UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-K





(Mark
      One)


x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of
      1934


For
      the
      fiscal year ended September 30, 2007 or


 ̈ 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 0-6508





**IEC
      ELECTRONICS CORP.**


(Exact
      name of registrant as specified in its charter)





Delaware
            13-3458955(State
                or other jurisdiction ofincorporation
                or organization)
            (IRS
                Employer ID No.)





105
      Norton Street, Newark, New York 14513


(Address
      of principal executive offices, including zip code)





Registrant's
      telephone number, including area code: 315-331-7742




Securities
      registered pursuant to Section 12(b) of the Act: None





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





Common
      Stock, $.01 par value


(Title
      of
      Class)





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





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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days.    Yes x No  ̈





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K  ̈ .





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





 ̈ Large
      accelerated filer  ̈ Accelerated filer x Non-accelerated filer




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No x




At
      March
      31, 2007, the last business day of the registrant’s most recently completed
      second fiscal quarter, the aggregate market value of the shares of common stock
      held by non-affiliates for the registrant was $10,630,985 (based on the closing
      price of the registrant’s common stock on the Over-the-Counter Bulletin Board on
      such date). Shares of common stock held by each executive officer and director
      and by each person and entity who beneficially owns more than 10% of the
      outstanding common stock have been excluded in that such person or entity under
      certain circumstances may be deemed to be an affiliate. Such exclusion should
      not be deemed a determination or admission by registrant that such individuals
      or entities are, in fact, affiliates of the registrant.





As
      of
      November 2, 2007, there were outstanding 8,699,710 shares of Common
      Stock.





Documents
      incorporated by reference:





Portions
      of IEC Electronics Corp.'s Proxy Statement for the 2008 Annual Meeting of
      Stockholders are incorporated into Part III of this Form 10-K.








**TABLE
      OF CONTENTS**


PAGE**PART
                  I**Item 1:
              Business
              3Item 1A:
              Risk
                  Factors
              5Item 1B:
              Unresolved
                  Staff Comments
              9Item 2:
              Properties
              9Item 3:
              Legal
                  Proceedings
              9Item 4:
              Submission
                  of Matters to a Vote of Security Holders
              10Executive
                  Officers of Registrant
              10**PART
                  II**Item 5:
              Market
                  for Registrant's Common Equity, Related Stockholder Matters, and
                  Issuer
                  Purchases of Equity Securities
              11Item 6:
              Selected
                  Financial Data
              12Item 7:
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              13Item 7A:
              Quantitative
                  and Qualitative Disclosures about Market Risk
              16Item 8:
              Financial
                  Statements and Supplementary Data
              16Item 9:
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              16Item 9A:
              Controls
                  and Procedures
              16Item 9B:
              Other
                  Information
              16**PART
                  III**Item 10:
              Directors,
                  Executive Officers, and Corporate Governance
              17Item 11:
              Executive
                  Compensation
              17Item 12:
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              17Item 13:
              Certain
                  Relationships, Related Transactions and Director
                  Independence
              17Item 14:
              Principal
                  Accountant Fees and Services
              17**PART
                  IV**Item 15:
              Exhibits
                  and Financial Statement Schedules
              17





"SAFE
      HARBOR" CAUTIONARY STATEMENT UNDER THE


PRIVATE
      SECURITIES LITIGATION REFORM ACT OF 1995





This
      Annual Report on Form 10-K contains certain statements that are, or may be
      deemed to be,
      forward-looking statements within the meaning of section-27A of the Securities
      Act of 1933
      and
      section-21E of the Securities Exchange Act of 1934, and are made in reliance
      upon the protections provided by such Acts for forward-looking statements.
      These
      forward-looking statements (such as when we describe what we “believe”, “expect”
or “anticipate” will occur, and other similar statements) include, but are not
      limited to, statements regarding future sales and operating results, future
      prospects, the capabilities and capacities of business operations, any financial
      or other guidance and all statements that are not based on historical fact,
      but
      rather reflect our current expectations concerning future results and events.
      The ultimate correctness of these forward-looking statements is dependent upon
      a
      number of known and unknown risks and events, and is subject to various
      uncertainties and other factors that may cause our actual results, performance
      or achievements to be different from any future results, performance or
      achievements expressed or implied by these statements. The following important
      factors, among others, could affect future results and events, causing those
      results and events to differ materially from those expressed or implied in
      our
      forward-looking statements: business conditions and growth in our customer's
      industries, the electronic manufacturing services industry and the general
      economy, variability of operating results, our dependence on a limited number
      of
      major customers, the potential consolidation of our customer base, availability
      of components, dependence on certain industries, variability of customer
      requirements, other economic, business and competitive factors affecting our
      customers, our industry and business generally and other factors that we may
      not
      have currently identified or quantified. For a further list and description
      of
      various risks, relevant factors and uncertainties that could cause future
      results or events to differ materially from those expressed or implied in our
      forward-looking statements, see the "Risk Factors” and "Management's Discussion
      and Analysis of Financial Condition and Results of Operations" sections
      elsewhere in this document. All forward-looking statements included in this
      Report on Form-10-K are made only as of the date of this Report on Form-10-K,
      and we do not undertake any obligation to publicly update or correct any
      forward-looking statements to reflect events or circumstances that subsequently
      occur or which we hereafter become aware of. You should read this document
      and
      the documents that we incorporate by reference into this Annual Report on
      Form-10-K completely and with the understanding that our actual future results
      may be materially different from what we expect. We may not update these
      forward-looking statements, even if our situation changes in the future. All
      forward-looking statements attributable to us are expressly qualified by these
      cautionary statements.


2


**PART
      I**




ITEM
      1.
      BUSINESS





Overview





IEC
      Electronics Corp. ("IEC", "We", "Our", the “Company”) is an independent
      electronics manufacturing services ("EMS") provider of complex printed circuit
      board assemblies and electronic products and systems. We provide high quality
      electronics manufacturing services with state-of-the-art manufacturing
      capabilities. Utilizing automated manufacturing and test equipment, IEC provides
      manufacturing services employing surface mount technology ("SMT") and
      pin-through-hole ("PTH") interconnection technologies. As an independent
      full-service EMS provider, we offer our customers a wide range of manufacturing
      services, on either a turnkey or consignment basis. These services include
      product development, prototype assembly, material procurement, volume assembly,
      test engineering support, statistical quality assurance, order fulfillment
      and
      repair services. Our strategy is to cultivate strong manufacturing relationships
      with established and emerging original equipment manufacturers
      ("OEMs").





IEC
      Electronics Corp., a Delaware corporation, is the successor by merger in 1990
      to
      IEC Electronics Corp., a New York corporation, which was organized in 1966.




IEC
      is a
      world-class ISO:9001-2000 certified company. Our manufacturing processes
      encompass the best aspects of Lean Manufacturing and Six Sigma Principles.
      IEC
      is ITAR registered, NSA approved under the COMSEC standard, and we recently
      achieved our AS9100 certification to better serve the military and aerospace
      markets. Many customers consider these certifications crucial when qualifying
      an
      EMS provider.





Our
      New
      York facility is self-certified to previously recognized British Approvals
      Board
      Telecommunications standards, allowing us to provide manufacturing and test
      services to manufacturers producing telecommunication equipment destined for
      shipment to the European Common Market. Our state-of-the-art 10,000 square
      foot
      Technology Center includes pilot build, prototype assembly, design engineering
      services, and an Advanced Materials Technology Laboratory.





We
      continually evaluate emerging technology and maintain a technology road map
      to
      ensure relevant processes are available to our customers when commercial and
      design factors so indicate. The current generation of interconnection
      technologies includes chip scale packaging and ball grid array (BGA) assembly
      techniques. We have placed millions of plastic BGA's since 1994 and added
      Ceramic BGA placement for networking customers to our service offerings in
      fiscal 2001. Future advances will be directed by our Technology Center, which
      combines Prototype and Pilot Build Services with the capabilities of our
      Advanced Materials Technology Laboratory, and is supported by our Design
      Engineering Group.





Our
      experienced workforce has a high level of technical expertise. Our emphasis
      is
      on building the most challenging complete systems serving original equipment
      manufacturers with advanced electronics technology. IEC has positioned itself
      as
      a leader of lead-free solder assembly technology through early development
      and
      technical publications. Lead-free was mandated by July 2006 for many electronic
      products sold in Europe.





Our
      executive offices are located at 105 Norton Street, Newark, New York 14513.
      Our
      telephone number is (315)331-7742, and our Internet address is www.iec-electronics.com .





Electronics
      Manufacturing Services: The Industry




The
      EMS
      industry specializes in providing program management, technical support and
      manufacturing expertise required to take a product from the early design and
      prototype stages through volume production and distribution. Primarily as a
      response to rapid technological change and increased competition in the
      electronics industry, OEMs have recognized that by utilizing EMS providers
      they
      can improve their competitive position, realize an improved return on investment
      and concentrate on their core competencies such as research, product design
      and
      development and marketing. In addition, EMS providers allow OEMs to bring new
      products to market rapidly and adjust more quickly to fluctuations in product
      demand; avoid additional investment in plant, equipment and personnel; reduce
      inventory and other overhead costs; and establish known unit costs over the
      life
      of a contract. Many OEMs now consider EMS providers an integral part of their
      business and manufacturing strategy.





OEMs
      increasingly require EMS providers to provide complete turnkey manufacturing
      and
      material handling services, rather than working on a consignment basis in which
      the OEM supplies all materials and the EMS provider supplies labor. Turnkey
      contracts involve design, manufacturing and engineering support, the procurement
      of all materials, and sophisticated in-circuit and functional testing and
      distribution.


3





IEC's
      Strategy





Our
      strategy is to cultivate strong manufacturing partnerships with established
      and
      emerging OEMs in the electronics industry. These long-term business partnerships
      involve the joint development of manufacturing and support strategies with
      OEM
      customers and promote customer satisfaction. In implementing this strategy,
      we
      offer our customers a full range of manufacturing solutions through flexibility
      in production, high quality and fast-turnaround manufacturing services and
      computer-aided testing.




We
      generally enter into formal agreements with our significant customers. These
      agreements generally provide for fixed prices for one year, absent any customer
      changes which impact cost of labor or material, and rolling forecasts of
      customer requirements. After establishing an OEM relationship, we offer our
      consultation services with respect to the manufacturability and testability
      of
      the product design. We often recommend design changes to reduce manufacturing
      costs and to improve the quality of the finished assemblies.





Products
      and Services





We
      manufacture a wide range of assemblies, which are incorporated into many
      different products. We provide electronic manufacturing services primarily
      for
      telecommunications and wireless communication systems, test diagnostic
      equipment, military and defense systems, transportation products, alternative
      energy equipment, and medical instrumentation. During the fiscal year ended
      September 30, 2007 we provided electronics manufacturing services to
      approximately 25 different customers. We provide our services to multiple
      divisions and product lines of many of our customers and typically manufacture
      for a number of each customer's successive product generations. In some cases,
      we are the sole contract manufacturer for the customer site or division,
      providing all services, prototype through box build and functional
      test.





Materials
      Management





We
      generally procure material only to meet specific contract requirements. In
      addition, our agreements with our significant customers generally provide for
      cancellation charges equal to the costs, which are incurred by us as a result
      of
      a customer's cancellation of contracted quantities. Our internal systems provide
      effective controls for all materials, whether purchased by us or provided by
      the
      customer, through all stages of the manufacturing process, from receiving to
      final shipment.





Availability
      of Components





Substantially
      all of our net sales are derived from turnkey manufacturing in which we provide
      both materials procurement and assembly services. We are well positioned with
      supplier relationships and material procurement expertise to acquire needed
      materials. However, availability of customer-consigned parts and unforeseen
      shortages of components on the world market are beyond our control and could
      adversely affect revenue levels and operating efficiencies.





Suppliers





We
      operate in a strategic partnership arrangement with our key distribution
      suppliers. These strategic partnerships and associated automated trading
      methodologies provide benefits such as better payment terms, consignment or
      bonded inventories, reduced procurement lead-time, competitive pricing, reduced
      quotation processing, some protection during periods of supply allocation and
      opens access to global resources. We also have preferred supplier partnership
      agreements in place for custom commodities such as printed circuit boards,
      metals, and cable harnesses.





