**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-K/A**

**(AmendmentNo. 1)**

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| **(Mark One)**                                                                                                                                                                                                |   | ** **                                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **x**                                                                                                                                                                                                         |   | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **For the  fiscal year ended March 31, 2007**                                                                                                                                                            |
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **OR**                                                                                                                                                                                                        |
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **o**                                                                                                                                                                                                         |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **For the  transition period from              to              ** |
| ** **                                                                                                                                                                                                    |   | ** **                                                                                              |
| **Commission  file number 001-08762**                                                                                                                                                                         |

 

**ITERIS,INC.**

(Exact Name of Registrantas Specified in Its Charter)

| **Delaware**                                                     |   | **95-2588496**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or Other  Jurisdiction  of Incorporation or Organization) |   | (I.R.S. Employer  Identification No.) |

 

**1515South Manchester Avenue, Anaheim, California 92802**

(Address ofPrincipal Executive Offices)(Zip Code)

Registrant’sTelephone Number, Including Area Code: **(714)774-5000**

Securitiesregistered pursuant to Section 12(b) of the Act:
| Title of each class            | ** ** | **Name of each exchange on which registered** |
|--------------------------------|------------|-----------------------------------------------|
| Common Stock,  $0.10 par value |       | American Stock  Exchange                      |

 

Securities registeredpursuant to Section 12(g) of the Act: **None**

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Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.Yes o No x

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Act..Yes o No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  x  No  o

Indicate by a check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Largeaccelerated filer  o      Acceleratedfiler  o      Non-acceleratedfiler  x

Indicate by check markwhether the registrant is a shell company (as defined in Exchange ActRule 12b-2). Yes o No x

Based on the closing saleprice of the registrant’s common stock on September 30, 2006, the last businessday of the registrant’s most recently completed second fiscal quarter, theaggregate market value of the voting common stock held by nonaffiliates of theregistrant was $54,700,000. For the purposes of this calculation, shares ownedby officers, directors and 10% stockholders known to the registrant have beendeemed to be owned by affiliates. This determination of affiliate status is notnecessarily a conclusive determination for other purposes.

As of June 18, 2007, therewere 32,575,330 shares of common stock outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

The following documents (orportions thereof) are incorporated by reference into this Form 10-K: None.

 

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**EXPLANATORY NOTE**

ThisAmendment No. 1 to our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2007 (originally filed with the Securities and Exchange Commission onJune 21, 2007) is being filed in order to amend Items 10 through 14 of Part IIIto include information that we previously anticipated providing byincorporating by reference from the definitive proxy statement for our 2007Annual Meeting of Stockholders.  Inaccordance with General Instruction G(3) to Form 10-K, we hereby amend Items10, 11, 12, 13 and 14 of Part III contained in our Annual Report on Form 10-Kto provide the additional required information as set forth below.  Part IV, Item 15 is also set forth below toreflect the inclusion of the certifications required by Rule 12b-15 under theSecurities Exchange Act of 1934, as amended. The complete text of Items 10 through 15, as amended, is included inthis amendment.  With the exception ofthe foregoing, no other changes are being made to our Report on Form 10-K forthe fiscal year ended March 31, 2007.

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**PART III**

**ITEM 10.****                      DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

**Directors and Executive Officers**

The followingtable sets forth certain information, as of July 1, 2007, regarding thedirectors and executive officers of Iteris, Inc. (“Iteris” or the “Company”):
| **Name**                    | ** ** | **Age** | ** ** | **Current Position(s) with Iteris**                                   |
|-----------------------------|------------|---------|------------|-----------------------------------------------------------------------|
| Abbas Mohaddes              |       | 50      |       | Chief Executive Officer, President, Assistant  Secretary and Director |
| Gregory McKhann             |       | 44      |       | Senior Vice President and General Manager                             |
| Francis Memole              |       | 49      |       | Senior Vice President and General Manager                             |
| James S. Miele              |       | 39      |       | Vice President, Chief Financial Officer and  Secretary                |
| Richard Char(1)             |       | 48      |       | Director                                                              |
| Kevin C. Daly,  Ph.D.(2)(3) |       | 62      |       | Director and Assistant Secretary                                      |
| Gary  Hernandez(3)          |       | 48      |       | Director                                                              |
| Dr. Hartmut  Marwitz        |       | 65      |       | Director                                                              |
| Gregory A. Miner            |       | 52      |       | Chairman of the Board                                                 |
| John W.  Seazholtz(1)(2)(3) |       | 70      |       | Director                                                              |
| Joel Slutzky                |       | 68      |       | Director and Assistant Secretary                                      |
| Thomas L.  Thomas(1)(2)(3)  |       | 58      |       | Director                                                              |
| Paul E. Wright              |       | 76      |       | Director                                                              |

 

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(1)    Member of the Audit Committee.

(2)    Member of the Compensation Committee.

(3)    Member of the Nominatingand Corporate Governance Committee.

***Abbas Mohaddes***has served as our ChiefExecutive Officer and President since March 2007, as an Assistant Secretarysince May 2004 and as a director since September 2005.  Prior to his promotion in March 2007, Mr.Mohaddes served as our Executive Vice President and a General Manager fromOctober 2004.  He was the Executive VicePresident of our former Iteris, Inc. subsidiary (the “Iteris Subsidiary”) fromMarch 2004 to October 2004 and its Secretary from September 2001 to October2004.  Prior to that, he served as theSenior Vice President and Director of Transportation Systems of the IterisSubsidiary from May 2000 to March 2004 and as its Vice President and DeputyDirector of Transportation from October 1998 to May 2000.  Mr. Mohaddes also served as President andChief Executive Officer of Meyer, Mohaddes Associates, Inc. (“MMA”), an ITS andtransportation firm that he co-founded in 1991, which was acquired by theIteris Subsidiary in October 1998 and dissolved in April 2006.  Mr. Mohaddes is a founding and a currentboard member of ITS America and a member of several trade organizationsincluding Transportation Research Board, Institute of Transportation Engineers,and the Design/Build Institute of America.

***Gregory McKhann*** has served as a SeniorVice President and General Manager since October 2004.  Mr. McKhann was a Senior Vice President ofthe Iteris Subsidiary from March 2004 to October 2004, its Vice President andGeneral Manager of Roadway Sensors from December 1998 to March 2004, its VicePresident, Strategic Business Development from October 1999 to May 2000 and theMarketing Director of our ITS division (which became the Iteris Subsidiary)from July 1997 to October 1999.  Prior tojoining us, Mr. McKhann served as a Business Development Manager at RockwellInternational from 1990 to 1997.  While atRockwell, Mr. McKhann was a founding member of Rockwell Transportation Systemsbusiness.  Prior to 1990, Mr. McKhannheld a variety of Engineering and Project Management positions at RockwellInternational.

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***Francis Memole*** has served as a SeniorVice President and General Manager since October 2004.  Mr. Memole was a Senior Vice President of theIteris Subsidiary from March 2004 to October 2004, its Vice President ofVehicle Sensors from December 1998 to March 2004 and the Marketing Director ofour ITS division (which became the Iteris Subsidiary) from June 1997 toDecember 1998.  Prior to joining us, Mr.Memole was one of the founding members of the Rockwell Transportation Systemsbusiness unit.  At Rockwell, Mr. Memole wasinvolved in initiating Transportation Systems and In-Vehicle Systems.

***James S. Miele*** has served as our VicePresident of Finance and Chief Financial Officer since October 2004 and as theSecretary since March 2004.  Mr. Mielewas our Controller from October 2003 to October 2004 and the Controller of theIteris Subsidiary from April 2001 to October 2004.  Prior to that, from October 1998 to June2000, Mr. Miele served as an audit manager at Ernst & Young LLP, supervisingfinancial statement audits for a variety of public and privately heldcompanies.  Mr. Miele also served inErnst & Young’s Assurance and Advisory Business Services group from 1994 to1998.  Mr. Miele is a Certified PublicAccountant and holds a B.S. degree in Accounting from San Diego StateUniversity.

***Richard Char*** has served as a directorsince September 2005.  Since June 2006,Mr. Char has served as Senior Vice President of Corporate Development andGeneral Counsel at Blackhawk Network, Inc., a provider of card-based financialsolutions, including third-party prepaid cards. From March 2003 to April 2005, Mr. Char served as the President andChief Executive Officer of IC Media, a developer of CMOS image sensors that wasacquired in April 2005 by MagnaChip Semiconductors, a developer andmanufacturer of mixed-signal and digital multimedia semiconductors.  Prior to joining IC Media, from March 1999 toJanuary 2002, Mr. Char was Managing Director with the Technology Group ofCredit Suisse First Boston.  From 1997 to1999, Mr. Char was Co-Head of Technology Investment Banking at Cowen &Company and from 1984 to 1997, he was a partner in the law firm of WilsonSonsini Goodrich & Rosati.  Mr. Charreceived his A.B. degree from Harvard College and his J.D. degree from StanfordLaw School.

***Kevin C. Daly, Ph.D.*** has served as adirector since 1993.  Since November2005, Dr. Daly has served as the Chief Executive Officer of MAXxess Systems,Inc., a provider of electronic security solutions, which he joined in June 2005.  From June 2002 to June 2005, Dr. Daly was theChief Executive Officer of Avamar Technologies, Inc., a provider of highavailability storage software solutions. Dr. Daly was Chief Technical Officer of Quantum Corporation’s StorageSolutions Group from October 2001 to July 2002 and, prior to that, he was ChiefExecutive Officer of ATL Products, Inc., one or our former subsidiaries, fromATL’s formation in 1993 until 2001.  Dr.Daly also served as our Chief Technical Officer from 1985 until ATL’s separationfrom us in an initial public offering in 1997. Prior to joining us, Dr. Daly was Director of the Control and DynamicsDivision of the Charles Stark Draper Laboratory at MIT from 1974 through 1985.  Dr. Daly is also a member of the Board ofDirectors of Danka Business Systems PLC and iStor Networks Inc.

***Gary Hernandez*** has served as adirector since September 2004.  He alsoserved as a director of the Iteris Subsidiary from January 1999 to October2004.  Mr. Hernandez has been a partnerin the law firm of Sonnenschein, Nath and Rosenthal LLP since December1997.  From December 1995 to December1997, Mr. Hernandez was a partner in the law firm of Long & Levit.  Mr. Hernandez served as Deputy InsuranceCommissioner of California from April 1991 to November 1995.  Mr. Hernandez received his B.A. degree fromthe University of California, Berkeley and his J.D. degree from the Universityof California, Davis.

***Dr. Hartmut Marwitz*** has served as adirector since September 2004.  Dr.Marwitz also served as a director of the Iteris Subsidiary from 1999 to October2004 and has served as the Vice-President of Engineering Mercedes-Benz Trucksof DaimlerChrysler in Germany since 1995. Previously, Dr. Marwitz served with Daimler-Benz AG as Director of TruckPowertrain Testing.  Furthermore, Dr.Marwitz has broad experiences in the field of passenger car development.  Before joining Daimler-Benz AG, Dr. Marwitzworked as Senior Manager for Rheinmetall in the field of Special MachineryDevelopment in Germany and Spain.  Dr. Marwitzholds an Engineering Degree in Mechanical Engineering and a Doctoral Degree inExperimental Mechanics from the Technical University of Munich, Germany.  Since 2003, Dr. Marwitz has held an honoraryprofessorship as the Chair of Machine and Design at the Institute of MachineDesign and Automotive Engineering at the Technical University of Karlsruhe(Germany).

***Gregory A. Miner*** has served as adirector since 1998 and as our Chairman of the Board of Directors since October2004.  Mr. Miner is also the ManagingPartner of Merchant Capital Source, LLC, a company that provides workingcapital financing solutions to merchants. Prior to that, Mr. Miner served as our Chief Executive Officer fromFebruary 2002 to October 2004 and as our Chief Financial Officer from January1994 to October 2004.  He also served asour Chief Operating Officer from 1998 to 2002 and as the Chairman of the Boardof the Iteris Subsidiary from December 2003 to October 2004.

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Mr. Miner has served invarious capacities for our other subsidiaries from time to time.  From December 1984 until joining us, Mr.Miner served as the Vice President, Chief Financial Officer and a director ofLaser Precision Corporation, a manufacturer of telecommunications testequipment.  Mr. Miner is a CertifiedPublic Accountant and, from 1979 to 1984, was employed by Deloitte Haskins andSells (now known as Deloitte & Touche LLP) in various capacities, the mostrecent of which was Audit Manager.

***John W. Seazholtz*** has served as adirectors since May 1998.  From May 1998to April 2000, Mr. Seazholtz served as the President and Chief ExecutiveOfficer of Telesoft America, Inc.  Heretired in April 1998 as the Chief Technology Officer of Bell Atlantic after 36years of service with that company and its predecessor.  Mr. Seazholtz was a senior officer of BellAtlantic from 1986, serving in various positions, including the positions ofVice President, Operations and Engineering, Vice President, Marketing, VicePresident of New Services, and Vice President, Technology and InformationSystems.  Mr. Seazholtz currently servesas the Chairman of the Board of Westell Technologies, Inc.

