10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 28, 2019

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 001-34376

IEC ELECTRONICS CORP.

(Exact name of registrant as specified in its charter)

Delaware	13-3458955
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

105 Norton Street, Newark, New York   14513

(Address of Principal Executive Offices) (Zip Code)

315-331-7742

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	IEC	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company x
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.01 par value – 10,334,583 shares as of August 1, 2019

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TABLE OF CONTENTS

Part I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
SIGNATURES		35

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Part I     FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 28, 2019 and SEPTEMBER 30, 2018

(unaudited; in thousands, except share and per share data)

	June 28, 2019			September 30, 2018
ASSETS
Current assets:
Cash	$	—		$	—
Accounts receivable, net of allowance	26,612			25,168
Unbilled contract revenue	7,305			—
Inventories	44,889			34,126
Other current assets	1,893			1,747
Total current assets	80,699			61,041
Property, plant and equipment, net	19,331			20,110
Deferred income taxes	7,999			8,855
Other long-term assets	862			442
Total assets	$	108,891		$	90,448
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	1,371		$	1,449
Current portion of capital lease obligation	331			306
Accounts payable	29,510			28,689
Accrued payroll and related expenses	3,165			1,796
Other accrued expenses	543			458
Customer deposits	9,750			7,595
Total current liabilities	44,670			40,293
Long-term debt	26,622			16,002
Long-term capital lease obligation	6,772			7,027
Other long-term liabilities	1,558			1,750
Total liabilities	79,622			65,072
Commitments and contingencies (Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value:
500,000 shares authorized; none issued or outstanding	—			—
Common stock, $0.01 par value:
Authorized: 50,000,000 shares
Issued: 11,387,974 and 11,304,393 shares, respectively
Outstanding: 10,332,486 and 10,248,905 shares, respectively	103			102
Additional paid-in capital	47,824			47,326
Accumulated deficit	(17,069		)	(20,463		)
Treasury stock, at cost: 1,055,488 shares	(1,589		)	(1,589		)
Total stockholders’ equity	29,269			25,376
Total liabilities and stockholders’ equity	$	108,891		$	90,448

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

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IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE and NINE MONTHS ENDEDJUNE 28, 2019 and JUNE 29, 2018

(unaudited; in thousands, except share and per share data)

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Net sales	$	40,324	$	29,782	$	113,059	$	82,706
Cost of sales	34,719		26,423		97,808		73,045
Gross profit	5,605		3,359		15,251		9,661
Selling and administrative expenses	3,721		2,833		10,402		8,543
Operating income	1,884		526		4,849		1,118
Interest and financing expense	452		322		1,160		834
Income before income taxes	1,432		204		3,689		284
Income tax expense/(benefit)	221		—		736		(1,005		)
Net income	$	1,211	$	204	$	2,953	$	1,289
Net income per common share:
Basic	$	0.12	$	0.02	$	0.28	$	0.12
Diluted	$	0.11	$	0.02	$	0.28	$	0.12
Weighted average number of shares outstanding:
Basic	10,332,548		10,243,286		10,294,173		10,221,869
Diluted	10,642,403		10,556,764		10,556,953		10,467,112

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

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IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENT of CHANGES in STOCKHOLDERS’ EQUITY

NINE MONTHS ENDEDJUNE 28, 2019

(unaudited; in thousands, except share data)

	Number of Shares Outstanding	Common Stock, par $0.01		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock, at cost			Total Stockholders’ Equity
Balances, October 1, 2018	10,248,905	$	102	$	47,326		$	(20,463	)	$	(1,589	)	$	25,376
Impact of adoption of ASC 606, net of taxes	—	—		—			441			—			441
Net income	—	—		—			1,072			—			1,072
Stock-based compensation	—	—		146						—			146
Restricted stock vested, net of shares withheld for payment of taxes	4,439	—		—			—			—			—
Exercise of stock options, net of shares surrendered	2,553	—		—			—			—			—
Employee stock plan purchases	5,674	—		20			—			—			20
Balances, December 28, 2018	10,261,571	102		47,492			(18,950		)	(1,589		)	27,055
Net income	—	—		—			670			—			670
Stock-based compensation	—	—		152						—			152
Restricted stock vested, net of shares withheld for payment of taxes	38,636	1		—			—			—			1
Exercise of stock options, net of shares surrendered	11,654	—		51			—			—			51
Balances, March 29, 2019	10,311,861	103		47,695			(18,280		)	(1,589		)	27,929
Net income	—	—		—			1,211			—			1,211
Stock-based compensation	—	—		117			—			—			117
Restricted stock vested, net of shares withheld for payment of taxes	2,458	—		(14		)	—			—			(14		)
Restricted stock units vested, net of shares withheld for payment of taxes	5,277	—		(34		)	—			—			(34		)
Exercise of stock options, net of shares surrendered	7,500	—		27			—			—			27
Employee stock plan purchases	5,390	—		33			—			—			33
Balances, June 28, 2019	10,332,486	$	103	$	47,824		$	(17,069	)	$	(1,589	)	$	29,269

