UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K


(Mark
One)


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


For the fiscal year ended September 30,
2009 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 of
              (IRS
      Employer ID No.)incorporation
      or organization)





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:





Common
      Stock, $.01 par value
              NYSE
      Amex(Title
      of Class)
              (Name
      of each exchange on which
registered)





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





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  xNo   ̈





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files.) Yes   ̈    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, a non-accelerated
filer, or a smaller reporting company.  See the definitions of “large
accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule
12b-2 of the Exchange Act (Check one)





 ̈Large
      accelerated filer
                   ̈Accelerated
      filerxNon-accelerated
      filer
                   ̈Smaller
      reporting company





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 27, 2009, 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 $ 9,558,887(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 9, 2009, there were
outstanding 8,750,455 shares of Common Stock.





Documents
incorporated by reference:





Portions of IEC Electronics Corp.'s
definitive Proxy Statement for the 2010 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.





TABLE
OF CONTENTS





PAGEPART
      IItem 1:
                                                                            Business
                                                                            3Item 1A:
                                                                            Risk Factors
                                                                            6Item 1B:
                                                                            Unresolved Staff Comments
                                                                            10Item 2:
                                                                            Properties
                                                                            10Item 3:
                                                                            Legal Proceedings
                                                                            10Item 4:
                                                                            Submission of Matters to a Vote of Security
      Holders
                                                                            10Executive Officers of Registrant
                                                                            11PART
      IIItem 5:
                                                                            Market for Registrant's Common Equity, Related Stockholder
      Matters, and Issuer Purchases of Equity Securities
                                                                            12Item 6:
                                                                            Selected Consolidated Financial Data
                                                                            13Item 7:
                                                                            Management's Discussion and Analysis of Financial Condition
      and Results of Operations
                                                                            14Item 7A:
                                                                            Quantitative and Qualitative Disclosures about Market
      Risk
                                                                            18Item 8:
                                                                            Financial Statements and Supplementary
    Data
                                                                            18Item 9:
                                                                            Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
                                                                            18Item 9A(T):
                                                                            Controls and Procedures
                                                                            18Item 9B:
                                                                            Other Information
                                                                            19PART
      IIIItem 10:
                                                                            Directors, Executive Officers, and Corporate
      Governance
                                                                            19Item 11:
                                                                            Executive Compensation
                                                                            19Item 12:
                                                                            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
                                                                            19Item 13:
                                                                            Certain Relationships, Related Transactions and Director
      Independence
                                                                            20Item 14:
                                                                            Principal Accountant Fees and Services
                                                                            20PART
      IVItem 15:
                                                                            Exhibits and Financial Statement
    Schedules
                                                                            20





"SAFE
HARBOR" CAUTIONARY STATEMENT UNDER THE


PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995





References in this report to “IEC”, the
“Company”, “we”, “our”, or “us” mean IEC Electronics Corp. and its subsidiaries,
except where the context otherwise requires.  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, our ability to
assimilate acquired businesses and to achieve the anticipated benefits of such
acquisitions, 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", “us” the “Company”), is a premier provider of electronic manufacturing
services,(“EMS”), to advanced technology companies. We specialize in the custom
manufacture of high reliability, complex circuit cards, system level assemblies
and a wide array of custom cable/wire harness assemblies.  We excel
where quality is paramount and where low to medium volume, high mix production
is the norm.  We utilize state-of-the art, automated circuit card
assembly equipment coupled with a full complement of high reliability
manufacturing stress testing technologies.  We have created a “high
intensity response culture” to react and adapt to our customer’s ever-changing
needs.  Our customer focused approach offers a high degree of
flexibility while simultaneously complying with the industry’s rigorous quality
and on-time delivery standards.  As a true extension of our customer’s
operation, we have applied industry leading Six Sigma and Lean Manufacturing
principles to eliminate waste and lower our customer’s total cost of ownership.
While many EMS services are viewed as a commodity, we have set ourselves apart
through an uncommon mix of features including:




§
            A
      world class Technology Center that combines a dedicated prototype
      manufacturing center with an on-site Materials Analysis Lab (headed by two
      staff PhD’s) for the seamless introduction of complex
      electronics




§
            A
      sophisticated Lean/Sigma continuous improvement program supported by five
      certified Six Sigma Blackbelts delivering best-in-class
      results




§
            Industry-leading
      Web Portal providing real-time access to a wide array of critical customer
      data




§
            In-house
      custom functional test development to support complex system-level
      assembly, test, troubleshoot and end-order
  fulfillment




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.  On May 30, 2008, IEC
acquired all of the stock of Val-U-Tech Corp., a wire and cable-harness
inter-connect business, located in Victor, New York.  Val-U-Tech was
renamed IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) during
2009.  IEC Electronics Wire and Cable, Inc. is a premier cable and
wire harness manufacturer specializing in high-reliability applications for
companies in the military, medical, industrial and transportation market
sectors.  Wire and Cable manufactures a diverse portfolio of custom
cable/wire harness assemblies, mechanical sub-assemblies, circuit card
assemblies and box builds with an emphasis on perfect quality delivered
precisely on time.





IEC is a world-class ISO 9001-2000,
AS9100 and ISO13485 certified company. The AS9100 certification enables IEC to
service the military and commercial aerospace markets.  The ISO13485
certification supports the quality requirements of the medical device
markets.  We are also ITAR registered and NSA approved under the
COMSEC standard.  Our manufacturing processes encompass the best
aspects of Lean Manufacturing and Six Sigma Principles. Many customers consider
these certifications crucial when qualifying an EMS provider.  Our
state-of-the-art Technology Center includes prototype assembly, design
engineering services, and an Advanced Materials Technology
Laboratory.





We continually evaluate emerging
technologies and maintain a technology road map to ensure relevant processes and
advances in new equipment 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 and ceramic BGA's
since 1994. 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 our Design Engineering
Group.





Our experienced workforce has a high
level of technical expertise.  Our emphasis is on building the most
challenging complex systems serving original equipment manufacturers (“OEMs”)
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.


3


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.





IEC's
Strategy





Our strategy is to cultivate strong
manufacturing partnerships with established and emerging OEMs in the ruggedized
industrial, communications, medical, homeland security, and military and
aerospace industries that require high reliability final
assemblies.  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 wireless communication systems,
test diagnostic equipment, military and defense systems, transportation
products, and medical systems and instrumentation.  During the fiscal
year ended September 30, 2009 we provided electronics and cable harness
manufacturing services to approximately 80 different customers. We provide
our services to multiple divisions and product lines of many of our customers
and typically manufacture successive product generations for our
customers.  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 and metals.


4


Marketing
and Sales





Our sales increased during 2009,
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 2010.  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 aligned with our core areas of expertise.  For
example, we focus on customers developing complex, advanced technology products
for a wide array of market sectors ranging from satellite communications,
medical, military and ruggedized 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 for 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.





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





During fiscal 2009 our backlog remained
solid, an excellent result given the commercial turbulence of the last
year.  We closed the year with backlog of $41.4 million as compared to
a fiscal 2008 closing backlog of $43.9 million.  Backlog consists of
two categories; orders, and firm forecasted commitments.  We also
receive orders during the quarter, to ship in the same period, that do not
appear in our backlog information.  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 all 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





The Company added 18 employees during
fiscal 2009. IEC's employees numbered 368 at September 30, 2009, including 295
employees engaged in manufacturing and manufacturing support, 38 in engineering,
and 35 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.  IEC's employees numbered 350 at September 30, 2008, including
300 employees engaged in manufacturing and manufacturing support, 28 in
engineering, and 22 in administrative and marketing functions.





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.


5


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 various factors, including, but not limited to,
the following:





-
            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.





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
2009, 2008, and 2007, our five largest customers accounted for 55%, 62%, and 61%
of net sales, respectively.  During fiscal 2009, 2008, and 2007, our
single largest customer in each year accounted for 15%, 21%, and 26% 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 may 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 and
      evolving industry standards, which result in short product life
      cycles;





-
            the
      inability of our customers to develop and market their products, some of
      which are new and untested;





-
            the
      potential that our customers' products may become obsolete or the failure
      of our customers' products to gain widespread commercial acceptance;
      and





-
            recessionary
      periods in our customers'
markets.


6


OUR
RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY
GLOBAL ECONOMIC AND FINANCIAL MARKETS CONDITIONS.





Current global economic and financial
markets conditions, including severe disruptions in the credit markets and the
potential for a significant and prolonged global economic recession, may
materially and adversely affect our results of operations and financial
condition.  These conditions may also materially impact our customers
and suppliers.  Economic and financial market conditions that
adversely affect our customers may cause them to terminate existing purchase
orders or to reduce the volume of products they purchase from us in the
future.  We may have significant balances owing from customers that
operate in cyclical industries and under leveraged conditions that may impair
the collectability of those receivables.  Failure to collect a
significant portion of those receivables could have a material adverse effect on
our results of operations and financial condition.  Adverse economic
and financial credit terms our suppliers extend to us, such as shortening the
required payment period for outstanding accounts receivable or reducing the
maximum amount of trade credit available to us could have an adverse effect on
our results of operations and financial condition.  Changes of this
type could significantly affect our liquidity and could have a material adverse
effect on our results of operations and financial condition.  If we
are unable to successfully anticipate changing economic and financial markets
conditions, we may be unable to effectively plan for and respond to those
changes, and our business could be negatively affected.





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.





ENERGY
PRICE INCREASES MAY NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS





Certain of the components used in our
manufacturing activities are petroleum-based.  In addition, we, along
with our suppliers and customers, rely on various energy sources (including oil)
in our transportation activities.  Over the past several years, energy
prices have sharply increased and have experienced significant
volatility.  These increased energy prices have resulted in an
increase to our raw material costs and transportation costs.  In
addition, the transportation costs of certain of our suppliers and customers
have increased, and some of these increased costs may be passed along to
us.  We may not be able to increase our product prices enough to
offset these increased costs.  In addition, any increase in our
product prices may reduce our future customer orders and
profitability.





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





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.


7


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





The
EMS industry is highly fragmented and is characterized by intense
competition.  We may be operating at a cost disadvantage compared to
other EMS 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.





THE
INTEGRATION OF ACQUIRED OPERATIONS MAY POSE DIFFICULTIES FOR US.





In May 2008, we completed our
acquisition of Wire and Cable.  We may continue to acquire additional
businesses in the future.  This acquisition and future acquisitions
involve risks, including:





▪
            integration
      and management of the operations;


▪
            retention
      of key personnel;


▪
            integration
      of information systems, internal procedures, accounts receivable and
      management, financial and operational
controls;


▪
            retention
      of customer base of acquired
businesses;


▪
            diversion
      of management’s attention from other ongoing business concerns;
      and


▪
            exposure
      to unanticipated liabilities of acquired
  companies.





These and
other factors could harm our ability to achieve anticipated levels of
profitability or realize other anticipated benefits of an acquisition and could
adversely affect our business and operating results.





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.


8


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
additional expense 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 actually may not be
reimbursed on these obligations.  In that case, we could have excess
inventory and/or cancellation or return charges from our suppliers.





In addition, we are starting to provide
managed inventory programs for some of our customers under which we hold and
manage finished goods inventories.  This managed inventory program may
result in higher finished goods inventory levels, 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.





FAILURE
TO ATTRACT AND RETAIN KEY PERSONNEL AND SKILLED EMPLOYEES COULD HURT OUR
OPERATIONS.





Our continued success depends to a
large extent on our ability to recruit, train, and retain skilled employees,
particularly executive management 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.  While we do have an employment
agreement with W. Barry Gilbert, our Chief Executive Officer, we do not have
employment agreements or non-competition agreements with any of our other 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, and local 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 violations, we
may have to spend funds to comply with present and future regulations or be
required to perform site remediation.


