8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  July 2, 2019

ITERIS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	001-08762	95-2588496
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1700 Carnegie Ave., Suite 100, Santa Ana, California	92705
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:  (949) 270-9400

Not Applicable

(Former Name or Former Address, if Changed since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o  Pre-commencement communications pursuant to Rule 4d-2(b) under the Exchange Act

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value	ITI	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Explanatory Note

Iteris, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) with the Securities and Exchange Commission on July 9, 2019, announcing the closing of its acquisition of 100% of the outstanding shares of capital stock of Albeck Gerken, Inc. (“AGI’) which was completed on July 2, 2019. This Amendment to the Original Form 8-K (“Amendment No. 1”) is being filed solely for the purpose of including the required financial statements and pro forma financial information in accordance with the requirements of Item 9.01 of Form 8-K. The disclosures and exhibits included in the Original Form 8-K otherwise remain unchanged. The financial statements and information filed within this Form 8-K/A should be read in conjunction with the Original Form 8-K.

Item 9.01Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

Pursuant to paragraph (a)(4) of Item 9.01 of Form 8-K, the attached financial statements were omitted from disclosure contained in the Original 8-K. Attached hereto as Exhibit 99.2, and incorporated herein by reference, are the audited financial statements of Albeck Gerken, Inc. for the years ended December 31, 2018 and 2017.

(b) Pro Forma Financial Information.

Pursuant to paragraph (b)(2) of Item 9.01 of Form 8-K, the attached pro forma financial statements were omitted from disclosure contained in the Original 8-K. Attached hereto as Exhibit 99.3, and incorporated herein by reference, are the required unaudited pro forma condensed combined financial statements.

(d)Exhibits.  The following exhibits are being furnished herewith:

2.1+Stock Purchase Agreement, dated June 10, 2019, by and among Iteris, Inc., Albeck Gerken, Inc. and its shareholders (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 14, 2019).

10.1+Form of Retention Bonus Agreement entered into between the Company and each of the Selling Shareholders

23.1*Consent of Bland & Associates, P.C.

99.1+Press Release dated July 2, 2019, announcing closing of acquisition of Albeck Gerken, Inc.

99.2*Audited Financial Statements of Albeck Gerken, Inc. for the years ended December 31, 2018 and 2017

99.3*Unaudited Pro Forma Condensed Combined Financial Statements

Unaudited Pro Forma Condensed Combined Balance Sheet

Unaudited Pro Forma Condensed Combined Statements of Operations

* Filed herewith.

+ Previously filed/furnished with Original Form 8-K on July 9, 2019.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  September 10, 2019

ITERIS, INC.,
a Delaware corporation
By:	/s/ ANDREW SCHMIDT
	Andrew Schmidt
	Vice President of Finance & Chief Financial Officer

3

EX-23.1

Exhibit 23.1

Consent of Independent Accounting Firm

We have issued our report dated May 28, 2019 relating to the audit of the financial statements of Albeck Gerken, Inc. for the years ended December 31, 2018 and 2017, which report is included in this Current Report on Form 8-K/A of Iteris, Inc.  We hereby consent to the incorporation by reference of said report in the Registration Statements of Iteris, Inc. on Form S-3 (File No. 333-220305), and on Form S-8 (File Nos. 333-228210, 333-221790, 333-216407, 333-190309, 333-162807 and 333-146459).

/s/ Justin Frauendorfer

for Bland & Associates, P.C.

Omaha, Nebraska

September 10, 2019

EX-99.2

Exhibit 99.2

ALBECK GERKEN, INC.

FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT

YEARS ENDED DECEMBER 31, 2018 AND 2017

Contents

	Page
INDEPENDENT AUDITORS’ REPORT	1 - 2
FINANCIAL STATEMENTS
Balance Sheets	3
Statements of Income	4
Statements of Shareholders’ Equity	5
Statements of Cash Flows	6
Notes to Financial Statements	7-15
SUPPLEMENTAL INFORMATION
Schedules of General and Administrative Expenses	16

INDEPENDENT AUDITORS’ REPORT

To the Shareholders
Albeck Gerken, Inc
Tampa, Florida

Report on Financial Statements

We have audited the accompanying financial statements of Albeck Gerken, Inc. (a Nebraska Corporation) which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of income, shareholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Albeck Gerken, Inc. as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Supplementary Information

Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of general and administrative expenses are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

/s/ BLAND & ASSOCIATES, P.C.