Marketing
      and Sales





Our
      sales
      increased during 2007, primarily due to the addition of several new customers,
      and increased market share with existing customers. These customers, along
      with
      the customers we anticipate adding, are expected to generate further revenue
      growth during 2008. We utilize a direct sales force as well as a nationwide
      network of Manufacturers Representatives. Through this hybrid sales approach,
      we
      execute a focused sales strategy targeting only those customers with product
      profiles aligning with our core areas of expertise. For example, we are focusing
      on customers developing complex, advanced technology products for a wide array
      of market sectors ranging from satellite communications, medical, military
      and
      general industrial.





Typically,
      the demand profiles associated with these customers are in the low to moderate
      volume range with high variability of quantity and mix requirements and end
      item
      configurations. In fact, these products often represent emerging technologies
      requiring high intensity of manufacturing support to seamlessly transfer them
      from the early product development stage through prototyping onto volume
      manufacturing. As these products exit the product development phase, specialized
      capabilities are required to support rapid response prototyping requirements
      in
      a dynamic engineering change environment. As a result, the usual industry
      outsourcing models associated with these customers rarely include supply
      alternatives in low cost labor regions such as Asia and Mexico.


4





Our
      sales
      efforts are driven by focused marketing and sales activities in targeted areas
      supported by customer presentations. Sales leads resulting from these marketing
      activities are assigned to a representative covering a customer's location
      for
      qualification and further development. Referrals by existing customers continue
      to be one of our sources of new opportunities.





Backlog





Our
      backlog as of September 30, 2007 and 2006 was approximately $22.3 million and
      $21.7 million, respectively. We had additional forecasted orders as of September
      30, 2007 and 2006 of $5.3 million and $5.1 million respectively. These are
      not
      firm orders, but our customers have made commitments to compensate us for any
      unused inventory that we procure in anticipation of these orders. Backlog
      consists of contracts or purchase orders with delivery dates scheduled within
      the next 12 months. Substantially the entire current backlog is expected to
      be
      shipped within our current fiscal year. Variations in the magnitude and duration
      of contracts received by us, and customer delivery requirements may result
      in
      fluctuations in backlog from period to period.





Governmental
      Regulation





Our
      operations are subject to certain federal, state and local regulatory
      requirements relating to environmental, waste management, health and safety
      matters. Management believes that our business is operated in compliance with
      applicable regulations promulgated by the Occupational Safety and Health
      Administration and the Environmental Protection Agency and corresponding state
      agencies, which respectively, pertain to health and safety in the work place
      and
      the use, discharge, and storage of chemicals employed in the manufacturing
      process. Current costs of compliance are not material to us. However, new or
      modified requirements, not presently anticipated, could be adopted creating
      additional expense for us.





Employees





IEC's
      employees numbered 229 at November 2, 2007, including 182 employees engaged
      in
      manufacturing, 31 in engineering, and 16 in administrative and marketing
      functions. None of our employees are covered by a collective bargaining
      agreement. We have not experienced any work stoppages and believe that our
      employee relations are good. We have access to a large work force by virtue
      of
      our northeast location midway between Rochester and Syracuse, two upstate New
      York industrial cities.





Patents
      and Trademarks





We
      hold
      patents unrelated to electronics manufacturing services and also employ various
      registered trademarks. We do not believe that either patent or trademark
      protection is material to the operation of our business.





ITEM
      1A.
      RISK FACTORS





OUR
      OPERATING RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS, MANY OF WHICH ARE
      BEYOND OUR CONTROL.





Our
      annual and quarterly results may vary significantly depending on factors,
      including:




-
              adverse
                  changes in general economic
                  conditions
 
 -
              the
                  level and timing of customer orders and the accuracy of their
                  forecasts
 
 -
              the
                  level of capacity utilization of our manufacturing facility and
                  associated
                  fixed costs
 
 -
              price
                  competition
 
 -
              market
                  acceptance of our customers
                  products
 
 -
              business
                  conditions in our customers’ end markets
 
 -
              our
                  level of experience in manufacturing a particular
                  product
 
 -
              change
                  in the sales mix of our customers
 
 -
              the
                  efficiencies achieved in managing inventories and fixed
                  assets
 
 -
              fluctuations
                  in materials costs and availability of
                  materials
 
 -
              the
                  timing of expenditures in anticipation of future
                  orders
 
 -
              changes
                  in cost and availability of labor and
                  components
 
 -
              our
                  effectiveness in managing manufacturing
                  process.


5





The
      EMS
      industry is impacted by the state of the U.S. and global economies, which are
      both impacted by world events. An economic slowdown, in particular in the
      industries served by us, may result in our customers reducing their forecasts.
      The demand for our services could weaken, which in turn could substantially
      influence our sales, capacity utilization, margins and financial results.
      Historically, we have seen periods, such as in fiscal 2003 and 2002, when EMS
      industry sales were adversely affected by a slowdown in wireless/networking
      and
      wireless infrastructure sectors as a result of reduced end-market demand and
      reduced availability of capital to fund existing and emerging technologies.





WE
      DEPEND
      ON A RELATIVELY SMALL NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THESE CUSTOMERS
      OUR SALES AND OPERATING RESULTS COULD DECLINE SIGNIFICANTLY.





A
      small
      number of customers are responsible for a significant portion of our net sales.
      During fiscal 2007, 2006, and 2005, our five largest customers accounted for
      61%, 66% and 67% of net sales, respectively. The percentage of IEC's sales
      to
      its major customers may fluctuate from period to period. Our principal customers
      have varied from period to period, and our principal customers many not continue
      to purchase services from us at the current levels, or at all.





WE
      DEPEND
      ON THE ELECTRONICS INDUSTRY, WHICH CONTINUALLY PRODUCES TECHNOLOGICALLY ADVANCED
      PRODUCTS WITH SHORT LIFE CYCLES.





Factors
      affecting the electronics industry in general could seriously harm our customers
      and, as a result, us. These factors include:




-
              the
                  inability of our customers to adapt to rapidly changing technology
                  andevolving
                  industry standards, which result in short product life
                  cycles;
 
 -
              the
                  inability of our customers to develop and market their products,
                  some of
                  which arenew
                  and untested;
 
 -
              the
                  potential that our customers' products may become obsolete or thefailure
                  of our customers' products to gain widespread commercial acceptance;
                  and
 
 -
              recessionary
                  periods in our customers'
                  markets.





FALILURE
      TO MANAGE GROWTH AND CONTRACTION, IF ANY, MAY SERIOUSLY HARM OUR
      BUSINESS





In
      late
      2006 and early 2007 we expanded our operations and added many new employees.
      These actions resulted in additional costs and start-up inefficiencies. If
      we
      are unable to effectively manage the currently anticipated growth or if the
      anticipated net sales are not realized, our operating results could be adversely
      affected.





START-UP
      COSTS AND INEFFICIENCIES RELATED TO NEW OR TRANSFERRED PROGRAMS CAN ADVERSELY
      AFFECT OUR OPERATING RESULTS AND MAY NOT BE RECOVERABLE.





Start-up
      costs, the management of labor and equipment resources in connection with
      establishing new programs and new customer relationships, and the need to
      estimate required resources, and the timing of those resources in advance of
      production, can adversely affect our gross margins and operating margins. If
      new
      programs or new customer relationships are terminated or delayed, our operating
      results may be harmed, particularly in the near term. We may not be able to
      recoup our start-up costs or quickly replace anticipated new program
      revenues.





MOST
      OF
      THE CUSTOMERS IN OUR INDUSTRY DO NOT COMMIT TO LONG-TERM PRODUCTION SCHEDULES,
      WHICH CAN MAKE IT DIFFICULT FOR US TO SCHEDULE PRODUCTION.





Customers
      may cancel their orders, change production quantities or delay production for
      a
      number of reasons that are beyond our control. Cancellations, reductions or
      delay by a significant customer or by a group of customers could negatively
      impact our operating results. Such cancellations, reductions or delays have
      occurred and may continue to occur.


The
      volume and timing of sales to our customers may vary due to:


-
              variation
                  in demand for our customers' products in their end
                  markets
 
 -
              our
                  customers' attempts to manage their
                  inventory
 
 -
              electronic
                  design changes
 
 -
              changes
                  in our customers' manufacturing
                  strategy
 
 -
              recessionary
                  conditions in customers'
                  industries


6





Due
      in
      part to these factors, most of our customers do not commit to firm production
      schedules. We make significant decisions based on our estimates of customers’
requirements, including deciding on the levels of business that we will seek,
      production schedules, component procurement commitments, equipment requirements,
      personnel needs and other resource requirements. The short-term nature of our
      customers’ commitments and the possibility of rapid changes in demand for their
      products reduce our ability to accurately estimate and forecast the future
      requirements of those customers. Since many of our costs and operating expenses
      are relatively fixed, a reduction in customer demand can impact our revenue
      and
      harm our gross margins and operating results.





INCREASED
      COMPETITION MAY RESULT IN DECREASED DEMAND OR REDUCED PRICES FOR OUR
      SERVICES.





We
      may be
      operating at a cost disadvantage compared to other electronic manufacturing
      service providers who have greater direct buying power from component suppliers,
      distributors and raw material suppliers or who have lower cost structures as
      a
      result of their geographic location. As a result, competitors may have a
      competitive advantage. Our manufacturing processes are generally not subject
      to
      significant proprietary protection, and companies with greater resources or
      a
      greater market presence may enter our market or increase their competition
      with
      us. We also expect our competitors to continue to improve the performance of
      their current products or services, to reduce their current products or service
      sales prices and to introduce new products or services that may offer greater
      performance and improved pricing. Any of these could cause a decline in sales,
      loss of market acceptance of our products or services, profit margin
      compression, or loss of market share.





IF
      WE DO
      NOT MANAGE OUR BUSINESS EFFECTIVELY, OUR PROFITABILITY COULD
      DECLINE.





Our
      ability to manage our business effectively will require us to continue to
      implement and improve our operational, financial and management information
      systems; continue to develop the management skills of our managers and
      supervisors; and continue to train, motivate and manage our employees. Our
      failure to effectively do so could harm our business.





WE
      DEPEND
      ON A LIMITED NUMBER OF SUPPLIERS FOR COMPONENTS THAT ARE CRITICAL TO OUR
      MANUFACTURING PROCESSES. A SHORTAGE OF THESE COMPONENTS OR AN INCREASE IN THEIR
      PRICE COULD INTERRUPT OUR OPERATIONS AND REDUCE OUR PROFITS.





Much
      of
      our net revenue is derived from turnkey manufacturing in which we provide
      materials procurement. While some of our customer agreements permit periodic
      adjustments to pricing based on decreases and increases in component prices
      and
      other factors, we typically bear the risk of component price increases that
      occur between any such re-pricing or, if such re-pricing is not permitted,
      during the balance of the term of the particular customer contract. Accordingly,
      certain component price increases could adversely affect our gross profit
      margins.





Almost
      all of the products we manufacture require one or more components that are
      available from a limited number of suppliers. Some of these components are
      allocated from time to time in response to supply shortages. In some cases,
      supply shortages could substantially curtail production of those assemblies
      using a particular component. At times, component shortages have been prevalent
      in our industry, and such shortages may be expected to recur from time to time.
      In some cases, supply shortages and delays in deliveries of particular
      components have resulted in curtailed or delayed production of assemblies,
      which
      contributed to an increase in our inventory levels. An increase in economic
      activity could result in shortages, if manufacturers of components do not
      adequately anticipate the increased orders and/or have previously excessively
      cut back their production capabilities in view of reduced activity in recent
      years. World events, armed conflict and epidemics, could also affect our supply
      chain. An inability to obtain sufficient components on a timely basis could
      harm
      relationships with our customers.





In
      addition, due to the specialized nature of some components and the needs of
      our
      customers’ products, we may be required to use suppliers which are the sole
      provider of certain components. Such suppliers may encounter financial
      difficulties or may not have adequate financial resources, which could preclude
      them from delivering components on time or at all.





OUR
      TURNKEY MANUFACTURING SERVICES INVOLVE INVENTORY RISK





Most
      of
      our services are provided on a turnkey basis, where we purchase some or all
      of
      the materials required for product assembling and manufacturing. These services
      involve greater resource investment and inventory risk management than
      consignment services, where the customer provides materials. Accordingly,
      various component price increases and inventory obsolescence could adversely
      affect our selling price, gross margins and operating results.





In
      our
      turnkey operations, we must order parts and supplies based on customer
      forecasts, which may be for a larger quantity of product than is included in
      the
      firm orders ultimately received from those customers. Customers' cancellation
      or
      reduction of orders can result in expenses to us. While most of our customer
      agreements typically include provisions which require customers to reimburse
      us
      for excess inventory specifically ordered to meet their forecasts, we may not
      be
      actually reimbursed or be able to collect on these obligations. In that case,
      we
      could have excess inventory and/or cancellation or return charges from our
      suppliers.