***Joel Slutzky*** has served as a directorsince he co-founded our company in 1969. Mr. Slutzky was the Chairman of the Board of Directors from 1969 toOctober 2004 and our Chief Executive Officer from 1975 to February 2002.  Mr. Slutzky also served as the Chairman ofthe Board of the Iteris Subsidiary until December 2003 and served in variouscapacities for our other subsidiaries from time to time.  Mr. Slutzky currently serves on the Board ofDirectors of Project Tomorrow, an organization focused on improvingKindergarten through 12th grade science education in Orange County, California.

***Thomas L. Thomas*** has served as adirector since May 1999.  Mr. Thomasserved as the Chairman of the Board, President and Chief Executive Officer ofHAHT Commerce, a provider of software applications that enable companies to usethe Internet to conduct business, from February 2000 until February 2004 whenHAHT Commerce was sold to Global Exchange Services, or GXS.  Mr. Thomas currently serves as the Presidentand Chief Operating Officer of GXS, a provider of business-to-business EDI andsupply chain management solutions.  Mr.Thomas was previously the President and Chief Executive Officer of AjubaSolutions, a provider of B2B integration solution software, which was sold toInterwoven in October 2000. From April 1999 until January 2000, he served asthe President, Chief Executive Officer and Chairman of the Board of VantiveCorporation, a customer relationship management software vendor which wasacquired by Peoplesoft in January 2000. Prior to that, from September 1995 to April 1999, Mr. Thomas served asthe Senior Vice President of e-Business and Information Services and ChiefInformation Officer at 3Com Corporation. From 1993 to 1995, Mr. Thomas served as a Vice President and the ChiefInformation Officer of Dell Computer Corporation.  From 1987 to 1993, he served as the VicePresident of Management Information Systems at Kraft General Foods, and at SaraLee Corporation from 1981 to 1987.  Mr.Thomas also serves on the Board of Directors of iManage, Inc.

***Paul E. Wright*** has served as adirector since June 1993.  He also servedas a director of the Iteris Subsidiary from January 1999 to October 2004.  Mr. Wright is the President of WrightAssociates—Engineering and Business Consultants, a company he formed in1997.  From 1988 until his retirement in1997, Mr. Wright served as the Chairman of Chrysler Technologies Corp., theaerospace and defense electronics subsidiary of Chrysler Corporation.  From 1986 to 1988, Mr. Wright served as thePresident and Chief Operating Officer of Fairchild Industries, Inc. Prior tojoining Fairchild, he was employed for 28 years by RCA Corporation, where helast served as the Senior Vice President, responsible for planning RCA’s mergerinto General Electric Corporation.

All directors areelected annually and hold office until the next annual meeting of stockholdersand until their successors are duly elected and qualified.  Officers serve at the discretion of the Boardof Directors.

There are nofamily relationships among any of our directors or executive officers.

**Codeof Ethics and Business Conduct**

Our Board of Directorshas adopted a Code of Ethics and Business Conduct which applies to alldirectors, officers (including our principal executive officer, principalfinancial officer, principal accounting officer or controller, or personsperforming similar functions) and employees. The full text of our Code of Ethics and Business Conduct is available onthe Investor Relations section of our website at *www.iteris.com*.  Weintend to disclose future amendments to certain provisions of the Code ofEthics and Business Conduct, and any waivers of provisions of the Code ofEthics required to be disclosed under the rules of the Securities and ExchangeCommission (“SEC”), at the same location on our website.

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**MaterialChanges to Procedure for Recommending Nominees by Security Holders**

There have been nomaterial changes to the procedures by which security holders may recommendnominees to the Board since our previous disclosure regarding this matter.

**AuditCommittee of the Board**

We currently have severalstanding committees of the Board of Directors, including the Audit Committee,the Compensation Committee, and the Nominating and Corporate GovernanceCommittee.  The current members of ourAudit Committee are Messrs. Char, Seazholtz and Thomas.  Each member of the Audit Committee is “independent”under the current listing standards of the American Stock Exchange and the SECrules regarding audit committee memberships. The Board has identified Mr. Char as the member of the Audit Committeewho qualifies as an “audit committee financial expert” under applicable SECrules and regulations governing the composition of the Audit Committee.

**Section16(A) Beneficial Ownership Reporting Compliance**

Under the federalsecurities laws, our directors and officers and any persons holding more than10% of our common stock are required to report their ownership of our commonstock and any changes in that ownership to the SEC.  Specific due dates for these reports havebeen established, and we are required to report any failure to file by suchdates.  In the year ended March 31, 2007,the Form 4 filings for the annual option grants to non-employee directors,consisting of Messrs. Char, Daly, Hernandez, Marwitz, Miner, Seazholtz,Slutzky, Thomas and Wright, were not filed within two business days of thegrant date.  Based solely on our reviewof copies of the reports on Forms 3, 4 and 5 received by us with respect to thefiscal year ended March 31, 2007 and the written representations received fromthe reporting persons that no other reports were required, except as indicated inthe foregoing sentence, we believe that all directors, executive officers andpersons who own more than 10% of our common stock have complied with thereporting requirements of Section 16(a) and have filed all reports required bysuch section.

**ITEM 11.****                      EXECUTIVECOMPENSATION**

**Compensation Discussion andAnalysis**

### ***General Compensation Policy***

The guiding principle ofour compensation policies is to align executive compensation with our company’sobjectives and business strategies as well as with financial and operationalperformance.  In keeping with thisprinciple, the Compensation Committee seeks to:

(1)                                  Attractand retain qualified senior executives who can play a significant role in theachievement of our company goals;

(2)                                  Rewardexecutives for strategic management and the long-term enhancement ofstockholder value; and

(3)                                  Createa performance-oriented environment that rewards performance with respect to ourfinancial and operational goals.

The CompensationCommittee meets periodically to review and recommend for approval by the Boardof Directors, the salaries, bonuses and benefit plans for our executiveofficers and key associates.  Ourmanagement provides recommendations to the Compensation Committee with respectto most compensation matters, including executive compensation, and we utilizeindependent third party salary survey data as reference points.  However, the final decisions regarding thecompensation of our executive officers are made by the Compensation Committee.  In measuring the executive officers’contributions to the Company, the Compensation Committee considers a number offactors, including our revenue growth, net income and other financialperformance measurements.

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In the fiscal yearended March 31, 2007 (“Fiscal 2007”), the annual compensation for the namedexecutive officers included base salaries, cash bonuses and stock optiongrants.  In setting the totalcompensation payable to our named executive officers for Fiscal 2007, theCompensation Committee sought to make such compensation competitive with thatprovided by other companies with which we compete for executive talent whileproviding short and long-term incentives for the achievement of measurablecorporate and individual performance objectives in keeping with thecompensation principles described above. The primary components of our executive compensation program for thefiscal year ending March 31, 2008 (“Fiscal 2008”) are expected to continue toconsist of base salaries, cash incentive opportunities and long-term equityincentive opportunities in the form of stock options.  In the future, such long-term equityopportunities may also include other types of equity instruments including, butnot limited to, restricted stock or restricted stock units.  Executives also participate in employeebenefit programs available to the broader employee population.

Our compensationplans and the amount of each compensation element to pay our named executiveofficers are generally developed and determined on an individual, case-by-casebasis utilizing a number of factors, including publicly available data fromindependent outside sources, including the American Electronics Associationannual survey of executive compensation, our general business conditions andobjectives, as well as our subjective determination with respect to theexecutive’s individual contributions to such objectives.  For our executive officers, the CompensationCommittee has adopted a policy of setting total compensation at approximatelythe 75th to 100th percentile level of comparable companies in order toeffectively recruit and retain key executives. The cash compensation, including the base salaries and bonuses, forFiscal 2007 for our executive officers was established generally at the higherend of such percentile range, while the equity compensation generally was atthe lower end of such range.

***Elements of Compensation***

*Base Salary*

We seek to provide oursenior management with a base salary appropriate to their roles andresponsibilities, and to provide them with a level of stability and certaintyeach year.  We establish salaries for thenamed executive officers by considering the salaries of officers at comparablysized companies according to data obtained by the Compensation Committee fromindependent outside sources, including the American Electronics Associationannual survey of executive compensation. Our Chief Executive Officer does not participate in the discussionsregarding his own compensation but does provide input to the CompensationCommittee regarding the compensation of other executive officers.  We have generally established base salariesfor our executive officers at the higher end of our target percentile range,with the exact base salaries for our executives based on the executive’squalifications and experience, scope of responsibilities, and the executive’spast performance and future potential. Base salaries are reviewed annually, and adjusted from time to time torealign salaries with market levels after taking into account such individualfactors, including responsibilities, performance and experience.  The Compensation Committee has reviewed thebase salaries for Fiscal 2007 of each of the named executive officers and is ofthe opinion that such salaries are at a competitive level with the base salariesin effect for similarly situated officers and are not unreasonable in view ofthose paid by our competitors and by other companies of similar size.

In addition, as describedbelow under the caption “Non-Qualified Deferred Compensation,” we have a DeferredCompensation Savings Plan pursuant to which our executive officers may defersome or all of their salaries.  Noamounts were deferred by any executive officer in Fiscal 2007.

*Incentive Cash Bonuses*

The remaining cashcomponent of the named executive officers’ compensation for Fiscal 2007 was anannual cash bonus determined by the Compensation Committee based upon criteriaestablished by the committee at the beginning of the fiscal year.  For Fiscal 2007, the bonuses were primarilydependent upon corporate and business unit performance.  80% of the potential bonus for the ChiefExecutive Officer and the Chief Financial Officer was based on total revenueand operating income achieved for the year, and the remaining 20% of thepotential bonus was based on the applicable officer’s achievement of individualobjectives that were qualitative in nature and were established by theCompensation Committee.  The potentialbonus for each of the other named executive officers, including Mr. Mohaddes whoserved as our Executive Vice President during almost all of Fiscal 2007, werebased on revenue and operating income achieved by the business unit for whichsuch officer had primary responsibility, as well as the operating incomeachieved by the Company.

For Fiscal 2008,the potential bonuses for our named executive officers have similarly been setbased primarily on our overall corporate and business unit performance, with80% of the potential bonus for Messrs. Mohaddes and Miele to be based on thetotal revenue and operating income achieved by the Company for the year, and80% of the potential bonus for

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each of Messrs. McKhann and Memole to be based on revenue and operatingincome achieved by the business unit for which such officer has primaryresponsibility, as well as the operating income achieved by the Company.  The remaining 20% of the potential bonus foreach named executive officer will be based on the officer’s achievement ofindividual objectives.

The individualobjectives in Fiscal 2007 for the Chief Executive Officer and the ChiefFinancial Officer were primarily focused on such officer’s management of hisarea of responsibility.  The objectivesfor Mr. Johnson, our Chief Executive Officer until March 2007, generallyincluded enhancing the relationship of the Company with the financial communityand increasing Company market value.  Theobjectives for Mr. Miele principally included strategic development of theCompany and increasing Company market value. For Fiscal 2008, the objectives for Messrs. Mohaddes and Miele wereestablished by the Compensation Committee and included strategic development ofthe Company and Company market value enhancement.  The Fiscal 2008 objectives for the othernamed executive officers were established by our Chief Executive Officer andprimarily consisted of operational objectives within their business area ofresponsibility for each of Messrs. McKhann and Memole.

In Fiscal 2007,the target bonuses under the plan as a percent of the officer’s base salaryranged from 30% to 55%, with the Chief Executive Officer’s target bonus set at55% of his base salary.  The targetbonuses for the other named executive officers were 20% to 45% of theapplicable officer’s base salary.  ForFiscal 2008, the target bonuses were set at 35% to 46% of base salaries, withthe Chief Executive Officer’s target bonus set at 43% of his base salary andthe target bonus for all other named executive officers set at 35% to 46% ofthe applicable officer’s base salary. Revenue and operating income goals established for bonus purposes aregenerally higher than the goals established by the Company for the operation ofthe business in general, and may thus be difficult to attain without a highdegree of effort.  If the Company performanceexceeds the targets set for bonus purposes, the executives can earn, in theaggregate, up to 150% of the target bonus award.  Bonus achievement or overachievement isdetermined on a factor-by-factor basis.

Based upon theabove described criteria, cash bonuses for the named executive officers in thefollowing amounts were approved for Fiscal 2007:  Mr. Mohaddes – $66,487; Mr. Johnson– $29,531;Mr. McKhann – $80,285; Mr. Memole – $2,585; and Mr. Miele – $17,680.

*Long-Term EquityCompensation*

A portion of thecompensation of executive officers has historically been based upon the awardof stock options which rely on increases in the value of our securities.  The award of options is intended to encourageexecutives to establish a meaningful, long-term ownership interest in thecompany consistent with the interests of our stockholders.  Under our equity incentive plans, options aregranted from time to time to certain officers and key associates of us and oursubsidiaries at the fair market value of the shares of common stock at the timeof grant.  We do not have a formal policyas to the amount or timing of grants to executive officers.  Because the compensation element of optionsis dependent on increases over time in the market value of such shares, stockoptions represent compensation that is tied to our long-term performance.  The award of stock options to our executiveofficers is determined based upon individual performance, level of base salaryand position with us.