Omaha, Nebraska

May 28, 2019

2

ALBECK GERKEN, INC.
BALANCE SHEETS

	December 31,
ASSETS	2018			2017
CURRENT ASSETS
Cash and Cash Equivalents	$	882,431		$	302,620
Investments	90,660			100,329
Accounts Receivable	890,286			1,452,586
Prepaid Expenses	120,036			146,048
Deposits	41,178			39,889
Work in Progress	8,651			13,334
Current Portion of Shareholder Notes Receivable	111,722			69,500
Total Current Assets	2,144,964			2,124,306
PROPERTY AND EQUIPMENT
Software	66,337			66,337
Leasehold Improvements	72,905			72,905
Vehicles	495,380			469,861
Furniture, Fixtures and Equipment	790,051			791,324
	1,424,673			1,400,427
Less Accumulated Depreciation	(975,049		)	(827,664		)
Total Property and Equipment	449,624			572,763
OTHER ASSETS
Shareholder Notes Receivable, Less Current Portion	471,668			278,000
	$	3,066,256		$	2,975,069

	December 31,
LIABILITIES AND SHAREHOLDERS’ EQUITY	2018			2017
CURRENT LIABILITIES
Accounts Payable	$	112,893		$	107,822
Current Portion of Shareholder Note Payable	111,722			—
Accrued Expenses	335,604			274,885
Total Current Liabilities	560,219			382,707
LONG-TERM LIABILITIES
Shareholder Note Payable, Less Current Portion	471,668			—
Stock Appreciation Rights Payable	85,642			66,436
Total Long-Term Liabilities	557,310			66,436
Total Liabilities	1,117,529			449,143
COMMITMENTS AND CONTINGENCIES	—			—
SHAREHOLDERS’ EQUITY
$1 Par Value, Authorized 10,000 Shares, Issued and Outstanding 3,788 and 3,125 Shares, Respectively	3,788			3,125
Additional Paid-In-Capital	1,406,667			524,375
Retained Earnings	538,732			1,998,426
Unrealized Holding Loss on Investments	(460		)	—
Total Shareholders’ Equity	1,948,727			2,525,926
	$	3,066,256		$	2,975,069

The accompanying notes to financial statements are
an integral part of these statements

3

ALBECK GERKEN, INC.
STATEMENTS OF INCOME

	Years Ended December 31,
	2018		2017
REVENUES	$	8,098,972	$	7,572,441
COST OF REVENUES	3,067,345		3,136,602
Gross Profit	5,031,627		4,435,839
GENERAL AND ADMINISTRATIVE EXPENSES	3,161,821		2,740,020
Operating Income	1,869,806		1,695,819
OTHER INCOME
Dividend Income	2,072		329
Interest Income	2,903		1,930
Gain on Disposal of Property and Equipment	980		2,101
Total Other Income	5,955		4,360
NET INCOME	$	1,875,761	$	1,700,179

The accompanying notes to financial statements are
an integral part of these statements

4

ALBECK GERKEN, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY

	Common Stock		Additional Paid-In-Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss) Net Unrealized Holding Loss on Marketable Securities			Total Shareholders’ Equity
BALANCES, January 1, 2017	$	2,778	$	249,722	$	1,598,247		$	—		$	1,850,747
Issuance of Common Stock	347		—		—			—			347
Shareholder Distributions	—		—		(1,300,000		)	—			(1,300,000		)
Shareholder Contributions	—		274,653		—			—			274,653
Net Income	—		—		1,700,179			—			1,700,179
BALANCES, December 31, 2017	3,125		524,375		1,998,426			—			2,525,926
Issuance of Common Stock	663		—		—			—			663
Shareholder Distributions	—		—		(3,335,455		)	—			(3,335,455		)
Shareholder Contributions	—		882,292		—			—			882,292
Net Income	—		—		1,875,761			—			1,875,761
Changes in Comprehensive Income	—		—		—			(460		)	(460		)
BALANCES, December 31, 2018	$	3,788	$	1,406,667	$	538,732		$	(460	)	$	1,948,727

The accompanying notes to financial statements are
an integral part of these statements

5

ALBECK GERKEN, INC.
STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	1,875,761		$	1,700,179
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Depreciation	158,049			176,104
Gain on Disposal of Property and Equipment	(980		)	(2,101		)
Increase in Stock Appreciation Rights Payable	19,206			1,191
Decrease (Increase) in Current Assets:
Accounts Receivable	562,300			(540,548		)
Prepaid Expenses	26,012			(146,048		)
Deposits	(1,289		)	(10,986		)
Work in Progress	4,683			112,241
Increase (Decrease) in Current Liabilities:
Accounts Payable	5,071			(89,890		)
Accrued Expenses	60,719			39,175
Net Cash Provided By Operating Activities	2,709,532			1,239,317
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Investments	(87,172		)	(100,329		)
Proceeds from Sale of Investments	96,381			—
Purchase of Property and Equipment	(33,930		)	(276,721		)
Net Cash Used In Investing Activities	(24,721		)	(377,050		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Additional Paid-In-Capital	122,974			—
Proceeds from Shareholder Notes Receivable	347,500			74,500
Loan Payments to Shareholder	(122,975		)	—
Distributions to Shareholders	(2,452,499		)	(1,300,000		)
Net Cash Used In Financing Activities	(2,105,000		)	(1,225,500		)
Net Increase (Decrease) in Cash and Cash Equivalents	579,811			(363,233		)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR	302,620			665,853
CASH AND CASH EQUIVALENTS - END OF YEAR	$	882,431		$	302,620
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Shareholder Note Receivable Issued for Common Stock	$	583,390		$	275,000
Shareholder Note Payable Issued for Common Stock	$	882,956		$	—
Settlement of Shareholder Note Payable for Common Stock	$	176,591		$	—

