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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,2015-06-18,2015-03-31,2015-06-18T01:28:19.000Z,0001047469-15-005534,a2225120z10-k.htm,10-K,13202770,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746915005534/a2225120z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746915005534/,2014,2014,1

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+ITEM 1. BUSINESS 
+Overview 
+We are a leading provider of information solutions for the intelligent traffic systems ("ITS") and the precision agriculture ("PA")
+markets. In the ITS 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 analytics, and that improve the efficiency and safety of surface transportation systems infrastructure. We believe our products, services and solutions, in conjunction with sound
+traffic management, minimize the environmental impact of traffic congestion and enhance the adoption of advanced ITS solutions that are required for the deployment of connected and autonomous
+vehicles. In the PA market, we have combined our unique intellectual property with enhanced soil, land surface, and agronomy modeling techniques utilizing our extensible EMPower hybrid computing
+architecture to create a set of ClearAg™ solutions that provide analytical support to large enterprises in the agriculture market and field-specific advisories to individual producers. 
+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 Performance Analytics (formerly known as
+iPerform). The Roadway Sensors segment includes, among 
+2 
+Table of Contents 
+other
+products, our Vantage, Vantage Vector, VantageView, SmartCycle and vehicle detection systems for traffic intersection control, incident detection and certain highway traffic data collection
+applications. 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 Performance Analytics segment includes ClearAg, our precision agriculture solution that provides access to a comprehensive database of weather, soil and agronomic information, which
+is essential to making informed agricultural decisions; iPeMS, our transportation performance measurement solution, which provides big data and software analytics solutions that help determine current
+and future traffic patterns, permitting the effective performance analysis and management of traffic infrastructure resources; and ClearPath Weather, our road-maintenance application, which provides
+maintenance and treatment recommendation for road networks. 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 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 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 complements our Vantage video detection systems by providing an
+integrated platform to manage video detection assets remotely over a network connection. 
+• Our Vantage Vector video/radar hybrid 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, bicycle detection capability and high precision for dilemma zone detection, by integrating the video field-of-view with radar sensing.
+Enhanced information, including vehicle counts, speed and distance in user configurable zones that is available for use in special applications. 
+• Our Vantage systems equipped with SmartCycle capability can effectively differentiate between bicycles and other vehicles with a
+single video detection camera, enabling more efficient signalized intersections and improved 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. 
+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. 
+3 
+Table of Contents 
+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, 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, was due to expire at the end of September, 2014. The President signed a federal highway funding bill that kept the
+federal highway bill operational until May 2015, and the House of Representatives recently approved a two-month extension to maintain funding for the federal highway bill through July 31, 2015.
+We expect the extension and proposed federal highway bill to encourage government agencies to continue incorporating ITS technologies in transportation infrastructure projects. In addition, various
+other funding mechanisms exist to support transportation infrastructure and related projects as regulatory deadlines approach, which require these technologies. 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 regarding such matters has adversely impacted in the past, and may continue to adversely impact in the future, our Transportation Systems revenues and our overall
+financial performance in future periods. 
+Performance Analytics (formerly known as iPerform) 
+Our Performance Analytics 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 specialized 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. 
+The
+Performance Analytics 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. Our Performance Analytics is a market leader in performance management solutions for federal and state organizations. We intend to 
+4 
+Table of Contents 
+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. 
+Beginning
+in late 2013, Iteris undertook a focused development activity to supplement its intellectual property, technology base and product suites to provide products and services for
+the emerging precision agriculture ("PA") market. This activity included market research into the needs of the PA market, scientific modeling and forecasting development, computing infrastructure
+development to support both the required big data acquisition and processing and the distributed delivery vehicles required to service the commercial PA market as well as the development of several
+products specifically intended for the PA market. Iteris refers to is products for the PA market generically as its ClearAg solutions. ClearAg, solutions provide access to a comprehensive database of
+weather, soil and
+agronomic information essential to making informed agricultural decisions. ClearAg application programming interfaces ("APIs") include historical, real-time and forecast weather content, soil and
+plant health information, as well as real-time weather and other useful crop growing information, to provide solutions in the precision agriculture technology markets. We expect positive market
+acceptance of our ClearAg solutions to continue in upcoming quarters. We plan to continue to fund these investments through internally generated cash flow from our Roadway Sensors and Transportation
+Systems operating segments, as well as revenues from our Performance Analytics 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 organizations to sell, oversee installations and set-up issues and support our products. Our indirect sales channel is comprised of a
+network of independent distributors in the U.S. and select international locations, who sell integrated systems and related products to the traffic management market. Our independent distributors 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 distributors 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 distributors 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 distributor network to accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions and Performance Analytics 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. 
+We
+market and sell our ClearAg products to commercial entities in the PA market. We currently have two primary product sets which we are marketing for PA; our ClearAg API integration and
+modeling services and our ClearAg Apps. Our ClearAg APIs are intended for large enterprises in the agriculture market that can benefit from the value of a tight integration of their processes with the
+ClearAg modeling and forecasting engine; our ClearAg App was introduced in May 2015 and is intended for individual agriculture producers that can benefit from advisories based upon the ClearAg 
+5 
+Table of Contents 
+platform
+that are tailored for their specific locations of interest. We are dealing directly with customers interested in the ClearAg API products and, typically, through selling partners for those
+interested in the ClearAg App products. 
+We
+currently have a diverse customer base, but a large portion of our revenues historically has been derived from sales to federal, state and local government agencies. For our fiscal
+year ended March 31, 2015 ("Fiscal 2015"), one individual customer represented approximately 10% of our total revenues and no other individual customer represented greater than 10% of our total
+revenues. For the 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 other individual customer represented greater than 10% of
+our total revenues. See Note 13 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this report for additional information regarding our significant
+customers. 
+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 2015, Fiscal 2014 and Fiscal 2013. We believe customer support is a key competitive factor. 
+Our
+ClearAg products are primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we maintain a full-time support and customer
+service activity for our ClearAg products. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $39.2 million as of March 31, 2015, which included
+$29.6 million related to Transportation Systems. In the past three fiscal years, we have recognized approximately 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 Performance Analytics. Substantially the entire backlog for Roadway Sensors
+is expected to be recognized as revenue in Fiscal 2016. At March 31, 2014, we had backlog of approximately $35.6 million, which included $27.6 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 
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+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 
+Our product development activities are conducted at our Performance Analytics facilities in Grand Forks, North Dakota and Berkeley,
+California, as well as at our principal facilities in Santa Ana, California. Our research and development costs and expenses were approximately $5.4 million for Fiscal 2015, $4.0 million
+for Fiscal 2014 and $3.1 million for Fiscal 2013. 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 our ever-changing markets,
+as well as to enhance and refine our existing product lines. We plan to focus our development efforts on our ClearAg products for the PA market; however, since 2012, 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. We believe that developing new offerings across our segments and enhancing, refining and marketing our existing products are
+key components for 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. 
+The
+markets in which our Performance Analytics segment operates vary from the commercial sector customers for ClearAg solutions to public sector customers for iPeMS and ClearPath Weather
+products. 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 weather-related data to that market such as Climate Corp (now a division of Monsanto) and John Deere as well as new entrants such as Granular and
+Conservis. 
+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 operate are 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 
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+engineering,
+planning and design include major regional firms, as well as many smaller local 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 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 seven U.S. patents, two U. S. allowed
+but not issued patents, five foreign patent applications, and 20 U. S. non-provisional patent applications. One U.S. patent, which expires in May 2019, is for general technology related to CMOS
+sensors. Two U.S. patents, which expire in 2029 and 2034, one foreign patent applications, and one U.S. non-provisional patent application relate specifically to our Roadway Sensors technology. Four
+U.S. patents, which expire in 2034 and 2035, two allowed but not issued U. S. patents, and 17 U.S. non-provisional patent applications relate specifically to our Performance Analytics technology. Two
+U. S. non-provisional patent applications relate to our Transportation Systems technology. 
+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, rapidly evolving technology makes our future success dependent largely 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. 
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+Table of Contents 
+Employees 
+We refer to our employees as associates. As of March 31, 2015, we employed 257 full-time associates and 28 part-time associates,
+for a total of 285 associates. 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 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 2015 Annual Meeting of Stockholders, is incorporated herein by reference.

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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 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. In order to improve and to maintain the effectiveness of our internal controls
+over financial reporting
+and disclosure controls and procedures, we remediated the material weakness identified in our Annual Report on Form 10-K for the fiscal year ended March 31, 2014. Our remediation process
+began in our third quarter of Fiscal 2015 with our hiring of a Director of Revenue Recognition, and implementing processes and controls to evaluate revenues resulting from contracts, including
+multiple-element arrangements, to ensure revenue is recognized and accounted for in accordance with GAAP. Except as discussed above, during the fourth quarter of Fiscal 2015, there has been no
+significant change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely
+to materially affect, our internal controls 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 
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+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, 2015. 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 (2013) . Based on our assessment,
+we believe that, as of March 31, 2015, our internal control over financial reporting was effective. 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.

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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,2016-06-20,2016-03-31,2016-06-17T22:53:13.000Z,0001047469-16-013877,a2228979z10-k.htm,10-K,9235289,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746916013877/a2228979z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746916013877/,2015,2015,1

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its subsidiary in this report as "Iteris," the "Company," "we," "our" and "us") is a
+provider of intelligent information solutions for both the traffic management and global agribusiness markets. 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 and weather analytics, and improve the safety of surface transportation
+systems infrastructure. By combining our unique intellectual property, products, decades of experience in traffic management, weather forecasting solutions and information technologies, we offer a
+broad range of Intelligent Transportation Systems ("ITS") solutions to customers throughout the U.S. and internationally. We believe our products, services and solutions, in conjunction with sound
+traffic management, minimize the environmental impact of traffic congestion. 
+In
+the agribusiness markets, we have combined our unique intellectual property with enhanced soil, land surface and agronomy modeling techniques to create a set of ClearAg solutions.
+These solutions provide analytical support to large enterprises in the agriculture market and field-specific advisories to individual producers. We continue to make significant investments to leverage
+our existing technologies and further expand our software-based information systems to offer solutions to the precision agriculture technology markets. 
+Iteris
+was 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 Performance Analytics. The Roadway
+Sensors segment provides various vehicle detection and information systems and products for traffic intersection control, incident detection and roadway traffic data collection applications. 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
+Performance Analytics segment includes iPeMS, our specialized transportation performance measurement and traffic analytics solutions, as well as ClearPath Weather, our road-maintenance applications,
+and ClearAg, our precision agriculture solutions. 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 and other techniques to capture and analyze sensor
+data through sophisticated algorithms, enabling vehicle detection and transmission of both video images and data using various communication technologies. Our Roadway Sensors products include, among
+other products, our
+Vantage, VantageNext, VersiCam, Vantage Vector, SmartCycle, SmartSpan, Pegasus, Velocity, P10, P100 and Abacus products. 
+3 
+Table of Contents 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in
+traffic management systems. Vantage detection systems typically include up to four of our advanced cameras or radars. Our Vantage systems give traffic managers the ability to mitigate roadway
+congestion by modifying traffic signal timing or detecting incidents quickly. Our various software complement our Vantage detection systems by providing integrated platforms to manage and view
+detection assets remotely over a network connection. 
+• Our Vantage Vector video/radar hybrid 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, bicycle detection capability and high precision for dilemma zone detection, by integrating the video field-of-view with radar sensing.
+Enhanced information, including vehicle counts, speed and distance in user configurable zones that is available for use in special applications. 
+• Our Vantage systems equipped with SmartCycle capability can effectively differentiate between bicycles and other vehicles with a
+single video detection camera, enabling more efficient signalized intersections and improved 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. 
+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, 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. On December 4, 2015, the Fixing America's
+Surface Transportation ("FAST") Act was signed into law, providing approximately $305 billion over five years for surface transportation projects and programs. In addition, various other
+funding mechanisms exist to support transportation infrastructure and related projects as regulatory deadlines approach, which require these technologies. 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 continue to be dependent at least in part on the federal
+government's use of funds under the federal highway bill. Delays in the allocation of funds may prolong uncertainty regarding the 
+4 
+Table of Contents 
+allotment
+of transportation funds in federal, state and local budgets. We believe that prolonged uncertainty regarding such matters has adversely impacted in the past, and may continue to adversely
+impact in the future, our Transportation Systems revenues and our overall financial performance in future periods. 
+Performance Analytics 
+Our Performance Analytics 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 our former subsidiary, Berkeley Transportation Systems, Inc. ("BTS"), which we
+acquired in November 2011. BTS specialized in transportation performance measurement systems that leverage its real-time data collection, diagnostic, fusion and warehousing platform to aggregate and
+compute performance measurements. iPeMS is a state-of-the-art information management software suite that provides big data and software analytics solutions that help determine current and future
+traffic patterns, permitting the effective performance analysis and management of traffic infrastructure resources. iPeMS 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. 
+The
+Performance Analytics segment also includes the operations of our former subsidiary, Meridian Environmental Technology, Inc. ("MET"), which we acquired in January 2011. MET
+specializes in 511/Advanced Traveler Information Systems, and includes our ClearPath Weather management tools that allow users to create solutions to meet roadway maintenance decision needs. Our
+ClearPath Weather tools provide winter road maintenance recommendations for state agencies, municipalities and for commercial companies. 
+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. Our Performance Analytics 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. 
+Beginning
+in late 2013, we undertook a focused development activity to supplement our intellectual property, technology base and product suites to provide products and services for the
+emerging precision agriculture ("PA") market. This activity included market research into the needs of the PA market, scientific modeling and forecasting development, computing infrastructure
+development to support both the required big data acquisition and processing and the distributed delivery vehicles required to service the commercial PA market, as well as the development of several
+products
+specifically intended for the PA market. We refer to our products for the PA market generically as ClearAg solutions. Our ClearAg platform provides access to a comprehensive database of weather, soil
+and agronomic information essential to making informed agricultural decisions. Our ClearAg application programming interfaces ("APIs") include historical, real-time and forecast weather content, soil
+and plant health information, as well as real-time weather and other useful crop growing information, to provide solutions in the precision agriculture technology markets. We commenced commercial
+sales of our ClearAg platform and related APIs in the first quarter of our fiscal year ended March 31, 2015 ("Fiscal 2015") and introduced our first ClearAg Application ("App") in the first
+quarter of our fiscal year ended March 31, 2016 ("Fiscal 2016"). We expect positive market acceptance of our ClearAg solutions to continue in upcoming quarters. We plan to continue to fund the 
+5 
+Table of Contents 
+investments
+in our ClearAg solutions through internally generated cash flow from our Roadway Sensors and Transportation Systems operations, as well as revenues from our Performance Analytics segment
+and our available cash on hand, if necessary. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories where we sell
+direct, we use a combination of our own sales personnel and outside sales organizations to sell, oversee installations and set-up issues and support our products. Our indirect sales channel is
+comprised of a network of independent distributors in the U.S. and select international locations, who sell integrated systems and related products to the traffic management market. Our independent
+distributors 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 distributors 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 various high-quality ITS products to the traffic management market.
+We periodically hold technical training classes for our distributors 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 distributor network to accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions and Performance Analytics solutions primarily 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 Transportation Systems contracts generally involve long lead times and require extensive specification development, evaluation and price negotiations. 
+We
+currently market and sell our ClearAg products to commercial entities in the PA market. We currently have two primary product sets which we are marketing for our PA segment; our
+ClearAg API integration and modeling services and our ClearAg Apps. Our ClearAg APIs are intended for large enterprises in the agriculture market that can benefit from the value of a tight integration
+of their processes with the ClearAg modeling and forecasting engine; our ClearAg App was introduced in May 2015 and is intended for individual agriculture producers that can benefit from advisories
+based upon the ClearAg platform that are tailored for their specific locations of interest. We generally deal directly to customers interested in the ClearAg API products, whereas we typically sell
+through selling partners for our ClearAg App products. 
+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 Veris
+Manufacturing, Sony Electronics, Inc. and LG Electronics, Inc. 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 generally adjust on a monthly basis to control inventory levels. We typically do not manufacture any of 
+6 
+Table of Contents 
+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 Fiscal 2016, Fiscal 2015 and our fiscal year ended March 31, 2014 ("Fiscal 2014"). We believe customer support is a key
+competitive factor. 
+Our
+ClearAg products are primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we provide full-time support and customer service
+for our ClearAg products. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $63.3 million as of March 31, 2016, which included
+$53.3 million related to Transportation Systems. In the past three fiscal years, we have recognized approximately 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 Performance Analytics. Substantially the entire backlog for Roadway Sensors
+as of March 31, 2016 is expected to be recognized as revenue in the fiscal year ending March 31, 2017. At March 31, 2015, we had backlog of approximately $39.2 million,
+which included $29.6 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 
+Our product development activities are conducted at our Performance Analytics facilities in Grand Forks, North Dakota and Berkeley,
+California, as well as at our principal facility in Santa Ana, California. Our research and development costs and expenses were approximately $6.9 million for Fiscal 2016, $5.4 million
+for Fiscal 2015 and $4.0 million for Fiscal 2014. We expect to continue to pursue various product development programs and incur research and development expenditures, primarily in our
+Performance Analytics and Roadway Sensors segments, 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 our ever-changing markets,
+as well as to enhance and refine our existing product lines. We plan to focus our development efforts in the near future in our Performance Analytics segment on our ClearAg products for the PA market;
+however, since 2014, our Roadway Sensors segment has introduced our VantageNext, Vantage Vector, SmartCycle, SmartSpan, Pegasus, Velocity, P10 and P100 products. Additionally, during Fiscal 2015 and
+Fiscal 2016, we engaged in development activities of our ClearAg precision agriculture solutions. We believe that developing new offerings across our segments and enhancing, refining and marketing our
+existing products are key components for strong organic growth and profitability. 
+7 
+Table of Contents 
+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. 
+The
+markets in which our Performance Analytics segment operates vary from the commercial sector customers for ClearAg solutions to public sector customers for iPeMS and ClearPath Weather
+products. 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 weather-related data to that market such as Climate Corp (now a division of Monsanto) and John Deere as well as new entrants such as Granular and
+Conservis. 
+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 manufacturers
+and distributors 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 been, and currently continue to be, the predominant vehicle detection system in this market. 
+The
+markets in which our Transportation Systems segment operate are 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 large, national corporations that generally offer
+expertise in traveler information, integration and transportation management. Our competitors in transportation engineering, planning and design include major regional ITS engineering firms, as well
+as many smaller local 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 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 have (i) two U.S. non-provisional patent
+applications relating to our Roadway Sensors technologies, (ii) twelve issued U.S. patents, two U.S. non-provisional patent applications that were allowed and issued in 2007 and twelve U.S.
+non-provisional patents, relating to our Performance Analytics technologies, and (iii) four issued U.S. patents and one U.S. non-provisional patent relating specifically
+to our Transportation Systems technologies. The twelve issued patents relating to our Performance Analytics technologies expire between 2033 and 2035, and our four issued U.S. patents relating to our
+Transportation Systems technologies expire between 2033 and 2035. 
+8 
+Table of Contents 
+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, rapidly evolving technology makes our future success dependent largely 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, 2016, we employed 366 full-time associates and 34 part-time associates,
+for a total of 400 associates. 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 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; however, as we expand internationally,
+foreign laws and regulations could have a material impact on our business in the 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 2016 Annual Meeting of Stockholders, is incorporated herein by reference.

