reserved for amounts owed to us by Maxxess and all outstanding principal remains fully reserved. 
+Director Independence 
+The Board of Directors has determined that each of Messrs. Char, Daly, Miner, Mooney, Thomas and Williams satisfies the
+requirements for "independence" under the listing standards of NYSE MKT.

raw/filings/0000928022/2003/0000950134-04-003498/filing_metadata.csv

@@ -0,0 +1,2 @@
+cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing
+0000928022,CPE,Callon Petroleum Co,10-K,2004-03-15,2003-12-31,2004-03-15T20:08:05.000Z,0000950134-04-003498,d13486e10vk.txt,FORM 10-K,1223542,0,0,https://www.sec.gov/Archives/edgar/data/928022/000095013404003498/d13486e10vk.txt,https://www.sec.gov/Archives/edgar/data/928022/000095013404003498/,2003,2003,1

raw/filings/0000928022/2003/0000950134-04-003498/item13.txt

@@ -0,0 +1,5 @@
+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
+For information concerning Item 13, see the definitive proxy statement of Callon
+Petroleum Company relating to the Annual Meeting of Stockholders on May 6, 2004
+which will be filed with the Securities and Exchange Commission and is
+incorporated herein by reference.

raw/filings/0000928022/2003/0000950134-04-003498/item9a.txt

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+ITEM 9A. CONTROLS AND PROCEDURES
+The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and
+15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term
+refers to the controls and procedures of a company that are designed to ensure
+that information required to be disclosed by a company in the reports that it
+files or submits under the Exchange Act is recorded, processed, summarized and
+reported within the time periods specified by the Securities and Exchange
+Commission. Our management, including our Chief Executive Officer and Chief
+Financial Officer, has evaluated the effectiveness of our disclosure controls
+and procedures as of the end of the period covered by this annual report. Based
+upon that evaluation, our Chief Executive Officer and Chief Financial Officer
+have concluded that our disclosure controls and procedures were effective as of
+the end of the period covered by this annual report.
+There were no changes to our internal control over financial reporting during
+our last fiscal quarter that has materially affected, or is reasonably likely to
+materially affect, our internal control over financial reporting.
+74
+PART III.