The accompanying notes to financial statements are
an integral part of these statements

6

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2018 and 2017

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Albeck Gerken, Inc. (the Company) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Nature of Business and Operating Cycle

The Company, a Nebraska S-Corporation, is a professional transportation engineering firm specializing in Arterial Transportation System Management, Operations (TSM&O), and Maintenance. This includes Traffic Operations Engineering, Advanced Transportation Management System (ATMS) operation and Transportation Analysis. The Company’s financial statements are presented on the accrual basis of accounting.

Revenue Recognition

The Company recognizes revenue when earned and expenses when incurred.

Use of Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from those estimates used.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

Investments

The Company has classified its investments as available for sale. These investments are reported at fair value, with unrealized gains and losses excluded from earnings and reported net of income taxes as a component of shareholders’ equity. Fair value is the price that would be received to sell an investment in an orderly transaction between market participants at the measurement date. Realized gains and losses from the sale of investments are computed using the specific identification cost method.

7

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable

Accounts receivable are carried at the original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a periodic basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. The Company considers all accounts receivable to be fully collectible, thus no allowance for doubtful accounts is necessary.

Property and Equipment

Property and equipment purchased with an original cost of $2,500 or more and an expected life of more than one year are recorded at historical cost. Additions, renewals, and betterments are capitalized, whereas expenditures for maintenance and repairs are expensed as incurred. The cost and related accumulated depreciation of assets retired or sold is removed from the appropriate asset and contra-asset accounts, with the resulting gain or loss recognized.

Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives on straight-line and accelerated methods. The estimated useful lives by type of assets are as follows:

	Years
Software	3
Leasehold Improvements	40
Vehicles	5
Furniture, Fixtures and Equipment	3-7

Stock Appreciation Rights

The Company has granted stock appreciation rights to key employees. The stock appreciation rights vest over a 6 year period and are redeemable for cash value. The stock appreciation rights are not shares of stock of the Company and do not have voting rights. The cash value of the stock appreciation rights granted depends upon the future performance and growth of the Company.

8

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company, with the consent of its shareholders, has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code, which provide that in lieu of corporation income taxes, the shareholders report the Company’s taxable income on their individual tax returns. As a result of this election, no income taxes have been recognized in these financial statements. The Company may make distributions to the shareholders to cover the income taxes on their individual income tax returns.

The Company has concluded there are no significant uncertain tax positions requiring disclosure and there are no material amounts of unrecognized tax benefits.

Compensated Absences

Employees of the Company are entitled to paid time off. This paid time off is granted in varying amounts based on length of service. The compensated absences liability balances were $63,576 and $49,584 at December 31, 2018 and 2017, respectively, and are included in accrued expenses.

Advertising

The Company expenses advertising costs as they are incurred. Advertising expense was $61,963 and $30,113 for the years ended December 31, 2018 and 2017, respectively.

Subsequent Events

Management has evaluated subsequent events through May 28, 2019, which is the date the financial statements were available to be issued.

NOTE B — CONCENTRATION OF CREDIT RISK

The Company has three types of financial instruments subject to credit risk. The Company maintains cash balances in a financial institution in which the balances sometimes exceed federally insured limits. The Company’s investments and receivables also subject the Company to credit risk.

NOTE C — INVESTMENTS

The Company’s investments at December 31, 2018 consisted of the following:

			Gross		Gross
	Cost		Unrealized Gain		Unrealized Loss			Fair Value
Mutual Funds	$	91,120	$	—	$	(460	)	$	90,660

9

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE C — INVESTMENTS (Continued)

The Company’s investments at December 31, 2017 consisted of the following:

			Gross		Gross
	Cost		Unrealized Gain		Unrealized Loss		Fair Value
Mutual Funds	$	100,329	$	—	$	—	$	100,329

The following schedule summarizes the investment return and its classification in the statements of income for the years ended December 31,:

	2018		2017
Dividend Income	$	2,072	$	329

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below.

·Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

·Level 2 - Inputs to the valuation methodology include:

·Quoted prices for similar assets or liabilities in active markets;

·Quoted prices for identical or similar assets or liabilities in inactive markets;

·Inputs other than quoted prices that are observable for the asset or liability;

·Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

·Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

10

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE C — INVESTMENTS (Continued)

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2018.

Mutual funds: Valued at the closing price reported on the active market on which the individual securities are traded.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2018.

	Level 1		Level 2		Level 3		Total
Mutual Funds	$	90,660	$	—	$	—	$	90,660

The following table sets forth by level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2017.

	Level 1		Level 2		Level 3		Total
Mutual Funds	$	100,329	$	—	$	—	$	100,329

NOTE D — SHAREHOLDER NOTES RECEIVABLE

The Company received a note receivable from a shareholder during 2012 and 2017 in exchange for common stock in the amount of $250,000 and $275,000, respectively. The notes are payable in annual installments of $24,500 and $45,000, respectively, plus the interest on the outstanding balances at a rate of 1%. The balance as of December 31, 2018 and 2017 was $0 and $347,500, respectively. These notes have been paid in full.

The Company entered into notes receivable with the shareholders in exchange for common stock in 2018. The notes are due in July of 2023 and have a balance of $583,390 as of December 31, 2018. The notes are payable in annual installments ranging from $15,326 to $47,602 and accrue interest at a rate of 2.17%.

11

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE D — SHAREHOLDER NOTES RECEIVABLE (Continued)

The aggregate maturities of the shareholder notes receivable for the years ending after December 31, 2018 are as follows:

Years Ending December 31,	Amount
2019	$	111,722
2020	114,147
2021	116,624
2022	119,154
2023	121,743
	$	583,390

NOTE E — BANK REVOLVING LINE OF CREDIT

The Company has a $500,000 revolving line of credit financing arrangement with a financial institution with interest payable monthly at the national prime rate minus 0.5% (5.5% at December 31, 2018). The revolving line of credit matures in June 2019 and is collateralized by substantially all business assets and is guaranteed by a shareholder. The balance was $0 at December 31, 2018 and 2017.

NOTE F — SHAREHOLDER NOTE PAYABLE

Long-term debt consists of the following at December 31, 2018:

Note payable to a shareholder, payable in annual installments of $124,382 including interest at a fixed rate of 2.17%, due July 2023.	$	583,390
Total Long-Term Debt	583,390
Less Current Portion of Long-Term Debt	(111,723		)
	$	471,667

The aggregate maturities of the shareholder note payable for the years ending after December 31, 2018 are as follows:

Years Ending December 31,	Amount
2019	$	111,723
2020	114,147
2021	116,624
2022	119,155
2023	121,741
	$	583,390

12

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE G — STOCK APPRECIATION RIGHTS

As of December 31, 2018 and 2017, the Company has a total of 4,050 and 8,100 of stock appreciation rights to key employees, respectively, using a weighted base value share price of $29.30 and $27.98 per unit, respectively, subject to the below vesting schedule. As of December 31, 2018 and 2017, the stock appreciation rights have a net value of $85,642 and $66,436, respectively. Share-based liabilities paid out were $96,381 and $0 for the years ended December 31, 2018 and 2017, respectively.

Vesting

If employment terminates within two years after acquiring the units of stock appreciation rights, the employee is 0% vested in such units and there shall be no amount paid.

If employment terminates more than two years but less than four years after acquiring the units of stock appreciation rights, the employee is 40% vested in such units and the amount to be paid shall be reduced by 60%.

If employment terminates more than four years but less than six years after acquiring the units of stock appreciation rights, the employee is 75% vested in such units and the amount to be paid shall be reduced by 25%.

An employee is considered fully vested after six years of acquiring the units.

A summary of the activity under the liability incentive plan and changes during the years ended December 31, is presented as follows:

	2018			2017
Units Outstanding at January 1,	8,100			7,950
Units Granted	250			650
Units Forfeited	(4,300		)	(500		)
Units Outstanding at December 31,	4,050			8,100
Units Vested at December 31,	2,208			2,500
Value per Plan Unit at December 31,	$	21.15		$	8.20

As required by the FASB ASC 718, Stock Compensation, the Company is required to determine the fair value of the options and recognize compensation expense recorded over the vesting period if the fair value of the options is in excess of the exercise price. The compensation expense was $115,587 and $1,191 for the years ended December 31, 2018 and 2017, respectively.

13

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE H — RETIREMENT PLAN

The Company sponsors a 401(k) profit sharing plan which covers substantially all employees upon meeting certain eligibility requirements. The Company’s contribution is based on matching 100% of the first 5% of salary deferral elected by each eligible employee. Additional contributions may be made at the discretion of the Company. Contributions to the plan were $146,285 and $126,130 for the years ended December 31, 2018 and 2017, respectively.