9


IF
WE ARE UNABLE TO MAINTAIN EFFECTIVE INTERNAL CONTROL OVER OUR FINANCIAL
REPORTING, INVESTORS COULD LOSE CONFIDENCE IN THE RELIABILITY OF OUR FINANCIAL
STATEMENTS, WHICH COULD RESULT IN A REDUCTION IN THE VALUE OF OUR COMMON
STOCK.





As required by Section 404 of the
Sarbanes-Oxley Act, the SEC adopted rules requiring public companies to include
a report of management on the company’s internal control over financial
reporting in their annual reports on Form 10-K; that report must contain an
assessment by management of the effectiveness of our internal control over
financial reporting.





We are continuing our comprehensive
efforts to comply with Section 404 of the Sarbanes-Oxley Act.  If we
are unable to maintain effective internal control over financial reporting, this
could lead to a failure to meet reporting obligations to the SEC, which in turn
could result in an adverse reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements.





THE
AGREEMENTS GOVERNING OUR DEBT CONTAIN VARIOUS COVENANTS THAT IMPACT 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, rent and lease payments and stock option
expense(EBITDARS) and restrict our ability to:





▪
            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 or
  repurchases.





Our credit facilities are secured by a
general security agreement in the assets of the Company and its subsidiaries, a
pledge of the Company’s equity interest in its subsidiary, a negative pledge on
the Company’s real property, and a guarantee by the Company’s
subsidiary.





Our ability to comply with covenants
contained in our existing debt and 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 NYSE
AMEX.  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





None





ITEM 2.  PROPERTIES





We own our administrative and main
manufacturing facility which is located in Newark, New York and contains an
aggregate of approximately 300,000 square feet.  We also lease a
manufacturing facility in Victor, New York, which contains an aggregate of
approximately 18,000 square feet.  We believe that our properties are
generally in good condition, are well maintained, and are generally suitable and
adequate to carry on our business in its current form.





ITEM 3.  LEGAL PROCEEDINGS





There are no material legal proceedings
pending to which IEC or its subsidiary is a party or of which any of their
property is the 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 five percent (5%) of Common Stock of IEC, or any
associate of any of the foregoing, is a party adverse to IEC or its subsidiary
or has a material interest adverse to IEC or its subsidiary.





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





During
the fourth quarter of fiscal 2009, no matters were submitted to vote of security
holders.


10


EXECUTIVE OFFICERS OF THE REGISTRANT





IEC's
executive officers as of September 30, 2009, were as follows:





Name
              
              Age
              
              PositionW.
      Barry Gilbert
              
              63
              
              Chairman
      of the Board, and Chief Executive OfficerJeffrey
      T. Schlarbaum
              
              43
              
              Executive
      Vice President and President of IEC Contract
  ManufacturingDonald
      S. Doody
              
              43
              
              Senior
      Vice President of OperationsMichael
      R. Schlehr
              
              47
              
              Vice
      President and Chief Financial
Officer





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.  He holds an MBA from the University of Rochester in
Applied Economics and Finance.





Jeffrey T. Schlarbaum was promoted to
Executive Vice President and President of IEC Contract Manufacturing in May
2008.  He 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.





Donald S. Doody, was promoted to Senior
Vice President of Operations in May 2008. He 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
degree in Engineering from the State University of New York, College at Buffalo
and a M.S. degree in Industrial Sciences from Colorado State
University.





Michael R. Schlehr joined IEC in
February of 2008 with more than 20 years experience in operations and financial
management for manufacturers in diverse industries.  Mr. Schlehr started
his career with RJR Nabisco in various facility accounting roles and eventually
as a Senior Investment Analyst at the corporate level.  He was a Controller
and Production Manager for a subsidiary of Smurfit/Stone.  Mr. Schlehr held
positions of Operations Manager and Corporate Controller before relocating to
Rochester, NY for Birdseye Foods, Inc. where he functioned as Director of
Operations Accounting.  Mr. Schlehr’s most recent position was Vice
President of Finance and Administration for the Process Solutions Division of
Robbins & Myers, Inc.  He holds a BS degree with Honors in dual majors
of Accounting and Management from Canisius College in Buffalo,
NY.


11


PART
II




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





(a)   Market
Information.





IEC's Common Stock began trading on the
NYSE Amex on June 9, 2009 under the symbol "IEC".  Prior to that,
IEC's Common Stock was traded 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 sales prices for the Common
Stock as reported on the OTCBB or NYSE Amex, as applicable.  The
quotations on the OTCBB reflect inter-dealer prices, without mark-up, mark-down
or commission, and may not represent actual transactions.





Quarter
                  
                  High
                  
                  
                  LowOctober
      1, 2007 – December 28, 2007
                  
                  $
                  2.50
                  
                  
                  $
                  1.60December
      29, 2007 – March 28, 2008
                  
                  $
                  1.90
                  
                  
                  $
                  1.60March
      29, 2008 – June 27, 2008
                  
                  $
                  2.20
                  
                  
                  $
                  1.50June
      28, 2008 – September 30, 2008
                  
                  $
                  2.20
                  
                  
                  $
                  1.76October
      1, 2008 – December 26, 2008
                  
                  $
                  1.90
                  
                  
                  $
                  1.40December
      27, 2008 – March 27, 2009
                  
                  $
                  1.60
                  
                  
                  $
                  1.19March
      28, 2009 – June 26, 2009
                  
                  $
                  3.98
                  
                  
                  $
                  1.35June
      27, 2009 – September 30, 2009
                  
                  $
                  7.45
                  
                  
                  $
                  3.30





The
closing price of IEC's Common Stock on the NYSE Amex on November 9, 2009, was $
4.57 per share.





(b)  
Holders.





As of November 9, 2009, there were
approximately 165 holders of record of IEC's Common Stock, which does not
include shareholders whose stock is held through securities position
listings.  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,
2009.





Number of securitiesNumber of securities
                
                
                
                
                
                remaining available forto be issued upon
                
                
                Weighted-average
                
                
                future issuance underexercise of
                
                
                exercise price of
                
                
                equity compensation plansoutstanding options,
                
                
                outstanding options,
                
                
                (excluding securitiesPlan Category
                
                warrants and rights
                
                
                warrants and rights
                
                
                reflected in column
      (a))(a)(2)
                
                
                (b)
                
                
                (c)(3)Equity
      compensation plans:approved
      by security holders(1)
                
                
                971,988
                
                
                $
                1.10
                
                
                
                602,786not
      approved by security holders
                
                
                -0-
                
                
                
                N/A
                
                
                
                -0-Total
                
                
                971,988
                
                
                $
                1.10
                
                
                
                602,786





(1)  Consists
of IEC's 2001 Stock Option and Incentive Plan (the "2001 Plan")


(2)  Under
the 2001 Plan, in addition to options, we have granted share-based compensation
awards to outside directors, restricted stock awards, other stock-based awards
and stock purchase programs.  As of September 30, 2009, there were
545,602 such awards under the 2001 Plan, all of which shares were issued and
outstanding.


(3)  These
shares may be issued in the form of stock options, restricted stock, performance
shares or other share-based awards.





Issuance
      of Unregistered Securities:
              Not
      ApplicableRepurchases
      of IEC Securities:
              We
      repurchased no shares during the last quarter of Fiscal
    2009.




12


Item 6. SELECTED FINANCIAL DATA





IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES


SELECTED
FINANCIAL DATA


(in
thousands, except per share data)





Years
      Ended September 30,
                                            
                                            2009(#1)
                                            
                                            
                                            2008(#1)
                                            
                                            
                                            2007
                                            
                                            
                                            2006
                                            
                                            
                                            2005INCOME
      STATEMENT DATANet
      sales
                                            
                                            $
                                            67,811
                                            
                                            
                                            $
                                            51,092
                                            
                                            
                                            $
                                            40,914
                                            
                                            
                                            $
                                            22,620
                                            
                                            
                                            $
                                            19,066Gross
      profit
                                            
                                            $
                                            10,826
                                            
                                            
                                            $
                                            6,217
                                            
                                            
                                            $
                                            3,877
                                            
                                            
                                            $
                                            2,753
                                            
                                            
                                            $
                                            2,630Percent
      of net sales
                                            
                                            
                                            16.0
                                            %
                                            
                                            
                                            12.2
                                            %
                                            
                                            
                                            9.5
                                            %
                                            
                                            
                                            12.2
                                            %
                                            
                                            
                                            13.8
                                            %Operating
      income
                                            
                                            $
                                            4,819
                                            
                                            
                                            $
                                            2,392
                                            
                                            
                                            $
                                            985
                                            
                                            
                                            $
                                            598
                                            
                                            
                                            $
                                            346Percent
      of net sales
                                            
                                            
                                            7.1
                                            %
                                            
                                            
                                            4.7
                                            %
                                            
                                            
                                            2.4
                                            %
                                            
                                            
                                            2.6
                                            %
                                            
                                            
                                            1.8
                                            %Net
      income before tax
                                            
                                            $
                                            4,718
                                            
                                            
                                            $
                                            1,634
                                            
                                            
                                            $
                                            503
                                            
                                            
                                            $
                                            215
                                            
                                            
                                            $
                                            257Net
      income
                                            
                                            $
                                            4,956
                                            
                                            
                                            $
                                            10,477
                                            
                                            
                                            $
                                            875
                                            
                                            
                                            $
                                            215
                                            
                                            
                                            $
                                            285Net
      income (loss) per common and common equivalent share:Basic
                                            
                                            $
                                            0.57
                                            
                                            
                                            $
                                            1.22
                                            
                                            
                                            $
                                            0.11
                                            
                                            
                                            $
                                            0.03
                                            
                                            
                                            $
                                            0.03Diluted
                                            
                                            $
                                            0.52
                                            
                                            
                                            $
                                            1.12
                                            
                                            
                                            $
                                            0.10
                                            
                                            
                                            $
                                            0.03
                                            
                                            
                                            $
                                            0.03Common
      and common equivalent sharesBasic
                                            
                                            
                                            8,729
                                            
                                            
                                            
                                            8,554
                                            
                                            
                                            
                                            8,114
                                            
                                            
                                            
                                            7,973
                                            
                                            
                                            
                                            8,261Diluted
                                            
                                            
                                            9,554
                                            
                                            
                                            
                                            9,337
                                            
                                            
                                            
                                            8,896
                                            
                                            
                                            
                                            8,276
                                            
                                            
                                            
                                            8,571BALANCE
      SHEET DATAWorking
      capital(#2)
                                            
                                            $
                                            11,295
                                            
                                            
                                            $
                                            9,247
                                            
                                            
                                            $
                                            3,985
                                            
                                            
                                            $
                                            5,775
                                            
                                            
                                            $
                                            2,038Total
      assets
                                            
                                            $
                                            34,469
                                            
                                            
                                            $
                                            34,184
                                            
                                            
                                            $
                                            12,344
                                            
                                            
                                            $
                                            11,894
                                            
                                            
                                            $
                                            5,538Long-term
      debt, including current maturities(#3)
                                            
                                            $
                                            7,747
                                            
                                            
                                            $
                                            10,008
                                            
                                            
                                            $
                                            1,751
                                            
                                            
                                            $
                                            4,164
                                            
                                            
                                            $
                                            937Shareholders'
      equity
                                            
                                            $
                                            20,254
                                            
                                            
                                            $
                                            15,976
                                            
                                            
                                            $
                                            4,163
                                            
                                            
                                            $
                                            3,092
                                            
                                            
                                            $
                                            3,020





Notes:


#1.)
Comparability of 2009 to prior year is affected by 2008 late-year acquisition of
Wire and Cable.


#2.) 2009
Customer deposits included in current liabilities.  Previously an
offset to assets.


#3.)
Revolving Line of Credit categorized as Long Term Debt.


