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Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. sustainable for everyone. impact. 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. products, will be dependent in part on the continued replacement of adoption of traditional in-pavement loop technology with above-ground video and radar detection technologies to manage traffic. Sales and Marketing selected members of our traffic engineering, mobility consulting, data science and the traveling public. timing of the receipt of some large contracts. revenues. ClearMobility Platform. The markets in which 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 BlueTOAD and VantagePegasus compete against various competitors in the travel-time and data communications markets, respectively. 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. delays or reductions in other state and local funding dedicated for transportation and ITS projects; Our profitability could be adversely affected if we are not able to maintain adequate utilization of our (949) 270-9400(512) 716-0808Title of each class Trading Symbol(s) Name of each exchange on which
registeredCommon Stock, $0.10 par value ITI The NASDAQNasdaq Stock Market LLCLarge accelerated filer oo Accelerated filer ýý Non-accelerated filer oo Smaller reporting company ý Emerging growth company o oý20192021 was approximately $233,300,000.$223,257,646. For the purposes of this calculation, shares owned by officers, directors and 10% stockholders known to the registrant have been deemed to be owned by affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of May 29, 2020,31, 2022, there were 40,732,99442,429,597 shares of our common stock outstanding.20202022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission.2020
2022 PART IITEM 1.BUSINESS4RISK FACTORS12PROPERTIES26SELECTED FINANCIAL DATA27 PART IIIClearGuide™ClearGuide®, ClearFleet™ClearFleet®, ClearMobility™, ClearRoute™, CVIEW-Plus™, Edge®, EdgeConnect™, inspect™Inspect™, iPeMS®, Iteris®, Iteris SPM™SPM®, Next®, P10™, P100™, P-Series™, PedTrax®, Pegasus™, Reverse 511®, SmartCycle®, SmartCycle Bike Indicator™Indicator®, SmartSpan®, SPM™Spectra™, SPM® (logo), TrafficCarma®, UCRLink™, Vantage®, Vantage Apex™, VantageFusion™, VantageLive!™®, Vantage Next®, VantagePegasus®, VantageRadius®, Vantage Vector®, Velocity® and VersiCam™ are among, but not all of, the trademarks of Iteris, Inc. Any other trademarks or trade names mentioned herein are the property of their respective owners.impact of planned acquisitions and dispositions, the Company's strategy for growth,services, competition, thestatements concerning any potential future impact of the outbreak of a novel strain of coronavirus disease COVID-19 pandemic on our business, the impact of any current or future litigation, the impact of recent accounting pronouncements, the impact of current supply chain constraints, the applications for and acceptance of our products and services, and the status of our facilities and product development.development, the impact of the sale of our Agriculture and Weather Analytics Business, and the impact of the acquisition of substantially all of the assets of TrafficCast International, Inc. These statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause our actual results to differ materially from those projected. You should not place undue reliance on these forward-looking statements that speak only as of the date hereof. We encourage you to carefully review and consider the various disclosures made by us which describe certain factors which could affect our business, including in "Risk Factors" set forth in Part I, Item 1A of this report, before deciding to invest in our company or to maintain or increase your investment. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, including to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.essential applied informatics that enable smart transportation. Municipalities, governmentmobility infrastructure management solutions. Our cloud-enabled end-to-end solutions help public transportation agencies, municipalities, commercial entities and other businesses use our solutionstransportation infrastructure providers monitor, visualize, and optimize mobility infrastructure to make roads safermobility safe, efficient and travel more efficient.for more than two decades, our intellectual property, productsadvanced detection sensors, mobility and traffic data, software-as-a-service ("SaaS") offerings, offermobility consulting services and end-to-end solutions delivered as cloud-enabled managed services represent a comprehensive range of ITSsmart mobility infrastructure management solutions that we distribute to our 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.improveincrease safety and safely optimize mobilitydecrease congestion within our communities, while also minimizing environmental impact on our roadways.expand bothenhance our advanced detection sensors, mobility intelligence software, mobility data sets, mobility consulting services, and performance analytics systems in the transportation infrastructure marketcloud-enabled managed services. As we are always mindful of capital allocation, we apply significant effort to evaluate and prioritize these investments. Likewise, we are always exploring strategic alternatives intended to optimize the value of all of our Company.1700 Carnegie Avenue, Santa Ana, California 92705,1250 S Capital of Texas Hwy, Bldg. 1, Suite 330, Austin TX 78746, and our telephone number at that location is (949) 270-9400.(512) 716-0808. 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").11, "Acquisition" of12, Acquisitions, to the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for further details on the acquisition of AGI)Statements), and plans to use the balance of the net proceeds for general corporate purposes and possibly for other future acquisitions.
Sale of Agriculture and Weather Analytics BusinessCoronavirus 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 Segmentpursuant to an Asset Purchase Agreement (the "Purchase Agreement") entered in on May 2, 2020, the Company soldcompleted the sale of substantially all of our assets of itsused in connection with our former Agriculture and Weather Analytics segment, composed of its ClearAg and ClearPath Weather product lines,business to DTN, LLC ("DTN"(“DTN”), an operating company of TBG AG, a Swiss-based holding company. See Note 14 "Subsequent Events"company, pursuant to an Asset Purchase Agreement (the “AWA 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, the Company received $10.5 million in cash and $1.5 million of payment was deferred. DTN paid the Company $1.45 million at the 12-month anniversary of the Notesclosing date, and $0.05 million at the 18-month anniversary of the closing date. (See Note 3, Discontinued Operations, to the Consolidated Financial Statements.)saleacquisition of TrafficCast).AgricultureIteris ClearMobility Cloud, a suite of data integration and Weather Analytics segment.Restructuring On April 30, 2020, in connection with the saleanalytics engines that aggregates and validates both proprietary and diversely sourced data inputs, including incidents, construction and connected vehicle GPS probes. Following processing and quality assurance, ClearData reflects real-time road conditions and is delivered to public- and private-sector customers via subscription-based direct data feeds or application programming interfaces (APIs), or through ClearGuide, our mobility intelligence and transportation performance measures software solution. The complex, dynamic nature of the Agricultureroadway traffic cannot be explained by any single data source. ClearData resolves data conflicts through proprietary algorithms and Weather Analytics segment, the Board of Directors of selective quality control from experienced traffic analysts.Inc. approved a plan of restructuringoffers advanced intersection detection and other fixed traffic sensors 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 Agriculturecollectively comprise our two sensor families – Vantage 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, communicationBlueTOAD. Increasingly, we bundle communications systems and roadway traffic data collection applications. applications (e.g., VantageLive! and BlueARGUS) with our sensor products.Roadway Sensors product lineVantage family of sensors uses advanced image processing technology, radar technology and other techniques to capture and analyze sensor data through sophisticated algorithms, enablingobserve multi-modal traffic (e.g., vehicle, bicycle, and pedestrian detection, as well aspedestrian), translate these observations into structured data, and apply sophisticated, proprietary algorithms to this structured data to optimize traffic signal performance in real-time. Certain Vantage sensors apply machine learning techniques for enhanced object classification. In addition to detecting the transmissionpresence 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,objects, our road maintenance applications, and ClearAg, our digital agriculture platform. 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 asrecord vehicle count, speed and other traffic datainformation used in traffic management systems. Vantage detection systems typically include up to four ofThus, 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 The Vantage family of sensors includes Vantage Apex, Vantage Fusion, Vantage Next, VantagePegasus, VantageRadius, Vantage Vector, video/Velocity, SmartCycle, SmartCycle Bike Indicator, SmartSpan, VersiCam, PedTrax, and P-Series products.productsensor with integrated artificial intelligence (AI) algorithms. Vantage Apex provides precise and detailed detection, tracking and classification of traffic.an all-in-onea hybrid video and radar 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 enablingis available with all of our Vantage systems. SmartCycle enables 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 Our Vantage systems arethe PedTrax capability, whichall of our Vantage systems, provides bi-directional pedestrian 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.ouran 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 believefuture growth domesticallyenables advanced analytics through our SaaS offerings. The BlueTOAD family of sensors includes BlueTOAD Spectra and internationally, will be dependent in part onBlueTOAD Spectra RSU, both of which we bundle with a Cloud-based software application branded as BlueARGUS.continued adoptiontravel times of above-ground video detection technologies, instead of traditional in-pavement loop technology,vehicles using advanced Bluetooth re-identification techniques. This provides traffic flow information for vehicle travel as well as Origin-Destination information.manage traffic.wethe Company also sellsells 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.TableContentsTransportation SystemsTransportation Systems segment includestraffic engineering and mobility 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 also 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 includesoperations of AGI beginning July 2, 2019 (see Note 11 "Acquisition"company’s introduction of the Notes to Consolidated Financial Statements, included in Part II, Item 8ClearMobility Platform, we aligned our entire portfolio of solutions under a common branding structure. We believe this report for further details onalignment will drive internal synergies, increase our cross-sell rate, enhance sales productivity, and increase market awareness of our entire solutions portfolio. Additionally, we launched the acquisitionClearMobility Cloud that enables seamless interoperation among our solutions via a common mobility data management engine, applicationtraffic analytics solutions, Iteris Signal Performance Measures (SPM), Iteris ClearGuide, and iPeMS—a state-of-the-art analytics software suitemicroservices ecosystem that provides prescriptivestandardized data insights for multiple applications, including to help determine currentingestion, cleansing, 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 authentication and policy-based security for each component of the ClearMobility Platform. ClearMobility Cloud is both horizontally scalable and third-party extensible.commercial vehicle operationsportfolio of individual solutions to a common platform, the Company’s chief operating decision maker (“CODM”) evaluates financial and vehicle safety compliance platforms, knownoperational performance holistically. As such, in fiscal 2022 we began reporting 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 segmenta single operating segment.largelyattributable to public-sector customers. Therefore, most of our revenue is dependent upon state and local governmentalgovernment funding, and to a lesser extent federal governmental funding. In addition,some cases, this funding is appropriated annually through the respective legislative process. In other cases, various otherdedicated funding mechanisms exist to support transportation infrastructure and related projects, including, but not limited to bonds, dedicated sales and gas tax measures, vehicle and permit fees, and other alternative dedicated funding sources. Additionally, some of our activities may be funded through bond measures.thethat overall expansion ofdemand for our Transportation Systems segment in the futuresolutions 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,may be, at times, adversely affected by governmental budgetary issues. DelaysTherefore, we were pleased that the Infrastructure Investment and Jobs Act ("IIJA") became effective on November 15, 2021. The IIJA will contribute $1.2 trillion to fund physical infrastructure and public works, adding $550 billion to existing levels of transportation-specific funding. With that funding pool, areas of direct relevant to Iteris include $110 billion for roads, bridges and major projects, $39 billion for public transit, and $11 billion for transportation safety. However, 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. 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. 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.Transportation Systemssoftware, mobility data, managed services, traffic engineering, and solutions and, prior to May 2020, our ClearPath Weathermobility consulting 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 useinformation technologyproduct management teams on a regional basis to serve in sales and business development functions. Our Transportation Systemstraffic engineering and mobility consulting service contracts generally involve long lead times and require extensive specification development, evaluation and price negotiations. ClearAg solutions were marketedsoldBlueTOAD product families along with their related software bundles through both direct and indirect sales channels. Where we sell direct, 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, who 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, as they 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 we maintain a full-time staff of customer support technicians throughout the U.S. to provide technical assistance when needed. When appropriate, we modify or make changes to our distributor network to accommodate the needs of the market and our customer base.subscription basis, under a SaaS license,direct sales model to seedcommercial enterprises, such as media companies involved in providing real-time traffic data and crop protectiontraffic incident data to insurance companies, agriculture equipment manufacturers, irrigation solution providers, allied providersautomotive OEMs and other agriculture service providers.theFiscal 2022, fiscal year ended March 31, 2021 ("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) and Fiscal 2018, one individual customer represented greater than 10% of our total revenues. As of March 31, 20202022 and 2019,2021, no individual customer accounted for more than 10% of our total trade accounts receivable.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-sourcingmanufacturingassembly and test 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 quarterlybi-annual 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 ISOInternational Organization for Standardization ("ISO") 9001:2015 international standard.2020,2022, Fiscal 20192021 and Fiscal 2018.2020. 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.$67.2$99.9 million at March 31, 2020, which included $53.4 million related2022. We expect to Transportation Systems, $8.7 million related to Roadway Sensors, and $5.2 million related to Agriculture and Weather Analytics. Typically, we recognize revenue of approximately more than 70%75% 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.year. At March 31, 2019,2021, 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 WeatherAnalytics.$78.1 million. The increase in backlog in the current fiscal year was largely duegenerally attributable to increased salesoverall strong demand for our products and marketing efforts in our Transportation Systems segment duringservices, as well as the current fiscal year.that are to beand earned under our existing agreements and areagreements. Backlog is not included in deferred revenue on our consolidated balance sheets. Backlog does not include announced orderscontract awards for which definitive contracts have not been executed. We believe backlog is a useful metric for investors, given its relevance to total orders.revenues, in particular for our Roadway Sensors segment. principal facility in Santa Ana, California, as well as our facilities in Grand Forks, North DakotaMadison, Wisconsin and Oakland, California. Our research and development costs and expenses were approximately $8.6$7.4 million for Fiscal 2020, $7.82022, $5.1 million for Fiscal 2019,2021, and $7.9$4.3 million for Fiscal 2018.2020. We expect to continue to pursue various product development programs and incur research and development expenditures primarily in our Roadway Sensors and Transportation Systems segmentsfor the Company in future periods.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 enhancementsenhancement and functionality inof 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. 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.our Transportation Systems segment operates iswe 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 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 and, 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 breadthpublic sector,market for our products, we competed with some of the same transportation engineering, planning and design firms that also compete with our Transportation Systems segment.we.we do. 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.2130 issued U.S. patents, including: (i) 1417 relating to our Roadway Sensorsadvanced sensor technologies, four of which were issued in Fiscal 2020 and (ii) 7 relating to our Transportation Systems technologies. Priorengineering and consulting services technologies and (iii) 6 related to our purchase of the sale of our Agriculture and Weather Analytics segment in May 2020, weTrafficCast Business. 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 142 pending patent applications in the U.S. We currently have 5 issued foreign patents and 8 total2 foreign patent applications.applications related to our purchase of the TrafficCast Business. The expiration dates of our patents range from 2026 to 2038.2040. We intend to pursue additional patent protection to the extent we believe it would be beneficial and cost-effective.2020,2022, we employed 414428 full-time employees and 2616 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-time444 employees. None of our employees isare represented by a labor union, and we have never experienced a work stoppage. We believe our relations with our employees are good.sub-contractorsubcontractor or supplier. We anticipate that revenue from government contracts will continue to remain a significant portion of our revenues. Government business is, in general, subject to special risks and challenges, including:delays in the expenditures from the federal highway bill and We may not be able to achieve profitability on a quarterly or annual basis in the future. We had net losses of approximately $5.6 million in Fiscal 2020, $7.8 million in Fiscal 2019 and $3.5 million in Fiscal 2018, and we cannot assure you that we will be profitable in the future. Our ability to become profitable in future periods could be impacted by governmental budgetary constraints,government and political agendas, economic instability and other items that are not in our control. Furthermore, we rely on operating profits from certain of our business segments to fund investments in sales and marketing and research and development initiatives. We cannot assure you that our financial performance will sustain a sufficient level to completely support those investments. Most of our expenses are fixed in advance. As such, we generally are unable to reduce our expenses significantly in the short-term to compensate for any unexpected delay or decrease in anticipated revenues or increases in planned investments. We may expect to continue to experience operating losses and net losses in Fiscal 2021 and may continue to do so in the future, which would make it difficult to fund our operations and achieve our business plan, and could cause the market price of our common stock to decline.Transportation Systemsengineering and consulting workforce.
confidential information. Any data security event, such as a breach, data loss or information security lapses, whether resulting in the compromise of personal information or the improper use or disclosure of confidential, sensitive or classified information, could result in interruptions, cessation of service(s), claims, remediation costs, regulatory sanctions against us, loss of current and future contracts, adverse effects to results of operations and financial condition, serious harm to our reputation and/or adverse effects to our stock price. We operate our ERP system on a SaaS platform, and we use this system for reporting, planning, sales, audit, inventory control, loss prevention, purchase order management and business intelligence. Accordingly, we depend on this system, and the third-party provider of this service, for a number of aspects of our operations. If this service provider or this system fails, or if we are unable to continue to have access to this system on commercially reasonable terms, or at all, operations would be severely disrupted until an equivalent system could be identified, licensed or developed, and integrated into our operations. This disruption would have a material adverse effect on our business. We carry insurance, including cyber insurance, commensurate
In April 2020, certain internal computer systems at our headquarters in Santa Ana were breached by an intruder, which prevented them temporarily from operating. We immediately took steps to isolate those systems and implemented measures to prevent additional systems from being affected, including taking systems offline as a precaution. The intrusion did not affect any customer-facing systems. Third party forensic experts were engaged to assist our information technology team to restore those affected internal systems to operation. We completed our investigation on June 3, 2020 and we have not experienced, nor do we believe there has been, any material impact to our operating activities nor our controls over financial reporting. To date, we have found no evidence of data exfiltration or misappropriation.
In March 2020, a
financial circumstances of our customers and suppliers, all of which are highly uncertain and cannot be predicted. This situation is changing rapidly,continuously and can be rapid, and additional impacts may arise that we are not aware of currently.
In July 2019, we
- •
- management time and focus may be diverted from operating our business to challenges related to acquisitions and other strategic transactions;
- •cultural challenges may arise associated with integrating employees from the acquired company into our organization, and retention of employees from the businesses we acquire; and•we may fail to successfully further develop the acquired business or technology.Our failure to address the risks and other issues in connection with our past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits and opportunities, including unanticipated liabilities, increased costs, and harm our business generally.We participate in the software development market, which may be subject to various technical and commercial challenges.We have only been in the business of software development for a few years and have in the past and may in the future experience development and technical challenges. Our business and results of operations could also be seriously harmed by any significant delays in our software development activities. Despite testing and quality control, we cannot be certain that errors will not be found in our software after its release. Any faults or errors in our existing products or in any new products may cause delays in product introduction and shipments, require design modifications, or harm customer relationships or our reputation, any of which could adversely affect our business and competitive position. In addition, software companies are subject to litigation concerning intellectual property disputes, which could be costly and distract our management.
Due to delays in the completion of a software development contract with a customer, the Company recorded an estimated loss on the contract during the year ended March 31, 2022. The estimates and assumptions used in these assessments were based upon management's judgment and may be subject to change as new events occur and additional information is obtained. In particular, there remains uncertainty with regards to the additional costs required to fulfill the Company's obligations with regards to the
15contract. If the future estimated costs to fulfill this contract exceed current estimates, the Company's financial condition, cash flows, and results of operations may be materially impacted.If we do not keep pace with rapid technological changes and evolving industry standards, we will not be able to remain competitive, and the demand for our products will likely decline.Our markets are in general characterized by the following factors:•rapid technological advances;•downward price pressures in our target markets as technologies mature;•changes in customer requirements;•additional qualification requirements related to new products or components;•frequent new product introductions and enhancements;•obsolescence of certain parts and components from time to time that may require re-engineering of certain portions of our product;•inventory issues related to transition to new or enhanced models; and•evolving industry standards and changes in the regulatory environment.Our future success will depend upon our ability to anticipate and adapt to changes in technology and industry standards, and to effectively develop, introduce, market and gain broad acceptance of new products and product enhancements incorporating the latest technological advancements.If we are unable to develop and introduce new products and product enhancements in a cost-effective and timely manner, or are unable to achieve market acceptance of our new products, our operating results would be adversely affected.We believe our revenue growth and future operating results will depend on our ability to complete development of new products and enhancements, introduce these products in a timely, cost-effective manner, achieve broad market acceptance of these products and enhancements, and reduce ourproduction costs. During the past few fiscal years, we have introduced, and will continue to introduce this fiscal year, both new and enhanced
products across all segments.products. We cannot guarantee the success of these products, and we may not be able to introduce any new products or any enhancements to our existing products on a timely basis, or at all. In addition, the introduction of any new products could adversely affect the sales of certain of our existing products.We believe that we must continue to make substantial investments to support ongoing research and development in order to develop new or enhanced products and software to remain competitive. We need to continue to prepare updates for existing products and develop and introduce new products that incorporate the latest technological advancements in outdoor image processing hardware, camera technologies, software and analysis in response to evolving customer requirements. In addition, we are beginning to migrate some of our products to a new platform. We cannot assure you that we will be able to adequately manage product transition issues. Our business and results of operations could be adversely affected if we do not anticipate or respond adequately to technological developments or changing customer requirements or if we cannot adequately manage inventory issues typically related to new product transitions and introductions. We cannot assure you that any such investments in research and development will lead to any corresponding increase in revenue.We may need to raise additional capital in the future, which may not be available on terms acceptable to us, or at all.We have historically experienced volatility in our earnings and cash flows from operations from year to year. Should the credit markets further tighten or our business decline, we may need or choose to raise additional capital to fund our operations, to repay indebtedness, pursue acquisitions or expand our operations. Such additional capital may be raised through bank borrowings, or other debt or equity financings. We cannot assure you that any additional capital will be available on a timely basis, on acceptable terms, or at all, and such additional financing may result in further dilution to our stockholders.Our capital requirements will depend on many factors, including, but not limited to:•market acceptance of our products and product enhancements, and the overall level of sales of our products;•our ability to control costs and achieve profitability;16•the supply of key components for our products;•our ability to increase revenue and net income;•increased research and development expenses and sales and marketing expenses;•our need to respond to technological advancements and our competitors' introductions of new products or technologies;•capital improvements to new and existing facilities and enhancements to our infrastructure and systems;•any acquisitions of businesses, technologies, product lines, or possible strategic transactions or dispositions;•our relationships with customers and suppliers;•government budgets, political agendas and other funding issues, including potential delays in government contract awards or commencement of work for a project;•our ability to successfully negotiate credit arrangements with our bank and the state of the financial markets in general; and•general economic conditions, including the effects of the economic slowdowns and international conflicts.If our capital requirements are materially different from those currently planned, we may need additional capital sooner than anticipated. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced and such securities may have rights, preferences and privileges senior to our common stock. Additional equity or debt financing may not be available on favorable terms, on a timely basis, or at all. If adequate funds are not available or are not available on acceptable terms when needed, we may be unable to continue our operations as planned, develop or enhance our products, expand our sales and marketing programs, take advantage of future opportunities or respond to competitive pressures.
The markets in which we operate are highly competitive with many companies more established than we are.We compete with numerous other companiesOur competitors tend to vary across the various product categories inour target markets including, but not limitedwhich we participate.The engineering and consulting market is highly fragmented and is subject to evolving national and regional quality and safety standards. Our competitors vary in size, number, scope and breadth of the products and services they offer, and include large multi-nationalcorporationsengineering firms andmanysmaller local or regionalengineeringfirms.We competeOur sensors line of business competes with existing, well-established companies and technologies,in our Roadway Sensors segment,both domestically and abroad. Only a portion of the traffic intersection market has adopted advanced above-ground detection technologies, and our future success will depend in part upon gaining broader market acceptance for such technologies. Certain technological barriers to entry make it difficult for new competitors to enter the market with competing video or other technologies; however, we are aware of new market entrants from time to time. Increased competition could result in loss of market share, price reductions and reduced gross margins, any of which could seriously harm our business, financial condition and results of operations.The Transportation Systems market is highly fragmented and is subject to evolving national and regional quality and safety standards. Our competitors vary in size, number, scope and breadth of the products and services they offer, and include large multi-national engineering firms and smaller local or regional firms.In each of our operating segments, manyMany of our competitors have far greater name recognition and greater financial, technological, marketing and customer service resources than we do. This may allow our competitors to respond more quickly to new or emerging technologies and changes in customer requirements. It may also allow them to devote greater resources to the development, promotion, sale and support of their products and services than we can. Consolidations of end users, distributors and manufacturers in our target markets exacerbate this problem. As a result of the foregoing factors, we may not be able to compete effectively in our target markets and competitive pressures could adversely affect our business, financial condition and results of operations.Our failure to successfully secure new contracts and renew existing contracts could reduce our revenues and profitability.Our business depends on our ability to successfully bid on new contracts and renew existing contracts with private and public sector customers. We continually bid on new contracts and negotiate contract renewals on expiring contracts. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which are affected by a number of factors, such as market conditions, financing arrangements and required governmental approvals. As a condition to contract award, customers require us to provide a surety bond or letter of credit to protect the client should we fail to perform17under the terms of the contract. Government entities are also taking more time between contract award and approval to commence work under the contract, which delays our ability to recognize revenues under the contract. If negative market conditions materialize, or if we fail to secure adequate financing arrangements or the required governmental approval or fail to meet other required conditions, we may not be able to pursue, obtain or perform particular projects, which could reduce or eliminate our profitability.
We may be unable to attract and retain key personnel, including senior management, which could seriously harm our business.TableDue to the specialized nature ofContentsour business and the current tight labor market, we are highly dependent on the continued service of our executive officers and other key management, engineering and technical personnel. We believe that our success will depend on the continued employment of a highly qualified and experienced senior management team to retain existing business and generate new business. The loss of any of our officers, or any of our other executives or key members of management could adversely affect our business, financial condition, or results of operations (e.g., loss of customers or loss of new business opportunities). Our success will also depend in large part upon our ability to continue to attract, retain and motivate qualified engineering and other highly skilled technical personnel. Particularly in highly specialized areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which may adversely affect our growth in the current fiscal year and in future years. This situation is exacerbated by pressure from agency customers to contain our costs, while salaries for most employees are on the rise. Although we intend to continue to devote significant resources to recruit, train and retain qualified skilled personnel, we may not be able to attract and retain such employees, which could impair our ability to perform our contractual obligations, meet our customers' needs, win new business, and adversely affect our future results. Likewise, the future success of our consulting services will depend on our ability to hire additional qualified engineers, planners and technical personnel. Competition for qualified employees, particularly development engineers and software developers, is intense and has become more so in recent months. We may not be able to continue to attract and retain sufficient numbers of such highly skilled employees. Our inability to attract and retain additional key employees or the loss of one or more of our current key employees could adversely affect our business, financial condition and results of operations.
The ongoing military action between Russia and Ukraine could adversely affect our business, financial condition and results of operations.On February 24, 2022, Russian military forces launched a military action in Ukraine and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military action in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in government agency budgets and funding preferences as well as increase in cyberattacks and cyber and corporate espionage. To date we have not experienced any material interruptions in our infrastructure, supplies, technology systems or networks needed to support our operations. We are actively monitoring the situation in Ukraine and assessing its impact on our business. The extent and duration of the military action and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.Legal and Regulatory RisksWe may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position.If we are not able to adequately protect or enforce the proprietary aspects of our technology, competitors may be able to access our proprietary technology and our business, financial condition and results of operations will likely be seriously harmed. We currently attempt to protect our technology through a combination of patent, copyright, trademark and trade secret laws, employee andthird partythird-party nondisclosure agreements and similar means. Despite our efforts, other parties may attempt to disclose, obtain or use our technologies or systems. Our competitors may also be able to independently develop products that are substantially equivalent or superior to our products or design around our patents. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the U.S. As a result, we may not be able to protect our proprietary rights adequately in the U.S. or internationally.Litigation may be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation may also be necessary to defend against claims of infringement or invalidity by others. We have in the past, currently, and may in the future, be subject to litigation regarding our intellectual property rights. An adverse outcome in litigation or any similar proceedings could subject us to significant liabilities to third parties, require us18to license disputed rights from others or require us to cease marketing or using certain products or technologies. We may not be able to obtain any licenses on terms acceptable to us, or at all. We also may have to indemnify certain customers or strategic partners if it is determined that we have infringed upon or misappropriated another party's intellectual property. Our continued expansion into software development activities may subject us to increased possibility of litigation. Any of the foregoing could adversely affect our business, financial condition and results of operations. In addition, the cost of addressing any intellectual property litigation claim, including legal fees and expenses, and the diversion of management's attention and resources, regardless of whether the claim is valid, could be significant and could seriously harm our business, financial condition and results of operations.We may continue to be subject to traffic-related litigation.The traffic industry in general is subject to frequent litigation claims due to the nature of personal injuries that can result from traffic accidents. As a provider of traffic engineering services, products and solutions, we are, and could from time to time in the future continue to be, subject to litigation for traffic related accidents, even if our products or services did not cause the particular accident. While we generally carry insurance against these types of claims, some claims may not be covered by insurance or the damages resulting from such litigation could exceed our insurance coverage limits. In the event that we are required to pay significant damages as a result of one or more lawsuits that are not covered by insurance or exceed our coverage limits, it could materially harm our business, financial condition or cash flows. Even defending against unsuccessful claims could cause us to incur significant expenses and result in a diversion of management's attention.We may be unable to attractFinancial andretain key personnel, including senior management, which could seriously harm our business.