In Fiscal 2007, wegranted to our named executive officers stock options for the following numberof shares:  Mr. Mohaddes – 130,000shares; Mr. McKhann – 30,000 shares; Mr. Memole – 30,000 shares; and Mr. Miele –15,000 shares. The options granted to Mr. Mohaddes in Fiscal 2007 included anoption for 100,000 shares granted to him in connection with his promotion asour Chief Executive Officer and President in March 2007.  In the event that our stockholders approvethe 2007 Omnibus Incentive Plan, Mr. Mohaddes will be granted a stock optionfor 200,000 additional shares of our common stock, pursuant to the offer letterrelating to his March 2007 promotion. The options granted to our named executive officers generally have anexercise price equal to the fair market value on the date of grant, vest inequal annual installments over four years, and are not exercisable untilvested.

*Other Compensation*

Our executiveofficers are eligible to receive the same benefits, including non-cash grouplife and health benefits, that are available to all employees.  Certain additional benefits may be providedto our executives such as a car allowance, but each on a case-by-case basis.

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**Summary Compensation Table**

The following table shows information regarding thecompensation earned during Fiscal 2007 by our Chief Executive Officer, ChiefFinancial Officer and our two other executive officers who were employed by usas of March 31, 2007 and whose total compensation exceeded $100,000 during thatfiscal year, as well as information regarding the compensation earned duringFiscal 2007 by our former Chief Executive Officer and another former executiveofficer whose total compensation exceeded $100,000 during Fiscal 2007.  The officers listed below will becollectively referred to as the “named executive officers” in this proxystatement. 
| **Name**                                                                               | ** ** | **Salary** | ** ** | **Option  Awards(1)** | ** ** | **Non-Equity  Incentive Plan  Compensation  (2)** | ** ** | **Change in Pension  Value and Non-  Qualified Deferred  Compensation  Earnings(3)** | ** ** | **All Other  Compensation  (4)** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------------|------------|------------|------------|-----------------------|------------|--------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-----------|------------|
| Abbas Mohaddes  Chief Executive Officer,  President, Assistant  Secretary and Director |       | $          | 227,483    |                  | $          | 14,655                                                 |       | $                                                                                                             | 66,487     |                                  | 3⁄4     |      | $          | 13,276 |   | $ | 321,901 |   |
|                                                                                   |       |       |       |                  |       |                                                   |       |                                                                                                          |       |                                  |       |      |       |
| Jack Johnson(5)  Former Chief Executive  Officer and President                         |       | 304,611    |       | 3,141                 |       | 29,531                                                 |       | 3⁄4                                                                                                        |       | 11,150                                |       | 348,433   |       |
|                                                                                   |       |       |       |                  |       |                                                   |       |                                                                                                          |       |                                  |       |      |       |
| Gregory McKhann  Senior Vice President and  General Manager                            |       | 192,004    |       | 11,786                |       | 80,285                                                 |       | 3⁄4                                                                                                        |       | 4,515                                 |       | 288,590   |       |
|                                                                                   |       |       |       |                  |       |                                                   |       |                                                                                                          |       |                                  |       |      |       |
| Francis Memole  Senior Vice President and  General Manager                             |       | 198,319    |       | 22,041                |       | 2,585                                                  |       | 3⁄4                                                                                                        |       | 13,220                                |       | 236,165   |       |
|                                                                                   |       |       |       |                  |       |                                                   |       |                                                                                                          |       |                                  |       |      |       |
| James S. Miele  Vice President, Chief  Financial Officer and  Secretary                |       | 156,625    |       | 14,912                |       | 17,680                                                 |       | 3⁄4                                                                                                        |       | 5,325                                 |       | 194,542   |       |
|                                                                                   |       |       |       |                  |       |                                                   |       |                                                                                                          |       |                                  |       |      |       |
| Richard D. Crawshaw(6)  Former Vice President of  Engineering                          |       | 152,964    |       | 1,371                 |       | 3⁄4                                                 |       | 3⁄4                                                                                                        |       | 5,503                                 |       | 158,838   |       |
|                                                                                        |            |            |            |                       |            |                                                        |            |                                                                                                               |            |                                       |            |           |            |  |  |  |  |  |

 

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(1)                                  Representsthe expense recognized by us for Fiscal 2007 for the stock options granted,determined pursuant to SFAS 123(R) utilizing assumptions discussed in Note 1 toour consolidated financial statements in our annual report for Fiscal 2007 (the“Annual Report”) regarding assumptions underlying valuation of equityawards.  See also our discussion ofshare-based compensation under “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Critical Accounting Policies andEstimates” in the Annual Report.

(2)                                  Theamounts shown in this column constitute the cash bonuses made to each namedexecutive officer based on the attainment of certain criteria pre-establishedby the Compensation Committee.  Theseawards are discussed in further detail under “Compensation Discussion andAnalysis” above.

(3)                                  Nocompensation was deferred in Fiscal 2007 under the Deferred CompensationSavings Plan by any named executive officer. The non-cash assets of the Deferred Compensation Savings Plan consist ofshares of our common stock.  As such, thevalue of such assets are based on the market value of our common stock andthere were no above-market or preferential earnings on the assets held underthe plan.

(4)                                  Represents401(k) plan employer contributions and automobile allowances paid by us.

(5)                                  Mr.Johnson served as our Chief Executive Officer and President and as a directoruntil March 2007.

(6)                                  Mr.Crawshaw served as our Vice President of Engineering until January 2007.

9

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**Employment Contracts; Termination of Employmentand Change of Control Arrangements**

On February 28, 2007, weentered into an offer letter agreement with Abbas Mohaddes in connection withhis promotion as our Chief Executive Officer effective as of March 2007.  The offer letter agreement provides for abase salary of $350,000 per year, a potential bonus of $150,000 for Fiscal 2008and the grant of an option to purchase 100,000 shares of our common stock (the “NewOption”).  In addition, upon approval byour stockholders of the 2007 Omnibus Incentive Plan described in ProposalThree, Mr. Mohaddes will be entitled to a stock option to purchase anadditional 200,000 shares of our common stock. Under the terms of the offer letter, in the event that his employmentwith us is terminated for any reason other than cause within three years of hispromotion to Chief Executive Officer, Mr. Mohaddes will also be entitled toreceive one year’s severance, based on his then current base salary, as well as50% of his then current on-target bonus amount. In the event of his death or disability, Mr. Mohaddes or his estate willbe entitled to one year’s acceleration on the vesting of the New Option.  If a triggering event under the severanceprovisions of his agreement had occurred on the last business day of Fiscal2007, then Mr. Mohaddes would have been entitled to a payment of approximately$425,000, based on his current base salary and on-target bonus.

On March 1, 2007, weentered into a Separation Agreement and Release of Claims with Jack Johnson inconnection with his resignation from all officer and director positions withus, although he remained employed by us until March 31, 2007 to assist with thetransition in management.  Under theterms of the agreement, we agreed to pay Mr. Johnson one year’s compensation,based on his salary as of his resignation, payable in accordance with ourregular payroll practices, together with certain healthcare benefits throughMarch 31, 2008.

We do not currently haveany employment contracts in effect with any of our named executive officersother than the agreements described above. We provide incentives such as salary, benefits and option grants toattract and retain executive officers and other key associates.  The plan administrator of the 1997 Plan hasthe authority to provide for the accelerated vesting of outstanding optionsheld by an individual, in connection with the termination of such individual’semployment following an acquisition in which these options are assumed or therepurchase rights with respect to the unvested shares are assigned or uponcertain hostile changes in control of the Company.  Other than such accelerated vesting and theagreements described above, there is no agreement or policy which would entitleany executive officer to severance payments or any other compensation as aresult of such officer’s termination.

10

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**Grants of Plan-Based Awards**

The following table sets forth certain informationwith respect to the options granted during Fiscal 2007 to our named executiveofficers, as well as bonuses that were potentially payable to such officersunder our bonus plan.  All options weregranted under our 1997 Stock Incentive Plan and are incentive stock options, tothe extent permissible under the Internal Revenue Code.  The exercise price per share of each optiongranted to our named executive officers was equal to the fair market value ofour common stock on the date of grant. Except as otherwise noted below, each option vests at the rate of 25% oneach of the first four anniversaries of the grant date.
| ** **                                                                             | ** ** | ** **          | ** ** | ** **                               | ** ** | **All Other Option ** | ** ** | ** **                  | ** ** | ** **                  | ** ** |
|----------------------------------------------------------------------------------------|------------|---------------------|------------|------------------------------------------|------------|--------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                             | ** ** | ** **          | ** ** | ** **                               | ** ** | **Awards:**                          | ** ** | **Exercise or**        | ** ** | ** **                  | ** ** |
| ** **                                                                             | ** ** | ** **          | ** ** | **Estimated Future Payouts**   | ** ** | **Number of**                   | ** ** | **Base Price of** | ** ** | **Grant Date**         | ** ** |
| ** **                                                                             | ** ** | ** **          | ** ** | **Under Non-Equity Incentive** | ** ** | **Securities**                       | ** ** | **Option**                  | ** ** | **Fair Value of** | ** ** |
| ** **                                                                             | ** ** | ** **          | ** ** | **Plan Awards (1)**            | ** ** | **Underlying**                       | ** ** | **Awards**                  | ** ** | **Option**                  | ** ** |
| **Name**                                                                               | ** ** | **Grant Date** | ** ** | **Threshold**                            | ** ** | **Target**                           | ** ** | **Maximum**                 | ** ** | **Options (#)**        | ** ** | **($/Share)** | ** ** | **Awards (2)** | ** ** |
| Abbas Mohaddes  Chief Executive Officer,  President, Assistant  Secretary and Director |       | 03/14/07  06/15/06  |       | —                                   |       | $                                    | 99,000     | (3)                         | $          | 148,500                     | (3)        | 100,000  30,000 |   | $ | 2.55  2.21 |   | $ | 201,500  53,160 |   |
|                                                                                   |       |                |       |                                     |       |                                 |       |                        |       |                        |       |   |   |   |   |
| Jack Johnson(4)  Former Chief Executive  Officer and President                         |       | —              |       | —                                   |       | 137,500                              |       | 206,250                     |       | —                      |       | — |   | — |   |
|                                                                                   |       |                |       |                                     |       |                                 |       |                        |       |                        |       |   |   |   |   |
| Gregory McKhann  Senior Vice President and  General Manager                            |       | 06/15/06            |       | —                                   |       | 86,400                               |       | 129,600                     |       | 30,000                      |       | 2.21 |   | 53,160 |   |
|                                                                                   |       |                |       |                                     |       |                                 |       |                        |       |                        |       |   |   |   |   |
| Francis Memole  Senior Vice President and  General Manager                             |       | 06/15/06            |       | —                                   |       | 86,400                               |       | 129,600                     |       | 30,000                      |       | 2.21 |   | 53,160 |   |
|                                                                                   |       |                |       |                                     |       |                                 |       |                        |       |                        |       |   |   |   |   |
| James S. Miele  Vice President, Chief  Financial Officer and  Secretary                |       | 06/15/06            |       | —                                   |       | 47,100                               |       | 70,650                      |       | 15,000                      |       | 2.21 |   | 26,580 |   |
|                                                                                   |       |                |       |                                     |       |                                 |       |                        |       |                        |       |   |   |   |   |
| Richard D. Crawshaw(5)  Former Vice President of  Engineering                          |       | —              |       | —                                   |       | 34,000                               |       | 51,000                      |       | —                      |       | — |   | — |   |
|                                                                                        |            |                     |            |                                          |            |                                      |            |                             |            |                             |            |  |  |  |  |  |  |  |  |

 

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(1)                                  Consistsof amounts that were potentially payable as cash bonuses based on theattainment of certain criteria pre-established by the CompensationCommittee.  These awards are discussed infurther detail under “Compensation Discussion and Analysis” above.  The “Target” amounts represent the maximumamounts that could have been awarded to the executives if the pre-establishedcriteria had been attained.  The “Maximum”amounts consist of the “Target” amounts plus the maximum overachievementbonuses that could have been awarded to the executives.

(2)                                  Representsthe grant date fair value of the stock options granted, determined pursuant toSFAS 123(R) utilizing assumptions discussed in Note 1 to our consolidatedfinancial statements in our Annual Report. See also our discussion of share-based compensation under “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—CriticalAccounting Policies and Estimates” in the Annual Report.  The amounts listed represent the totalshare-based compensation to be recognized by us over the vesting period.

(3)                                  Reflectsthe amounts that were potentially payable to him in his prior positions withthe Company, as our Executive Vice President and General Manager.

(4)                                  Mr.Johnson served as our Chief Executive Officer and President until March 2007.

(5)                                  Mr.Crawshaw served as our Vice President of Engineering until January 2007.