raw/filings/0000350868/2015/0001047469-16-013877/item9a.txt

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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 
+35 
+Table of Contents 
+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 significant change in our internal controls over financial
+reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during Fiscal 2016 that has materially affected, or is reasonably likely to materially affect, our
+internal controls 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 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, 2016. 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
+(2013) . Based on our assessment, we believe that, as of March 31, 2016, our internal control over financial reporting was effective. 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/0000350868/2016/0001047469-17-003975/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,2017-06-13,2017-03-31,2017-06-13T21:27:43.000Z,0001047469-17-003975,a2232390z10-k.htm,10-K,9357863,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746917003975/a2232390z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746917003975/,2016,2016,1

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its subsidiary in this report as "Iteris," the "Company," "we," "our" and "us") is a provider
+of intelligent information solutions for both the traffic management and global agribusiness markets. 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 and weather analytics, and improve the safety of surface transportation systems
+infrastructure. By combining our unique intellectual property, products, decades of experience in traffic management, weather forecasting solutions and information technologies, we offer a broad range
+of Intelligent Transportation Systems ("ITS") solutions to customers throughout the U.S. and internationally. We believe our products, services and solutions, in conjunction with sound traffic
+management, minimize the environmental impact of traffic congestion. 
+In
+the agribusiness markets, we have combined our unique intellectual property with enhanced soil, land surface and agronomy modeling techniques to create a set of ClearAg solutions.
+These solutions provide analytical support to large enterprises in the agriculture market and field-specific advisories to individual producers. We continue to make significant investments to leverage
+our existing technologies and further expand our software-based information systems to offer solutions to the precision agriculture technology markets. 
+Iteris
+was 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"). 
+Recent Developments 
+In March 2017, our subsidiary, Iteris Michigan LLC, was dissolved as a legal entity and ceased operating as a wholly-owned subsidiary of
+the Company. 
+Products and Services 
+We currently operate in three reportable segments: Roadway Sensors, Transportation Systems and Agriculture and Weather Analytics (formerly known
+as our Performance Analytics segment). On April 1, 2016, certain operations that were previously within the Agriculture and Weather Analytics segment, specifically our performance measurement
+and information management solution, iPeMS, and related traffic analytic consulting services, were reassigned to the Transportation Systems segment to better align our traffic analytics capabilities,
+resources and initiatives. All prior segment information presented in this report has been reclassified to reflect this change. 
+The
+Roadway Sensors segment provides various vehicle detection and information systems and products for traffic intersection control, incident detection and roadway traffic data
+collection applications. The Transportation Systems segment includes transportation engineering and consulting services, iPeMS, our specialized transportation performance measurement and traffic
+analytics solutions, as well as the development of transportation management and traveler information systems for the ITS industry. The Agriculture and Weather Analytics segment includes ClearPath
+Weather, our road maintenance applications, and ClearAg, our precision agriculture solutions. See Note 13 of Notes to 
+4 
+Table of Contents 
+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 and other techniques to capture and analyze sensor data
+through sophisticated algorithms, enabling vehicle detection and transmission of both video images and data using various communication technologies. Our Roadway Sensors products include, among other
+products, our Vantage, VantageLive!, VantageNext, VersiCam, Vantage Vector, SmartCycle, SmartSpan, PedTrax, Pegasus, P-series and Velocity products. 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in traffic
+management systems. Vantage detection systems typically include up to four of our advanced cameras or radars. Our Vantage systems give traffic managers the ability to mitigate roadway congestion by
+modifying traffic signal timing or detecting incidents quickly. Our various software components complement our Vantage detection systems by providing integrated platforms to manage and view detection
+assets remotely over a network connection. 
+• Our Vantage Vector video/radar hybrid 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 of the proven benefits of Iteris video detection, including high
+accuracy, high availability remote viewing of video images, bicycle and pedestrian detection capability and high precision for dilemma zone detection, by integrating the video field-of-view with radar
+sensing. Enhanced information, including vehicle counts, speed and distance in user configurable zones that is available for use in special applications. 
+• Our Vantage systems equipped with SmartCycle capability can effectively differentiate between bicycles and other vehicles with a single video
+detection camera, enabling more efficient signalized intersections and improved 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. 
+• Our Vantage systems equipped with PedTrax capability provides bi-directional counting and speed tracking of pedestrians within the cross-walk
+to help improve signal timing efficiency and provides additional data stream to existing vehicle and bicycle counts. PedTrax is included with all new Vantage video detection systems, field-upgradable
+for the latest Vantage hardware platforms, and utilizes previously installed non-intrusive sensor systems. 
+• Our VantageLive! is a cloud-based subscription service release that was announced on May 2, 2017. Our VantageLive! service allows users
+to collect, process and analyze advanced intersection data, and to view and understand intersection activity. 
+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
+also sell certain complementary original equipment manufacturer ("OEM") products for the traffic intersection market, which include, among other things, intersection controllers and
+component cabinets. 
+5 
+Table of Contents 
+Transportation Systems 
+Our Transportation Systems segment includes transportation engineering and consulting services focused on the planning, design, development and
+implementation of software and hardware-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, implementation, operation and
+management of surface transportation infrastructure systems. We perform analysis and study goods movement, commercial vehicle operations, provide travel demand forecasting and systems engineering, and
+identify mitigation measures to reduce traffic congestion. 
+The
+Transportations Systems segment also includes our performance measurement and information management solution, iPeMS. iPeMS is a state-of-the-art information management software
+suite that provides big data and software analytics solutions that help determine current and future traffic patterns, permitting the effective performance analysis and management of traffic
+infrastructure resources. iPeMS 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. 
+Our
+Transportation Systems segment is largely dependent upon state and local governmental funding, and to a lesser extent, on federal governmental funding. As such, our Transportation
+Systems business has been adversely affected by governmental budgetary issues. In addition, various other funding mechanisms exist to support transportation infrastructure and related projects,
+including, but not limited to, 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 continue to be dependent at least in part on the federal government's use of funds under the federal highway bill. Delays in the allocation of funds may prolong uncertainty regarding the
+allotment of transportation funds in federal, state and local budgets. We believe that prolonged uncertainty regarding such matters has adversely impacted in the past, and may continue to adversely
+impact in the future, our Transportation Systems revenues and our overall financial performance in future periods. 
+Agriculture and Weather Analytics 
+Our Agriculture and Weather Analytics segment, which we formed during the first quarter of our fiscal year ended March 31, 2013, consists
+of our ClearAg solutions and our ClearPath Weather management tools. Our ClearPath Weather tools provide winter road maintenance recommendations for state agencies, municipalities and for commercial
+companies that allow such users to create solutions to meet roadway maintenance decision needs. 
+Our
+Weather Analytics business 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 in this market. 
+Beginning
+in late 2013, we undertook a focused development activity to supplement our intellectual property, technology base and product suites to provide products and services for the
+emerging precision agriculture ("PA") market. This activity included market research into the needs of the PA market, scientific modeling and forecasting development, computing infrastructure
+development to support both the required big data acquisition and processing and the distributed delivery vehicles required to service the commercial PA market, as well as the development of several
+products 
+6 
+Table of Contents 
+specifically
+intended for the PA market. We refer to our products for the PA market generically as our ClearAg solutions. 
+Our
+ClearAg solutions combine weather and agronomic data with proprietary land-surface modeling and analytics to solve complex agricultural problems. By using our ClearAg digital
+platform, growers, researchers and other agribusinesses can access and use a comprehensive database of historical, real-time and forecasted weather content, soil and plant health information, as well
+as other useful crop growing information to make better agricultural decisions and improve the efficiency and sustainability of farmlands. Companies use our ClearAg platform to simulate field
+conditions and determine how new products may perform on a crop given certain weather and soil conditions. Growers leverage ClearAg solutions to determine the best times to plant, spray, fertilize and
+harvest their crops. 
+We
+currently offer our ClearAg solutions on an enterprise basis using our modeling solutions and ClearAg application programming interfaces ("APIs"), which can allow the integration of
+ClearAg's analytics and insights with the offerings of large enterprise customers in the agriculture market. The APIs facilitate the integration of such companies' processes and solutions with the
+ClearAg modeling and forecasting engine. We commenced commercial sales of our ClearAg platform and the related APIs in the first quarter of our fiscal year ended March 31, 2015 ("Fiscal 2015"). 
+We
+also offer our ClearAg solutions to individual agriculture producers or growers who can benefit from the advisories based on our platform that are tailored for their specific location
+of interest. These solutions can be accessed in a web based-product or pursuant to our mobile applications. Our first mobile application, ClearAg Mobile, was introduced in the first quarter of our
+fiscal year ended March 31, 2016 ("Fiscal 2016"). ClearAg Mobile is an analytics application for individual growers that leverages weather, water, soil and crop growth information to provide
+growers with field local specific advisories that help improve the management of crop production operations. Our harvest advisory tools of our ClearAg mobile application help growers better understand
+up-to-the-minute environmental impact of weather, water and soil on crop growth and health, and to plan their harvest operations accordingly. Our ClearAg WeatherPlot and ClearAg Insights are
+applications that help agronomists and crop consultants identify ideal environmental conditions for treatments and make recommendations based on forecasted or historical weather, water and soil
+analytics. 
+We
+expect market acceptance of our ClearAg solutions to continue to increase in upcoming quarters. We plan to continue to fund the investments in our ClearAg solutions, largely for
+expanded sales and marketing resources, through internally generated cash flow from our Roadway Sensors and Transportation Systems operations, as well as revenues from our Agriculture and Weather
+Analytics segment and our available cash on hand, if necessary. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories where we sell direct, we use
+a combination of our own sales personnel and outside sales organizations to sell, oversee installations and set-up issues and support our products. Our indirect sales channel is comprised of a network
+of independent distributors in the U.S. and select international locations, who sell integrated systems and related products to the traffic management market. Our independent distributors 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 distributors 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 various high-quality ITS products to the traffic management market. We periodically hold
+technical training classes for our distributors and end users and maintain a full-time 
+7 
+Table of Contents 
+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 distributor network to
+accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions, and our ClearPath Weather services primarily to government agencies pursuant to negotiated contracts that involve
+competitive bidding and specific qualification requirements. Most of our contracts are with federal, state and local 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 Transportation Systems contracts generally involve long lead times and require extensive specification development, evaluation and price
+negotiations. 
+We
+currently market and sell our ClearAg products as a subscription-based service to seed and crop protection companies, allied providers and agriculture integrators, as well as to
+growers and retailers. Due to the recent consolidation of certain large companies in the agriculture market, sales to such companies typically involve long lead times. We generally sell directly to
+customers interested in the ClearAg API products, but typically sell through selling partners for our ClearAg applications. Versions of ClearAg Mobile and WeatherPlot are currently available in the
+Apple app store and on Google Play. 
+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 Veris Manufacturing,
+MoboTrex, Inc., and Sony Electronics, Inc. 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 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 our fiscal year ended March 31, 2017 ("Fiscal 2017"), Fiscal 2016 and Fiscal 2015. We believe customer support is a key competitive
+factor. 
+Our
+ClearAg solutions are primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we provide full-time support and customer
+service for such ClearAg solutions. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $64.5 million as of March 31, 2017, which included
+$54.4 million related to Transportation Systems. We typically recognize approximately 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 Agriculture and Weather Analytics. Substantially the entire backlog for
+Roadway Sensors as of March 31, 2017 is expected to be recognized as revenue in the fiscal year ending March 31, 2018. At 
+8 
+Table of Contents 
+March 31,
+2016, we had backlog of approximately $63.3 million, which included $53.3 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 
+Our product development activities are conducted at our Agriculture and Weather Analytics facilities in Grand Forks, North Dakota and Berkeley,
+California, as well as at our principal facility in Santa Ana, California. Our research and development costs and expenses were approximately $6.9 million for both Fiscal 2017 and 2016, and
+$5.4 million for Fiscal 2015. We expect to continue to pursue various product development programs and incur research and development expenditures, primarily in our Agriculture and Weather
+Analytics and Roadway Sensors segments, in future periods. 
+We
+believe our engineering and product development capabilities are a competitive strength. We strive to continuously develop new products, technologies, features and functionalities to
+meet the needs of our ever-changing markets, as well as to enhance, improve upon, and refine our existing product lines. We plan to focus our development efforts in the near future in our Agriculture
+and Weather Analytics segment on our ClearAg products for the PA market; however, since 2014, our Roadway Sensors segment has introduced our VantageNext, Vantage Vector, PedTrax, SmartCycle,
+SmartSpan, Pegasus, Velocity, and P-series, products. Additionally, during Fiscal 2016 and Fiscal 2017, we engaged in development activities of our ClearAg precision agriculture solutions, including
+WeatherPlot and ClearAg mobile applications. We believe that developing new offerings across our segments and
+enhancing, refining and marketing our existing products are key components for 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. 
+The
+markets in which our Agriculture and Weather Analytics segment operates vary from the commercial sector customers for ClearAg solutions to public sector customers for ClearPath
+Weather products. 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 weather-related data to that market
+such as IBM/The Weather Company, MeteoGroup and agronomic analytics companies such as FBN and Famer's Edge. 
+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 manufacturers
+and distributors 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 been, and currently continue to be, the predominant 
+9 
+Table of Contents 
+vehicle
+detection system in this market. Additionally, products such as Velocity and Pegasus compete against various competitors in the travel-time and data communications markets, respectively. 
+The
+markets in which our Transportation Systems segment operate are 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 large, national corporations that generally offer
+expertise in traveler information, integration and transportation management. Our competitors in transportation
+engineering, planning and design include major regional ITS engineering firms, as well as many smaller local 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 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 have a total of thirty-one issued U.S. patents,
+including: (i) nine relating to our Roadway Sensors technologies, four of which issued in fiscal year 2017, (ii) seventeen relating to our Agriculture and Weather Analytics technologies,
+five of which issued in fiscal year 2017, and (iii) six relating specifically to our Transportation Systems technologies, two of which issued in fiscal year 2017. We have a total of
+twenty-three pending patent applications in the U.S. and nine pending foreign patent applications. We intend to pursue additional patent protection to the extent we believe it would be beneficial and
+cost effective. 
+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, rapidly evolving technology makes our future success dependent largely 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. 
+10 
+Table of Contents 
+Employees 
+As of March 31, 2017, we employed 397 full-time employees and 35 part-time employees, for a total of 432 employees. None of our employees
+are represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees 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 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; however, as we expand internationally, foreign laws and regulations could have a material impact on
+our business in the 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 2017 Annual Meeting of Stockholders, is incorporated herein by reference.