Market RisksDue to the specialized nature of our business, we are highly dependent on the continued service of our executive officers and other key management, engineering and technical personnel. We believe that our success will depend on the continued employment of a highly qualified and experienced senior management team to retain existing business and generate new business. The loss of any of our officers, or any of our other executives or key members of management could adversely affect our business, financial condition, or results of operations (e.g., loss of customers or loss of new business opportunities). Our success will also depend in large part upon our ability to continue to attract, retain and motivate qualified engineering and other highly skilled technical personnel. Particularly in highlyspecialized areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which may adversely affect our growth in the current fiscal year and in future years. This situation is exacerbated by pressure from agency customers to contain our costs, while salaries for highly skilled employees are on the rise. Although we intend to continue to devote significant resources to recruit, train and retain qualified skilled personnel, we may not be able to attract and retain such employees, which could impair our ability to perform our contractual obligations, meet our customers' needs, win new business, and adversely affect our future results. Likewise, the future success of our Transportation Systems segment will depend on our ability to hire additional qualified engineers, planners and technical personnel. Competition for qualified employees, particularly development engineers and software developers, is intense.We may not be able tocontinue to attract and retain sufficient numbers of such highly skilled employees. Our inability to attract and retain additional key employeesconsistently achieve profitability on a quarterly or annual basis in the future.We had a GAAP net loss ofone or moreapproximately $7.1 million in Fiscal 2022, which includes $0.2 million of net loss from discontinued operations, and net income of $10.1 million in Fiscal 2021 and net loss of $5.6 million in Fiscal 2020, and we cannot assure you that we will be profitable in the future. Our ability to operate at a profit in future periods could be impacted by governmental budgetary constraints, government and political agendas, economic instability, supply chain constraints and other items that are not in our control. Furthermore, we rely on operating profits to fund investments in sales and marketing and research and development initiatives. We cannot assure you that our financial performance will sustain a sufficient level to completely support those investments. Most of ourcurrent key employees could adversely affectexpenses are fixed in advance. As such, we generally are unable to reduce ourbusiness, financial condition and results of operations.expenses significantly in the short-term to compensate for any unexpected delay or decrease in anticipated revenues or increases in planned investments.
If we experience declining or flat revenues and we fail to manage such declines effectively, we may be unable to execute our business plan and may experience future weaknesses in our operating results.Based on our business objectives, and in order to achieve future growth, we will need to continue to add additional qualified personnel, and invest in additional research and development and sales and marketing activities, which could lead to increases in our expenses and future declines in our operating results. In addition, our past expansion has placed, and future expansion is expected to place, a significant strain on our managerial, administrative, operational, financial and other resources. If we are unable to manage these activities or any revenue declines successfully, our growth, our business, our financial condition and our results of operations could continue to be adversely affected.Our use of estimates in conjunction with the input method of measuring progress to completion of performance obligations for ourTransportation Systemsengineering and consulting services revenues could result in a reduction or reversal of previously recorded revenues and profits.A portion ofTransportation Systemsour engineering and consulting services revenues are measured and recognized over time using the input method of measuring progress to completion. Our use of this accounting method results in recognition of revenues and profits proportionally over the life of a contract, based generally on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effects of revisions to revenues and estimated costs are recorded when the amounts are known or can be reasonably estimated. Such revisions could occur in any period and their effects could be material. Although we have historically made reasonably reliable estimates of the progress towards completion of long-term engineering, program management, construction management or construction contracts, the uncertainties inherent in the estimating process make it possible for actual costs to vary materially from estimates, including reductions or reversals of previously recorded revenues and profits.Declines in the value of securities held in our investment portfolio can affect us negatively.19As of March 31,2020, the value of2022, we had no securities available for sale within our investmentportfolio was $11.6 million, which is generally determined based upon market values available from third-party sources.portfolio. The value of our investment portfolio has fluctuated as a result of market volatility and economic or financial market conditions. Declines in the value of securities held in our investment portfolio negatively impact our levels of capital and liquidity. Further, to the extent that we experience unrealized losses in our portfolio of investment securities from declines in securities values that management determines to be other than temporary, the book value of those securities will be adjusted to their estimated recovery value and we will recognize a charge to earnings in the quarter during which we make that determination. Although we have policies and procedures in place to assess and mitigate potential impacts of market risks, those policies and procedures are inherently limited becausethey cannot anticipate the existence or future development of currently unanticipated or unknown risks. Accordingly, we could suffer adverse effects as a result of our failure to anticipate and manage these risks properly.
If our internal controls over financial reporting do not comply with the requirements of the Sarbanes-Oxley Act, our business and stock price could be adversely affected.Section 404 of the Sarbanes-Oxley Act of 2002 currently requires us to evaluate the effectiveness of our internal controls over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial reporting in all annual reports. We are required to obtain our auditors' attestation pursuant to Section 404(b) of the Sarbanes-Oxley Act. Going forward, we may not be able to complete the work required for such attestation on a timely basis and, even if we timely complete such requirements, our independent registered public accounting firm may still conclude that our internal controls over financial reporting are not effective.A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and 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 fraud, if any, within Iteris have been or will be detected. These inherent limitations include the realities that technology, decision-making and other processes can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. If we are not able to maintain effective internal controls over financial reporting, we may lose the confidence of investors and analysts and our stock price could decline.Our quarterly operating results fluctuate as a result of many factors. Therefore, we may fail to meet or exceed the expectations of securities analysts and investors, which could cause our stock price to decline.Our quarterly revenues and operating results have fluctuated and are likely to continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. Factors that could affect our revenues and operating results include, among others, the following:•the Pandemic, which may have a continuing impact on ourfirst quarter and full fiscal year 2021future operating results;•delays in government contracts and funding from time to time and budgetary constraints at the federal, state and local levels;•our ability to access stimulus funding, funding from the federal highway bill or other government funding;•declines in new home and commercial real estate construction and related road and other infrastructure construction;•changes in our pricing policies and the pricing policies of our suppliers and competitors, pricing concessions on volume sales, as well as increased price competition in general;•the long lead times associated with government contracts;- •
- the size, timing, rescheduling or cancellation of significant customer orders;
- •our ability to control
costs;- costs, including costs associated with strategic alternatives;
20•the mix of our products and services sold in a quarter, which has varied and is expected to continue to vary from time to time;•our ability to develop, introduce, patent, market and gain market acceptance of new products, applications and product enhancements in a timely manner, or at all;•market acceptance of the products incorporating our technologies and products;•the introduction of new products by competitors;•the availability and cost of components used in the manufacture of our products;•our success in expanding and implementing our sales and marketing programs;•the effects of technological changes in our target markets;•the amount of our backlog at any given time;•timing of backlog fulfillment;•the nature of our government contracts;•decrease in revenues derived from key or significant customers;•deferrals of customer orders in anticipation of new products, applications or product enhancements;•risks and uncertainties associated with our international business;•market condition changes such as industry structure consolidations that could slow down our ability to procure new business;•general economic and political conditions;•our ability to raise additional capital;•international conflicts and acts of terrorism; and•other factors beyond our control, including but not limited to, natural disasters.Due to all of the factors listed above as well as other unforeseen factors, our future operating results could be below the expectations of securities analysts or investors. If that happens, the trading price of our common stock could decline. As a result of these quarterly variations, you should not rely on quarter-to-quarter comparisons of our operating results as an indication of our future performance.21Supply shortages or production gaps could materially and adversely impact our sales and financial results.We havein the pastexperienced, and may from time to time in the future continue to experience parts shortages,orsharp increases in component costs and unforeseen quality control issues by our suppliers that may impact our ability to meet demand for our products. The Pandemic has increased the occurrence of such shortages. We have historically used and continue to use single suppliers for certain significant components in ourproducts,products; however, in light of the current supply chain shortage we have begun to use other suppliers to meet our demand, and we have had to reengineer products from time to time to address obsoletecomponents, especially in our Roadway Sensors products.or unavailable components. OurRoadway Sensorsproducts are also included with other traffic intersection products that also could experience supply issues for their products, which in turn could result in delays in orders for our products. Should any such supply delay or disruption occur, or should a key supplier discontinue operations, our future sales and costs will likely be materially and adversely affected. Additionally, we rely heavily on select contractmanufacturers to produce many of our products and do not have any long-term contracts to guarantee supply of such products. Although we believe our contract manufacturers have sufficient capacity to meet our production schedules for the foreseeable future and we believe we could find alternative contract manufacturing sources for many of our products, if necessary, we could experience a production gap should for any reason our contract manufacturers become unable to meet our production requirements and our cost of goods sold could increase, adversely affecting our margins. Further, foreign imports of components in our products subject the Company to risks of changes in, or the imposition of new, export/import requirements, tariffs, work stoppages, delays in shipment, product cost increases due to component shortages, public health issues that could lead to temporary closures of facilities or shipping ports, such as the Pandemic and other economic uncertainties, affecting trade between the U.S. and other countries where we source components for our
Roadway Sensorsproducts. Any such actions could increase the cost to us of such products and cause increases in the prices at which we sell such products, which could adversely affect the financial performance of ourRoadway Sensorsbusiness. Similarly, these actions could result in cost increases or supply chain delays that impact third party products (e.g., steel poles) which could lead our customers to delay or cancel planned purchases of our products.Our international business operations may be threatened by many factors that are outside of our control.While we historically have had limited international sales, revenues and operational experience, we have been expanding our distribution capabilities for ourRoadway Sensors segmentproducts internationally, particularly in Europe and in South America. We plan to continue to expand our international efforts, but we cannot assure you that we will be successful in such efforts. International operations subject us to various inherent risks including, among others:•the Pandemic and related government responses, including travel restrictions, quarantines and "stay-at-home" orders;•political, social and economic instability, as well as international conflicts and acts of terrorism;•bonding requirements for certain international projects;•longer accounts receivable payment cycles;•import and export license requirements and restrictions of the U.S., as well as requirements and restrictions in the other countries in which we operate;•currency fluctuations and restrictions, and our ability to repatriate currency from certain foreign regions;•unexpected changes in regulatory requirements, tariffs and other trade barriers or restrictions;•required compliance with existing and new foreign regulatory requirements and laws, more restrictive labor laws and obligations, including but not limited to the U.S. Foreign Corrupt Practices Act;•difficulties in managing and staffing international operations;•potentially adverse tax consequences; and•reduced protection for intellectual property rights in some countries.Substantially all of our international product sales are denominated in U.S. dollars. As a result, an increase in the relative value of the dollar could make our products more expensive and potentially less price competitive in international markets. We do not currently engage in any transactions as a hedge against risks of loss due to foreign currency fluctuations.Any of the factors mentioned above may adversely affect our future international revenues and, consequently, affect our business, financial condition and operating results. Additionally, as we pursue the expansion of our international business,
22certain fixed and other overhead costs could outpace our revenues, thus adversely affecting our results of operations. We may likewise face local competitors in certain international markets who are more established, have greater economies of scale and stronger customer relationships. Furthermore, as we increase our international sales, our total revenues may also be affected to a greater extent by seasonal fluctuations resulting from lower sales that typically occur during the summer months in Europe and certain other parts of the world.The trading price of our common stock is highly volatile.The trading price of our common stock has been subject to wide fluctuations in the past. From March 31,20172019 through March 31,2020,2022, our common stock has traded at prices as low as $2.08 per share and as high as$8.17$7.81 per share. The market price of our common stock could continue to fluctuate in the future in response to various factors, including, but not limited to:•quarterly variations in operating results;•our ability to control costs, improve cash flow and sustain profitability;•statements made by third parties or speculation regarding our strategic alternatives;•our ability to raise additional capital;•shortages announced by suppliers;•announcements of technological innovations or new products or applications by our competitors, customers or us;•transitions to new products or product enhancements;•acquisitions of businesses, products or technologies, or other strategic transactions or dispositions;•the impact of any litigation;•changes in investor perceptions;•government funding, political agendas and other budgetary constraints;•changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry in general;•changes in earnings estimates or investment recommendations by securities analysts; and•international conflicts, political unrest and acts of terrorism.The stock market is currently experiencing and has fromtime to timetime-to-time experienced volatility, which has often affected and may continue to affect the market prices of equity securities of many technology companies. This volatility has often been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been the subject of securities class action litigation. If we were to become the subject of a class action lawsuit, it could result in substantial losses and divert management's attention and resources from other matters.Provisions of our charter documents may discourage a third party from acquiring us and may adversely affect the price of our common stock.Provisions of our certificate of incorporation could make it difficult for a third party to influence or acquire us, even though that might be beneficial to our stockholders. Such provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. For example,under the terms of our certificate of incorporation, our Board of Directors is authorized to issue, without stockholder approval, up to 2,000,000 shares of preferred stock with voting, conversion and other rights and preferences superior to those of our common stock. In addition, our bylaws contain provisions governing the ability of stockholders to submit proposals or make nominations for directors. We may also adopt provisions and agreements from time to time that could make it harder for a potential acquirer.
ITEM 1B. UNRESOLVED STAFF COMMENTSNone.23ITEM 2. PROPERTIESOurheadquarters and principal operations are housedlargest physical office is located in Santa Ana, CA where we lease approximately 47,000 square feet of leased office, manufacturing and warehouse space located in Santa Ana, California, pursuant to a lease which terminates in March2022.2027. For additional information regarding our lease obligations, see Note7 "Right-of-Use8, Right-of-Use Assets and LeaseLiabilities" ofLiabilities, to theNotes toConsolidated Financial Statements, included in Part II, Item 8 of thisreport.report for further details.ITEM 3. LEGAL PROCEEDINGSThe information set forth under the heading "Litigation and Other Contingencies" under Note6 of Notes7 to the Consolidated Financial Statements, included in Part II, Item 8 of this report, is incorporated herein by reference.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.PART IIITEM 5. MARKET FORREGISTRANT'sREGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket Information for Common StockOur common stock is traded on theNASDAQNasdaq Capital Market under the symbol "ITI" since February 8, 2016. Prior to that, our common stock traded on the NYSE MKT under the same symbol.As of May29, 2020,31, 2022, we had318286 holders of record of our common stock according to information furnished by our transfer agent. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.Securities Authorized for Issuance under Equity Compensation PlansInformation regarding securities authorized for issuance can be found under Part III, "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."Dividend PolicyWe have never paid or declared cash dividends on our common stock, and have no current plans to pay such dividends in the foreseeable future. We currently intend to retain any earnings for working capital and general corporate purposes. The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon a number of factors, including, but not limited to, future earnings, the success of our business, our capital requirements, our general financial condition and future prospects, general business conditions, and such other factors as the Board of Directors may deem relevant.Issuer Purchases of Equity SecuritiesOn August 9, 2012, our Board of Directors approved anewstock repurchase program pursuant to which wemaycould acquire up to$3$3.0 million of our outstanding common stock for an unspecified length of time. Under the program, we could repurchase shares from time to time in the open market and privately negotiated transactions and block trades, and could also repurchase shares pursuant to a 10b5-1 trading plan during our closed trading windows, to the extent such a 10b5-1 plan was in place. There was no guarantee as to the exact number of shares that would be repurchased. We could modify or terminate the repurchase program at any time without prior notice. On November 6, 2014, our Board of Directors approved a $3.0 million increase to the Company's existing stock repurchase program, pursuant to which the Company could continue to acquire shares of its outstanding common stock from time to time for an unspecified length of time.In Fiscal 2022, Fiscal 2021, and Fiscal 2020, we did not repurchase any shares. From inception of the program in August 2011 through March 31, 2022, we repurchased approximately 2,458,000 shares of our common stock for an aggregate price of approximately $4.3 million, at an average price per share of $1.73. As of March 31, 2022, all repurchased shares have been retired and returned to their status as authorized and unissued shares of our common stock. As of March 31, 2022, prior to the termination of the 2012 repurchase program, approximately $1.7 million remained available for the repurchase of our common stock.On May 12, 2022 the Board of Directors retired the previously approved plan and approved a new plan for the company to acquire up to $10.0 million of our outstanding common stock for an unspecified length of time. Under the program, we may repurchase shares from time to time in the open market and privately negotiated transactions and block trades, and may also repurchase shares pursuant to a 10b5-1 trading plan during our closed trading windows, to the extent such a 10b5-1 plan is in place. There is no guarantee as to the exact number of shares that will be repurchased. We may modify or terminate the repurchase program at any time without prior notice.On November 6, 2014, our Board of Directors approved a $3.0 million increase to the Company's existing stock repurchase program, pursuant to which the Company may continue to acquire shares of its outstanding common stock from time to time for an unspecified length of time.In Fiscal 2020, Fiscal 2019, and Fiscal 2018, we did not repurchase any shares. From inception of the program in August 2011 through March 31, 2020, we repurchased approximately 3,422,000 shares of our common stock for an aggregate price of approximately $5.6 million, at an average price per share of $1.63. As of March 31, 2020, all repurchased shares have been retired and returned to their status as authorized and unissued shares of our common stock. As of March 31, 2020, approximately $1.7 million remains available for the repurchase of our common stock under our current program.ITEM 6.SELECTED FINANCIAL DATA
RESERVEDThe Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.ITEM 7.MANAGEMENT'sMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSYou should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part II, Item 8 of this report and the "Risk Factors" section in Part I, Item 1A, as well as the25other cautionary statements and risks described elsewhere in this report before deciding to purchase, hold or sell our common stock.OverviewGeneral.GeneralWe are a provider of smart mobility infrastructure management solutions.Municipalities, governmentOur cloud-enabled solutions help public transportation agencies, municipalities, commercial entities and other transportation infrastructure providersuse our solutions tomonitor, visualize, and optimize mobility infrastructure tohelp ensure roads aremake mobility safe,travel isefficient, andcommunities thrive.sustainable for everyone.
Recent DevelopmentsImpact of COVID-19 on Our BusinessThe Pandemic has materially adversely impacted global economic conditions.More than 24 months into the Pandemic, COVID-19 continues to have an unpredictable and unprecedented impact on the global economy. Though there has been a trend in increasing availability of COVID-19 vaccines, as well as an easing of restrictions on social, business, travel and government activities and functions, infection rates continue to fluctuate and federal, state and local government regulations continue to rapidly change. 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. We have not had any facility closures due to the Pandemic, but we have experienced supply chain and work delays on certain projects. Should such delays become protracted or worsen or should longer term budgets or priorities of our clients be impacted, the Pandemic 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 the volatility of our stock price will depend largely on future developments, including the duration of the Pandemic, new and potentially more contagious variants, such as the Delta and Omicron variants, 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 and suppliers, 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, we have taken certain actions to preserve our liquidity, manage cash flow and strengthen our financial flexibility. Such actions included, but are not limited to, reducing our discretionary spending, reducing capital expenditures, implementing restructuring activities with the goal of reducing payroll costs, including employee furloughs, pay freezes and pay cuts.Our products require specialized parts which have become more difficult to source. In some cases, we have had to purchase such parts from third-party brokers at substantially higher prices. Additionally, to mitigate for component shortages, we have begun to increase inventory levels and may continue to do so for an extended period. In the event demand doesn’t materialize, we may need to hold excess inventory for several quarters. Alternatively, we may be unable to source sufficient components, even from third-party brokers, to meet customer demand, resulting in high levels of unshippable backlog. We have placed non-cancellable inventory orders for certain products in advance of our normal lead times to secure normal and incremental future supply and capacity and may need to continue to do so in the future. Still, we may remain supply-constrained beyond our Fiscal 2022.On March 27, 2020, the 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. For more information, refer to Note 6, Income Taxes, to the Consolidated Financial Statements, including in Part II, Item 8 of this report.The Pandemic has had an impact on the Company’s human capital. While our Santa Ana product and commercial operations facility has remained open throughout the Pandemic, the easing of Pandemic restrictions imposed by local and state authorities have allowed a portion of our workforce to return to our various facilities while others continue to work remotely. The Company’s information technology infrastructure has proven sufficiently flexible to minimize disruptions in required duties and responsibilities. We believe that our system of internal control over financial reporting has not been fundamentally altered and that the effectiveness of the design and operation of internal controls remained materially consistent during the fiscal year ended March 31, 2022. Additionally, we have been able to timely file financial reports. We believe we have the right infrastructure to efficiently work remotely for the balance of the Pandemic. We do not expect to incur significant costs to safely reopen our facilities to all our employees.26Despite the Pandemic, we believe that the ITS ("Intelligent Traffic Systems") industry in the U.S. should continue to provide new opportunities for the Company although, in the near term, the pace of new opportunities emerging may be restrained and the start dates of awarded projects may be delayed. We believe that our expectations are valid and that our plans for the future continue to be based on reasonable assumptions.Acquisition of the Assets of TrafficCast International, Inc.On December 6, 2020, the Company entered into the TrafficCast Purchase Agreement with 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 TrafficCast 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.The $17.7 million in total consideration was comprised of $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 TrafficCast 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 transaction closed on December 7, 2020.Simultaneous with closing the transaction, the parties 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.TrafficCast operates two lines of business – commercial and public sector – each of which contributes about 50% of total revenue. Its commercial line of business develops software that collects, filters, and models real-time traveler information and traffic incident data for global media companies and other commercial customers. Its public sector line of business provides sensors and related software that help state and local agencies measure, visualize, and manage traffic flow. Since its integration in early Fiscal 2022, TrafficCast’s market-leading software and internet of things, or IoT, devices, as well as its data ingestion, data science and analytics solutions, has enhanced Iteris’ suite of smart mobility infrastructure management solutions.Sale ofVehicle Sensors.Agriculture and Weather Analytics BusinessOnJuly 29, 2011, weMay 5, 2020, the Company completed the sale of substantially all of our assets used in connection with our formerVehicle Sensors segment to Bendix Commercial Vehicle Systems LLC ("Bendix"), a member of Knorr-Bremse Group, pursuant to an Asset Purchase Agreement signed on July 25, 2011 (the "Asset Sale"). In connection with the Asset Sale, we were entitled to additional consideration in the form of certain performance and royalty-related earn-outs through December 31, 2017. From the date of the Asset Sale, through March 31, 2020, we received approximately $2.7 million in connection with royalty-related earn-outs provisions for a total of $18 million in cash received from the Asset Sale. We do not anticipate any further payments from Bendix.As a result of the Asset Sale, we no longer operate in the Vehicle Sensors segment. We determined that the Vehicle Sensors segment, which previously constituted one of our operating segments, qualified as a discontinued operation. The applicable financial results of our former Vehicle Sensors segment through the closing of the Asset Sale have been reclassified as a discontinued operation for all periods presented in this report. Refer to Note 3 of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report, for additional discussion regarding the Asset Sale.Business Segments.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 Roadways 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. 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. In select territories, our Roadway Sensors segment also sells OEM products for the traffic intersection markets, which include, among other things, traffic signal controllers and traffic signal equipment cabinets.The Transportation Systems segment includes engineering and consulting services, managed 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 transportationinfrastructure 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 product line includes: Iteris Signal Performance Measures ("SPM"), Iteris ClearGuide, and iPeMS, our performance measurement and analytics solution, our advanced traveler information system solutions ClearPath 511 and Reverse 511, as well as our commercial vehicle operations and vehicle safety compliance platforms known as ClearFleet, CVIEW-Plus, CheckPoint, UCRLink and inspect.TheAgriculture and Weather Analyticssegment 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 technologiesbusiness toassess historical weather conditions for both short-term and long-range weather forecasts and customizable route/site weather and pavement forecasting, and providing winter road maintenance recommendations for state agencies, municipalities and commercial companies that allow such users to create solutions to meet roadway maintenance decision needs. 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. ClearAg solutions were offered to companies in the agriculture industry, such as seed and crop protection companies, integrated food companies, and agricultural equipment manufacturers and service providers. ClearAg solutions provided weather, environment, soil and plant growth modeling to deliver environmental intelligence through ClearAg APIs and components, IMFocus APIs and ClearAg web applications.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, toDTN,LLC ("DTN"),an operating company of TBG AG, a Swiss-based holdingcompany. Ascompany, pursuant to the AWA Purchase Agreement signed on May 2, 2020, in exchange for aresulttotal purchase consideration of $12.0 million in cash, subject to working capital adjustments. Upon closing, the Company received $10.5 million in cash and $1.5 million of payment was deferred. DTN paid the Company $1.45 million at the 12-month anniversary of thesale, we no longer operateclosing date, and $0.05 million at the 18-month anniversary of the closing date. The AWA Purchase Agreement also provides for customary post-closing adjustments to the purchase price related to working capital at closing. The parties also entered into certain ancillary agreements at the closing of the transaction that will provide Iteris with ongoing access to weather and pavement data that it integrates into its transportation software products, and a joint development agreement under which the parties agreed to pursue future joint opportunities in theAgriculture 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 theglobal transportation market.The sale of the Agriculture and Weather Analyticssegment.business was a result of the Company’s shift in strategy to focus on its mobility infrastructure management solutions and to capitalize on the potential for a future partnership upon the sale of this business component to DTN. We have determined that the Agriculture and Weather Analytics business, qualifies as a discontinued operation in accordance with the criteria set forth in ASC 205-20,
Presentation of Financial Statements – Discontinued Operations.On May 5, 2020, the Company also entered into a transition services agreement (“TSA”) with DTN, pursuant to which the Company agreed to support the information technology function of the Agriculture and Weather Analytics business for a period up to 12 months and DTN agreed to provide the contract administration/account management services for certain contracts of the Company and other transition services. Either party may make any reasonable request to extend the period of time the other party shall provide a transition service beyond the initial service period or access to additional services that are necessary for the transition of the business operations. The Company earned less than $0.1 million in income and incurred less than $0.1 million in costs associated with the TSA for the fiscal year ended March 31, 2022, which was included in loss from discontinued27operations before gain on sale, net of tax on the consolidated statement of operations (see Note 3, Discontinued Operations, to the Consolidated Financial Statements).Non-GAAP Financial MeasuresAdjusted income (loss) from continuing operations before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, project loss reserves, acquisition costs, executive severance and transition costs, and fair value adjustment related to TrafficCast's opening balance inventory (“Adjusted EBITDA”) was approximately $4.5 million, $7.5 million and $4.2 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively.When viewed with our financial results prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and accompanying reconciliations, we believe Adjusted EBITDA provides additional useful information to clarify and enhance the understanding of the factors and trends affecting our past performance and future prospects. We define these measures, explain how they are calculated and provide reconciliations of these measures to the most comparable GAAP measure in the table below. Adjusted EBITDA and the related financial ratios, as presented in this Annual Report on Form 10-K (“Form 10-K”), are supplemental measures of our performance that are not required by or presented in accordance with GAAP. They are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP, or as an alternative to net cash provided by operating activities as measures of our liquidity. The presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items.We use Adjusted EBITDA non-GAAP operating performance measures internally as complementary financial measures to evaluate the performance and trends of our businesses. We present Adjusted EBITDA and the related financial ratios, as applicable, because we believe that measures such as these provide useful information with respect to our ability to meet our operating commitments.Adjusted EBITDA and the related financial ratios have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:•They do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;•They do not reflect changes in, or cash requirements for, our working capital needs;•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;•They are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows;•They do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations; and•Other companies in our industry may calculate Adjusted EBITDA differently than we do, whereby limiting its usefulness as comparative measures.Because of these limitations, Adjusted EBITDA and the related financial ratios should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations. You should compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as supplemental information. See our audited consolidated financial statements contained in this Form 10-K. However, in spite of the above limitations, we believe that Adjusted EBITDA and the related financial ratios are useful to an investor in evaluating our results of operations because these measures:•Are widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;•Help investors to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance; and•Are used by our management team for various other purposes in presentations to our Board of Directors as a basis for strategic planning and forecasting.The following financial items have been added back to or subtracted from our net income (loss) when calculating Adjusted EBITDA:•Interest expense. Iteris excludes interest expense because it does not believe this item is reflective of ongoing business and operating results. This amount may be useful to investors for determining current cash flow.28•Income tax. This amount may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business;•Depreciation expense. Iteris excludes depreciation expense primarily because it is a non-cash expense. These amounts may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations.•Amortization. Iteris incurs amortization of intangible assets in connection with acquisitions. Iteris also incurs amortization related to capitalized software development costs. Iteris excludes these items because it does not believe that these expenses are reflective of ongoing operating results in the period incurred. These amounts may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights.•Stock-based compensation. These expenses consist primarily of expenses from employee and director equity based compensation plans Iteris excludes stock-based compensation primarily because they are non-cash expenses and Iteris believes that it is useful to investors to understand the impact of stock-based compensation to its results of operations and current cash flow.•Restructuring charges. These expenses consist primarily of employee separation expenses, facility termination costs, and other expenses associated with Company restructuring activities. Iteris excludes these expenses as it does not believe that these expenses are reflective of ongoing operating results in the period incurred. These amounts may be useful to our investors in evaluating our core operating performance.•Project loss reserves. These expenses consist primarily of expenses incurred to complete a software development contract that will not be recoverable and are largely related to previously incurred and capitalized costs for non-recurring engineering activity. Iteris excludes these expenses as it does not believe that these expenses are reflective of ongoing operating results in the period incurred. These amounts may be useful to our investors in evaluating our core operating performance.•Acquisition costs. In connection with its business combinations, Iteris incurs professional service fees, changes to the fair value of contingent consideration, and other direct expenses. Iteris excludes such items as they are related to acquisitions and have no direct correlation to the operation of Iteris’ business. These amounts may be useful to our investors in evaluating our core operating performance.•Executive severance and transition costs. Iteris excludes executive severance and transition costs because it does not believe that these expenses are reflective of ongoing operating results in the period incurred. These amounts may be useful to our investors in evaluating our core operating performance.•Fair value adjustment related to acquired opening balance inventories. Iteris excludes fair value adjustment related to the opening inventory balance acquired as part of its business combination because it does not believe that these costs are reflective of operating results in the period incurred. These amounts may be useful to our investors in evaluating our core operating performance.Reconciliations of net income (loss) from continuing operations to Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of total revenues were as follows:29Year Ended March 31, 2022 2021 2020 (In thousands) Net income (loss) from continuing operations $ (6,900) $ 491 $ (1,758) Income tax expense 174 115 160 Depreciation expense 820 734 770 Amortization expense 3,240 2,036 1,255 Stock-based compensation 3,401 2,902 2,495 Other adjustments: Restructuring charges — 619 — Project loss reserve 3,394 — — Acquisition costs — 417 689 Executive severance and transition costs 340 — 553 Fair value adjustment - opening balance inventories — 136 — Total adjustments 11,369 6,959 5,922 Adjusted EBITDA $ 4,469 $ 7,450 $ 4,164 Percentage of total revenues 3.3 % 6.4 % 3.9 % Critical Accounting Policies and Estimates"Management's"Management's Discussion and Analysis of Financial Condition and Results of Operations" is based on our consolidated financial statements included herein, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.On an ongoing basis,Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements. In preparing our consolidated financial statements in accordance with GAAP and pursuant to the rules and regulations of the SEC, weevaluate thesemake estimates, assumptions andassumptions, include those related tojudgments that affect the reported amounts of assets, liabilities, revenuerecognition, the collectability of accounts receivableand expenses, and relatedallowance for doubtful accounts, projectionsdisclosures oftaxable income used to assess realizability of deferred tax assets, warranty reserves and other contingencies, costs to complete long-term contracts, indirect cost rates used in cost plus contracts, the valuation of inventories, the valuation of purchased intangiblecontingent assets andgoodwill, the valuation of investments, estimates of future cash flows used to assess the recoverability of long-lived assets and the impairment of goodwill, and fair value of our stock option awards used to calculate stock-based compensation.liabilities. We basetheseour estimates, assumptions and judgments on historical experience andon variousother factors that we believeto be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities thatarenot readily apparent from other sources. These estimates and assumptions by their nature involve risks and uncertainties, and may prove to be inaccurate. In the event that any ofreasonable. We evaluate our estimates,
orassumptionsare inaccurateand judgments on a regular basis and apply our accounting policies on a consistent basis. We believe that the estimates, assumptions and judgments involved inany material respect, it couldthe accounting for revenue recognition, goodwill, and income taxes havea material adverse effectthe most potential impact on ourreported amounts of assetsconsolidated financial statements. Historically, our estimates, assumptions andliabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.judgments relative to our critical accounting policies have not differed materially from actual results.