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

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IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENT of CHANGES in STOCKHOLDERS’ EQUITY

NINE MONTHS ENDEDJUNE 29, 2018

(unaudited; in thousands, except share data)

	Number of Shares Outstanding	Common Stock, par $0.01		Additional Paid-In Capital		Accumulated Deficit			Treasury Stock, at cost			Total Stockholders’ Equity
Balances, October 1, 2017	10,197,078	$	102	$	46,789	$	(30,873	)	$	(1,589	)	$	14,429
Net loss	—	—		—		(494		)	—			(494		)
Stock-based compensation	—	—		69		—			—			69
Restricted stock vested, net of shares withheld for payment of taxes	3,498	—		—		—			—			—
Employee stock plan purchases	5,483	—		24		—			—			24
Balances, December 29, 2017	10,206,059	102		46,882		(31,367		)	(1,589		)	14,028
Net income	—	—		—		1,579			—			1,579
Stock-based compensation	—	—		129		—			—			129
Restricted stock vested, net of shares withheld for payment of taxes	30,530	—		—		—			—			—
Balances, March 30, 2018	10,236,589	102		47,011		(29,788		)	(1,589		)	15,736
Net income	—	—		—		204			—			204
Stock-based compensation	—	—		149		—			—			149
Restricted stock vested, net of shares withheld for payment of taxes	3,529	—		—		—			—			—
Exercise of stock options	1,400	—		—		—			—			—
Employee stock plan purchases	6,565	—		26		—			—			26
Balances, June 29, 2018	10,248,083	$	102	$	47,186	$	(29,584	)	$	(1,589	)	$	16,115

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

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IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS

NINE MONTHS ENDEDJUNE 28, 2019 and JUNE 29, 2018

(unaudited; in thousands)

	Nine Months Ended
	June 28, 2019			June 29, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,953		$	1,289
Non-cash adjustments:
Stock-based compensation	415			347
Depreciation and amortization	2,047			1,708
Change in reserve for doubtful accounts	(30		)	(42		)
Change in inventory reserve and warranty reserve	19			143
Deferred tax expense/(benefit)	732			(1,010		)
Amortization of deferred gain	(85		)	(54		)
Changes in assets and liabilities:
Accounts receivable	(1,414		)	(1,739		)
Unbilled contract revenue	(2,972		)	—
Inventory	(14,485		)	(10,612		)
Other current assets	(146		)	(204		)
Other long-term assets	(436		)	4
Accounts payable	1,293			3,268
Change in book overdraft position	(602		)	1,268
Accrued expenses	1,389			1,171
Customer deposits	2,155			790
Other long-term liabilities	(75		)	(75		)
Net cash flows used in operating activities	(9,242		)	(3,748		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(1,119		)	(2,001		)
Proceeds from disposal of property, plant and equipment	20			5
Proceeds from sale-leaseback	—			1,947
Net cash flows used in investing activities	(1,099		)	(49		)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from revolving credit facility	57,343			47,402
Repayments of revolving credit facility	(46,331		)	(41,609		)
Borrowings under other loan agreements	391			836
Repayments under other loan agreements	(889		)	(2,665		)
Repayments under capital lease	(230		)	(172		)
Debt issuance costs	(27		)	(45		)
Proceeds from exercise of stock options	79			—
Proceeds from employee stock plan purchases	53			50
Cash paid for taxes upon vesting of restricted stock	(48		)	—
Net cash flows provided by financing activities	10,341			3,797
Net cash change for the period	—			—
Cash, beginning of period	—			—
Cash, end of period	$	—		$	—
Supplemental cash flow information
Interest paid	$	1,183		$	807
Income taxes paid	3			4
Property, plant and equipment additions financed through capital lease	—			2,000
Non-cash transactions:
Property, plant and equipment purchased with extended payment terms	$	130		$	—