13


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





The information in this Management's
Discussion & Analysis should be read in conjunction with the accompanying
financial statements, the related Notes to Consolidated 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 10-K.





Overview





During 2004, we refocused our sales
efforts on high technology products that are less likely to migrate to offshore
suppliers due to proprietary technology content, governmental restriction or
volume considerations.  Since then we have continued to expand our
business adding new customers and new markets.  Our customer base is
stronger and more diverse than ever.  We continue to expand in areas
we view as important for our continued growth.  IEC is ISO-9001:2000
registered, and an NSA approved supplier under the COMSEC
standard.  Both IEC and Wire and Cable, our cable harness and
interconnect business, are AS9100 certified to service the military and
commercial aerospace market sector and ISO13485 certified to service the medical
market sector.  We have identified and gained entry into advantageous
markets by leveraging our ability to provide products of the highest quality and
reliability, including significantly complex, low-run volume
assemblies.  Currently, the markets we serve include military,
governmental agencies, aerospace, communications, medical, computing and a
variety of industrial sectors.  During fiscal 2009 our backlog
remained solid, an excellent result given the commercial turbulence of the last
year.  We closed the year with backlog of $41.4 million as compared to
a fiscal 2008 closing backlog of $43.9 million.  Backlog consists of
two categories; orders, and firm forecasted commitments.  We also
receive orders during the quarter, to ship in the same period, that do not
appear in our backlog information.  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.  We continue to improve our internal bench
strength and skills, our reliability testing capabilities and our machinery and
equipment infrastructure to optimize production performance and effectively
manage the steady growth in volume and complexity that we are
experiencing.   Despite the recessionary outlook for the economy,
based upon cautiously optimistic comments from our customers in the military and
aerospace sectors, we expect continued growth in both revenue and profitability
throughout fiscal 2010.





Analysis
of Operations





Sales   
       (dollars in millions)For
      Year Ended September 30,
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Net
      sales
                  
                  $
                  67.8
                  
                  
                  $
                  51.1
                  
                  
                  $
                  40.9





IEC continues to experience strong
top-line growth.  Revenue has increased 33% over 2008 and 66% over the
sales achieved in 2007.  While the current fiscal year included twelve
months of Wire and Cable revenues compared to four months in the previous fiscal
year, the Company also enjoyed healthy organic growth in its core
business.  This significant growth has been fueled by the expansion of
product offerings and by market segment diversification as discussed
above.  Because of our execution, our customers have rewarded us with
ongoing programs and additional business.  The ongoing programs have
become a stable core of our operation. The most significant revenue growth in
recent years has occurred for IEC in the aerospace, medical and industrial
market sectors.





Gross
      Profit(dollars
      in thousands and as a % of Net Sales)For
      Year Ended September 30,
                      
                      2009
                      
                      
                      2008
                      
                      
                      2007Gross
      profit
                      
                      $
                      10,826
                      
                      
                      $
                      6,217
                      
                      
                      $
                      3,877Gross
      profit percent
                      
                      
                      16.0
                      %
                      
                      
                      12.2
                      %
                      
                      
                      9.5
                      %





IEC continues to show an increasing
Gross Profit measured as a percentage of Net Sales.  Versus the prior
year, fiscal 2009 gross profit as a percentage of net sales improved over 2008
by 3.8%.  Since fiscal 2007, the Company has increased its gross
profit as a percentage of net sales by 6.5%.  This trend of
significant increase, at a materially higher revenue level, further demonstrates
the strength of our Company.  This improvement in gross margin was
expected and was discussed in the 2007 year end SEC filing.  In fiscal
2007 IEC transitioned from low volume prototype work to new programs with larger
production volumes.  The associated learning curves for new employees
and for new products affected our efficiency and therefore our
profitability.  In fiscal 2008 and 2009 labor efficiency improved
through effective training of production employees, investments in capital
equipment that served to modernize some processes, and through further
implementation of continuous improvement and lean manufacturing
principles.  Our workforce has expanded in size and in
capability.  Our continued increases in productivity and improvements
in execution have resulted in further penetration into profitable market
sectors.


14





Selling
      and Administrative Expense(dollars
      in thousands and as a % of Net Sales)For
      Year Ended September 30,
                            
                            2009
                            
                            
                            2008
                            
                            
                            2007Selling
      and administrative expense
                            
                            $
                            6,007
                            
                            
                            $
                            3,825
                            
                            
                            $
                            2,892Selling
      and administrative expense percent
                            
                            
                            8.9
                            %
                            
                            
                            7.5
                            %
                            
                            
                            7.1
                            %





Selling and administrative expenses as
a percentage of sales increased to 8.9% in fiscal 2009. Fiscal 2009 included
twelve months of Wire and Cable SG&A costs as compared to fiscal 2008 which
included only four months of Wire and Cable SG&A costs.  This
accounts for $618 of the increase in SG&A costs.  Incremental
costs were also incurred in fiscal 2009 to strengthen our sales and marketing
team.  Sales commissions, advertising, public relations and travel
costs were higher as would be expected with incremental sales efforts and our
efforts to expand into newer markets.  Additionally, costs were
incurred to improve our information systems and technology
infrastructure.  We also have accrued for plant-wide performance-based
incentives which includes a provision for the next segment of Mr. Gilbert’s
contractual incentives.





Other
      Income and Expense(dollars
      in millions)For
      Year Ended September 30,
                      
                      2009
                      
                      
                      2008
                      
                      
                      2007Interest
      and financing expense
                      
                      $
                      0.4
                      
                      
                      $
                      0.5
                      
                      
                      $
                      0.4Other
      (income)/expense
                      
                      $
                      (0.3
                      )
                      
                      $
                      0.3
                      
                      
                      $
                      -





Interest and financing expense was
reduced in 2009.  Favorable interest rates and reduced debt levels
resulted in lower financing costs.  The Company has consistently
remained ahead of schedule with respect to the reduction of debt associated with
its acquisition of the Wire and Cable business. From fiscal year end 2008 to
fiscal year end 2009 the Company’s debt was reduced by $2.3 million. Total cash
available to reduce debt was offset by $1.8 million of capital investments and
$2.0 million of payments to suppliers to capture discounts.





We had “Other income” of $0.3 million
during fiscal 2009 versus $0.3 million of “Other expense” in fiscal
2008.  Other Income for the current year is comprised mainly of a
refund of sales tax, penalties and accrued interest from the State of Alabama
and the City of Arab, Alabama in settlement of a long standing dispute over a
previous sales tax assessment.  Additionally, we received a rebate on
utilities associated with our recent capital project to reduce electricity usage
for plant lighting.




Income
      Taxes    (dollars in thousands)For
      Year Ended September 30,
                                      
                                      2009
                                      
                                      
                                      2008
                                      
                                      
                                      2007Effective
      tax (benefit)
                                      
                                      $
                                      (238
                                      )
                                      
                                      $
                                      (8,843
                                      )
                                      
                                      $
                                      (372
                                      )





Our 2009 tax benefit included a $1.9
million reversal of the valuation allowance against our deferred tax
asset.  Our 2008 tax benefit included an $8.9 million reversal of the
valuation allowance against our deferred tax asset.  (See Note #4 in
Notes to Consolidated Financial Statements)





Liquidity
and Capital Resources





Cash Flow provided by (used in)
operating activities was $3.0 million for the fiscal year ended September 30,
2009 compared to $0.1 million for fiscal 2008.  The principal reason
for this variance of $2.9 million versus prior year is the improvement in Net
Income Before Tax.  Improved cash inflows from collections on customer
receivables was offset by cash used to reduced payables and capture vendor
discounts which was a benefit to earnings.





Cash Flow provided by (used in)
investing activities was ($1.8) million for the fiscal year end versus ($4.4)
million for fiscal 2008.  The prior year’s investing activities
included the cash investment in Wire and Cable.  During fiscal 2009 we
invested ($1.8) million in new production equipment to improve efficiency and
capacity.




Cash Flow provided by (used in)
financing activities was a use of ($1.2) million in fiscal 2009 versus a net
source of cash of $4.4 million in fiscal 2008.  In fiscal 2009 we
reduced our term debt and our revolving debt by an aggregate total of $2.2
million.  We also borrowed $0.8 million on our capital financing line
of credit.  The prior year included the funding from our new credit
facility which enabled the acquisition of Wire and Cable.


15





At September 30, 2009 we had a $3.9
million balance under our revolving credit facility.  The maximum
borrowing limit under our revolving credit facility is limited to the lesser of
(i) $9.0 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, 2009, the remaining availability under the collateralized portion of our
line of credit was $5.1 million.  We believe that our liquidity is
adequate to cover operating requirements for the next 12 months.





The Company entered into a $14.2
million senior secured loan agreement (Credit Agreement) and Sale Leaseback
agreement with Manufacturers and Traders Trust Company (M&T Bank) on May 30,
2008.  The following is a summary of the Credit and Sale Leaseback
agreements:





§
            A
      revolving credit facility up to $9.0 million, available for direct
      borrowings.  The facility is based on a borrowing base formula
      equal to the sum of 85% of eligible receivables and 35% of eligible
      inventory.  As of September 30, 2009, outstanding loans under
      the revolving credit facility were $3.9 million.  The credit
      facility matures on May 30, 2013.  Interest on the revolver is
      either prime or a stated rate over LIBOR, whichever is lower based on
      certain ratios.  On September 30, 2009 the interest rate on our
      revolving line balance was 1.75%.





§
            A
      $1.7 million term loan amortized equally over 60 months beginning July
      2008.  IEC’s interest rate is fixed at 6.7%.  The
      outstanding balance at September 30, 2009 was $0.8 million.  One
      year prior, at September 30, 2008, the outstanding balance of our term
      loan was $1.1 million.





§
            An
      available $1.5 million equipment line of credit.  The capital
      credit facility is amortized equally over 60 months and matures on May 30,
      2013.  Interest on the equipment line is either prime or a
      stated rate over LIBOR, whichever is lower based on certain ratios at the
      time of borrowing.  Using this capital credit line the Company
      was able to secure additional interest rate subsidies from New York
      State’s Linked Deposit Program and has used a total of $0.8 million of the
      $1.5 million available line as of September 30, 2009.  New
      equipment was purchased to continue driving our increased operating
      efficiencies.  For the year ended September 30, 2009 the
      weighted average interest rate on capital financing was 3.08%. The
      outstanding balance at September 30, 2009 was $0.7
  million.





§
            A
      $2.0 million Sale Leaseback of the Company’s fixed assets amortized
      equally over 60 months beginning June 27, 2008.  Annual payments
      are fixed and are $388,800 per year with a total for the five years of
      $1.9 million. Assets sold had a cost of $15.6 million inclusive of $1.2
      million of assets purchased during the nine months ended June 27, 2008,
      and an accumulated depreciation of $13.6 million.  A minimal
      loss will be amortized over the five year period of the
      lease.  At September 30, 2009 our remaining unpaid balance for
      the lease was $1.5 million compared to $1.8 million at September 30,
      2008.





§
            All
      loans and the Sale-Leaseback are secured by a security interest in the
      assets of the Company and Wire and Cable; a pledge of all the Company’s
      equity interest in Wire and Cable, a negative pledge on the Company’s real
      property and a guaranty by Wire and
Cable.





In connection with the acquisition of
Wire and Cable and the payment of the purchase price to the sellers, a portion
of the purchase price was paid in the form of promissory notes (the "Seller
Notes") in the aggregate principal amount of $3.9 million with interest at the
rate of 4% per annum.  The remaining balance at September 30, 2009 is
$2.2 million.