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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 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 
+36 
+Table of Contents 
+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 significant change in our internal controls over financial
+reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of Fiscal 2017 that has materially affected, or is reasonably likely to
+materially affect, our internal controls 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 
+Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
+Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted
+an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated
+Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal
+Control—Integrated Framework (2013) , our management concluded that our internal control over financial reporting was effective as of March 31, 2017. The
+effectiveness of our internal control over financial reporting as of March 31, 2017 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as
+stated in their report, which is included herein.

raw/filings/0000350868/2017/0001047469-18-004333/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,2018-06-07,2018-03-31,2018-06-07T21:24:34.000Z,0001047469-18-004333,a2235930z10-k.htm,10-K,11255259,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746918004333/a2235930z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746918004333/,2017,2017,1

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its wholly-owned subsidiary, ClearAg, Inc., in this report as "Iteris," the "Company,"
+"we," "our," and "us") is a provider of essential applied informatics that enable smart transportation and digital agriculture. Municipalities, government agencies, crop science companies, farmers and
+agronomists use our solutions to make roads safer and travel more efficient, as well as farmlands more sustainable, healthy and productive. 
+As
+a pioneer in intelligent transportation systems ("ITS") technology for more than two decades, our intellectual property, products, software-as-a-service offerings and weather
+forecasting systems offer a comprehensive range of ITS solutions to our customers throughout the U.S. and internationally. 
+In
+the agribusiness markets, we have combined our intellectual property with enhanced atmospheric, land surface and agronomic modeling techniques to offer smart content solutions that
+provide analytical support to large enterprises in the agriculture industry, such as seed and crop protection companies, integrated food companies, and agricultural equipment manufacturers and service
+providers. 
+We
+believe our products, solutions and services improve and safely optimize mobility within our communities, while minimizing environmental impact on the roads we travel and the lands we
+farm. 
+We
+continue to make significant investments to leverage our existing technologies and further expand both our advanced detection sensors and performance analytics systems in the
+transportation infrastructure market, while supporting the entire value chain in the agriculture market with our smart content and digital farming platform. 
+Iteris
+was 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 
+3 
+Table of Contents 
+(949) 270-9400.
+Our 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 "Investor Relations" section of our website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities
+and Exchange Commission ("SEC"). 
+Recent Developments 
+ClearAg, Inc. 
+In April 2017, Iteris, Inc. formed a wholly-owned subsidiary, ClearAg, Inc., a Delaware corporation, to provide ClearAg solutions
+in the agribusiness markets. 
+Products and Services 
+We currently operate in three reportable segments: Roadway Sensors, Transportation Systems, and Agriculture and Weather Analytics. 
+The
+Roadway Sensors segment provides various advanced detection sensors and systems for traffic intersection management, communication systems and roadway traffic data collection
+applications. The Transportation Systems segment provides engineering and consulting services, performance measurement, regulatory compliance, and traffic analytics solutions, as well as the
+development of traveler information systems for the ITS industry. The Agriculture and Weather Analytics segment includes ClearPath Weather, our road maintenance applications, and ClearAg, our digital
+agriculture platform. 
+See
+Note 13 of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report, for further details on our reportable segments. 
+Roadway Sensors 
+Our Roadway Sensors segment product line uses advanced image and signal processing technology and other techniques to capture and analyze sensor
+data through sophisticated algorithms, enabling vehicle, bicycle and pedestrian detection, as well as the transmission of both video images and data using various communication technologies. Our
+Roadway Sensors products include, among others, Vantage, VantageLive!, VantageNext, VantageRadius, VantagePegasus, Vantage Vector, Velocity, SmartCycle, SmartCycle Bike Indicator, SmartSpan, VersiCam,
+PedTrax and P-Series products. 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in traffic
+management systems. Vantage detection systems typically include up to four of our advanced cameras or radar devices. Our Vantage systems give traffic managers the tools to mitigate roadway congestion
+by visualizing and analyzing traffic patterns allowing them to modify traffic signal timing to improve traffic flow. Our various software components complement our Vantage detection systems by
+providing integrated platforms to manage and view detection assets remotely over a network connection, as well as mobile application for viewing anywhere. 
+• Our Vantage Vector video/radar hybrid product is an all-in-one detection sensor with a wide range of capabilities, including stop bar and
+advanced zone detection, which enable advanced safety and adaptive control applications. Vantage Vector includes all of the benefits of Iteris video detection, including high accuracy,
+high-availability remote viewing of video images, bicycle and pedestrian detection capability, and dilemma-zone detection. 
+4 
+Table of Contents 
+• VantageLive! is a cloud-based platform that allows users to collect, process and analyze advanced intersection data, as well as to view and
+understand intersection activity. 
+• All of our Vantage systems are available with SmartCycle capability, which can effectively differentiate between bicycles and other vehicles
+with a single video detection camera, enabling more efficient signalized intersections, improved traffic throughput and increased bicyclist safety. 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. 
+• The SmartCycle Bike Indicator, which leverages the SmartCycle bicycle detection algorithm, is a device that mounts onto traffic signals and
+illuminates when cyclists waiting at an intersection have been detected, allowing cyclists to avoid interacting with vehicle traffic to push pole-mounted buttons. 
+• Our Vantage systems are also available with the PedTrax capability, which provides bi-directional counting and speed tracking of pedestrians
+within the crosswalk to help improve signal timing efficiency, as well as providing an additional data stream to existing vehicle and bicycle counts. 
+• 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. 
+We
+believe that future growth domestically and internationally, 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
+also sell certain complementary original equipment manufacturer ("OEM") products for the traffic intersection market, which include, among other things, traffic signal controllers and
+traffic signal equipment cabinets. 
+Transportation Systems 
+Our Transportation Systems segment includes engineering and consulting services focused on the planning, design, development and implementation
+of software and hardware-based ITS 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, implementation, operation and management of
+surface transportation infrastructure systems. We perform analysis and study goods movement, commercial vehicle operations, provide travel demand forecasting and systems engineering, and identify
+mitigation measures to reduce traffic congestion. 
+The
+Transportations Systems segment also includes our performance measurement and management solution, iPeMS—a state-of-the-art information management software suite that
+provides prescriptive data insights to help determine current and future traffic patterns, permitting the effective performance analysis and management of traffic infrastructure resources. iPeMS
+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. 
+This
+segment also includes our commercial vehicle operations and vehicle safety compliance platforms, known as "CVIEW-Plus," "CheckPoint," "UCRLink" and "inspect." 
+5 
+Table of Contents 
+Our
+Transportation Systems segment is largely dependent upon state and local governmental funding, and to a lesser extent federal governmental funding. As such, our Transportation
+Systems business has been adversely affected by governmental budgetary issues. In addition, various other funding mechanisms exist to support transportation infrastructure and related projects,
+including, but not limited to, 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 continue to be dependent at least in part on the federal and local government's use of funds. Delays in the allocation of funds may prolong uncertainty regarding the allotment of transportation
+funds in federal, state and local budgets. 
+Agriculture and Weather Analytics 
+Our Agriculture and Weather Analytics segment, which we formed during the first quarter of our fiscal year ended March 31, 2013, consists
+of our ClearPath Weather and Clear Ag solutions. 
+Our
+ClearPath Weather is a web-based system that has a suite of tools that enable users to assess historical weather conditions and analyze short-term and long-range weather forecasts,
+to customize route/site weather and pavement forecast tools, which provide winter road maintenance recommendations for state agencies, municipalities and enable commercial companies to create
+solutions for the management of roadway maintenance. 
+Our
+Weather Analytics business 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 in this market. 
+Beginning
+in late 2013, we undertook the development of "ClearAg solutions" for the digital agricultural market. These new products utilize and expand the intellectual property,
+technology base and product suites of our ClearPath Weather solutions. For our ClearAg solutions, we developed additional scientific and agronomic models and forecasts, expanded our computing
+infrastructure for additional big data acquisition and processing, and designed distributed delivery vehicles and products. 
+Our
+ClearAg solutions combine weather and agronomic data with proprietary land-surface modeling and analytics to solve complex agricultural problems, which results in the increased
+efficiency and sustainability of farmlands. The ClearAg Platform delivers product validation, irrigation and harvest solutions giving growers, researchers and other agribusinesses access to a
+comprehensive database of historical, real-time and forecasted weather, soil and plant health information, as well as other information on crop growth. Companies use the ClearAg Platform to simulate
+field conditions and determine how new products may perform on a crop given certain weather and soil conditions. Growers leverage the ClearAg Platform to determine the best times to plant, spray,
+fertilize, irrigate, and harvest crops. 
+We
+currently offer our ClearAg solutions on an enterprise basis combining our modeling solutions with ClearAg application programming interfaces ("APIs"). These APIs facilitate the
+integration of ClearAg's analytics and insights with the offerings of large enterprise customers in the agriculture market. We commenced commercial sales of the ClearAg solutions and related APIs in
+the first quarter of our fiscal year ended March 31, 2015 ("Fiscal 2015"). We also developed the ClearAg WeatherPlot and ClearAg Insights applications, which provide analytics on forecasted
+historical weather, water and soil temperatures to help agronomists and crop consultants identify and make recommendations for treatments at ideal environmental conditions to maximize crop quality and
+yield. 
+We
+expect market acceptance of our ClearAg solutions to continue to increase in upcoming quarters. We plan to continue to fund the investments in our ClearAg solutions, through cash flow
+generated from our Roadway Sensors and Transportation Systems operations, revenues from our 
+6 
+Table of Contents 
+Agriculture
+and Weather Analytics segment, and our available cash on hand, as needed. We may also elect to raise additional equity for these investments. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories where we sell direct, we use
+a combination of our own sales personnel and outside sales organizations to sell, oversee installations and set-up issues, and support our products. Our indirect sales channel is comprised of a
+network of independent distributors in the U.S. and select international locations, which sell integrated systems and related products to the traffic management market. In the fourth quarter of our
+fiscal year ended March 31, 2018 ("Fiscal 2018"), we entered into a distribution agreement to expand our northern European sales coverage in the U.K. and Ireland. Our independent distributors
+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 distributors 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 various high-quality ITS products to the traffic management market. We
+periodically hold technical training classes for our distributors 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 distributor network to accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions, and our ClearPath Weather services primarily to government agencies pursuant to negotiated contracts that involve
+competitive bidding and specific qualification requirements. Most of our contracts are with federal, state and local 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 Transportation Systems contracts generally involve long lead times and require extensive specification development, evaluation and price
+negotiations. 
+We
+currently market and sell our ClearAg solutions as a subscription-based service to seed and crop protection companies, allied providers and agriculture integrators, as well as to
+growers and retailers. Due to the recent consolidation of certain large companies in the agriculture market, sales to such companies typically involve long lead times. We generally sell directly to
+customers interested in the ClearAg API products, but typically sell through selling partners for our ClearAg applications. Mobile versions of WeatherPlot are currently available in the Apple app
+store and on Google Play. 
+We
+have historically had a diverse customer base. For Fiscal 2018, one individual customer represented greater than 10% of our total revenues. For the fiscal year ended March 31,
+2017 ("Fiscal 2017"), one individual customer represented greater than 10% of our total revenues. 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in our Roadway Sensors products. Additionally, we procure certain components
+for our Roadway Sensors products from qualified suppliers, both in the U.S. and internationally, 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 Veris Manufacturing, MoboTrex, Inc. and Sony Electronics, Inc. Our manufacturing activities are conducted in approximately 9,000 square feet of space at our Santa
+Ana, California facility. Production volume at 
+7 
+Table of Contents 
+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 Fiscal 2018, Fiscal 2017 and the fiscal year ended March 31, 2016 ("Fiscal 2016"). We believe customer support is a key competitive
+factor for our company. 
+Our
+ClearAg solutions are primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we provide full-time support and customer
+service for such ClearAg solutions. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $47.5 million as of March 31, 2018, which included
+$37.7 million related to Transportation Systems. We typically recognize approximately 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 Agriculture and Weather Analytics. Substantially the entire backlog for Roadway Sensors as of
+March 31, 2018 is expected to be recognized as revenue in the fiscal year ending March 31, 2019. At March 31, 2017, we had backlog of approximately $64.5 million, which
+included $54.4 million related to Transportation Systems. The decline in backlog in the current fiscal year was largely due to the completion of a large Transportation Systems contract in the
+current fiscal year. 
+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 
+Our product development activities are mostly conducted at our Agriculture and Weather Analytics facilities in Grand Forks, North Dakota and
+Oakland, California, as well as at our principal facility in Santa Ana, California. Our research and development costs and expenses were approximately $7.9 million for Fiscal 2018 and
+$6.9 million for both Fiscal 2017 and Fiscal 2016. We expect to continue to pursue various product development programs and incur research and development expenditures, primarily in our
+Agriculture and Weather Analytics and Roadway Sensors segments, in future periods. 
+We
+believe our engineering and product development capabilities are a competitive strength. We strive to continuously develop new products, technologies, features and functionalities to
+meet the needs of our ever-changing markets, as well as to enhance, improve upon, and refine our existing product lines. We plan to focus our development efforts in the near future in our Agriculture
+and Weather Analytics segment on our ClearAg solutions and to developing further enhancements and functionality in our Vantage products family. We believe that developing new and enhanced product 
+8 
+Table of Contents 
+offerings
+across our segments and enhancing, refining and marketing our existing products are key components for 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. 
+The
+markets in which our Agriculture and Weather Analytics segment operates vary from the commercial sector customers for ClearAg solutions to public sector customers for ClearPath
+Weather solutions. 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 weather-related data to that
+market, such as IBM/The Weather Company, MeteoGroup and agronomic analytics companies such as FBN and Farmer's Edge. 
+In
+the market for our Roadway Sensors detection products, we compete with manufacturers and distributors of other above-ground video camera detection systems such as Econolite, and
+manufacturers and distributors of 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 been, and currently continue to be, the predominant vehicle detection system in this market. Additionally, products such as Velocity and VantagePegasus
+compete against various competitors in the travel-time and data communications markets, respectively. 
+The
+markets in which our Transportation Systems segment operate are 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 large, national corporations that generally offer
+expertise in traveler information, integration and transportation management. Our competitors in transportation engineering, planning and design include major regional ITS engineering firms, as well
+as many smaller local 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 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 have a total of 
+9 
+Table of Contents 
+40
+issued U.S. patents, including: (i) 10 relating to our Roadway Sensors technologies, one of which was issued in Fiscal 2018, (ii) 23 relating to our Agriculture and Weather Analytics
+technologies, six of which were issued in Fiscal 2018, and (iii) seven relating specifically to our Transportation Systems technologies, one of which was issued in Fiscal 2018. We have a total
+of 22 pending patent applications in the U.S. and 15 pending foreign patent applications. The expiration dates of our patents range from 2026 to 2037. We intend to pursue additional patent protection
+to the extent we believe it would be beneficial and cost-effective. 
+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,
+rapidly evolving technology makes our future success dependent largely 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 
+As of March 31, 2018, we employed 414 full-time employees and 33 part-time employees, for a total of 447 employees. None of our employees
+are represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees 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 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; however, as we expand internationally, foreign laws and
+regulations could have a material impact on our business in the future. 
+10 
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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+The information required by Item 13 will be either included in the Form 10-K Amendment or is incorporated by reference to our 2018
+Proxy Statement under the heading "Corporate Governance" and "Certain Transactions."