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

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IEC ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. (“IEC,” or the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking.  As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, and ISO 13485, and we are Nadcap accredited.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its web site at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ending September 30, 2019 (“fiscal 2019”), the fiscal quarters ended on December 28, 2018, March 29, 2019 and June 28, 2019. For the fiscal year ended September 30, 2018 (“fiscal 2018”), the fiscal quarters ended on December 29, 2017, March 30, 2018 and June 29, 2018.

Consolidation

The condensed consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc. The Rochester unit operates as a division of IEC. All intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

The accompanying unaudited condensed consolidated financial statements for the three and nine months endedJune 28, 2019 and June 29, 2018 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include certain of the information the footnotes require by GAAP for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY. The Company’s cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft. Book overdrafts are presented in accounts payable in the condensed consolidated balance sheets. Book overdrafts were $2.0 million and $2.6 million as of June 28, 2019 and September 30, 2018, respectively. Changes in the book overdrafts are presented within net cash flows provided by operating activities within the condensed consolidated statements of cash flows.

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Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that the likelihood of collection is remote.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or net realizable value.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) 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, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7
Software	3 to 10

Reviewing Long-Lived Assets for Potential Impairment

ASC 360 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definite lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were recorded by IEC for long-lived assets during either of the three or nine months ended June 28, 2019 and June 29, 2018.

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450 (Contingencies) requires the Company to determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

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Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable, accrued liabilities and borrowings.

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the three and nine months endedJune 28, 2019 and June 29, 2018.

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price.

Income Taxes and Deferred Taxes

ASC 740 (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, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred tax balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

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Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense. The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2014 through fiscal year ended September 30, 2018.

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.  Furthermore, the Company’s Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities. 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Significant items subject to such estimates include: allowance for doubtful accounts, excess and obsolete inventory reserve, warranty reserves, the valuation of deferred income tax assets and revenue recognition related to the accounts for over time contracts. Actual results may differ from management’s estimates.

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Segments

The Company’s results of operations for the three and nine months endedJune 28, 2019 and June 29, 2018 represent a single operating and reporting segment, referred to as contract manufacturing within the EMS industry. The Company strategically directs production between its various manufacturing facilities based on a number of considerations to best meet its customers’ requirements. The Company shares resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources.  The Company’s operations as a whole reflect the level at which the business is managed and how the Company’s chief operating decision maker assesses performance internally.

Recently Issued Accounting Standards Adopted

FASB Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASC 606”) was issued in May 2014 and updated the principles for recognizing revenue. This ASU superseded most of the existing revenue recognition requirements in GAAP. Under the new standard, revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that generally requires companies to use more judgment and make more estimates than under previous guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of the transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. Additionally, disclosures required for revenue recognition include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. Such disclosures are more extensive than what was required under previous GAAP.

The guidance was effective for the Company beginning with the first quarter of fiscal 2019. The Company evaluated the guidance and approved a transition method during fiscal 2018. The Company assessed the impact of the new guidance, which resulted in a change of the Company’s revenue recognition model for electronics manufacturing services from “point in time” upon physical delivery to an “over time” model. The Company implemented ASC 606 using the modified retrospective approach with the cumulative effect on accumulated deficit on adoption of $0.4 million, net of taxes recognized on October 1, 2018. The implementation of ASC 606 is more fully described in Note 2—Revenue Recognition.

Recently Issued Accounting Standards Not Yet Adopted

FASB ASU 2016-02, “Leases” (Topic 842) was issued in February 2016. This update supersedes ASC 840 (Leases) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the

13

principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease for finance leases and operating leases, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842 (Leases),” and ASU 2018-11, “Leases (Topic 842),” Targeted Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which provides certain narrow-scope improvements to Topic 842 as it relates to lessors. The ASUs related to Topic 842 will be effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is in the process of finalizing the analysis of its lease portfolio, implementing systems and processes and updating its accounting policies to comply with Topic 842.