NOTE I — OPERATING LEASES

The Company leases office spaces under several operating leases through November 2024. The monthly payments for the leases vary. Rent expense for these facilities was $236,631 and $143,774 for the years ended December 31, 2018 and 2017, respectively.

Future minimum payments on leases with initial or remaining terms of one year or more consisted of the following at December 31, 2018:

Years Ending December 31,	Amount
2019	$	197,651
2020	177,146
2021	199,501
2022	205,486
2023	211,651
Thereafter	197,021
	$	1,188,456

NOTE J — RELATED PARTY TRANSACTIONS

The Company leases a residential property from a related party, Gerken Albeck Company, LLC, a single member limited liability company owned by a shareholder of the Company. Rent paid to Gerken Albeck Company, LLC was $3,000 and $12,000 for the years ended December 31, 2018 and 2017, respectively. This lease arrangement was terminated in March 2018.

NOTE K — ECONOMIC DEPENDENCY

The following are the Company’s major vendors that exceed 10% of purchases and/or exceed 10% of accounts payable at December 31,:

	Percentage				Percentage
	of Purchases				of Accounts Payable
	2018		2017		2018		2017
Vendor A	—	%	10	%	—	%	39	%

14

ALBECK GERKEN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2018 and 2017

NOTE K — ECONOMIC DEPENDENCY (Continued)

The following are the Company’s major customers that exceed 10% of revenues and/or exceed 10% of accounts receivable at December 31,:

	Percentage of Revenues				Percentage of Accounts Receivable
	2018		2017		2018		2017
Customer A	28	%	27	%	14	%	9	%
Customer B	—	%	14	%	—	%	13	%
Customer C	—	%	11	%	—	%	10	%

NOTE L — INCOME TAXES

The Tax Cuts and Jobs Act of 2017 was signed in law on December 22, 2017. The law includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expenses and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The Company does not expect the legislation to have a financial impact on the Company because, as a S-Corporation, it is not subject to federal income tax and the tax effect of its activities accrues to the shareholders.

Management has not taken any positions nor foresees any changes within the next 12 months for which it would be reasonably possible that the total amounts of unrecognized tax benefits will materially increase or decrease. Tax years that remain subject to examination by major tax jurisdictions are fiscal years 2015, 2016, 2017, and 2018.

15

SUPPLEMENTAL INFORMATION

ALBECK GERKEN, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES

	Years Ended December 31,
	2018		2017
Salaries and Wages	$	1,282,611	$	1,167,543
Insurance	401,155		334,173
Rent	236,631		143,774
Payroll Taxes	211,225		192,881
Contract Services	165,066		169,286
Depreciation	158,049		176,104
Pension	146,285		126,130
Stock Appreciation Rights Compensation	115,587		1,191
Professional Fees	87,384		56,185
Advertising	61,963		30,113
Office	49,862		61,107
Software	49,637		53,782
Professional Development	43,691		33,631
Travel and Entertainment	42,573		25,371
Telephone	34,789		33,272
Vehicle	32,395		34,624
Utilities	13,899		13,226
Other Taxes	13,115		5,471
Property Taxes	4,656		4,019
Repairs and Maintenance	2,343		11,649
Miscellaneous	2,342		197
Licenses and Permits	1,940		5,672
Recruitment & Relocation	1,899		55,543
Dues and Subscriptions	1,187		906
Bank Charges	937		3,070
Donations and Gifts	600		1,100
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES	$	3,161,821	$	2,740,020

16

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On July 2, 2019, Iteris, Inc (“Iteris” or the “Company”) completed the acquisition of all outstanding shares of Albeck Gerken, Inc. (“AGI”), a professional transportation engineering firm with offices in Tampa (FL), Orlando (FL), Virginia Beach (VA) and Chester Pike (PA), pursuant to a Stock Purchases Agreement, dated June 10, 2019 (the “Stock Purchase Agreement”), entered into by and among the Company, AGI and the shareholders of AGI (collectively, the “Selling Shareholders”).

The purchase price of $10,720,000 was delivered to the Selling Shareholders through the payment of an aggregate of $6,185,000 in cash (adjusted for working capital at closing) and the issuance of 868,774 shares of Iteris Common Stock, a portion of which was deposited in escrow for the 18 months of secure performance of the indemnification and other post-closing obligations of the Selling Shareholders under the Stock Purchase Agreement. In addition, the Company agreed to grant $1,744,200 in retention bonuses to the Selling Shareholders payable in the form of restricted stock at $5.22 per share, and $570,000 in retention bonuses to other employees payable in cash, each vesting over three years following the closing.

The unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2019 gives effect to Iteris’ acquisition of AGI as if it had occurred on April 1, 2018, combines the historical results of Iteris for its year ended March 31, 2019 and the historical results of AGI for its twelve months ended March 31, 2019, and reflects pro forma adjustments that are expected to have a continuing impact of the combined results.