11

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**Outstanding Equity Awards atFiscal Year-End**

The following table presents the outstanding equityawards held by each of the named executive officers as of March 31, 2007.  Each option vests at the rate of 25% on eachof the first four anniversaries of the grant date.
| ** **                                                                             | ** ** | **Option Awards**                                                                 | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------|------------|
| **Name**                                                                               | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Unexercisable** | ** ** | **Equity Incentive Plan  Awards: Number of  Securities Underlying  Unexercised Unearned  Options  (#)** | ** ** | **Option  Exercise  Price  ($)** | ** ** | **Option  Expiration  Date** | ** ** |
| Abbas Mohaddes  Chief Executive Officer,  President, Assistant Secretary  and Director |       | 220,000  44,000  —  —                                                        |       | —  —30,000  100,000 |   | —  —  —  — |   | $ | 1.19  1.40  2.21  2.55 |   | 09/26/11  04/30/12  06/14/16  03/13/17 |   |
| ** **                                                                             | ** ** | ** **                                                                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Jack Johnson(1)  Former Chief Executive Officer  and President                         |       | 449,980  80,000  12,000  56,000                                                        |       | —  —  —  — |   | —  —  —  — |   | 0.53  1.19  1.40  1.40 |   | 06/28/07  06/28/07  06/28/07  06/28/07 |   |
|                                                                                   |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| Gregory McKhann  Senior Vice President and  General Manager                            |       | 12,500  333  56,248  96,000  34,000  —                                            |       | —  —  —  —  —  30,000 |   | —  —  —  —  —  — |   | 0.53  4.63  1.07  1.19  1.40  2.21 |   | 09/29/07  01/17/08  05/13/08  09/26/11  04/30/12  06/14/16 |   |
|                                                                                   |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| Francis Memole  Senior Vice President and  General Manager                             |       | 87,496  2,000  68,000  20,000  6,000  —                                           |       | —  —  —  —  18,000  30,000 |   | —  —  —  —  —  — |   | 0.53  4.63  1.19  1.40  3.21  2.21 |   | 09/29/07  01/17/08  09/26/11  04/30/12  08/28/15  06/14/16 |   |
|                                                                                   |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| James S. Miele  Vice President, Chief Financial  Officer and Secretary                 |       | 40,000  12,000  5,000  —                                                          |       | —  —  15,000  15,000 |   | —  —  —  — |   | 1.19  1.40  3.26  2.21 |   | 09/26/11  04/30/12  09/01/15  06/14/16 |   |
|                                                                                   |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| Richard D. Crawshaw(2)  Former Vice President of  Engineering                          |       | 1,667                                                                                  |       | — |   | — |   | 4.63 |   | 04/26/07 |   |
|                                                                                        |            |                                                                                        |            |  |  |  |  |  |  |  |  |  |

 

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**(1)**              Mr. Johnson served as ourChief Executive Officer and President until March 2007.

**(2)**              Mr. Crawshaw served as ourVice President of Engineering until January 2007.

12

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**Option Exercises and Stock Vested**

The following table includes certain information withrespect to the options exercised by the named executive officers during Fiscal2007.
|                                                                                       | ** ** | **Option Awards**                                              | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| **Name and Principal Position**                                        | ** ** | **Number of Shares  Acquired on  Exercise (#)** | ** ** | **Value Realized on  Exercise ($)** | ** ** |
| Abbas Mohaddes  Chief Executive Officer, President, Assistant Secretary  and Director |       | 40,000                                                              |       | $ | 94,600 |   |
|                                                                                  |       |                                                                |       |   |   |
| Jack Johnson(1)  Former Chief Executive Officer and President                         |       | —                                                              |       | — |   |
|                                                                                  |       |                                                                |       |   |   |
| Gregory McKhann  Senior Vice President and General Manager                            |       | 25,000                                                              |       | 60,875 |   |
|                                                                                  |       |                                                                |       |   |   |
| Francis Memole  Senior Vice President and General Manager                             |       | 25,000                                                              |       | 65,500 |   |
|                                                                                  |       |                                                                |       |   |   |
| James S. Miele  Vice President, Chief Financial Officer and Secretary                 |       | —                                                              |       | — |   |
|                                                                                  |       |                                                                |       |   |   |
| Richard D. Crawshaw(2)  Former Vice President of Engineering                          |       | 198,496                                                             |       | 504,080 |   |
|                                                                                       |            |                                                                     |            |  |  |  |

 

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**(1)**           Mr. Johnson served as our Chief ExecutiveOfficer and President until March 2007.

**(2)**           Mr. Crawshaw served as our Vice President ofEngineering until January 2007.

**Pension Benefits**

We do not have anyqualified or non-qualified defined benefit plans.

**Non-Qualified DeferredCompensation**

During the yearended March 31, 2003, the Iteris Subsidiary adopted the Iteris, Inc. DeferredCompensation Savings Plan (the “Deferred Compensation Plan”).  The plan was assumed by us in connection withthe merger of the Iteris Subsidiary into us in October 2004.  The Deferred Compensation Plan is anon-qualified voluntary deferral plan that, prior to 2005, permitted eligibleexecutives to defer up to a total of 50% of their regular salary and 100% oftheir bonuses in exchange for phantom stock units representing the value of ourcommon stock in any plan year, which begins on January 1 and ends on December31 of each calendar year.

Prior to themerger of the Iteris Subsidiary into us in October 2004, the plan held sharesof the Iteris Subsidiary’s common stock. In connection with the merger of the Iteris Subsidiary into us, sharesof Iteris Subsidiary common stock held by the plan were exchanged for shares ofour common stock.  No deferrals have beencredited to the Deferred Compensation Plan since January 1, 2005 (and noemployer contributions have been permitted since the Plan’s inception).

A participant’sentire account balance becomes distributable in the form of our common stockupon the earlier of the participant’s death, disability or termination ofemployment.  Distribution may be made intwo substantially equal lump sum payments, monthly installments over fiveyears, or monthly installments over ten years, as elected by the participant inhis or her benefit agreement received upon commencement of participation.  The plan also permits participants to receivepayment while employed either (i) due to hardship or (ii) for any reason if theparticipant forfeits 12 months of earnings. Because all amounts in the Deferred Compensation Plan were both earnedand vested prior to January 1, 2005, the plan is exempt from the application ofsection 409A of the Internal Revenue Code.

13

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All deferrals tothe Deferred Compensation Plan are considered part of our general assets.  As general assets, they are subject to theclaims of our creditors, and the participants are considered an unsecuredcreditor with respect to them.  We haveestablished a “rabbi trust” which holds our common stock that is used to makepayments to participants.  The purpose ofthe trust is to protect participants against a refusal to pay payments (forexample, in the event of a change in control). The trust does not, however, protect the account balance in the eventthat we become insolvent or bankrupt.

At March 31, 2007,the Deferred Compensation Plan held 310,510 shares of our common stock and$15,000 in cash.  Changes in the value ofour common stock held by the Deferred Compensation Plan are determined based onchanges in the quoted market price of our common stock at the close of eachreporting period and presented within operating expenses in the accompanyingconsolidated statements of operations.

The followingtable sets forth information with respect to the accounts of the namedexecutive officers under the  DeferredCompensation Plan.
| **Name**                                                                              | ** ** | **Executive  Contributions  in Last Fiscal  Year($)** | ** ** | **Registrant**

**Contributions  in Last Fiscal  Year ($)** | ** ** | **Aggregate  Earnings in  Last Fiscal Year  ($)(1)** | ** ** | **Aggregate  Withdrawals/  Distributions($)** | ** ** | **Aggregate  Balance at  Last Fiscal  Year End ($)** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| Abbas Mohaddes  Chief Executive Officer, President,  Assistant Secretary and Director |       | —                                                          |       | —                                                                     |       | $                                                                   | (2,477     | )                                             | $          |                                                                     |       | $ | 19,458 |   |
|                                                                                  |       |                                                            |       |                                                                       |       |                                                                |       |                                          |       |                                                                     |       |
| Jack Johnson(2)  Former Chief Executive Officer and  President                        |       | —                                                          |       | —                                                                     |       | (83,238                                                             | )          | —                                        |       | 674,685                                                                  |       |
|                                                                                  |       |                                                            |       |                                                                       |       |                                                                |       |                                          |       |                                                                     |       |
| Gregory McKhann  Senior Vice President and General  Manager                           |       | —                                                          |       | —                                                                     |       | (4,505                                                              | )          | —                                        |       | 35,383                                                                   |       |
|                                                                                  |       |                                                            |       |                                                                       |       |                                                                |       |                                          |       |                                                                     |       |
| Francis Memole  Senior Vice President and General  Manager                            |       | —                                                          |       | —                                                                     |       | —                                                              |       | —                                        |       | —                                                                   |       |
|                                                                                  |       |                                                            |       |                                                                       |       |                                                                |       |                                          |       |                                                                     |       |
| James S. Miele  Vice President, Chief Financial Officer  and Secretary                |       | —                                                          |       | —                                                                     |       | —                                                              |       | —                                        |       | —                                                                   |       |
|                                                                                  |       |                                                            |       |                                                                       |       |                                                                |       |                                          |       |                                                                     |       |
| Richard D. Crawshaw(3)  Former Vice President of Engineering                          |       | —                                                          |       | —                                                                     |       | —                                                              |       | —                                        |       | —                                                                   |       |
|                                                                                       |            |                                                                 |            |                                                                            |            |                                                                     |            |                                               |            |                                                                          |            |  |  |  |

 

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(1)           Reflects the difference between the value ofour common stock held in such officer’s Deferred Compensation Plan account asof March 31, 2007 compared to the value of such shares as of March 31, 2006.

**(2)**           Mr. Johnson served as our Chief ExecutiveOfficer and President through March 2007. In May 2007, Mr. Johnson, elected to receive a distribution of 50% ofhis Deferred Compensation Plan balance, representing 143,333 shares of ourcommon stock and $8,000 in cash, on or before June 30, 2007, and his remainingdeferred compensation plan balance of 143,333 shares of our common stock and$7,000 in cash on the one year anniversary of this election.

**(3)**           Mr. Crawshaw served as our Vice President ofEngineering until January 2007.

14

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**Director Compensation**

Directors who arenot employees of Iteris or any of its subsidiaries receive an annual fee of$12,000 per year, paid quarterly, in addition to $1,500 for each Board meetingattended in person and $250 for each telephone conference Board meeting.  All directors are reimbursed for their out-of-pocketexpenses incurred in attending meetings of our Board of Directors and itscommittees.

Non-employeedirectors were also eligible to receive periodic option grants pursuant to theAutomatic Option Grant Program under our 1997 Stock Incentive Plan.  Under this plan, each non-employee directorreceived an option to purchase 20,000 shares of common stock upon his initialappointment to the Board of Directors and an additional option to purchase5,000 shares of common stock on the date of each annual meeting after hisappointment.  The annual grants vest inequal annual installments over four years, but are immediatelyexercisable.  Each option granted tonon-employee directors under the Automatic Option Grant Program will have anexercise price equal to the fair market value of the common stock on the grantdate and will have a maximum term of ten years, subject to earlier terminationfollowing the optionee’s cessation of service as a Board member.  If the stockholders approve the 2007 OmnibusIncentive Plan, non-employee directors would continue to receive the initialand annual option grants described above.

The following table sets forth a summary of thecompensation earned or paid in Fiscal 2007 by each person who served as adirector during such year, who is not a named executive officer. 
| Name                  | ** ** | **Fees Earned or  Paid in Cash ($)(1)** | ** ** | **Option  Awards ($)(2)** | ** ** | **All Other  Compensation ($)** | ** ** | **Total ($)** | ** ** |
|-----------------------|------------|------------------------------------------------------------------|------------|--------------------------------|------------|-------------------------------------------|------------|--------------------|------------|
| Richard Char          |       | $                                                                | 18,750     |                           | $          | 1,302                                     |       | $                  | —     |   | $ | 20,052 |   |
| Kevin C. Daly,  Ph.D. |       | 18,750                                                           |       | 1,302                          |       | —                                    |       | 20,052             |       |
| Gary Hernandez        |       | 17,250                                                           |       | 1,302                          |       | —                                    |       | 18,552             |       |
| Dr. Hartmut  Marwitz  |       | 16,500                                                           |       | 1,302                          |       | —                                    |       | 17,802             |       |
| Gregory A. Miner      |       | 18,250                                                           |       | 1,302                          |       | 300,000                                   | (3)        | 319,552            |       |
| John W.  Seazholtz    |       | 20,750                                                           |       | 1,302                          |       | —                                    |       | 22,052             |       |
| Joel Slutzky          |       | 18,250                                                           |       | 1,302                          |       | —                                    |       | 19,552             |       |
| Thomas L. Thomas      |       | 19,250                                                           |       | 1,302                          |       | —                                    |       | 20,552             |       |
| Paul E. Wright        |       | 18,000                                                           |       | 1,302                          |       | —                                    |       | 19,302             |       |
|                       |            |                                                                  |            |                                |            |                                           |            |                    |            |  |  |  |  |

 

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(1)           Representsamounts earned by the directors based on the compensation arrangement fordescribed above.