NOTE 2—REVENUE RECOGNITION

ASC 606: Revenue from Contracts with Customers

General Description of the New Guidance

Effective October 1, 2018, the Company applied the modified retrospective approach for its adoption of ASC 606. The primary impact of the new standard resulted in a change in the timing of the Company’s revenue recognition for some customer contracts for our custom manufacturing services to recognizing revenue over time as products are manufactured, as opposed to the prior revenue recognition of point in time. The transitional adjustment resulted in the recognition of unbilled revenue with a corresponding reduction in finished goods and work-in-process inventory (“WIP inventory”). The Company recognized the cumulative effect of initially applying the new revenue standard, totaling $0.4 million, net of tax, as an adjustment to its opening accumulated deficit balance at October 1, 2018 included in stockholders’ equity. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Satisfaction of Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Many of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company primarily provides contract manufacturing services to its customers. The customer provides a design, the Company procures materials and manufactures to that design and ships the product to the customer. Revenue is derived primarily from the manufacturing of these electronics components that are built to customer specifications.

The Company's performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods and services transferred to customers at a point in time accounted for 52.3% and 50.8% of the Company's revenue for the three and nine months endedJune 28, 2019, respectively. Revenue on these contracts is recognized when obligations under the terms of the customer contract are satisfied; generally this occurs with the transfer of control upon shipment. If there is no enforceable right to payment for work completed to date, or the Company does not recapture costs incurred plus an applicable margin, then the Company records revenue upon shipment to the customer.

Revenue from goods and services transferred to customers over time accounted for 47.7% and 49.2% of our revenue for the three and nine months endedJune 28, 2019, respectively. For revenue recognized over time, the Company uses an input measure to determine progress towards completion. Under this method, sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion. If the Company has an enforceable right to payment for work completed to date, with a recapture of costs incurred plus an applicable margin, and the goods do not have an alternative future use once the manufacturing process has commenced, then the Company records an unbilled revenue associated with non-cancellable customer orders.

The Company derives revenue from engineering and design services. Service revenue is generally recognized once the service has been rendered.  For material management arrangements, revenue is generally recognized as services are rendered.  Under such arrangements, some or all of the following services may be provided: design, bid, procurement, testing, storage or other activities relating to materials the customer expects to incorporate into products that it manufactures.  Value-added support services revenue, including material management and repair work revenue, amounted to less than 3% of total revenue in each of the three and nine months endedJune 28, 2019 and June 29, 2018.

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Returns and Discounts

The Company does not offer its customers a right of return. Rather, the Company warrants that each unit received by the customer will meet the agreed upon technical and quality specifications and requirements. Only when the delivered units do not meet these requirements can the customer return the non-compliant units as a corrective action under the warranty. The remedy offered to the customer is repair of the returned units or replacement if repair is not viable. Accordingly, the Company records a warranty reserve and any warranty activities are not considered to be a separate performance obligation. Historically, warranty reserves have not been material.

Provisions for discounts, allowances, estimated returns and other adjustments are recorded in the period the related sales are recognized.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in net sales in the accompanying condensed consolidated statements of operations. Shipping and handling costs incurred by the Company for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying condensed consolidated statements of operations.

Contract Assets

Contract assets consist of unbilled contract amounts resulting from sales under contracts when the revenue recognized exceeds the amount billed to the customer.

Practical Expedients and Exemptions

The Company generally expenses incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are recorded in selling and administrative expense in the condensed consolidated statements of operations.

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Disaggregated Revenue

The table below shows net sales from contracts with customers by market sector. See additional information regarding market sectors in Note 10—Market Sectors and Major Customers.

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Point in Time		Over Time		Net Sales		Point in Time		Over Time		Net Sales
(in thousands)
Aerospace & Defense	$	11,300	$	13,298	$	24,598	$	30,950	$	35,755	$	66,705
Medical	5,127		3,744		8,871		12,441		12,432		24,873
Industrial	4,657		2,198		6,855		14,063		7,418		21,481
	$	21,084	$	19,240	$	40,324	$	57,454	$	55,605	$	113,059

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Impact of adoption of ASC 606

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of October 1, 2018: 

	Balances Without Adoption of ASC 606			Effect of Change			Adjusted
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	4,333		$	4,333
Inventories	34,126			(3,768		)	30,358
Deferred income taxes	8,855			(124		)	8,731
Stockholders’ Equity:
Accumulated deficit	(20,463		)	441			(20,022		)

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of June 28, 2019: 