The Company’s financing agreements
contain various affirmative and negative covenants concerning the ratio of
“EBITDARS” (Earnings Before Interest, Taxes, Depreciation, Amortization, Rent
Expense under the Sale Leaseback and Stock Option Expense) to total debt and to
fixed charges.  These are calculated on a twelve month rolling
basis.  The Company must also maintain a minimum EBITDARS level of
$350,000 per individual quarter.   The Company was compliant with
these covenants as of September 30, 2009.  The table below provides
details on the Company’s performance relative to each of the three covenants as
of September 30, 2009:




Covenant
                                    
                                    Requirement
                                    
                                    
                                    Actual
      Performance▪
                                    Minimum
      quarterly EBITDARS
                                    
                                    ≥
                                    
                                    $
                                    350,000
                                    
                                    
                                    $
                                    1,641,000▪
                                    Fixed
      Charge Coverage
                                    
                                    ≥
                                    
                                    
                                    1.1
                                    x
                                    
                                    
                                    3.03
                                    x▪
                                    Total
      Debt to EBITDARS
                                    
                                    <
                                    
                                    
                                    3.75
                                    x
                                    
                                    
                                    1.56
                                    x


If evaluated on an annual basis rather
than quarterly, the Company’s performance with respect to the “Minimum EBITDARS
Covenant” was $5,902,000 versus a four-quarter aggregate required minimum of
$1,400,000.


16


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, provisions for doubtful accounts, provisions for inventory
obsolescence, impairment of long-lived assets, accounting for legal
contingencies and accounting for income taxes.





FASB ASC 605-10 (Prior Authoritative
Literature: 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.





FASB ASC 360-10 (Prior Authoritative
Literature: Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets), requires that we evaluate our
long-lived assets for financial impairment on a regular basis.  We
evaluate the recoverability of long-lived assets not held for sale by measuring
the carrying amount of the assets against the estimated undiscounted 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.





FASB ASC 450-10 (Prior Authoritative
Literature: Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies"), requires that when, from time to time, we are subject to
various legal proceedings and claims, the outcomes of which are subject to
significant uncertainty, 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.





FASB ASC 740 (Prior Authoritative
Literature: 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 our financial statements or
tax returns.  Fluctuations in the actual outcome of these future tax
consequences could impact our financial position or our results of
operations.





Impact of
Inflation





To date, the impact of inflation has
been minimal due to the fact that we have been able to adjust many of our bids
to reflect most inflationary increases in costs; however it is not clear this
will continue and in turn could affect our margins.





RECENTLY
ISSUED ACCOUNTING STANDARDS





FASB ASC 805 (Prior Authoritative
Literature: Financial Accounting Standards Board Statement of Financial
Accounting Standards (“SFAS”) No. 141(R), “Business Combinations”),
establishes principles and requirements for how the acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest in the acquiree, recognizes
and measures the goodwill acquired in the business combination or a gain from a
bargain purchase, and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. FASB ASC 805 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
As such, the Company is required to adopt these provisions at the beginning of
the fiscal year ended September 30, 2010. The Company is currently evaluating
the impact of FASB ASC 805 but does not expect it to have a material effect on
its consolidated financial statements.





FASB ASC 810-10-65 (Prior Authoritative
Literature: Financial Accounting Standards Board Statement of Financial
Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51”), establishes accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary.  FASB ASC 810-10-65 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  As such, the Company is required to adopt
these provisions at the beginning of the fiscal year ended September 30,
2010.  The Company is currently evaluating the impact of FASB ASC
810-10-65 but does not expect it to have a material effect on its consolidated
financial statements.


17


FASB ASC
855-10 (Prior Authoritative Literature: Financial Accounting Standards Board
(“FASB”) Statement of Financial Accounting Standard (“SFAS”) No.165, "Subsequent
Events"), establishes requirements for subsequent events. FASB ASC 855-10 is
effective for interim or annual periods ending after June 15,
2009.  The Company is required to adopt this standard in the current
period.  Adoption of FASB ASC 855 did not have a significant effect on
the Company’s consolidated financial statements.





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 Revolving
Credit borrowings under the Credit Agreement, due to the 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 38 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 changes in or
disagreements on accounting and financial disclosure matters.





ITEM 9A(T) 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 the 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 the business has disclosure controls and procedures that were
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 year ended September 30, 2009, that
materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.





(c) Management's Report on Internal
Control over Financial Reporting.




Our management is responsible for
establishing and maintaining adequate internal control over financial reporting.
Our internal control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles in the United States of America.  The Company’s
internal control over financial reporting includes those policies and procedures
that:




(i)
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the
      Company,




(ii)
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company
      are being made only in accordance with authorizations of management and
      directors of the Company, and




(iii)
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on financial
  statements.




18




An
evaluation, based on the framework entitled Internal Controls - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission(COSO), was performed under the supervision and with the participation
of our management, including the principal executive officer and the principal
financial officer, of the effectiveness of the design and operation of our
procedures and internal control over financial reporting. Based on this
evaluation, our management, including the principal executive officer and the
principal financial officer, concluded that our internal control over financial
reporting was effective in providing reasonable assurance regarding the
reliability of financial reporting and the preparation of our financial
statements for external purposes in accordance with generally accepted
accounting principles as of September 30, 2009.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report on internal control over financial reporting was not subject
to attestation by our independent registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only management's report in this annual report.





(d)
            Inherent
      Limitations of Internal Controls.





In
designing and evaluating our internal control system, we recognize that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance of achieving the desired control
objectives and that the effectiveness of any system has inherent limitations
including, but not limited to, the possibility of human error and the
circumvention or overriding of controls and procedures. Management, including
the principal executive officer and the principal financial officer, is required
to apply judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Because of the inherent limitations in a cost-effective
control system, internal control over financial reporting may not prevent or
detect misstatements. Although unlikely, misstatements due to error or fraud may
occur and not be detected in a timely manner.





ITEM 9B  OTHER INFORMATION





None.





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 2010 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 2010
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 AND
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 2010 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.


19


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 Person Transactions” and “Election of Directors”
contained in the definitive proxy statement issued in connection with the 2010
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 "Ratification
of Selection of Independent Registered Public Accounting Firm” contained in the
definitive proxy statement issued in connection with the 2010 Annual Meeting of
Stockholders and is incorporated in this report by reference
thereto.





PART
IV





ITEM 15.  EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULES





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





Page(1)
                                        Consolidated
      Financial Statements and Supplementary SchedulesReport
      of Independent Registered Public Accounting Firm
                                        23Consolidated
      Balance Sheets as ofSeptember
      30, 2009 and 2008
                                        24Consolidated
      Statements of Operations for the yearsended
      September 30, 2009, 2008 and 2007
                                        25Consolidated
      Statements of Comprehensive Income and Shareholders'Equity
      for the years ended September 30, 2009, 2008 and 2007
                                        26Consolidated
      Statements of Cash Flows for the yearsended
      September 30, 2009, 2008 and 2007
                                        27Notes
      to Consolidated Financial Statements
                                        28Selected
      Quarterly Financial Data (unaudited
                                        35All
      other schedules are either inapplicable or the information is included
      inthe
      consolidated 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
                                        36(3)
                                        Exhibits




Exhibit No.
                              
                              Title
                              
                              Page2.1
                              
                              Agreement
      and Plan of Merger by and among IEC Electronics Corp.,  VUT
      Merger Corp. and Val-U-Tech Corp. dated as of May 23, 2008 (incorporated
      by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
      10-Q for the quarter ended June 27, 2008)3.1
                              
                              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)


20





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)10.1
                      
                      Credit
      Facility Agreement dated as of May 30, 2008 by and among IEC Electronics
      Corp. and Manufacturers and Traders Trust Company (incorporated by
      reference to Exhibit 10.2 to the Company's Quarterly Report on
      Form  10-Q for the quarter ended June 27, 2008)10.2
                      
                      First
      Amendment to Credit Facility Agreement made July 29, 2008 to be effective
      as of May 30, 2008 between IEC Electronics Corp.
      and  Manufacturers and Traders Trust Company (incorporated by
      reference to Exhibit 10.8  to the Company's Annual Report on
      Form 10-K for the year ended September 30, 2008)10.3*
                      
                      Form
      of Indemnity Agreement between the Company and its directors and executive
      officers. (incorporated by reference to Exhibit 10.2 to the Company's
      Quarterly Report on Form 10-Q for the quarter ended July 2,
      1993)10.4*
                      
                      IEC
      Electronics Corp. 2001 Stock Option and Incentive Plan, as amended
      on  February 4, 200910.5*
                      
                      Form
      of Incentive Stock Option Agreement pursuant to 2001 Stock Option
      and  Incentive Plan10.6*
                      
                      Form
      of Outside Director Stock Option Agreement pursuant to 2001 Stock Option
      and Incentive Plan10.7*
                      
                      Form
      of Restricted Stock Award Agreement pursuant to 2001 Stock Option and
      Incentive Plan10.8*
                      
                      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)10.9*
                      
                      Form
      of First Amendment to Challenge Award Option Agreement dated as of
      September 29, 2006 (incorporated by reference to Exhibit 10.16 to the
      Company's Annual Report on Form 10-K for the year ended September 30,
      2007)10.10*
                      
                      Form
      of Second Amendment to Challenge Award Option Agreement dated as
      of  January 23, 2008 (incorporated by reference to Exhibit 10.11
      to the Company's Annual Report on Form 10-K for the year ended September
      30, 2008)10.11*
                      
                      Form
      of Sales Restriction Agreement between IEC Electronics Corp. and certain
      option holders, dated as of August 24,2005 (incorporated by reference to
      Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year
      ended September 30, 2005)10.12*
                      
                      Option
      Award Agreement between the Company and W. Barry Gilbert dated as of
      August 12, 2003 (incorporated by reference to Exhibit 10.13 to the
      Company's Annual Report on Form 10-K for the year ended September 30,
      2008)10.13*
                      
                      First
      Amendment to Option Award Agreement between the Company and W. Barry
      Gilbert dated as of August 4, 2006 (incorporated by reference to Exhibit
      10.14 to the Company's  Annual Report on Form 10-K for the year
      ended September 30, 2008)10.14*
                      
                      Restricted
      Stock Award Agreement between the Company and Jeffrey T. Schlarbaum dated
      as of May 14, 2008 (incorporated by reference to Exhibit 10.15 to the
      Company's  Annual Report on Form 10-K for the year ended
      September 30, 2008)10.15*
                      
                      Restricted
      Stock Award Agreement between the Company and Donald S. Doody dated as of
      May 14, 2008 (incorporated by reference to Exhibit 10.16 to the
      Company's  Annual Report on Form 10-K for the year ended
      September 30, 2008)10.16*
                      
                      Separation
      Agreement between the Company and Brian Davis dated February 15, 2008
      (incorporated by reference to Exhibit 10.17 to the Company's Annual Report
      on  Form 10-K for the year ended September 30,
    2008)10.17*
                      
                      Independent
      Consulting Agreement between the Company and Brian Davis dated February
      15, 2008 (incorporated by reference to Exhibit 10.18 to the Company's
      Annual Report on Form 10-K for the year ended September 30,
      2008)10.18*
                      
                      Employment
      Agreement between the Company and W. Barry Gilbert, effective April 24,
      2009 (incorporated by reference to Exhibit 10.1 to the Company's Current
      Report on  Form 8-K filed April 30, 2009)10.19*
                      
                      Summary
      of the Company's Fiscal 2009 Management Incentive Plan10.20*
                      
                      Summary
      of the Company's Long-Term Incentive Plan10.21*
                      
                      IEC
      Electronics Corp. Management Deferred Compensation Plan, effective January
      1, 200910.22*
                      
                      IEC
      Electronics Corp. Board of Directors Deferred Compensation Plan,
      effective  January 1, 200910.23
                      
                      Settlement
      Agreement dated March 17, 2009 by and among the Company, Val-U-Tech
      Corp.,  Kathleen Brudek, Michael Brudek and Nicholas Vaseliv
      (incorporated by reference to Exhibit 10.1 to the Company's Current Report
      on Form 8-K filed on March 23, 2009)14
                      
                      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)21.1
                      
                      Subsidiaries
      of IEC Electronics Corp.23.1
                      
                      Consent
      of EFP Rotenberg, 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


21





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 12, 2009.