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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 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 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 significant change in our internal controls over financial
+reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of Fiscal 2018 that has materially affected, or is reasonably likely to
+materially affect, our internal controls 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 
+Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
+Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted
+an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of
+Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework
+(2013) , our management concluded that our internal control over financial reporting was effective as of March 31, 2018. The effectiveness of 
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+Table of Contents 
+our
+internal control over financial reporting as of March 31, 2018 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in
+their report, which is included herein.

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+Transactions with Related Persons 
+Since April 1, 2015, other than the agreements and transactions described in "Item 11. Executive Compensation" in the Annual
+Report 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, director nominee, 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. The sublease terminated in September 2007, at which time Maxxess owed us an aggregate of $274,000. Maxxess executed a promissory note for such amount, which was subsequently amended and restated
+on July 23, 2013, and extended on August 11, 2016 and 
+55 
+Table of Contents 
+August 13,
+2018. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with accrued interest payable annually on the first business day of each calendar
+year. When authorized by the Company, Maxxess may pay down the balance of this note by providing consulting services to Iteris. We have previously fully reserved for amounts owed to us by Maxxess and
+the outstanding principal balance remains fully reserved. As of March 31, 2018, approximately $146,000 of the original principal balance was outstanding and payable to Iteris. The note
+currently matures
+August 20, 2020. Maxxess is currently owned by an investor group that includes, among others, one former Iteris director, who has not been a director of Iteris since September 2013, and one
+existing director of Iteris, who currently owns less than 2% of Maxxess' capital stock.