	Balances Without Adoption of ASC 606			Effect of Change			As Reported
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	7,305		$	7,305
Inventories	51,086			(6,197		)	44,889
Deferred income taxes	8,242			(243		)	7,999
Stockholders’ Equity:
Accumulated deficit	(17,934		)	865			(17,069		)

The following table presents the impacted financial statement line items under ASC 605 "Revenue Recognition" and ASC 606 in the condensed consolidated statements of operations for the three and nine months ended June 28, 2019:

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Balances Without Adoption of ASC 606		Effect of Change		As Reported		Balances Without Adoption of ASC 606		Effect of Change		As Reported
Net sales	$	39,062	$	1,262	$	40,324	$	110,087	$	2,972	$	113,059
Cost of sales	33,604		1,115		34,719		95,379		2,429		97,808
Gross profit	5,458		147		5,605		14,708		543		15,251
Income tax expense	189		32		221		617		119		736
Net income	1,096		115		1,211		2,529		424		2,953

For each of the three and nine months endedJune 28, 2019 and June 29, 2018, less than 1% of net sales were shipped to locations outside the United States.

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NOTE 3—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary follows of activity in the allowance for doubtful accounts during the nine months endedJune 28, 2019 and June 29, 2018:

	Nine Months Ended
Allowance for doubtful accounts	June 28, 2019			June 29, 2018
(in thousands)
Allowance, beginning of period	$	85		$	75
Change in provision for doubtful accounts	(30		)	(42		)
Write-offs	—			—
Allowance, end of period	$	55		$	33

NOTE 4—INVENTORIES

A summary of inventory by category at period end follows:

Inventories	June 28, 2019		September 30, 2018
(in thousands)
Raw materials	$	28,737	$	21,323
Work-in-process	12,793		11,263
Finished goods	3,359		1,540
Total inventories	$	44,889	$	34,126

NOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant and Equipment	June 28, 2019			September 30, 2018
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	7,397			7,314
Building under capital lease	7,750			7,750
Machinery and equipment	31,593			30,969
Furniture and fixtures	7,923			7,877
Software	5,215			—
Construction in progress	557			5,360
Total property, plant and equipment, at cost	61,223			60,058
Accumulated depreciation	(41,892		)	(39,948		)
Property, plant and equipment, net	$	19,331		$	20,110

Depreciation expense during the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Depreciation expense	$	707	$	567	$	2,008	$	1,729

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NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:   

			June 28, 2019					September 30, 2018
Debt	Fixed/Variable Rate	Maturity Date	Balance			Interest Rate		Balance			Interest Rate
(in thousands)
M&T Bank credit facilities:
Revolving Credit Facility	v	5/5/2022	$	24,008		4.94	%	$	12,996		5.26	%
Term Loan B	v	5/5/2022	2,993			5.19		3,636			5.36
Equipment Line Advances	v	Various	—			—		314			5.56
Equipment Line Term Note	v	Various	1,254			5.28		794			5.56
Total debt, gross			28,255					17,740
Unamortized debt issuance costs			(262		)			(289		)
Total debt, net			27,993					17,451
Less: current portion			(1,371		)			(1,449		)
Long-term debt			$	26,622				$	16,002

M&T Bank Credit Facilities

During the quarter ended March 29, 2019, the Company and M&T Bank entered into the Seventh and Eighth Amendments to the Fifth Amended and Restated Credit Facility Agreement, which amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Credit Facility, as amended”). Among other things, the Seventh Amendment increased the Company’s revolving credit commitment to $27.0 and added a monthly information requirement for backlog conversion ratio metrics. The Eighth Amendment modified the definition of “Borrowing Base” to increase the amount of certain availability limits contained within the definition.