(2)           Stockoptions were granted pursuant to our 1997 Stock Incentive Plan.  The amounts listed represent the expenserecognized by us for fiscal year ended March 31, 2007 for the stock optionsgranted, determined pursuant to SFAS 123(R) utilizing assumptions discussed inNote 1 to our consolidated financial statements in our Annual Report.  See also our discussion of share-basedcompensation under “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Critical Accounting Policies and Estimates” in theAnnual Report.  For the options grantedin Fiscal 2007, the total share-based compensation to be recognized over thevesting period are as follows:  RichardChar — $10,125; Kevin C. Daly, Ph.D. — $10,125; Gary Hernandez — $10,125; Dr.Hartmut Marwitz — $10,125; Gregory A. Miner — $10,125; John W. Seazholtz — $10,125;Joel Slutzky — $10,125; Thomas L. Thomas — $10,125; and Paul E. Wright — $10,125.   As of March 31, 2007, the non-employeedirectors held options for the following number of shares of common stock:  Richard Char — 25,000 shares; Kevin C. Daly,Ph.D. — 43,000 shares; Gary Hernandez — 80,000 shares; Dr. Hartmut Marwitz —50,000 shares; Gregory A. Miner — 520,000 shares; John W. Seazholtz — 59,000shares; Joel Slutzky — 200,000 shares; Thomas L. Thomas — 55,000 shares; andPaul E. Wright — 123,000 shares.

(3)           Priorto our merger with our Iteris Subsidiary in October 2004, Mr. Miner served asour Chief Executive Officer and Chief Financial Officer.  In accordance with his May 2003 change incontrol agreement, we paid to Mr. Miner severance payments totaling $300,000 duringFiscal 2007.  See “Certain Transactions”under Item 13.

15

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**Indemnification of Directors and Officers**

Under Section 145 of theDelaware General Corporation Law, we can indemnify our directors and officersagainst liabilities they may incur in such capacities, including liabilitiesunder the Securities Act of 1933, as amended (the “Securities Act”).  Our certificate of incorporation and bylawsprovide that we will indemnify our directors and officers to the fullest extentpermitted by law, and our bylaws require us to advance litigation expenses uponreceipt of an undertaking by the director or officer to repay such advances ifit is ultimately determined that the director or officer is not entitled toindemnification.  The bylaws furtherprovide that rights conferred under such bylaws do not exclude any other rightsuch persons may have or acquire under any bylaw, agreement, vote ofstockholders or disinterested directors or otherwise.

Our certificate ofincorporation provides that, pursuant to Delaware law, our directors shall notbe liable for monetary damages for breach of the directors’ fiduciary duty ofcare to us and our stockholders.  Thisprovision in the certificate of incorporation does not eliminate the duty ofcare, and in appropriate circumstances equitable remedies such as injunctive orother forms of non-monetary relief will remain available under Delawarelaw.  In addition, each director willcontinue to be subject to liability for breach of the director’s duty ofloyalty to us or our stockholders, for acts or omissions not in good faith orinvolving intentional misconduct or knowing violations of law, for actionsleading to improper personal benefit to the director, and for payment ofdividends or approval of stock repurchases or redemptions that are unlawfulunder Delaware law.  The provision alsodoes not affect a director’s responsibilities under any other law, such as thefederal securities laws or state or federal environmental laws.

We have entered intoagreements to indemnify our directors and certain of our officers in additionto the indemnification provided for in the certificate of incorporation andbylaws.  These agreements, among other things,indemnify our directors and certain of our officers for certain expenses(including attorneys’ fees), judgments, fines and settlement amounts incurredby such person in any action or proceeding, including any action by or in theright of our company, on account of services as a director or officer ofIteris, or as a director or officer of any other company or enterprise to whichthe person provides services at our request.

**Compensation CommitteeInterlocks and Insider Participation**

The members of theCompensation Committee of our Board of Directors during the fiscal year endedMarch 31, 2007 were Messrs. Daly, Seazholtz and Thomas.  None of the members of our CompensationCommittee at any time has been one of our officers or employees or an officeror employee of one of our subsidiaries at any time during the fiscal year endedMarch 31, 2007.  None of our executiveofficers currently serves, or in the year ended March 31, 2007 has served, as amember of the board of directors or compensation committee of any entity thathas one or more executive officers on our Board of Directors or CompensationCommittee.

**Compensation Committee Report**

We have reviewed anddiscussed with the management of Iteris the Compensation Discussion andAnalysis to be included in the annual report on Form 10-K for the year endedMarch 31, 2007.  Based on the reviews anddiscussions referred to above, we recommended to the Board of Directors thatthe Compensation Discussion and Analysis referred to above be included in theannual report on Form 10-K for the year ended March 31, 2007.

Submitted by the Compensation Committee

of the Board ofDirectors:

Kevin C. Daly, Ph.D.

John W. Seazholtz

Thomas L. Thomas

16

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**ITEM 12.**       SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

**EquityCompensation Plans**

The following table provides information as of March31, 2007 with respect to shares of our common stock that may be issued underexisting equity compensation plans.  Thetable does not include information with respect to shares of our common stocksubject to outstanding options granted under equity compensation plans oroption agreements that were assumed in connection with the merger of the IterisSubsidiary into us in October 2004. However, Note 1 to the table sets forth the total number of shares ofcommon stock issuable upon the exercise of those assumed options as of March31, 2007 and the weighted average exercise price of those options.  Except for the adjustments described in Note1 with respect to the outstanding assumed options, no additional options may begranted under those assumed plans. 
| **Plan Category**                                        | ** ** | **Number of Securities to  be Issued Upon Exercise  of Outstanding Options,  Warrants and Rights** | ** ** | **Weighted Average  Exercise Price of  Outstanding Options,  Warrants and Rights** | ** ** | **Number of Securities  Remaining Available For  Future Issuance under Equity  Compensation Plans  (excluding some securities  reflected in first column)** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| * *                                                      |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
| *Equity  Compensation Plans Approved by Security Holders*     |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
| 1997 Stock Incentive Plan                                     |       | 1,550,830                                                                                                                                            |       | $                                                                                                                | 2.83       |                                                                                                                                                                                                                         | 8,879      |   |
|                                                          |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
| *Equity  Compensation Plans Not Approved by Security Holders* |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
| None                                                          |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
|                                                          |       |                                                                                                                                                 |       |                                                                                                             |       |                                                                                                                                                                                                                         |       |
| Total(1)                                                      |       | 1,550,830                                                                                                                                            |       | 2.83                                                                                                             |       | 8,879                                                                                                                                                                                                                        |       |
|                                                               |            |                                                                                                                                                      |            |                                                                                                                  |            |                                                                                                                                                                                                                              |            |  |

 

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(1)    The table doesnot include information with respect to the equity compensation plan or optionagreements that were assumed by us in connection with the merger of the IterisSubsidiary into us in October 2004.  Asof March 31, 2007, a total of 4,266,770 shares of common stock were issuableupon exercise of outstanding options under the assumed plan andagreements.  No additional options may begranted under the assumed plan.  Theweighted average exercise price of all such assumed options to acquire sharesof our common stock was $1.15 per share.

17

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**Principal Stockholders and Common Stock Ownershipof Certain Beneficial Owners and Management**

The following table setsforth, as of July 1, 2007, the number and percentage ownership of our commonstock by (i) all persons known to us to beneficially own more than 5% of theoutstanding common stock, (ii) each of the named executive officers in theSummary Compensation Table which appears elsewhere herein, (iii) each of ourdirectors, and (iv) all of our executive officers and directors as agroup.  To our knowledge, except asotherwise indicated, each of the persons named in this table has sole votingand investment power with respect to the common stock shown as beneficiallyowned, subject to community property and similar laws, where applicable.
| ** **                                                           | ** ** | **Common Stock**                                                | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| **Name and Address of Beneficial Owner(1)** | ** ** | **Amount and Nature of  Beneficial  Ownership(2)(3)** | ** ** | **Percent of Class(2)** | ** ** |
|                                                                 |       |                                                                 |       |   |   |
| Austin W. Marxe  and David M. Greenhouse(4)                          |       | 4,549,658                                                            |       | 13.9 | % |
| Bryant R.  Riley(5)                                                  |       | 3,515,743                                                            |       | 10.7 |   |
| John D. Gruber,  J. Patterson McBaine and Eric Swergold(6)           |       | 2,742,837                                                            |       | 8.4 |   |
| Clint D. Coghill(7)                                                  |       | 1,670,100                                                            |       | 5.1 |   |
|                                                                 |       |                                                                 |       |   |   |
| Abbas  Mohaddes(8)                                                   |       | 1,032,873                                                            |       | 3.1 |   |
| Jack Johnson(9)                                                      |       | 872,352                                                              |       | 2.7 |   |
| Greg McKhann(10)                                                     |       | 245,913                                                              |       | * |   |
| Francis  Memole(11)                                                  |       | 176,079                                                              |       | * |   |
| James S.  Miele(12)                                                  |       | 69,068                                                               |       | * |   |
| Richard D.  Crawshaw(13)                                             |       | —                                                               |       | — |   |
|                                                                 |       |                                                                 |       |   |   |
| Richard  Char(14).                                                   |       | 25,000                                                               |       | * |   |
| Kevin C. Daly,  Ph.D.(15).                                           |       | 388,132                                                              |       | 1.2 |   |
| Gary  Hernandez(14)                                                  |       | 80,000                                                               |       | * |   |
| Dr. Hartmut  Marwitz(14)                                             |       | 50,000                                                               |       | * |   |
| Gregory A.  Miner(16)                                                |       | 947,828                                                              |       | 2.9 |   |
| John W.  Seazholtz(17)                                               |       | 107,547                                                              |       | * |   |
| Joel Slutzky(18)                                                     |       | 2,041,032                                                            |       | 6.2 |   |
| Thomas L.  Thomas(19)                                                |       | 74,000                                                               |       | * |   |
| Paul E.  Wright(20)                                                  |       | 177,794                                                              |       | * |   |
|                                                                 |       |                                                                 |       |   |   |
| All executive officers  and directors as a group (13 persons)(21)    |       | 5,415,266                                                            |       | 15.7 | % |

 

----

*              Lessthan 1%.

(1)           Theaddress for Messrs. Marxe and Greenhouse is 527 Madison Avenue, Suite 2600, NewYork, NY 10022.  The address for BryantR. Riley is 11550 Santa Monica Blvd., Suite 750, Los Angeles, CA 90025.  The address for Messrs. Gruber and McBaine is50 Osgood Place, San Francisco, CA 94133. The address for Clint D. Coghill is One North Wacker Drive, Suite 4350,Chicago, IL 60606.  The address of allother persons named in the table is 1515 South Manchester Avenue, Anaheim, CA92802.

(2)           Basedon 32,584,830 shares of common stock outstanding as of July 1, 2007.  Shares of common stock subject to options orwarrants which are exercisable within 60 days of July 1, 2007 are deemed to bebeneficially owned by the person holding such options or warrants for thepurpose of computing the percentage of ownership of such person

18

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but are not treated asoutstanding for the purpose of computing the percentage of any otherperson.  Other than as described in thepreceding sentence, shares issuable upon exercise of outstanding options andwarrants are not deemed to be outstanding for purposes of this calculation.

(3)           Inaddition to the shares held in the individual’s name, this column also includesshares held for the benefit of the named person under our 401(k) and StockOwnership Plan and the Deferred Compensation Savings Plan.

(4)           Includes246,250 shares issuable upon exercise of warrants that were issued to SpecialSituations Cayman Fund, L.P., Special Situations Fund III, L.P., SpecialSituations Fund III QP, L.P. and Special Situations Private Equity Fund, L.P.(collectively, the “Special Situations Funds”). Pursuant to a Schedule 13G filed on February 14, 2007 with the SEC,Messrs. Marxe and Greenhouse reported that they had shared voting power andshared dispositive power over the shares of common stock (including the 246,250shares issuable upon exercise of warrants) held by the Special SituationsFunds.  Messrs. Marxe and Greenhouse arethe controlling principals of AWM Investment Company, Inc. (“AWM”), the generalpartner of and investment adviser to Special Situations Cayman Fund, L.P.  AWM is the general partner of MGP AdvisersLimited Partnership, the general partner of and investment adviser to SpecialSituations Fund III, L.P. and the general partner of Special Situations FundIII QP, L.P.  In addition, Messrs. Marxeand Greenhouse are members of MG Advisers L.L.C., the general partner ofSpecial Situations Private Equity Fund, L.P. AWM serves as the investment adviser to Special Situations Fund III QP,L.P. and Special Situations Private Equity Fund, L.P.

(5)           Includes(i) 2,944,801 shares owned by Riley Investment Partners Master Fund, L.P. (“RIPMF”),(ii) 41,667 shares owned by B. Riley and Co. Inc. held in Mr. Riley’sproprietary account, (iii) 50,000 shares owned by B. Riley & Co. RetirementTrust, of which Mr. Riley serves as trustee, (iv) 88,640 shares issuable uponconversion of convertible debenture owned by custodial accounts of Mr. Riley’schildren, for which Mr. Riley controls voting and investment decisions in hisrole as custodian for such accounts, (v) 120,065 shares owned by an investmentadvisory client of Riley Investment Management LLC (“RIM”) over which RIM hasshared voting and dispositive power and (vi) 237,237 shares issuable uponexercise of warrants held by Mr. Riley, his children’s accounts, B. Riley &Co., Inc. and RIPMF that are currently exercisable.  Pursuant to a Schedule 13G filed on January25, 2007 with the SEC, Mr. Riley reported that because RIM has sole voting andinvestment power over RIPMF’s security holdings and Mr. Riley, in his role asthe sole manager of RIM, controls its voting and investment decisions, each ofRIM, RIPMF, and Mr. Riley may be deemed to have beneficial ownership of theshares held by, or issuable to, RIPMF. Mr. Riley controls RIM’s voting and investment decisions for itsinvestment advisory clients, but disclaims beneficial ownership of the 120,065shares owned by the investment advisory client of RIM.  Mr. Riley also disclaims beneficial ownershipof the shares held in his children’s accounts.