The following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.Revenue Recognition.Our revenue arrangements are complex in nature and require significant judgement in determining the performance obligation structure. Each contract is unique in nature and therefore is assessed individually for appropriate accounting treatment.Revenues are recognized when control of the promised goods or services are transferred to our customers, in a gross amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services. We generate all of ourrevenuesrevenue from contracts withourcustomers.Product revenue related contracts with customers begin when we acknowledge a purchase order for a specific customer order of product to be delivered in the nearterm. Theseterm and these purchase orders are short-term in nature. Product revenue is recognized at a point in time upon shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.Service revenues, primarily derivedfrom the Transportation Systems and Agriculture and Weather Analytics segments, are primarilyfrom long-term engineering and consulting service contracts with governmental agencies. These contracts generally include performance obligations in which control is transferred over time. We recognize revenue on fixed fee contracts, over time, using the proportion of actual costs incurred to the total costs expected to complete30the contract performance obligation. The Company determined that this method best represents the transfer of services as the proportion closely depicts the efforts or inputs completed towards the satisfaction of a fixed fee contract performance obligation. Time & Materials ("T&M") and Cost Plus Fixed Fee ("CPFF") contracts are considered variable consideration. However, performance obligations with these fee types qualify for the "Right to Invoice" Practical Expedient. Under this practical expedient, the Company is allowed to recognize revenue, over time, in the amount to which the Company has a right to invoice. In addition, the Company is not required to estimate such variable consideration upon inception of the contract and reassess the estimate each reporting period. The Company determined that this method best represents the transfer of services as, upon billing, the Company has a right to consideration from a customer in an amount that directly corresponds with the value to the customer of the Company's performance completed to date.Service revenues also consist of revenues derived from maintenance and support, extended warranty, and the use of the Company's service platforms and APIs on a subscription basis. We generate this revenue from fees for maintenance and support, extended warranty, monthly active user fees, SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price, which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer of services as the customer obtains equal benefit from the service throughout the service period.The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledgeGoodwill. Goodwill represents the excess of theproducts and/or services, the solutions provided and the structure of the sales contract. In SaaS agreements, we provide a service to the customer which combines the software functionality, maintenance and hosting into a single performance obligation. In product related contracts, apurchaseorder may contain different products, each constituting a separate performance obligation.We generally estimate variable consideration at the most likely amount to which we expect to be entitled and in certain cases based on the expected value, which requires judgment. We includeestimated amounts in the transactionpriceto the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We review and update these estimates on a quarterly basis.The Company's typical performance obligations include the following:Performance ObligationWhen PerformanceObligation isTypically SatisfiedWhen Payment isTypically DueHow StandaloneSelling Price isTypically EstimatedProduct RevenuesStandard purchase orders for delivery of a tangible productUpon shipment (point in time)Within 30 days of deliveryObservable transactionsEngineering services where the deliverable is considered a productAs work is performed (over time)Within 30 days of services being invoicedEstimated using a cost-plus margin approachService RevenuesEngineering and consulting servicesAs work is performed (over time)Within 30 days of services being invoicedEstimated using a cost-plus margin approachSaaSOver the course of the SaaS service once the system is available for use (over time)At the beginning of the contract periodEstimated using a cost-plus margin approachGoodwill and Other Long-Lived Assets.Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition andover the fair value of net assets acquired in a business combination. We test goodwill for impairment in accordance with theacquired net tangibleprovisions of ASC 350, Intangibles – Goodwill andintangible assets.Other,long-lived assets primarily represent internally developed and purchased intangible assets including developed technology, customer relationships, trade names and patents. We currently amortize our intangible assets with definitive lives over periods ranging from one to seven years using a method(“ASC 350”). Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate thatreflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used or, ifgoodwill might be impaired. ASC 350 provides thatpattern cannot be reliably determined, using a straight-line amortization method over the estimated useful life of the asset.The Companyan entity has the option to firstperform aassess qualitativeassessmentfactors to determineifwhether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carryingvalue. However,amount. If, after assessing theCompany may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment tests. The first steptotality ofthe impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill. If the net book value exceeds its fair value, the Company would perform the second step of the goodwill impairment test to determine the amount of the impairment loss. We perform an annual qualitative assessment of our goodwill during the fourth fiscal quarter, or more frequently, to determine if anyevents or circumstances,exist, such asanadverse change in business climate or a decline in overall industry demand, that would indicate thatentity determines itwouldis not more likely than notreduce the fair value of a reporting unit below its carrying amount, including goodwill. If events or circumstances do not indicatethat the fair value of a reporting unit isbelowless than its carrying amount, thengoodwilladditional impairment testing is notconsidered to be impaired and no further testingrequired. However, if an entity concludes otherwise, then it is requiredif otherwise, we compareto perform an impairment test. The impairment test involves comparing the estimated fair value ofoura reporting unittowith itscarryingbook value, including goodwill. If thecarrying amount of a reporting unit exceeds the reporting unit'sestimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, theamount by which thecarryingfair value of thegoodwill exceeds its implied fairreporting unit is less than book value,if any,then an impairment loss is recognizedasin animpairment loss. We determine the fair values of our reporting units using the income valuation approach, as well as other generally accepted valuation methodologies.We test long-lived assets and purchased intangible assets (other than goodwill) for impairment if we believe indicators of impairment exist. We determine whether the carrying value of an asset or asset group is recoverable, based on comparisons to undiscounted expected future cash flows the asset or asset group is expected to generate. If an asset is not recoverable, we record an impairment lossamount equal to the amountby whichthat thecarryingbook value of theassetreporting unit exceeds its fairvalue. We primarily usevalue, not to exceed the total amount of goodwill allocated to the reporting unit.The estimates of fair value of the reporting units are computed using either an income approach, a market approach, or a combination of both. Under the incomevaluationapproach, we utilize the discounted cash flow method todetermineestimate the fair value ofour long-lived assetsthe reporting units. Significant assumptions inherent in estimating the fair values include the estimated future cash flows, growth assumptions for future revenues (including future gross margin rates, expense rates, capital expenditures andpurchased intangible assets.Income Taxes.We utilize the assetother estimates), andliability method of accounting for income taxes, under which deferred taxes are determineda rate used to discount estimated future cash flow projections to their present value (or estimated fair value) based on estimated weighted average cost of capital (i.e., thetemporary differences betweenselected discount rate). We select assumptions used in the financialstatementforecasts by using historical data, supplemented by current andtax basis of assetsanticipated market conditions, estimated growth rates, andliabilities using tax rates expected to be in effect duringmanagement’s plans. Under theyears in which the basis differences reverse. A valuation allowance is recorded when it is more-likely-than-not that some or all of the deferred tax assets will not be realized, which increases our income tax expense in the period such determination is made.On an interim basis, we estimate what our anticipated annual effective tax rate will be, while also separately considering applicable discrete and other non-recurring items, and record a quarterly income tax provision in accordance with this anticipated rate. As the fiscal year progresses, we refine our estimates based upon actual events and financial results during the year. This estimation process can result in significant changes to our expected effective tax rate. When this occurs, we adjust our income tax provision during the quarter in which our estimates are refined so that the year-to-date provision reflects the expected annual effective tax rate. These changes, along with adjustments to our deferred taxes, among others, may create fluctuations in our overall effective tax rate from quarter to quarter.Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are reversed in the first subsequent financial reporting period in which that threshold is no longer met.The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.In relation to the Tax Cuts and Jobs Act ("TCJA"), we determined reasonable provisional estimates on our existing deferred tax balances and the one-time transition tax under the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"). Actual future operating results and the underlying amount and type of income could differ materially from our estimates, assumptions and judgments, thereby impacting our consolidated financial position and results of operations.On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Changes in tax laws or rates are accounted for in the period of enactment. The income tax provisions of the CARES Act had an immaterial impact on our current taxes, deferred taxes, and uncertain tax positions of the Company.Stock-Based Compensation.We record stock-based compensation in the statements of operations as an expense, based on the grant date estimatedmarket approach, fair value is derived from metrics ofour stock-based awards, whereby such fair values are amortized over the requisite service period. Our stock-based awards are currently comprisedpublicly traded companies or historically completed transactions ofcommon stock options and restricted stock units.comparable businesses (i.e. guideline companies). Thefair valueselection ofour stock option awards is estimated on the grant date using the Black-Scholes-Merton option-pricing formula. While utilizing this model meets established requirements, the estimated fair values generated by it may not be indicative of the actual fair values of our stock option awards as it does not consider certain factors important to those awards to employees, such as continued employment and periodic vesting requirements, as well as the limited transferability of the awards. The fair value of our restricted stock unitscomparable businesses is based on theclosing market pricemarkets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity ofour common stock on the grant date. If there are any modifications or cancellations of the underlying unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.Recent Accounting PronouncementsRefer to Note 1 "Description of Business and Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this report for a discussion of recent accounting pronouncements.Analysis of Fiscal 2020 and Fiscal 2019 Results of OperationsFor a comparison of the 2019 to 2018 fiscal years, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Form 10-K for the fiscal year ended March 31, 2019."Total Revenues.Total revenues are comprised of sales from our Roadway Sensors, Transportation Systems and Agriculture and Weather Analytics segments. The following tables present details of total revenues for Fiscal 2020 as compared to Fiscal 2019:Year Ended March 31, 2020 2019 $ Increase % Change (In thousands, except percentages) Product revenues
$ 55,007 $ 48,227 $ 6,780 14.1 % Service revenues
59,110 50,896 8,214 16.1 % Total revenues
$ 114,117 $ 99,123 $ 14,994 15.1 % Product revenues primarily consist of Roadway Sensors product sales, but also include OEM products for the traffic signal markets, as well as Transportation Systems third-party product sales for installation under certain construction-type contracts. Product revenues for Fiscal 2020 increased approximately 14.1% to $55.0 million, compared to $48.2 million in Fiscal 2019, primarily due to an increase in sales of our core Roadway Sensors video detectionproducts andto a lesser extent, increasesservices.Income Taxes. Significant judgment is required inboth unit sales from our distribution in Texas of certain OEM products for the traffic intersection market and Transportation Systems third-party product sales for installation under certain construction-type contracts.Service revenues primarily consist of Transportation Systems engineering services, but also includes service revenues generated by our Roadway Sensors segment and the Agriculture and Weather Analytics segment. Service revenues for Fiscal 2020 increased approximately 16.1% to $59.1 million, compared to $50.9 million in Fiscal 2019, primarily due to approximately $6.4 million of revenues from the operations of AGI as well as higher Transportation Systems traffic engineering service revenues and to a lesser extent higher Agriculture and Weather Analytics revenues. Total revenues for Fiscal 2020 increased approximately 15.1% to $114.1 million, compared to $99.1 million in Fiscal 2019. The increase in total revenues was primarily due to an approximate 16.5% increase in TransportationSystems revenues, an approximate 13.5% increase in Roadway Sensors revenues, and an approximate 15.5% increase in Agriculture and Weather Analytics revenues.Roadway Sensors revenues in Fiscal 2020 included approximately $49.1 million in product revenues and approximately $0.3 million of service revenues, reflecting an increase in total revenues of approximately $5.9 million or 13.5%, compared to Fiscal 2019, primarily due to higher sales from our core video detection products, as well as higher unit sales from our distribution in Texas of certain OEM products for the traffic intersection market, which increased approximately $2.0 million or 54.1% to approximately $5.8 million. While OEM products generally have lower gross margins than our core video detection products, we believe the offering of OEM products can benefit sales of our core products in Texas by providing a more comprehensive suite of traffic solutions for our customers. Going forward, we plan to grow revenues by focusing on our core domestic traffic intersection market, and refining and delivering products that address the needs of this market, primarily our Vantage processors and camera systems and our Vantage Vector video/radar hybrid sensor, as well as our SmartCycle, Velocity, PedTrax and SmartSpan products.Transportation Systems revenues in Fiscal 2020 included approximately $52.1 million of service revenues and approximately $5.9 million of sales of third-party products purchased for installation under certain construction-type contracts, reflecting an increase in total revenues of approximately $8.2 million or 16.5%, compared to Fiscal 2019, primarily due to approximately $6.4 million of revenues from the operations of AGI and an increase in Transportation Systems traffic engineering service revenues of approximately $1.1 million. Transportation Systems added approximately $68.7 million of new backlog during the Fiscal 2020. Transportation Systems backlog increased to approximately $53.4 million as of March 31, 2020, compared to approximately $44.5 million as of March 31, 2019.We plan to continue to focus on securing new contracts and to extend and/or continue our existing relationships with key agencies related to projects in their final project phases. While we believe our ability to obtain additional large contracts will contribute to overall revenue growth, the mix of sub-consulting content and third-party product sales will likely affect the related total gross profit from period to period, as total revenues derived from sub-consultants and third-party product sales generally have lower gross margins than revenues generated by our professional services.Agriculture and Weather Analytics revenues in Fiscal 2020 included no product revenue and approximately $6.7 million of service revenues, largely consisting of subscription revenues, reflecting an increase in total revenues of approximately $0.9 million or 15.5%, compared to Fiscal 2019. The increase was primarily due to increases in both ClearPath Weather and ClearAg solutions under newly signed contracts during Fiscal 2020.Gross Profit.The following tables present details of our gross profit for Fiscal 2020 compared to Fiscal 2019:Year Ended March 31, 2020 2019 $ Increase % Change (In thousands, except percentages) Product gross profit
$ 24,741 $ 19,793 $ 4,948 25.0 % Service gross profit
23,020 18,813 4,207 22.4 % Total gross profit
$ 47,761 $ 38,606 $ 9,155 23.7 % Product gross margin as a % of product revenues
45.0 % 41.0 % Service gross margin as a % of service revenues
38.9 % 37.0 % Total gross margin as a % of total revenues
41.9 % 38.9 % Our product gross margin as a percentage of product revenues for Fiscal 2020 increased approximately 400 basis points compared to Fiscal 2019 primarily due to an increase in our Roadway Sensors core video detection products, which typically yields higher gross margins than our Roadway Sensors OEM sales and our Transportation Systems third-party product sales for installation under certain construction-type contracts that we classify as product revenues.Our service gross margin as a percentage of service revenues for Fiscal 2020 increased 190 basis points compared to Fiscal 2019 primarily due to the completion of previously awarded contracts, the timing of certain extension contracts, the contract mix and a decrease in the amount of related sub-consulting content of such contracts. Sub-consulting content generally results in lower gross margins than our direct labor content.Our total gross margin as a percentage of total revenues for Fiscal 2020 increased 300 basis points compared to Fiscal 2019 primarily as a result of the revenue mix within our Roadway Sensors and Transportation Systems segments. During Fiscal 2020, there was an increase in the percentage of revenue from our Roadway Sensors core video detection products as well as a decrease in the percentage of revenue from our Transportation Systems sales of third-party products purchased for installation under certain construction-type contracts, both of which drove an increase in gross margin.Roadway Sensors gross profit can fluctuate indetermining anyspecific quarter or year based on, among other factors, customer and product mix between core products and third party OEM products, competitive pricing requirements, product warranty costs and provisions for our excess and obsolete inventories, as well as shifts of engineering resources from development activities to sustaining activities, which we record as cost of goods sold.We recognize a portion of our Transportation Systems revenues and related gross profit over time using the costs incurred input method, where revenue is recognized based on the Company's efforts or inputs toward satisfying a performance obligation, and the underlying mix of contract activity affects the related gross profit recognized in any given period. For the Transportation Systems segment, we expect to experience gross profit variability in future periods due to our contract mix and the amount of related sub-consulting content of such contracts, as well as factors such as our ability to efficiently utilize our internal workforce, which could cause fluctuations in our margins from period to period.Selling, General and Administrative ExpenseSelling, general and administration expense for Fiscal 2020 increased approximately 15.3% to $44.4 million, compared to $38.5 million in Fiscal 2019. The increase was primarily due to expenses related to the acquisition of AGI, retention costs for certain Agriculture and Weather Analytics employees, and executive severance costs. In connection with the AGI acquisition completed in July 2019, we added more than 40 employees, which has increased our selling, general and administrative expense in Fiscal 2020.Research and Development ExpenseResearch and development expense for Fiscal 2020 increased approximately 10.3% to $8.6 million, compared to $7.8 million in Fiscal 2019. The overall increase was primarily due to continued investment in research and development activities largely focused on improving our existing software related product offerings.During Fiscal 2020, we invested in the development of further enhancements and functionality of the ClearAg and ClearPath Weather solutions in the Agriculture and Weather Analytics segment and our Vantage products family in our Roadway Sensors segment. In our Transportation Systems segment, we invested in, and successfully released Iteris ClearGuide, our state-of-the-art mobility intelligence platform, designed to help transportation agencies achieve safer, more efficient mobility for theirnetworks. Going forward, we plan to continue to invest in Iteris ClearGuide and our Vantage products family.In both the current and prior year periods 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.Impairment of GoodwillBased on our goodwill impairment testing for Fiscal 2020 and 2019, we believe the carrying value of our goodwill was not impaired, as the estimated fair values of our reporting units exceeded their carrying values at the end of Fiscal 2020 and 2019. If our actual financial results, or the plans and estimates used in future goodwill impairment analyses, are lower than our original estimates used to assess impairment of our goodwill, we could incur goodwill impairment charges in the future.Amortization of Intangible AssetsAmortization expense for intangible assets subject to amortization was approximately $1.5 million and $1.1 million for Fiscal 2020 and Fiscal 2019, respectively. Approximately $736,000 and $850,000 of the intangible asset amortization was recorded to cost of revenues, and approximately $757,000 and $275,000 was recorded to amortization expense for Fiscal 2020 and Fiscal 2019, respectively, in the consolidated statements of operations. The increase in amortization was primarily due to amortization expenses related to intangible assets acquired as part of the AGI acquisition.Interest Income, NetNet interest income was approximately $229,000 and $129,000 in Fiscal 2020 and Fiscal 2019, respectively. The increase in net interest income in the current year was primarily due to interest earned on investments purchased and held during the current Fiscal year.Income TaxesThe following table presents our (benefit) provision for income taxes for Fiscal 2020 and Fiscal 2019:Year Ended
March 31,2020 2019 (In thousands,
except percentages)Provision (benefit) for income taxes
$ 160 $ 36 Effective tax rate
(3.1 )% (0.5 )% For Fiscal 2020 and 2019, the difference between the statutory and the effective tax rate was primarily attributable to thevaluation allowance recorded againstourdeferred tax assets.In assessing the realizability of our deferred tax assets, we review all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance. As the Company has sustained a cumulative pre-tax loss over the trailing three fiscal years, we considered it appropriate to maintain valuation allowances of
2022 and 2021, respectively. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.$14.2$14.6 million and $12.3 million against our deferred tax assets at March 31,Recent Accounting PronouncementsRefer to Note 1, Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements, included in Part II, Item 8 of this report for a discussion of recent accounting pronouncements.31Analysis of Fiscal 2022 and Fiscal 2021 Results of OperationsFor a comparison of the 2021 to 2020 fiscal years, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Form 10-K for the fiscal year ended March 31, 2021. Note that the filings of the 2020 and 2019 fiscal years do not reflect results of discontinued operation related activities, which are reflected in this report.Total Revenues. The following table presents details of total revenues for Fiscal 2022 as compared to Fiscal 2021:Year Ended March 31, 2022 2021 $ Increase % Change (In thousands, except percentage) Product revenues $ 68,729 $ 62,933 $ 5,796 9.2 % Service revenues 64,843 54,205 10,638 19.6 % Total revenues $ 133,572 $ 117,138 $ 16,434 14.0 % Product revenues primarily consist of product sales, but also includes OEM products for the traffic signal markets, as well as third-party product sales for installation under certain construction-type contracts. Product revenues for Fiscal 2022 increased approximately 9.2% to $68.7 million, compared to $62.9 million in Fiscal 2021, primarily due to continued strong demand for our hardware solutions, further augmented by approximately $6.0 million of TrafficCast product sales in Fiscal 2022 as compared to approximately $1.4 million of TrafficCast product sales in Fiscal 2021, or a net increase of approximately $4.6 million.Service revenues primarily consist of traffic study, design, engineering, and management services, but also includes service revenues generated from advanced sensor technologies product installation services and cloud-based application installation and support services. Service revenues for Fiscal 2022 increased approximately 19.6% to $64.8 million, compared to $54.2 million in Fiscal 2021. This increase was primarily due to continued adoption of Iteris' ClearMobility Platform and the addition of $7.9 million of TrafficCast SaaS revenue in Fiscal 2022 as compared to approximately $2.7 million of TrafficCast service sales in Fiscal 2021, or a net increase of approximately $5.2 million. Total annual recurring revenue, which we define as revenues from software and managed services contracts, was approximately 25% of total revenue for Fiscal 2022 and approximately 22% of total revenue for Fiscal 2021.The Company added approximately $155.4 million of new bookings, or potential revenue under binding agreements, during Fiscal 2022. The Company's total backlog increased to approximately $99.9 million as of March 31, 2022, as compared to approximately $78.1 as of March 31, 2021.We plan to continue to focus on securing new contracts and to extend and/or continue our existing relationships with both key public-sector and private-sector customers related to projects in their final project phases. While we believe our ability to obtain additional large contracts will contribute to overall revenue growth, the mix of subcontractor revenue and third-party product sales to our public-sector customers will likely affect the related total gross profit from period to period, as total revenues derived from subcontractors and third-party product sales generally have lower gross margins than revenues generated by our professional services.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 includes new bookings but 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, but there can be no assurances we will recognize revenue from bookings or backlog timely or ever.Gross Profit. The following tables present details of our gross profit for Fiscal 2022 compared to Fiscal 2021:32Year Ended March 31, 2022 2021 $ Increase (decrease) % Change (In thousands, except percentage) Product gross profit $ 28,228 $ 28,000 $ 228 0.8 % Service gross profit 19,165 18,856 309 1.6 % Total gross profit $ 47,393 $ 46,856 $ 537 1.1 % Product gross margin as a % of product revenues 41.1 % 44.4 % Service gross margin as a % of service revenues 29.6 % 34.9 % Total gross margin as a % of total revenues 35.5 % 40.0 % Our product gross margin as a percentage of product revenues for Fiscal 2022 decreased approximately 330 basis points compared to Fiscal 2021 primarily due to an increase in raw material costs as a result of global supply chain constraints.Our service gross margin as a percentage of service revenues for Fiscal 2022 decreased 530 basis points compared to Fiscal 2021 primarily due to the completion of previously awarded contracts, the timing of certain extension contracts, the contract mix, an increase in the number of subcontractors of such contracts, and recognition of an estimated contractual loss on a project with a customer, for which approximately $3.4 million was recorded in Fiscal 2022. Subcontractor revenue generally results in lower gross margins than our direct labor revenue.Our total gross margin as a percentage of total revenues for Fiscal 2022 decreased 450 basis points compared to Fiscal 2021 primarily as a result of the aforementioned reasons.General and Administrative ExpenseGeneral and administration expense for Fiscal 2022 increased approximately 4% to $25.1 million, compared to $24.2 million in Fiscal 2021 primarily due to the addition of TrafficCast, and additional professional services fees related to the Company's review of strategic alternatives.Sales and Marketing ExpenseSales and marketing expense for Fiscal 2022 increased approximately 27% to $18.9 million, compared to $15.0 million in Fiscal 2021 primarily due to the addition of TrafficCast, and higher sales commissions based on higher sales for Fiscal 2022.Research and Development ExpenseResearch and development expense for Fiscal 2022 increased approximately 43% to $7.4 million, compared to $5.1 million in Fiscal 2021. The overall increase was primarily due to continued investment in research and development activities largely focused on improving our existing software related product offerings.We plan to continue to invest in the development of further enhancements and functionality of our Iteris ClearMobility Platform which includes among other things our software portfolio and our Vantage sensors.Certain development costs were capitalized into intangible assets in the consolidated balance sheets in both the current and prior year periods; 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 software solutions. This continued investment may result in increases in research and development costs, as well as additional capitalized software in future periods.Impairment of GoodwillBased on our goodwill impairment testing for Fiscal 2022, we believe the carrying value of our goodwill was not impaired, as the estimated fair values of our reporting units exceeded their carrying values at the end of Fiscal 2022. If our actual financial results, or the plans and estimates used in future goodwill impairment analyses, are lower than our original estimates used to assess impairment of our goodwill, we could incur goodwill impairment charges in the future.Amortization of Intangible AssetsAmortization expense for intangible assets subject to amortization was approximately $3.2 million and $2.0 million for Fiscal 2022 and Fiscal 2021, respectively. Approximately $0.6 million and $0.5 million of the intangible asset amortization was33recorded to cost of revenues, and approximately $2.7 million and $1.5 million was recorded to amortization expense for Fiscal 2022 and Fiscal 2021, respectively, in the consolidated statements of operations. The increase in amortization was primarily due to amortization expenses related to intangible assets acquired as part of the TrafficCast acquisition.Interest Income (Expense), NetNet interest expense was approximately $0.0 million and net interest income was approximately $0.1 million in Fiscal 2022 and Fiscal 2021, respectively. The decrease in net interest income in the current year was primarily due to the decrease in interest earned on investments purchased and held during the current fiscal year.Income TaxesThe following table presents our provision for income taxes for Fiscal 2022 and Fiscal 2021:Year Ended
March 31,2022 2021 (In thousands,
except percentage)Provision for income taxes $ 174 $ 115 Effective tax rate (2.5) % 1.8 % For Fiscal 2022 and 2021, the difference between the statutory and the effective tax rate was primarily attributable to the valuation allowance recorded against our deferred tax assets.In assessing the realizability of our deferred tax assets, we review all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance. As the Company has sustained a cumulative pre-tax loss over the trailing three fiscal years, we considered it appropriate to maintain valuation allowances of $14.6 million and $12.3 million against our deferred tax assets at March 31, 2022 and 2021, respectively. We will continue to reassess the appropriateness of maintaining a valuation allowance.As we update our estimates in future periods, adjustments to our deferred tax asset and valuation allowance may be necessary. We anticipate this will cause our future overall effective tax rate in any given period to fluctuate from prior effective tax rates and statutory tax rates. We utilize the liability method of accounting for income taxes. We record net deferred tax assets to the extent that we believe these assets will more likely than not be realized.At March 31,2020,2022, we had$10.7$16.0 million of federal net operating loss carryforwards that do not expire as a result of recent tax law changes. Wehad $7.3 million of federal net operating loss carryforwards that begin to expire in 2038. Wealso had$8.7$9.9 million of state net operating loss carryforwards that begin to expire in 2031. Although the impact cannot be precisely determined at this time, we believe that our net operating loss carryforwards will provide reductions in our future income tax payments, that would otherwise be higher using statutory tax rates.On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the Pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017. The CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The income tax provisions of the CARES Act had an immaterial impact on our current taxes, deferred taxes, and uncertain tax positions of the Company.Liquidity and Capital ResourcesFor a comparison of the20192021 to20182020 fiscal years, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's Form 10-K for the fiscal year ended March 31,2019."2021.