The Credit Facility, as amended, is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility, as amended, are described below:

a) Revolving Credit Facility (“Revolver”): At June 28, 2019, up to $27.0 million is available through May 5, 2022. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

b) Term Loan B:$14.0 million was borrowed on January 18, 2013. Principal was being repaid in 120 equal monthly installments of $117 thousand. As part of an amendment to the Credit Facility, as amended, the principal was modified from $8.0 million to $6.0 million and principal is being repaid in equal monthly installments of $71 thousand plus a balloon payment of $0.6 million. The maturity date of the loan is May 5, 2022.

c) Equipment Line Advances: Up to $1.5 million is available through May 5, 2022. Interest only is paid until maturity. Principal is due in three or six months after borrowing or can be converted to an Equipment Line Term Loan. On September 18, 2018, $0.3 million was borrowed and upon maturity at March 18, 2019, was converted into an Equipment Line Term Loan. On November 6, 2018, an additional $0.4 million was borrowed and upon maturity at May 6, 2019, was converted into an Equipment Line Term Note.

d) Equipment Line Term Note: On July 26, 2018, $0.8 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $21 thousand and matures July 26, 2021. On September 27, 2018, $0.1 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $2 thousand and matures September 29, 2021. On March 18, 2019, $0.3 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $9 thousand and matures March 18, 2022. On May 6, 2019, $0.4 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $11 thousand and matures May 6, 2022.

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Borrowing Base

At June 28, 2019, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $14.0 million) or (ii) $27.0 million. At September 30, 2018, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $8.0 million) or (ii) $22.0 million.

At June 28, 2019, the upper limit on Revolver borrowings was $27.0 million with $3.0 million available. At September 30, 2018, the upper limit on Revolver borrowings was $22.0 million with $9.0 million available. Average Revolver balances amounted to $20.0 million and $11.8 million during the nine months endedJune 28, 2019 and June 29, 2018, respectively.

Interest Rates

Under the Credit Facility, as amended, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At June 28, 2019, the applicable marginal interest rate was 2.50% for the Revolver and 2.75% for Term Loan B and Equipment Line Advances. At September 30, 2018, the applicable marginal interest rate was 3.00% for the Revolver and 3.25% for Term Loan B and Equipment Line Advances. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.25% to 0.375% of the excess of $27.0 million over average borrowings under the Revolver. Fees incurred amounted to $2.6 thousand and $15.3 thousand during the three and nine months endedJune 28, 2019, respectively. Fees incurred amounted to $5.3 thousand and $16.5 thousand during the three and nine months endedJune 29, 2018, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Credit Facility, as amended, contains various affirmative and negative covenants including financial covenants. As of June 28, 2019, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended June 28, 2019 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at June 28, 2019. The Credit Facility, as amended, also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at June 28, 2019.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at June 28, 2019 for the next three years taking into consideration the Credit Facility, as amended, is as follows:

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ending June
2020		$	1,371
2021		1,371
2022	(1)	25,513
		$	28,255

⁽¹⁾ Includes Revolver balance of $24.0 million at June 28, 2019.

As more fully described in Note 14—Subsequent Events, effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Ninth Amendment”), that amended the Credit Facility, as amended.

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NOTE 7—WARRANTY RESERVES

IEC generally warrants its products and workmanship for up to twelve months from date of sale.  As an offset to warranty claims, the Company is sometimes able to obtain reimbursement from suppliers for warranty-related costs or losses.  Based on historical warranty claims experience and in consideration of sales trends, a reserve is maintained for estimated future warranty costs to be incurred on products and services sold through the balance sheet date. The warranty reserve is included in other accrued expenses on the condensed consolidated balance sheets.

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Nine Months Ended
Warranty Reserve	June 28, 2019			June 29, 2018
(in thousands)
Reserve, beginning of period	$	173		$	153
Provision	65			213
Warranty costs	(89		)	(199		)
Reserve, end of period	$	149		$	167

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 replaced 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 and the 2019 Plan, totaled $0.1 million and $0.4 million for the three and nine months endedJune 28, 2019, respectively. Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.1 million and $0.3 million for the three and nine months endedJune 29, 2018, respectively.

At June 28, 2019, there were 776,775 remaining shares of common stock available to be issued under the 2019 Plan and 89,701 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 and 2019 Plan is generally seven years.  The volatility rate is based on the historical volatility of IEC's common stock.

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Assumptions used in the Black-Scholes model and the estimated value of options granted during the nine months endedJune 28, 2019 and June 29, 2018 follows in the table below.