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
      12, 2009/s/Michael R. Schlehr
              
              Vice
      President and(Michael
      R. Schlehr)
              
              Chief
      Financial Officer
              
              November
      12, 2009/s/Carl E. Sassano
              
              Director
              
              November
      12, 2009(Carl
      E. Sassano)/s/Jerold L. Zimmerman
              
              Director
              
              November
      12, 2009(Jerold
      L. Zimmerman)/s/Eben S. Moulton
              
              Director
              
              November
      12, 2009(Eben
      S. Moulton)/s/Amy L. Tait
              
              Director
              
              November
      12, 2009(Amy
      L. Tait)/s/James C. Rowe
              
              Director
              
              November
      12, 2009(James
      C. Rowe)


22


Report


23





IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


SEPTEMBER
30, 2009 AND 2008


(in
thousands)





ASSETS





2009
                                  
                                  
                                  2008CURRENT
      ASSETS:Cash
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Accounts
      receivable (net of allowance for doubtful
                                  
                                  
                                  10,354
                                  
                                  
                                  
                                  10,345Accounts
      of $85 and $145 respectively)Inventories
                                  
                                  
                                  6,491
                                  
                                  
                                  
                                  6,230Deferred
      income taxes
                                  
                                  
                                  2,050
                                  
                                  
                                  
                                  1,908Other
      current assets
                                  
                                  
                                  110
                                  
                                  
                                  
                                  61Total
      Current Assets
                                  
                                  
                                  19,005
                                  
                                  
                                  
                                  18,544FIXED
      ASSETS:Land
      and land improvements
                                  
                                  
                                  742
                                  
                                  
                                  
                                  742Building
      and improvements
                                  
                                  
                                  4,339
                                  
                                  
                                  
                                  4,368Machinery
      and equipment
                                  
                                  
                                  10,335
                                  
                                  
                                  
                                  8,567Furniture
      and fixtures
                                  
                                  
                                  4,131
                                  
                                  
                                  
                                  4,083Sub-Total
      Gross Property
                                  
                                  
                                  19,547
                                  
                                  
                                  
                                  17,760Less
      Accumulated Depreciation
                                  
                                  
                                  (17,156
                                  )
                                  
                                  
                                  (16,907
                                  )Net
      Fixed Assets
                                  
                                  
                                  2,391
                                  
                                  
                                  
                                  853NON-CURRENT
      ASSETS:Deferred
      income taxes
                                  
                                  
                                  13,026
                                  
                                  
                                  
                                  14,727Other
      Non Current Assets
                                  
                                  
                                  47
                                  
                                  
                                  
                                  60Total
      Non-Current Assets
                                  
                                  
                                  13,073
                                  
                                  
                                  
                                  14,787Total
      Assets
                                  
                                  $
                                  34,469
                                  
                                  
                                  $
                                  34,184





LIABILITIES
AND SHAREHOLDERS' EQUITY





2009
                          
                          
                          2008CURRENT
      LIABILITIES:Short
      term borrowings
                          
                          $
                          1,147
                          
                          
                          $
                          1,098Accounts
      payable
                          
                          
                          4,183
                          
                          
                          
                          6,125Accrued
      payroll and related expenses
                          
                          
                          1,564
                          
                          
                          
                          808Other
      accrued expenses
                          
                          
                          531
                          
                          
                          
                          603Customer
      deposits
                          
                          
                          190
                          
                          
                          
                          664Total
      current liabilities
                          
                          
                          7,615
                          
                          
                          
                          9,298Long
      term debt
                          
                          
                          6,600
                          
                          
                          
                          8,910Total
      Liabilities
                          
                          
                          14,215
                          
                          
                          
                          18,208SHAREHOLDERS'
      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 - 9,747,283 and9,326,582
      shares
                          
                          
                          97
                          
                          
                          
                          93Treasury
      Shares at Cost 1,012,873 and 412,873 shares
                          
                          
                          (1,413
                          )
                          
                          
                          (223
                          )Additional
      paid-in capital
                          
                          
                          40,632
                          
                          
                          
                          40,124Accumulated
      deficit
                          
                          
                          (19,062
                          )
                          
                          
                          (24,018
                          )Total
      shareholders' equity
                          
                          
                          20,254
                          
                          
                          
                          15,976Total
      liabilities and shareholders’ equity
                          
                          $
                          34,469
                          
                          
                          $
                          34,184





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


24
 
 IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR THE
YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
 (in
thousands, except per share and share data)
 
 2009
                                      
                                      
                                      2008
                                      
                                      
                                      2007Net
      sales
                                      
                                      $
                                      67,811
                                      
                                      
                                      $
                                      51,092
                                      
                                      
                                      $
                                      40,914Cost
      of sales
                                      
                                      
                                      56,985
                                      
                                      
                                      
                                      44,875
                                      
                                      
                                      
                                      37,037Gross
      profit
                                      
                                      
                                      10,826
                                      
                                      
                                      
                                      6,217
                                      
                                      
                                      
                                      3,877Selling
      and administrative expenses
                                      
                                      
                                      6,007
                                      
                                      
                                      
                                      3,825
                                      
                                      
                                      
                                      2,892Operating
      income
                                      
                                      
                                      4,819
                                      
                                      
                                      
                                      2,392
                                      
                                      
                                      
                                      985Interest
      and financing expense
                                      
                                      
                                      389
                                      
                                      
                                      
                                      452
                                      
                                      
                                      
                                      440Other
      (income)/expense
                                      
                                      
                                      (287
                                      )
                                      
                                      
                                      306
                                      
                                      
                                      
                                      42Net
      income before income taxes
                                      
                                      
                                      4,718
                                      
                                      
                                      
                                      1,634
                                      
                                      
                                      
                                      503(Benefit
      from) income taxes (footnote #4)
                                      
                                      
                                      (238
                                      )
                                      
                                      
                                      (8,843
                                      )
                                      
                                      
                                      (372
                                      )Net
      income
                                      
                                      $
                                      4,956
                                      
                                      
                                      $
                                      10,477
                                      
                                      
                                      $
                                      875Net
      income per common and common equivalent share:Basic
      Income available to common shareholders
                                      
                                      $
                                      0.57
                                      
                                      
                                      $
                                      1.22
                                      
                                      
                                      $
                                      0.11Diluted
      Income available to common shareholders
                                      
                                      $
                                      0.52
                                      
                                      
                                      $
                                      1.12
                                      
                                      
                                      $
                                      0.10Weighted
      average number of common and common equivalent shares
      outstanding:Basic
                                      
                                      
                                      8,728,930
                                      
                                      
                                      
                                      8,553,635
                                      
                                      
                                      
                                      8,114,491Diluted
                                      
                                      
                                      9,553,526
                                      
                                      
                                      
                                      9,337,097
                                      
                                      
                                      
                                      8,895,819
 
 The
accompanying notes are an integral part of these financial
statements.
  25
 
 IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY
 FOR THE
YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
 (in
thousands)
  Additional
                      
                      
                      Retained
                      
                      
                      TotalComprehensive
                      
                      
                      Common
                      
                      
                      Treasury
                      
                      
                      Paid-In
                      
                      
                      Earnings
                      
                      
                      ShareholdersIncome
                      
                      
                      Stock
                      
                      
                      Stock
                      
                      
                      Capital
                      
                      
                      (Deficit)
                      
                      
                      EquityBALANCE,
      September 30, 2006
                      
                      
                      
                      
                      $
                      84
                      
                      
                      $
                      (223
                      )
                      
                      $
                      38,601
                      
                      
                      $
                      (35,370
                      )
                      
                      $
                      3,092Shares
      issued and expensed Under Directors and Employee Stock
Plan
                      
                      
                      
                      
                      $
                      3
                      
                      
                      
                      -
                      
                      
                      $
                      193
                      
                      
                      
                      -
                      
                      
                      $
                      196Net
      Income
                      
                      $
                      875
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      875
                      
                      
                      $
                      875Comprehensive
      income
                      
                      $
                      875BALANCE,
      September 30, 2007
                      
                      
                      
                      
                      
                      $
                      87
                      
                      
                      $
                      (223
                      )
                      
                      $
                      38,794
                      
                      
                      $
                      (34,495
                      )
                      
                      $
                      4,163Shares
      issued and expensed Under Directors and Employee Stock
Plan
                      
                      
                      
                      
                      
                      $
                      1
                      
                      
                      
                      -
                      
                      
                      $
                      285
                      
                      
                      
                      -
                      
                      
                      $
                      286Shares
      Issued for Wire and Cable Acquisition
                      
                      
                      
                      
                      
                      $
                      5
                      
                      
                      
                      -
                      
                      
                      $
                      1,045
                      
                      
                      
                      -
                      
                      
                      $
                      1,050Net
      Income
                      
                      $
                      10,477
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      10,477
                      
                      
                      $
                      10,477Comprehensive
      income
                      
                      $
                      10,477BALANCE,
      September 30, 2008
                      
                      
                      
                      
                      
                      $
                      93
                      
                      
                      $
                      (223
                      )
                      
                      $
                      40,124
                      
                      
                      $
                      (24,018
                      )
                      
                      $
                      15,976Shares
      issued and expensed Under Directors and Employee Stock
Plan
                      
                      
                      
                      
                      
                      $
                      4
                      
                      
                      
                      -
                      
                      
                      $
                      508
                      
                      
                      
                      -
                      
                      
                      $
                      512Acquisition
      of Treasury Stock
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      (1,190
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      (1,190
                      )Net
      Income
                      
                      $
                      4,956
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      4,956
                      
                      
                      $
                      4,956Comprehensive
      income
                      
                      $
                      4,956BALANCE,
      September 30, 2009
                      
                      
                      
                      
                      
                      $
                      97
                      
                      
                      $
                      (1,413
                      )
                      
                      $
                      40,632
                      
                      
                      $
                      (19,062
                      )
                      
                      $
                      20,254
  The
accompanying notes are an integral part of these financial
statements.
  26
  IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE
YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
 (in
thousands)
 
 2009
                                        
                                        
                                        2008
                                        
                                        
                                        2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                        
                                        $
                                        4,956
                                        
                                        
                                        $
                                        10,477
                                        
                                        
                                        $
                                        875Non-cash
      adjustments:Compensation
      Expense - Stock Options
                                        
                                        
                                        131
                                        
                                        
                                        
                                        195
                                        
                                        
                                        
                                        80Depreciation
      and amortization (See Note#3)
                                        
                                        
                                        282
                                        
                                        
                                        
                                        378
                                        
                                        
                                        
                                        410(Gain)
      loss on sale of fixed assets
                                        
                                        
                                        (5
                                        )
                                        
                                        
                                        1
                                        
                                        
                                        
                                        17Issuance
      of directors fees in stock
                                        
                                        
                                        44
                                        
                                        
                                        
                                        35
                                        
                                        
                                        
                                        41Changes
      in operating assets and liabilities:Accounts
      receivable
                                        
                                        
                                        (9
                                        )
                                        
                                        
                                        (2,497
                                        )
                                        
                                        
                                        (1,244
                                        )Inventories
                                        
                                        
                                        (260
                                        )
                                        
                                        
                                        (595
                                        )
                                        
                                        
                                        1,788Deferred
      income taxes
                                        
                                        
                                        (335
                                        )
                                        
                                        
                                        (9,014
                                        )
                                        
                                        
                                        (390
                                        )Other
      assets
                                        
                                        
                                        (46
                                        )
                                        