The historical results of Iteris were derived from its audited consolidated statements of operations included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2019. The historical results of AGI were derived from its audited statements of income included in its financial statements for the year ended December 31, 2018, as well as its unaudited interim period statement of income for the three months ended March 31, 2019, which was used to develop a fiscal period that aligns with that of Iteris.

The unaudited pro forma condensed combined balance sheet data at March 31, 2019 gives effect to Iteris’ acquisition of AGI as if it occurred on such date and combines the historical balance sheets of Iteris and AGI as of March 31, 2019. The historical Iteris balance sheet information was derived from its audited consolidated balance sheets included in its Annual Report on Form 10-K for the year ended March 31, 2019. The historical AGI balance sheet information was derived from its unaudited balance sheet as of March 31, 2019.

The historical consolidated financial information has been adjusted to give effect to pro forma events that are: (i) directly attributable to the transaction, (ii) factually supportable and with (iii) with respect to the statement of operations expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial statements have been prepared by Iteris’ management for illustrative purpose only and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Iteris and AGI been a combined company during the periods presented. The pro forma adjustments are based on the preliminary assumptions and information available at the time of the preparation of this Form 8-K/A, and as such assumptions are subject to change.

The unaudited pro forma condensed combined statements of operations exclude certain non-recurring charges that have been or will be incurred in connection with the acquisition of AGI, including investment banker and professional fees of Iteris and AGI. These expense total approximately $500,000 and exclude fees and expenses of the underwriters.

The unaudited pro forma condensed combined financial statements do not reflect any cost savings operating synergies or revenue enhancements that we may achieve as a result of the acquisition of AGI or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

The unaudited pro forma data should be read in conjunction with the information contained in “Capitalization,” “Selected Historical Consolidated Financial Data of the Company,” “Selected Historical Financial Data of AGI”, and “Financial Statements of Albeck Gerken, Inc.” included in this filing and the historical consolidated financial statements of Iteris and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and incorporated by reference herein.

Iteris, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2019

(In thousands)

	As Reported			AGI
	Iteris, Inc.			March 31,					Combined
	March 31,			2019		Pro forma			Pro forma
	2019			(Adjusted)		Adjustments			March 31,
	(Note 3)			(Note 4)		(Note 5)			2019
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	9,006		$	1,024	$	(6,685	)	$	3,345
Trade accounts receivable	16,929			1,094		—			18,023
Unbilled accounts receivable	6,487			52		—			6,539
Inventories	2,916			—		—			2,916
Prepaid expenses and other current assets	1,367			—		—			1,367
Total current assets	36,705			2,170		(6,685		)	32,190
Property and equipment, net	1,965			412		—			2,377
Intangible assets, net	3,286			—		3,710			6,996
Goodwill	15,150			—		4,813			19,963
Other assets	849			41		—			890
Total assets	$	57,955		$	2,623	$	1,838		$	62,416
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	9,441		$	171	$	—		$	9,612
Accrued payroll and related expenses	6,536			255		—			6,791
Accrued liabilities	2,370			—		—			2,370
Deferred revenue	4,883			—		—			4,883
Total current liabilities	23,230			426		—			23,656
Deferred rent	455			—		—			455
Deferred income taxes	65			—		—			65
Unrecognized tax benefits	150			—		—			150
Total liabilities	23,900			426		—			24,326
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—		—			—
Common stock	3,338			4		82			3,424
Additional paid-in capital	142,260			1,407		3,042			146,709
(Accumulated deficit) retained earnings	(111,543		)	786		(1,286		)	(112,043		)
Total stockholders’ equity	34,055			2,197		1,838			38,090
Total liabilities and stockholders’ equity	$	57,955		$	2,623	$	1,838		$	62,416

Iteris, Inc.

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year Ended March 31, 2019

(In thousands, except per share amounts)

	As Reported			AGI Inc.
	Iteris Inc.			Twelve Months						Combined
	Year Ended			Ended			Pro forma			Pro forma
	March 31, 2019			March 31, 2019			Adjustments			Year Ended
	(Note 3)			(Note 4)			(Note 5)			March 31, 2019
Total revenues	$	99,123		$	7,926		$	—		$	107,049
Cost of revenues	60,517			3,003			—			63,520
Gross profit	38,606			4,923			—			43,529
Operating expenses	46,565			3,160			1,408			51,133
Operating (loss) income	(7,959		)	1,763			(1,408		)	(7,604		)
Non-operating income	179			6			—			185
(Loss) income from operations before income taxes	(7,780		)	1,769			(1,408		)	(7,419		)
Provision for income taxes	(36		)	(8		)	7			(37		)
Net (loss) income	$	(7,816	)	$	1,761		$	(1,401	)	$	(7,456	)
Net loss per share - basic and diluted	$	(0.23	)							$	(0.20	)
Shares used in basic per share calculations	33,266									38,160
Shares used in diluted per share calculations	33,266									38,160