raw/filings/0000350868/2018/0001047469-19-003522/filing_metadata.csv

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its wholly-owned subsidiary, ClearAg, Inc., in this report as "Iteris," the "Company,"
+"we," "our," and "us") is a provider of essential applied informatics that enable smart transportation and digital agriculture. Municipalities, government agencies, crop science companies, agriculture
+service providers and other agribusinesses use our solutions to make roads safer and travel more efficient, as well as farmlands more sustainable, healthy and productive. 
+As
+a pioneer in intelligent transportation systems ("ITS") technology for more than two decades, our intellectual property, products, software-as-a-service ("SaaS") offerings and weather
+forecasting systems offer a comprehensive range of ITS solutions to our customers throughout the U.S. and internationally. 
+In
+the digital agriculture market, we have combined our intellectual property with enhanced atmospheric, land surface and agronomic modeling techniques to offer smart content and
+analytic solutions that provide analytical support to large enterprises in the agriculture industry, such as seed and crop protection companies, integrated food companies, and agricultural equipment
+manufacturers and service providers. 
+We
+believe our products, solutions and services improve and safely optimize mobility within our communities, while minimizing environmental impact on the roads we travel and the lands we
+farm. 
+We
+continue to make significant investments to leverage our existing technologies and further expand both our advanced detection sensors and performance analytics systems in the
+transportation infrastructure market, while supporting the agriculture market with our smart content and digital agriculture platform, and always exploring strategic alternatives intended to optimize
+the value of all of our businesses. 
+Iteris
+was incorporated in Delaware in 1987 and has operated in its current form since 2004. 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 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 "Investor Relations" section of our website, free of charge, as soon as reasonably practicable after such material is
+electronically filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC"). 
+Recent Developments 
+ClearAg, Inc. 
+In April 2017, Iteris, Inc. formed a wholly-owned subsidiary, ClearAg, Inc., a Delaware corporation, to provide ClearAg solutions
+to the agriculture markets. 
+Products and Services 
+We currently operate in three reporting segments: Roadway Sensors, Transportation Systems, and Agriculture and Weather Analytics. 
+The
+Roadway Sensors segment provides various advanced detection sensors and systems for traffic intersection management, communication systems and roadway traffic data collection
+applications. The Transportation Systems segment provides traffic engineering and consulting services, as well as 
+4 
+Table of Contents 
+performance
+measurement, traffic analytics, traveler information and commercial vehicle operating software solutions. The Agriculture and Weather Analytics segment includes ClearPath Weather, our road
+maintenance applications, and ClearAg, our digital agriculture platform. 
+See
+Note 11 of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on our reporting segments. 
+Roadway Sensors 
+Our Roadway Sensors products include, among others, Vantage, VantageLive!, Vantage Next®, VantagePegasus, VantageRadius, Vantage
+Vector, Velocity, SmartCycle, SmartCycle Bike Indicator, SmartSpan, VersiCam, PedTrax and P-Series products. 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in traffic
+management systems. Vantage detection systems typically include up to four of our advanced cameras or radar devices. Our Vantage systems give traffic managers the tools to mitigate roadway congestion
+by visualizing and analyzing traffic patterns allowing them to modify traffic signal timing to improve traffic flow. Our various software components complement our Vantage detection systems by
+providing integrated platforms to manage and view detection assets remotely over a network connection, as well as mobile application for viewing anywhere. 
+• Our Vantage Vector video/radar hybrid product is an all-in-one detection sensor with a wide range of capabilities, including stop bar and
+advanced zone detection, which enable advanced safety and adaptive control applications. Vantage Vector includes all of the benefits of Iteris video detection, including high accuracy,
+high-availability remote viewing of video images, bicycle and pedestrian detection capability, and dilemma-zone detection. 
+• VantageLive! is a cloud-based platform that allows users to collect, process and analyze advanced intersection data, as well as to view and
+understand intersection activity. 
+• All of our Vantage systems are available with SmartCycle capability, which can effectively differentiate between bicycles and other vehicles
+with a single video detection camera, enabling more efficient signalized intersections, improved traffic throughput and increased bicyclist safety. 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. 
+• The SmartCycle Bike Indicator, which leverages the SmartCycle bicycle detection algorithm, is a device that mounts onto traffic signals and
+illuminates when cyclists waiting at an intersection have been detected, allowing cyclists to avoid interacting with vehicle traffic to push pole-mounted buttons. 
+• Our Vantage systems are also available with the PedTrax capability, which provides bi-directional counting and speed tracking of pedestrians
+within the crosswalk to help improve signal timing efficiency, as well as providing an additional data stream to existing vehicle and bicycle counts. 
+• 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. 
+We
+believe that future growth domestically and internationally, 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. 
+5 
+Table of Contents 
+In
+select territories, we also sell certain complementary original equipment manufacturer ("OEM") products for the traffic intersection market, which include, among other things, traffic
+signal controllers and traffic signal equipment cabinets. 
+Transportation Systems 
+Our Transportation Systems segment includes engineering and consulting services focused on the planning, design, development and implementation
+of software and hardware-based ITS 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, implementation, operation and management of
+surface transportation infrastructure systems. We perform analysis and study goods movement, commercial vehicle operations, provide travel demand forecasting and systems engineering, and identify
+mitigation measures to reduce traffic congestion. 
+The
+Transportations Systems segment also includes our performance measurement and management solutions, Iteris Signal Performance Measures (SPM) and iPeMS—a state-of-the-art
+information management software suite that provides prescriptive data insights to help determine current and future traffic patterns, permitting the effective performance analysis and management of
+traffic infrastructure resources. iPeMS 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. 
+We
+recently launched our comprehensive signal performance measures solution offering, Iteris SPM, a cloud-based application that provides proactive operations and signal maintenance with
+business process outsourcing and managed services. This offering is expected to be priced on a per intersection per month basis. 
+This
+segment also includes our advanced traveler information system solutions, as well as our commercial vehicle operations and vehicle safety compliance platforms, known as
+"CVIEW-Plus," "CheckPoint," "UCRLink" and "inspect." These platforms support state-based commercial vehicle operations by storing and distributing intrastate and interstate commercial vehicle
+information for local, state and federal agencies' roadside and enforcement operations. 
+Our
+Transportation Systems segment is largely dependent upon state and local governmental funding, and to a lesser extent federal governmental funding. In addition, various other funding
+mechanisms exist to support transportation infrastructure and related projects, including, but not limited to, 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 continue to be dependent at least in part on the federal and local government's use of funds, and as in the past,
+our Transportation Systems business has been, at times, adversely affected by governmental budgetary issues. Delays in the
+allocation of funds may prolong uncertainty regarding the allotment of transportation funds in federal, state and local budgets. 
+Agriculture and Weather Analytics 
+Our Agriculture and Weather Analytics segment, which we formed during the first quarter of our fiscal year ended March 31, 2013, consists
+of our ClearPath Weather and ClearAg solutions. 
+Our
+ClearPath Weather is a web-based solution, which includes a suite of tools that apply data assimilation and modeling technologies to assess weather conditions for customizable
+route/site weather 
+6 
+Table of Contents 
+and
+pavement forecasting, and render winter road maintenance recommendations for state agencies, municipalities and commercial companies to improve roadway maintenance decisions. 
+Our
+ClearPath Weather business is a market leader in performance management solutions for 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 in this market. 
+Beginning
+in late 2013, we undertook the development of "ClearAg solutions" for the digital agricultural market. These new products utilize and expand the intellectual property,
+technology base and product suites of our ClearPath Weather solutions. For our ClearAg solutions, we developed additional scientific and agronomic models and forecasts, expanded our computing
+infrastructure for additional big data acquisition and processing, and designed distributed delivery vehicles and products. 
+Our
+ClearAg solutions combine weather and agronomic data with proprietary land-surface modeling and analytics to solve complex agricultural problems and to increase the efficiency and
+sustainability of farmlands. The ClearAg Platform delivers validation tools for ag inputs, irrigation, field readiness, and harvest solutions giving growers, researchers and other agribusinesses
+access to a comprehensive database of historical, real-time and forecasted weather, soil and plant health information, as well as
+other information on crop growth. Companies use the ClearAg Platform to simulate field conditions and determine how new products may perform on a crop given certain weather and soil conditions.
+Growers and agribusinesses leverage the ClearAg Platform to determine the best times to plant, spray, fertilize, irrigate, and harvest crops. 
+Currently,
+we offer our ClearAg solutions on a subscription basis, with customers consuming ClearAg through our visualization component application programming interfaces ("APIs"). These
+APIs facilitate the integration of ClearAg's analytics and insights with the offerings of large enterprise customers in the agriculture market. We commenced commercial sales of the ClearAg solutions
+and related APIs in the first quarter of our fiscal year ended March 31, 2015 ("Fiscal 2015"). 
+We
+expect market acceptance of our ClearAg solutions to continue to increase in upcoming quarters. We plan to continue to fund the investments in our ClearAg solutions, through cash flow
+generated from our Roadway Sensors and Transportation Systems operations, revenues from our Agriculture and Weather Analytics segment, and our available cash on hand, as needed. We may also elect to
+raise additional equity for these investments. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories we sell through direct
+channels, we use a combination of our own sales personnel and outside sales organizations to sell, oversee installations, and support our products. Our indirect sales channel is comprised of a network
+of independent distributors in the U.S. and select international locations, which sell integrated systems and related products to the traffic management market. In the fourth quarter of our fiscal
+year ended March 31, 2018 ("Fiscal 2018"), we entered into a distribution agreement to expand our northern European sales coverage in the U.K. and Ireland. Our independent distributors 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 distributors 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 various high-quality ITS products to the traffic management market. We
+periodically hold technical training classes for our distributors and end users, and maintain a full-time staff of customer support technicians throughout the U.S. to provide technical assistance when
+needed. When 
+7 
+Table of Contents 
+appropriate,
+we have the ability to modify or make changes to our distributor network to accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions and our ClearPath Weather services primarily to government agencies pursuant to negotiated contracts that involve
+competitive bidding and specific qualification requirements. Most of our contracts are with federal, state and local 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 Transportation Systems contracts generally involve long lead times and require extensive specification development, evaluation and price
+negotiations. 
+Currently,
+we market and sell our ClearAg solutions on a subscription basis, under a SaaS license, to seed and crop protection companies, agriculture equipment manufacturers, irrigation
+solution providers, allied providers and other agriculture service providers. Due to the recent consolidation of certain large companies in the agriculture market, sales to such companies typically
+involve long lead times. Although we sell directly to all of our customers, some of these customers include ClearAg into their solutions which are ultimately used by growers. 
+We
+have a small dedicated software solutions sales team that serves as an overlay to our regionally aligned customer management team. 
+We
+have historically had a diverse customer base. For the fiscal year ended March 31, 2019 ("Fiscal 2019") and Fiscal 2018, one individual customer represented greater than 10% of
+our total revenues. 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in our Roadway Sensors products. Additionally, we procure certain components
+for our Roadway Sensors products from qualified suppliers, both in the U.S. and internationally, 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 Veris Manufacturing, MoboTrex, Inc. and Sony Electronics, Inc. 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 generally adjust on a monthly basis to
+control inventory levels. Typically, we 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 Fiscal 2019, Fiscal 2018 and the fiscal year ended March 31, 2017 ("Fiscal 2017"). We believe customer support is a key competitive
+factor for our company. 
+Our
+ClearAg solutions are primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we provide full-time support and customer
+service for such ClearAg solutions. 
+8 
+Table of Contents 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $55.4 million as of March 31, 2019, which included
+$44.5 million related to Transportation Systems, $6.2 million related to Roadway Sensors, and $4.7 million related to Agriculture and Weather Analytics. Typically, we recognize
+approximately 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. Substantially the
+entire backlog for Roadway Sensors and Agriculture and Weather Analytics as of March 31, 2019 is expected to be recognized as revenue in the fiscal year ending March 31, 2020 ("Fiscal
+2020"). At March 31, 2018, we had backlog of approximately $47.5 million, which included $37.7 million related to Transportation Systems, $5.6 million related to Roadway
+Sensors and $4.2 million related to Agriculture and Weather Analytics. The increase in backlog in the current fiscal year was largely due to increased sales and marketing efforts in our
+Transportation Systems segment during the current fiscal year. 
+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 
+Our product development activities are mostly conducted at our principal facility in Santa Ana, California, as well as our facilities in Grand
+Forks, North Dakota and Oakland, California. Our research and development costs and expenses were approximately $7.8 million for Fiscal 2019, $7.9 million for Fiscal 2018, and
+$6.9 million for Fiscal 2017. We expect to continue to pursue various product development programs and incur research and development expenditures, primarily in our Agriculture and Weather
+Analytics and Roadway Sensors segments, in future periods. 
+We
+believe our engineering and product development capabilities are a competitive strength. We strive to continuously develop new products, technologies, features and functionalities to
+meet the needs of our ever-changing markets, as well as to enhance, improve upon, and refine our existing product lines. We plan to continue to invest in the development of our ClearAg and ClearPath
+Weather solutions, and our Iteris SPM, iPeMS, and commercial vehicle operations software offerings. In addition, we intend to continue to invest in further enhancements and functionality in our
+Vantage products family. We believe that developing new and enhanced product offerings across our segments and enhancing, refining and marketing our existing products are key components for strong
+organic growth and profitability. 
+Competition 
+Generally, we 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. 
+The
+markets in which our Agriculture and Weather Analytics segment operates vary from the commercial sector customers for ClearAg solutions to public sector customers for ClearPath
+Weather solutions. 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 weather-related data to that
+market, such as IBM/The Weather Company and DTN. 
+9 
+Table of Contents 
+In the market for our Roadway Sensors detection products, we compete with manufacturers and distributors of other above-ground video camera detection systems such
+as Econolite, and manufacturers and distributors of 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 been, and currently continue to be, the predominant vehicle detection system in this market. Additionally, products such as
+Velocity and VantagePegasus compete against various competitors in the travel-time and data communications markets, respectively. 
+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 the managed services and consulting business lines include a mix of local, regional and
+international engineering services firms. Our competitors in the software business line, which includes performance measurement and management, advance traveler information systems, and our commercial
+vehicle operations and vehicle safety compliance platforms include university affiliated software organizations, venture backed software companies, as well as other multi-disciplinary hardware and
+software corporations. 
+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 have a total of 53 issued U.S. patents, including:
+(i) 10 relating to our Roadway Sensors technologies, two of which was issued in Fiscal 2019, (ii) 36 relating to our Agriculture and Weather Analytics technologies, ten of which were
+issued in Fiscal 2019, and (iii) 7 relating to our Transportation Systems technologies, one of which was issued in Fiscal 2019. We have a total of 14 pending patent applications in the U.S. and
+15 pending foreign patent applications. The expiration dates of our patents range from 2026 to 2038. We intend to pursue additional patent protection to the extent we believe it would be
+beneficial and cost-effective. 
+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, rapidly evolving technology makes our future success dependent largely upon our ability to successfully achieve continuing innovation. 
+10 
+Table of Contents 
+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 
+As of March 31, 2019, we employed 362 full-time employees and 31 part-time employees, for a total of 393 employees. None of our employees
+is represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees 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 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; however, as we expand internationally, foreign laws and
+regulations could have a material impact on our business in the future.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+Certain Transactions 
+Since April 1, 2015, other than the agreements and transactions described in "Item 11. Executive Compensation" 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 one percent of the average of our total assets at year-end for the last two fiscal years and in which any director, director nominee, 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. The sublease terminated in September
+2007, at which time Maxxess owed us an aggregate of $274,000. Maxxess executed a promissory note for such amount, 
+103 
+Table of Contents 
+which
+was subsequently amended and restated on July 23, 2013 and on August 11, 2016. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with
+accrued interest payable annually on the first business day of each calendar year. When authorized by the Company, Maxxess may pay down the balance of this note by providing consulting services to
+Iteris. We have previously fully reserved for amounts owed to us by Maxxess and the outstanding principal balance remains fully reserved. As of March 31, 2019, approximately $146,000 of the
+original principal balance was outstanding and payable to Iteris. Maxxess is currently owned by an investor group that includes, among others, one former Iteris director, who has not been a director
+of Iteris since September 2013, and one existing director of Iteris, who currently owns less than 2% of Maxxess' capital stock. 
+Director Independence 
+The Board of Directors has determined that Ms. Siegal and each of Messrs. Daly, Deeter, Mooney, Thomas and Williams satisfies the
+requirements for "independence" using the
+standards established by Nasdaq, except that Dr. Daly did not qualify as an independent director while he was serving as our interim Chief Executive Officer from February 2015 to September
+2015.

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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 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 effective at a reasonable
+assurance level 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 significant change in our internal controls over financial
+reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of Fiscal 2019 that has materially affected, or is reasonably likely to
+materially affect, our internal controls 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 
+Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
+Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted
+an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework
+(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal
+Control—Integrated Framework (2013) , our management concluded that our internal control over financial reporting was effective as of March 31, 2019. The
+effectiveness of our internal control over financial reporting as of March 31, 2019 has been audited by Deloitte & 
+81 
+Table of Contents 
+Touche LLP,
+an independent registered public accounting firm, as stated in their report, which is included herein.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+Certain Transactions 
+Since April 1, 2015, other than the agreements and transactions described in "Item 11. Executive Compensation" 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 one percent of the average of our total assets at year-end for the last two fiscal years and in which any director, director nominee, 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. The sublease terminated in September
+2007, at which time Maxxess owed us an aggregate of $274,000. Maxxess executed a promissory note for such amount, 
+103 
+Table of Contents 
+which
+was subsequently amended and restated on July 23, 2013 and on August 11, 2016. The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with
+accrued interest payable annually on the first business day of each calendar year. When authorized by the Company, Maxxess may pay down the balance of this note by providing consulting services to
+Iteris. We have previously fully reserved for amounts owed to us by Maxxess and the outstanding principal balance remains fully reserved. As of March 31, 2019, approximately $146,000 of the
+original principal balance was outstanding and payable to Iteris. Maxxess is currently owned by an investor group that includes, among others, one former Iteris director, who has not been a director
+of Iteris since September 2013, and one existing director of Iteris, who currently owns less than 2% of Maxxess' capital stock. 
+Director Independence 
+The Board of Directors has determined that Ms. Siegal and each of Messrs. Daly, Deeter, Mooney, Thomas and Williams satisfies the
+requirements for "independence" using the
+standards established by Nasdaq, except that Dr. Daly did not qualify as an independent director while he was serving as our interim Chief Executive Officer from February 2015 to September
+2015.

raw/filings/0000350868/2019/0001047469-20-003463/filing_metadata.csv

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+0000350868,ITI,"ITERIS, INC.",10-K,2020-06-09,2020-03-31,2020-06-09T20:21:25.000Z,0001047469-20-003463,a2241797z10-k.htm,10-K,10779665,1,0,https://www.sec.gov/Archives/edgar/data/350868/000104746920003463/a2241797z10-k.htm,https://www.sec.gov/Archives/edgar/data/350868/000104746920003463/,2019,2019,1