                                        
                                        (23
                                        )
                                        
                                        
                                        62Accounts
      payable
                                        
                                        
                                        (1,942
                                        )
                                        
                                        
                                        761
                                        
                                        
                                        
                                        1,084Accrued
      expenses
                                        
                                        
                                        685
                                        
                                        
                                        
                                        333
                                        
                                        
                                        
                                        385Customer
      Deposits
                                        
                                        
                                        (475
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Net
      cash flows from operating activities
                                        
                                        
                                        3,026
                                        
                                        
                                        
                                        51
                                        
                                        
                                        
                                        3,108CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from sale of property
                                        
                                        
                                        11
                                        
                                        
                                        
                                        2,002
                                        
                                        
                                        
                                        17Cash
      Paid for Acquisition of Subsidiary
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (5,500
                                        )
                                        
                                        
                                        -Cash
      Received upon Acquisition of Subsidiary
                                        
                                        
                                        -
                                        
                                        
                                        
                                        544
                                        
                                        
                                        
                                        -Purchases
      of property, plant and equipment
                                        
                                        
                                        (1,816
                                        )
                                        
                                        
                                        (1,434
                                        )
                                        
                                        
                                        (787
                                        )Capitalized
      acquisition costs paid
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (54
                                        )
                                        
                                        
                                        -Net
      cash flows from investing activities
                                        
                                        
                                        (1,805
                                        )
                                        
                                        
                                        (4,442
                                        )
                                        
                                        
                                        (770
                                        )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      Borrowings (Repayments) on Revolver
                                        
                                        
                                        (1,110
                                        )
                                        
                                        
                                        3,964
                                        
                                        
                                        
                                        (2,558
                                        )Repayments
      on Term Debt
                                        
                                        
                                        (1,135
                                        )
                                        
                                        
                                        (1,501
                                        )
                                        
                                        
                                        (305
                                        )Borrowings
      from Capital and Term Debt
                                        
                                        
                                        828
                                        
                                        
                                        
                                        1,903
                                        
                                        
                                        
                                        450Proceeds
      from exercise of stock options
                                        
                                        
                                        196
                                        
                                        
                                        
                                        89
                                        
                                        
                                        
                                        75Capitalized
      financing costs
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (64
                                        )
                                        
                                        
                                        -Net
      cash flows from financing activities
                                        
                                        
                                        (1,221
                                        )
                                        
                                        
                                        4,391
                                        
                                        
                                        
                                        (2,338
                                        )Change
      in cash and cash equivalents
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Cash
      and cash equivalents, beginning of year
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Cash
      and cash equivalents, end of year
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the year for:Interest
                                        
                                        $
                                        419
                                        
                                        
                                        $
                                        452
                                        
                                        
                                        $
                                        427Income
      taxes, net of refunds received
                                        
                                        
                                        26
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        3SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Wire
      and Cable Assets and Liabilities acquired:Net
      Accounts Receivable
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        1,663
                                        
                                        
                                        $
                                        -Net
      Inventories
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,645
                                        
                                        
                                        
                                        -Net
      Fixed Assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        175
                                        
                                        
                                        
                                        -Deferred
      Tax Assets
                                        
                                        
                                        -1,894
                                        
                                        
                                        
                                        6,981
                                        
                                        
                                        
                                        -Other
      Assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        489
                                        
                                        
                                        
                                        -Accounts
      Payable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -428
                                        
                                        
                                        
                                        -Accrued
      Expenses
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -83
                                        
                                        
                                        
                                        -Seller
      Notes
                                        
                                        
                                        844
                                        
                                        
                                        
                                        -3,892
                                        
                                        
                                        
                                        -Stock
      issued to Sellers
                                        
                                        
                                        1,050
                                        
                                        
                                        
                                        -1,050
                                        
                                        
                                        
                                        -Cash
      Paid to Sellers
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,500
                                        
                                        
                                        
                                        -Return
      Exercised Option to Treasury
                                        
                                        
                                        140
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
 
 The
accompanying notes are an integral part of these financial
statements.
  27
 
 IEC
ELECTRONICS CORP. AND ITS SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009, 2008 AND 2007
 
 1.
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
 Business
 
 IEC
Electronics Corp.,("IEC", "we", "our", “us” the “Company”), is a premier
provider of electronic manufacturing services,(“EMS”), to advanced technology
companies. We specialize in the custom manufacture of high reliability, complex
circuit cards, system level assemblies and a wide array of custom cable/wire
harness assemblies.  We excel where quality is paramount and where low
to medium volume, high mix production is the norm.  We utilize
state-of-the art, automated circuit card assembly equipment coupled with a full
complement of high reliability manufacturing stress testing
technologies.  We have created a “high intensity response culture” to
react and adapt to our customer’s ever-changing needs.  Our customer
focused approach offers a high degree of flexibility while simultaneously
complying with the industry’s rigorous quality and on-time delivery
standards.  As an extension of our customer’s operation, we have
applied industry leading Six Sigma and Lean Manufacturing principles to
eliminate waste and lower our customer’s total cost of ownership. While many EMS
services are viewed as a commodity, we have set ourselves apart through an
uncommon mix of features including:
  §
              A
      world class Technology Center that combines a dedicated prototype
      manufacturing center with an on-site Materials Analysis Lab (headed by a
      staff PhD) for the seamless introduction of complex
      electronics
  §
              A
      sophisticated Lean/Sigma continuous improvement program supported by five
      certified Six Sigma Blackbelts delivering best-in-class
      results
  §
              Industry-leading
      Web Portal providing real-time access to a wide array of critical customer
      data
  §
              In-house
      custom functional test development to support complex system-level
      assembly, test, troubleshoot and end-order
  fulfillment
  Fiscal
Calendar
 
 The
Company’s fiscal quarters end on the last Friday of the final month of each
quarter, except that our fiscal year ends on September 30.
 
 Change of
Name of Wholly Owned Subsidiary
 
 Effective
June 17, 2009 the name of IEC Electronics’ wholly owned subsidiary, formerly
known as Val-U-Tech Corp., was changed to IEC Electronics Wire and Cable, Inc.
(“Wire and Cable”)
 
 Consolidation
 
 The
consolidated financial statements include the accounts of IEC and its wholly
owned subsidiary, Wire and Cable, from May 31, 2008.  All significant
inter-company transactions and accounts have been eliminated.
 
 Reclassifications
 
 Certain
amounts in the prior year financial statements have been reclassified to conform
with the current year presentation.  Customer deposits for raw
materials, previously shown as offsets to inventory, have been reclassified on
the balance sheet as Other Current Liabilities.
 
 Cash and
Cash Equivalents
 
 The
Company’s cash received is applied against its revolving line of credit on a
daily basis reducing interest expense. 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.
  28
 
 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
collectability of outstanding balances.
 
 Inventory
Valuation
 
 Inventories
are stated at the lower of weighted average cost (first-in, first-out) or
market.  The Company regularly assesses slow-moving, excess and
obsolete inventory and maintains a balance sheet reserve against these
risks.
 
 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 $0.3 million, $0.4 million, and $0.4 million for the years
ended September 30, 2009, 2008 and 2007, respectively.
 
 The
principal depreciation and amortization lives used are as follows:
 
 Description
                    
                    Estimated Useful LivesLand
      improvements
                    
                    10
      yearsBuildings
      and improvements
                    
                    5
      to 40 yearsMachinery
      and equipment
                    
                    3
      to  5 yearsFurniture
      and fixtures
                    
                    3
      to  7 years
 
 Long-Lived
Assets
 
 FASB ASC
360-10 (Prior Authoritative Literature: Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets), requires that we evaluate our long-lived assets for financial
impairment on a regular basis.  We evaluate the recoverability of
long-lived assets not held for sale by measuring the carrying amount of the
assets against the estimated undiscounted 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.
 
 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.
 
 Revenue
Recognition
 
 FASB ASC
605-10 (Prior Authoritative Literature: 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.  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.
 
 Stock
Based Compensation
 
 FASB ASC
718 (Prior Authoritative Literature: SFAS No. 123(R), Share-Based Payment),
requires the measurement of the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value of the
award. The cost is recognized over the period during which an employee is
required to provide service in exchange for the award.
  29
 
 Income
Tax/Deferred Tax Policy
 
 FASB ASC
740 (Prior Authoritative Literature: SFAS No. 109, Accounting for Income
Taxes), requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on differing treatment of items for financial
reporting and income tax reporting purposes. The deferred tax balances are
adjusted to reflect tax rates by tax jurisdiction, based on currently enacted
tax laws, which will be in effect in the years in which the temporary
differences are expected to reverse. We have provided deferred income tax
benefits on net operating loss carry-forwards to the extent we believe we will
be able to utilize them in future tax filings.
 
 Earnings
Per Share
 
 FASB ASC
260 (Prior Authoritative Literature: 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.
 
 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 amount 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
 
 FASB ASC
805 (Prior Authoritative Literature: Financial Accounting Standards Board
Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business
Combinations”), establishes principles and requirements for how the acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree,
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase, and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. FASB ASC 805 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after
December 15, 2008. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended September 30, 2010. The
Company is currently evaluating the impact of FASB ASC 805 but does not expect
it to have a material effect on its consolidated financial
statements.
 
 FASB ASC
810-10-65 (Prior Authoritative Literature: Financial Accounting Standards Board
Statement of Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51”),
establishes accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary.  FASB ASC
810-10-65 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
September 30, 2010.  The Company is currently evaluating the impact of
FASB ASC 810-10-65 but does not expect it to have a material effect on its
consolidated financial statements.
 
 FASB ASC
855-10 (Prior Authoritative Literature: Financial Accounting Standards Board
(“FASB”) Statement of Financial Accounting Standard (“SFAS”) No.165, "Subsequent
Events"), establishes requirements for subsequent events. FASB ASC 855-10 is
effective for interim or annual periods ending after June 15,
2009.  The Company is required to adopt this standard in the current
period.  Adoption of FASB ASC 855 did not have a significant effect on
the Company’s consolidated financial statements.
 
 2.
INVENTORIES
 
 Inventories
are stated at the lower of weighted average cost (first-in, first-out) or
market.  The Company regularly assesses slow-moving, excess and
obsolete inventory and maintains a balance sheet reserve against these
risks.  The major classifications of inventories are as follows at
period end (in thousands):
 2009
                    
                    
                    2008Raw
      Materials
                    
                    $
                    3,365
                    
                    
                    $
                    3,775Work-in-process
                    
                    
                    2,555
                    
                    
                    
                    1,743Finished
      goods
                    
                    
                    571
                    
                    
                    
                    712$
                    6,491
                    
                    
                    $
                    6,230
 
 The Company negotiates deposits from
customers covering its raw material exposure when the customer significantly
delays its original shipping date.  These customer deposits, when
received, are carried as other current liabilities on the balance
sheet.  Current customer deposits total $190,000 and $664,000 at
September 30, 2009 and 2008, respectively.
  30
 
 3. CREDIT
FACILITIES:
 
 Debt
consists of the following at September 30 (in thousands):
 
 2009
                    
                    
                    2008Short
      Term Portion
                    
                    $
                    1,147
                    
                    
                    $
                    1,098Long
      Term Portion
                    
                    
                    6,600
                    
                    
                    
                    8,910$
                    7,747
                    
                    
                    $
                    10,008
 
 The
Company entered into a $14.2 million new senior secured loan agreement (Credit
Agreement) and Sale Leaseback agreement with Manufacturers and Traders Trust
Company (M&T Bank) on May 30, 2008.  The following is a summary of
the Credit and Sale Leaseback agreements:
 
 §
              A
      revolving credit facility up to $9.0 million, available for direct
      borrowings.  The facility is based on a borrowing base formula
      equal to the sum of 85% of eligible receivables and 35% of eligible
      inventory.  As of September 30, 2009, outstanding loans under
      the revolving credit facility were $3.9 million.  The credit
      facility matures on May 30, 2013.  Interest on the revolver is
      either prime or a stated rate over LIBOR, whichever is lower based on
      certain ratios.  On September 30, 2009 the interest rate on our
      revolving line balance was 1.75%.
 
