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Commitments and Contingencies
9 Months Ended
Dec. 31, 2015
Commitments and Contingencies:  
Commitments and Contingencies

 

7.Commitments and Contingencies

 

Litigation and Other Contingencies

 

As a provider of traffic engineering services, hardware products, software and other various solutions for the traffic and agricultural industries, the Company has in the past been, and may in the future be from time to time, involved in litigation relating to claims arising out of our operations in the normal course of business. While the Company cannot accurately predict the outcome of any such litigation, except as described below, material proceeding, including whether the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial position or cash flows.

 

November 30, 2015, the City of Detroit, Michigan (the “City”) filed a lawsuit against the Company in the United States Bankruptcy Court for the Eastern District of Michigan alleging that the Company received a payment in the amount of approximately $124,000 from the City during the 90-day period prior to the City’s bankruptcy filing in 2013. At this time, it is too early to predict the outcome of this matter or the resulting financial impact to us, if any. However, we dispute the allegations of wrongdoing, as we believe the alleged payment was made to us in the normal course of business, and we intend to vigorously defend ourselves in this matter.

 

Related Party Transaction

 

We previously subleased office space to Maxxess Systems, Inc. (“Maxxess”), one of our former subsidiaries that we sold in September 2003. Maxxess is currently owned by an investor group that includes one current Iteris director, who is the Chief Executive Officer of Maxxess, and one former Iteris director.   The sublease terminated in September 2007, at which time Maxxess owed us an aggregate of $274,000.  Maxxess executed a promissory note for such amount, which was subsequently amended and restated on July 23, 2013.

 

The amended and restated note bears interest at a rate of 6% per annum, compounded annually, with accrued interest to be paid quarterly on the first business day of each calendar quarter. Payments under the amended and restated note may only be paid in cash and all amounts outstanding will become due and payable on the earliest of (i) August 10, 2016, (ii) a change of control in Maxxess, or (iii) a financing by Maxxess resulting in gross proceeds of at least $10 million. As of December 31, 2015, approximately $219,000 of the original principal balance was outstanding and payable to Iteris. We have previously fully reserved for amounts owed to us by Maxxess and the outstanding principal balance remains fully reserved.

 

On June 30, 2015, the Company entered into an agreement with Maxxess to provide professional services for the Company’s Performance Analytics segment, in support of its ClearAg software development initiative. The professional services commenced in July 2015 and continued through December 31, 2015. The total effort under this agreement was limited to 200 hours, billed on a time and materials basis, not to exceed $40,000. During the three and nine month periods ended December 31, 2015, approximately $33,000 and $40,000 of professional services were rendered to the Company.