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its wholly-owned subsidiaries, ClearAg, Inc. and Albeck Gerken, Inc. ("AGI"),
+in this report as "Iteris," the "Company," "we," "our," and "us") is a provider of essential applied informatics that enable smart transportation. Municipalities, government agencies and other
+businesses use our solutions to make roads safer and travel more efficient. 
+As
+a pioneer in intelligent transportation systems ("ITS") technology for more than two decades, our intellectual property, products and software-as-a-service ("SaaS") offerings offer a
+comprehensive range of ITS solutions to our customers throughout the U.S. and internationally. 
+Prior
+to the sale of our Agriculture and Weather Analytics segment in May 2020, we combined our intellectual property with enhanced atmospheric, land surface and agronomic modeling
+techniques to offer smart content and analytic solutions that provided analytical support to large enterprises in the agriculture industry, such as seed and crop protection companies, integrated food
+companies, and agricultural equipment manufacturers and service providers. 
+We
+believe our products, solutions and services improve and safely optimize mobility within our communities, while minimizing environmental impact on our roadways. 
+We
+continue to make significant investments to leverage our existing technologies and further expand both our advanced detection sensors and performance analytics systems in the
+transportation infrastructure market and we are always exploring strategic alternatives intended to optimize the value of all of our Company. 
+Iteris
+was incorporated in Delaware in 1987 and has operated in its current form since 2004. 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 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 "Investor Relations" section of our website, free of charge, as soon as reasonably practicable after such material is electronically
+filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC"). 
+Recent Developments 
+Public Offering and Acquisition of Albeck Gerken, Inc. 
+On June 13, 2019, the Company completed an underwritten public offering of 6,182,797 shares of the Company's common stock for net
+proceeds to the Company of approximately $26.8 million, after deducting underwriting discounts and estimated offering expenses payable by the Company. The Company used approximately
+$6.2 million of the net proceeds of this offering to pay the cash portion of the purchase price in the acquisition of AGI, a privately-held professional transportation engineering services firm
+headquartered in Tampa, Florida (see Note 11, "Acquisition" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on
+the acquisition of AGI), and plans to use the balance of the net proceeds for general corporate purposes and possibly for other future acquisitions. 
+4 
+Table of Contents 
+Coronavirus 
+In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of
+coronavirus, COVID-19 ("the Pandemic"). The Pandemic is having an unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis, such as travel
+restrictions, quarantines and "stay-at-home" orders. The uncertainties caused by these events and actions include, but are not limited to, the adverse effect of the Pandemic on the economy, our
+vendors, our employees and customers and customer sentiment in general. Continued impacts of the Pandemic have materially adversely impacted global economic conditions, and could impact our business,
+results of operations and financial condition. The extent of the impact of the Pandemic on our business and financial results and volatility of our stock price will depend largely on future
+developments, including the duration of the spread of the outbreak, the impact on capital and financial markets and the related impact on the
+financial circumstances of our customers, all of which are highly uncertain and cannot be reasonably estimated as of this report. 
+Sale of Segment 
+On May 5, 2020, pursuant to an Asset Purchase Agreement (the "Purchase Agreement") entered in on May 2, 2020, the Company sold the
+assets of its Agriculture and Weather Analytics segment, composed of its ClearAg and ClearPath Weather product lines, to DTN, LLC ("DTN"), an operating company of TBG AG, a Swiss-based holding
+company. See Note 14 "Subsequent Events" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on the sale of the
+Agriculture and Weather Analytics segment. 
+Restructuring 
+On April 30, 2020, in connection with the sale of the Agriculture and Weather Analytics segment, the Board of Directors of
+Iteris, Inc. approved a plan of restructuring that will involve a charge in the range of approximately $1.7 million to $1.9 million in the fiscal quarter ending June 30,
+2020, of which approximately 60% relates to the sale of the Agriculture and Weather Analytics segment. The restructuring charge includes separation costs for certain employees who will not transition
+to DTN and an additional 10 to 15 positions that are being eliminated to right-size the cost structure of the Company. The restructuring is expected to result in a cash expenditure of approximately
+$1.7 million to $1.9 million. The annualized savings from the restructuring charges, excluding those related to the sale, are expected to be in the range of $1.2 million to
+$1.3 million. The amounts stated above are preliminary and subject to change as the Company finalizes its assessment of the charges and savings associated with the above items. 
+Products and Services 
+Our reportable segments consist of: Roadway Sensors, Transportation Systems, and, prior to May 5, 2020, Agriculture and Weather
+Analytics. 
+The
+Roadway Sensors segment provides various advanced detection sensors and systems for traffic intersection management, communication systems and roadway traffic data collection
+applications. The Roadway Sensors product line uses advanced image processing technology and other techniques to capture and analyze sensor data through sophisticated algorithms, enabling vehicle,
+bicycle and pedestrian detection, as well as the transmission of both video images and data using various communication technologies. The Transportation Systems segment provides traffic engineering
+and consulting services, as well as managed services, performance measurement, traffic analytics, traveler information and commercial vehicle operating software solutions. The Agriculture and Weather
+Analytics segment includes ClearPath Weather, our road maintenance applications, and ClearAg, our digital agriculture platform. 
+5 
+Table of Contents 
+See
+Note 12 "Business Segments, Significant Customer and Geographic Information" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of
+this report for further details on our reporting segments. See Note 14 "Subsequent Events" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this
+report for further details on the sale of the Agriculture and Weather Analytics segment. 
+Roadway Sensors 
+Our Roadway Sensors products include, among others, Vantage, VantageLive!, Vantage Next®, VantagePegasus, VantageRadius, Vantage
+Vector, Velocity, SmartCycle, SmartCycle Bike Indicator, SmartSpan, VersiCam, PedTrax and P-Series products. 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in traffic
+management systems. Vantage detection systems typically include up to four of our advanced cameras or radar devices. Our Vantage systems give traffic managers the tools to mitigate roadway congestion
+by visualizing and analyzing traffic patterns allowing them to modify traffic signal timing to improve traffic flow. Our various software components complement our Vantage detection systems by
+providing integrated platforms to manage and view detection assets remotely over a network connection, as well as mobile application for viewing anywhere. 
+• Our Vantage Vector video/radar hybrid product is an all-in-one detection sensor with a wide range of capabilities, including stop bar and
+advanced zone detection, which enable advanced safety and adaptive control applications. Vantage Vector includes all of the benefits of Iteris video detection, including high accuracy,
+high-availability remote viewing of video images, bicycle and pedestrian detection capability, and dilemma-zone detection. 
+• VantageLive! is a cloud-based platform that allows users to collect, process and analyze advanced intersection data, as well as to view and
+understand intersection activity. 
+• All of our Vantage systems are available with SmartCycle capability, which can effectively differentiate between bicycles and other vehicles
+with a single video detection camera, enabling more efficient signalized intersections, improved traffic throughput and increased bicyclist safety. 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. 
+• The SmartCycle Bike Indicator, which leverages the SmartCycle bicycle detection algorithm, is a device that mounts onto traffic signals and
+illuminates when cyclists waiting at an intersection have been detected, allowing cyclists to avoid interacting with vehicle traffic to push pole-mounted buttons. 
+• Our Vantage systems are also available with the PedTrax capability, which provides bi-directional counting and speed tracking of pedestrians
+within the crosswalk to help improve signal timing efficiency, as well as providing an additional data stream to existing vehicle and bicycle counts. 
+• 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. 
+We
+believe that future growth domestically and internationally, 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. 
+In
+select territories, we also sell certain complementary original equipment manufacturer ("OEM") products for the traffic intersection market, which include, among other things, traffic
+signal controllers and traffic signal equipment cabinets. 
+6 
+Table of Contents 
+Transportation Systems 
+Our Transportation Systems segment includes engineering and consulting services, performance measurement and traffic analytics solutions, as
+well as the development of transportation management and traveler information systems for the ITS industry. Our Transportation Systems services include planning, design, development and implementation
+of software and hardware-based ITS 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, implementation, operation and management of
+surface transportation infrastructure systems. We perform analysis and study goods movement, commercial vehicle operations, provide travel demand forecasting and systems engineering, and identify
+mitigation measures to reduce traffic congestion. The Transportation Systems segment also includes the operations of AGI beginning July 2, 2019 (see Note 11 "Acquisition" of the Notes to
+Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on the acquisition of AGI). 
+The
+Transportations Systems segment also includes our performance measurement and traffic analytics solutions, Iteris Signal Performance Measures (SPM), Iteris ClearGuide, and
+iPeMS—a state-of-the-art analytics software suite that provides prescriptive data insights for multiple applications, including to help determine current and future traffic patterns,
+permitting the effective performance analysis and management of traffic infrastructure resources. Our analytics suite of products 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. These applications are also capable of providing users with predictive traffic
+analytics, and easy-to-use visualization and animation features based on historical traffic conditions. 
+This
+segment also includes our advanced traveler information system solutions and services, as well as our commercial vehicle operations and vehicle safety compliance platforms, known as
+"ClearFleet", "CVIEW-Plus," "CheckPoint," "UCRLink" and "inspect." These software applications support state-based commercial vehicle operations by storing and distributing intrastate and interstate
+commercial vehicle information for local, state and federal agencies' roadside and enforcement operations. 
+Our
+Transportation Systems segment is largely dependent upon state and local governmental funding, and to a lesser extent federal governmental funding. In addition, various other funding
+mechanisms exist to support transportation infrastructure and related projects, including, but not limited to, 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 continue to be dependent at least in part on the federal and local government's use of funds, and as in the past,
+our Transportation Systems business has been, at times, adversely affected by governmental budgetary issues. Delays in the allocation of funds may prolong uncertainty regarding the allotment of
+transportation funds in federal, state and local budgets. 
+Agriculture and Weather Analytics 
+The Agriculture and Weather Analytics segment, which we sold in May 2020, consisted of ClearPath Weather, a road maintenance application, and
+ClearAg, a digital agriculture platform. 
+ClearPath
+Weather is a web-based solution, which includes a suite of tools that apply data assimilation and modeling technologies to assess weather conditions for customizable route/site
+weather and pavement forecasting, and render winter road maintenance recommendations for state agencies, municipalities and commercial companies to improve roadway maintenance decisions. 
+7 
+Table of Contents 
+Beginning
+in late 2013, we undertook the development of "ClearAg solutions" for the digital agricultural market. These new products utilize and expand the intellectual property,
+technology base and product suites of our ClearPath Weather solutions. For ClearAg solutions, we developed additional
+scientific and agronomic models and forecasts, expanded our computing infrastructure for additional big data acquisition and processing, and designed distributed delivery vehicles and products. 
+The
+ClearAg solutions combine weather and agronomic data with proprietary land-surface modeling and analytics to solve complex agricultural problems and to increase the efficiency and
+sustainability of farmlands. The ClearAg Platform delivers validation tools for ag inputs, irrigation, field readiness, and harvest solutions giving growers, researchers and other agribusinesses
+access to a comprehensive database of historical, real-time and forecasted weather, soil and plant health information, as well as other information on crop growth. Companies use the ClearAg Platform
+to simulate field conditions and determine how new products may perform on a crop given certain weather and soil conditions. Growers and agribusinesses leverage the ClearAg Platform to determine the
+best times to plant, spray, fertilize, irrigate, and harvest crops. 
+ClearAg
+solutions were offered on a subscription basis, with customers consuming ClearAg through visualization component application programming interfaces ("APIs"). These APIs
+facilitate the integration of ClearAg's analytics and insights with the offerings of large enterprise customers in the agriculture market. 
+On
+May 5, 2020, pursuant to a Purchase Agreement the Company sold the assets of its Agriculture and Weather Analytics segment, composed of its ClearAg and ClearPath Weather
+product lines, to DTN, an operating company of TBG AG, a Swiss-based holding company. As a result of the sale, we no longer operate in the Agriculture and Weather Analytics segment. See Note 14
+"Subsequent Events" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on the sale of the Agriculture and Weather Analytics
+segment. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories we sell through direct
+channels, we use a combination of our own sales personnel and outside sales organizations to sell, oversee installations, and support our products. Our indirect sales channel is comprised of a network
+of independent distributors in the U.S. and select international locations, which sell integrated systems and related products to the traffic management market. In the fourth quarter of our fiscal
+year ended March 31, 2018 ("Fiscal 2018"), we entered into a distribution agreement to expand our northern European sales coverage in the U.K. and Ireland. Our independent distributors 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 distributors 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 various high-quality ITS products to the traffic management market. We
+periodically hold technical training classes for our distributors 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 distributor network to
+accommodate the needs of the market and our customer base. 
+We
+market and sell our Transportation Systems services and solutions and, prior to May 2020, our ClearPath Weather services, primarily to government agencies pursuant to negotiated
+contracts that involve competitive bidding and specific qualification requirements. Most of our contracts are with federal, state and local 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 
+8 
+Table of Contents 
+selected
+members of our engineering, science and information technology teams 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. 
+ClearAg
+solutions were marketed and sold on a subscription basis, under a SaaS license, to seed and crop protection companies, agriculture equipment manufacturers, irrigation solution
+providers, allied providers and other agriculture service providers. 
+We
+have historically had a diverse customer base. For the fiscal year ended March 31, 2020 ("Fiscal 2020"), no individual customer represented greater than 10% of our total
+revenues. For the fiscal year ended March 31, 2019 ("Fiscal 2019) and Fiscal 2018, one individual customer represented greater than 10% of our total revenues. As of March 31, 2020 and
+2019, no individual customer accounted for more than 10% of our total trade accounts receivable. 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in our Roadway Sensors products. Additionally, we procure certain components
+for our Roadway Sensors products from qualified suppliers, both in the U.S. and internationally, 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 Veris
+Manufacturing and MoboTrex, Inc. 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 generally adjust on a monthly basis to control inventory levels. Typically, we do not manufacture any of the hardware used in the
+transportation management and traveler information systems that we design and implement. Our production facility maintains a Quality Management System that is currently certified as conforming to all
+requirements of the ISO 9001:2015 international standard. 
+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 Fiscal 2020, Fiscal 2019 and Fiscal 2018. We believe customer support is a key competitive factor for our Company. 
+Our
+ClearAg solutions were primarily sold as annual subscription services with recurring monthly revenue. As an element of these services, we provided full-time support and customer
+service for such ClearAg solutions. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $67.2 million at March 31, 2020, which included
+$53.4 million related to Transportation Systems, $8.7 million related to Roadway Sensors, and $5.2 million related to Agriculture and Weather Analytics. Typically, we recognize
+approximately more than 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.
+Substantially all of the backlog for Roadway Sensors at March 31, 2020 is expected to be recognized as revenue in the fiscal year ending March 31, 2021 ("Fiscal 2021") and only a small
+portion of the backlog for Agriculture and Weather Analytics was realized prior to its sale in May 2020. At March 31, 2019, we had backlog of approximately $55.4 million, which included
+$44.5 million related to Transportation Systems, $6.2 million related to Roadway Sensors and $4.7 million related to Agriculture and Weather 
+9 
+Table of Contents 
+Analytics.
+The increase in backlog in the current fiscal year was largely due to increased sales and marketing efforts in our Transportation Systems segment during the current fiscal year. 
+Backlog
+is an operational measure representing future unearned revenue amounts believed to be firm that are to be earned under our existing agreements and are not included in deferred
+revenue on our consolidated balance sheets. Backlog does not include announced orders for which definitive contracts have not been executed. We believe backlog is a useful metric for investors, given
+its relevance to total orders. 
+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 
+Our product development activities are mostly conducted at our principal facility in Santa Ana, California, as well as our facilities in Grand
+Forks, North Dakota and Oakland, California. Our research and development costs and expenses were approximately $8.6 million for Fiscal 2020, $7.8 million for Fiscal 2019, and
+$7.9 million for Fiscal 2018. We expect to continue to pursue various product development programs and incur research and development expenditures, primarily in our Roadway Sensors and
+Transportation Systems segments in future periods. 
+We
+believe our engineering and product development capabilities are a competitive strength. We strive to continuously develop new products, technologies, features and functionalities to
+meet the needs of our ever-changing markets, as well as to enhance, improve upon, and refine our existing product lines. We plan to continue to invest in the development of our software offerings that
+include Iteris SPM, iPeMS, Iteris ClearGuide, and Iteris ClearFleet, as well as our other commercial vehicle operations software products. In addition, we intend to continue to invest in further
+enhancements and functionality in our Vantage products family. We believe that developing new and enhanced product
+offerings across our segments and enhancing, refining and marketing our existing products are key components for strong organic growth and profitability. 
+Competition 
+Generally, we 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 detection products, we compete with manufacturers and distributors of other above-ground video camera detection systems and manufacturers and
+distributors of other non-intrusive detection devices (e.g., microwave, infrared, radar, ultrasonic and magnetic detectors), as well as manufacturers and installers of in-pavement inductive
+loop products, which have historically been, and currently continue to be, the predominant vehicle detection system in this market. Additionally, products such as Velocity and VantagePegasus compete
+against various competitors in the travel-time and data communications markets, respectively. 
+10 
+Table of Contents 
+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 the managed services and consulting business lines include a mix of local,
+regional and international engineering services firms. Our competitors in the software business line (e.g., performance measurement and management, advanced traveler information systems, and
+our commercial vehicle operations and vehicle safety compliance platforms) include university affiliated software organizations, venture backed software companies, as well as other multi-disciplinary
+hardware and software corporations. 
+The
+markets in which our Agriculture and Weather Analytics segment operated vary from the commercial sector customers for ClearAg solutions to public sector customers for ClearPath
+Weather solutions. Our competitors vary in number, scope and breadth of the products and services they offer. In the public sector, we competed with some of the same transportation engineering,
+planning and design firms that also compete with our Transportation Systems segment. 
+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 we. 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 have a total of 21 issued U.S. patents, including:
+(i) 14 relating to our Roadway Sensors technologies, four of which were issued in Fiscal 2020 and (ii) 7 relating to our Transportation Systems technologies. Prior to the sale of our
+Agriculture and Weather Analytics segment in May 2020, we had a total of 36 issued U.S. patents relating to our Agriculture and Weather Analytics technologies. Prior to the sale of our Agriculture and
+Weather Analytics in May 2020, we had a total of 14 pending patent applications in the U.S. and 8 total foreign patent applications. The expiration dates of our patents range from 2026 to 2038. We
+intend to pursue additional patent protection to the extent we believe it would be beneficial and cost-effective. 
+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, rapidly evolving technology makes our future success dependent largely upon our ability to successfully achieve continuing innovation. 
+11 
+Table of Contents 
+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 
+As of March 31, 2020, we employed 414 full-time employees and 26 part-time employees, for a total of 440 employees. As a result of the
+sale of our Agriculture and Weather Analytics segment in May 2020 and related restructuring activities, we currently have approximately 348 full-time and 26 part-time employees. None of our employees
+is represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees 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 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; however, as we expand internationally, foreign laws and
+regulations could have a material impact on our business in the future.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+The information required by Item 13 will be either included in the Form 10-K Amendment or is incorporated by reference to our 2020
+Proxy Statement under the heading "Corporate Governance, Board Meetings and Committees" and "Additional Matters—Certain Transactions."