7


In
      addition, we are starting to provide managed inventory programs for some of
      our
      customers under which we hold and manage finished goods inventories. These
      managed inventory program may result in higher finished goods inventory level,
      further reduce our inventory turns and increase our financial exposure with
      such
      customers. Even though they will generally have contractual obligations to
      purchase such inventories from us, we may remain subject to the risk of
      enforcing those obligations.





PRODUCTS
      WE MANUFACTURE MAY CONTAIN MANUFACTURING DEFECTS, WHICH COULD RESULT IN REDUCED
      DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.





We
      manufacture products to our customers' specifications, which are highly complex
      and may, at times, contain design or manufacturing errors or failures. Despite
      our quality control and quality assurance efforts, defects may occur. Defects
      in
      the products we manufacture, whether caused by a customer design, manufacturing
      or component failure or error, may result in delayed shipments to customers
      or
      reduced or cancelled customer orders and may affect our business reputation.
      In
      addition, these defects may result in liability claims against us. Even if
      customers or component suppliers are responsible for the defects, they may
      be
      unwilling or unable to assume responsibility for any costs or
      payments.





WE
      MAY
      NOT BE ABLE TO MAINTAIN OUR ENGINEERING, TECHNOLOGICAL AND MANUFACTURING PROCESS
      EXPERTISE.





The
      markets for our manufacturing and engineering services are characterized by
      rapidly changing technology and evolving process development. The continued
      success of our business will depend upon our ability to:





-
            hire
                and retain our qualified engineering and technical
                personnel;





-
            maintain
                and enhance our technological leadership; and





-
            develop
                and market manufacturing services that meet changing customer needs.




Although
      we believe that our operations provide the assembly and testing technologies,
      equipment and processes that are currently required by our customers, we cannot
      be certain that we will develop the capabilities required by our customers
      in
      the future. The emergence of new technology industry standards or customer
      requirements may render our equipment, inventory or processes obsolete or
      noncompetitive. In addition, we may have to acquire new assembly and testing
      technologies and equipment to remain competitive. The acquisition and
      implementation of new technologies and equipment may require significant expense
      or capital investment, which could reduce our operating margins and our
      operating results. Our failure to anticipate and adapt to our customers'
      changing technological needs and requirements could have an adverse effect
      on
      our business.




WE
      DO NOT
      HAVE EMPLOYMENT AGREEMENTS WITH ANY OF OUR KEY PERSONNEL, THE LOSS OF WHICH
      COULD HURT OUR OPERATIONS.





Our
      continued success depends largely on the efforts and skills of our key
      managerial and technical employees. The competition for these individuals is
      significant; hence the loss of the services of certain of these key employees
      or
      an inability to attract or retain qualified employees could negatively impact
      us. We do not have employment agreements or non-competition agreements with
      our
      key employees.




COMPLIANCE
      OR THE FAILURE TO COMPLY WITH CURRENT AND FUTURE ENVIRONMENTAL REGULATIONS
      COULD
      CAUSE US SIGNIFICANT EXPENSE.





We
      are
      subject to a variety of federal, state, local and foreign environmental
      regulations relating to the use, storage, discharge and disposal of hazardous
      chemicals used during our manufacturing process. If we fail to comply with
      any
      present and future regulations, we could be subject to future liabilities or
      the
      suspension of production. In addition, such regulations could restrict
      our ability to expand our facilities or could require us to acquire costly
      equipment, or to incur other significant expenses to comply with environmental
      regulations. While we are not currently aware of any material violations, we
      may
      have to spend funds to comply with present and future regulations or be required
      to perform site remediation.




THE
      AGREEMENTS GOVERNING OUR EXISTING DEBT CONTAIN VARIOUS COVENANTS THAT IMPACT
      UPON THE OPERATION OF OUR BUSINESS.





The
      agreements and instruments governing our existing debt and our secured credit
      facility contain various restrictive covenants that, among other things, require
      us to comply with or maintain certain financial tests and ratios including,
      among others, limitations on the amount available under the revolving line
      of
      credit relative to the borrowing base, capital expenditures and minimum earnings
      before interest, taxes, depreciation and amortization (EBITDA) and restrict
      our
      ability to:


8





-
              incur
                  debt;





-
              incur
                  or maintain liens;


-
              make
                  acquisitions of businesses or
                  entities;





-
              make
                  investments, including loans, guarantees and
                  advances;





-
              engage
                  in mergers, consolidations or certain sales of
                  assets;





-
              engage
                  in transactions with affiliates;
                  and





-
              pay
                  dividends or engage in stock
                  redemptions.





Our
      credit facilities are secured by a general security agreement covering
      receivables, inventory, equipment, intangibles, investment property and deposit
      accounts and indirectly by a first mortgage on our Newark plant.





Our
      ability to comply with covenants contained in our existing debt and our secured
      credit facility may be affected by events beyond our control, including
      prevailing economic, financial and industry conditions. Our failure to comply
      with our debt-related covenants could result in an acceleration of our
      indebtedness and cross-defaults under our other indebtedness, which may have
      a
      material adverse effect on our financial condition. We are currently in
      compliance with all of our covenants.




OUR
      STOCK
      PRICE MAY BE VOLATILE DUE TO FACTORS BEYOND OUR CONTROL





Our
      common stock is traded on the Over-the-Counter Bulletin Board. The market price
      of our common stock has fluctuated substantially in the past and could fluctuate
      substantially in the future, based on a variety of factors, including future
      announcements concerning us or our key customers or competitors, government
      regulations, litigation, fluctuations in quarterly operating results, or general
      conditions in the EMS industry.




ITEM
      1B.
      UNRESOLVED STAFF COMMENTS





Not
      Applicable





ITEM
      2.
      PROPERTIES





Our
      administrative and manufacturing facility is located in Newark, New York and
      contains an aggregate of approximately 300,000 square feet.





ITEM
      3.
      LEGAL PROCEEDINGS





Except
      as
      set forth below, there are no material legal proceedings pending to which IEC
      is
      a party or to which IEC's property is subject. To our knowledge, there are
      no
      material legal proceedings to which any director, officer or affiliate of IEC,
      or any beneficial owner of more than 5 percent (5%) of Common Stock, or any
      associate of any of the foregoing, is a party adverse to IEC.





On
      August
      13, 2003 General Electric Company (“GE”) commenced an action in the state of
      Connecticut against IEC and Vishay Intertechnology, Inc. (“Vishay”). The action
      alleges cause of action for breach of a manufacturing services contract, which
      had an initial value of $4.4 million, breach of express warranty, breach of
      implied warranty, and a violation of the Connecticut Unfair Trade Practices
      Act.
      Vishay supplied a component that IEC used to assemble printed circuit boards
      for
      GE that GE contends failed to function properly requiring a product recall.
      GE
      claims damages “in excess of $15,000” plus interest and attorney’s fees. IEC and
      Vishay are proceeding to defend GE’s Connecticut action on the merits and IEC is
      proceeding with a cross claim against Vishay.





IEC
      filed
      a motion for summary judgment directed to all counts. On January 11, 2007,
      the
      Court granted the motion in part, dismissing
      the claim for violation of the Connecticut Unfair Trade Practices Act, but
      determined that factual issues were disputed on the contract and warranty
      claims. On
      September 17, 2007, at a status conference, the parties agreed to a schedule
      for
      the case and it was set forth as an order of the Court. The Scheduling Order
      contemplates a trial to begin on January 5, 2010. IEC
      intends to vigorously defend the claims and prosecute the cross claim, and
      is
      proceeding with the discovery process in accordance with the Scheduling
      Order.




9





ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





During
      the fourth quarter of fiscal 2007, no matters were submitted to vote of security
      holders.




EXECUTIVE
      OFFICERS OF THE REGISTRANT





IEC's
      executive officers as of September 30, 2007, were as follows:





Name
            Age
            
            PositionW.
                Barry Gilbert
            61
            
            Chairman
                of the Board, and Chief Executive OfficerJeffrey
                T. Schlarbaum
            41
            
            Executive
                Vice President of Sales and MarketingBrian
                H. Davis
            53
            
            Vice
                President, Chief Financial Officer and ControllerDonald
                S. Doody
            41
            
            Vice
                President of Operations





W.
      Barry
      Gilbert has served as Chief Executive Officer since June 2002. He has been
      a
      director of IEC since February 1993, and Chairman of the Board since February
      2001. He is an adjunct faculty member at the William E. Simon Graduate School
      of
      Business Administration of the University of Rochester. Mr. Gilbert previously
      held the position of President of the Thermal Management Group of Bowthorpe
      (now
      known as Spirent) and was corporate Vice President and President of the
      Analytical Products Division of Milton Roy Company, a manufacturer of analytical
      instrumentation.





Jeffrey
      T. Schlarbaum joined IEC in May 2004 as Vice President of Sales and Marketing
      and in November 2006 he was appointed Executive Vice President of Sales and
      Marketing. Before joining IEC, he had over 15 years of sales experience in
      the
      electronics industry. Most recently, he served as Regional Vice President of
      Sales for Plexus Corp., a contract manufacturer of electronics products, Neenah,
      Wisconsin. Prior to that, he worked as Vice President of Sales, Eastern Region
      for MCMS as well as holding various senior sales and marketing management
      positions with MACK Technologies and Conner Peripherals. He holds a Bachelors
      of
      Business Administration degree from National University, and an MBA from
      Pepperdine University.





Brian
      H.
      Davis joined IEC in April 2003 as Vice President, Chief Financial Officer and
      Controller. Mr. Davis previously served as Vice President of Finance at Thermo
      Spectronic, a manufacturer of laboratory equipment located in Rochester, NY.
      Prior to that, Mr. Davis functioned in various Controller and General Management
      positions with Life Sciences International and Milton Roy Company. He holds
      a
      B.S. in Accounting from the Pennsylvania State University, and an MBA from
      the
      Rochester Institute of Technology.





Donald
      S.
      Doody joined IEC in November 2004 as Vice President of Operations. Before
      joining IEC, he had more than 8 years of experience in the contract electronics
      manufacturing industry. He started his career with GE Transportation and
      Industrial Systems and became a Master Black Belt/Supplier Quality Engineer.
      Mr.
      Doody was a senior manufacturing engineer at Plexus Corporation, then became
      VP/GM of MCMS’s North Carolina facility. When Plexus acquired MCMS he became
      responsible for leading Lean Manufacturing and Six Sigma initiatives throughout
      the company. Mr. Doody holds a Bachelor’s in Engineering from the State
      University of New York, Buffalo and a Master’s degree in Industrial Science from
      Colorado State University.




10




**PART
      II**




ITEM
              5.
            MARKET
                FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
                ISSUER
                PURCHASESOF
                EQUITY SECURITIES





(a)
      Market Information.





IEC's
      Common Stock is listed on The Over the Counter Bulletin Board ("OTCBB") under
      the symbol IECE.OB.




The
      following table sets forth, for the fiscal quarter indicated, the high and
      low
      closing prices for the Common Stock as reported on the OTCBB. These quotations
      reflect inter-dealer prices, without mark-up, mark-down or commission, and
      may
      not represent actual transactions.





Quarter
            
            High
            
            LowOctober
                1, 2005 – December 30, 2005
            
            $
            0.74
            
            $
            0.41December
                31, 2005 – March 31, 2006
            
            $
            0.93
            
            $
            0.55April
                1, 2005 – June 30, 2006
            
            $
            0.85
            
            $
            0.60July
                1, 2006 – September 30, 2006
            
            $
            1.15
            
            $
            0.77October
                1, 2006 – December 29, 2006
            
            $
            1.75
            
            $
            1.09December
                30, 2006 – March 30, 2007
            
            $
            1.66
            
            $
            1.41March
                31, 2007 – June 29, 2007
            
            $
            1.98
            
            $
            1.48June
                30, 2007 – September 30, 2007
            
            $
            2.05
            
            $
            1.75




The
      closing price of IEC's Common Stock on the OTCBB on November 2, 2007, was $2.35
      per share.





(b)
      Holders.





As
      of
      November 2, 2007, there were approximately 165 holders of record of IEC's Common
      Stock. Many of our shares of Common Stock are held in street name by brokers
      and
      other institutions, and we are unable to estimate the number of their beneficial
      stockholders.





(c)
      Dividends.





IEC
      has
      never paid dividends on its Common Stock. It is the current policy of the Board
      of Directors of IEC to retain earnings for use in our business. Certain
      financial covenants set forth in IEC's current loan agreement prohibit IEC
      from
      paying cash dividends. We do not plan to pay cash dividends on our Common Stock
      in the foreseeable future.