(6)           Pursuantto a Schedule 13G filed on January 29, 2007 with the SEC, Gruber & McBaineCapital Management, LLC (“GMCM”), Jon D. Gruber, J. Patterson McBaine and EricSwergold reported that they had shared voting power and shared dispositivepower over 2,233,547 shares of common stock. The table also includes 437,665 shares, 36,100 shares and 35,525 sharesover which Messrs. Gruber, McBaine and Swergold, respectively, have sole votingand dispositive power.  GMCM is aregistered investment advisor whose clients have the right to receive or thepower to direct the receipt of dividends from, or the proceeds from the sale ofthe shares.  Messrs. Gruber and McBaineare the Managers, controlling persons and portfolio managers of GMCM.  No individual client’s holdings of the sharesof our common stock are more than five percent of our outstanding shares.  Lagunitas and Firefly are investment limitedpartnerships of which GMCM is the general partner.  GMCM, Gruber, McBaine and Swergold constitutea group within the meaning of Rule 13d-5(b). Lagunitas and Firefly is not a member of any group and each disclaimsbeneficial ownership of the securities with respect to its ownership isreposited.

(7)           Pursuantto a Schedule 13G filed on February 14, 2007 with the SEC, CCM Master QualifiedFund, Ltd., Coghill Capital Management, L.L.C. and Clint D. Coghill reportedthat they had shared voting power and shared dispositive power over the sharesof common stock held by the CCM Master Qualified Fund, Ltd.  Mr. Coghill is the managing member of CoghillCapital Management, L.L.C., which serves as the investment manager of CCMMaster Qualified Fund, Ltd.  Thereporting persons disclaim beneficial ownership of the securities except to theextent of their pecuniary interest therein.

(8)           Includes(i) 13,850 shares issuable upon conversion of convertible debentures, (ii)3,167 shares issuable upon exercise of warrants that are currently exercisable,(iii) 271,500 shares issuable upon exercise of options that are currentlyexercisable or will become exercisable within 60 days after July 1, 2007 and(iv) 11,540 shares held by Mr. Mohaddes’ IRA.

19

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(9)           Includes(i) 27,700 shares issuable upon conversion of convertible debentures held byMr. Johnson’s IRA and (ii) 6,335 shares issuable upon exercise of warrants heldby Mr. Johnson’s IRA which are currently exercisable.  Mr. Johnson served as our Chief ExecutiveOfficer and President and as a director until March 2007.

(10)         Includes194,081 shares issuable upon exercise of options that are currently exercisableor will become exercisable within 60 days after July 1, 2007.

(11)         Includes(i) 13,850 shares issuable upon conversion of convertible debentures held byMr. Memole’s IRA, (ii) 3,167 shares issuable upon exercise of warrants held byMr. Memole’s IRA which are currently exercisable, and (iii) 109,500 sharesissuable upon exercise of options that are currently exercisable or will becomeexercisable within 60 days after July 1, 2007.

(12)         Includes60,750 shares issuable upon exercise of options that are currently exercisableor will become exercisable within 60 days after July 1, 2007.

(13)         Mr.Crawshaw served as our Vice President of Engineering until January 2007.

(14)         Consistsof shares issuable upon exercise of options that are currently exercisable orwill become exercisable within 60 days after July 1, 2007.

(15)         Includes(i) 100 shares held by Dr. Daly’s spouse, (ii) 329,032 shares held by a trustto which Dr. Daly serves as a trustee, and (iii) 43,000 shares issuable uponexercise of options that are currently exercisable or will become exercisablewithin 60 days after July 1, 2007.

(16)         Includes(i) 13,850 shares issuable upon conversion of convertible debentures held byMr. Miner’s IRA, (ii) 3,167 shares issuable upon exercise of warrants held by Mr.Miner’s IRA that are currently exercisable, (iii) 183,334 shares held by Mr.Miner’s IRA, (iv) 19,230 shares held by Mr. Miner’s wife’s IRA and (v) 520,000shares issuable upon exercise of options that are currently exercisable or willbecome exercisable within 60 days after July 1, 2007.

(17)         Includes59,000 shares issuable upon exercise of options that are currently exercisableor will become exercisable within 60 days after July 1, 2007.

(18)         Includes(i) 144,616 shares held by Mr. Slutzsky’s IRA and (ii) 200,000 shares issuableupon exercise of options that are currently exercisable or will becomeexercisable within 60 days after July 1, 2007. Excludes shares of common stock held in trust for the benefit of thechildren and relatives of Mr. Slutzky as well as shares in the Joel SlutzkyFamily Trust; Mr. Slutzky has no investment or voting power with respect to theshares in such trusts and disclaims any beneficial ownership.

(19)         Includes55,000 shares issuable upon exercise of options that are currently exercisableor will become exercisable within 60 days after July 1, 2007.

(20)         Includes123,000 shares issuable upon exercise of options that are currently exercisableor will become exercisable within 60 days after July 1, 2007.

(21)         Includes(i) 41,550 shares issuable upon conversion of convertible debentures, (ii)9,501 shares issuable upon exercise of warrants which are currentlyexercisable, and (iii) 1,790,831 shares issuable upon exercise of options thatare currently exercisable or will become exercisable within 60 days after July1, 2007; does not include shares held by Jack Johnson and Richard Crawshaw, whoare not currently employed by us.

20

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**ITEM13.**       CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

**Certain Transactions**

Since April 1,2006, other than the agreements and transactions described in “Item 11.  Executive Compensation — EmploymentContracts; Termination of Employment and Change of Control Arrangements” andthe transactions described below, there has not been, nor is there any proposedtransaction, where we (or any of our subsidiaries) were or will be a party inwhich the amount involved exceeded or will exceed $120,000 and in which anydirector, director nominee, executive officer, holder of more than 5% of any classof our voting securities, or any member of the immediate family of any of theforegoing persons had or will have a direct or indirect material interest.

In May 2003, weentered into change in control agreement with Gregory Miner, who was thenserving as our Chief Executive Officer and Chief Financial Officer.  In the event of an involuntary termination ofhis employment within three months prior to or twenty-four months after achange in control, the agreements provided for a severance payment to him of200% of his annual base pay plus target bonus for the current fiscal year.  In addition, Mr. Miner and his dependentswere entitled to all insurance benefits for up to twenty-four months or untilhe obtained new employment with comparable benefits, whichever wasearlier.  Upon the merger of the IterisSubsidiary into us in October 2004, Jack Johnson assumed the role of Presidentand Chief Executive Officer of Iteris, replacing Mr. Miner.  The merger and subsequent change in positiontriggered the payment of severance to Mr. Miner under the terms of hisagreement.  The severance amount was paidto Mr. Miner in bi-weekly installments over 30 months, and the final paymentwas made in April 2007.  The severanceamounts paid to Mr. Miner in Fiscal 2007 totaled $300,000.

On October 18,2006, we entered into a Joint Development Agreement (the “Joint DevelopmentAgreement”) with Transportation Planning Group, Inc. d/b/a Crain and Associatesof Southern California (“Crain”), a 20 person Southern California consultingfirm focused on providing transportation planning services for privatedevelopment projects.  Abbas Mohaddes,our current Chief Executive Officer and President, had acquired all of theoutstanding capital stock of Crain following the death of Crain’s founder andPresident, who was a close friend of Mr. Mohaddes.  Under the terms of the Joint DevelopmentAgreement, we were to provide staffing support to Crain.  Under the agreement, Crain was required toreimburse us at a rate of $8,000 per month during the first six months of theagreement and $4,000 per month for the last six months of the agreement, plusan additional $80 per hour to the extent the hours provided exceeded targethour amounts.  The agreement alsoprovided for additional consideration to be paid to us in the event Crain wassold for gross proceeds in excess of $1.0 million no later than five yearsafter the termination of the agreement. We were also granted a right of first refusal to purchase Crain.

On May 30, 2007,we entered into a Termination Agreement with Crain and Mr. Mohaddes, pursuantto which the parties agreed to terminate the Joint Development Agreement.  The termination of the Joint DevelopmentAgreement became effective upon the closing of the sale by Mr. Mohaddes of hisinterest in Crain to a third-party buyer, which occurred on May 31, 2007.  In connection with such sale, we also waivedour right of first refusal with respect to Mr. Mohaddes’ interest in Crain.

Pursuant to itswritten charter, the Audit Committee of the Board of Directors is responsiblefor reviewing and approving all related party transactions.  The Audit Committee monitors and reviewspotential conflict of interest situations involving a principal stockholder, amember of the Board of Directors or senior management..

**DirectorIndependence**

The Board ofDirectors has determined that Messrs. Char, Daly, Seazholtz, Slutzky and Thomaseach satisfies the requirements for “independence” under the listing standardsof the American Stock Exchange.

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**ITEM14.**       PRINCIPAL ACCOUNTING FEESAND SERVICES

### **Principal Accountant Fees**

The following tablepresents the aggregate fees billed for the indicated services performed byMcGladrey & Pullen, LLP for the fiscal years ended March 31, 2006 and 2007:
|                     | ** ** | **Fiscal Year Ended March 31,** | ** ** |
|---------------------|------------|-----------------------------------------------------|------------|
| ** **          | ** ** | **2006**                                            | ** ** | **2007** | ** ** |
| Audit Fees          |       | $                                                   | 309,000    |   | $ | 341,000 |   |
| Audit-Related  Fees |       | 38,000                                              |       | 48,000 |   |
| Tax Fees            |       | 37,000                                              |       | 3⁄4 |   |
| All Other Fees      |       | 3⁄4                                              |       | 3⁄4 |   |
| Total Fees          |       | $                                                   | 384,000    |   | $ | 389,000 |   |

 

***AuditFees.***  Audit feesconsist of fees billed by McGladrey & Pullen, LLP for professional servicesrendered in connection with the audit of our annual consolidated financialstatements and review of those consolidated financial statements included inour quarterly reports on Forms 10-Q and other regulatory filings.

***Audit-RelatedFees.*** Audit-related fees consist of fees billed for professional services thatare reasonably related to the performance of the audit or review of ourconsolidated financial statements but are not reported under “Audit Fees.”  Such fees include, among other things, feesfor registration statements, fees for internal control reviews and assistancewith meeting the requirements of Section 404 of the Sarbanes-Oxley Act andcertain consultations concerning financial accounting and reporting standards.

***TaxFees.***  Tax feesconsist of fees billed for professional services for tax compliance, whichinclude the preparation of federal, state and international tax returns, andfees billed for tax consultations, including federal, state and internationaltax advice, tax planning and assistance with tax audits.

***AllOther Fees.***  AllOther Fees consist of fees for products and services other than the servicesreported above.  There were no other feesbilled to us by McGladrey & Pullen, LLP during the fiscal years ended March31, 2006 and 2007.

### **Determination of Independence**

The Audit Committee ofthe Board of Directors has determined that the provision by McGladrey &Pullen, LLP of the non-audit related services described above is compatiblewith maintaining the independence of McGladrey & Pullen, LLP.

### **Audit Committee Pre-Approval Policies andProcedures**

All engagements forservices by McGladrey & Pullen, LLP or other independent registered publicaccountants are subject to prior approval by the Audit Committee; however, deminimis non-audit services may instead be approved in accordance withapplicable SEC rules.  The prior approvalof the Audit Committee was obtained for all services provided by McGladrey& Pullen, LLP in the fiscal year ended March 31, 2007.

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**PART IV**

**ITEM 15.****                      EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES**

(a)               Documentsfiled as part of this report:

1.     *FinancialStatements.*  The followingfinancial statements of Iteris, Inc. are included in a separatesection of this Annual Report on Form 10-K:
| Report of Independent  Registered Public Accounting Firm                                                                               |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Consolidated  Balance Sheets as of March 31, 2007 and 2006                                                                        |   |   |
| Consolidated  Statements of Operations for the years ended March 31, 2007, 2006 and  2005                                         |   |   |
| Consolidated  Statements of Stockholders’ Equity and Comprehensive Income for the years  ended March 31, 2007, 2006 and 2005 |   |   |
| Consolidated  Statements of Cash Flows for the years ended March 31, 2007, 2006 and  2005                                         |   |   |
| Notes  to Consolidated Financial Statements                                                                                            |   |   |

 

2.     *Financial Statement Schedules*.
| Schedule II – Valuation  and Qualifying Accounts |   |   |
|------------------------------------------------------------|--------|--------|

 

All other schedules havebeen omitted because they are not required or the required information isincluded in our consolidated financial statements and notes thereto.