Cash FlowsWe have historically financed our operations with a combination of cash flows from operations and the sale of equity securities. We expect to continue to rely on cash flows from operations and our cash reserves to fund our operations, which we believe to be sufficient to fund our operations for at least the next twelve months. However, we may need or choose to raise additional capital to fund potential future acquisitions and our future growth. We may raise such funds by selling equity or debt securities to the public or to selected investors or by borrowing money from financial institutions. If we raise additional funds by issuing equity or convertible debt securities, our existing stockholders may experience significant dilution, and any equity securities that may be issued may have rights senior to our existing stockholders. There is no assurance that we will be able to secure additional funding on a timely basis, on terms acceptable to us, or at all.At March 31,2020,2022, we had$32.5$36.8 million in working capital, excluding current liabilities of discontinued operations, which included$14.4$23.8 million in cash and cash equivalents. This compares to working capital of $36.7 million at March 31, 2021, which included $25.5 million in cash and cash equivalents and$11.6$3.1 million in short-term investments.This compares to working capital of $13.5 million at March 31, 2019, which included $7.1 million in cash and cash equivalents and $1.9 million in short-term investments.The following table summarizes our cash flows from continuing operations for Fiscal20202022 and Fiscal2019:2021:Year Ended
March 31,2022 2021 (In thousands) Net cash provided by (used in): Operating activities $ (5,593) $ 8,888 Investing activities 999 (7,998) Financing activities 1,563 2,873 Year Ended
March 31,2020 2019 (In thousands) Net cash provided by (used in):
Operating activities
$ (3,827 ) $ (5,828 ) Investing activities
$ (16,243 ) $ 2,345 Financing activities
$ 27,362 $ 402 Operating Activities.
CashNet cash usedinby operating activities of our continuing operationsduringfor Fiscal20202022 of $5.6 million was primarily the result ofour net loss of approximately $5.6 million, adjusted by approximately $6.9 million in non-cash items fornoncash lease expense,deferred income taxes,depreciation expenses, stock-based compensation, and amortizationoffset by a decreasecoupled with our net loss from continuing operations of approximately$5.2$6.9 million, as well as approximately $11.8 million of outflows from changes in workingcapital.Cashcapital offset by $13.1 million in non-cash items. Net cash used in operating activities due to discontinued operations was $0.1 million.Net cash provided by operating activities of our continuing operationsduringfor Fiscal20192021 of $8.9 million was primarily the result ofour net loss of approximately$7.8million, adjusted by approximately $4.1million in non-cash items, primarily fordeferred income taxes,noncash lease expense, depreciation expenses, stock-based compensation, andamortization. Theamortization coupled with our netloss was offset in part byincome from continuing operations of approximately$2.1$0.5 million, as well as approximately $0.6 million of inflows due to changes in workingcapital used in our operations in Fiscal 2019.Investing Activities.capital. Net cash used inouroperating activities from discontinued operations was $2.4 million.Investing Activities. Net cash provided by investing activities of our continuing operations during Fiscal20202022 was primarily the result ofpurchases ofapproximately$33.8 million of short-term investments and approximately $468,000 of property and equipment, as well as approximately $5.6 million in net cash paid for the AGI acquisition and approximately $633,000 of capitalized software development, primarily in the Roadway Sensors and Transportation Systems business segments related to VantageLive! and Iteris ClearGuide, respectively. These investments were partially offset by approximately $24.2$3.1 million in proceeds from the sale and maturity of short-terminvestments.investments which were partially offset by approximately $0.5 million of property and equipment purchases, and approximately $1.6 million of capitalized software development costs, primarily in VantageLive! and ClearGuide, respectively. Net cash provided by
ourinvesting activities from discontinued operations was $1.5 million.Net cash used in investing activities of our continuing operations during Fiscal20192021 was primarily the result of purchases of approximately $23.7 million of short-term investments, approximately $15.0 million in cash paid for the TrafficCast acquisition, approximately $0.6 million of property and equipment purchases, and approximately $0.8 million of capitalized software development costs, related to VantageLive! and ClearGuide. These investments were partially offset by approximately $32.0 million in proceeds from the sale and maturity of short-term investments.Financing Activities. Net cash provided by financing activities of our continuing operations during Fiscal 2022 was primarily the result of approximately$7.5$1.3 millionin proceeds from the maturity of short-term investmentsandapproximately $107,000 in proceeds from the last earn-out payment related to the sale of the assets of the Vehicle Sensors segment in 2011. These amounts were partially offset by purchases of approximately $4.1$0.4 millionof short-term investments and approximately $486,000 of property and equipment as well as approximately $660,000 of capitalized software development primarily in the Roadway Sensors business segment related to VantageLive! developments.Financing Activities.Net cash provided by financing activities during Fiscal 2020 was the result of approximately $26.8 million of proceeds from the issuance of common stock in connection with the public offering, net of costs, of 6,182,797 shares of the Company's common stock on June 13, 2019. In addition, there was $370,000of cash proceeds from thepurchase of ESPP shares and approximately $256,000 of cash proceeds from the exercisesexercise of stockoptions.Net cash provided by financing activities during Fiscal 2019 was primarily the result of approximately $365,000 of cash proceeds received from theoptions and purchases of Employee Stock Purchase Plan ("ESPP") shares, respectively.Net cash provided by financing activities of our continuing operations during Fiscal 2021 was primarily the result of approximately $2.6 million andapproximately $85,000$0.4 million of cash proceeds from the exercise of stock optionsduring Fiscal 2019.and purchases of ESPP shares, respectively.
Off-Balance Sheet ArrangementsWe do not have any other material off-balance sheet arrangements at March 31,2020.2022.SeasonalityWe have historically experienced seasonality, particularly with respect to ourRoadway Sensors segment,products, which adversely affects such sales in our third and fourth fiscal quarters due to a reduction in intersection construction and repairs during the winter months due to inclement weather conditions, with the third fiscal quarter generally impacted the most by inclement weather. We have also experienced seasonality,particularly with respect to our Transportation Systems segment,which adversely impacts our third fiscal quarter due to the increased number of holidays, causing a reduction in available billable hours.In addition, we have experienced seasonality related to certain ClearPath Weather services which adversely impacts such sales in our first and second fiscal quarters, mainly because these services are generally not required during Spring and Summer when weather conditions are comparatively milder.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe Company is a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and is not required to provide the information required by this Item.Iteris, Inc.Index to Consolidated Financial StatementREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the stockholders and the Board of Directors of Iteris, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Iteris, Inc. and subsidiaries (the"Company"“Company”) as of March 31,20202022 and2019,2021, the related consolidated statements of operations,stockholders'stockholders’ equity, and cash flows, for each of the three years in the period ended March 31,2020,2022, and the related notes (collectively, referred to as the"financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31,20202022 and2019,2021, and the results of its operations and its cash flows for each of the three years in the period ended March 31,2020,2022, in conformity with accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), theCompany'sCompany’s internal control over financial reporting as of March 31,2020,2022, based on criteria established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June9, 2020,1, 2022, expressed an unqualified opinion on theCompany'sCompany’s internal control over financial reporting.Adoption of New Accounting StandardAs discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of and for the year ended March 31, 2020 due to the adoption of Accounting Standards Update 2016-02,Leases.Basis for OpinionThese financial statements are the responsibility of theCompany'sCompany’s management. Our responsibility is to express an opinion on theCompany'sCompany’s financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform theauditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Revenue from Contracts with Customers – Determination of Distinct Performance Obligations Relating to Service Revenues – Refer to Note 1 of the financial statementsCritical Audit Matter DescriptionThe Company’s service revenues within the Consulting Solutions (“CS”) and Application and Cloud Solutions (“ACS”) revenue streams, primarily derive revenue from long-term engineering and consulting services and software as a service (“SaaS”). The Company accounts for individual services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the services, the solution provided, and the structure of the sales contract. During the year ended March 31, 2022, the Company recognized service revenues from contracts with customers of $64.8 million.We identified the determination of distinct performance obligations in contracts with customers relating to service revenues as a critical audit matter. Significant judgment is required to determine whether the performance obligations in these sales contracts are distinct; that is, if a service is separately identifiable from other items in the sales contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. Auditing these aspects include especially challenging auditor judgment due to the nature and extent of audit effort required to address this matter.How the Critical Audit Matter was Addressed in the Audit37Our audit procedures related to the Company’s determination of distinct performance obligations relating to service revenues for these contracts included the following, among others:• We tested the effectiveness of controls related to management’s identification and assessment of distinct performance obligations in contracts with customers.• We selected a sample of customer contracts to evaluate the appropriateness of management’s determination of distinct performance obligations.• We selected a sample of invoices from the accounts receivable detail and determined whether amounts invoiced were in accordance with the related contract terms. Further, we inspected line items on the invoice to verify that all line items were included in management's evaluation of performance obligations.• We selected a sample of customer contracts and investigated all changes in current forecasted cost to original forecasted cost to evaluate if changes in estimate are indicative of existing services known by operations personnel, but not previously considered as distinct performance obligations by management.• We investigated offsets to revenue to determine that they represent a valid purpose, and a service was not previously identified.• We selected a sample of expenditures and determined whether the good/service represented by the selected transaction was properly identified and evaluated by management as a distinct performance obligation./s/ Deloitte & Touche LLPCosta Mesa, CAJune9, 20201, 2022
We have served as the Company's auditor since 2016.Iteris, Inc.Consolidated Balance Sheets(In thousands, except par value)March 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 23,689 $ 25,205 Restricted cash 120 263 Short-term investments — 3,100 Trade accounts receivable, net of allowance for doubtful accounts of $903 and $1,019 at March 31, 2022 and 2021, respectively 25,628 19,020 Unbilled accounts receivable 10,870 11,541 Inventories 7,980 5,066 Prepaid expenses and other current assets 4,076 5,445 Total current assets 72,363 69,640 Property and equipment, net 1,392 1,923 Right-of-use assets 11,382 11,353 Intangible assets, net 11,780 14,297 Goodwill 28,340 28,340 Other assets 1,120 1,238 Noncurrent assets of discontinued operations 6 78 Total assets $ 126,383 $ 126,869 Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 11,926 $ 8,935 Accrued payroll and related expenses 11,409 11,734 Accrued liabilities 5,623 4,921 Deferred revenue 6,566 7,349 Current liabilities of discontinued operations 163 94 Total current liabilities 35,687 33,033 Lease liabilities 10,763 10,146 Deferred income taxes 337 808 Unrecognized tax benefits 105 119 Other long-term liabilities 2,456 3,523 Noncurrent liabilities of discontinued operations 172 261 Total liabilities 49,520 47,890 Commitments and contingencies (Note 7) 0 0 Stockholders' equity: Preferred stock, $1.00 par value: Authorized shares—2,000 — — Issued and outstanding shares—none — — Common stock, $0.10 par value: Authorized shares—Authorized shares—70,000 at March 31, 2022 and March 31, 2021 Issued and outstanding shares— 42,416 at March 31, 2022 and 41,687 at March 31, 2021 4,242 4,170 Additional paid-in capital 186,720 181,828 Accumulated deficit (114,099) (107,019) Total stockholders' equity 76,863 78,979 Total liabilities and stockholders' equity $ 126,383 $ 126,869 March 31, 2020 2019 Assets
Current assets:
Cash and cash equivalents
$ 14,217 $ 7,071 Restricted cash
146 — Short-term investments
11,556 1,935 Trade accounts receivable, net of allowance for doubtful accounts of $802 and $539 at March 31, 2020 and 2019, respectively
17,569 16,929 Unbilled accounts receivable
10,352 6,487 Inventories
3,040 2,916 Prepaid expenses and other current assets
2,149 1,367 Total current assets
59,029 36,705 Property and equipment, net
1,942 1,965 Right-of-use assets
13,044 — Intangible assets, net
6,137 3,286 Goodwill
20,590 15,150 Other assets
1,215 849 Total assets
$ 101,957 $ 57,955 Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable
$ 8,355 $ 9,441 Accrued payroll and related expenses
8,441 6,536 Accrued liabilities
3,756 2,370 Deferred revenue
5,963 4,883 Total current liabilities
26,515 23,230 Deferred rent
— 455 Lease liabilities
11,995 — Deferred income taxes
190 65 Unrecognized tax benefits
130 150 Total liabilities
38,830 23,900 Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $1.00 par value:
Authorized shares—2,000 Issued and outstanding shares—none
— — Common stock, $0.10 par value:
Authorized shares—70,000 at March 31, 2020 and March 31, 2019 Issued and outstanding shares—40,713 at March 31, 2020 and 33,377 at March 31, 2019
4,071 3,338 Additional paid-in capital
176,209 142,260 Accumulated deficit
(117,153 ) (111,543 ) Total stockholders' equity
63,127 34,055 Total liabilities and stockholders' equity
$ 101,957 $ 57,955 See accompanyingnotes.Notes to the Consolidated Financial Statements.Iteris, Inc.Consolidated Statements of Operations(In thousands, except per share amounts)Year Ended March 31, 2022 2021 2020 Product revenues $ 68,729 $ 62,933 $ 55,007 Service revenues 64,843 54,205 52,396 Total revenues 133,572 117,138 107,403 Cost of product revenues 40,501 34,933 30,266 Cost of service revenues 45,678 35,349 33,524 Cost of revenues 86,179 70,282 63,790 Gross profit 47,393 46,856 43,613 Operating expenses: General and administrative 25,131 24,207 24,047 Sales and Marketing 18,929 14,957 16,618 Research and development 7,354 5,130 4,315 Amortization of intangible assets 2,673 1,504 757 Restructuring charges — 619 — Total operating expenses 54,087 46,417 45,737 Operating income (loss) (6,694) 439 (2,124) Non-operating income (expense): Other income (expense) (18) 54 297 Interest income (expense) (14) 113 229 Income (loss) from continuing operations before income taxes (6,726) 606 (1,598) Provision for income taxes (174) (115) (160) Net income (loss) from continuing operations (6,900) 491 (1,758) Loss from discontinued operations before gain on sale, net of tax (180) (1,654) (3,852) Gain on sale of discontinued operations, net of tax — 11,297 — Net income (loss) from discontinued operations, net of tax (180) 9,643 (3,852) Net income (loss) $ (7,080) $ 10,134 $ (5,610) Income (loss) per share - basic: Income (loss) per share from continuing operations $ (0.16) $ 0.01 $ (0.04) Income (loss) per share from discontinued operations $ 0.00 $ 0.23 $ (0.10) Net income (loss) per share $ (0.16) $ 0.24 $ (0.14) Income (loss) per share - diluted: Income (loss) per share from continuing operations $ (0.16) $ 0.01 $ (0.04) Income (loss) per share from discontinued operations $ 0.00 $ 0.23 $ (0.10) Net income (loss) per share $ (0.16) $ 0.24 $ (0.14) Shares used in basic per share calculations 42,222 41,176 39,012 Shares used in diluted per share calculations 42,222 41,599 39,012 Year Ended March 31, 2020 2019 2018 Product revenues
$ 55,007 $ 48,227 $ 46,464 Service revenues
59,110 50,896 57,265 Total revenues
114,117 99,123 103,729 Cost of product revenues
30,266 28,434 26,633 Cost of service revenues
36,090 32,083 37,265 Cost of revenues
66,356 60,517 63,898 Gross profit
47,761 38,606 39,831 Operating expenses:
Selling, general and administrative
44,383 38,471 37,400 Research and development
8,597 7,819 7,945 Amortization of intangible assets
757 275 88 Total operating expenses
53,737 46,565 45,433 Operating loss
(5,976 ) (7,959 ) (5,602 ) Non-operating income (expense):
Other income (expense), net
297 50 (16 ) Interest income, net
229 129 32 Loss from continuing operations before income taxes
(5,450 ) (7,780 ) (5,586 ) (Provision) benefit for income taxes
(160 ) (36 ) 1,818 Loss from continuing operations
(5,610 ) (7,816 ) (3,768 ) Gain on sale of discontinued operation, net of tax
— — 242 Net loss
$ (5,610 ) $ (7,816 ) $ (3,526 ) Loss per share from continuing operations—basic and diluted
$ (0.14 ) $ (0.23 ) $ (0.12 ) Gain per share from sale of discontinued operation—basic and diluted
$ — $ — $ 0.01 Net loss per share—basic and diluted
$ (0.14 ) $ (0.23 ) $ (0.11 ) Shares used in basic per share calculations
39,012 33,266 32,776 Shares used in diluted per share calculations
39,012 33,266 32,776 See accompanyingnotes.Notes to the Consolidated Financial Statements.40Iteris, Inc.Consolidated Statements of Stockholders' Equity(In thousands)Common Stock Additional
Paid-In
CapitalAccumulated
DeficitTotal
Stockholders'
EquityShares Amount Balance at March 31, 2019 33,377 $ 3,338 $ 142,260 $ (111,543) $ 34,055 Issuance of common stock in connection with public offering, net of costs 6,183 618 26,133 — 26,751 Stock option exercises 120 12 244 — 256 Issuance of shares pursuant to Employee Stock Purchase Plan 91 9 361 — 370 Stock-based compensation — — 2,785 — 2,785 Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes 73 7 (22) — (15) Issuance of common stock in connection with acquisition 869 87 4,448 — 4,535 Net loss — — — (5,610) (5,610) Balance at March 31, 2020 40,713 4,071 176,209 (117,153) 63,127 Stock option exercises 731 74 2,559 — 2,633 Issuance of shares pursuant to Employee Stock Purchase Plan 97 10 438 — 448 Stock-based compensation — — 2,845 — 2,845 Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes 146 15 (223) — (208) Net income — — — 10,134 10,134 Balance at March 31, 2021 41,687 4,170 181,828 (107,019) 78,979 Stock option exercises 489 48 1,282 1,330 Issuance of shares pursuant to Employee Stock Purchase Plan 95 9 427 436 Stock-based compensation — — 3,401 3,401 Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes 145 15 (218) (203) Net loss (7,080) (7,080) Balance at March 31, 2022 42,416 $ 4,242 $ 186,720 $ (114,099) $ 76,863 Common Stock Additional
Paid-In
CapitalAccumulated
DeficitTotal
Stockholders'
EquityShares Amount Balance at March 31, 2017
32,488 $ 3,249 $ 136,968 $ (99,993 ) $ 40,224 Stock option exercises
591 59 1,131 — 1,190 Stock-based compensation
— — 1,781 — 1,781 Issuance of shares pursuant
— to vesting of restricted stock units,
— net of payroll withholding taxes
107 10 (158 ) — (148 ) Net loss
(3,526 ) (3,526 ) Balance at March 31, 2018
33,186 $ 3,318 $ 139,722 $ (103,519 ) $ 39,521 Adoption of ASU 2014-09 (see Note 1)
(208 ) (208 ) Stock option exercises
43 4 81 — 85 Issuance of shares pursuant
to Employee Stock Purchase Plan
92 10 355 — 365 Stock-based compensation
— — 2,156 — 2,156 Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes
56 6 (54 ) — (48 ) Net loss
(7,816 ) (7,816 ) Balance at March 31, 2019
33,377 $ 3,338 $ 142,260 $ (111,543 ) $ 34,055 Issuance of common stock in connection with public offerring, net of costs
6,183 618 26,133 — 26,751 Stock option exercises
120 12 244 — 256 Issuance of shares pursuant to Employee Stock Purchase Plan
91 9 361 — 370 Stock-based compensation
— — 2,785 — 2,785 Issuance of shares pursuant to vesting of restricted stock units, net of payroll withholding taxes
73 7 (22 ) — (15 ) Issuance of common stock in connection with acquisition
869 87 4,448 — 4,535 Net loss
(5,610 ) (5,610 ) Balance at March 31, 2020
40,713 $ 4,071 $ 176,209 $ (117,153 ) $ 63,127 See accompanyingnotes.Notes to the Consolidated Financial Statements.41Iteris, Inc.Consolidated Statements of Cash Flows(In thousands)Iteris, Inc.42Year Ended March 31, 2020 2019 2018 Cash flows from operating activities
Net loss
$ (5,610 ) $ (7,816 ) $ (3,526 ) Adjustments to reconcile net loss to net cash used in operating activities:
Right-of-use asset non-cash expense
1,772 — — Deferred income taxes
105 (18 ) (660 ) Depreciation of property and equipment
848 854 819 Stock-based compensation
2,785 2,156 1,781 Amortization of intangible assets
1,492 1,125 726 Gain on sale of discontinued operation, net of tax
— — (242 ) Loss on disposal of equipment
— — 16 Other
(60 ) — — Changes in operating assets and liabilities, net of effects of discontinued operation and acquisition:
Trade accounts receivable
265 (4,063 ) 1,433 Unbilled accounts receivable and deferred revenue
(2,438 ) 457 (166 ) Inventories
(124 ) 5 (671 ) Prepaid expenses and other assets
(987 ) 902 (693 ) Trade accounts payable and accrued expenses
(534 ) 570 915 Operating lease liabilities
(1,341 ) — — Net cash used in operating activities
(3,827 ) (5,828 ) (268 ) Cash flows from investing activities
Purchases of property and equipment
(468 ) (486 ) (1,079 ) Purchase of short term investments
(33,786 ) (4,079 ) (5,319 ) Maturities of investments
24,225 7,463 — Capitalized software development costs
(633 ) (660 ) (2,936 ) Cash paid in business acquisition, net of cash acquired
(5,581 ) — — Net proceeds from sale of business segment
— 107 511 Net cash (used in) provided by investing activities
(16,243 ) 2,345 (8,823 ) Cash flows from financing activities
Proceeds from stock option exercises
256 85 1,190 Proceeds from ESPP purchases
370 365 — Tax withholding payments for net share settlements of restricted stock units
(15 ) (48 ) (148 ) Proceeds from issuance of common stock, net of costs
26,751 — — Net cash provided by financing activities
27,362 402 1,042 Increase (decrease) in cash, cash equivalents and restricted cash
7,292 (3,081 ) (8,049 ) Cash, cash equivalents and restricted cash at beginning of period
7,071 10,152 18,201 Cash, cash equivalents and restricted cash at end of period
$ 14,363 $ 7,071 $ 10,152 Supplemental cash flow information:
Cash paid during the year for:
Income taxes
$ 63 $ 4 $ 130 Supplemental schedule of non-cash investing and financing activities:
Issuance of common stock for vested restricted stock units
$ 7 $ 6 $ 10 Issuance of common stock in connection with acquisition
$ 4,535 $ — $ — Lease liabilities arising from obtaining right-of-use assets
$ 581 $ — $ — Capitalized software development costs included in accounts payable and accrued expenses
$ — $ — $ 102 Landlord contribution for tenant improvements
$ — $ — $ 145 See accompanying notes.Year Ended March 31, 2022 2021 2020 Cash flows from operating activities Net income (loss) $ (7,080) $ 10,134 $ (5,610) Less: Net income (loss) from discontinued operations (180) 9,643 (3,852) Net income (loss) from continuing operations (6,900) 491 (1,758) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Project Loss 3,394 0 0 Right-of-use asset non-cash expense 2,515 1,438 1,199 Deferred income taxes (485) 607 105 Depreciation of property and equipment 820 734 770 Stock-based compensation 3,401 2,902 2,495 Amortization of intangible assets 3,240 2,036 1,255 Loss on disposal of equipment 177 — — Other — 86 (60) Changes in operating assets and liabilities, net of effects of discontinued operations and acquisitions: Trade accounts receivable (6,608) (227) 235 Unbilled accounts receivable and deferred revenue 148 903 (2,353) Inventories (2,914) (1,085) (124) Prepaid expenses and other assets (2,495) (1,738) (951) Trade accounts payable and accrued expenses 2,683 4,168 (409) Operating lease liabilities (2,569) (1,427) (866) Net cash provided by (used in) operating activities - continuing operations (5,593) 8,888 (462) Net cash used in operating activities - discontinued operations (128) (2,398) (3,365) Net cash provided by (used in) in operating activities (5,721) 6,490 (3,827) Cash flows from investing activities Purchases of property and equipment (466) (601) (409) Purchase of short-term investments — (23,655) (33,786) Maturities of investments 3,100 32,025 24,225 Capitalized software development costs (1,635) (767) (633) Cash paid in business acquisition, net of cash acquired — (15,000) (5,581) Net cash provided by (used in) investing activities - continuing operations 999 (7,998) (16,184) Net cash provided by (used in) investing activities - discontinued operations 1,500 9,740 (59) Net cash provided by (used in) investing activities 2,499 1,742 (16,243) Cash flows from financing activities Proceeds from stock option exercises 1,330 2,633 256 Proceeds from ESPP purchases 436 448 370 Tax withholding payments for net share settlements of restricted stock units (203) (208) (15) Proceeds from issuance of common stock, net of costs — — 26,751 Net cash provided by financing activities - continuing operations 1,563 2,873 27,362 Net cash provided by financing activities - discontinued operations — — — Net cash provided by financing activities 1,563 2,873 27,362 Increase (decrease) in cash, cash equivalents and restricted cash (1,659) 11,105 7,292 Cash, cash equivalents and restricted cash at beginning of period 25,468 14,363 7,071 Cash, cash equivalents and restricted cash at end of period $ 23,809 $ 25,468 $ 14,363 Supplemental cash flow information: Cash paid during the year for: Income taxes $ 223 $ 183 $ 63 Supplemental schedule of non-cash investing and financing activities: Issuance of common stock for vested restricted stock units $ 15 $ 15 $ 7 Lease liabilities arising from obtaining right-of-use assets $ 2,544 $ 689 $ 581 Deferred purchase price receivable $ — $ 1,500 $ — Issuance of common stock in connection with acquisition $ — $ — $ 4,535 Deferred consideration related to TrafficCast acquisition $ — $ 2,050 $ — Working capital adjustment related to TrafficCast acquisition $ — $ 681 $ — See accompanying Notes to the Consolidated Financial Statements.431. Description of Business and Summary of Significant Accounting PoliciesDescription of BusinessIteris, 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 solutions. Our cloud-enabled solutions. Municipalities, governmenthelp public transportation agencies, municipalities, commercial entities and other transportation infrastructure providersuse our solutions tomonitor, visualize, and optimize mobility infrastructure tohelp ensure roads aremake mobility safe,travel isefficient andcommunities thrive.sustainable for everyone.