	Nine Months Ended
Valuation of Options	June 28, 2019			June 29, 2018
Assumptions for Black-Scholes:
Risk-free interest rate	2.35		%	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	20,000			20,000
Weighted average fair value per share	$	2.33		$	1.53
Fair value of options granted (000s)	$	47		$	31

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

	Nine Months Ended
	June 28, 2019				June 29, 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	20,000		6.12		20,000		4.00
Exercised	(34,000	)	4.46		(1,400	)	4.08
Forfeited	(24,250	)	3.70		(90,000	)	4.75
Expired	(5,750	)	4.06		(10,500	)	5.24
Outstanding, end of period	693,145		$	4.40	661,145		$	4.18
For options expected to vest
Number expected to vest	685,354		$	4.39	653,922		$	4.18
Weighted average remaining contractual term, in years	3.4				3.7
Intrinsic value (000s)			$	1,306			$	1,009
For exercisable options
Number exercisable	533,645		$	4.18	450,358		$	4.28
Weighted average remaining contractual term, in years	2.7				3.4
Intrinsic value (000s)			$	1,132			$	721
For non-exercisable options
Expense not yet recognized (000s)			$	232			$	205
Weighted average years to be recognized	3.1				1.5
For options exercised
Intrinsic value (000s)			$	77			$	2

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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: 

	Nine Months Ended
	June 28, 2019				June 29, 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	32,385		7.09		44,878		4.29
Vested	(49,511	)	4.08		(39,300	)	4.10
Forfeited	(1,400	)	4.13		(9,490	)	4.20
Outstanding, end of period	84,707		$	5.23	105,783		$	4.09
For non-vested shares
Expense not yet recognized (000s)			$	365			$	353
Weighted average remaining years for vesting	2.2				1.9
For shares vested
Aggregate fair value on vesting dates (000s)			$	333			$	173

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.

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

	Nine Months Ended
	June 28, 2019				June 29, 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	63,011		7.09		102,864		4.28
Vested	(12,258	)	4.64		—		—
Forfeited	—		—		(151,341	)	4.08
Outstanding, end of period	221,245		$	4.81	219,522		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	573			$	371
Weighted average remaining years for vesting	2.4				2.5

NOTE 9—INCOME TAXES

The income tax expense/(benefit) during each of the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Income tax expense/(benefit)	$	221	$	—	$	736	$	(1,005	)

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal tax rate of approximately 24.2% for fiscal 2018, and 21% for subsequent fiscal years. The Tax Act eliminated the domestic manufacturing deduction and moved to a territorial system. In addition, previously paid federal alternative minimum tax (“AMT”) are now refundable regardless of whether there is future income tax liability before AMT credits.

The Company concluded that the Tax Act caused the Company’s U.S. deferred tax assets and liabilities to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are revalued and any change is adjusted through the provision for income tax expense in the reporting period of the enactment.

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income, changes in tax laws, business reorganizations, and settlements with taxing authorities, if any.

For the nine months endedJune 29, 2018, the impact of the Tax Act resulted in the Company recording a net tax benefit of approximately $1.0 million, resulting from the release of the valuation allowance on the Company’s AMT credits.

The Company's estimated annual effective tax rate for fiscal 2019 is comprised of the federal tax rate of 21% plus the state tax rate of 1.58%, which is adjusted for permanent book tax differences. During the three and nine months endedJune 28, 2019, the permanent items included meals and entertainment and stock based compensation. There were no material discrete items recognized in the three and nine months endedJune 28, 2019.

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NOTE 10—MARKET SECTORS AND MAJOR CUSTOMERS

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Nine Months Ended
% of Sales by Sector	June 28, 2019	June 29, 2018	June 28, 2019	June 29, 2018
Aerospace & Defense	61%	60%	59%	62%
Medical	22%	22%	22%	21%
Industrial	17%	18%	19%	17%
	100%	100%	100%	100%

One individual customer represented 10% or more of sales for the three months ended June 28, 2019. This customer was from the aerospace & defense sector and represented 24% of sales. One individual customer represented 10% or more of sales for the nine months ended June 28, 2019. This customer was from the aerospace & defense sector and represented 22% of sales.

Two individual customers each represented 10% or more of sales for the three months ended June 29, 2018. One customer was from the aerospace & defense sector and represented 25% of sales, while one was from the medical sector and represented 11% of sales for the three months ended June 29, 2018. Two individual customers each represented 10% or more of sales for the nine months ended June 29, 2018. One customer was from the aerospace & defense sector and represented 23% of sales, while one customer was from the medical sector and represented 11% of sales for the six months ended June 29, 2018.

One individual customer represented 10% or more of receivables and accounted for 26% of the outstanding balance at June 28, 2019. Three individual customers represented 10% or more of receivables and accounted for 55% of the outstanding balance at September 30, 2018.