(d)
      Securities Authorized for Issuance under Equity Compensation Plans





The
      following table sets forth information concerning IEC's equity compensation
      plans as of September 30, 2007.




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 securities
              reflected in column (a))(a)
            
            (b)
            
            (c)Equity
                compensation plans:approved
                by security holders
            
            
            1,348,272
            
            $
            0.84
            
            
            203,930not
                approved by security holders
            
            
            -
            
            
            NA
            
            
            -Total
            
            
            1,348,272
            
            $
            0.84
            
            
            203,930




Issuance
                  of Unregistered Securities:
              Not
                  ApplicableRepurchases
                  of IEC Securities:
              We
                  repurchased no shares during the last quarter of fiscal
                  2007.


11





Item
      6.
      SELECTED FINANCIAL DATA





SELECTED
      FINANCIAL DATA


(in
      thousands, except per share data)





Years
                Ended September 30,
            
            2007
            
            2006
            
            2005
            
            2004
            
            2003INCOME
                STATEMENT DATANet
                sales
            
            $
            40,914
            
            $
            22,620
            
            $
            19,066
            
            $
            27,701
            
            $
            48,201Gross
                profit (loss)
            
            $
            3,877
            
            $
            2,753
            
            $
            2,630
            
            $
            1,987
            
            $
            5,508Operating
                income (loss)
            
            $
            985
            
            $
            598
            
            $
            346
            
            $
            (759
            )
            $
            2,652Net
                income (loss)
            
            $
            875
            
            $
            215
            
            $
            285
            
            $
            (828
            )
            $
            2,597Net
                income (loss) per common and common equivalent share:Basic
            
            $
            0.11
            
            $
            0.03
            
            $
            0.03
            
            $
            (0.10
            )
            $
            0.33Diluted
            
            $
            0.10
            
            $
            0.03
            
            $
            0.03
            
            $
            (0.10
            )
            $
            0.31Common
                      and common equivalent sharesBasic
            
            
            8,114
            
            
            7,973
            
            
            8,261
            
            
            8,119
            
            
            7,899Diluted
            
            
            8,896
            
            
            8,276
            
            
            8,571
            
            
            8,119
            
            
            8,274BALANCE
                SHEET DATAWorking
                capital
            
            $
            2,970
            
            $
            2,202
            
            $
            2,038
            
            $
            726
            
            $
            1,428Total
                assets
            
            $
            11,845
            
            $
            11,718
            
            $
            5,538
            
            $
            8,530
            
            $
            10,506Long-term
                  debt, includingcurrent
                  maturities
            
            $
            1,751
            
            $
            4,164
            
            $
            937
            
            $
            2,366
            
            $
            2,667Shareholders'
                equity
            
            $
            4,163
            
            $
            3,092
            
            $
            3,020
            
            $
            2,616
            
            $
            3,414





12




ITEM
      7.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





MANAGEMENT'S
      DISCUSSION OF OPERATIONS





The
      information in this Management's Discussion & Analysis should be read in
      conjunction with the accompanying financial statements, the related Notes to
      Financial Statements and the Five-Year Summary of Financial Data.
      Forward-looking statements in this Management's Discussion and Analysis are
      qualified by the cautionary statement preceding Item 1 of this Form
      10K.





Overview





During
      2004, we refocused our sales efforts on high technology products that are less
      likely to migrate to offshore suppliers. We have since added a number of new
      customers that have contributed to our sales growth. Our backlog has grown
      to it
      highest level since the restructuring, and we expect revenue and profitability
      growth to continue in 2008.





Analysis
      of Operations





Sales
      (dollars in millions)




For
                Year Ended September 30,
            
            2007
            
            2006
            
            2005Net
                sales
            
            $
            40.9
            
            $
            22.6
            
            $
            19.1




The
      81%
      increase in fiscal 2007 net sales compared to fiscal year 2006, and the 19%
      increase in fiscal 2006 net sales compared to fiscal year 2005 was due to the
      addition of a number of new customers.




Gross
      Profit and Selling and Administrative Expenses





(as
      a %
      of Net Sales)





For
                Year Ended September 30,
            
            2007
            
            2006
            
            2005Gross
                profit
            
            
            9.5
            %
            
            12.1
            %
            
            13.8
            %Selling
                and administrative expenses
            
            
            7.1
            %
            
            9.5
            %
            
            11.4
            %




Gross
      profit as a percentage of sales was 9.5% in fiscal 2007 as compared to 12.1%
      in
      fiscal 2006. The lower gross profit percentage was due to our transition from
      low volume prototype work to larger production volumes, and also due to the
      learning curve related to new employees and new products that we experienced
      during our first and fourth quarters. We expect improvement in these areas
      during fiscal 2008.





Gross
      profit as a percentage of sales was 12.1% in fiscal 2006 as compared to 13.8%
      in
      fiscal 2005. The decrease was primarily due to product mix. Material cost as
      a
      percent of sales was much higher on some of our 2006 large volume orders.





Selling
      and administrative expenses as a percentage of sales decreased to 7.1% in fiscal
      2007 compared to 9.5% in fiscal 2006. Expenses increased by $0.7 million during
      fiscal 2007 compared to fiscal 2006. However, this increase was offset by the
      increase in sales volume.





Selling
      and administrative expenses were relatively flat in fiscal 2006 compared to
      fiscal 2005. As a percentage of sales, selling and administrative expenses
      decreased to 9.5% in fiscal 2006 compared to 11.4% in fiscal 2005. The
      percentage decrease was due to expenses being spread over higher sales
      dollars.


13


Other
      Income and Expense (dollars in millions)





For
                Year Ended September 30,
            
            2007
            
            2006
            
            2005Interest
                and financing expense
            
            $
            0.4
            
            $
            0.4
            
            $
            0.4Other
                income
            
            $
            -
            
            $
            -
            
            $
            0.3





Interest
      and financing expense was $0.4 million during 2007, 2006 and 2005. The average
      debt balance during 2007 was similar to 2006. The average prime interest rate
      was higher during 2007 compared to 2006, resulting in a $62,000 increase in
      interest expense.





The
      average debt balance was higher in 2006 compared to 2005, resulting in a $99,000
      increase in interest expense. This was offset by $99,000 in reduced fees and
      amortization of loan origination costs.




We
      had
      other income of $0.3 million during fiscal 2005. This was primarily attributable
      to gains on the sale of excess equipment.




Income
      Taxes (as a % of income (loss) before income taxes)





For
                Year Ended September 30,
            
            2007
            
            2006
            
            2005Effective
                tax (benefit)
            
            
            (73
            )%
            
            -
            %
            
            -
            %





Our
      2007
      tax benefit included a ($390,000) reversal of the valuation allowance against
      our deferred tax asset, and an $18,000 provision for minimum taxes due. The
      reversal of the valuation allowance was based on management’s belief that it is
      more likely than not that this portion of our the deferred tax asset will be
      realized. We continue to maintain a $19 million valuation allowance against
      our
      net deferred tax assets, which are comprised primarily of net operating loss
      carryforwards.




Restructuring
      Charge (dollars in millions)


For
                  Year Ended September 30,
              
              2007
              
              2006
              
              2005$
              0.0
              
              $
              0.0
              
              $
              0.1




During
      May 2004, the Company commenced a restructuring initiative in an attempt to
      more
      closely align resources to customer requirements. The Company recorded $119,000
      of expenses during fiscal 2005. All payments were made by November 30, 2005.





Liquidity
      and Capital Resources




Cash
      Flow
      provided by (used in) operating activities was $3.1 million for the fiscal
      year
      ended September 30, 2007 compared to ($3.1) million and ($1.9) million for
      fiscal 2006 and fiscal 2005 respectively. During fiscal 2007 we used ($0.8)
      million to purchase new equipment. During fiscal 2006, we used ($0.4) million
      to
      purchase new equipment (investing activities) and ($0.2) to repurchase Company
      stock (financing activities). The increase in operating cash flows for fiscal
      2007 compared to fiscal 2006 was primarily due to improved inventory and
      accounts payable management. The decrease in operating cash flows for fiscal
      2006 compared to fiscal 2005 was primarily due to higher accounts receivable
      and
      inventory related to a substantial increase in customer orders.




Working
      capital at September 30, 2007 was $3.0 million, compared to $2.2 million in
      the
      same period of the prior year. At September 30, 2007 we had a $1.0 million
      balance under our revolving credit facility. The maximum borrowing limit under
      our revolving credit facility is limited to the lesser of (i) $6.0 million
      or
      (ii) an amount equal to the sum of 85% of the receivables borrowing base and
      35%
      of the inventory borrowing base. On September 30, 2007, the remaining
      availability under the collateralized portion of our line of credit was $4.6
      million. We believe that our liquidity is adequate to cover operating
      requirements for the next 12 months.





We
      also
      have a term loan of $385,000 that is secured by a first mortgage on the IEC
      plant in Newark, New York (the “Real Estate Loan”), and another term loan
      balance of $337,500 that is secured by certain manufacturing equipment (the
      “Equipment” Loan). The Real Estate Loan is payable in 39 monthly installments of
      $12,500 that commenced October 1, 2005, and a final payment of the remaining
      balance on January 1, 2009. The Equipment Loan is payable in 39 monthly
      installments of $12,500 that commenced on January 2, 2007, and a final payment
      of the remaining balance on September 12, 2009. Both term loans have an interest
      rate of prime plus 1.0%.





The
      financing agreements contain various affirmative and negative covenants
      including, among others, limitations on the amount available under the revolving
      line of credit relative to the borrowing base, capital expenditures, and minimum
      earnings before interest, taxes, depreciation and amortization (EBITDA). We
      were
      compliant with these covenants at September 30, 2007.





14




Application
      of Critical Accounting Policies





Our
      financial statements and accompanying notes are prepared in accordance with
      generally accepted accounting principles in the United States. Preparing
      financial statements requires management to make estimates and assumptions
      that
      affect the reported amounts of assets, liabilities, revenue, and expenses.
      These
      estimates and assumptions are affected by management's application of accounting
      policies. Critical accounting policies for us include revenue recognition,
      impairment of long-lived assets, accounting for legal contingencies and
      accounting for income taxes.





We
      recognize revenue in accordance with Staff Accounting Bulletin No.101, "Revenue
      Recognition in Financial Statements." Sales are recorded when products are
      shipped to customers. Provisions for discounts and rebates to customers,
      estimated returns and allowances and other adjustments are provided for in
      the
      same period the related sales are recorded.





We
      evaluate our long-lived assets for financial impairment on a regular basis
      in
      accordance with Statement of Financial Accounting Standards No. 144, "Accounting
      for the Impairment or Disposal of Long-Lived Assets." We evaluate the
      recoverability of long-lived assets not held for sale by measuring the carrying
      amount of the assets against the estimated discounted future cash flows
      associated with them. At the time such evaluations indicate that the future
      discounted cash flows of certain long-lived assets are not sufficient to recover
      the carrying value of such assets, the assets are adjusted to their fair
      values.





We
      are
      subject to various legal proceedings and claims, the outcomes of which are
      subject to significant uncertainty. Statement of Financial Accounting Standards
      No. 5, "Accounting for Contingencies", requires that an estimated loss from
      a
      loss contingency should be accrued by a charge to income if it is probable
      that
      an asset has been impaired or a liability has been incurred and the amount
      of
      the loss can be reasonably estimated.





Disclosure
      of a contingency is required if there is at least a reasonable possibility
      that
      a loss has been incurred. We evaluate, among other factors, the degree of
      probability of an unfavorable outcome and the ability to make a reasonable
      estimate of the amount of loss. Changes in these factors could materially impact
      our financial position or our results of operations.





Statement
      of Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
      establishes financial accounting and reporting standards for the effect of
      income taxes. The objectives of accounting for income taxes are to recognize
      the
      amount of taxes payable or refundable for the current year and deferred tax
      liabilities and assets for the future tax consequences of events that have
      been
      recognized in an entity's financial statements or tax returns. Judgment is
      required in assessing the future tax consequences of events that have been
      recognized in IEC's financial statements or tax returns. Fluctuations in the
      actual outcome of these future tax consequences could materially impact IEC's
      financial position or its results of operations.





Impact
      of
      Inflation





The
      impact of inflation on our operations has been minimal due to the fact that
      we
      are able to adjust our bids to reflect any inflationary increases in
      cost.