3.     Exhibits.

The following exhibitsare filed herewith or incorporated by reference to the location indicatedbelow:
| Exhibit  Number | ** ** | **Description**                                                                                           | ** ** | **Where Located**                                                                                                                                                  |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                                                                | ** ** | ** **                                                                                                                                                         |
| 3.1             |       | Amended and Restated Certificate of Incorporation of  the registrant                                      | * *   | *Exhibit 3.1 to the registrant’s Current  Report on Form 8-K as filed with the SEC on October 28, 2004*                                        |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.2             |       | Bylaws of the registrant, as amended                                                                      | * *   | *Exhibit 4.2 to the registrant’s Registration  Statement on Form S-1 (Reg. No. 033-67932) as filed with the SEC on  July 6, 1993*         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.3             |       | Certificates of Amendment to Bylaws of the  registrant dated April 24, 1998 and August 10, 2001 | * *   | *Exhibit 3.4 to the registrant’s Annual  Report on Form 10-K/A for the year ended March 31, 2003 as filed  with the SEC on July 29, 2003* |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.4             |       | Certificate of Amendment to Bylaws of registrant  dated September 9, 2004                                 | * *   | *Exhibit 3.1 to the registrant’s Quarterly Report  on Form 10-Q for the quarter ended September 30, 2004 as filed with the SEC  on November 15, 2004*         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.5             |       | Certificate of Amendment to Bylaws of registrant  effective September 16, 2005                            | * *   | *Exhibit 3.5 to the registrant’s  Annual Report on Form 10-K for the year ended March 31, 2007 as filed with  the SEC on June 21, 2007*                       |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 4.1             |       | Specimen of common stock certificate                                                                      | * *   | *Exhibit 4.1 to registrant’s Registration  Statement on Form 8-A as filed with the SEC on December 8, 2004*                                         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 4.2             |       | Amended and Restated Rights Agreement, dated as of  May 10, 2004, by and between the registrant and       | * *   | *Exhibit 99.1 to the registrant’s Registration  Statement on Form 8-A/A as field with the SEC on June 18, 2004*                                               |

 

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| Exhibit  Number | ** ** | **Description**                                                                                                                     | ** ** | **Where Located**                                                                                                                                                                                           |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       | U.S. Stock Transfer Corporation, including exhibits  thereto                                                                        |       |                                                                                                                                                                                                        |
|            |       |                                                                                                                                | * *   | * *                                                                                                                                                                                                    |
| 10.1*           |       | Profit Sharing Plan and Trust                                                                                                       | * *   | *Exhibit 10.3 to the registrant’s Amendment  No. 2 to the Registration Statement on Form S-8 (Reg.  No. 002-98656) as filed with the SEC on May 5, 1988*                      |
| ** **      | ** ** | ** **                                                                                                                          | ** ** | ** **                                                                                                                                                                                                  |
| 10.2*           |       | Amendment Nos. 3 and 4 to the Profit Sharing Plan  and Trust                                                                        | * *   | *Exhibits 4.3.1 and 4.3.2, respectively, to  Amendment No. 3 to the registrant’s Registration Statement on  Form S-3 (Reg. No. 002-86220) as filed with the SEC on  June 13, 1990* |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.3*           |       | Form of Executive Deferral Plan between the  registrant and certain employees of the registrant                                | * *   | *Exhibit 10.4 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 1988*                                                                                        |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.4            |       | Form of Indemnity Agreement entered into by the  registrant and certain of its officers and directors                          | * *   | *Exhibit 19.4 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 1988*                                                                              |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.5            |       | Form of Indemnification Agreement entered into  by the registrant and certain of its officers and directors                    | * *   | *Exhibit 10.5 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2004 as filed with  the SEC on June 29, 2004*                                           |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.6*           |       | 1997 Stock Incentive Plan (as amended on May 3,  2003, as further amended on December 15, 2004)                           | * *   | *Exhibit 10.32 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*                                          |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.7*           |       | Form of Notice of Grant of Stock Option                                                                                        | * *   | *Exhibit 99.2 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.8*           |       | Form of Stock Option Agreement                                                                                                 | * *   | *Exhibit 99.3 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.9*           |       | Form of Addendum to Stock Option  Agreement—Involuntary Termination Following Corporate Transaction or Change  in Control | * *   | *Exhibit 99.4 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.10*          |       | Form of Addendum to Stock Option Agreement—Limited  Stock Appreciation Rights                                             | * *   | *Exhibit 99.5 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.11*          |       | Form of Stock Issuance Agreement                                                                                               | * *   | *Exhibit 99.6 to the registrant’s Registration  Statement on Form S-8 (File No. 333-30396) as filed with the SEC on  February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.12*          |       | Form of Addendum to Stock Issuance  Agreement—Involuntary Termination Following Corporate Transaction/Change in  Control  | * *   | *Exhibit 99.7 to the registrant’s Registration  Statement on Form S-8 (File No. 333-30396) as filed with the SEC on  February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.13*          |       | Form of Notice of Grant of Automatic Stock  Option—Initial Grant                                                          | * *   | *Exhibit 99.8 to Exhibit 99.8 to  registrant’s Registration Statement on Form S-8 (File  No. 333-30396) as filed with the SEC on February 14, 2000*                           |

 

24

----

 
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                  | ** ** | **Where Located**                                                                                                                                                        |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14*          |       | Form of Notice of Grant of Automatic Stock  Option—Annual Grant                                                                                                                                                                                                                                                        | * *   | *Exhibit 99.9 to the registrant’s Registration  Statement on Form S-8 (File No. 333-30396) as filed with the SEC on  February 14, 2000*         |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.15*          |       | Form of Automatic Stock Option Agreement.                                                                                                                                                                                                                                                                                   | * *   | *Exhibit 99.10 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 19, 2000*        |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.16           |       | Amended and Restated Agreement of Purchase and Sale  and Escrow Instructions, dated February 19, 2002, by and between  Iteris, Inc. and 1515 South Manchester, LLC                                                                                                                                                     | * *   | *Exhibit 2.1 to the registrant’s Current  Report on Form 8-K as filed with the SEC on June 12, 2002*                                                 |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.17*          |       | Change in Control Agreement dated May 8, 2003  by and between the registrant and Gregory A. Miner                                                                                                                                                                                                                           | * *   | *Exhibit 10.1 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended June 30, 2003 as filed  with the SEC on August 14, 2003* |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.18*          |       | Change in Control Agreement dated May 20, 2003  by and between the registrant and Jack E. Johnson                                                                                                                                                                                                                           | * *   | *Exhibit 10.23 to Amendment No. 1 to the  registrant’s Registration Statement on Form S-1 as filed with the SEC on  February 17, 2004*          |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.19*          |       | Iteris Inc. 1998 Stock Incentive Plan (as amended on  February 7, 2000)                                                                                                                                                                                                                                                     | * *   | *Exhibit 10.24 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*       |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.20*          |       | Form of Notice of Grant, including forms of Option  Agreement and Stock Purchase Agreement for the following directors and  executive officers: Gary Hernandez, Dr. Hartmut Marwitz, Paul E. Wright, Jack  Johnson, Richard D. Crawshaw, Gregory McKhann, Francis Memole, James S.  Miele, Abbas Mohaddes and Stephen Edwin Rowe | * *   | *Exhibit 99.2 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.21*          |       | Form of Addendum to Stock Option Agreement                                                                                                                                                                                                                                                                                       | * *   | *Exhibit 99.3 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.22*          |       | Form of 1997 Stock Option Agreements                                                                                                                                                                                                                                                                                             | * *   | *Exhibit 99.4 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.23*          |       | Iteris, Inc. Deferred Compensation Savings Plan  and Grantor Trust                                                                                                                                                                                                                                                          | * *   | *Exhibit 10.31 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*       |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.24+          |       | Cooperative Agreement for Development, Manufacture,  Marketing and Sale of Products to the Class 1 and Class 2 Vehicle  Markets Incorporating Iteris’ LDWS Technology (Valeo Schalter and Sensoren  GmbH)                                                                                                         | * *   | *Exhibit 10.1 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended June 30, 2004 as filed  with the SEC on August 16, 2004* |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.25           |       | Warrant Exercise Agreement dated September 27, 2006  by and among the registrant and Special Situations Fund III QP, L.P., Special  Situations                                                                                                                                                                                   | * *   | *Exhibit 10.1 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.*            |

 

25

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| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                          | ** ** | **Where Located**                                                                                                                                             |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       | Fund III, L.P., Special Situations Cayman Fund, L.P.  and Special Situations Private Equity Fund, L.P.                                                                                                                                                   |       |                                                                                                                                                          |
|            |       |                                                                                                                                                                                                                                                     | * *   | * *                                                                                                                                                      |
| 10.26           |       | Registration Rights Agreement dated September 28,  2006 by and among the registrant and Special Situations Fund III QP, L.P.,  Special Situations Fund III, L.P., Special Situations Cayman Fund, L.P. and  Special Situations Private Equity Fund, L.P. | * *   | *Exhibit 10.2 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.27+          |       | National Intelligent Transportation Systems (ITS)  Architecture Evolution and Support Award/Contract effective as of October 1,  2006 by and between the registrant and the Federal Highway Administration                                               | * *   | *Exhibit 10.3 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.28           |       | Loan and Security Agreement effective as of October  16, 2006 by and between the registrant and Silicon Valley Bank                                                                                                                                      | * *   | *Exhibit 10.4 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.29           |       | Intellectual Property Security Agreement dated  October 9, 2006 by and between the registrant and Silicon Valley Bank                                                                                                                                    | * *   | *Exhibit 10.5 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.30+          |       | Settlement Agreement, effective August 15, 2006, by  and between the registrant and Delta Networks, Inc.                                                                                                                                                 | * *   | *Exhibit 10.1 to the registrant’s Current Report  on Form 8-K as filed with the SEC on August 21, 2006*                                                  |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.31*          |       | Offer letter effective February 28, 2007 by and  between the registrant and Abbas Mohaddes                                                                                                                                                               | * *   | *Exhibit 10.1 to the registrant’s Current Report  on Form 8-K as filed with the SEC on March 6, 2007*                                                    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.32*          |       | Separation Agreement and Release of Claims dated  March 1, 2007 by and between the registrant and Jack Johnson                                                                                                                                           | * *   | *Exhibit 10.2 to the registrant’s Current Report  on Form 8-K as filed with the SEC on March 6, 2007*                                                    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 21              |       | Subsidiaries of the registrant                                                                                                                                                                                                                           | * *   | *Exhibit 21 to the registrant’s Annual Report  on Form 10-K for the year ended March 31, 2007 as filed with the  SEC on June 21, 2007*    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 23              |       | Consent of Independent Registered Public Accounting  Firm                                                                                                                                                                                                | * *   | *Exhibit 23 to the registrant’s Annual Report  on Form 10-K for the year ended March 31, 2007 as filed with the  SEC on June 21, 2007*    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 31.1            |       | Certification of the Chief Executive Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                             | * *   | *Filed Herewith*                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 31.2            |       | Certification of the Chief Financial Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                             | * *   | *Filed Herewith*                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 32.1            |       | Certification of the Chief Executive Officer  Pursuant to 18 U.S.C. Section 1350, as Adopted                                                                                                                                                        | * *   | *Filed Herewith*                                                                                                                                              |

 

26

----

 
| Exhibit  Number | ** ** | **Description**                                                                                                                                                   | ** ** | **Where Located** |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
|            |       | Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002                                                                                                   |       |              |
|            |       |                                                                                                                                                              | * *   | * *          |
| 32.2            |       | Certification of the Chief Financial Officer  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 | * *   | *Filed Herewith*  |

 

----

* Indicates a management contract or compensatory planor arrangement

+ Confidential treatment has been requested forcertain confidential portions of this exhibit pursuant to Rule 24b-2 ofthe Securities Exchange Act of 1934, as amended. In accordance withRule 24b-2, these confidential portions have been omitted from the exhibitand filed separately with the SEC.