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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 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 effective at a reasonable
+assurance level 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 within
+the time periods specified in the SEC's rules and forms, 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 significant change in our internal controls over financial
+reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of Fiscal 2020 that has materially affected, or is reasonably likely to
+materially affect, our internal controls 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 
+Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
+Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our President and Chief Executive Officer and Chief Financial Officer,
+we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework
+(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal
+Control—Integrated Framework (2013) , our management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of
+March 31, 2020. 
+80 
+Table of Contents 
+The
+Company acquired AGI on June 13, 2019. Management excluded AGI from its assessment of the effectiveness of the Company's internal control over financial reporting as of
+March 31, 2020. AGI's total assets excluded from this assessment was approximately $2.8 million, representing 3% of the Company's consolidated total assets as of March 31, 2020,
+and AGI's total revenue of approximately $6.4 million represented 6% of the Company's consolidated revenue for the year ended March 31, 2020. 
+The
+effectiveness of our internal control over financial reporting as of March 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered public
+accounting firm, as stated in their report, which is included herein. 
+81 
+Table of Contents 
+REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
+To
+the stockholders and the Board of Directors of Iteris, Inc. 
+Opinion on Internal Control over Financial Reporting 
+We have audited the internal control over financial reporting of Iteris, Inc. and subsidiaries (the "Company") as of March 31,
+2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
+the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020, based on criteria
+established in Internal Control—Integrated Framework (2013) issued by COSO. 
+We
+have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the
+year ended March 31, 2020, of the Company and our report dated June 9, 2020, expressed an unqualified opinion on those financial statements and included an explanatory paragraph
+regarding the Company's adoption of Accounting Standards Update 2016-02, Leases , in the year ended March 31, 2020. 
+As
+described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting for Albeck
+Gerken, Inc. ("AGI"), which was acquired on July 2, 2019, and whose financial statements constitute 3% of total assets, and 6% of revenues, of the consolidated financial statements of
+the Company as of and for the year ended March 31, 2020. Accordingly, our audit did not include the internal control over financial reporting for AGI. 
+Basis for Opinion 
+The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
+effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
+on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
+in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
+We
+conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
+internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
+understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
+on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 
+Definition and Limitations of Internal Control over Financial Reporting 
+A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
+financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting
+includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
+of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
+principles, and that receipts and expenditures of the company are being made only 
+82 
+Table of Contents 
+in
+accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
+disposition of the company's assets that could have a material effect on the financial statements. 
+Because
+of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
+periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 
+/s/
+Deloitte & Touche LLP 
+Costa
+Mesa, CA 
+June 9, 2020 
+83 
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+Transactions with Related Persons 
+Since April 1, 2019, other than the agreements and transactions described in “Executive Compensation and Other Matters” above 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 one percent of the average of our total assets at year-end for the last two fiscal years and in which any director, director nominee, 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 had a promissory note, with an interest rate of 6%, owed to us by Maxxess Systems, Inc., which is currently owned by an investor group that includes two former Iteris directors. During Fiscal 2020, Maxxess paid the full amount due on the note, $146,000, to the Company.