RECENTLY
      ISSUED ACCOUNTING STANDARDS





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
      Option for Financial Assets and Financial Liabilities, including an amendment
      of
      FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value at specified
      election dates. This Statement applies to all entities, including not-for-profit
      organizations. SFAS 159 is effective as of the beginning of an entity’s first
      fiscal year that begins after November 15, 2007. As such, the Company is
      required to adopt these provisions at the beginning of the fiscal year ended
      September 30, 2009. The Company is currently evaluating the impact of SFAS
      159
      on its financial statements, but does not expect this to have a material
      impact





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
      Measurements”. SFAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS 157 is effective as of the beginning of the first fiscal year that begins
      after November 15, 2007. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ended September 30, 2009. The
      Company is currently evaluating the impact of SFAS 157 on its financial
      statements, but does not expect this to have a material impact.





15





In
      June
      2006, the FASB issued FIN 48, *Accounting
      for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109.* This
      interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements. This interpretation
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. As such, the Company is required to adopt
      these provisions at the beginning of the fiscal year ended September 30, 2008. The
      Company is currently evaluating the impact of FIN 48 on its financial
      statements, but it does not expect the impact to be material.




ITEM
      7A.
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Quantitative
      and Qualitative Disclosures about Market Risk represents the risk of loss that
      may impact the financial position, results of operations or cash flows of IEC
      due to adverse changes in financial rates. We are exposed to market risk in
      the
      area of interest rates. One exposure is directly related to our Term Loan and
      Revolving Credit borrowings under the Credit
      Agreement, due to their variable interest rate pricing. Management believes
      that
      interest rate fluctuations will not have a material impact on IEC's results
      of
      operations.





ITEM
      8.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The
      information required by this item is incorporated herein by reference to pages
      25 through 35 of this Form 10-K and is indexed under Item 15(a)(1) and
      (2).





ITEM
      9.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





There
      have been no disagreements on accounting and financial disclosure
      matters.





ITEM
      9A
      CONTROLS AND PROCEDURES





(a)
      Evaluation of disclosure controls and procedures





An
      evaluation was performed under the supervision and with the participation of
      IEC's management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of our disclosure
      controls and procedures as of the end of the period covered by this Annual
      Report on Form 10-K as required by Rule 13a-15 under the Securities Exchange
      Act
      of 1934 (the "Exchange Act"). Based on that evaluation, our Chief Executive
      Officer and Chief Financial Officer have concluded that IEC's disclosure
      controls and procedures are effective as of the end of the period covered by
      this Annual Report on Form 10-K to provide reasonable assurance that information
      required to be disclosed by IEC in the reports that it files or submits under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      period specified in the SEC rules and forms and that such information is
      accumulated and communicated to our management (including the Chief Executive
      Officer and Chief Financial Officer) to allow timely decisions regarding
      disclosures.





(b)
      Changes in internal control over financial reporting





In
      connection with the evaluation described above, our management, including our
      Chief Executive Officer and Chief Financial Officer, identified no change in
      our
      internal control over financial reporting that occurred during our fiscal
      quarter ended September 30, 2007, that


materially
      affected, or is reasonably likely to materially affect, our internal controls
      over financial reporting.





ITEM
      9B
      OTHER INFORMATION





None





16




**PART
      III**





ITEM
      10.
      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





The
      information required by this item is presented under the captions entitled
      "Election of Directors” and “Section 16 (a) Beneficial Ownership Reporting
      Compliance” contained in the definitive proxy statement issued in connection
      with the 2008 Annual Meeting of Stockholders and is incorporated in this report
      by reference thereto. The information regarding Executive Officers of the
      Registrant is found in Part I of this report.





IEC
      has
      adopted a Code of Business Conduct and Ethics (the “Code”), which applies to all
      of its directors, officers (including IEC’s Chief Executive Officer, Chief
      Financial Officer, and other senior financial officers), and employees. The
      Code, a copy of which was filed as Exhibit 14 to IEC’s Current Report on Form
      8-K filed on September 1, 2004, may be viewed on IEC’s website, www.iec-electronics.com ,
      under
      its “Investor Relations - Corporate Governance” captions, and is available in
      print (free of charge) to any person upon request to Chief Financial Officer,
      IEC Electronics Corp., 105 Norton Street, Newark, NY 14513, telephone (315)
      331-7742. Any amendment to, or waiver of, a provision of the Code which applies
      to IEC’s Chief Executive Officer, Chief Financial Officer, or other senior
      financial officers and relates to the elements of a “code of ethics” as defined
      by the Securities and Exchange Commission will also be posted on the
      website.





ITEM
      11.
      EXECUTIVE COMPENSATION





The
      information required by this item is presented under the captions entitled
      "Compensation of Named Executive Officers and Directors” and “Election of
      Directors - Compensation Committee Interlocks and Insider Participation”
contained in the definitive proxy statement issued in connection with the 2008
      Annual Meeting of Stockholders and is incorporated in this report by reference
      thereto, except, however, the section entitled “Compensation Committee Report”
shall not be deemed to be “soliciting material” or to be filed with the
      Commission or subject to Regulation 14A or 14C, or to the liabilities of Section
      18 of the Exchange Act of 1934, as amended.





ITEM
      12.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





The
      information required by this item is presented under the caption entitled
      "Security Ownership of Certain Beneficial Owners and Management" contained
      in
      the definitive proxy statement issued in connection with the 2008 Annual Meeting
      of Stockholders and is incorporated in this report by reference thereto.
      Information relating to Equity Compensation Plans is found in Item 5 of Part
      II
      of this report.





ITEM
      13.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
      information required by this item is presented under the captions “Certain
      Relationships and Related Transactions” and “Election of Directors” contained in
      the definitive proxy statement issued in connection with the 2008 Annual Meeting
      of Stockholders and is incorporated in this report by reference
      thereto.





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
      information required by this item is presented under the caption "Independent
      Public Accountants” contained in the definitive proxy statement issued in
      connection with the 2008 Annual Meeting of Stockholders and is incorporated
      in
      this report by reference thereto.





**PART
      IV**





ITEM
      15.
      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





(a)
            The
                following documents are filed as part of this report and as response
                to
                Item 8:


Page(1)
              Financial
                  Statements and Supplementary SchedulesReport
                  of Independent Public Accountants
              
              21Balance
                  Sheets as of September 30, 2007 and 2006
              
              22Statements
                  of Operations for the years ended September 30, 2007, 2006 and
                  2005
              
              23Statements
                  of Comprehensive Income (Loss) and Shareholders' Equity for the
                  years
                  ended September 30, 2007, 2006 and 2005
              
              24Statements
                  of Cash Flows for the years ended September 30, 2007, 2006 and
                  2005
              
              25Notes
                  to Financial Statements
              
              26Selected
                  Quarterly Financial Data (unaudited)
              
              33All
                  other schedules are either inapplicable or the information is included
                  in
                  the financial statements and, therefore, have been
                  omitted.(2)
              Financial
                  Statement Schedules required to be filed by Item 8 of this Form
                  10-K:Valuation
                  of Qualifying Accounts
              
              33(3)
              Exhibits





17





Exhibit
                No.
            
            Title3.1
            
            Amended
                and Restated Certificate of Incorporation of DFT Holdings Corp.
                (Incorporated by reference to Exhibit 3.1 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.2
            
            Amended
                Bylaws of IEC Electronics Corp. (Incorporated by reference to Exhibit
                3.2
                to the Company's Annual Report on Form 10-K for the year ended September
                30, 2002).3.3
            
            Agreement
                and Plan of Merger of IEC Electronics into DFT Holdings Corp.
                (Incorporated by reference to Exhibit 3.3 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.4
            
            Certificate
                of Merger of IEC Electronics Corp. into DFT Holdings Corp. - New
                York.
                (Incorporated by reference to Exhibit 3.4 to the Company's Registration
                Statement on Form S-1, Registration No. 33-56498)3.5
            
            Certificate
                of Ownership and Merger merging IEC Electronics Corp. into DFT Holdings
                Corp. - Delaware. (Incorporated by reference to Exhibit 3.5 to the
                Company's Registration Statement on Form S-1, Registration No.
                33-56498)3.6
            
            Certificate
                of Merger of IEC Acquisition Corp. into IEC Electronics Corp.
                (Incorporated by reference to Exhibit 3.6 to the Company’s Registration
                Statement on Form S-1, Registration No. 33-56498)3.7
            
            Certificate
                of Amendment of Certificate of Incorporation of IEC Electronics Corp.
                filed with the Secretary of State of the State of Delaware on Feb.
                26,
                1998 (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly
                Report on Form 10-Q for the Quarter ended March 27,
                1998)3.8
            
            Certificate
                of Designations of the Series A Preferred Stock of IEC Electronics
                Corp.
                filed with the Secretary of State of the State of Delaware on June
                3,
                1998. (Incorporated by reference to Exhibit 3.8 of the Company's
                Annual
                Report on Form 10-K for the year ended September 30,
                1998)4.1
            
            Specimen
                of Certificate for Common Stock.
              Incorporated
                by reference to Exhibit 4.1 to the Company's Registration Statement
                on
                Form S-1, Registration No. 33-56498)4.2
            
            Rights
                Agreement dated as of June 2, 1998 between IEC Electronics Corp.
                and Chase
                Mellon Shareholder Services. LLC., as Rights Agents (Incorporated
                by
                reference to Exhibit 4.1 to the Company's Current Report on Form
                8-K dated
                June 2, 1998)10.1*
            
            Form
                of Indemnity Agreement. (Incorporated by reference to Exhibit 10.2
                to the
                Company's Quarterly Report on Form 10-Q for the quarter ended July
                2,
                1993)10.2*
            
            IEC
                Electronics Corp. 1993 Stock Option Plan, as amended (Incorporated
                by
                reference to Exhibit 10.9 to the Company's Annual Report on Form
                10-K for
                the year ended September 30, 1998)10.3*
            
            Form
                of Incentive Stock Option Agreement (Incorporated by reference to
                Exhibit
                4.2 to the Company's Registration Statement on Form S-8, Registration
                No.
                33-79360)10.4*
            
            Form
                of Non-Statutory Stock Option Agreement (Incorporated by reference
                to
                Exhibit 4.3 to the Company's Registration Statement on Form S-8,
                Registration No. 33-79360)10.5*
            
            Form
                of Non-Employee Director Stock Option Agreement (Incorporated by
                reference
                to Exhibit 4.4 to the Company's Registration Statement on Form S-8,
                Registration No. 33-79360)10.6*
            
            IEC
                Electronics Corp. 2001 Stock Option and Incentive Plan, as amended
                on
                November 17, 2004 (Incorporated by reference to Exhibit 4.1 to the
                Company's Registration Statement on Form S-8, Registration No.
                333-122181).10.7
            
            Loan
                Agreement between IEC Electronics Corp., and Keltic Financial Partners,
                LLP, dated January 14, 2003 (Incorporated by reference to Exhibit
                10.28 to
                the Company’s Annual Report on Form 10-K for the year ended September 30,
                2003)10.8
            
            First
                Amendment, dated as of March 23, 2004, to the Loan Agreement dated
                January
                14, 2003, by and between Keltic Financial Partners, LP and IEC Electronics
                Corp. (Incorporated by reference to Exhibit 10.1 to the Company’s
                Quarterly Report on Form 10-Q for the quarter ended March 26,
                2004).