As a pioneer in intelligent transportation systems ("ITS") technology,for more than two decades, we offerour intellectual property, advanced detection sensors, mobility and traffic data, software-as-a-service ("SaaS") offerings, mobility consulting services and end-to-end solutions delivered as cloud-enabled managed services represent a comprehensive range ofITS technologysmart mobility infrastructure management solutions that we distribute toourcustomers throughout the United States ("U.S.") andinternationally through a combination intellectual property, products, and SaaS offerings.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 analytical 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.internationally.
We believe our products, solutions and servicesimproveincrease safety andsafely optimize mobilitydecrease congestion within our communities, while also minimizing environmentalimpact on the roads we travel.impact.
We continue to make significant investments to leverage our existing technologies and furtherexpand bothenhance our advanceddetectionsensors, mobility intelligence software, mobility data sets, mobility consulting services andperformance analytics systems in the transportation infrastructure marketcloud-enabled managed services. As we are always mindful of capital allocation, we apply significant effort to evaluate and prioritize these investments. Likewise, we are always exploring strategic alternatives intended to optimize the value ofall ofourbusinesses.Company.
Iteris was incorporated in Delaware in 1987 and has operated in its current form since 2004.Recent DevelopmentsCOVID-19 UpdateThe COVID-19 pandemic (the “Pandemic”) has materially adversely impacted global economic conditions. More than 24 months into the Pandemic, COVID-19 continues to have an unpredictable and unprecedented impact on the global economy. Though there has been a trend in increasing availability of COVID-19 vaccines, as well as an easing of restrictions on social, business, travel and government activities and functions, infection rates continue to fluctuate and federal, state and local government regulations continue to rapidly change. 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. Due to the Pandemic, we have experienced supply chain and work delays on certain projects. 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 Pandemic, new and potentially more contagious variants, such as the Delta and Omicron variants, 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 and suppliers, 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, and implementing restructuring activities. Refer to Note 4, Restructuring Activities, for more information.Our products require specialized parts which have become more difficult to source. In some cases, we have had to purchase such parts from third-party brokers at substantially higher prices. Additionally, to mitigate for component shortages, we have begun to increase inventory levels and may continue to do so for an extended period. In the event demand doesn’t materialize, we may need to hold excess inventory for several quarters. Alternatively, we may be unable to source sufficient components, even from third-party brokers, to meet customer demand, resulting in high levels of unshippable backlog. We have placed non-cancellable inventory orders for certain products in advance of our normal lead times to secure normal and incremental future supply and capacity and may need to continue to do so in the future. Still, we may remain supply-constrained beyond the fiscal year ended March 31, 2022 ("Fiscal 2022").44Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)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. Refer to Note 6, Income Taxes, for more information.The Pandemic has had an impact on the Company’s human capital. While our Santa Ana product and commercial operations facility has remained open, easing of Pandemic restrictions imposed by local and state authorities have allowed a portion of our workforce to return to our various facilities while others continue to work remotely. The Company’s information technology infrastructure has proven sufficiently flexible to minimize disruptions in required duties and responsibilities. Additionally, we have been able to timely file financial reports. We believe we have the right infrastructure to efficiently work remotely for the balance of the Pandemic. We do not expect to incur significant costs to safely reopen our facilities to all our employees.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. As a result, our 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 “TrafficCast 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 TrafficCast 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”) and assume certain specified liabilities of the TrafficCast Business in exchange for a total purchase price of up to $17.7 million.The $17.7 million in total consideration was comprised of $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 TrafficCast Purchase Agreement also provided 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 transaction closed on December 7, 2020.Simultaneous with closing the transaction, the parties 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.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 Note11 for further details on12, Acquisitions, to theacquisition of AGI)Consolidated Financial Statements), and plans to use the balance of the net proceeds for general corporate purposes and possibly for other future acquisitions.CoronavirusIn MarchSale of Agriculture and Weather Analytics BusinessOn May 5, 2020, the Company completed the sale of substantially all of our assets used in connection with our Agriculture and Weather Analytics ("AWA") business to DTN, LLC (“DTN”), an operating company of TBG AG, aglobal 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 economicSwiss-based holdingNotes to Consolidated Financial Statements (Continued)March 31,20202022
1. Description of Business and Summary of Significant Accounting Policies (Continued)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 SegmentOn May 5, 2020,company, pursuant to an Asset Purchase Agreement (the"Purchase Agreement"“AWA Purchase Agreement”)entered insigned on May 2, 2020, in exchange for a total purchase consideration of $12.0 million in cash, subject to working capital adjustments. Upon closing, the Companysold the assetsreceived $10.5 million in cash and $1.5 million ofits Agriculture and Weather Analytics segment, composed of its ClearAg and ClearPath Weather product lines, topayment was deferred. DTNLLC ("DTN"), an operating company of TBG AG, a Swiss-based holding company. As of March 31, 2020,paid the Companydetermined that Agriculture$1.45 million at the 12-month anniversary of the closing date, andWeather Analytics did not meet$0.05 million at theheld for sale classification criteria under Accounting Standard Codification Topic 360 ("ASC 360"), and as such, Agriculture and Weather Analytics assets and liabilities as18-month anniversary ofMarch 31, 2020, andtheresults of operations for all periods presented are not classified as held for sale and are included in continuing operations in the consolidated financial statements.closing date. See Note143, Discontinued Operations, to the Consolidated Financial Statements, for further details on the sale of the Agriculture and Weather Analyticssegment.business.
Restructuring ActivitiesOn April 30, 2020, in connection with the sale of the Agriculture and Weather Analytics business, the Board of Directors of the Company 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).Basis of PresentationOur consolidated financial statements include the accounts of Iteris, Inc. and all its wholly-owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). All intercompanyaccountsbalances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of consolidated financial statements in conformity with GAAP requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.Significant estimates made in the preparation of the consolidated financial statements include,thebut are not limited to, recoverability of long-lived and intangible assets; fair value of acquired intangible assets and goodwill; collectability of accounts receivable and related allowance for doubtfulaccounts,accounts; projections of taxable income used to assess realizability of deferred taxassets,assets; warrantyreserves,reserves; costs to complete long-termcontracts,contracts; indirect cost rates used in cost pluscontracts, the valuationcontracts; fair value ofpurchased intangible assetsstock option awards andgoodwill, the valuation ofequityinstruments,instruments; estimates of future cash flows used to assess the recoverability oflong-lived assets andthe impairment ofgoodwill, andgoodwill; fair value ofour stock option awards usedcontingent consideration and capitalization and estimated useful life of the Company's internal-use software development costs. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject tocalculate the stock-based compensation.change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.
Revenue RecognitionRevenues are recognized when control of the promised goods or services are transferred to our customers, in a gross amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services. We generate all of our revenue from contracts with customers.Product revenue related contracts with customers begin when we acknowledge a purchase order for a specific customer order of product to be delivered in the nearterm. Theseterm and these purchase orders areNotes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)short-term in nature. Product revenue is recognized at a point in time upon shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.
Service revenues, primarily derivedfrom the Transportation Systems and Agriculture and Weather Analytics segments, are primarilyfrom long-term engineering and consulting service contracts with governmental agencies. These contracts generally include performance obligations in which control is transferred over time. We recognize revenue on fixed fee contracts, over time, using the proportion of actual costs incurred to the total costs expected to complete the contract performance obligation. The Company determined that this method best represents the transfer of services as the proportion closely depicts the efforts or inputs completed towards the satisfaction of a fixed fee contract performance obligation. Time & Materials ("T&M") and Cost Plus Fixed Fee ("CPFF") contracts are considered variable consideration. However, performance obligations with these fee types qualify for the "Right to Invoice" Practical Expedient. Under this practical expedient, the Company is allowed to recognize revenue, over time, in the amount to which the Company has a right46Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)to invoice. In addition, the Company is not required to estimate such variable consideration upon inception of the contract and reassess the estimate each reporting period. The Company determined that this method best represents the transfer of services as, upon billing, the Company has a right to consideration from a customer in an amount that directly corresponds with the value to the customer of the Company's performance completed to date.Service revenues also consist of revenues derived from maintenance and support,as well asextended warranty, and the use of the Company's service platforms and APIs on a subscription basis. We generate this revenue from fees for maintenance and support, extended warranty, monthly active user fees,software-as-a-service ("SaaS")SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price, which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer of services as the customer obtains equal benefit from the service throughout the service period.The Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. In SaaS agreements, we provide a service to the customer which combines the software functionality, maintenance and hosting into a single performance obligation. In product related contracts, a purchase order may contain different products, each constituting a separate performance obligation.We generally estimate variable consideration at the most likely amount to which we expect to be entitled and in certain cases based on the expected value, which requires judgment. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We review and update these estimates on a quarterly basis.Notes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)The Company's typical performance obligations include the following:
Performance Obligation When Performance
Obligation is Typically
SatisfiedWhen Payment is
Typically DueHow Standalone
Selling Price is
Typically EstimatedProduct RevenuesProduct Revenues
Standard purchase orders for delivery of a tangible product Upon shipment (point in time) Within 30 days of delivery Observable transactions Engineering services where the deliverable is considered a product
As work is performed (over time) Within 30 days of services being invoiced Estimated using a cost-plus margin approach
Service RevenuesEngineering and consulting services
As work is performed (over time) Within 30 days of services being invoiced Estimated using a cost-plus margin approach SaaS
Over the course of the SaaS service once the system is available for use (over time) At the beginning of the contract period Estimated using a cost-plus margin approach Extended warranty service Over the course of the extended warranty period (over time) At the beginning of the contract period Estimated using a cost-plus margin approach Disaggregation of RevenueThe Company disaggregates revenue from contracts with customers intoreportable segmentsproduct revenues andthe nature of the products and services. See Note 12 for our revenue by reportable segment.services revenues.
Trade Accounts Receivable and Contract BalancesWe classify our right to consideration in exchange for goods and services as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due). We present such receivables in trade accounts receivable, net inourthe accompanying consolidated balance sheet at their net estimated realizable value.47Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. If warranted, the allowance is increased by the Company's provision for doubtful accounts, which is charged against income. All recoveries on receivables previously charged off are included in income, while direct charge-offs of receivables are deducted from the allowance.Notes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are presented as unbilled accounts receivable
onin the accompanying consolidated balance sheet. For example, we would record a contract asset if we record revenue on a professional services engagement, but are not entitled to bill until we achieve specified milestones.Our contract assets and refund liabilities are reported in a net position on a contract basis at the end of each reporting period. Refund liabilities are consideration received in advance of the satisfaction of performance obligations.Contract Fulfillment CostsThe Company evaluates whether or not we should capitalize the costs of fulfilling a contract. Such costs would be capitalized when they are not within the scope of other standards and: (1) are directly related to a contract; (2) generate or enhance resources that will be used to satisfy performance obligations; and (3) are expected to be recovered. As of March 31,20202022 and2019,2021, there was approximately$1,236,000$0.6 million and$172,000,$3.2 million, respectively, of contract fulfillment costs which are presented in the accompanying consolidated balance sheets as prepaid and other current assets. These costs primarily relate to the satisfaction of performance obligations related to the set up of SaaS platforms. These costs are amortized on a straight-line basis over the estimated useful life of the SaaS platform.Due to delays in the completion of a software development contract with a customer, the Company recorded an estimated loss on the contract. During the twelve months ended March 31, 2022, the Company has recorded approximately $3.4 million, charged to cost of sales, of which approximately $0.9 million related to previously capitalized software development costs and the remainder reduced the balance of the related contract fulfillment costs. The estimates and assumptions used in these assessments were based upon management's judgment and may be subject to change as new events occur and additional information is obtained. In particular, there remains uncertainty with regards to the additional costs required to fulfill the Company's obligations with regards to the contract. If the future estimated costs to fulfill this contract exceed current estimates, the Company's financial condition, cash flows, and results of operations may be materially impacted.Transaction Price Allocated to the Remaining Performance ObligationsAs of March 31,20202022 and2019,2021, the aggregate amount of transaction price allocated to remaining performance obligations was immaterial, primarily as a result of termination provisions within our contracts, which make the duration of the accounting term of the contract one year or less.Practical Expedients and ExemptionsT&M and CPFF contracts are considered variable consideration. However, performance obligations with an underlying fee type of T&M or CPFF qualify for the "Right to Invoice" Practical Expedient under ASC 606-10-55-18. Under this practical expedient, the Company is not required to estimate such variable consideration upon inception of the contract and reassess the estimate each reporting period.The Company utilizes the practical expedient under ASC 606-10-50-14 of not disclosing information about its remaining performance obligations for contracts with an original expected duration (i.e., contract term, determined based on the analysis of termination provisions described above) of 12 months or less.The Company pays sales commissions on certain sales contracts. These costs are accrued in the same period that the revenues are recorded. Using the practical expedient under ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred since the amortization period of the asset that the Company otherwise would have recognized is one year or less.The Company utilizes the practical expedient under ASC 606-10-25-18B to account for shipping and handling as fulfillment costs, and not a promised service (a revenue element). Shipping and handling costs are included as cost of revenues in the period during which the products ship.Notes to Consolidated Financial Statements (Continued)March 31,20202022
1. Description of Business and Summary of Significant Accounting Policies (Continued)The Company excludes from the transaction price all sales taxes that are assessed by a governmental authority and that are imposed on and concurrent with a specific revenue-producing transaction and collected from a customer (for example, sales, use, value added, and some excise taxes). This employs the practical expedient under ASC 606-10-32-2A. Sales taxes are presented on a net basis (excluded from revenues) in theCompany'saccompanying consolidated statements of operations.Deferred RevenueDeferred revenue in the accompanying consolidated balance sheets is comprised ofrefund liabilities related tobillings and consideration received in advance of the satisfaction of performance obligations.Concentration of Credit RiskFinancial instruments that potentially subject us to a concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable.Cash and cash equivalents consist primarily of demand deposits and money market funds maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with high quality financial institutions, and therefore are believed to have minimal credit risk.Our accounts receivable are primarily derived from billings with customers located throughout North America, as well as in Europe, South America and Asia. We generally do not require collateral or other security from our domestic customers. We maintain an allowance for doubtful accounts for potential credit losses, which losses have historically been within management's expectations.We currently have, and historically have had, a diverse customer base. For the fiscalyearyears ended March 31, 2022 ("Fiscal 2022"), March 31, 2021 ("Fiscal 2021"), and March 31, 2020 ("Fiscal 2020"), no individual customer represented greater than 10% of our total revenues.For the fiscal years ended March 31, 2019 ("Fiscal 2019") and March 31, 2018 ("Fiscal 2018"), one individual customer represented approximately 24% and 22%, respectively, of our total revenues.As of March 31,20202022 and2019,2021, no individual customer represented greater than 10% of our total accounts receivable.Fair Values of Financial InstrumentsThe accounting guidance provided in ASC 820, Fair Value Measurements ("ASC 820") for fair valueof cash equivalents, receivables, accounts payable and accrued expenses approximate carrying value because of the short period of time to maturity. Our investments are measured at fair value onprovides arecurring basis.Theframework for measuring fair value,and related disclosure requirements aboutclarifies the definition of fair value,measurements are provided in ASC 820,Fair Value Measurements("ASC 820"). This pronouncement definesand expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liabilityin the principal or most advantageous market for the asset or liability(an exit price) in an orderly transaction between market participantsonat themeasurementreporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair valuehierarchy proscribed by ASC 820 contains three levelsas follows:Level 1—QuotedUnadjusted quoted prices in active markets for identical assets orliabilities.Notesliabilities accessible toConsolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)the reporting entity at the measurement date.
Level 2—Observable inputs other than quoted prices in active markets for identical assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3—Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing theassetassets orliability.liabilities.
A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.The Company applies fair value accounting for all financial instruments on a recurring basis. The Company's financial instruments, which include cash, cash equivalents, accounts receivable and accounts payable are recorded at their carrying amounts, which approximate their fair values due to their short-term nature. All marketable securities are considered to be available-for-sale and recorded at their estimated fair values. In valuing these items, the Company uses inputs and assumptions that market participants would use to determine their fair value, utilizing valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.49Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)Cash, Cash Equivalents and Restricted CashCash and cash equivalents consist of cash and short-term investments with initial maturities of 90 days or less.Restricted cash asAs of March 31,2020 consisted of $146,0002022 and 2021 restricted cash was $0.1 million and $0.3 million, respectively, related to cash restricted for shares purchased under the Employee Stock Purchase Plan ("ESPP") (see Note910 for further details on the ESPP).Cash, cash equivalents and restricted cash presented in the accompanying statements of cash flows consist of the following (in thousands):March 31, 2022 2021 Cash and cash equivalents $ 23,689 $ 25,205 Restricted cash 120 263 $ 23,809 $ 25,468 Year Ended March 31, 2020 2019 Cash and cash equivalents
$ 14,217 $ 7,071 Restricted cash
146 — $ 14,363 $ 7,071 InvestmentsThe Company's investments are classified as either held-to-maturity, available-for-sale or trading, in accordance with ASC 320. Held-to-maturity securities are those securities that the Company has the positive intent and ability to hold until maturity. Trading securities are those securities that the Company intends to sell in the near term. All other securities not included in the held-to-maturity or trading category are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost which approximates fair market value. Trading securities are carried at fair value with unrealized gains and losses charged to earnings. Available-for-sale securities are carried at fair value with unrealized gains and losses recorded within accumulated other comprehensive loss as a separate component of stockholders' equity. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available (see Note4)5). The Company had no investments as of March 31, 2022. As of March 31,2020,2021, all of our investmentsarewere available-for-sale.Under ASC 320-10-35, a security is considered to be other-than-temporarily impaired if the present value of cash flows expected to be collected are less than the security's amortized cost basis (the difference being defined as the "Credit Loss") or if the fair value of the security is less than the security's amortized cost basis and the investor intends, or will be required, to sell the security beforeNotes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)recovery of the security's amortized cost basis. If an other-than-temporary impairment exists, the charge to earnings is limited to the amount of Credit Loss if the investor does not intend to sell the security, and will not be required to sell the security before recovery of the security's amortized cost basis. Any remaining difference between fair value and amortized cost is recognized in other comprehensive loss, net of applicable taxes. The Company evaluates whether the decline in fair value of its investments is other-than-temporary at each quarter-end. This evaluation consists of a review by management, and includes market pricing information and maturity dates for the securities held, market and economic trends in the industry and information on the issuer's financial condition and, if applicable, information on the guarantors' financial condition. Factors considered in determining whether a loss is temporary include the length of time and extent to which the investment's fair value has been less than its cost basis, the financial condition and near-term prospects of the issuer and guarantors, including any specific events which may influence the operations of the issuer and the Company's intent and ability to retain the investment for a reasonable period of time sufficient to allow for any anticipated recovery of fair value.
Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are recorded net of the allowance for doubtful accounts. The allowance for doubtful accounts is estimated based on the Company's assessment of its ability to collect on customer accounts receivable. The collectability of our accounts receivable is evaluated through review of outstanding invoices and ongoing credit evaluations of our customers' financial condition. In cases where we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations subsequent to the original sale, we will record an allowance against amounts due, and thereby reduce the net recognized accounts receivable to the amount we reasonably believe will be collected.We also maintain an allowance based on our historical collections experience. When we determine that collection is not likely, we write offThe Company writes-off accounts receivable against the allowance when a determination is made that the balance is uncollectible and collection of the receivable is no longer being actively pursued. The allowance for doubtfulaccounts.accounts was approximately $0.9 million and $1.0 million as of March 31, 2022 and 2021, respectively.
50Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)InventoriesInventories consist of finished goods, work-in-process and raw materials and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method.Property and EquipmentProperty and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful life of the related assets ranging from three to eight years. Leasehold improvements are depreciated over the term of the related lease or the estimated useful life of the improvement, whichever is shorter.Intangible AssetsIntangible assets with determinable economic lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful life of each asset on a straight-line basis. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions. Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually.
GoodwillWe record stock-based compensation in our consolidated statements of operations as an expense, based on the estimated grant date fair value of our stock-based awards, whereby such fair values are amortized over the requisite service period. Our stock-based awards are currently comprised of common stock options, restricted stock units andrestrictedperformance stock units. The fair value of our common stock option awards is estimated on the grant date using the Black-Scholes-Merton option-pricing formula. The fair value of our performance stock unit awards is estimated on the grant date using a Monte Carlo simulation model. Whileutilizing this modelthe use of these models meets established requirements, the estimated fair values generated byitthe models may not be indicative of the actual fair values of ourcommon stock optionawards as it does not consider certain factors important to those awards to employees, such as continued employment and periodic vesting requirements, as well as limited transferability. The fair value of our restricted stock units is based on the closing market price of our common stock on the grant date. If there are any modifications or cancellations of the underlying unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.Research and Development ExpendituresResearch and development expenditures are charged to expense in the period incurred.Shipping and Handling CostsShipping and handling costs are included as cost of revenues in the period during which the products ship.Sales TaxesSales taxes are presented on a net basis (excluded from revenues) in the consolidated statements of operations.Right-of-Use Assets and Lease LiabilitiesWe determine if an arrangement contains a lease at inception and determine the classification of the lease, as either operating or finance, at commencement.Right-of-use assets and lease liabilities are recorded based on the present value of future lease payments which factors in certain qualifying initial direct costs incurred as well as any lease incentives received. If an implicit rate is not readily determinable, we utilize inputs from third-party lenders to determine the appropriate discount rate. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term. Finance leases incur interest expense using the effective interest method in addition to amortization of the leased asset on straight-line basis, both over the applicable lease term. Lease terms may factor in options to extend or terminate the lease.52Notes to Consolidated Financial Statements (Continued)March 31, 20221. Description of Business and Summary of Significant Accounting Policies (Continued)We adhere to the short-term lease recognition exemption for all classes of assets (i.e., facilities and equipment). As a result, leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In addition, for certain equipment leases, we account for lease and non-lease components, such as services, as a single lease component as permitted.
WarrantyNotes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)WarrantyWe generally provide a one to threeyearyears warranty from the original invoice date on all products, materials and workmanship. Products sold to various original equipment manufacturer customers sometimes carry longer warranties. Defective products will be either repaired or replaced, usually at our option, upon meeting certain criteria. We accrue a provision for the estimated costs that may be incurred for product warranties relating to a product as a component of cost of sales at the time revenue for that product is recognized. The accrued warranty reserve is included within accrued liabilities in the accompanying consolidated balance sheets. We do not provide any service-type warranties.Repair and Maintenance CostsWe incur repair and maintenance costs in the normal course of business. Should the repair or maintenance result in a permanent improvement to one of our leased facilities, the cost is capitalized as a leasehold improvement and amortized over its useful life or the remainder of the lease period, whichever is shorter. Non-permanent repair and maintenance costs are charged to expense as incurred.Comprehensive LossThe difference between netlossincome (loss) and comprehensivelossincome (loss) was de minimis fortheFiscal2020,2022, Fiscal2019,2021 and Fiscal2018.2020.
Recent Accounting PronouncementsIn February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU No. 2016-02 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either "finance" or "operating," with classification affecting the pattern of expense recognition in the income statement. This update was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. As a result of the adoption of ASU 2016-02, on April 1, 2019, the Company recognized (a) an operating lease liability of $14.2 million, which represents the present value of our remaining lease payments and (b) a related right-of-use asset of $13.4 million. In addition, the Company derecognized approximately $827,000 of deferred rent liability. The adoption of ASU 2016-02 did not have a material impact on the Company's statement of operations, cash flows, or stockholders' equity. Due to the adoption of the standard using the modified retrospective cumulative-effect adjustment method, there are no changes to our previously reported results prior to April 1, 2019. See Note 7, Right-of-Use Assets and Lease Liabilities, for additional details.In August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirement for Fair Value Measurements ("ASU 2018-13"), which modifies the disclosure requirements on fair value measurements. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We have completed our preliminary assessment and do not anticipate this pronouncement will have a significant impact on our consolidated financial statements upon adoption.In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal Use Software (subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a CloudNotes to Consolidated Financial Statements (Continued)March 31, 20201. Description of Business and Summary of Significant Accounting Policies (Continued)Computing Arrangement That Is a Service Contract ("ASU 2018-15"), which clarifies the accounting for implementation costs in cloud computing arrangements. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We have completed our preliminary assessment and do not anticipate this pronouncement will have a significant impact on our consolidated financial statements upon adoption.In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This update requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, ASU 2016-13 will now be effective for our fiscal year 2024 beginning April 1, 2023; however, early adoption is permitted. We are currently evaluating the timing and impact of adopting ASU 2016-13 on our consolidated financial statements.
