NOTE 8—STOCK-BASED COMPENSATION

The 2019 Stock Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the March 2019 Annual Meeting. The 2019 Plan replaces the 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) that was approved by the Company’s stockholders at the January 2011 Annual Meeting. The 2019 Plan, like the 2010 Plan, is administered by the Compensation Committee of the Board of Directors and provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards. Awards are generally granted to certain members of management and employees, as well as directors. The Company also has an ESPP, adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. Under the 2019 Plan, 840,360 shares of common stock, plus any shares that are subject to awards granted under the 2010 Plan that expire, are forfeited or canceled without the issuance of shares (other than shares used to pay the exercise price of a stock option under the 2010 Plan and shares used to cover the tax withholding of the award under the 2010 Plan) may be issued over a term of ten years. Under the ESPP, 150,000 shares of common stock may be issued over a term of ten years.

Stock-based compensation expense recorded under the 2010 Plan, totaled $0.2 million and $0.3 million for the three and six months ended March 29, 2019, respectively. Stock-based compensation expense recorded under the 2010 Plan, totaled $0.1 million and $0.2 million for the three and six months ended March 30, 2018, respectively.

At March 29, 2019, there were 421,360 remaining shares of common stock available to be issued under the 2010 Plan and 95,091 remaining shares of common stock available to be issued under the ESPP.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee. Further information regarding awards granted under the 2010 Plan and ESPP is provided below.

Stock Options

When options are granted, IEC estimates fair value using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years. The contractual term of options granted under the 2010 Plan is generally seven years. The volatility rate is based on the historical volatility of IEC's common stock.

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months ended March 29, 2019 and March 30, 2018 follows in the table below.



	Six Months Ended
Valuation of Options	March 29, 2019			March 30, 2018
Assumptions for Black-Scholes:
Risk-free interest rate	2.85		%	2.31		%
Expected term in years	5.5			5.5
Volatility	37		%	38		%
Expected annual dividends	none			none

Value of options granted:
Number of options granted	10,000			20,000
Weighted average fair value per share	$	2.40		$	1.53
Fair value of options granted (000s)	$	24		$	31

A summary of stock option activity, together with other related data, follows:



	Six Months Ended
	March 29, 2019				March 30, 2018
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price
Outstanding, beginning of period	737,145		$	4.33	743,045		$	4.27
Granted	10,000		6.20		20,000		4.00
Exercised	(26,500	)	4.71		—		—
Forfeited	(24,250	)	3.70		(10,000	)	4.25
Expired	(5,000	)	4.08		(10,500	)	5.24
Outstanding, end of period	691,395		$	4.36	742,545		$	4.25

For options expected to vest
Number expected to vest	683,135		$	4.35	731,316		$	4.25
Weighted average remaining contractual term, in years	3.6				4.2
Intrinsic value (000s)			$	1,706			$	281

For exercisable options
Number exercisable	510,895		$	4.18	428,008		$	4.30
Weighted average remaining contractual term, in years	2.9				3.8
Intrinsic value (000s)			$	1,365			$	153

For non-exercisable options
Expense not yet recognized (000s)			$	230			$	319
Weighted average years to be recognized	3.3				1.6

For options exercised
Intrinsic value (000s)			$	57			$	—

Restricted (Non-vested) Stock

Certain holders of IEC restricted stock have voting and dividend rights as of the date of grant, and, until vested, the shares may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other common stockholder of the Company. The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period.

A summary of restricted stock activity, together with related data, follows:



	Six Months Ended
	March 29, 2019				March 30, 2018
Restricted (Non-vested) Stock	Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value
Outstanding, beginning of period	103,233		$	4.08	109,695		$	4.01
Granted	15,000		6.97		39,878		4.28
Vested	(43,075	)	4.09		(34,028	)	4.06
Shares withheld for payment of taxes upon vesting of restricted stock	(3,061	)	3.60		(1,502	)	3.60
Forfeited	(1,400	)	4.13		(7,700	)	4.18
Outstanding, end of period	70,697		$	4.72	106,343		$	4.09

For non-vested shares
Expense not yet recognized (000s)			$	291			$	330
Weighted average remaining years for vesting	2.1				2.3

For shares vested
Aggregate fair value on vesting dates (000s)			$	311			$	150

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock. The Company has not paid any meeting fees in stock since May 21, 2013.

Restricted Stock Units

Holders of IEC restricted stock units do not have voting and dividend rights as of the date of grant, and, until vested, the unit may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically three years, holders will receive shares of the Company's common stock and have all the rights and privileges of any other common stockholder of the Company. The fair value of a restricted stock unit is the market value of the underlying shares of the Company's stock on the date of grant and that value is recognized as stock compensation expense over the vesting period.

A summary of restricted stock unit activity, together with related data, follows:



	Six Months Ended
	March 29, 2019			March 30, 2018
Restricted Stock Units	Number of Non-vested Units	Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Units	Wgtd. Avg. Grant Date Fair Value
Outstanding, beginning of period	170,492	$	3.96	267,999	$	4.03
Granted	—	—		102,864	4.28
Vested	—	—		—	—
Forfeited	—	—		—	—
Outstanding, end of period	170,492	$	3.96	370,863	$	4.10

For non-vested shares
Expense not yet recognized (000s)		$	282		$	582
Weighted average remaining years for vesting	1.9			2.7