18




10.9
            
            Second
                Amendment, dated as of January 7, 2005, to the Loan Agreement dated
                January 14, 2003, as amended by the First Amendment to the Loan Agreement,
                dated March 23, 2004, by and between Keltic Financial Partners, L.P.
                and
                IEC Electronics Corp. (Incorporated by reference to Exhibit 10.1
                of the
                Company’s Current Report on Form 8-K filed on January 13,
                2005).10.10
            
            Third
                Amendment dated as of September 30, 2005 to Loan Agreement dated
                January
                14, 2003, as amended by the First Amendment to the Loan Agreement,
                dated
                March 23, 2004, and subsequently amended by the Second Amendment
                to the
                Loan Agreement dated January 7, 2005, by and between Keltic Financial
                Partners, L.P. and IEC Electronics Corp. (Incorporated by reference
                to
                Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October
                6, 2005).10.11
            
            Waiver,
                dated as of June 25, 2004 to the Loan Agreement, dated January 14,
                2003,
                by and between Keltic Financial Partners, LP and IEC Electronics
                Corp.(Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
                Report on Form 10-Q for the quarter ended June 25,
                2004).10.12
            
            Fourth
                Amendment dated as of September 12, 2006 to the Loan Agreement dated
                January 14, 2003, as amended by the First Amendment to the Loan Agreement
                dated March 23, 2004, a Second Amendment to the Loan Agreement dated
                as of
                January 27, 2005 and a Third Amendment to the Loan Agreement dated
                September 30, 2005, by and between IEC Electronics and Keltic Financial
                Partners, L.P. (Incorporated by reference to Exhibit 10.1 of the
                Company’s
                Current Report on Form 8-K filed on October 2, 2006).10.13
            
            Fifth
                Amendment dated as of December 4, 2006 to the Loan Agreement dated
                January
                14, 2003 by and between IEC Electronics Corp. and Keltic Financial
                Partners, L.P. (Incorporated by reference to Exhibit 10.1 of the
                Company’s
                Current Report on Form 8-K filed December 5, 2006).10.14*
            
            Form
                of challenge award option agreement granted to senior management
                in Fiscal
                2005 (Incorporated by reference to Exhibit 10.14 to the Company’s Annual
                Report on Form 10-K for the year ended September 30,
                2005).10.15*
            
            Form
                of Sales Restriction Agreement between IEC Electronics Corp. and
                certain
                optionholders,
                dated as of August 24,2005 (Incorporated by reference to Exhibit
                10.15 to
                theCompany’s
                Annual Report on Form 10-K for the year ended September 30,
                2005).10.16*
            
            Form
                of First Amendment to Challenge Award Option Agreement dated as of
                September 29, 2006.10.17*
            
            2007
                Management Incentive Plan14
            
            Code
                of Business Conduct and Ethics (Incorporated by Reference to Exhibit
                14 to
                the Company’s Current Report on Form 8-K filed on September 1,
                2004)23.1
            
            Consent
                of Rotenberg & Co., LLP31.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002





*Management
      contract or compensatory plan or arrangement


19





SIGNATURES





Pursuant
      to the requirement of Section 13 or 15(d) of the Securities and Exchange Act
      of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





Dated:
      November 15, 2007.





IEC
                Electronics Corp.By:/s/
                W. Barry GilbertW.
                Barry GilbertChief
                Executive Officer and Chairman of the
                Board





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report
      has been signed below by the following persons on behalf of the registrant
      and in the capacities and on the dates indicated.


Signature
              
              Title
              
              Date/s/W.
                  Barry Gilbert
              
              Chief
                  Executive Officer and(W.
                  Barry Gilbert)
              
              Chairman
                  of the Board
              
              November
                  15, 2007/s/Brian
                  H. Davis
              
              Vice
                  President,(Brian
                  H. Davis)
              
              Chief
                  Financial Officerand
                  Controller
              
              November
                  15, 2007/s/Carl
                  E. Sassano
              
              Director
              
              November
                  15, 2007(Carl
                  E. Sassano)/s/Jerold
                  L. Zimmerman
              
              Director
              
              November
                  15, 2007(Jerold
                  L. Zimmerman)/s/Eben
                  S. Moulton
              
              Director
              
              November
                  15, 2007(Eben
                  S. Moulton)/s/Justin
                  L. Vigdor
              
              Director
              
              November
                  15, 2007(Justin
                  L. Vigdor)/s/James
                  C. Rowe
              
              Director
              
              November
                  15, 2007(James
                  C. Rowe)




20





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors


and
      Stockholders


IEC
      Electronics Corp.


Newark,
      New York





We
      have
      audited the accompanying balance sheets of IEC Electronics Corp. (a Delaware
      corporation) as of September 30, 2007 and 2006, and the related statements
      of
      operations, comprehensive income and shareholders’ equity, and cash flows for
      each of the three years in the period ended September 30, 2007. These financial
      statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall consolidated financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the IEC Electronics Corp. as of
      September 30, 2007 and 2006, and the results of its operations and its cash
      flows for each of the three years in the period ended September 30, 2007, in
      conformity with accounting principles generally accepted in the United States
      of
      America.





/s/
                Rotenberg & Co., LLPRotenberg
                & Co., LLPRochester,
                New YorkNovember
                15, 2007




21





IEC
      ELECTRONICS CORP.


BALANCE
      SHEETS


SEPTEMBER
      30, 2007 AND 2006


(in
      thousands)





ASSETS





2007
            
            2006CURRENT
                ASSETS:Cash
            
            $
            -
            
            $
            -Accounts
                receivable (net allowance for doubtful Accounts
                of $100 and $59 respectively)
            
            
            6,185
            
            
            4,941Inventories
            
            
            3,326
            
            
            5,114Deferred
                income taxes
            
            
            640
            
            
            250Other
                current assets
            
            
            75
            
            
            124Total
                Current Assets
            
            
            10,226
            
            
            10,429FIXED
                ASSETS:Land
                and land improvements
            
            $
            704
            
            $
            707Building
                and improvements
            
            
            4,134
            
            
            4,089Machinery
                and equipment
            
            
            22,626
            
            
            22,164Furniture
                and fixtures
            
            
            4,262
            
            
            4,170Sub-Total
                Gross Property
            
            
            31,726
            
            
            31,130Less
                Accumulated Depreciation
            
            
            (30,123
            )
            
            (29,870
            )Net
                Fixed Assets
            
            
            1,603
            
            
            1,260Other
                Non Current Assets
            
            
            16
            
            
            29Total
                Assets
            
            $
            11,845
            
            $
            11,718





LIABILITIES
      AND SHAREHOLDERS' EQUITY





2007
            
            2006CURRENT
                LIABILITIES:Short
                term borrowings
            
            $
            1,325
            
            $
            3,765Accounts
                payable
            
            
            4,937
            
            
            3,853Accrued
                payroll and related expenses
            
            
            628
            
            
            265Other
                accrued expenses
            
            
            366
            
            
            344Total
                current liabilities
            
            
            7,256
            
            
            8,227Long
                term debt
            
            
            426
            
            
            399TOTAL
                LIABILITIES
            
            
            7,682
            
            
            8,626SHAREHOLDERS'
                EQUITY:Preferred
                stock, $.01 par value, Authorized - 500,000 shares; Issued and outstanding
                - none
            
            
            -
            
            
            -Common
                stock, $.01 par value, Authorized - 50,000,000 shares; Issued - 8,670,030
                and 8,401,133 shares
            
            
            87
            
            
            84Treasury
                Shares at Cost 412,873 and 412,873 shares
            
            
            (223
            )
            
            (223
            )Additional
                paid-in capital
            
            
            38,794
            
            
            38,601Accumulated
                deficit
            
            
            (34,495
            )
            
            (35,370
            )Total
                shareholders' equity
            
            
            4,163
            
            
            3,092$
            11,845
            
            $
            11,718




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




22


IEC
        ELECTRONICS CORP.
 STATEMENTS
        OF OPERATIONS
 FOR
        THE
        YEARS ENDED SEPTEMBER 30, 2007, 2006 AND 2005
 (in
        thousands, except per share and share data)
 
 2007
              
              2006
              
              2005Net
                  sales
              
              $
              40,914
              
              $
              22,620
              
              $
              19,066Cost
                  of sales
              
              
              37,037
              
              
              19,867
              
              
              16,436Gross
                  profit
              
              
              3,877
              
              
              2,753
              
              
              2,630Operating
                  expensesSelling
                  and administrative expenses
              
              
              2,892
              
              
              2,155
              
              
              2,165Restructuring
                  charge
              
              
              -
              
              
              -
              
              
              119Total
                  operating expenses
              
              
              2,892
              
              
              2,155
              
              
              2,284Operating
                  income
              
              
              985
              
              
              598
              
              
              346Interest
                  and financing expense
              
              
              (440
              )
              
              (378
              )
              
              (363
              )Other
                  income (expense)
              
              
              (42
              )
              
              (5
              )
              
              302Net
                  income before income taxes
              
              
              503
              
              
              215
              
              
              285(Benefit
                  from) income taxes
              
              
              (372
              )
              
              -
              
              
              -Net
                  income
              
              $
              875
              
              
              215
              
              $
              285Net
                  income per common and common equivalent share:Basic
                          Income available to common
                          shareholders
              
              $
              0.11
              
              $
              0.03
              
              $
              0.03Diluted
                      Income available to common shareholders
              
              $
              0.10
              
              $
              0.03
              
              $
              0.03Weighted
                  average number of common and common equivalent shares
                  outstanding:Basic
              
              
              8,114,491
              
              
              7,973,199
              
              
              8,260,595Diluted
              
              
              8,895,819
              
              
              8,275,961
              
              
              8,570,520
  The
        accompanying notes are an integral part of these financial
        statements.
  23
 
 IEC
        ELECTRONICS CORP.
 STATEMENTS
        OF COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY
 FOR
        THE
        YEARS ENDED SEPTEMBER 30, 2007, 2006 AND 2005
 (in
        thousands)
 
 Comprehensive
                Income
              
              Common
                  Stock
              
              Additional
                  Paid-In Capital
              
              Retained
                Earnings
                (Deficit)
              
              Accumulated
                  Other
                Comprehensive
                (Loss)
              
              Treasury
                Stock
              
              Total
                  Shareholders EquityBALANCE,September
                      30, 2004
              
              
              
              
              $
              82
              
              $
              38,507
              
              $
              (35,870
              )
              $
              (92
              )
              $
              (11
              )
              $
              2,616Shares
                  issued underDirectors
                  and Employee Stock Plan
              
              
              
              
              $
              1
              
              $
              26
              
              
              -
              
              
              -
              
              
              -
              
              $
              27Net
                  Income
              
              $
              285
              
              
              -
              
              
              -
              
              $
              285
              
              
              -
              
              
              -
              
              $
              285Other
                  comprehensiveIncome,
                  currency translation adjustments
              
              $
              92
              
              
              -
              
              
              -
              
              
              -
              
              $
              92
              
              
              -
              
              $
              92Comprehensive
                  income
              
              $
              377BALANCE,September
                  30, 2005
              
              
              
              
              $
              83
              
              $
              38,533
              
              $
              (35,585
              )
              $
              -
              
              $
              (11
              )
              $
              3,020Shares
                  issued and expensed Under Directors and Employee Stock
                  Plan
              
              
              
              
              $
              1
              
              $
              68
              
              
              -
              
              
              -
              
              
              -
              
              $
              69Net
                  Income
              
              $
              215
              
              
              -
              
              
              -
              
              $
              215
              
              
              -
              
              
              -
              
              $
              215Purchase
                  of Treasury Stock
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              (212
              )
              $
              (212
              )Comprehensive
                  income
              
              $
              215BALANCE,September
                  30, 2006
              
              
              
              
              $
              84
              
              $
              38,601
              
              $
              (35,370
              )
              $
              -
              
              $
              (223
              )
              $
              3,092Shares
                  issued and expensed Under Directors and Employee Stock
                  Plan
              
              
              
              
              $
              3
              
              $
              193
              
              
              -
              
              
              -
              
              
              -
              
              $
              196Net
                  Income
              
              $
              875
              
              
              -
              
              
              -
              
              $
              875
              
              
              -
              
              
              -
              
              $
              875Comprehensive
                  income
              
              $
              875BALANCE,September
                  30, 2007
              
              
              
              
              $
              87
              
              $
              38,794
              
              $
              (34,495
              )
              $
              -
              
              $
              (223
              )
              $
              4,163
 
 The
        accompanying notes are an integral part of these financial
        statements.
  24
  IEC
        ELECTRONICS CORP.
 STATEMENTS
        OF CASH FLOWS
 FOR
        THE
        YEARS ENDED SEPTEMBER 30, 2007, 2006 AND 2005
 (in
        thousands)
 
 2007
              
              2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              875
              
              $
              215
              
              $
              285Non-cash
                  adjustments:Compensation
                  Expense - Stock Options
              
              
              80
              
              
              27
              
              
              -(Income)
                  from discontinued operations
              
              
              -
              
              
              -
              
              
              (28
              )Depreciation
                  and amortization
              
              
              410
              
              
              676
              
              
              1,016(Gain)
                  loss on sale of fixed assets
              
              
              17
              
              
              5
              
              
              (270
              )Issuance
                  of directors fees in stock
              
              
              41
              
              
              27
              
              
              21Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (1,244
              )
              
              (2,597
              )
              
              1,366Inventories
              
              
              1,788
              
              
              (4,484
              )
              
              1,253Deferred
                  income taxes
              
              
              (390
              )
              
              -
              
              
              -Other
                  assets
              
              
              62
              
              
              155
              
              
              3Accounts
                  payable
              
              
              1,084
              
              
              2,935
              
              
              (1,336
              )Accrued
                  expenses
              
              
              385
              
              
              (54
              )
              