In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections". This update simplifies the guidance in various sections that was duplicative, redundant or outdated. The Company adopted this update effective July 2019. It did not have a material impact on our consolidated financial statements upon adoption.In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, however we do not anticipate this pronouncement will have a significant impact on our consolidated financial statements upon adoption.2. Supplementary Financial InformationInventoriesThe following table presents details regarding our inventories:March 31, 2022 2021 (In thousands) Materials and supplies $ 5,680 $ 2,714 Work in process 200 435 Finished goods 2,100 1,917 $ 7,980 $ 5,066 53March 31, 2020 2019 (In thousands) Materials and supplies
$ 1,380 $ 1,517 Work in process
162 356 Finished goods
1,498 1,043 $ 3,040 $ 2,916 Notes to Consolidated Financial Statements (Continued)March 31,20202022
2. Supplementary Financial Information (Continued)Property and Equipment, netThe following table presents details of our property and equipment, net:March 31, 2022 2021 (In thousands) Equipment $ 6,825 $ 6,806 Leasehold improvements 3,117 3,046 Accumulated depreciation (8,550) (7,929) $ 1,392 $ 1,923 March 31, 2020 2019 (In thousands) Equipment
$ 7,134 $ 6,444 Leasehold improvements
3,009 2,939 Accumulated depreciation
(8,201 ) (7,418 ) $ 1,942 $ 1,965 Depreciation expense was approximately
$848,000, $854,000$0.8 million, $0.7 million and$819,000$0.8 million in Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, respectively. Approximately$291,000, $286,000$0.2 million, $0.2 million, and$288,000$0.3 million of the depreciation expense was recorded to cost of revenues, and approximately$557,000, $568,000$0.6 million, $0.5 million, and$531,000$0.5 million was recorded to operating expenses in Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, respectively, in the accompanying consolidated statements of operations.Intangible AssetsThe following table presents details regarding our intangible assets:March 31, 2022 March 31, 2021 Gross
Carrying
AmountAccumulated
AmortizationNet
Book
ValueGross
Carrying
AmountAccumulated
AmortizationNet
Book
Value(In thousands) Technology $ 4,986 $ (2,519) $ 2,467 $ 4,986 $ (1,594) $ 3,392 Customer contracts / relationships 9,550 (2,959) 6,591 9,550 (1,547) 8,003 Trade names and non-compete agreements 782 (753) 29 782 (683) 99 Capitalized software development costs 5,900 (3,207) 2,693 5,177 (2,374) 2,803 Total $ 21,218 $ (9,438) $ 11,780 $ 20,495 $ (6,198) $ 14,297 March 31, 2020 March 31, 2019 Gross
Carrying
AmountAccumulated
AmortizationNet
Book
ValueGross
Carrying
AmountAccumulated
AmortizationNet
Book
Value(In thousands) Technology
$ 1,856 $ (1,856 ) $ — $ 1,856 $ (1,856 ) $ — Customer contracts / relationships
4,250 (1,188 ) 3,062 750 (750 ) — Trade names and non-compete agreements
1,320 (1,163 ) 157 1,110 (1,110 ) — Capitalized software development costs
6,400 (3,482 ) 2,918 5,768 (2,482 ) 3,286 Total
$ 13,826 $ (7,689 ) $ 6,137 $ 9,484 $ (6,198 ) $ 3,286 Amortization expense for intangible assets subject to amortization was approximately
$1.5$3.2 million,$1.1$2.0 million and$726,000$1.3 million for Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, respectively. Approximately$736,000, $850,000$0.6 million, $0.5 million and$638,000$0.5 million of the intangible asset amortization was recorded to cost of revenues, and approximately$757,000, $275,000$2.7 million, $1.5 million and$88,000$0.8 million was recorded to amortization expense for Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, respectively, in the consolidated statements of operations. The weighted average remaining useful lives of the intangible assets as of March 31,20202022 is5.34.2 years.Wedo nothaveany intangible assets withone indefinite usefullives.life intangible asset, with de minimis carrying value, which was included in trade names and non-complete agreements. Our net customer contracts/relationships have a useful life of 6years beginning Fiscal 2020.years. Our nettradenamestrade names and non-compete agreements have a useful life of 3years beginning Fiscal 2020.years. Our net capitalized software development costs of approximately$2.9$2.7 million and$3.3$2.8 million primarily consisted of our Oracle Enterprise Resource Planning("ERP")system design and implementation of approximatelyNotes to Consolidated Financial Statements (Continued)March 31, 20202. Supplementary Financial Information (Continued)$1.9$1.4 million and$2.2$1.7 million as of March 31,20202022 and2019,2021, respectively, which has a useful life of 10years beginning Fiscal 2019.years.
54Notes to Consolidated Financial Statements (Continued)March 31, 20222. Supplementary Financial Information (Continued)As of March 31,2020,2022, the future estimated amortization expense is as follows:Year Ending March 31, (In thousands) 2023 3,198 2024 3,021 2025 2,538 2026 1,298 2027 1,095 Thereafter 618 $ 11,768 (In thousands) 2021
$ 1,419 2022
1,234 2023
1,010 2024
879 2025
849 Thereafter
746 $ 6,137 GoodwillThe following table presents the carrying value of our goodwillby reportable segmentsfor Fiscal2018,2022, Fiscal20192021 and Fiscal 2020:Total Balance—March 31, 2022 Goodwill $ 36,310 Acquired goodwill (see Note 12) — Accumulated impairment losses (7,970) $ 28,340 Balance—March 31, 2021 Goodwill $ 28,560 Acquired goodwill (see Note 12) 7,750 Accumulated impairment losses (7,970) $ 28,340 Balance—March 31, 2020 Goodwill $ 23,120 Acquired goodwill (Note 12) 5,440 Accumulated impairment losses (7,970) $ 20,590 Roadway
SensorsTransportation
SystemsAg & Weather
AnalyticsTotal (In thousands) Balance—March 31, 2018
Goodwill
$ 8,214 $ 14,906 $ 2,168 $ 25,288 Accumulated impairment losses
— (7,970 ) (2,168 ) (10,138 ) $ 8,214 $ 6,936 $ — $ 15,150 Balance—March 31, 2019
Goodwill
$ 8,214 $ 14,906 $ 2,168 $ 25,288 Accumulated impairment losses
— (7,970 ) (2,168 ) (10,138 ) $ 8,214 $ 6,936 $ — $ 15,150 Balance—March 31, 2020
Goodwill
$ 8,214 $ 14,906 $ 2,168 $ 25,288 Acquired goodwill (see Note 11)
— 5,440 — 5,440 Accumulated impairment losses
— (7,970 ) (2,168 ) (10,138 ) $ 8,214 $ 12,376 $ — $ 20,590 Notes to Consolidated Financial Statements (Continued)March 31, 20202. Supplementary Financial Information (Continued)Warranty Reserve Activity
The following table presents activity with respect to the warranty reserve:Year Ended March 31, 2022 2021 2020 (In thousands) Balance at beginning of fiscal year $ 569 $ 416 $ 463 Additions charged to cost of sales 238 508 649 Warranty claims (191) (355) (696) Balance at end of fiscal year $ 616 $ 569 $ 416 55Notes to Consolidated Financial Statements (Continued)March 31, 20222. Supplementary Financial Information (Continued)Year Ended March 31, 2020 2019 2018 (In thousands) Balance at beginning of fiscal year
$ 463 $ 403 $ 278 Additions charged to cost of sales
649 647 623 Warranty claims
(696 ) (587 ) (498 ) Balance at end of fiscal year
$ 416 $ 463 $ 403 Earnings Per Share
The following table sets forth the computation of basic and dilutedlossincome (loss) from continuing operations per share:Year Ended March 31, 2022 2021 2020 (In thousands, except per
share amounts)Numerator: Net income (loss) from continuing operations $ (6,900) $ 491 $ (1,758) Net income (loss) from discontinued operations, net of tax (180) 9,643 (3,852) Net income (loss) $ (7,080) $ 10,134 $ (5,610) Denominator: Weighted average common shares used in basic computation 42,222 41,176 39,012 Dilutive stock options — 423 — Weighted average common shares used in diluted computation 42,222 41,599 39,012 Basic: Net income (loss) per share from continuing operations: $ (0.16) $ 0.01 $ (0.04) Net income (loss) per share from discontinued operations: $ — $ 0.23 $ (0.10) Net income (loss) per basic share $ (0.16) $ 0.24 $ (0.14) Diluted: Net income (loss) per share from continuing operations: $ (0.16) $ 0.01 $ (0.04) Net income (loss) per share from discontinued operations: $ — $ 0.23 $ (0.10) Net income (loss) per diluted share $ (0.16) $ 0.24 $ (0.14) Year Ended March 31, 2020 2019 2018 (In thousands, except per
share amounts)Numerator:
Loss from continuing operations
$ (5,610 ) $ (7,816 ) $ (3,768 ) Gain on sale of discontinued operation, net of tax
— — 242 Net loss
$ (5,610 ) $ (7,816 ) $ (3,526 ) Denominator:
Weighted average common shares used in basic and diluted computation
39,012 33,266 32,776 Loss from continuing operations per share:
Basic
$ (0.14 ) $ (0.23 ) $ (0.12 ) Diluted
$ (0.14 ) $ (0.23 ) $ (0.12 ) The following instruments were excluded for purposes of calculating weighted average common share equivalents in the computation of diluted
lossincome (loss) per share from continuing operations as their effect would have beenanti-dilutive:Year Ended March 31, 2020 2019 2018 (In thousands) Stock options
6,190 5,056 3,917 Restricted stock units
110 12 228 Notes to Consolidated Financial Statements (Continued)anti-dilutive for the years ended March 31,
20202022, 2021, and 2020:
Year Ended March 31, 2022 2021 2020 (In thousands) Stock options 3,857 3,935 6,190 Restricted stock units 386 126 110 3.Sale of Vehicle SensorsDiscontinued Operations
OnJuly 29, 2011, weMay 5, 2020, the Company completed the sale(the "Asset Sale")of substantially all of our assets used in connection with ourprior Vehicle Sensors segmentAgriculture and Weather Analytics business toBendix Commercial Vehicle Systems LLC ("Bendix"),DTN, an operating company of TBG AG, amember of Knorr Bremse Group. In connection withSwiss-based holding company, pursuant to theAsset Sale, we are entitled to additional considerationAWA Purchase Agreement signed on May 2, 2020, inthe form of the following performance and royalty related earn-outs: Bendix was obligated to pay us an amount in cash equal to 85% of revenue associated with royalties received under our license and distribution agreements with Audiovox Electronics Corporation and Valeo Schalter and Sensoren GmbH through December 31, 2017, subject to certain reductions and limitations set forth in the asset purchase agreement. From the date of the Asset Sale, through March 31, 2019, we received approximately $2.7 million in connection with royalty-related earn-outs provisionsexchange for a total purchase consideration of$18$12.0 million in cash, subject to working capital adjustments. Upon closing, the Company receivedfrom$10.5 million in cash and $1.5 million of payment was deferred. DTN paid theAsset Sale.In accordanceCompany $1.45 million at the 12-month anniversary of the closing date, and $0.05 million at the 18-month anniversary of the closing date. The parties also entered into certain ancillary agreements at the closing of the transaction that will provide Iteris withapplicable accounting guidance, weongoing access to weather and pavement data that it integrates into its transportation software products, and a joint development agreement under which the parties agreed to pursue future joint opportunities in the global transportation market.The sale of the Agriculture and Weather Analytics business was a result of the Company’s shift in strategy to focus on its smart mobility infrastructure management solutions and to capitalize on the potential for a future partnership upon the sale of this business component to DTN. We have determined that theVehicle Sensors segment,Agriculture and Weather Analytics business, which constituted one of our operating segmentsqualifiedprior to first quarter of Fiscal 2021, qualifies as a discontinuedoperation. Foroperation in accordance with thefiscal yearscriteria set forth in ASC 205-20, Presentation of Financial Statements – Discontinued Operations.56Notes to Consolidated Financial Statements (Continued)March 31, 20223. Discontinued Operations (Continued)On May 5, 2020, the Company also entered into a transition services agreement (“TSA”) with DTN, pursuant to which the Company agreed to support the information technology and accounting functions of the Agriculture and Weather Analytics business for a period up to 12 months and DTN agreed to provide the contract administration/account management services for certain contracts of the Company and other transition services. Either party may make any reasonable request to extend the period of time the other party shall provide a transition service beyond the initial service period or access to additional services that are necessary for the transition of the operations and business. The income and costs associated with the TSA for the year ended March 31,2020,2022 were de minimis, as compared to approximately $0.2 million in income and approximately $0.1 million in costs for the year ended March 31,2019,2021, which were included in Other income (expense) on the accompanying consolidated statement of operations.The related assets and2018, weliabilities of the Agriculture and Weather Analytics business were reclassified to assets and liabilities of discontinued operations as of March 31, 2022 and March 31, 2021 on the accompanying consolidated balance sheets. The following table is a summary of major classes of assets and liabilities of discontinued operations:March 31, 2022 March 31, 2021 (In thousands) Assets Trade accounts receivable, net of allowance for doubtful accounts $ — $ — Unbilled accounts receivable — — Prepaid expenses and other current assets — — Total current assets of discontinued operations — — Property and equipment, net $ — — Right-of-use assets 6 78 Other classes of assets that are not major — — Total noncurrent assets of discontinued operations 6 78 Total assets of discontinued operations $ 6 $ 78 Liabilities Trade accounts payable $ — $ — Accrued liabilities — — Accrued payroll and related expenses 63 — Deferred revenue — — Current Lease Liabilities 100 94 Total current liabilities of discontinued operations 163 94 Noncurrent Lease liabilities 172 261 Total liabilities of discontinued operations $ 335 $ 355 The results of operations for the Agriculture and Weather Analytics business were included in net income (loss) from discontinued operations on the accompanying consolidated statements of operations. The following table provides information regarding the results of discontinued operations:57Notes to Consolidated Financial Statements (Continued)March 31, 20223. Discontinued Operations (Continued)Year Ended March 31, 2022 2021 2020 Service revenue $ — $ 695 $ 6,714 Cost of service revenues — 350 2,566 Gross profit — 345 4,148 Operating expenses: Selling, general and administration 180 780 3,718 Research and development — 407 4,282 Restructuring charges — 837 — Total operating expenses 180 2,024 8,000 Operating loss from discontinued operations (180) (1,679) (3,852) Other income, net — 72 — Loss from discontinued operation before income tax (180) (1,607) (3,852) Income tax expense 0 (47) — Net loss from discontinued operations (180) (1,654) (3,852) Gain on disposal of discontinued operations before income tax — 11,315 — Income tax expense on gain on disposal — (18) — Gain on disposal of discontinued operations after income tax — 11,297 — Net income (loss) from discontinued operations $ (180) $ 9,643 $ (3,852) The following table provides information on the gain recordeda gainon the sale ofdiscontinued operationthe Agriculture and Weather Analytics business for the year ended March 31, 2021. These amounts reflect the closing balance sheet of the Agriculture and Weather Analytics business upon the closing of the sale on May 5, 2020 (in thousands).Initial proceeds from sale, net of transaction costs $ 9,440 Closing working capital adjustment 250 Deferred payments of purchase price 1,500 Total consideration, net of transaction costs 11,190 Trade accounts receivable, net of allowance for doubtful accounts 1,060 Unbilled accounts receivable 488 Other classes of assets that are not major 194 Total Agriculture and Weather Analytics business assets 1,742 Trade accounts payable 349 Deferred revenue 1,518 Total Agriculture and Weather Analytics business liabilities 1,867 Gain on sale of Agriculture and Weather Analytics business $ 11,315 The initial proceeds were net of transaction costs of approximately$0, $0$1.1 million.4. Restructuring ActivitiesOn April 30, 2020, in connection with the sale of the Agriculture and$242,000, respectively, netWeather Analytics business, the Board oftax,Directors of Iteris, Inc. approved restructuring activities to better position the Company for increased profitability and growth, and the Company incurred total restructuring charges of approximately $1.5 million, primarily resulting from a separation for certain58Notes to Consolidated Financial Statements (Continued)March 31, 20224. Restructuring Activities (Continued)employees who did not transition to DTN, additional positions that were eliminated to right-size the cost structure of the Company and lease impairment related to our Grand Forks, North Dakota facility.As of March 31, 2022, we did not accrue any amounts for severance and benefits related to theearn-out provisions ofrestructuring activities in accrued payroll and related expenses in theasset purchase agreement.4.accompanying consolidated balance sheet. Our restructuring activities during the fiscal year ended March 31, 2022 were as follows (in thousands):Balance at March 31, 2021 $ 100 Cash payments (79) Adjustment to estimated expenses (21) Balance at March 31, 2022 $ — 5. Fair Value MeasurementsWe measure fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include:Level 1—Quoted prices in active markets for identical assets or liabilities.Level 2—Observable inputs other than quoted prices in active markets for identical assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3—Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.We did not have any material financial assets or liabilities measured at fair value on a recurring basis using Level 3 inputs as of March 31,20202022 or2019.2021. Our non-financial assets, such as goodwill, intangible assets, property and equipment, securities held in the deferred compensation plan and the liabilities associated with the deferred compensation plan, and acquired assets and liabilities assumed are measured at fair value on a non-recurring basis, generally when there is a transaction involving thoseassets such as a purchase transaction, a business combination or an adjustment for impairment.assets. In Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, Level 3 inputs were used to evaluate the fair value ofourthe contingent consideration and goodwillin our two reporting units that had goodwill balances.of the Company. No other non-financial assets were measured at fair valueduring the fiscal years endedas of March 31,2020, March 31, 20192022 and March 31,2018.2021.Notes to Consolidated Financial Statements (Continued)March 31, 20204. Fair Value Measurements (Continued)The following tables present the Company's financial assets and liabilities that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy:
As of March 31, 2022 Amortized
CostGross
Unrealized
LossGross
Unrealized
GainEstimated
Fair ValueAssets: (In thousands) Level 1: Money market funds $ 71 $ — $ — $ 71 Securities held in deferred compensation plan (1)998 (106) 73 965 Subtotal 1,069 (106) 73 1,036 Level 2: Commercial paper 7,499 — — 7,499 Corporate notes and bonds — — — — US treasuries 7,798 — — 7,798 Subtotal 15,297 — — 15,297 Total $ 16,366 $ (106) $ 73 $ 16,333 Liabilities: Level 1: Deferred compensation plan liabilities (2) $ 1,013 $ (106) $ 72 $ 979 Level 3: Contingent consideration (3) 600 — — — 600 Total $ 1,613 $ (106) $ 72 $ 1,579 59Notes to Consolidated Financial Statements (Continued)March 31, 20225. Fair Value Measurements (Continued)As of March 31, 2020 Amortized
CostGross
Unrealized
LossGross
Unrealized
GainEstimated
Fair Value(In thousands) Level 1:
Money market funds
$ 10,576 $ (1 ) $ — $ 10,575 Subtotal
10,576 (1 ) — 10,575 Level 2:
Commercial paper
1,495 (1 ) — 1,494 Corporate notes and bonds
6,044 (22 ) — 6,022 US Treasuries
3,013 — 20 3,033 US Government agencies
1,007 — — 1,007 Subtotal
11,559 (23 ) 20 11,556 Total
$ 22,135 $ (24 ) $ 20 $ 22,131 As of March 31, 2021 Amortized
CostGross
Unrealized
LossGross
Unrealized
GainEstimated
Fair Value(In thousands) Level 1: Money market funds $ 4,676 $ — $ — $ 4,676 Securities held in deferred compensation plan (1) 89 — 11 100 Subtotal 4,765 — 11 4,776 Level 2: Commercial paper 4,999 — — 4,999 Corporate notes and bonds 1,085 — — 1,085 US treasuries 4,600 — — 4,600 Subtotal 10,684 — — 10,684 Total $ 15,449 $ — $ 11 $ 15,460 Liabilities: Level 1: Deferred compensation plan liabilities (2) $ 100 $ — $ 11 $ 111 Level 3: Contingent consideration (3) $ 600 $ — $ — $ 600 Total $ 700 $ — $ 11 $ 711 (1) Included in prepaid expenses and other current assets on the Company’s consolidated balance sheet.As of March 31, 2019 Amortized
CostGross
Unrealized
LossGross
Unrealized
GainEstimated
Fair Value(In thousands) Level 1:
Money market funds
$ 3,338 $ — $ — $ 3,338 Subtotal
3,338 — — 3,338 Level 2:
Commercial paper
— — — Corporate notes and bonds
1,434 (1 ) — 1,433 US Treasuries
502 — — 502 Subtotal
1,936 (1 ) — 1,935 Total
$ 5,274 $ (1 ) $ — $ 5,273 (3) Included in other long-term liabilities on the Company’s consolidated balance sheet.Unrealized losses related to these investments are due to interest rate fluctuations as opposed to credit quality. In addition, we do not intend to sell, and it is not more likely than not that we would be required to sell, these investments before recovery of their cost basis. As a result, there is no other-than-temporary impairment for these investments as of March 31,2020.2022.6. Income TaxesThe components of current and deferred federal and state income tax(benefits)(benefit) provision are as follows:Year Ended March 31, 2022 2021 2020 (In thousands) Income (loss) from continuing operations before income taxes $ (6,726) $ 606 $ (1,598) Current income tax provision: Federal — 0 — State 75 67 34 Total current tax provision 75 67 34 Deferred income tax provision: Federal 33 21 105 State 66 27 21 Total deferred tax provision 99 48 126 Provision for income taxes on continuing operations 174 115 160 Income (loss) from continuing operations, net of taxes $ (6,900) $ 491 $ (1,758) Year Ended March 31, 2020 2019 2018 (In thousands) Loss from continuing operations before income taxes
$ (5,450 ) $ (7,780 ) $ (5,586 ) Current income tax provision:
Federal
— — 3 State
34 36 45 Total current tax provision
34 36 48 Deferred income tax benefit:
Federal
105 — (1,849 ) State
21 — (17 ) Total deferred benefit provision
126 — (1,866 ) Provision (benefit) for income taxes on continued operations
160 36 (1,818 ) Loss from continuing operations, net of taxes
$ (5,610 ) $ (7,816 ) $ (3,768 ) The reconciliation of our income tax (benefit) provision to taxes computed at U.S. federal statutory rates is as follows:
Year Ended March 31, 2022 2021 2020 (In thousands) Provision (benefit) for income taxes at statutory rates $ (1,422) $ 90 $ (1,095) State income taxes net of federal benefit (559) (177) (198) Tax credits (141) (663) (658) Compensation charges 34 313 151 Change in valuation allowance 2,169 523 1,913 Other 93 29 47 Provision for income taxes $ 174 $ 115 $ 160 61Year Ended March 31, 2020 2019 2018 (In thousands) Benefit for income taxes at statutory rates
$ (1,095 ) $ (1,634 ) $ (1,720 ) Change in federal tax rate
— — 4,134 State income taxes net of federal benefit
(198 ) (620 ) (255 ) Tax credits
(658 ) (343 ) (567 ) Compensation charges
151 199 (324 ) Change in valuation allowance
1,913 2,385 (3,153 ) Other
47 49 67 Provision (benefit) for income taxes
$ 160 $ 36 $ (1,818 ) Notes to Consolidated Financial Statements (Continued)March 31,20205.20226. Income Taxes (Continued)The components of deferred tax assets and liabilities are as follows:March 31, 2022 2021 (In thousands) Deferred tax assets: Net operating losses $ 3,980 $ 2,186 Capitalized R&D 1,808 2,282 Credit carry forwards 4,530 4,088 Deferred compensation and payroll 2,902 2,475 Bad debt allowance and other reserves 1,299 930 Property and equipment 297 354 Acquired intangibles 129 — Other, net 171 765 Total deferred tax assets 15,116 13,080 Valuation allowance (14,552) (12,349) Total deferred tax assets, net of valuation allowance 564 731 Deferred tax liabilities: Acquired intangibles — (297) Goodwill (901) (672) Total deferred tax liabilities (901) (969) Net deferred tax liabilities $ (337) $ (238) March 31, 2020 2019 (In thousands) Deferred tax assets:
Net operating losses
$ 4,284 $ 5,335 Capitalized R&D
3,520 2,347 Credit carry forwards
3,510 2,806 Deferred compensation and payroll
2,304 1,655 Bad debt allowance and other reserves
656 618 Deferred rent
— 202 Operating leases
219 — Property and equipment
60 139 Other, net
556 309 Total deferred tax assets
15,109 13,411 Valuation allowance
(14,163 ) (12,250 ) Total deferred tax assets, net of valuation allowance
946 1,161 Deferred tax liabilities:
Acquired intangibles
(596 ) (759 ) Goodwill
(540 ) (467 ) Total deferred tax liabilities
(1,136 ) (1,226 ) Net deferred tax liabilities
$ (190 ) $ (65 ) At March 31,
2020,2022, we had$551,000 in federal alternative minimum tax credit carryforwards, which were classified as a current income tax receivable included in the prepaid expenses and other current assets in the accompanying consolidated balance sheet. We also had $2.5$3.3 million in federal research credits that begin to expire in 2031 and$1.3$1.5 million in state tax credits that begin to expire in 2023. We had$10.7$16.0 million of federal net operating loss carryforwards at March 31,20202022 that do not expire as a result of recent tax law changes. Wehad $7.3 million of federal net operating loss carryforwards at March 31, 2020 that begin to expire in 2038. Wealso had$8.7$9.9 million of state net operating loss carryforwards at March 31,20202022 that begin to expire in2036.2031.
In assessing the realizability of our deferred tax assets, we review all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance. As the Company has sustained a cumulative pre-tax loss over the trailing three years, we considered it appropriate to maintain valuation allowances of$14.2$14.6 million and $12.3 million against our deferred tax assets at March 31,20202022 and2019,2021, respectively. Wewill continuously reassess the appropriateness ofintend to continue maintaining a full valuationallowance.allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.
On March 27, 2020, theCoronavirus Aid, Relief, and Economic SecurityCARES Act(CARES Act)was enacted in response to the Pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017. TheCARES Act allows net operating losses incurredNotes to Consolidated Financial Statements (Continued)March 31, 20205. Income Taxes (Continued)in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. Theincome tax provisions of the CARES Act had an immaterial impact on our current taxes, deferred taxes, and uncertain tax positions of theCompany.Company in the year ended March 31, 2022. The CARES Act also allows for the deferral of payroll taxes, as well as the immediate refund of federal Alternative Minimum Tax credits, which had previously been made refundable over a period of four years by the Tax Cuts and Jobs Act of 2017. The Company is utilizing the provision of the CARES Act allowing for the deferral of payroll taxes as of March 31, 2022.