Iteris, Inc.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(amounts in tables in thousands)

1. Basis of Presentation

The unaudited pro forma condensed combined balance sheet was prepared using the historical balance sheets of Iteris and AGI as of March 31, 2019. The unaudited pro forma condensed combined statement of operations was prepared using the historical statement of operations of Iteris for the year ended March 31, 2019, the historical statement of income of AGI for the year ended December 31, 2018 and the historical interim statement of income of AGI for the three months ended March 31, 2019. Refer to Note 4 for details.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and should not be considered indicative of the actual financial position or results that would have been achieved had the acquisition been consummated on the dates indicated and do not purport to indicate balance sheet data or results of operations as of any future date or any future period. Based on the terms of the Purchase Agreement, Iteris is treated as the acquirer of AGI. In applying the acquisition method of accounting for the transaction, the tangible and intangible assets acquired and the liabilities assumed will be recognized at their respective fair values at the time the transaction is consummated. The excess of the estimated purchase cost over the historical basis of the net assets to be acquired has been allocated in the accompanying unaudited pro forma condensed combined financial information based upon preliminary appraisal estimates and certain assumptions that management believes are reasonable. The actual allocation is subject to finalization of the appraisal and the determination of any working capital adjustment, and the actual allocation of the purchase cost and the resulting effect on income from operations may differ significantly from the pro forma amounts included herein. The estimated adjustments are described in the accompanying footnotes.

2. Preliminary Purchase Price Allocation

The purchase price for the Acquisition is approximately $10.7 million, of which approximately $6.2 million in cash and $4.5 million in Iteris common stock is payable at closing and is subject to working capital and other adjustments. In addition to the purchase price, approximately $2.3 million, $570,000 in cash and $1.7 million in Iteris common stock, is payable upon certain retention milestones. The purchase price of $10.7 million has been allocated to the assets acquired and the liabilities assumed as follows:

(In thousands)
Cash, cash equivalents and short-term investments	$	664
Trade accounts receivable	869
Unbilled accounts receivable	418
Prepaid expenses and other current assets	14
Property and equipment, net	285
Intangibles	3,710
Goodwill	5,565
Other assets	43
Total Assets Acquired	11,568
Accounts payable and accruals	(848		)
Total Liabilities Assumed	(848		)
Total Purchase Price	$	10,720

We have allocated $3.7 million to intangible assets, and assigned an weighted-average estimated economic life of 5.8 years. The determination of the preliminary fair value was primarily based upon historical intangible asset valuations in comparison to the purchase price for prior acquisitions. This value will be adjusted upon completion of the valuation analysis. The determination of useful life was also based upon historical experience. The estimated annual amortization expense for these acquired intangible assets is approximately $648,000, using straight-line amortization, and has been included in the unaudited pro forma condensed combined statements of operations for the year ended March 31, 2019.

3. Iteris Historical Financials

For presentation purposes, certain historical balance sheet and statement of operations line items have been combined. Below is a summary of the historical line items that have been combined.

	As of March 31, 2019
Balance Sheet	(in thousands)
Cash and cash equivalents	7,071
Short-term investments	1,935
Total cash, cash equivalents and short-term investments	9,006
	Year Ended
	March 31, 2019
Statement of Operations	(in thousands)
Product revenues	$	48,227
Service revenues	50,896
Total revenues	$	99,123
Cost of product revenues	$	28,434
Cost of service revenues	32,083
Total cost of revenues	$	60,517
Operating expenses:
Selling, general and administrative	$	38,471
Research and development	7,819
Amortization of intangible assets	275
Total operating expenses	$	46,565
Non-operating income:
Other income, net	$	50
Interest income, net	129
Total Non-operating income	$	179

4. AGI Historical Financials

As a wholly owned subsidiary of Iteris, AGI adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) as of the Acquisition date. It is not expected that the adoption of ASU 2014-09 will have a material effect on AGI’s financial statements, however, this conclusion is preliminary and is subject to change

In connection with the Acquisition, and pursuant to the terms and conditions of the Stock Purchase Agreement, certain assets and liabilities were not transferred upon consummation of the Acquisition. The following table reconciles the historical balance sheet of Albeck Gerken Inc. as of March 31, 2019 to the expected closing balance sheet (prior to pro forma adjustments) used for pro forma purposes.