              (459
              )Net
                  cash flows from operating activities
              
              
              3,108
              
              
              (3,095
              )
              
              (1,851
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                  of property, plant and equipment
              
              
              (787
              )
              
              (407
              )
              
              (239
              )Proceeds
                  from sale of property
              
              
              17
              
              
              11
              
              
              270Net
                  cash flows from investing activities
              
              
              (770
              )
              
              (396
              )
              
              31CASH
                  FLOWS FROM FINANCING ACTIVITIES:Repayments
                  under loan agreements
              
              
              (305
              )
              
              (346
              )
              
              (403
              )Proceeds
                  from equipment loan
              
              
              450Borrowings
                  (payments) on line of credit
              
              
              (2,558
              )
              
              3,573
              
              
              (1,025
              )Purchase
                  of Treasury Stock
              
              
              -
              
              
              (212
              )
              
              -Proceeds
                  from exercise of stock options
              
              
              75
              
              
              15
              
              
              7Net
                  cash flows from financing activities
              
              
              (2,338
              )
              
              3,030
              
              
              (1,421
              )Change
                  in cash and cash equivalents
              
              
              -
              
              
              (461
              )
              
              461Cash
                  and cash equivalents, beginning of year
              
              
              -
              
              
              461
              
              
              -Cash
                  and cash equivalents, end of year
              
              $
              -
              
              $
              -
              
              $
              461SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Cash
                  paid during the year for:Interest
              
              $
              427
              
              $
              340
              
              $
              260Income
                  taxes, net of refunds received
              
              $
              3
              
              $
              -
              
              $
              -
 
 The
        accompanying notes are an integral part of these financial
        statements.
  25
  IEC
        ELECTRONICS CORP.
 NOTES
        TO
        FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007, 2006 AND 2005
 
 1.
        BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
 Business
 
 IEC
        Electronics Corp. ("IEC", the "Company") is an independent electronics
        manufacturing services("EMS") provider of complex printed circuit board
        assemblies and electronic products and systems. The Company is a significant
        provider of high quality electronics manufacturing services with
        state-of-the-art manufacturing capabilities. Utilizing computer controlled
        manufacturing and test machinery and equipment, the Company provides
        manufacturing services employing surface mount technology ("SMT") and
        pin-through-hole ("PTH") interconnection technologies. As an independent
        full-service EMS provider, the Company offers its customers a wide range
        of
        manufacturing and management services, on either a turnkey or consignment
        basis,
        including design, prototype, material procurement and control, manufacturing
        and
        test engineering support, statistical quality assurance, complete resource
        management and distribution. The Company's strategy is to cultivate strong
        manufacturing relationships with established and emerging original equipment
        manufacturers ("OEMs").
 
 Revenue
        Recognition
 
 The
        Company’s net revenue is derived from the sale of electronic products built to
        customer specifications. The Company also derives revenue from design services
        and repair work. Revenue from sales is generally recognized, net of estimated
        product return costs, when goods are shipped; title and risk of ownership
        have
        passed; the price to the buyer is fixed or determinable; and recovery is
        reasonable assured. Service related revenues are recognized upon completion
        of
        the services. The Company assumes no significant obligations after product
        shipment.
 
 Allowance
        for Doubtful Accounts
 
 The
        Company establishes an allowance for uncollectable trade accounts receivable
        based on the age of outstanding invoices and management’s evaluation of
        collectibility of outstanding balances.
 
 Cash
        and
        Cash Equivalents
 
 Cash
        and
        cash equivalents include highly liquid investments with original maturities
        of
        three months or less. The Company's cash and cash equivalents are held and
        managed by institutions which follow the Company's investment policy. The
        fair
        value of the Company's financial instruments approximates carrying amounts
        due
        to the relatively short maturities and variable interest rates of the
        instruments, which approximate current market interest rates.
 
 Long-Lived
        Assets
 
 The
        Company evaluates its long-lived assets for financial impairment on a regular
        basis in accordance with Statement of Financial Accounting Standards No.
        144,
        "Accounting for the Impairment or Disposal of Long-Lived Assets." IEC evaluates
        the recoverability of long-lived assets not held for sale by measuring the
        carrying amount of the assets against the sum of the undiscounted cash flows
        expected to result from the use and eventual disposition of the asset (asset
        group).
 
 Fair
        Value of Financial Instruments
 
 Financial
        instruments consist of cash and cash equivalents, accounts receivable and
        payable, accrued liabilities, and debt. The carrying amount of cash and cash
        equivalents, accounts receivable, accounts payable and accrued liabilities
        approximate fair value. The fair value of the Company's debt is estimated
        based
        upon similar market rate debt issues.
 
 26
  Earnings
        Per Share
 
 Net
        income (loss) per common share is computed in accordance with SFAS No. 128,
        "Earnings Per Share". Basic earnings per common share are calculated by dividing
        income available to common shareholders by the weighted-average number of
        common
        shares outstanding for each period. Diluted earnings per common share are
        calculated by adjusting the weighted-average shares outstanding assuming
        conversion of all potentially dilutive stock options, warrants and convertible
        securities.
 
 Stock
        Based Compensation
 
 The
        Company adopted SFAS No. 123(R) on October 1, 2005 using the modified
        Prospective Application Method. Prior to October 1, 2005, the Company accounted
        for stock-based awards in accordance with APB Opinion No. 25. For the fiscal
        years ended September 30, 2006 and September 30, 2007, the Company recorded
        stock-based compensation expense for the cost of stock and options issued
        under
        its Stock Option and Incentive Plan. The Company’s expensing of stock-based
        compensation decreased both our basic and diluted net income per share by
        less
        than $0.01 for the fiscal years ended September 30, 2006 and September 30,
        2007.
 
 Under
        the
        provisions of APB Opinion No. 25, the Company was not required to recognize
        compensation expense for the cost of stock options. The following table
        illustrates the effect on net income and net income per share as if the Company
        had applied the fair value recognition provisions of SFAS No. 123, as amended
        by
        SFAS No. 148, *Accounting
        for Stock-Based Compensation — Transition and Disclosure* for
        the
        fiscal year ended September 30, 2005 (in thousands, except per share
        data):
  Net
                  earnings, as reported
              
              $
              285Deduct:   Compensation
                  Cost using theFair
                  value method, net of tax
              
              $
              (199
              )Pro
                  forma net earnings
              
              $
              86Earnings
                  per share:Basic -
                  as reported
              
              $
              0.03Basic -
                  pro forma
              
              $
              0.01Diluted -
                  as reported
              
              $
              0.03Diluted -
                  pro forma
              
              $
              0.01
  During
        2007, 2006, and 2005 the Company issued 141,250, 27,500, and 643,000 options,
        respectively. The fair value of each option issued during these periods was
        estimated on the date of grant using the Black-Scholes option pricing model
        with
        the following weighted average assumptions:
 
 2007
              
              2006
              
              2005Risk
                  free interest rate
              
              
              4.8
              %
              
              4.4
              %
              
              3.9
              %Expected
                  term
              
              
              5
                  years
              
              
              4
                  years
              
              
              4
                  yearsVolatility
              
              
              52
              %
              
              72
              %
              
              54
              %Expected
                  annual dividends
              
              
              none
              
              
              none
              
              
              none
 
 The
        weighted average fair value of options granted during 2007 was $0.81 with
        an
        aggregate value of $113,980. The weighted average fair value of options granted
        during 2006 was $.27 with an aggregate total value of $7,000. The weighted
        average fair value of options granted during 2005 was $.54 with an aggregate
        total value of $201,000. There were no dividends. Forfeitures are recognized
        as
        they occur.
 
 On
        August
        24, 2005, the Board of Directors approved accelerated vesting on stock options
        with an exercise price of $0.90 or higher. Approximately 184,000 options
        were
        vested due to this decision.
 
 27
  Use
        of
        Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of
      assets
      and liabilities, the disclosure of contingent assets and liabilities at the
      date
      of the financial statements, and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





RECENTLY
      ISSUED ACCOUNTING STANDARDS





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair Value
      Option for Financial Assets and Financial Liabilities, including an amendment
      of
      FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value at specified
      election dates. This Statement applies to all entities, including not-for-profit
      organizations. SFAS 159 is effective as of the beginning of an entity’s first
      fiscal year that begins after November 15, 2007. As such, the Company is
      required to adopt these provisions at the beginning of the fiscal year ended
      September 30, 2009. The Company is currently evaluating the impact of SFAS
      159
      on its financial statements, but does not expect this to have a material
      impact





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
      Measurements”. SFAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS 157 is effective as of the beginning of the first fiscal year that begins
      after November 15, 2007. As such, the Company is required to adopt these
      provisions at the beginning of the fiscal year ended September 30, 2009. The
      Company is currently evaluating the impact of SFAS 157 on its financial
      statements, but does not expect this to have a material impact.





In
      June
      2006, the FASB issued FIN 48, *Accounting
      for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109.* This
      interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements. This interpretation
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. As such, the Company is required to adopt
      these provisions at the beginning of the fiscal year ended September 30, 2008. The
      Company is currently evaluating the impact of FIN 48 on its financial
      statements, but does not expect the impact to be material.





2.
      INVENTORIES





Inventories
      are stated at the lower of weighted average cost (first-in, first-out) or
      market. The major classifications of inventories are as follows at period end
      (in thousands):





2007
            
            2006Raw
                Materials
            
            $
            1,811
            
            $
            3,270Work-in-process
            
            
            1,427
            
            
            1,836Finished
                goods
            
            
            88
            
            
            8$
            3,326
            
            $
            5,114




28




3.
      PROPERTY, PLANT, AND EQUIPMENT





Property,
      plant, and equipment are stated at cost and are depreciated over various
      estimated useful lives using the straight-line method.




Maintenance
      and repairs are charged to expense as incurred; renewals and improvements are
      capitalized. At the time of retirement or other disposition of property, plant,
      and equipment, the cost and accumulated depreciation are removed from the
      accounts and any gain or loss is reflected in other income.





Depreciation
      and amortization was $0.4 million, $0.7 million, and $1.0 million for the years
      ended September 30, 2007, 2006 and 2005, respectively.





The
      principal depreciation and amortization lives used are as follows:





Description
            
            EstimatedUseful LivesLand
                improvements
            
            
            10
                yearsBuildings
                and improvements
            
            
            5
                to 40 yearsMachinery
                and equipment
            
            
            3
                to 5 yearsFurniture
                and fixtures
            
            
            3
                to 7 years





4.
      CREDIT
      FACILITIES:





Debt
      consists of the following at September 30 (in thousands):





2007
            
            2006Short
                Term Borrowings
            
            $
            1,325
            
            $
            3,765Long
                Term Debt
            
            
            426
            
            
            399$
            1,751
            
            $
            4,164





Under
      the
      terms of the current agreement with Keltic Financial Partners. LP (“Keltic”),
      IEC has a line of credit with a maximum borrowing limit up to $6.0 million
      based
      upon advances on eligible accounts receivable and inventory. The Company also
      has a $0.4 million term loan that is secured by the Company’s real estate, and a
      $.3 million term loan that is secured by certain manufacturing equipment. The
      loans have an interest rate of prime plus 1%. The prime rate at September 30,
      2007 was 7.75%. The combined balance on the Keltic loans at September 30, 2007
      was $1.7 million.





The
      Keltic loan agreement contains various affirmative and negative covenants
      including limitations on the amount available under the revolving line of credit
      relative to the borrowing base, capital expenditures, and minimum earnings
      before interest, taxes, depreciation and amortization (EBITDA). The Company
      was
      compliant with these covenants as of September 30, 2007.