Unrecognized Tax BenefitsAs of March 31,20202022 and2019,2021, our gross unrecognized tax benefits were approximately$952,000$1.2 million and$687,000,$1.1 million, respectively, of which approximately$861,000,$1.1 million and$580,000,$1.0 million, respectively, are netted against certain noncurrent deferred62Notes to Consolidated Financial Statements (Continued)March 31, 20226. Income Taxes (Continued)tax assets. The amounts that would affect our effective tax rate if recognized are approximately$840,000$1.1 million and$609,000,$1.0 million, respectively.A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:Year Ended March 31, 2022 2021 2020 (In thousands) Gross unrecognized tax benefits at beginning of year $ 1,079 $ 952 $ 687 Increases for tax positions taken in prior years — 35 101 Decreases for tax positions taken in prior years (29) — — Increases for tax positions taken in the current year 159 104 180 Lapse in statute of limitations (11) (12) (16) Gross unrecognized tax benefits at March 31 $ 1,198 $ 1,079 $ 952 Year Ended March 31, 2020 2019 2018 (In thousands) Gross unrecognized tax benefits at beginning of year
$ 687 $ 586 $ 426 Increases for tax positions taken in prior years
101 2 62 Decreases for tax positions taken in prior years
— — — Increases for tax positions taken in the current year
180 116 122 Lapse in statute of limitations
(16 ) (17 ) (24 ) Gross unrecognized tax benefits at March 31
$ 952 $ 687 $ 586 We do not anticipate a significant change in gross unrecognized tax benefits within the next twelve months. We are subject to taxation in the U.S. and various state tax jurisdictions. We are subject to U.S. federal tax examination for fiscal tax years ended March 31,
20172019 or later, and state and local income tax examination for fiscal tax years ended March 31,20162018 or later. However, if net operating loss carryforwards that originated in earlier tax years are utilized in the future, the amount of such NOLs from such earlier years remain subject to review by tax authorities.6.7. Commitments and ContingenciesLitigation and Other ContingenciesAs a provider of traffic engineering services, hardware products, software and other various solutions for the traffic and agricultural industries, the Company is, and may in the future from time to time, be involved in litigation relating to claims arising out of its operations in the normal course of business. While the Company cannot accurately predict the outcome of any such litigation, the Company is not a party to any legal proceeding, the outcome of which, in management's opinion, individually or in the aggregate, would have a material effect on the Company's consolidated results of operations, financial position or cash flows.Related Party TransactionWe 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 timeNotes to Consolidated Financial Statements (Continued)March 31, 20206. Commitments and Contingencies (Continued)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, August 11, 2016 and on August 11, 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 had previously fully reserved for amounts owed to us by Maxxess. During Fiscal 2020, the full amount due was paid to the Company, and a gain of approximately $146,000 was recognized in other income on the accompanying consolidated statements of operations. As of March 31, 2020, no amounts are outstanding and payable to Iteris. Maxxess is currently owned by an investor group that includes, among others, two former Iteris directors, who have not been directors of Iteris since September 2013 and March 2020. These former directors currently own less than 2% of Maxxess' capital stock.7.8. Right-of-Use Assets and Lease LiabilitiesWe have various operating leases for our offices, office equipment and vehicles in the United States. These leases expire at various times through 2029. Certain lease agreements contain renewal options from 1 year to 5 years, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate.Through63Notes to Consolidated Financial Statements (Continued)March 31,2019, we recognized rent expense related to operating leases on a straight-line basis over the lease term20228. Right-of-Use Assets andaccordingly, recorded the difference between rent payments and rent expense as a deferred rent liability. Effective April 1, 2019, we adopted ASU 2016-02, Leases, or ASC 842.Lease Liabilities(Continued)
The table below presents lease-related assets and liabilities recorded on the consolidated balance sheet as follows:Classification March 31, 2022 (In thousands) Assets Operating lease right-of-use-assets - continuing operations Right-of-use assets $ 11,382 Operating lease right-of-use-assets - discontinued operation Noncurrent assets of discontinued operations 6 Total operating lease right-of-use-assets $ 11,388 Liabilities Operating lease liabilities (short-term) - continuing operations Accrued liabilities $ 1,447 Operating lease liabilities (short-term) - discontinued operation Current liabilities of discontinued operations 100 Total operating lease liabilities (short-term) 1,547 Operating lease liabilities (long-term) - continuing operations Lease liabilities 10,763 Operating lease liabilities (long-term) - discontinued operation Noncurrent liabilities of discontinued operations 172 Total operating lease liabilities (long-term) 10,935 Total operating lease liabilities $ 12,482 Classification March 31, 2020 (In thousands) Assets
Operating lease right-of-use-assets
Right-of-use assets $ 13,044 Liabilities
Operating lease liabilities (short-term)
Accrued liabilities $ 1,935 Operating lease liabilities (long-term)
Lease liabilities 11,995 Total lease liabilities
$ 13,930 Lease Costs
For Fiscal2020,2022, Fiscal20192021 and Fiscal2018,2020, lease costs totaled approximately$2.6$2.9 million,$1.9$2.7 million and$1.8$2.6 million, respectively. The Company currently has no variable lease costs.Notes to Consolidated Financial Statements (Continued)March 31, 20207. Right-of-Use Assets and Lease Liabilities (Continued)Supplemental Information
The table below presents supplemental information related to operating leases during the fiscal year ended March 31,20202022 (in thousands, except weighted average information):Cash paid for amounts included in the measurement of operating lease liabilities $ 2,795 Right-of-use assets obtained in exchange for new operating lease liabilities $ 2,544 Weighted average remaining lease term 5 Weighted average discount rate 4.8 % Cash paid for amounts included in the measurement of operating lease liabilities
$ 2,608 Right-of-use assets obtained in exchange for new operating lease liabilities
$ 581 Weighted average remaining lease term
7.0 Weighted average discount rate
5.0 % Undiscounted Cash Flows
The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of March 31,2020:2022:64Fiscal Year Ending March 31,(In thousands) 2021
$ 2,577 2022
2,457 2023
2,326 2024
2,248 2025
2,062 Thereafter
4,852 Total lease payments
16,522 Less imputed interest
(2,592 ) Present value of future lease payments
13,930 Less current obligations under leases
(1,935 ) Long-term lease obligations
$ 11,995 Disclosure Related to Periods Prior to Adoption of New Lease StandardMinimum lease payments under operating leases with non-cancelable terms in excess of one year as of March 31, 2019, were as follows:Fiscal Year Ending March 31,(In thousands) 2020
$ 2,408 2021
2,150 2022
1,981 2023
548 2024
177 Thereafter
— Total minimum lease payments
$ 7,264 Notes to Consolidated Financial Statements (Continued)March 31,20202022
8. Right-of-Use Assets and Lease Liabilities(Continued)Fiscal Year Ending March 31, Operating Leases Sublease Income Net Operating Leases (In thousands) 2023 $ 2,114 $ 9 $ 2,105 2024 2,809 — 2,809 2025 2,587 — 2,587 2026 2,336 — 2,336 2027 2,391 — 2,391 Thereafter 2,097 — 2,097 Total lease payments 14,334 $ 9 $ 14,325 Less imputed interest (1,852) Present value of future lease payments 12,482 Less current obligations under leases (1,547) Long-term lease obligations $ 10,935 9. Stockholders' EquityPreferred StockOur certificate of incorporation provides for the issuance of up to 2,000,000 shares of preferred stock. Our Board of Directors is authorized to issue from time to time such authorized but unissued shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each such series, including the dividend, conversion, voting, redemption and liquidation rights. As of March 31,20202022 and2019,2021, there were no outstanding shares of preferred stock, and we do not currently have plans to issue any shares of preferred stock.In August 2009, our Board of Directors adopted a stockholder rights plan, which calls for preferred stock purchase rights (each, a "Right") to be distributed, as a dividend, at the rate of one Right for each share of common stock held as of September 3, 2009. Each Right will entitle holders of common stock to buy one one-thousandth ofone1 share of Series A Junior Participating Preferred Stock of Iteris. A further description and terms of the Rights are set forth in the Rights Agreement dated August 20, 2009 (as amended in August 2012) by and between Iteris and Computershare Trust Company, N.A. ("Computershare"), as rights agent. In connection with the stockholder rights plan, our Board of Directors approved the adoption of a Certificate of Designations, which created the Series A Junior Participating Preferred Stock, and likewise authorized the filing of a Certification of Elimination to eliminate thetwo2 series of junior participating preferred stock, which were originally created in April 1998 in connection with our previous stockholder rights plan which expired in 2008. Effective on September 28, 2018, an amendment was entered into by and between Iteris and Computershare to accelerate the expiration of the Rights from August 20, 2019 to September 28,2019,2018, wherein all of the Rights distributed to the holders of the Company's common stock pursuant to the Rights Agreement expired.Common Stock Reserved for Future IssuanceThe following summarizes common stock reserved for future issuance at March 31,2020:2022:Number of Shares (In thousands) Stock options outstanding
5,943 5,934Restricted stock units outstanding
451 404Performance stock units outstanding
115 Authorized for future issuance under stock incentive plans 2,990 1,691Total common stock reserved for future issuance at March 31, 20229,4998,0299.10. Employee Benefit Plans65Notes to Consolidated Financial Statements (Continued)March 31, 202210. Employee Benefit Plans (Continued)Stock Incentive PlansIn September 2007, our stockholders approved the 2007 Omnibus Incentive Plan (the "2007 Plan"), which provides that options to purchase shares of our unissued common stock may be granted to our employees, officers, consultants and directors at exercise prices which are equal to or greater than the market value of our common stock on the date of grant. The 2007 Plan also allows for the issuance of stock appreciation rights, restricted stock, restricted stock units ("RSUs") and other stock-based awards based on the value of our common stock. New shares are issued to satisfy stock optionNotes to Consolidated Financial Statements (Continued)March 31, 20209. Employee Benefit Plans (Continued)exercises and share issuances under the 2007 Plan. In September 2009, our stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2007 Plan by 800,000 shares to a total of 1,650,000 shares. In September 2012, our stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2007 Plan by 800,000 shares to a total of 2,450,000 shares. In October 2014, our stockholders approved an amendment of the 2007 Plan to increase the number of shares of common stock authorized for issuance under the 2007 Plan by an additional 1,500,000 shares to a total of 3,950,000 shares. In September 2015, our stockholders approved an amendment of the 2007 Plan to increase the number of shares of common stock authorized for issuance under the 2007 Plan by an additional 1,000,000 shares to a total of 4,950,000 shares. In December 2016, our stockholders approved the 2016 Omnibus Incentive Plan (the "2016 Plan") which allows for the issuance of stock options, stock appreciation rights, restricted stock, RSUs, cash incentive awards and other stock-based awards to our employees, officers, consultants and directors at exercise prices which are equal to or greater than the market value of our common stock on the date of grant. Options expire no more than ten years after the date of grant and generally vest at the rate of 25% on each of the first
four4 years anniversaries of the grant date. Stock appreciation rights, restricted stock, RSUs and other stock-based awards are based on the value of our common stock. New shares are issued to satisfy stock option exercises and share issuances under the 2016 Plan.In September 2021, our stockholders approved an amendment of the 2016 Plan to increase the number of shares of common stock authorized for issuance under the 2016 Plan by an additional 3,360,000 shares.
We currently maintaintwo2 stock incentive plans, the 2007 Omnibus Incentive Plan (the "2007 Plan") and the 2016 Omnibus Incentive Plan (the "2016 Plan"). Of these plans, we may only grant future awards from the 2016 Plan. The 2016 Plan allows for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), cash incentive awards and other stock-based awards. At March 31,2020,2022, there were approximately1.73.0 million shares of common stock available for grant or issuance under the 2016 Plan. Total stock options vested and expected to vest were approximately 5.9 million as of March 31,2020.2022.
Stock OptionsA summary of activity in the Omnibus Incentive Plans with respect to our stock options for Fiscal20202022 is as follows:Options Weighted
Average
Exercise
Price Per
ShareWeighted
Average
Remaining
Contractual
LifeAggregate
Intrinsic
Value(In thousands) (Years) (In thousands) Options outstanding at March 31, 2021 5,623 $ 4.10 6.8 11,659 Granted 932 4.95 Exercised (489) 2.89 Forfeited (123) 4.88 Expired — — Options outstanding at March 31, 2022 5,943 4.32 6.5 974 Options Weighted
Average
Exercise
Price Per
ShareWeighted
Average
Remaining
Contractual
LifeAggregate
Intrinsic
Value(In thousands) (Years) (In thousands) Options outstanding at March 31, 2019
5,035 $ 3.70 7.6 $ 4,430 Granted
1,206 5.06 Exercised
(119 ) 2.13 Forfeited
(188 ) 4.94 Expired
— — Options outstanding at March 31, 2020
5,934 $ 3.99 7.2 $ 2,095 Notes to Consolidated Financial Statements (Continued)March 31,
20209. Employee Benefit Plans (Continued)2022, approximately 3,769,000 stock options were exercisable.
Restricted Stock UnitsRSU awards are stock-based awards that entitle the holder to receiveone1 share of our common stock for each RSU upon vesting. RSUs granted under the 2007 Plan vest at the rate of 25% on each of the first four anniversaries of the grant date provided that the holder remains in service (as defined by the 2007 Plan) as of the vesting date. RSUs granted under the 2016 Plan vest at varying terms betweenone1 year andfour4 years anniversaries of the grant date provided that the holder remains in service(as66Notes to Consolidated Financial Statements (Continued)March 31, 202210. Employee Benefit Plans (Continued)(as defined by the 2016 Plan) as of the vesting date. The fair value per RSU is determined based on the closing market price of our common stock on the grant date.A summary of activity with respect to our RSUs for Fiscal20202022 is as follows:# of Shares Weighted
Average
Price Per
ShareWeighted
Average
Remaining
LifeAggregate
Intrinsic
Value(In thousands) (Years) (In thousands) RSUs outstanding at March 31, 2021 448 $ 4.08 7.8 2,764 Granted 191 5.00 Vested (184) 4.92 Forfeited (4) 4.80 RSUs outstanding at March 31, 2022 451 4.12 7.5 1,271 # of Shares Weighted
Average
Price Per
ShareWeighted
Average
Remaining
LifeAggregate
Intrinsic
Value(In thousands) (Years) (In thousands) RSUs outstanding at March 31, 2019
112 $ 4.62 1.1 $ 19 Granted
374 5.12 Vested
(78 ) 4.17 Forfeited
(4 ) 5.52 RSUs outstanding at March 31, 2020
404 $ 5.16 2.0 $ 1,295 The Company has granted a total "target" number of 132,403 PSUs to our executive officers. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. In addition, the final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company's total shareholder return relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the "target" number of PSUs. The PSUs are amortized over a derived service period of 3 years. The value and the derived service period of the PSUs were estimated using the Monte-Carlo simulation model. The following table summarizes the details of the performance stock units:# of Shares Weighted Average Price Per Share (In thousands) PSUs outstanding at March 31, 2021 68 $ 5.47 Granted 64 7.26 Forfeited (17) 6.37 PSUs outstanding at March 31, 2022 115 6.33 Stock-Based CompensationThe following table presents stock-based compensation expense that is included in each functional line item in our consolidated statements of operations:Year Ended March 31, 2022 2021 2020 (In thousands) Cost of revenues $ 242 $ 209 $ 143 General and Administrative 2,574 2,359 2,116 Sales and marketing 340 158 156 Research and development expense 245 134 81 Restructuring activities — 42 — Loss from discontinued operations — (57) 290 Total stock-based compensation $ 3,401 $ 2,845 $ 2,785 Year Ended March 31, 2020 2019 2018 (In thousands) Cost of revenues
$ 175 $ 146 $ 71 Selling, general and administrative expense
2,364 1,804 1,558 Research and development expense
246 206 152 Total stock-based compensation
$ 2,785 $ 2,156 $ 1,781 At March 31,
2020,2022, there was approximately$5.5$4.6 million, $1.3 million and$1.5$0.4 million of unrecognized compensation expense related to unvested stock options, RSUs, andRSUs,PSUs respectively. This expense is currently expected to be recognized67Notes to Consolidated Financial Statements (Continued)March 31, 202210. Employee Benefit Plans (Continued)over a weighted average period of approximately2.92.8 years for stock options,and 2.02.6 years forRSUs.RSUs and 1.7 years for PSUs. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Futurestock basedstock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock options, RSUs or other stock-based awards.Notes to Consolidated Financial Statements (Continued)March 31, 20209. Employee Benefit Plans (Continued)The grant date fair value of stock options granted was estimated using the following weighted-average assumptions:
Year Ended March 31, 2022 2021 2020 Expected life—years 7.2 6.7 6.8 Risk-free interest rate 1.5 % 1.0 % 2.2 % Expected volatility of common stock 49 % 47 % 47 % Dividend yield 0 % 0 % 0 % Year Ended March 31, 2020 2019 2018 Expected life—years
6.8 5.9 6.5 Risk-free interest rate
2.2 % 2.7 % 2.7 % Expected volatility of common stock
47 % 43 % 43 % Dividend yield
0 % 0 % 0 % Expected Life:The Company's expected life represents the weighted-average period that the Company's stock options are expected to be outstanding. The expected life is based on expected time to post-vesting exercise of options by employees. The Company uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected exercise patterns.
Risk-Free Interest Rate:The risk-free interest rate is based on the U.S. Treasury zero coupon yield curve in effect at the time of grant for the expected term of the option.Expected Volatility:The Company uses historical volatility as it provides a reasonable estimate of the expected volatility. Historical volatility is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.A summary of certain fair value and intrinsic value information pertaining to our stock options is as follows:Year Ended March 31, 2022 2021 2020 (In thousands, except
per share amounts)Weighted average grant date fair value per share of options granted $ 2.58 $ 2.38 $ 2.52 Intrinsic value of options exercised $ 1,966 $ 1,494 $ 378 Year Ended March 31, 2020 2019 2018 (In thousands, except
per share amounts)Weighted average grant date fair value per share of options granted
$ 2.52 $ 1.89 $ 2.59 Intrinsic value of options exercised
$ 378 $ 114 $ 2,469 Employee Incentive Programs
Under the terms of a Profit Sharing Plan, we may contribute to a trust fund such amounts as determined annually by the Board of Directors. No contributions were made during the fiscal years ended March 31,2020, 20192022, 2021 and2018.2020.
We sponsor a defined contribution 401(k) plan (the "401(k) Plan"), adopted in 1990, under which eligible employees voluntarily contribute to the plan, up to IRS maximums, through payroll deductions. We match up to 50% of contributions, up to a stated limit, with all matching contributions being fully vested afterthree yearsone month of service. Our matching contributions under the 401(k) Plan were approximately$1,317,000, $1,185,000$1.8 million, $1.4 million and$1,067,000$1.3 million fortheFiscal 2022, Fiscal 2021 and Fiscal 2020,Fiscal 2019 and Fiscal 2018,respectively.Notes to Consolidated Financial Statements (Continued)March 31, 20209. Employee Benefit Plans (Continued)Other Stock-Based Compensation Plans
Beginning January 1, 2018, the Company adopted an ESPP which allows employees to withhold a percentage of their base compensation to purchase the Company's common stock at 95% of the lower of the fair market at the beginning of the offering period and on the last trading day of the offering period. There aretwo2 offering periods during a calendar year, which consist of the six months beginning each January 1 and July 1. Employees may contribute 1-15% of their eligible gross pay up to a$25,000$0.03 million annual stock value limit. During Fiscal20202022, Fiscal 2021, and Fiscal2019,2020, 95,000, 97,000 and 91,000and 92,000shares, respectively, were purchased.There were no share purchases in Fiscal 2018.The ESPP is considered a non-compensatory plan and accordingly no compensation expense is recorded in connection with this benefit.68Notes to Consolidated Financial Statements (Continued)March 31, 202210. Employee Benefit Plans (Continued)As of March 31,2020,2022, approximately$146,000$0.1 million of cash was restricted for the purchase of shares under the ESPP and is recorded as restricted cash in the accompanying consolidated balance sheets.10.Deferred Compensation PlanEffective October 1, 2020, the Company adopted the Iteris, Inc. Non Qualified Deferred Compensation Plan (the "DC Plan"). The DC Plan consists of two plans, one that is intended to be an unfunded arrangement for eligible key employees who are part of a select group of management or highly compensated employees of the Company within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and one for the benefit of non-employee members of our Board of Directors. Key employees, including our executive officers, and our non-employee directors who are notified regarding their eligibility to participate and delivered the DC Plan enrollment materials are eligible to participate in the DC Plan. Under the DC Plan, we will provide participants with the opportunity to make annual elections to defer a percentage of their eligible cash compensation and equity awards. A participant is always 100% vested in his or her own elective cash deferrals and any earnings thereon. Elective deferrals of equity awards are credited to a bookkeeping account established in the name of the participant with respect to an equivalent number of shares of our common stock, and such credited shares are subject to the same vesting conditions as are applicable to the equity award subject to the election. The Company established a rabbi trust to finance our obligations under the DC Plan with corporate-owned life insurance policies on participants, and the assets held within this trust are subject to the claims of the Company's creditors.As of March 31, 2022, the amount invested under the DC Plan totaled approximately $1.0 million and are classified as trading securities, which are recorded at fair market value with changes recorded as adjustments to other income. This amount is included in prepaid expenses and other current assets on the consolidated balance sheets.As of March 31, 2022, the vested amounts under the DC Plan totaled $1.0 million and are included in accrued payroll and related expenses on the consolidated balance sheets. Changes in the deferred compensation plan liabilities are recorded as an adjustment to compensation expense.As of March 31, 2022, no equity awards were deferred and held in the rabbi trust. The shares deferred and held in the rabbi trust will be classified as treasury stock, and the liability to participating employees will be classified as deferred compensation obligations in the stockholders' equity section of the consolidated balance sheets. The number of shares needed to settle the liability for deferred compensation obligations will be included in the denominator in both the basic and diluted earnings per share calculations.Employment Inducement Incentive PlanOn December 4, 2020, the Board of Directors approved the Iteris, Inc. 2020 Employment Inducement Incentive Award Plan (the “Inducement Plan”) in conjunction with the TrafficCast acquisition. The terms of the Inducement Plan are substantially similar to the terms of the Company’s 2016 Omnibus Incentive Plan with the exception that incentive stock options may not be granted under the Inducement Plan. The Inducement Plan was adopted by the Board of Directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.The Board of Directors has initially reserved 300,000 shares of the Company’s common stock for issuance pursuant to awards granted under the Inducement Plan. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board of Directors of the Company or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, and only if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.During the fiscal year ended March 31, 2021, the Company granted 95,000 stock options and 84,914 restricted stock units to TCI employees under the Inducement Plan. There were no awards granted under the Inducement Plan during the year ended March 31, 2022. No further awards will be granted under the Inducement Plan, although the outstanding awards under the Inducement Plan remain outstanding in accordance with their terms.11. Stock Repurchase Program69Notes to Consolidated Financial Statements (Continued)March 31, 202011. Stock Repurchase Program (Continued)In August 2011, our Board of Directors approved a stock repurchase program pursuant to which we were authorized to acquire up to$3$3.0 million of our outstanding common stock from time to time through August 2012. We repurchased approximately 964,000 shares under this original program for a total purchase price of $1.3 million. On August 9, 2012, our Board of Directors cancelled the initial stock repurchase program and the approximate $1.7 million of remaining funds, and approved anewsubsequent stock repurchase program pursuant to which wemaycould acquire up to$3$3.0 million of our outstanding common stock for an unspecified length of time. Under thenewprogram, wemaycould repurchase shares from time to time in the open market and privately negotiated transactions and block trades, andmaycould also repurchase shares pursuant to a 10b5-1 trading plan during our closed tradingwindows.windows, to the extent such a 10b5-1 plan was in place. Thereiswas no guarantee as to the exact number of shares thatwillwould be repurchased. Wemaycould modify or terminate the repurchase program at any time without prior notice. On November 6, 2014, our Board of Directors approved a $3.0 million increase to the Company's existing stock repurchase program, pursuant to which the Companymaycould continue to acquire shares of its outstanding common stock from time to time for an unspecified length of time.For our fiscal years ended March 31,2020, 2019,2022, 2021, and20182020 we did not repurchase any shares. From inception of the 2012 stock repurchase programin August 2011through March 31,2020,2022, we repurchased approximately3,422,0002,458,000 shares of our common stock for an aggregate price of approximately$5.6$4.3 million, at an average price per share of$1.63.$1.73. As of March 31,2020,2022, all repurchased shares have been retired and returned to their status as authorized and unissued shares of our common stock. As of March 31,2020,2022, prior to the termination of the 2012 repurchase program, approximately $1.7 millionremainsremained available for the repurchase of our common stock.On May 12, 2022 the Board of Directors retired the previously approved plan and approved a new plan for the company to acquire up to $10.0 million of our outstanding common stockunderfor an unspecified length of time. Under the program, we may repurchase shares from time to time in the open market and privately negotiated transactions and block trades, and may also repurchase shares pursuant to a 10b5-1 trading plan during ourcurrent program.11.closed trading windows, to the extent such a 10b5-1 plan is in place. There is no guarantee as to the exact number of shares that will be repurchased. We may modify or terminate the repurchase program at any time without prior notice.12. AcquisitionsTrafficCast AcquisitionOn December 7, 2020, the Company completed the acquisition of the assets of TrafficCast, a privately held company headquartered in Madison, Wisconsin that provides travel information technology, applications and content to media, mobile technology, automotive and public sector customers throughout North America. Under the TrafficCast 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.The aggregate acquisition-date fair value of the consideration transferred totaled approximately $17.7 million, which consisted of the following:Fair Value (in thousands) Cash $ 15,000 Security hold back 1,000 Acquisition-related liabilities 1,131 Contingent consideration 600 Total $ 17,731 The security hold back relates to amounts held back as security for certain post-closing adjustments and post-closing indemnity obligations of TrafficCast, and is included in other long-term liabilities on the consolidated balance sheets. Acquisition-related liabilities include customary post-closing adjustments, as well as short term liabilities related to certain ancillary agreements that will provide Iteris with ongoing access to mapping and monitoring services. These items are included in accrued liabilities on the consolidated balance sheets. Contingent consideration relates to a $1.0 million earn out, that if earned, will be paid over two years based on the TrafficCast Business’ achievement of certain revenue targets. This item is included in other long-term liabilities on the consolidated balance sheets.70Notes to Consolidated Financial Statements (Continued)March 31, 202212. Acquisitions (Continued)The acquisition of TrafficCast has been accounted for as a business combination. We estimated the fair values of net assets acquired, and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill.The following tables summarize the purchase price allocation (in thousands) as of December 7, 2020:Trade accounts receivable $ 2,087 Unbilled accounts receivable 596 Inventories 941 Right-of-use assets 193 Property and equipment 233 Intangible assets 9,500 Goodwill 7,750 Other assets 242 Total assets acquired 21,542 Accounts payable 1,026 Deferred revenue 2,460 Lease liabilities 193 Other liabilities 132 Total liabilities assumed 3,811 Total purchase price $ 17,731 The fair values of the TrafficCast assets and liabilities noted above approximate their carrying values at December 7, 2020. There was no difference between the fair value of trade accounts receivables and the gross contractual value of those receivables. There are no contractual cash flows related to these receivables that are not expected to be collected. The Company believes the goodwill related to the acquisition was a result of the ability of the Company to leverage its technology in the broader market, as well as offering cross-selling market exposure opportunities. Goodwill from the acquisition of TrafficCast was initially allocated to the Company's Roadway Sensors and Transportation Systems reporting segments and upon the reorganization described in Note 13, Business Segments, the goodwill has been reallocated to the Company's 3 new reporting units and will be included in the annual review for impairment. The goodwill is fully deductible for tax purposes. The significant intangible assets identified in the purchase price allocation include customer relationship and developed technology, which are amortized over their respective useful lives on a straight line basis which approximates the underlying cash flows. To value the customer relationships, the Company utilized the income approach, specifically a discounted cash-flow method known as the excess earnings method. The Company used the replacement cost method with consideration of opportunity costs to estimate the fair value of the technology. The fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. We believe the assumptions are representative of those a market participant would use in estimating fair value.The following table presents the fair values and useful lives of the identifiable intangible assets acquired:Amount Weighted Average
Useful Life(in thousands) (in years) Customer relationships $ 5,800 7 Technology 3,700 4 Total intangible assets assumed $ 9,500 AGI AcquisitionOn July 2, 2019, the Company completed the acquisition of AGI, a privately-held professional transportation engineering services firm headquartered in Tampa, Florida, with offices in Orlando,(FL),Florida, Virginia Beach,(VA)Virginia and Chadds Ford,(PA).Pennsylvania. AGI assists municipalities in maximizing the effectiveness of their existing transportation networks through a collection of traffic management services to cost effectively improve the performance of roadway systems and address71Notes to Consolidated Financial Statements (Continued)March 31, 202212. Acquisitions (Continued)increased traffic demands, traffic congestion and delay. With a foundation of arterial timing plan development, AGI has expanded itsNotes to Consolidated Financial Statements (Continued)March 31, 202011. Acquisition (Continued)services into active arterial monitoring and management with multiple public sector clients. AGI is expected to expand the Company's geographic footprint for ITS services in Florida, as well as in the Midwest and Mid-Atlantic region. AGI's typical contracts are for traffic operations professional engineering services focused on transportation systems management and operations.