 §
              A
      $1.7 million term loan amortized equally over 60 months beginning July
      2008.  IEC’s interest rate is fixed at 6.7%.  The
      outstanding balance at September 30, 2009 was $0.8 million.  At
      September 30, 2008, the outstanding balance of our term loan was $1.1
      million.
 
 §
              An
      available $1.5 million equipment line of credit.  The capital
      credit facility is amortized equally over 60 months and matures on May 30,
      2013.  Interest on the equipment line is either prime or a
      stated rate over LIBOR, whichever is lower based on certain ratios at the
      time of borrowing.  Using this capital credit line the company
      was able to secure additional interest rate subsidies from New York
      State’s Linked Deposit Program and has used a total of $0.8 million of the
      $1.5 million available line as of September 30, 2009.  For the
      year ended September 30, 2009 the weighted average interest rate on
      capital financing was 3.08%. The outstanding balance at September 30, 2009
      was $0.7 million.
 
 §
              A
      $2.0 million Sale Leaseback of the Company’s fixed assets amortized
      equally over 60 months beginning June 27, 2008.  Annual payments
      are fixed and are $388,800 per year with a total for the five years of
      $1.9 million. Assets sold had a cost of $15.6 million inclusive of $1.2
      million of assets purchased during the nine months ended June 27, 2008,
      and an accumulated depreciation of $13.6 million.  A minimal
      loss will be amortized over the five year period of the
      lease.  At September 30, 2009 our remaining unpaid balance for
      the lease was $1.5 million compared to $1.8 million at September 30,
      2008.
 
 §
              All
      loans and the Sale-Leaseback are secured by a security interest in the
      assets of the Company and Wire and Cable; a pledge of all the Company’s
      equity interest in Wire and Cable, a negative pledge on the Company’s real
      property and a guaranty by Wire and
Cable.
  In connection with the acquisition of
Wire and Cable in May 2008 and the payment of the purchase price to the sellers,
a portion of the purchase price was paid in the form of promissory notes (the
"Seller Notes") in the aggregate principal amount of $3.9 million with interest
at the rate of 4% per annum. Quarterly payments of principal and interest were
to be made in 20 equal installments. These payments began September 1, 2008. The
Seller Notes were subject to a final reconciliation to determine the total
increase or decrease depending upon the sales by Wire and Cable to its largest
customer in calendar year 2009. The Company waived its right to any further
purchase price adjustment under the original acquisition agreement as part of
the settlement agreement disclosed in the Company’s Current Report on Form 8-K
filed on March 23, 2009. As of September 30, 2009 the remaining aggregate
principal balance of the Seller Notes was $2.2 million. Each Seller Note is
subordinated to the indebtedness of the Company under the Credit
Agreement.
  31




The
Company’s financing agreements contain various affirmative and negative
covenants concerning the ratio of “EBITDARS” (Earnings Before Interest, Taxes,
Depreciation, Amortization, Rent Expense under the Sale Leaseback and Stock
Option Expense) to total debt and to fixed charges.  These are
calculated on a twelve month rolling basis.  The Company must also
maintain a minimum EBITDARS level of $350,000 per individual
quarter.   The Company was compliant with these covenants as of
September 30, 2009.  The table below provides details on the Company’s
performance relative to each of the three covenants as of September 30,
2009:


Covenant
                                  
                                  Requirement
                                  
                                  
                                  Actual
      Performance▪
                                  Minimum
      quarterly EBITDARS
                                  
                                  ≥
                                  
                                  $
                                  350,000
                                  
                                  
                                  $
                                  1,641,000▪
                                  Fixed
      Charge Coverage
                                  
                                  ≥
                                  
                                  
                                  1.1
                                  x
                                  
                                  
                                  3.03
                                  x▪
                                  Total
      Debt to EBITDARS
                                  
                                  <
                                  
                                  
                                  3.75
                                  x
                                  
                                  
                                  1.56
                                  x





The
Company has outstanding an energy loan ("NYSERDA Loan") from M&T Bank in the
principal amount of $0.2 million. The NYSERDA Loan is a low interest loan,
subsidized by New York State, to facilitate energy conservation projects. The
NYSERDA Loan is for a term of 5 years and has an effective interest rate of
2.08%. The maturity date is May 1, 2013. As amended, the NYSERDA Loan is
subject to the same financial covenants as those contained in the
Credit Agreement.





Annual
maturities of debt (in thousands) for the five years following September 30,
2009 are:




Year
      1
                              
                              
                              Year
      2
                              
                              
                              Year
      3
                              
                              
                              Year
      4
                              
                              
                              Year
      5$
                              1,147
                              
                              
                              $
                              1,170
                              
                              
                              $
                              948
                              
                              
                              $
                              4,482
                              *
                              
                              $
                              -




*includes
revolver of $3,881





4. INCOME
TAXES:





The
provision for (benefit from) income taxes in fiscal 2009, 2008 and 2009 is
summarized as follows (in thousands):





2009
                        
                        
                        2008
                        
                        
                        2007CurrentFederal
                        
                        $
                        95
                        
                        
                        $
                        38
                        
                        
                        $
                        15State/Other
                        
                        
                        2
                        
                        
                        
                        2
                        
                        
                        
                        3Deferred
      Tax Expense (Benefit)Federal
                        
                        
                        (325
                        )
                        
                        
                        (8,617
                        )
                        
                        
                        (370
                        )State/Other
                        
                        
                        (10
                        )
                        
                        
                        (266
                        )
                        
                        
                        (
      20
                        )Provision
      for (Benefit from)Income
      taxes, net
                        
                        $
                        (238
                        )
                        
                        $
                        (8,843
                        )
                        
                        $
                        (372
                        )





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





2009
                                                  
                                                  
                                                  2008
                                                  
                                                  
                                                  2007Net
      operating loss and AMTcredit carryovers
                                                  
                                                  $
                                                  13,939
                                                  
                                                  
                                                  $
                                                  15,598
                                                  
                                                  
                                                  $
                                                  15,848Accelerated
      depreciation
                                                  
                                                  
                                                  546
                                                  
                                                  
                                                  
                                                  596
                                                  
                                                  
                                                  
                                                  500New
      York State investment tax credits
                                                  
                                                  
                                                  3,265
                                                  
                                                  
                                                  
                                                  3,312
                                                  
                                                  
                                                  
                                                  3,276Inventories
                                                  
                                                  
                                                  140
                                                  
                                                  
                                                  
                                                  140
                                                  
                                                  
                                                  
                                                  95Other
                                                  
                                                  
                                                  292
                                                  
                                                  
                                                  
                                                  301
                                                  
                                                  
                                                  
                                                  32718,182
                                                  
                                                  
                                                  
                                                  19,947
                                                  
                                                  
                                                  
                                                  20,046Remaining
      Valuation allowance
                                                  
                                                  
                                                  (3,107
                                                  )
                                                  
                                                  
                                                  (3,312
                                                  )
                                                  
                                                  
                                                  (19,406
                                                  )$
                                                  15,076
                                                  *
                                                  
                                                  $
                                                  16,635
                                                  *
                                                  
                                                  $
                                                  640





*  includes
deferred tax assets acquired in the Wire and Cable acquisition.(The
cost of the acquisition in excess of the fair value of
assets acquired was assigned to deferred tax assets.)





The
Company has a net operating loss carry-forward of $39.1 million (expiring in
years through 2025).  The Company has available approximately $5.0
million in New York State investment tax credits (expiring in years through
2017).  FASB ASC 740 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.




32




At the
end of the first quarter of fiscal 2009, and as described in the Company’s
Quarterly Report on Form 10-Q for the three month period ended December 26,
2008, the Company decreased the Seller Notes by $844,000 based upon the terms
and conditions of the Wire and Cable acquisition agreement.  The
offset to the Seller Note decrease was a reduction of the Company’s deferred tax
asset.  Subsequently, during the second quarter of fiscal 2009, as
part of its settlement agreement with Wire and Cable, the Company received back
the 500,000 shares of IEC stock, with a value of $1,050,000, that had been
issued to the sellers of Wire and Cable as part of the purchase
price.  The settlement agreement with Wire and Cable is described in
the Company’s Current Report on Form 8-K,
filed on March 23, 2009.  The offset to the increase in treasury stock
was an additional reduction of the Company’s deferred tax asset.  FASB
ASC 740 requires that the company establish an asset on the balance sheet to
reflect the future value associated with the Company’s ability to utilize its
past losses and credits against future income tax obligations.  To
comply with FASB ASC 740 the Company performed an interim evaluation of its
deferred tax asset valuation allowance and, based upon expected performance,
determined that there is a high probability that the majority of the deferred
tax asset would be utilized.  Accordingly, adjustments to deferred tax
assets, as noted above, were credited to income tax expense in the current
quarter.  A valuation allowance of $3,107,000 remains appropriate due
to the Company's probable inability to realize the majority of the tax benefits
from New York State investment tax credits.  These credits fully expire in
2017 and cannot be used until the Company exhausts all of its NY State net
operating loss carry-forwards for state taxes.  Due to a low allocation of
income to New York, our effective state tax rate is
minimal.  Therefore it is unlikely that the Company will use 100% of
its state net operating losses before 2017.





The
differences between the effective tax rates and the statutory federal income tax
rates for fiscal years 2009, 2008 and 2007 are summarized as
follows:





2009
                        
                        
                        2008
                        
                        
                        2007Federal
      Tax at statutory rates
                        
                        
                        34.0
                        %
                        
                        
                        34.0
                        %
                        
                        
                        34.0
                        %State
      tax, net of Federal Benefit
                        
                        
                        1.0
                        
                        
                        
                        1.0
                        
                        
                        
                        5.0Carryforwards
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Valuation
      Allowance
                        
                        
                        (40.0
                        )
                        
                        
                        (576.2
                        )
                        
                        
                        (39.0
                        )(5.0
                        )%
                        
                        
                        (541.2
                        )%
                        
                        
                        -
                        %





5. Stock
Based Compensation





a.) Stock
Option Plan




Under
IEC's 2001 Stock Option and Incentive Plan (the "2001 Plan"), officers, key
employees, directors and other key individuals may be granted various types of
equity awards, including stock options, restricted stock and other stock
awards.  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.  Stock options issued to employees under the 2001 Plan
generally terminate seven years from date of grant.





Generally,
incentive stock options granted during the period between July 2002 through
January 2007 vest in annual increments of 25 percent.  Starting in
March 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 2002 through 2009 vest in increments of 33 1/3
percent six months, one year, and two years from the date of grant.





The fair
value of options issued during fiscal years 2007 through 2009 was estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:





2009
                    
                    
                    2008
                    
                    
                    2007Risk
      free interest rate
                    
                    
                    2.25
                    %
                    
                    
                    2.7
                    %
                    
                    
                    4.8
                    %Expected
      term
                    
                    4.5
      years
                    
                    
                    4.7
      years
                    
                    
                    5.0
      yearsVolatility
                    
                    
                    66
                    %
                    
                    
                    50
                    %
                    
                    
                    52
                    %Expected
      annual dividends
                    
                    none
                    
                    
                    none
                    
                    
                    none





The
weighted average fair value of options granted during 2009 was $0.92 with an
aggregate value of $71,680.  The weighted average fair value of
options granted during 2008 was $0.81 with an aggregate total value of
$163,410.  The weighted average fair value of options granted during
2007 was $0.81 with an aggregate total value of $113,980.  There were
no dividends.