27

----

**SIGNATURES**

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this Report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|        | ** ** | **ITERIS, INC.** |
|--------|------------|------------------|
|   |       | (Registrant)     |
|   |       |             |   |   |
|   |       | By               |   | /s/ ABBAS MOHADDES |   |
|   |       |             |   | Abbas Mohaddes |
|   |       |             |   | President and Chief Executive Officer |

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant in thecapacities and on the dates indicated:
| Signature               | ** ** | **Title**                                       | ** ** | **Date**      |
|-------------------------|------------|-------------------------------------------------|------------|---------------|
|                    |       |                                            |       |          |
| /s/ ABBAS  MOHADDES     |       | Director, President and Chief Executive Officer |       | July 30, 2007 |
| Abbas Mohaddes          |       | (principal executive officer)                   |       |          |
|                    |       |                                            |       |          |
| /s/ JAMES S.  MIELE     |       | Chief Financial Officer                         |       | July 30, 2007 |
| James S. Miele          |       | (principal financial and accounting officer)    |       |          |
|                    |       |                                            |       |          |
| *                       |       | Chairman of the Board                           |       | July 30, 2007 |
| Gregory A. Miner        |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Richard Char            |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Kevin C. Daly,  Ph.D.   |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Gary Hernandez          |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Hartmut Marwitz,  Ph.D. |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| John Seazholtz          |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Joel Slutzky            |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Thomas L. Thomas        |       |                                            |       |          |
|                    |       |                                            |       |          |
| *                       |       | Director                                        |       | July 30, 2007 |
| Paul E. Wright          |       |                                            |       |          |

 
| * By:  | /S/ ABBAS  MOHADDES                 |   |
|--------|-------------------------------------|--------|
|   | Abbas Mohaddes  as Attorney-in-Fact |

 

28

----

**EXHIBITINDEX**
| Exhibit  Number | ** ** | **Description**                                                                                           | ** ** | **Where Located**                                                                                                                                                  |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                                                                | ** ** | ** **                                                                                                                                                         |
| 3.1             |       | Amended and Restated Certificate of Incorporation of  the registrant                                      | * *   | *Exhibit 3.1 to the registrant’s Current  Report on Form 8-K as filed with the SEC on October 28, 2004*                                        |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.2             |       | Bylaws of the registrant, as amended                                                                      | * *   | *Exhibit 4.2 to the registrant’s Registration  Statement on Form S-1 (Reg. No. 033-67932) as filed with the SEC on  July 6, 1993*         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.3             |       | Certificates of Amendment to Bylaws of the  registrant dated April 24, 1998 and August 10, 2001 | * *   | *Exhibit 3.4 to the registrant’s Annual Report  on Form 10-K/A for the year ended March 31, 2003 as filed with the  SEC on July 29, 2003* |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.4             |       | Certificate of Amendment to Bylaws of registrant  dated September 9, 2004                                 | * *   | *Exhibit 3.1 to the registrant’s Quarterly Report  on Form 10-Q for the quarter ended September 30, 2004 as filed with the SEC  on November 15, 2004*         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 3.5             |       | Certificate of Amendment to Bylaws of registrant  effective September 16, 2005                            | * *   | *Exhibit 3.5 to the registrant’s  Annual Report on Form 10-K for the year ended March 31, 2007 as filed with  the SEC on June 21, 2007*                       |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 4.1             |       | Specimen of common stock certificate                                                                      | * *   | *Exhibit 4.1 to registrant’s Registration  Statement on Form 8-A as filed with the SEC on December 8, 2004*                                         |
|            |       |                                                                                                      |       |                                                                                                                                                               |
| 4.2             |       | Amended and Restated Rights Agreement, dated as of  May 10, 2004, by and between the registrant and       | * *   | *Exhibit 99.1 to the registrant’s Registration  Statement on Form 8-A/A as field with the SEC on June 18, 2004*                                               |

 

29

----

 
| Exhibit  Number | ** ** | **Description**                                                                                                                     | ** ** | **Where Located**                                                                                                                                                                                           |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       | U.S. Stock Transfer Corporation, including exhibits  thereto                                                                        |       |                                                                                                                                                                                                        |
|            |       |                                                                                                                                | * *   | * *                                                                                                                                                                                                    |
| 10.1*           |       | Profit Sharing Plan and Trust                                                                                                       | * *   | *Exhibit 10.3 to the registrant’s Amendment  No. 2 to the Registration Statement on Form S-8 (Reg.  No. 002-98656) as filed with the SEC on May 5, 1988*                      |
| ** **      | ** ** | ** **                                                                                                                          | ** ** | ** **                                                                                                                                                                                                  |
| 10.2*           |       | Amendment Nos. 3 and 4 to the Profit Sharing Plan  and Trust                                                                        | * *   | *Exhibits 4.3.1 and 4.3.2, respectively, to  Amendment No. 3 to the registrant’s Registration Statement on  Form S-3 (Reg. No. 002-86220) as filed with the SEC on  June 13, 1990* |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.3*           |       | Form of Executive Deferral Plan between the  registrant and certain employees of the registrant                                | * *   | *Exhibit 10.4 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 1988*                                                                                        |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.4            |       | Form of Indemnity Agreement entered into by the  registrant and certain of its officers and directors                          | * *   | *Exhibit 19.4 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 1988*                                                                              |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.5            |       | Form of Indemnification Agreement entered into  by the registrant and certain of its officers and directors                    | * *   | *Exhibit 10.5 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2004 as filed with  the SEC on June 29, 2004*                                           |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.6*           |       | 1997 Stock Incentive Plan (as amended on May 3,  2003, as further amended on December 15, 2004)                           | * *   | *Exhibit 10.32 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*                                          |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.7*           |       | Form of Notice of Grant of Stock Option                                                                                        | * *   | *Exhibit 99.2 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.8*           |       | Form of Stock Option Agreement                                                                                                 | * *   | *Exhibit 99.3 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.9*           |       | Form of Addendum to Stock Option  Agreement—Involuntary Termination Following Corporate Transaction or Change  in Control | * *   | *Exhibit 99.4 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.10*          |       | Form of Addendum to Stock Option  Agreement—Limited Stock Appreciation Rights                                             | * *   | *Exhibit 99.5 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.11*          |       | Form of Stock Issuance Agreement                                                                                               | * *   | *Exhibit 99.6 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.12*          |       | Form of Addendum to Stock Issuance  Agreement—Involuntary Termination Following Corporate Transaction/Change in  Control  | * *   | *Exhibit 99.7 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*                                            |
|            |       |                                                                                                                                |       |                                                                                                                                                                                                        |
| 10.13*          |       | Form of Notice of Grant of Automatic Stock  Option—Initial Grant                                                          | * *   | *Exhibit 99.8 to Exhibit 99.8 to  registrant’s Registration Statement on Form S-8 (File  No. 333-30396) as filed with the SEC on February 14, 2000*                           |

 

30

----

 
| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                  | ** ** | **Where Located**                                                                                                                                                        |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14*          |       | Form of Notice of Grant of Automatic Stock Option—Annual  Grant                                                                                                                                                                                                                                                        | * *   | *Exhibit 99.9 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 14, 2000*         |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.15*          |       | Form of Automatic Stock Option Agreement.                                                                                                                                                                                                                                                                                   | * *   | *Exhibit 99.10 to the registrant’s  Registration Statement on Form S-8 (File No. 333-30396) as filed  with the SEC on February 19, 2000*        |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.16           |       | Amended and Restated Agreement of Purchase and Sale  and Escrow Instructions, dated February 19, 2002, by and between  Iteris, Inc. and 1515 South Manchester, LLC                                                                                                                                                     | * *   | *Exhibit 2.1 to the registrant’s Current  Report on Form 8-K as filed with the SEC on June 12, 2002*                                                 |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.17*          |       | Change in Control Agreement dated May 8, 2003  by and between the registrant and Gregory A. Miner                                                                                                                                                                                                                           | * *   | *Exhibit 10.1 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended June 30, 2003 as filed  with the SEC on August 14, 2003* |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.18*          |       | Change in Control Agreement dated May 20, 2003  by and between the registrant and Jack E. Johnson                                                                                                                                                                                                                           | * *   | *Exhibit 10.23 to Amendment No. 1 to the  registrant’s Registration Statement on Form S-1 as filed with the SEC on  February 17, 2004*          |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.19*          |       | Iteris Inc. 1998 Stock Incentive Plan (as amended on  February 7, 2000)                                                                                                                                                                                                                                                     | * *   | *Exhibit 10.24 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*       |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.20*          |       | Form of Notice of Grant, including forms of Option  Agreement and Stock Purchase Agreement for the following directors and  executive officers: Gary Hernandez, Dr. Hartmut Marwitz, Paul E. Wright, Jack  Johnson, Richard D. Crawshaw, Gregory McKhann, Francis Memole, James S.  Miele, Abbas Mohaddes and Stephen Edwin Rowe | * *   | *Exhibit 99.2 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.21*          |       | Form of Addendum to Stock Option Agreement                                                                                                                                                                                                                                                                                       | * *   | *Exhibit 99.3 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.22*          |       | Form of 1997 Stock Option Agreements                                                                                                                                                                                                                                                                                             | * *   | *Exhibit 99.4 to the registrant’s Registration  Statement on  Form S-8 (File No. 333-126834) as filed with the SEC  on July 22, 2005*                |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.23*          |       | Iteris, Inc. Deferred Compensation Savings Plan  and Grantor Trust                                                                                                                                                                                                                                                          | * *   | *Exhibit 10.31 to the registrant’s Annual  Report on Form 10-K for the year ended March 31, 2005 as filed with  the SEC on July 14, 2005*       |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.24+          |       | Cooperative Agreement for Development, Manufacture,  Marketing and Sale of Products to the Class 1 and Class 2 Vehicle  Markets Incorporating Iteris’ LDWS Technology (Valeo Schalter and Sensoren  GmbH)                                                                                                         | * *   | *Exhibit 10.1 to the registrant’s Quarterly  Report on Form 10-Q for the quarter ended June 30, 2004 as filed  with the SEC on August 16, 2004* |
|            |       |                                                                                                                                                                                                                                                                                                                             |       |                                                                                                                                                                     |
| 10.25           |       | Warrant Exercise Agreement dated September 27, 2006  by and among the registrant and Special Situations Fund III QP, L.P., Special  Situations                                                                                                                                                                                   | * *   | *Exhibit 10.1 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.*            |

 

31

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| Exhibit  Number | ** ** | **Description**                                                                                                                                                                                                                                          | ** ** | **Where Located**                                                                                                                                             |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       | Fund III, L.P., Special Situations Cayman Fund, L.P.  and Special Situations Private Equity Fund, L.P.                                                                                                                                                   |       |                                                                                                                                                          |
|            |       |                                                                                                                                                                                                                                                     | * *   | * *                                                                                                                                                      |
| 10.26           |       | Registration Rights Agreement dated September 28,  2006 by and among the registrant and Special Situations Fund III QP, L.P.,  Special Situations Fund III, L.P., Special Situations Cayman Fund, L.P. and  Special Situations Private Equity Fund, L.P. | * *   | *Exhibit 10.2 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.27+          |       | National Intelligent Transportation Systems (ITS)  Architecture Evolution and Support Award/Contract effective as of October 1,  2006 by and between the registrant and the Federal Highway Administration                                               | * *   | *Exhibit 10.3 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.28           |       | Loan and Security Agreement effective as of October  16, 2006 by and between the registrant and Silicon Valley Bank                                                                                                                                      | * *   | *Exhibit 10.4 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.29           |       | Intellectual Property Security Agreement dated  October 9, 2006 by and between the registrant and Silicon Valley Bank                                                                                                                                    | * *   | *Exhibit 10.5 to the registrants’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2006 as filed with  the SEC on November 14, 2006.* |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.30+          |       | Settlement Agreement, effective August 15, 2006, by  and between the registrant and Delta Networks, Inc.                                                                                                                                                 | * *   | *Exhibit 10.1 to the registrant’s Current Report  on Form 8-K as filed with the SEC on August 21, 2006*                                                  |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.31*          |       | Offer letter effective February 28, 2007 by and  between the registrant and Abbas Mohaddes                                                                                                                                                               | * *   | *Exhibit 10.1 to the registrant’s Current Report  on Form 8-K as filed with the SEC on March 6, 2007*                                                    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 10.32*          |       | Separation Agreement and Release of Claims dated  March 1, 2007 by and between the registrant and Jack Johnson                                                                                                                                           | * *   | *Exhibit 10.2 to the registrant’s Current Report  on Form 8-K as filed with the SEC on March 6, 2007*                                                    |
|            |       |                                                                                                                                                                                                                                                     | * *   | * *                                                                                                                                                      |
| 21              |       | Subsidiaries of the registrant                                                                                                                                                                                                                           | * *   | *Exhibit 21 to the registrant’s Annual Report  on Form 10-K for the year ended March 31, 2007 as filed with the  SEC on June 21, 2007*    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 23              |       | Consent of Independent Registered Public Accounting  Firm                                                                                                                                                                                                | * *   | *Exhibit 23 to the registrant’s Annual Report  on Form 10-K for the year ended March 31, 2007 as filed with the  SEC on June 21, 2007*    |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 31.1            |       | Certification of the Chief Executive Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                             | * *   | *Filed Herewith*                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 31.2            |       | Certification of the Chief Financial Officer  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                             | * *   | *Filed Herewith*                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                     |       |                                                                                                                                                          |
| 32.1            |       | Certification of the Chief Executive Officer  Pursuant to 18 U.S.C. Section 1350, as Adopted                                                                                                                                                        | * *   | *Filed Herewith*                                                                                                                                              |

 

32

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| Exhibit  Number | ** ** | **Description**                                                                                                                                                   | ** ** | **Where Located** |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
|            |       | Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002                                                                                                   |       |              |
|            |       |                                                                                                                                                              | * *   | * *          |
| 32.2            |       | Certification of the Chief Financial Officer  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 | * *   | *Filed Herewith*  |

 

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* Indicates a management contract or compensatory planor arrangement

+ Confidential treatment has been requested forcertain confidential portions of this exhibit pursuant to Rule 24b-2 ofthe Securities Exchange Act of 1934, as amended. In accordance withRule 24b-2, these confidential portions have been omitted from the exhibitand filed separately with the SEC.

33

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