	Unaudited					AGI Inc.
	AGI Inc.					March 31,
	March 31,					2019
	2019		Adjustments			(Adjusted)
			(In thousands)
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	1,109	$	(85	)	$	1,024
Trade accounts receivable	1,094		—			1,094
Unbilled accounts receivable	52		—			52
Prepaid expenses and other current assets	112		(112		)	—
Total current assets	2,367		(197		)	2,170
Property and equipment, net	412		—			412
Other assets	513		(472		)	41
Total assets	$	3,292	$	(669	)	$	2,623
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	171	$	—		$	171
Accrued payroll and related expenses	255		—			255
Accrued liabilities	112		(112		)	—
Total current liabilities	538		(112		)	426
Other non-current liabilities	557		(557		)	—
Total liabilities	1,095		(669		)	426
Stockholders’ equity:
Common stock	4		—			4
Additional paid-in capital	1,407		—			1,407
Retained earnings	786		—			786
Total stockholders’ equity	2,197		—			2,197
Total liabilities and stockholders’ equity	$	3,292	$	(669	)	$	2,623

                The historical statement of operations of AGI for the twelve months ended March 31, 2019 was derived from AGI’s audited financial statements for the year ended December 31, 2018, adjusted by excluding activity from the three months ended March 31, 2018, and including unaudited interim period activity from the three months ended March 31, 2019. The following table reconciles the audited statement of income of AGI for the year ended December 31, 2018, to the historical statement of operations of AGI for the twelve months ended March 31, 2019 used for pro forma purposes.

				Adjustments
	Year ended			Three months ended						Twelve months ended
	December 31,			March 31,			March 31,			March 31,
	2018			2018			2019			2019
Total revenues	$	8,099		$	(2,329	)	$	2,156		$	7,926
Cost of revenues	3,067			(852		)	788			3,003
Gross profit	5,032			(1,477		)	1,368			4,923
Operating expenses	3,162			(723		)	721			3,160
Operating income	1,870			(754		)	647			1,763
Non-operating income	6			—			—			6
Income from operations before income taxes	1,876			(754		)	647			1,769
Provision for income taxes	(9		)	4			(3		)	(8		)
Net income	$	1,867		$	(750	)	$	644		$	1,761

AGI total revenues for the twelve months ended March 31, 2019 includes approximately $7.9 million in service revenues and no product revenues.

For presentation purposes, certain historical statement of income line items have been combined. Below is a summary of the historical line items that have been combined.

Non-operating income:
Dividend income	$	2
Interest income	3
Gain on disposal of property and equipment	1
Total Non-operating income	$	6

5. Pro Forma Adjustments

The pro forma adjustments give effect to the proposed AGI Acquisition under the purchase method of accounting and expenses relating to these transactions. The table below summarizes the gross pro forma adjustments by line item and references the notes that provide further detail on each adjustment.

		March 31, 2019			Footnote
Balance sheet line item	Reason for pro forma adjustment	(In thousands)			Reference
Assets
Cash, cash equvalents and short-term investments	Cash used for Acquisition	$	(6,185	)	2
	Transaction costs	(500		)	7
	Subtotal cash, cash equivalents and short-term investments	(6,685		)
Intangible assets, net	Purchase price allocation	3,710			2
Goodwill	Purchase price allocation	4,813			2
Total assets		$	1,838
Liabilities and stockholders’ equity
Common stock	Issuance of common stock related to Acquisition	86			2
	Remove historical balances	(4		)	6
	Subtotal common stock	82
Additional paid-in capital	Issuance of common stock related to Acquisition	4,449			2
	Remove historical balances	(1,407		)	6
	Subtotal additional paid-in capital	3,042
Accumulated deficit	Transaction costs	(500		)	7
	Remove historical balances	(786		)	6
	Subtotal accumulated deficit	(1,286		)
Total liabilities and stockholders’ equity		$	1,838

		Year Ended
		March 31, 2019		Footnote
Statement of operations line item	Reason for pro forma adjustment	(In thousands)		Reference
Operating Expenses	Acquisition related retention expense	$	760	2
	Intagible asset amortization expense	648		2
	Subtotal operating expenses	1,408
Provision for income taxes	Estimated tax	$	7	8

6. Elimination of Historical Balances

These adjustments reflect the elimination of AGI’s equity as of March 31, 2019, for the purpose of presenting a pro forma balance sheet assuming the proposed AGI Acquisition had occurred on March 31, 2019.

7. Non-recurring Acquisition Expenses

We expect to incur additional transaction costs, including financial and legal advisory fees of approximately $500,000 through the closing of the proposed AGI Acquisition. The total of these costs has been recorded as a reduction to retained earnings on the unaudited pro forma condensed combined balance sheet. These costs are excluded from the unaudited pro forma condensed combined statements of operations as they are considered non-recurring.

8. Taxes

For purposes of these unaudited pro forma condensed combined financial statements, we used an effective rate of 0.5%. This rate is an estimate and does not take into account any possible future tax events that may occur for the combined company. The actual rate may be different.