The
Company’s expensing of stock-based compensation decreased both our basic and
diluted net income per share by less than $0.02 for the fiscal years ended
September 30, 2009 and by less than $0.01 for fiscal year ended September 30,
2008.




33





Changes
in options status under the 2001 Plan at September 30 are summarized as
follows:





WeightedShares
                          
                          
                          AverageUnder
                          
                          
                          Exercise
                          
                          
                          AvailableSeptember
      30,
                          
                          Option
                          
                          
                          Price
                          
                          
                          for
      Grant
                          
                          
                          Exercisable2006
      (fiscal year end)
                          
                          
                          1,459,459
                          
                          
                          
                          
                          
                          
                          363,440
                          
                          
                          
                          700,580Options
      granted
                          
                          
                          141,250
                          
                          
                          
                          1.68Options
      exercised
                          
                          
                          (239,007
                          )
                          
                          
                          0.32Options
      forfeited
                          
                          
                          (13,625
                          )
                          
                          
                          1.792007
      (fiscal year end)
                          
                          
                          1,348,077
                          
                          
                          
                          
                          
                          
                          
                          203,930
                          
                          
                          
                          704,447Options
      granted
                          
                          
                          201,500
                          
                          
                          
                          1.80Options
      exercised
                          
                          
                          (111,720
                          )
                          
                          
                          0.80Options
      forfeited
                          
                          
                          (25,320
                          )
                          
                          
                          0.732008
      (fiscal year end)
                          
                          
                          1,412,537
                          
                          
                          
                          
                          
                          
                          
                          582,118
                          
                          
                          
                          587,549Options
      granted
                          
                          
                          78,000
                          
                          
                          
                          1.80Options
      exercised
                          
                          
                          (380,917
                          )
                          
                          
                          0.82Options
      forfeited
                          
                          
                          (137,632
                          )
                          
                          
                          0.972009
      (fiscal year end)
                          
                          
                          971,988
                          
                          
                          
                          
                          
                          
                          
                          602,786
                          
                          
                          
                          622,734





The
following table summarizes stock options outstanding as of September 30,
2009:





Options
      Outstanding
                                        
                                        
                                        
                                        
                                        
                                        Options
      ExercisableNumber
                                        
                                        
                                        Weighted
                                        
                                        
                                        
                                        
                                        
                                        NumberOutstanding
                                        
                                        
                                        Average
                                        
                                        Weighted
                                        
                                        
                                        Exercisable
                                        
                                        WeightedRange
      of
                                        
                                        
                                        at
                                        
                                        
                                        Remaining
                                        
                                        Average
                                        
                                        
                                        at
                                        
                                        AverageExercise
                                        
                                        
                                        September
      30,
                                        
                                        
                                        Contractual
                                        Exercise
                                        
                                        
                                        September
      30,
                                        
                                        ExercisePrices
                                        
                                        
                                        2009
                                        
                                        
                                        Life
                                        
                                        Price
                                        
                                        
                                        2009
                                        
                                        Price$
                                        0.40
      - $ 0.73
                                        
                                        
                                        
                                        445,236
                                        
                                        
                                        
                                        1.65
                                        
                                        
                                        $
                                        0.54
                                        
                                        
                                        
                                        442,736
                                        
                                        
                                        $
                                        0.54$
                                        0.95
      - $ 1.29
                                        
                                        
                                        
                                        177,000
                                        
                                        
                                        
                                        2.17
                                        
                                        
                                        $
                                        1.08
                                        
                                        
                                        
                                        148,332
                                        
                                        
                                        $
                                        1.05$
                                        1.43
      - $ 2.19
                                        
                                        
                                        
                                        329,752
                                        
                                        
                                        
                                        4.94
                                        
                                        
                                        $
                                        1.74
                                        
                                        
                                        
                                        31,666
                                        
                                        
                                        $
                                        1.55$
                                        2.25
      - $ 3.50
                                        
                                        
                                        
                                        20,000
                                        
                                        
                                        
                                        6.73
                                        
                                        
                                        $
                                        3.27
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -971,988
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        622,734





b.)
Restricted Stock Awards - The Company granted 10,000 shares of restricted
stock during fiscal 2009.  The stock vests 50% in 2012 and 50% in
2013.





6. MAJOR
CUSTOMER CONCENTRATIONS and CREDIT RISK:





Five
customers accounted for 55% of our revenue during the fiscal year ended
September 30, 2009.  No single customer exceeded 15% of total Company
sales revenue for the current fiscal year.  Comparatively, five
customers accounted for 62% and 61% of our revenue during the fiscal years ended
September 30, 2008 and September 30, 2007 respectively.  For fiscal
2008 and 2007, no single customer exceeded 25% of total Company sales
revenue.





At
September 30, 2009, amounts due from two customers represented 14 percent and 10
percent of trade accounts receivable.  At September 30, 2008, amounts
due from two customers represented 24 and 14 percent of trade accounts
receivable.  At September 30, 2007, amounts due from two customers
represented 28 and 19 percent of trade accounts receivable.  The
Company performs ongoing credit evaluations of its customers' financial
positions payment history and generally does not require
collateral.




34




7.
LITIGATION:





There are
no material legal proceedings pending to which IEC or its subsidiary is a party
or of which any of their property is the 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 five percent (5%) of
Common Stock of IEC, or any associate of any of the foregoing, is a party
adverse to IEC or its subsidiary or has a material interest adverse to IEC or
its subsidiary.





8.
COMMITMENTS AND CONTINGENCIES:





a.)
Operating Leases - The Company is obligated under non-cancelable operating
leases, primarily for manufacturing equipment, buildings, and office
equipment.  The buildings are leased under a non-cancelable operating
lease which expires in December 2012.  These operating leases
generally contain renewal options and provisions for payment of the lease by the
Company for executory costs (taxes, maintenance and
insurance).  Annual minimum lease obligations are approximated as
follows:





Fiscal
      Year
                            
                            Amount2010
                            
                            
                            628,5212011
                            
                            
                            636,2422012
                            
                            
                            638,8142013
                            
                            
                            368,708Total
      minimum lease payments
                            
                            $
                            2,272,285




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 2009,
2008, or 2007.





10.
SUBSEQUENT EVENTS:





There
have been no material subsequent events.  Subsequent events were
evaluated through November 12, 2009, the date these financial statements were
issued.





SELECTED
      QUARTERLY FINANCIAL DATA (UNAUDITED)First
                    
                    
                    Second
                    
                    
                    Third
                    
                    
                    FourthQuarter
                    
                    
                    Quarter
                    
                    
                    Quarter
                    
                    
                    Quarter(in
      thousands, except per share data)YEAR
      ENDED SEPTEMBER 30,2009:Net
      sales
                    
                    $
                    15,857
                    
                    
                    $
                    16,335
                    
                    
                    $
                    17,346
                    
                    
                    $
                    18,273Gross
      profit
                    
                    
                    2,233
                    
                    
                    
                    2,607
                    
                    
                    
                    2,790
                    
                    
                    
                    3,196Net
      income
                    
                    
                    532
                    
                    
                    
                    2,618
                    
                    
                    
                    903
                    
                    
                    
                    903Basic
      earnings per share
                    
                    $
                    0.06
                    
                    
                    $
                    0.30
                    
                    
                    $
                    0.11
                    
                    
                    $
                    0.10Diluted
      earnings per share
                    
                    $
                    0.06
                    
                    
                    $
                    0.29
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.09YEAR
      ENDED SEPTEMBER 30,2008:Net
      sales
                    
                    $
                    11,160
                    
                    
                    $
                    11,940
                    
                    
                    $
                    11,888
                    
                    
                    $
                    16,104Gross
      profit
                    
                    
                    1,147
                    
                    
                    
                    1,383
                    
                    
                    
                    1,413
                    
                    
                    
                    2,274Net
      income
                    
                    
                    420
                    
                    
                    
                    673
                    
                    
                    
                    868
                    
                    
                    
                    8,516Basic
      earnings per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.08
                    
                    
                    $
                    0.10
                    
                    
                    $
                    0.99Diluted
      earnings per share
                    
                    $
                    0.05
                    
                    
                    $
                    0.07
                    
                    
                    $
                    0.09
                    
                    
                    $
                    0.91YEAR
      ENDED SEPTEMBER 30,2007:Net
      sales
                    
                    $
                    9,246
                    
                    
                    $
                    10,899
                    
                    
                    $
                    11,165
                    
                    
                    $
                    9,604Gross
      profit
                    
                    
                    208
                    
                    
                    
                    1,529
                    
                    
                    
                    1,315
                    
                    
                    
                    825Net
      income
                    
                    
                    (576
                    )
                    
                    
                    603
                    
                    
                    
                    553
                    
                    
                    
                    295Basic
      earnings per share
                    
                    $
                    (
      0.07
                    )
                    
                    $
                    0.08
                    
                    
                    $
                    0.07
                    
                    
                    $
                    0.03Diluted
      earnings per share
                    
                    $
                    (
      0.07
                    )
                    
                    $
                    0.07
                    
                    
                    $
                    0.07
                    
                    
                    $
                    0.03





35


VALUATION
      AND QUALIFYING ACCOUNTSSeptember
                        
                        
                        Charged
      to
                        
                        
                        
                        
                        
                        September30,
      2008
                        
                        
                        Expense
                        
                        
                        Deductions
                        
                        
                        30,
      2009Allowance
      for doubtful accounts
                        
                        
                        145
                        
                        
                        
                        9
                        
                        
                        
                        (69
                        )**
                        
                        
                        85Inventory
      reserves
                        
                        
                        564
                        
                        
                        
                        66
                        
                        
                        
                        (51
                        )
                        
                        
                        579Warranty
      reserves
                        
                        
                        198
                        
                        
                        
                        52
                        
                        
                        
                        (139
                        )*
                        
                        
                        111Deferred
      tax valuation allowance
                        
                        
                        3,312
                        
                        
                        
                        -
                        
                        
                        
                        (205
                        )
                        
                        
                        3,107
 
 *
              final
      payment for GE settlement
 **
              A/R
      collections success
 
 September
                        
                        
                        Charged
      to
                        
                        
                        
                        
                        
                        September30,
      2007
                        
                        
                        Expense
                        
                        
                        Deductions
                        
                        
                        30,
      2008Allowance
      for doubtful accounts
                        
                        
                        100
                        
                        
                        
                        73
                        
                        
                        
                        (28
                        )
                        
                        
                        145Inventory
      reserves
                        
                        
                        506
                        
                        
                        
                        128
                        
                        
                        
                        (70
                        )
                        
                        
                        564Warranty
      reserves
                        
                        
                        115
                        
                        
                        
                        (9
                        )
                        
                        
                        92
                        *
                        
                        
                        198Deferred
      tax valuation allowance
                        
                        
                        19,406
                        
                        
                        
                        -
                        
                        
                        
                        (16,094
                        )
                        
                        
                        3,312
 
 *
              accrued
      for GE settlement
 
 September
                        
                        
                        Charged
      to
                        
                        
                        
                        
                        
                        September30,
      2006
                        
                        
                        Expense
                        
                        
                        Deductions
                        
                        
                        30,
      2007Allowance
      for doubtful accounts
                        
                        
                        59
                        
                        
                        
                        46
                        
                        
                        
                        (5
                        )
                        
                        
                        100Inventory
      reserves
                        
                        
                        516
                        
                        
                        
                        (58
                        )
                        
                        
                        48
                        
                        
                        
                        506Warranty
      reserves
                        
                        
                        140
                        
                        
                        
                        26
                        
                        
                        
                        (51
                        )
                        
                        
                        115Deferred
      tax valuation allowance
                        
                        
                        19,946
                        
                        
                        
                        -
                        
                        
                        
                        (540
                        )
                        
                        
                        19,406
  36