Pursuant to a Stock Purchase Agreement dated June 10, 2019 among the Company, AGI and the stockholders of AGI (the "Selling Shareholders"), the Company acquired all of the outstanding capital stock of AGI from the Selling Shareholders for an aggregate purchase price of $10.8 million, after working capital adjustments, payable in cash and stock, of which 114,943 sharesare beingwere held in escrow for 18 months to secure performance of indemnification and other post-closing obligations of the Selling Shareholders.Since the date of acquisition AGI operated as a wholly-owned subsidiary of the Company, as part of the Transportation Systems segment, and contributed approximately $6.4 million of service revenue and approximately $1.7 million of net income.The acquisition of AGI has been accounted for as a business combination. We estimated the fair values of net assets acquired, and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill.The following tables summarize the purchase price allocation (in thousands) as of July 2, 2019:Cash $ 664 Trade accounts receivable 905 Unbilled accounts receivable 347 Right-of-use assets 863 Property and equipment 357 Intangible assets 3,710 Goodwill 5,440 Other assets 161 Total assets acquired 12,447 Accounts payable (378) Accrued payroll and related expenses (426) Lease liabilities (863) Total liabilities assumed (1,667) Total purchase price $ 10,780 Cash
$ 664 Trade accounts receivable
905 Unbilled accounts receivable
347 Right-of-use assets
863 Property and equipment
357 Intangible assets
3,710 Goodwill
5,440 Other assets
161 Total assets acquired
12,447 Accounts payable
(378 ) Accrued payroll and related expenses
(426 ) Lease liabilities
(863 ) Total liabilities assumed
(1,667 ) Total purchase price
$ 10,780 The fair values of the remaining AGI assets and liabilities noted above approximate their carrying values at July 2, 2019. There was no difference between the fair value of trade accounts receivables and the gross contractual value of those receivables. There are no contractual cash flows related to these receivables that are not expected to be collected. The Company believes the goodwill related to the acquisition was a result of the ability of the Company to leverage its technology in the broader market, as well as offering cross-selling market exposure opportunities. Goodwill from the acquisition of AGI
iswas initially included within the Company's Transportation Systems reportingunit.segment. The goodwill is fully deductible for tax purposes. The significant intangible assets identified in the purchase price allocation include customer relationships and non-compete agreements, which are amortized over their respective usefulNotes to Consolidated Financial Statements (Continued)March 31, 202011. Acquisition (Continued)lives on a straight line basis which approximates the underlying cash flows. To value the customer relationships, the Company utilized the income approach, specifically a discounted cash-flow method known as the excess earnings method. The Company utilized the with and without method to derive the fair value of the non-compete agreement. The fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Varying discount rates were applied to the projected net cash flows and EBITDA as applicable to valuation methodology. We believe the assumptions are representative of those a market participant would use in estimating fair value.
The following table presents the fair values and useful lives of the identifiable intangible assets acquired:72Notes to Consolidated Financial Statements (Continued)March 31, 202212. Acquisitions (Continued)Amount Weighted Average
Useful Life(in thousands) (in years) Customer relationships
$ 3,500 6 Non-compete agreement
210 3 Total intangible assets assumed
$ 3,710 Amount Weighted Average
Useful Life(in thousands) (in years) Customer relationships 3,500 6 Non-compete agreement 210 3 Total intangible assets assumed 3,710 Acquisition-Related CostsIn connection with the acquisition of AGI, the Company agreed to grant $1.7 million in retention bonuses to the Selling Shareholders and other employees payable in the form of restricted stock units at $5.22 per share, and$570,000$0.6 million in retention bonuses payable in cash, each vesting and payable over three years following the closing, provided such employees remain in our service on the first, second and third anniversary of the closing of the acquisition. For the fiscalyearyears ended March 31, 2022, 2021, and 2020, the Company recorded approximately $0.7 million, $0.7 million, and $1.0 million respectively, asstockstock- based compensation and salaries expense to selling, general and administrative expense in the consolidated statements of operations, related to these bonuses.Additionally,In connection with the acquisition of AGI, the Company recorded approximately$689,000,$0.7 million, in acquisition related professional fees, which wasrecorded toincluded in selling, general and administrative expense, in the consolidated statements of operations for the year ended March 31, 2020.Pro Forma Financial Information (Unaudited)The following pro forma information presentsIn connection with the acquisition of TrafficCast, the Company recorded approximately $0.4 million in acquisition related professional fees, which was included in selling, general and administrative expense, in the consolidatedresultsstatements of operationsof the Company and AGIfor thefiscal yearsyear ended March 31,2020 and 2019, as if the acquisition of AGI had been completed on April 1, 2018. These pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments that reflect pro forma results of operations, such as increased amortization for the fair value of acquired intangible assets and increased salaries expense related to the retention bonuses. The pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and AGI. Accordingly, these pro forma results are presented for informational purposes only and are not necessarily indicative of the results of operations that actually would have
2021.Notes to Consolidated Financial Statements (Continued)March 31, 202011. Acquisition (Continued)been achieved had the acquisition occurred as of April 1, 2018, nor are they intended to represent or be indicative of future results of operations:Year Ended March 31, 2020 2019 Proforma revenue
$ 116,333 $ 107,049 Proforma net loss
(5,775 ) (7,108 ) Pro forma loss per common stock
Basic
(0.14 ) (0.21 ) Diluted
(0.14 ) (0.21 ) 12.13. Business Segments, Significant Customer and Geographic InformationBusiness SegmentsWe have operatedIn Fiscal 2021, the Company completed the sale of substantially all of the assets used inthree 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 Roadways 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 asconnection with thetransmission of both video images and data using various communication technologies. 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. In select territories, our Roadway Sensors segment also sells OEM products for the traffic intersection markets, which include, among other things, traffic signal controllers and traffic signal equipment cabinets.The Transportation Systems segment includes engineering and consulting services, managed 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 of 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 product line includes: Iteris Signal Performance Measures ("SPM"), Iteris ClearGuide, and iPeMS, our performance measurement and analytics solution, our advanced traveler information system solutions ClearPath 511 and Reverse 511, as well as our commercial vehicle operations and vehicle safety compliance platforms known as ClearFleet, CVIEW-Plus, CheckPoint, UCRLink and inspect.Notes to Consolidated Financial Statements (Continued)March 31, 202012. Business Segments, Significant Customer and Geographic Information (Continued)TheAgriculture and Weather Analytics segmentwhich 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 historical weather conditions for both short-term and long-range weather forecasts and customizable route/site weather and pavement forecasting, and providing winter road maintenance recommendations for state agencies, municipalities and commercial companies that allow such users to create solutions to meet roadway maintenance decision needs. ClearAg combines 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. ClearAg solutions are offered to companies in the agriculture industry, such as seed and crop protection companies, integrated food companies, and agricultural equipment manufacturers and service providers. ClearAg provides weather, environment, soil and plant growth modeling to deliver environmental intelligence through ClearAg APIs and components, IMFocus APIs and ClearAg web applications.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 DTNan operating companyin exchange for a total purchase consideration ofTBG AG, a Swiss-based holding company. As a result of the sale, we no longer operate$12.0 million. On April 30, 2020, inthe Agriculture and Weather Analytics segment. See Note 14 for further details onconnection with the sale of the Agriculture and Weather Analyticssegment.The accounting policiesbusiness, the Board approved restructuring activities to better position the Company for increased profitability and growth. Restructuring charges ofour reportable segments areapproximately $1.5 million were incurred in Fiscal 2021 for separation costs for certain employees who did not transition to DTN, additional positions that were eliminated to right-size thesame as those describedcost structure of the Company, and the impairment of certain lease-related assets.On December 6, 2020, the Company entered into an Asset Purchase Agreement with TrafficCast, a privately held company headquartered in Madison, Wisconsin that provides travel information technology, applications and content to customers throughout North America in thesummarymedia, mobile technology, automotive and public sectors. Under the TrafficCast Purchase Agreement, the Company agreed to purchase from TrafficCast substantially all of its assets, composed of its travel information technology, applications and content. The transaction closed on December 7, 2020.After these two significantaccounting policies (Note 1). Certain corporate general and administrative expenses, including general overhead functions such as information systems, accounting, human resources, marketing, compliance costs and certain administrative expenses, as well as interest and amortizationtransactions in Fiscal 2021, the Company underwent a re-organization that was completed in April 2021. The purpose ofintangible assets, are not allocatedthis was to align the Company’s organization structure with its singular goal of providing best in-class smart mobility infrastructure management solutions to thesegments. The reportable segments are each managed separately because they manufacture and distribute distinct products or provide services with different processes. All reported segment revenues are derived from external customers. Ourmarketplace. As a result of the reorganization, the Company's Chief Operating Decision Maker ("CODM"), which is our Chief Executive Officer,who isreviews the Company's results on a consolidated basis and ourchief operating decision maker ("CODM"), reviewsfinancialinformation at the operating segment level. Our CODM does not review assets byresults are presented on a consolidated basis under a single reporting segment inhis resource allocation, and therefore, assets by segment are not disclosed below.Tableorder to provide the most accurate representation ofContentsNotes to Consolidated Financial Statements (Continued)March 31, 202012. Business Segments,Company's performance.Significant Customer and Geographic Information(Continued)Selected financial information for our reportable segments for the fiscal years ended March 31, 2020, 2019 and 2018 is as follows:Roadway
SensorsTransportation
SystemsAgriculture
and Weather
AnalyticsTotal (In thousands) Year Ended March 31, 2020
Product revenues
$ 49,082 $ 5,925 $ — $ 55,007 Service revenues
288 52,108 6,714 59,110 Total revenues
49,370 58,033 6,714 114,117 Depreciation
200 330 77 607 Segment income (loss)
7,787 10,556 (3,852 ) 14,491 Year Ended March 31, 2019
Product revenues
43,253 4,974 — 48,227 Service revenues
239 44,841 5,816 50,896 Total revenues
43,492 49,815 5,816 99,123 Depreciation
233 195 103 531 Segment income (loss)
7,011 5,907 (5,024 ) 7,894 Year Ended March 31, 2018
Product revenues
44,163 2,301 — 46,464 Service revenues
194 52,180 4,891 57,265 Total revenues
44,357 54,481 4,891 103,729 Depreciation
221 204 109 534 Segment income (loss)
$ 8,825 $ 8,639 $ (8,048 ) $ 9,416 The following table reconciles total segment income to consolidated operating loss:Year Ended March 31, 2020 2019 2018 (In thousands) Segment income:
Total income from reportable segments
$ 14,491 $ 7,894 $ 9,416 Unallocated amounts:
Corporate expenses
(19,710 ) (15,578 ) (14,930 ) Amortization of intangible assets
(757 ) (275 ) (88 ) Operating loss
$ (5,976 ) $ (7,959 ) $ (5,602 ) $ (5,976 ) $ (7,959 ) $ (5,602 ) Significant Customer and Geographic InformationNo individual customer or government agency had a receivable balance greater than 10% of our total trade accounts receivable balances as of March 31,
2021.20202022 andMarch 31, 2019. One individual customer who is also a government agency had a receivable balance of 13% of our total trade accounts receivable balance as of March 31, 2018.Notes to Consolidated Financial Statements (Continued)March 31,202012.202213. Business Segments, Significant Customer and Geographic Information (Continued)The following table sets forth the percentages of our revenues, by geographic region, derived from shipments to, or contract, service and other revenues from, external customers located outside the U.S.:Year Ended March 31, 2022 2021 2020 Canada — % 1 % — % Europe — — 1 — % 1 % 1 % 14. Long-Term DebtYear Ended
March 31,2020 2019 2018 Canada
— % — % 1 % Europe
— 1 1 — % 1 % 2 % SubstantiallyOn January 25, 2022, Iteris, Inc., entered into a Credit Agreement (the “Credit Agreement”) with Capital One, National Association, as agent. The Credit Agreement provides for a $20 million revolving credit facility with a maturity date of January 24, 2026. In addition, the Company has the ability from time to time to increase the revolving commitments up to an additional aggregate amount not to exceed $40 million, subject to receipt of lender commitments and certain conditions precedent. The Credit Agreement evidencing the facility contains customary representation, warranties, covenants, and event of default. The Credit Agreement is collateralized by substantially all of ourlong-livedproperty and assets,are held in the U.S.13. Quarterly Financial Data (Unaudited)Quarter Ended:Revenues Gross
ProfitNet (Loss)
IncomeBasic Net
Income (Loss)
per ShareDiluted Net
Income (Loss)
per Share(In thousands, except per share amounts) June 30, 2019
$ 26,607 $ 10,407 $ (1,572 ) $ (0.05 ) $ (0.05 ) September 30, 2019
27,882 11,384 (2,187 ) (0.05 ) (0.05 ) December 31, 2019
28,733 11,938 (2,068 ) (0.05 ) (0.05 ) March 31, 2020
30,895 14,032 217 0.01 0.01 $ 114,117 $ 47,761 $ (5,610 ) $ (0.14) * $ (0.14) * June 30, 2018
$ 25,475 $ 10,192 $ (1,579 ) $ (0.05 ) $ (0.05 ) September 30, 2018
24,417 9,661 (1,341 ) (0.04 ) (0.04 ) December 31, 2018
23,140 8,892 (2,464 ) (0.07 ) (0.07 ) March 31, 2019
26,091 9,861 (2,432 ) (0.07 ) (0.07 ) $ 99,123 $ 38,606 $ (7,816 ) $ (0.23) * $ (0.23) * *Annual per share amounts may not agree to the sum of the quarterly per share amounts due to differences between average shares outstanding during the periods.
14. Subsequent EventsSale of SegmentOn May 2, 2020, Iteris, Inc.including intellectual property. The Credit Agreement also contains certain restrictions andits wholly-owned subsidiary, ClearAg, Inc. entered into an Asset Purchase Agreement (the "Purchase Agreement") with DTN, LLC ("DTN"), an operating company of TBG AG, a Swiss-based holding company. Under the Purchase Agreement,covenants that require the Companyagreedtosellmaintain, on an ongoing basis, (i) a leverage ratio of no greater than 3.00 toDTN1.00 and (ii) a fixed charge coverage ratio of not less than 1.25 to 1.00. The leverage ratio also determines theassets ofapplicable interest rate under theCompany's AgricultureCredit Agreement. Borrowings under the revolving credit facility accrue interest at a rate equal to either SOFR or a specified base rate, at the Company’s option, plus an applicable margin. The applicable margins range from 2.00% to 2.80% per annum for SOFR loans andWeather Analytics segment, composed of its ClearAg and ClearPath Weather product lines (the "Business").1.00% to 1.80% per annum for base rate loans. Thetransaction was completed by the parties and closed on May 5, 2020.
Company’s leverage ratio.Under the Purchase Agreement, the parties agreed, upon the terms andrevolving credit facility is subject to a commitment fee payable on theconditions set forth inunused revolving credit facility commitments ranging from 0.25% to 0.35%, depending on thePurchase Agreement, that DTN will purchase and assume from the Company substantially all of the assets used in the conduct of the Business and certain specified liabilities of theNotes to Consolidated Financial Statements (Continued)March 31, 202014. Subsequent Events (Continued)Business in exchange for a total purchase price of $12,000,000. Of that amount, $10,500,000 was paid at closing on May 5, 2020, and the balance of $1,500,000 will be paid at the 12- and 18-month anniversaries of the closing date, subject to satisfaction 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. The Purchase Agreement also provides for customary post-closing adjustments to the purchase price tied to working capital balances of the Business at closing.The parties also entered into certain ancillary agreements at the closing of the transaction that will provide Iteris with ongoing access to weather and pavement data that it integrates into its transportation software products, and a joint development agreement under which the parties agreed to pursue future joint opportunities in the global transportation market.As of March 31,2020,2022, there were no amounts borrowed under the revolving credit facility and the Companydetermined that Agriculture and Weather Analytics did not meetis in compliance with theheld for sale classification criteria under ASC 360, and as such, Agriculture and Weather Analytics assets and liabilities as ofcovenants. During the fiscal year ended March 31,2020, and2022, capitalized deferred financing costs of $0.3 million associated with theresults of operations for all periods presented are not classified as held for sale andCredit Agreement are included incontinuing operationsOther assets. Amortization of the deferred financing costs and commitment fees on the unused revolving credit facility commitments are included inthe consolidated financial statements.Interest Income (Expense), net.74ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURES(a) Evaluation of disclosure controls andprocedures.In accordanceproceduresOur management, withRule 13a-15(b)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 ExchangeAct,Act), as of the end of the period covered by this Annual Report on Form10-K, management evaluated, with the participation of10-K.Based upon that evaluation, ourPresident andChief Executive Officer andour 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 theChief Financial Officer have concluded that, as of March 31, 2022, our disclosure controls and procedures were effective atathe reasonable assurance levelas of the date of such evaluation in ensuringto ensure that information required to be disclosed by us inourthe reports we file or submit under the Exchange Actreportsis(1)recorded, processed, summarized and reported within the time periods specified in theSEC'sSecurities Exchange Commission's rules and forms, and(2)is accumulated and communicated to our management, includingthe Company's President andour Chief Executive Officer andtheChief 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 internalcontrol.controlThere 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 Fiscal20202022 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.(c) Inherent Limitations on Internal ControlA 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 ReportingManagement 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 ourPresident andChief Executive Officer and Chief Financial Officer,weour management conducted an evaluation of the effectiveness of our internal control over financial reporting based on theframeworkcriteria set forth inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation,under the framework inInternal Control—Integrated Framework (2013),our management concluded that our internal control over financial reporting was effective at a reasonable assurance level as of March 31,2020.2022.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,
20202022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein.75REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the stockholders and the Board of Directors of Iteris, Inc.Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Iteris, Inc. and subsidiaries (the "Company") as of March 31,2020,2022, based on criteria established inInternal 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 31,2020,2022, based on criteria established inInternal 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 31,2020,2022, of the Company and our report dated June9, 2020,1, 2022, expressed an unqualified opinion on those financialstatements 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.statements.
Basis for OpinionThe 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 ReportingAcompany'scompany’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. Acompany'scompany’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 onlyin 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'scompany’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 LLPCosta Mesa, CAJune9, 20201, 2022ITEM 9B. OTHER INFORMATIONNone, except as reported in Part III, Item 11None.77ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSNot applicable.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by Item 10 will be either (i) included in an amendment to this Annual Report on Form 10-K ("the Form 10-K Amendment") or (ii) incorporated by reference to our Definitive Proxy Statement to be filed with the SEC in connection with our20202022 Annual Meeting of Stockholders (the"2020"2022 Proxy Statement") under the headings "Executive Compensation and Other Information—Executive Officers," "Election of Directors," "Corporate Governance," and "Delinquent Section 16(a) Reports."ITEM 11. EXECUTIVE COMPENSATIONThe information required by Item 11 will be either included in the Form 10-K Amendment or is incorporated by reference to our20202022 Proxy Statement under the heading "Executive Compensation and Other Information" and "Election of Directors."ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by Item 12 will be either included in the Form 10-K Amendment or is incorporated by reference to our20202022 Proxy Statement under the heading "Equity Compensation Plan Information" and "Stock Ownership of Certain Beneficial Owners and Management."ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 13 will be either included in the Form 10-K Amendment or is incorporated by reference to our20202022 Proxy Statement under the heading "Corporate Governance, Board Meetings and Committees" and "Additional Matters—Certain Transactions."ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by Item 14 will be either included in the Form 10-K Amendment or is incorporated by reference to our20202022 Proxy Statement under the heading "Matters Related to Independent Registered Public Accounting Firm."PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a)Documents filed as part of this report:1.- Financial Statements.
Our consolidated financial statements are listed in the "Index to Consolidated Financial Statements" under Part II, Item 8, of this Annual Report.2.- Financial Statement Schedules.
All financial statement schedules have been omitted because they are not required or are not applicable, or the required information is shown in our consolidated financial statements or the notes thereto.3.- Exhibits.
The following table sets forth the exhibits either filed herewith or incorporated herein by reference:Exhibit IndexExhibit NumberDescriptionReference2.1†Stock Purchase Agreement, dated June 10, 2019, by and among Iteris, Inc., Albeck Gerken, Inc. and its shareholders.Exhibit 2.1 to the registrant's Current Report on Form 8-K as filed with the SEC on June 14, 2019
Exhibit Number2.2†DescriptionReference 2.1 †
Exhibit 2.1 to the registrant's Current Report on Form 8-K as filed with the SEC on May 6, 20203.14.1
Exhibit 3.1 to theregistrant'sRegistrant’s Current Report on Form 8-K as filed with theSECCommission on October 15, 20183.24.2
Exhibit 3.1 to theregistrant'sRegistrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 as filed with theSECCommission on August 7, 20184.14.3 Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A (File No. 001-08762), as filed with the Commission on December 8, 2004 4.4 Filed herewithExhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended for the year ended March 31, 2020 as filed with the SEC on June 9, 20204.2Specimen of common stock certificate10.1
†Exhibit 4.110.1 toregistrant's Registration Statementthe registrant’s Current Report on Form8-A8-K as filed with the SEC on December8, 20047, 202010.110.2 *
Exhibit 10.5 to the registrant's Annual Report on Form10- K10-K for the year ended March 31, 2004 as filed with the SEC on June 29, 2004Exhibit NumberDescriptionReference10.3 10.2Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 as filed with the SEC on August 14, 2007 10.310.4
Exhibit 10.29 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2014 as filed with the SEC on September 4,2014.201410.479Exhibit Number Description Reference 10.5
Exhibit 10.5 to registrant's Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the SEC on June 6, 201910.510.6 †
Exhibit 10.6 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2019 filed with the SEC on June 6, 201910.6*10.7 Exhibit 10.7 to the registrant’s Annual Report on Form 10-K for the year ended March 31, 2021 filed with the SEC on June 1, 2021 10.8 *
Exhibit 10.4 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2018 as filed with the SEC on June 7, 201810.7*10.9 *
Exhibit 10.19 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2012 as filed with the SEC on June 11, 201210.8*10.10 *
Exhibit 10.20 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2012 as filed with the SEC on June 11, 201210.9*10.11 *
Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 as filed with the SEC on July 28, 201010.10*10.12 *
Exhibit99.110.1 to registrant'sRegistration StatementCurrent Report on FormS-8 (File No. 333-228210)8-K as filed with the SEC onNovember 6, 2018.September 16, 202110.11*10.13 * Exhibit 99.2 to the registrant's Registration Statement on Form S-8 (File No.333-216407) as filed with the SEC on March 2, 201710.12*Form of Form of Notice of Grant of Stock Option and form of Stock Option Agreement for use with 2016 Omnibus Incentive PlanExhibit 99.3 to the registrant's Registration Statement on Form S-8 (File No.333-216407) as filed with the SEC on March 2, 201710.13Amended and Restated Promissory Note, effective July 23, 2013, by and between Maxxess Systems, Inc. in favor of Iteris, Inc.
Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,20132020 as filed with the SEC on August1, 20134, 202010.14 * Exhibit NumberDescriptionReference10.14First Amendment to Lease, dated February 21, 2014, by and between RREF II Freeway Acquisitions, LLC and Iteris, Inc.Exhibit 10.2910.2 to the registrant'sAnnualQuarterly Report on Form10-K10-Q for theyearquarter endedMarch 31, 2014June 30, 2020 as filed with the SEC onSeptemberAugust 4,2014.202010.15*10.15 * Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 as filed with the SEC on August 4, 2020 10.16 *
Exhibit 10.1 to the registrant's Current Report on Form 8-K as filed with the SEC on September 22, 201510.1610.17 *
Exhibit 10.1 to the registrant's Current Report on Form 8-K as filed with the SEC on December 4, 201910.17*10.18 *
Exhibit 10.20 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the SEC on June 6, 201910.18*10.19 *
Exhibit 10.21 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the SEC on June 6, 201910.19*10.20 *
Exhibit 10.22 to the registrant's Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the SEC on June 6, 201910.2080Exhibit Number Description Reference 10.21 *
Exhibit 10.1 to the registrant's Current Report on Form 8-K as filed with the SEC on July 9, 201910.21Severance and Release Agreement, effective date December 12, 2019, between Iteris, Inc. and Andrew Schmidt10.22
*Exhibit 10.1 to Amendment No. 110.2 to theregistrant'sregistrant’s Current Report on Form 8-K as filed with the SEC on December27, 20197, 20202310.23 * Exhibit 10.3 to the registrant’s Current Report on Form 8-K as filed with the SEC on December 7, 2020 10.24 * Exhibit 10.4 to the registrant’s Current Report on Form 8-K as filed with the SEC on December 7, 2020 10.25 * Exhibit 10.5 to the registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 as filed with the SEC on February 2, 2021 10.26 * Exhibit 10.6 to the registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 as filed with the SEC on February 2, 2021 10.27 * Exhibit 10.1 to the registrant’s Current Report on Form 8-K as filed with the SEC on September 9, 2021 10.28 Exhibit 10.1 to the registrant’s Current Report on Form 8-K as filed with the SEC on January 28, 202210.29 * Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 as filed with the SEC on February 3, 202223
Filed herewith2424 Power of Attorney
Filed herewith (included on the Signature page)31.131.1
Filed herewith31.231.2
Filed herewith32.132.1
Filed herewith32.232.2
Filed herewith101.INS101.INS XBRL Instance Document
Filed herewith101.SCH XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith Table of ContentsExhibit NumberDescriptionReference101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
Exhibit Number101.CAL
DescriptionXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewithReference
101.LAB101.LAB
XBRL Taxonomy Extension Label Linkbase Document
Filed herewith101.PRE101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith101.DEF101.DEF XBRL Taxonomy Definition Presentation Linkbase Document
Filed herewith104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Filed herewith - †
- Pursuant to Item 601(a)(5) of Regulation S-K, certain appendices to this agreement have been omitted. The Company agrees to furnish supplementally to the Securities and Exchange Commission, upon its request, any or all of such omitted appendices.
*- Indicates a contract, compensatory plan or arrangement in which directors or executive officers of the registrant are eligible to participate.
ITEM 16. FORM 10-K SUMMARYNone.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.Dated: June 9, 20201, 2022ITERIS, INC.
(Registrant)ByBy /s/ JOE BERGERA Joe BergeraChief Executive Officer(Principal Executive Officer)POWER OF ATTORNEYWe, the undersigned officers and directors of Iteris, Inc., do hereby constitute and appoint Joe Bergera and Douglas Groves, and each of them, our true and lawful attorneys-in-fact and agents, each with full power of substitution andresubstitution,re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby, ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:SignatureTitleDateSignature Title Date /s/ JOE BERGERA Joe BergeraDirector, President and Chief Executive Officer (principal executive officer) June 9, 20201, 2022
Joe Bergera/s/ DOUGLAS GROVES Douglas Groves
Chief Financial Officer (principal financial and accounting officer)
June9, 20201, 2022/s/ THOMAS L. THOMASThomas L. ThomasDouglas GrovesChairman of the BoardJune 9, 2020/s/ LAURA L. SIEGALLaura L. SiegalDirectorJune 9, 2020SignatureTitleDate
/s/ THOMAS L. THOMAS
Chairman of the Board
June 1, 2022Thomas L. Thomas /s/ GERARD M. MOONEY Director June 1, 2022 Gerard M. Mooney /s/ LAURA L. SIEGAL Director June 1, 2022 Laura L. Siegal /s/ DENNIS W. ZANK Director June 1, 2022 Dennis W. Zank DirectorJune 9, 2020/s/ GERARD M. MOONEYGerard M. MooneyDirectorJune 9, 2020/s/ SCOTT E. DEETERScott E. DeeterDirectorJune 9, 202083