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Mail Stop 0407
February 4, 2005
Via U.S. Mail and Fax
Gregory A. Miner, CEO and CFO
Iteris Holdings, Inc.
1515 South Manchester Avenue
Anaheim, CA 92802
RE: Iteris Holdings, Inc.
Registration Statement on Form S-3
Filed January 10, 2005
File No. 333-121942
Form 8-K filed October 12, 2004
File No. 0-10605
Dear Mr. Miner:
We have limited our review to your November 12, 2004 response
to
our comment letter of October 28, 2004, regarding the Form 8-K
filed
on October 12, 2004. If you disagree, we will consider your
explanation as to why our comments are inapplicable or a future
revision is unnecessary. Please be as detailed as necessary in
your
explanation. We may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments. We welcome any questions you may have about our comment
or
on any other aspect of our review. Feel free to call us at the
telephone numbers listed at the end of this letter.
1. We note from your supplemental materials that Ernst & Young
identified numerous significant deficiencies in the design or
operation of the company`s internal control that, in its judgment,
could "adversely affect" your ability to initiate, record,
process,
and report financial data consistent with the assertions of
management in the consolidated financial statements. We also note
from your response letter dated November 12, 2004, that, despite
these significant deficiencies, Iteris does not believe that they
represent a material weakness and continues to believe that its
disclosure controls and procedures were effective as of September
30,
2004. In light of the numerous significant deficiencies
identified
by Ernst & Young in the June 8, 2004 Management Letter, it is
unclear
why the company believes its disclosure controls and procedures
are
effective as of September 30, 2004. In particular, we note the
following deficiencies in your response letter and in Ernst &
Young`s
2004 Management Letter:
* the excessive length of time required to close your books;
* the lack of communication of important transactions that
occurred
during the period giving rise to matters being identified at or
near
the filing of your Form 10-K;
* the lack of detailed listing of required reconciliations and
account analysis required to close the books;
* delays in the closing of the books and completing account
reconciliations and analysis in a timely manner and the continuous
recording of adjusting entries and accruals through the date of
the
filing of the Form 10-K, resulting in a need to "audit a moving
target;"
* the heavy involvement of the professional service providers in
the
closing process and filing of the Form 10-K; and
* the significant rework of account reconciliations and analysis.
Accordingly, tell us in detail why you still believe that your
disclosure controls and procedures are effective and the basis for
your belief that the significant deficiencies, either individually
or
in the aggregate, do not rise to the level of a material weakness.
To the extent you now believe that the disclosure controls and
procedures are not effective, revise your periodic reports as
appropriate.
2. Please advise us of the basis for management`s conclusion that
as
of September 30, 2004 there were no changes in the company`s
internal
control over financial reporting that have materially affected, or
which are reasonably likely to materially affect, the company`s
internal control over financial reporting. While we recognize
that
Ernst & Young identified various significant deficiencies in its
report to management for the year ended March 31, 2004, and that
your
company did not receive the Ernst & Young report until late
September
2004, we also note your discussion, in your response to our prior
comment 5, of what appear to be various changes in your internal
control over financial reporting which have recently been
implemented.
3. Please provide a list of adjusting journal entries made prior
to
filing the Form 10-K for the year ended March 31, 2004, as
referenced
on page 1 of Ernst & Young`s 2004 Management Letter.
4. Refer to page 9 of Ernst & Young`s 2004 Management Letter.
Tell
us in more detail about the stock options and warrants that were
"not
identified and accounted for correctly." Your response should
address the following:
* the number of options issued and the related grant price and
fair
market value at the date of issuance;
* whether these options were issued to your employees or non-
employees and how you accounted for the issuance;
* provide the journal entries to record the issuance of such
options
and warrants; and
* provide more details of the transactions related to the issuance
of
warrants and how you accounted for those transactions.
* * * *
Please respond to this comment within 10 business days or tell
us
when you will provide us with a response. Please furnish a letter
that keys your response to our comment and provides any requested
supplemental information. Please file your response letter on
EDGAR.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures that
they have made.
Notwithstanding our comments, in the event the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they may relate to the proposed public
offering of the securities specified in the above registration
statement. We will act on the request and, pursuant to delegated
authority, grant acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact O. Nicole Holden, Staff Accountant, at (202)
824-
5265 or Kyle Moffatt, Accountant Branch Chief, at (202) 942-1990
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Derek Swanson, Staff Attorney, at
(202) 824-5526, or me at (202) 942-1797 with any other questions.
Sincerely,
Michele M. Anderson
Legal Branch Chief
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Gregory A. Miner
Iteris, Inc.
February 4, 2005
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