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+ITEM 1. BUSINESS 
+Overview 
+Iteris, Inc. (referred to collectively with its wholly-owned subsidiaries, ClearAg, Inc. and Albeck Gerken, Inc. ("AGI"), in this report as "Iteris," the "Company," "we," "our," and "us") is a provider of smart mobility infrastructure management solutions. Our solutions enable public transportation agencies, municipalities, commercial entities and other transportation infrastructure providers to monitor, visualize, and optimize mobility infrastructure to help ensure roads are safe, travel is efficient, and communities thrive. 
+As a pioneer in intelligent transportation systems ("ITS") technology, our intellectual property, advanced detection sensors, mobility and traffic data, software-as-a-service ("SaaS") offerings, specialized consulting services and end-to-end solutions delivered as cloud-enabled managed services represent a comprehensive range of smart mobility infrastructure management solutions that we distribute to customers throughout the United States ("U.S.") and internationally. 
+Prior to the sale of our Agriculture and Weather Analytics segment in May 2020, we combined our intellectual property with enhanced atmospheric, land surface and agronomic modeling techniques to offer smart content and analytic solutions that provided analytical support to large enterprises in the agriculture industry, such as seed and crop protection companies, integrated food companies, and agricultural equipment manufacturers and service providers. 
+We believe our products, solutions and services increase safety and decrease congestion within our communities, while also minimizing environmental impact. 
+We continue to make significant investments to leverage our existing technologies and further expand our advanced detection sensors, transportation performance analytics systems, and specialized consulting services and cloud-enabled managed services in the smart mobility infrastructure management market, and we are always exploring strategic alternatives intended to optimize the value of all of our Company. 
+Iteris was incorporated in Delaware in 1987 and has operated in its current form since 2004. 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 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 "Investor Relations" section of our website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC"). 
+Recent Developments 
+COVID-19 Update 
+The COVID-19 pandemic (the “Pandemic”) has materially adversely impacted global economic conditions. More than 12 months into the Pandemic, COVID-19 continues to have an unpredictable and unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis with travel restrictions, quarantines and "stay-at-home" orders. The uncertainties caused by the Pandemic include, but are not limited to, supply chain disruptions, workplace dislocations, economic contraction, and downward pressure on some customer budgets and customer sentiment in general. While there has been no material impact to our business during the fiscal year ended March 31, 2021 (“Fiscal 2021”), we did experience some work delays due to the Pandemic. Should such conditions become protracted or worsen or should longer-term budgets or priorities of our clients be impacted, the Pandemic could negatively affect our business, results of operations and financial condition. The extent of the impact of the Pandemic on our business and financial results, and the volatility of our stock price will depend largely on future developments, including the duration of the spread of the outbreak, the impact on capital and financial markets, the distribution, rate of adoption and efficacy of vaccines, and the related impact on the budgets and financial circumstances of our customers, all of which are highly uncertain and cannot be reasonably estimated as of the date of this report. 
+Given the uncertainties surrounding the impacts of the Pandemic on the Company's future financial condition and results of operations, the Company has taken certain actions to preserve its liquidity, manage cash flow and strengthen its financial flexibility. Such actions include, but are not limited to, reducing discretionary spending, reducing capital expenditures, 
+4 
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+implementing restructuring activities, and reducing payroll costs, including employee furloughs, pay freezes and pay cuts (see Note 4, Restructuring Activities , to the Consolidated Financial Statements). 
+On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law in the United States. The CARES Act provides relief to U.S. corporations through financial assistance programs and modifications to certain income tax provisions. The Company is applying certain beneficial provisions of the CARES Act, including the payroll tax deferral and the alternative minimum tax acceleration (see Note 6, Income Taxes, to the Consolidated Financial Statements). 
+The Company assessed the impacts of the Pandemic on the estimates and assumptions used in preparing these audited consolidated financial statements. The estimates and assumptions used in these assessments were based on management’s judgment and may be subject to change as new events occur and additional information is obtained. In particular, there is significant uncertainty about the duration and extent of the impact of the Pandemic and its resulting impact on global economic conditions. If economic conditions caused by the Pandemic do not recover as currently estimated by management, the Company’s financial condition, cash flows and results of operations may be materially impacted. See below for areas that required more judgments and estimates as a result of the Pandemic. The Company will continue to assess the effect on its operations by monitoring the spread of the Pandemic and the actions implemented to combat the virus throughout the world and its assessment of the impact of the Pandemic may change. 
+Acquisition of the Assets of TrafficCast International, Inc. 
+On December 6, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with TrafficCast International, Inc. (“TrafficCast”), a privately held company headquartered in Madison, Wisconsin that provides travel information technology, applications and content to customers throughout North America in the media, mobile technology, automotive and public sectors. Under the Purchase Agreement, the Company agreed to purchase from TrafficCast substantially all of its assets, composed of its travel information technology, applications and content (the “ TrafficCast Business”). The transaction closed on December 7, 2020. 
+Under the Purchase Agreement, Iteris purchased from TrafficCast substantially all of the assets used in the conduct of the TrafficCast Business and assumed certain specified liabilities of the TrafficCast Business in exchange for a total purchase price of up to $17.7 million, with $15.0 million paid in cash on the closing date, $1.0 million held back as security for certain post-closing adjustments and post-closing indemnity obligations of TrafficCast, $1.1 million acquisition-related liability, and a $1.0 million earn out, fair valued at $0.6 million as of March 31, 2021, that if earned, will be paid over two years based on the TrafficCast Business’ achievement of certain revenue targets. The Purchase Agreement also provides for customary post-closing adjustments to the purchase price tied to working capital balances of the TrafficCast Business at closing (see Note 12, Acquisitions , to the Consolidated Financial Statements). 
+The parties also entered into certain ancillary agreements that will provide Iteris with ongoing access to mapping and monitoring services that the TrafficCast Business uses to support its real-time and predictive travel data and associated content. 
+Sale of Agriculture and Weather Analytics Segment 
+On May 5, 2020, the Company completed the sale of substantially all of our assets used in connection with our Agriculture and Weather Analytics segment to DTN, LLC (“DTN”), an operating company of TBG AG, a Swiss-based holding company, pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) signed on May 2, 2020, in exchange for a total purchase consideration of $12.0 million, subject to working capital adjustments. Upon closing on May 5, 2020, the Company received $10.5 million in cash and $1.5 million of deferred payment, of which $1.45 million has been paid by DTN at the 12-month anniversary of the closing date, and $0.05 million will be paid by DTN at the 18-month anniversary of the closing date, subject to satisfactions of the conditions set forth in the Purchase Agreement relating to the transition of certain customers to DTN and the collection of certain receivables by DTN (see Note 3, Discontinued Operations , to the Consolidated Financial Statements). 
+Restructuring Activities 
+On April 30, 2020, in connection with the sale of the Agriculture and Weather Analytics segment, the Board of Directors of Iteris, Inc. approved restructuring activities to better position the Company for increased profitability and growth. Restructuring charges of approximately $1.5 million were incurred for separation costs for certain employees who did not transition to DTN, additional positions that were eliminated to right-size the cost structure of the Company, and the impairment of certain lease-related assets (see Note 4, Restructuring Activities , to the Consolidated Financial Statements). 
+Public Offering and Acquisition of Albeck Gerken, Inc. 
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+On June 13, 2019, the Company completed an underwritten public offering of 6,182,797 shares of the Company's common stock for net proceeds to the Company of approximately $26.8 million, after deducting underwriting discounts and estimated offering expenses payable by the Company. The Company used approximately $6.2 million of the net proceeds of this offering to pay the cash portion of the purchase price in the acquisition of AGI, a privately-held professional transportation engineering services firm headquartered in Tampa, Florida (see Note 12, Acquisitions , to the Consolidated Financial Statements), and plans to use the balance of the net proceeds for general corporate purposes and possibly for other future acquisitions. 
+Products and Services 
+Our reportable segments consist of: Roadway Sensors and Transportation Systems. 
+The Roadway Sensors segment provides advanced detection sensors and systems for traffic management that collectively comprise our family of Vantage sensors and BlueTOAD line of products, as well as communication systems and roadway traffic data collection applications that complement our sensor products. The Vantage product line uses advanced image processing technology, radar technology and other techniques to capture and analyze sensor data through sophisticated algorithms, enabling vehicle, bicycle and pedestrian detection, as well as the transmission of both video images and multiple data sets using various communication technologies. The Roadway Sensors segment also includes the public sector operations of TrafficCast beginning December 7, 2020 (see Note 12, Acquisitions , to the Consolidated Financial Statements). 
+The Transportation Systems segment provides traffic engineering and specialized consulting services, cloud-enabled managed services, transportation performance measurement and traffic analytics solutions, as well as the development of transportation management and traveler information systems for the smart mobility infrastructure management industry. The Transportation Systems segment also includes the operations of AGI beginning July 2, 2019 as well as the commercial operations of TrafficCast beginning December 7, 2020 (see Note 12, Acquisitions , to the Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on the acquisitions of AGI and TrafficCast). 
+With the company’s adoption of the ClearMobility platform we have started aligning our portfolio of solutions under a common branding structure called ClearMobility. We believe this alignment to the ClearMobility Platform will drive internal synergies in our development and sales efforts, as well as increase our market recognition across our entire suite of solutions. As a result of this alignment, the Company’s chief operating decision maker (“CODM”) is evaluating our management and operating structure and as a result of this evaluation we anticipate that we will report as a single operating segment starting with our fiscal year 2022. 
+In the fourth quarter of the 2021 fiscal year, we launched the ClearMobility Cloud, our open-architecture cloud framework for smart mobility infrastructure management. The ClearMobility Cloud’s mobility data management engine, application programming interface ("API") framework and microservices ecosystem provide standardized data ingestion, cleansing and analytics, as well as authentication and security for each component of the ClearMobility Platform. The ClearMobility Cloud sets the foundation for horizontally scalable data processing, third-party extensibility, and secure, policy-based access to public transportation agencies and commercial entities throughout the United States and internationally. 
+See Note 13, Business Segments, Significant Customer and Geographic Information, to the Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on our reporting segments. 
+Roadway Sensors 
+Our Roadway Sensors products include, among others, Vantage, VantageLive!, Vantage Next, VantagePegasus, VantageRadius, Vantage Vector, Velocity, SmartCycle, SmartCycle Bike Indicator, SmartSpan, VersiCam, PedTrax, P-Series products, BlueTOAD Spectra, BlueTOAD Spectra RSU, and BlueARGUS. 
+• Our Vantage detection systems detect vehicle presence at intersections, as well as vehicle count, speed and other traffic data used in traffic management systems. Vantage detection systems typically include up to four of our advanced cameras and/or radar devices. Our Vantage systems give traffic managers the tools to mitigate roadway congestion by visualizing and analyzing traffic patterns, allowing them to modify traffic signal timing to improve traffic flow. Our various software components complement our Vantage detection systems by providing integrated platforms to manage and view detection assets remotely over a network connection, as well as mobile application for viewing anywhere. 
+• Our Vantage Vector video/radar hybrid product is an all-in-one detection sensor with a wide range of capabilities, including stop bar and advanced zone detection, which enable advanced safety and adaptive control applications. 
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+Vantage Vector includes all of the benefits of Iteris video detection, including high accuracy, high-availability remote viewing of video images, bicycle and pedestrian detection capability, and dilemma-zone detection. 
+• VantageLive! is a cloud-based platform that allows users to collect, process and analyze advanced intersection data, as well as to view and understand intersection activity. 
+• All of our Vantage systems are available with SmartCycle capability, which can effectively differentiate between bicycles and other vehicles with a single video detection camera, enabling more efficient signalized intersections, improved traffic throughput and increased bicyclist safety. 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. 
+• The SmartCycle Bike Indicator, which leverages the SmartCycle bicycle detection algorithm, is a device that mounts onto traffic signals and illuminates when cyclists waiting at an intersection have been detected, allowing cyclists to avoid interacting with vehicle traffic to push pole-mounted buttons. 
+• Our Vantage systems are also available with the PedTrax capability, which provides bi-directional counting and speed tracking of pedestrians within the crosswalk to help improve signal timing efficiency, as well as providing an additional data stream to existing vehicle and bicycle counts. 
+• 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. 
+• BlueTOAD Spectra is a complete system for identifying the travel times of vehicles using advanced Bluetooth re-identification techniques. This provides traffic flow information for vehicle travel as well as Origin-Destination information. 
+• BlueARGUS collects, analyzes and visualizes various information related to travel times, speeds, O-D, as well as connected vehicle information from the BlueTOAD Spectra RSU. 
+• BlueTOAD Spectra RSU is a full-featured connected vehicle and travel time information system. In addition to travel times and vehicle speeds it communicates vital safety and mobility information via both DSRC and C-V2X from infrastructure to vehicles and other users. 
+We believe that future growth domestically and internationally, will be dependent in part on the continued adoption of above-ground video and radar detection technologies, instead of traditional in-pavement loop technology, to manage traffic. 
+In select territories, the Roadway Sensors segment also sells certain complementary original equipment manufacturer ("OEM") products for the traffic intersection market, which include, among other things, traffic signal controllers and traffic signal equipment cabinets. 
+Transportation Systems 
+Our Transportation Systems segment includes engineering and specialized consulting services, transportation performance measurement and traffic analytics solutions, end-to-end solutions delivered as cloud-enabled managed services, as well as the development of transportation management and traveler information systems for the smart mobility infrastructure management industry. Our Transportation Systems services include planning, design, development and implementation of software and hardware-based ITS 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, implementation, operation and management of surface transportation infrastructure systems. We perform analysis and study goods movement, commercial vehicle operations, provide travel demand forecasting and systems engineering, and identify mitigation measures to reduce traffic congestion. The Transportation Systems segment also includes the commercial sector operations of TrafficCast beginning December 7, 2020 (see Note 12, Acquisitions , to the Consolidated Financial Statements). 
+The Transportations Systems segment product line includes: the Iteris Signal Performance Measures ("Iteris SPM") and iPeMS traffic signal performance and traffic analytics software suites, the capabilities and customers of which have now respectively been incorporated into and migrated to ClearGuide, our state-of-the-art mobility intelligence and transportation performance measures solution; our advanced traveler information system ("ATIS") solution for public transportation agencies, ClearRoute; and our ATIS solution for the enterprise and commercial sector, TrafficCarma. Our analytics suite of products 
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+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, whether at the intersection level, arterial and corridor level, or highway level. This information can then be analyzed by traffic professionals to measure how a transportation network is performing and to identify potential areas of improvement. These applications are also capable of providing users with predictive traffic analytics, and easy-to-use visualization and animation features based on historical traffic conditions. 
+This segment also includes our commercial vehicle operations and vehicle safety compliance platforms, known as "ClearFleet", "CVIEW-Plus", "CheckPoint", "UCRLink" and "Inspect". These software applications support state-based commercial vehicle operations by storing and distributing intrastate and interstate commercial vehicle information for local, state and federal agencies' roadside and enforcement operations. 
+Our Transportation Systems segment is largely dependent upon state and local governmental funding, and to a lesser extent federal governmental funding. In addition, various other funding mechanisms exist to support transportation infrastructure and related projects, including, but not limited to, 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 continue to be dependent at least in part on the federal and local government's use of funds, and as in the past, our Transportation Systems business has been, at times, adversely affected by governmental budgetary issues. Delays in the allocation of funds may prolong uncertainty regarding the allotment of transportation funds in federal, state and local budgets. 
+Sales and Marketing 
+We currently sell our Roadway Sensors products through both direct and indirect sales channels. In the territories we sell through direct channels, we use a combination of our own sales personnel and outside sales organizations to sell, oversee installations, and support our products. Our indirect sales channel comprises a network of independent distributors in the U.S. and select international locations, which sell integrated systems and related products to the traffic management market. Our independent distributors are trained in and primarily responsible for the sales, installation, set-up and support of our products. They maintain an inventory of demonstration traffic products from various manufacturers, and sell directly to government agencies and installation contractors. These distributors 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 various high-quality ITS products to the traffic management market. We periodically hold technical training classes for our distributors 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 distributor network to accommodate the needs of the market and our customer base. 
+We market and sell our Transportation Systems services and solutions primarily to government agencies pursuant to negotiated contracts that involve competitive bidding and specific qualification requirements. Most of our contracts are with federal, state and local 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 Transportation Systems contracts generally involve long lead times and require extensive specification development, evaluation and price negotiations. 
+With the acquisition of the TrafficCast Business on December 7, 2020, we expanded our customer segments to now sell traffic and mobility data and software through a direct sales model to commercial enterprises, such as media companies involved in providing real-time traffic data and traffic incident data to both automotive OEMs and the traveling public. 
+We have historically had a diverse customer base. For Fiscal 2021 and fiscal year ended March 31, 2020 ("Fiscal 2020"), no individual customer represented greater than 10% of our total revenues. For the fiscal year ended March 31, 2019 ("Fiscal 2019"), one individual customer represented greater than 10% of our total revenues. As of March 31, 2021 and 2020, no individual customer accounted for more than 10% of our total trade accounts receivable. 
+Manufacturing and Materials 
+We use contract manufacturers to build subassemblies that are used in our Roadway Sensors products. Additionally, we procure certain components for our Roadway Sensors products from qualified suppliers, both in the U.S. and internationally, 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 Veris Manufacturing and MoboTrex, Inc. 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 generally adjust on a monthly basis to control 
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+inventory levels. Typically, we do not manufacture any of the hardware used in the transportation management and traveler information systems that we design and implement. Our production facility maintains a Quality Management System that is currently certified as conforming to all requirements of the International Organization for Standardization ("ISO") 9001:2015 international standard. 
+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 Fiscal 2021, Fiscal 2020 and Fiscal 2019. We believe customer support is a key competitive factor for our Company. 
+Backlog 
+Our total backlog of unfulfilled firm orders was approximately $78.1 million at March 31, 2021, which included $66.5 million related to Transportation Systems and $11.6 million related to Roadway Sensors. We expect to recognize revenue of approximately 73% of our Transportation Systems and 27% of our Roadway Sensors backlog including TrafficCast's commercial business as of the end of a fiscal year in the subsequent fiscal year. At March 31, 2020, we had backlog of approximately $62.1 million, which included $53.4 million related to Transportation Systems and $8.7 million related to Roadway Sensors. The increase in backlog in the current fiscal year was largely due to the additions of TrafficCast backlog of approximately $10.6 million and a slight increase in Transportation Systems backlog due to a few larger contracts. 
+Backlog is an operational measure representing future unearned revenue amounts believed to be firm that are to be earned under our existing agreements and are not included in deferred revenue on our consolidated balance sheets. Backlog does not include announced orders for which definitive contracts have not been executed. We believe backlog is a useful metric for investors, given its relevance to total orders. 
+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 
+Our product development activities are mostly conducted at our principal facility in Santa Ana, California, as well as our facilities in Madison, Wisconsin and Oakland, California. Our research and development costs and expenses were approximately $5.1 million for Fiscal 2021, $4.3 million for Fiscal 2020, and $3.8 million for Fiscal 2019. We expect to continue to pursue various product development programs and incur research and development expenditures in both our Roadway Sensors and Transportation Systems segments in future periods. 
+We believe our engineering and product development capabilities are a competitive strength. We strive to continuously develop new products, technologies, features and functionalities to meet the needs of our ever-changing markets, as well as to enhance, improve upon, and refine our existing product lines. We plan to continue to invest in the development of further enhancement and functionality of our ClearMobility Platform, which includes among other things our software offering in our Transportation Systems segment, as well as our Vantage products family in our Roadway Sensors segment. 
+During Fiscal 2020, we successfully released ClearGuide, our state-of-the-art transportation performance measures solution, designed to help transportation agencies achieve safer, more efficient mobility for their networks. Certain development costs were capitalized into intangible assets in the consolidated balance sheets; however, certain costs did not meet the criteria for capitalization under GAAP and are included in research and development expense. Going forward, we expect to continue to invest in our solutions. This continued investment may result in increases in research and development costs, as well as additional capitalized software in future periods. 
+Competition 
+Generally, we 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. 
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+In the market for our Roadway Sensors detection products, we compete with manufacturers and distributors of other above-ground video camera and radar detection systems and manufacturers and distributors of other non-intrusive detection devices (e.g., microwave, infrared, radar, ultrasonic and magnetic detectors), as well as manufacturers and installers of in-pavement inductive loop products, which have historically been, and currently continue to be, the predominant vehicle detection system in this market. Additionally, products such as Velocity, BlueTOAD and VantagePegasus compete against various competitors in the travel-time and data communications markets, respectively. 
+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 the managed services and consulting business lines include a mix of local, regional and international engineering services firms. Our competitors in the software business line (e.g., performance measurement and management, advanced traveler information systems, and our commercial vehicle operations and vehicle safety compliance platforms) include university affiliated software organizations, venture backed software companies, as well as other multi-disciplinary hardware and software corporations. 
+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 we. 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 have a total of 25 issued U.S. patents, including: (i) 15 relating to our Roadway Sensors technologies, (ii) 7 relating to our Transportation Systems technologies and (iii) 3 related to our purchase of the TrafficCast Business. We had a total of 2 pending patent applications in the U.S. We currently have 3 issued foreign patents and 2 foreign patent applications related to our purchase of the TrafficCast Business. The expiration dates of our patents range from 2026 to 2039. We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost-effective. 
+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, rapidly evolving technology makes our future success dependent largely 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 
+As of March 31, 2021, we employed 415 full-time employees and 24 part-time employees, for a total of 439 employees. None of our employees is represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees are good. 
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+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; however, as we expand internationally, foreign laws and regulations could have a material impact on our business in the future.

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+ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
+The information required by Item 13 will be either included in the Form 10-K Amendment or is incorporated by reference to our 2021 Proxy Statement under the heading "Corporate Governance, Board Meetings and Committees" and "Additional Matters—Certain Transactions."

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+ITEM 9A. CONTROLS AND PROCEDURES 
+(a) Evaluation of disclosure controls and procedures 
+Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. 
+Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission's rules and forms, and 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 was required to apply its judgment in evaluating the cost-benefit relationship of such controls and procedures. 
+(b) Changes in internal control 
+There was no significant change in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of Fiscal 2021 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 
+(c) 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. 
+(d) Management's Report on Internal Control Over Financial Reporting 
+Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles. 
+Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of March 31, 2021. 
+The Company acquired substantially all the assets of TrafficCast International, Inc. on December 7, 2020. Management excluded TrafficCast from its evaluation as of the end of the period covered by this Annual Report. TrafficCast's total assets excluded from this evaluation was approximatel y $3.2 million, representing 3% o f the Company's consolidated total assets as of 
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+March 31, 2021, and TrafficCast's total revenue of approxi mately $4.0 million represented 3% of the Company's consolidated revenue for the fiscal year ended March 31, 2021. 
+The effectiveness of our internal control over financial reporting as of March 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein. 
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+REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
+To the stockholders and the Board of Directors of Iteris, Inc. 
+Opinion on Internal Control over Financial Reporting 
+We have audited the internal control over financial reporting of Iteris, Inc. and subsidiaries (the "Company") as of March 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO. 
+We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2021, of the Company and our report dated June 1, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company's adoption of Accounting Standards Update 2016-02, Leases , in the year ended March 31, 2020. 
+As described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting for TrafficCast International, Inc. ("TrafficCast"), which was acquired on December 7, 2020, and whose financial statements constitute 3% of total assets, and 3% of revenues, of the consolidated financial statements of the Company as of and for the year ended March 31, 2021. Accordingly, our audit did not include the internal control over financial reporting for TrafficCast. 
+Basis for Opinion 
+The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
+We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 
+Definition and Limitations of Internal Control over Financial Reporting 
+A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. 
+Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 
+/s/ Deloitte & Touche LLP 
+Costa Mesa, CA 
+June 1, 2021 
+75 
+Table of Contents

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+Certain Transactions with Related Persons 
+Since April 1, 2020, other than the agreements and transactions described in “Executive Compensation and Other Matters” above, 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 one percent of the average of our total assets at year-end for the last two fiscal years and in which any director, director nominee, 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.