Aggregate
      maturities on term debt are as follows (in thousands):




Vendor
            
            Real Estate
            
            EquipmentAgreements
            
            Loan
            
            Loan2008
            
            
            11
            
            
            150
            
            
            1502009
            
            
            3
            
            
            235
            
            
            188Total
            
            $
            14
            
            $
            385
            
            $
            338




29




5.
      INCOME
      TAXES:





The
      provision for (benefit from) income taxes in fiscal 2007, 2006 and 2005 is
      summarized as follows (in thousands):




2007
            
            2006
            
            2005CurrentFederal
            
            $
            15
            
            $
            -
            
            $
            -State/Other
            
            
            3
            
            
            -
            
            
            -DeferredFederal
            
            
            (370
            )
            
            -
            
            
            -State/Other
            
            
            (
                20
            )
            
            -
            
            
            -(Benefit
                from) provision for income taxes, net
            
            $
            (372
            )
            
            -
            
            
            -




The
      components of the deferred tax asset (liability) at September 30 are as follows
      (in thousands):





2007
            
            2006
            
            2005Net
                operating loss and AMT credit carryovers
            
            $
            15,848
            
            $
            15,874
            
            $
            16,069Accelerated
                depreciation
            
            
            500
            
            
            495
            
            
            446New
                York State investment tax credits
            
            
            3,276
            
            
            3,254
            
            
            3,237Inventories
            
            
            95
            
            
            188
            
            
            128Goodwill
            
            
            130
            
            
            171
            
            
            212Other
            
            
            197
            
            
            214
            
            
            20020,046
            
            
            20,196
            
            
            20,292Valuation
                allowance
            
            
            (19,406
            )
            
            (19,946
            )
            
            (20,042
            )$
            640
            
            $
            250
            
            $
            250




The
      Company has a net operating loss carryforward of $46.4 million (expiring in
      years through 2024). The Company has available approximately $4.9 million in
      New
      York State investment tax credits (expiring in years through 2017). FAS
      109
      requires the company to establish an asset on the balance sheet to reflect
      the
      future value associated with the ability to utilize these losses and credits
      against future income tax obligations. During 2001 there was substantial doubt
      as to the company's viability as a going concern. The company was not certain
      about its ability to utilize its net operating losses and investment tax
      credits, so a full valuation allowance was established against the deferred
      tax
      asset.





The
      company has been rebuilding its business and increasing profitability since
      2005. Management is increasingly confident about its prospects for future
      profitability. The outlook for future profitability has been used as a basis
      for
      reversing $640,000 of the valuation allowance against the deferred tax asset.
      Going forward, management will continue to consider what portion of the deferred
      tax asset is more than likely to be realized, and the valuation allowance will
      be adjusted accordingly.




The
      differences between the effective tax rates and the statutory federal income
      tax
      rates for fiscal years 2007, 2006 and 2005 are summarized as
      follows:




2007
            
            2006
            
            2005Federal
                Tax at statutory rates
            
            
            34.0
            %
            
            34.0
            %
            
            34.0
            %Goodwill
                adjustments
            
            
            -
            
            
            -
            
            
            -State
                tax, net of Federal Benefit
            
            
            5.0
            
            
            5.0
            
            
            5.0Utilization
                of NOLCarryforwards
            
            
            -
            
            
            -
            
            
            -Valuation
                Allowance
            
            
            (112.0
            )
            
            (39.0
            )
            
            (39.0
            )(73.0
            )%
            
            -
            %
            
            -
            %




30




6.
      SHAREHOLDERS' EQUITY: Stock-Based Compensation Plans





In
      December 2001, the Board of Directors authorized the 2001 Stock Option and
      Incentive Plan, reserving 1,500,000 shares of common stock for issuance to
      directors, officers, consultants or independent contractors providing services
      to the Company and key employees. The shareholders approved the 2001 Plan in
      February 2002. In January 2005, the number of shares reserved under the 2001
      Plan was increased from 1,500,000 shares to 2,500,000 shares. The 2001 plan
      superceded a similar plan that was adopted in 1993 (the “1993 SOP”). The option
      price for incentive options must be at least 100 percent of the fair market
      value at date of grant, or if the holder owns more than 10 percent of total
      common stock outstanding at the date of grant, then not less than 110 percent
      of
      the fair market value at the date of grant. In conjunction with the approval
      of
      the 2001 Plan, no further grants will be made under the 1993 SOP and the 1993
      SOP was terminated. Stock options issued under the 2001 Plan generally terminate
      seven years from date of grant.





Generally,
      incentive stock options granted during the period between July 1995 through
      September 2007 vest in annual increments of 25 percent. Starting with fiscal
      2007, some incentive stock options were granted that vest 50% after three years
      from the date of grant, and 50% after four years from the date of grant. In
      fiscal 2005, the Board of Directors granted certain incentive stock options
      that
      vest on the attainment of certain performance goals rather than on the basis
      of
      time. Nonqualified stock options granted to directors during fiscal years 1999
      to 2007 vest in increments of 33 1/3 percent six months, one year, and two
      years
      from the date of grant.





Changes
      in the status of options under the SOP at September 30, are summarized as
      follows:





Shares
            
            Weighted
              AverageUnder
            
            Exercise
            
            AvailableSeptember
                30,
            
            Option
            
            Price
            
            for
                Grant
            
            Exercisable2004
            
            
            1,102,035
            
            
            
            
            
            70,583
            
            
            481,871Options
                granted
            
            
            643,000
            
            
            0.54Options
                exercised
            
            
            (41,390
            )
            
            0.15Options
                forfeited
            
            
            (77,516
            )
            
            1.012005
            
            
            1,626,129
            
            
            
            
            
            464,497
            
            
            789,159Options
                granted
            
            
            27,500
            
            
            0.63Options
                exercised
            
            
            (77,280
            )
            
            0.23Options
                forfeited
            
            
            (116,890
            )
            
            2.062006
            
            
            1,459,459
            
            
            
            
            
            363,440
            
            
            700,580Options
                granted
            
            
            141,250
            
            
            1.68Options
                exercised
            
            
            (239,007
            )
            
            0.32Options
                forfeited
            
            
            (13,430
            )
            
            1.792007
            
            
            1,348,272
            
            
            
            
            
            203,930
            
            
            704,447





The
      following table summarizes information about stock options outstanding as of September
      30, 2007:




Options Outstanding
            
            Options ExercisableRange
                of
              Exercise
              Prices
            
            Number
              Outstanding
              at
              September 30,
              2007
            
            Weighted
              Average
              Remaining
              Contractual
              Life
            
            Weighted
              Average
              Exercise
              Price
            
            Number
              Exercisable
              at
              September 30,
              2007
            
            Weighted
              Average
              Exercise
              Price$
                0.09 - $ 0.21
            
            
            34,500
            
            
            1.54
            
            $
            0.16
            
            
            34,500
            
            $
            0.16$
                0.40 - $ 0.73
            
            
            684,954
            
            
            3.67
            
            $
            0.54
            
            
            330,089
            
            $
            0.53$
                0.95 - $ 1.29
            
            
            447,334
            
            
            2.22
            
            $
            1.00
            
            
            274,834
            
            $
            1.03$
                1.43 - $ 1.95
            
            
            181,484
            
            
            4.62
            
            $
            1.68
            
            
            65,024
            
            $
            1.591,348,272
            
            
            
            
            
            
            
            
            704,447





31





7.
      MAJOR
      CUSTOMERS AND CREDIT RISK CONCENTRATIONS:





Financial
      instruments, which potentially subject the Company to concentrations of a
      significant credit risk, consist primarily of cash, cash equivalents, and trade
      accounts receivable. The Company has concentrations of credit risk due to sales
      to its major customers. Five customers accounted for 61% and 66% of our revenue
      during fiscal 2007 and 2006 respectively.





At
      September 30, 2007, amounts due from two customers represented 28 percent and
      19
      percent of trade accounts receivable. At September 30, 2006, amounts due from
      two customers represented 35 and 11 percent of trade accounts receivable. The
      Company performs ongoing credit evaluations of its customers' financial
      positions and generally does not require collateral.





8.
      COMMITMENTS AND CONTINGENCIES:





As
      of
      September 30, 2007, the Company was obligated under non-cancelable operating
      leases, primarily for manufacturing and office equipment. These leases generally
      contain renewal options and provisions for payment of the lease for executory
      costs (taxes, maintenance and insurance). Rental expenses on equipment were
      $5,000, $8,000, $34,000 for fiscal 2007, 2006 and 2005,
      respectively.





Litigation





On
      August
      13, 2003 General Electric Company (“GE”) commenced an action in the state of
      Connecticut against IEC and Vishay Intertechnology, Inc. (“Vishay”). The action
      alleges cause of action for breach of a manufacturing services contract, which
      had an initial value of $4.4 million, breach of express warranty, breach of
      implied warranty, and a violation of the Connecticut Unfair Trade Practices
      Act.
      Vishay supplied a component that IEC used to assemble printed circuit boards
      for
      GE that GE contends failed to function properly requiring a product recall.
      GE
      claims damages “in excess of $15,000” plus interest and attorney’s fees. IEC and
      Vishay are proceeding to defend GE’s Connecticut action on the merits and IEC is
      proceeding with a cross claim against Vishay. IEC filed a motion for summary
      judgment directed to all counts. On January 11, 2007, the Court granted the
      motion in part, dismissing
      the claim for violation of the Connecticut Unfair Trade Practices Act, but
      determined that factual issues were disputed on the contract and warranty
      claims. On
      September 17, 2007, at a status conference, the parties agreed to a schedule
      for
      the case and it was set forth as an order of the Court. The Scheduling Order
      contemplates a trial to begin on January 5, 2010. IEC
      intends to vigorously defend the claims and prosecute the cross claim, and
      is
      proceeding with the discovery process in accordance with the Scheduling
      Order.




9.
      RETIREMENT PLAN:





The
      Company has a retirement savings plan, established pursuant to Sections 401(a)
      and 401(k) of the Internal Revenue Code. This plan is for the exclusive benefit
      of its eligible employees and beneficiaries. Eligible employees may elect to
      contribute a portion of their compensation each year to the plan. The plan
      allows the Company to make discretionary contributions as determined by the
      Board of Directors. There were no discretionary contributions for fiscal 2007,
      2006, or 2005.





10.
      SUBSEQUENT EVENTS:





There
      have been no material subsequent events.





32


SELECTED
      QUARTERLY FINANCIAL DATA (UNAUDITED)





First
            
            Second
            
            Third
            
            FourthQuarter
            
            Quarter
            
            Quarter
            
            Quarter(in
                thousands, except per share data)YEAR
                ENDED SEPTEMBER 30,2007:Net
                sales
            
            $
            9,246
            
            $
            10,899
            
            $
            11,165
            
            $
            9,604Gross
                profit (loss)
            
            
            208
            
            
            1,529
            
            
            1,315
            
            
            825Net
                (loss) income
            
            
            (576
            )
            
            603
            
            
            553
            
            
            295Basic
                earnings(loss) per share
            
            $
            (0.07
            )
            $
            0.08
            
            $
            0.07
            
            $
            0.03Diluted
                earnings(loss) per share
            
            $
            (0.07
            )
            $
            0.07
            
            $
            0.07
            
            $
            0.03YEAR
                ENDED SEPTEMBER 30,2006:Net
                sales
            
            $
            3,607
            
            $
            5,580
            
            $
            5,379
            
            $
            8,054Gross
                profit
            
            
            519
            
            
            431
            
            
            755
            
            
            1,048Net
                income
            
            
            (48
            )
            
            (168
            )
            
            79
            
            
            352Basic
                earnings(loss) per share
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            0.01
            
            $
            0.05Diluted
                earnings(loss) per share
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            0.01
            
            $
            0.05





VALUATION
      AND QUALIFYING ACCOUNTS




September
            
            Charged
                to
            
            
            
            September30,
                2006
            
            Expense
            
            Deductions
            
            30,
                2007Allowance
                for doubtful accounts
            
            
            59
            
            
            46
            
            
            (5
            )
            
            100Inventory
                reserves
            
            
            516
            
            
            (58
            )
            
            547
            **
            
            1,005Warranty
                reserves
            
            
            140
            
            
            26
            
            
            (51
            )
            
            115Deferred
                tax valuation allowance
            
            
            19,946
            
            
            -
            
            
            (416
            )
            
            19,530




**
      customer funded




September
            
            Charged
                to
            
            
            
            September30,
                2005
            
            Expense
            
            Deductions
            
            30,
                2006Allowance
                for doubtful accounts
            
            
            35
            
            
            4
            
            
            20
            *
            
            59Inventory
                reserves
            
            
            343
            
            
            4
            
            
            169
            **
            
            516Warranty
                reserves
            
            
            190
            
            
            -
            
            
            (50
            )
            
            140Deferred
                tax valuation allowance
            
            
            
            
            
            19,729
            
            
            217
            
            
            19,946





*
      recoveries  **
      customer funded




September
            
            Charged
                to
            
            
            
            September30,
                2004
            
            Expense
            
            Deductions
            
            30,
                2005Allowance
                for doubtful accounts
            
            
            500
            
            
            (58
            )
            
            (407
            )
            
            35Inventory
                reserves
            
            
            290
            
            
            53
            
            
            -
            
            
            343Warranty
                reserves
            
            
            75
            
            
            115
            
            
            -
            
            
            190Deferred
                tax valuation allowance
            
            
            20,034
            
            
            -
            
            
            (628
            )
            
            19,406





33