Credit risk associated with individual customers is periodically evaluated by analyzing the entity’s financial condition and payment history.  Customers generally are not required to post collateral.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be involved in legal actions in the ordinary course of its business, but management does not believe that any such proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s condensed consolidated financial statements.

NOTE 12—CAPITAL LEASE

Leases

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ending June
2020	$	669
2021	683
2022	696
2023	711
2024 and thereafter	6,900
Total capital lease payments	9,659
Less: amounts representing interest	(2,556		)
Present value of minimum lease payment	$	7,103

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NOTE 13—NET INCOME PER SHARE

The Company applies the two-class method to calculate and present net income per share. Certain of the Company's restricted (non-vested) share awards contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net income per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends.

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as unvested restricted stock and restricted stock units.  Options, restricted stock and restricted stock units are primarily held by directors, officers and certain employees. 

The Company uses the two-class method to calculate net income per share as both classes share the same rights in dividends. Therefore, basic and diluted earnings per share (“EPS”) are the same for both classes of ordinary shares.

A summary of shares used in the EPS calculations follows (in thousands except share and per share data):

	Three Months Ended				Nine Months Ended
Earnings Per Share	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Basic net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Less: Income attributable to non-vested shares	10		2		25		13
Net income available to common stockholders	$	1,201	$	202	$	2,928	$	1,276
Weighted average common shares outstanding	10,332,548		10,243,286		10,294,173		10,221,869
Basic net income per share	$	0.12	$	0.02	$	0.28	$	0.12
Diluted net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Shares used in computing basic net income per share	10,332,548		10,243,286		10,294,173		10,221,869
Dilutive effect of non-vested shares	309,855		313,478		262,780		245,243
Shares used in computing diluted net income per share	10,642,403		10,556,764		10,556,953		10,467,112
Diluted net income per share	$	0.11	$	0.02	$	0.28	$	0.12

The diluted weighted average share calculations do not include the following shares, which are not dilutive to the EPS calculations.

	Three Months Ended		Nine Months Ended
	June 28, 2019	June 29, 2018	June 28, 2019	June 29, 2018
Anti-dilutive shares excluded	52,523	39,335	39,872	171,791

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NOTE 14—SUBSEQUENT EVENTS

Effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to the Credit Facility, as amended. The Ninth Amendment increased the Company’s revolving credit commitment to $35.0 million. In addition, the Ninth Amendment modified the definition of “Borrowing Base” to increase the amount of certain availability limits contained within the definition.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes.  All references to “Notes” are to the accompanying condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”).

Cautionary Note Regarding Forward-Looking Statements

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 Form 10-Q contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking 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 materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views expressed or implied in our forward-looking statements: business conditions and growth or contraction in our customers’ industries, the electronic manufacturing services industry and the general economy; variability of our operating results; our ability to control our material, labor and other costs; our dependence on a limited number of major customers; the potential consolidation of our customer base; availability of component supplies; dependence on certain industries; variability and timing of customer requirements; technological, engineering and other start-up issues related to new programs and products; uncertainties as to availability and timing of governmental funding for our customers; the impact of government regulations, including FDA regulations; risks related to the accuracy of the estimates and assumptions we used to revalue our net deferred tax assets in accordance with the Tax Cuts and Jobs Act of 2017; the types and mix of sales to our customers; litigation and governmental investigations; intellectual property litigation; our ability to maintain effective internal controls over financial reporting; unforeseen product failures and the potential product liability claims that may be associated with such failures; the availability of capital and other economic, business and competitive factors affecting our customers, our industry and business generally; failure or breach of our information technology systems; and natural disasters. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock. 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 in this Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, and our other filings with the Securities and Exchange Commission (the “SEC”).

All forward-looking statements included in this Form-10-Q are made only as of the date indicated or as of the date of this Form 10-Q. We do not undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of, except as required by law. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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Overview

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” the “Company”) conducts business directly, as well as through its subsidiaries, IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc. The Rochester unit operates as a division of IEC.

We are a premier provider of electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. We specialize in delivering technical solutions for the custom manufacturing, product configuration, and verification testing of highly engineered complex products that require a sophisticated level of manufacturing to ensure quality and performance.

Within the EMS sector, we have unique capabilities which allow our customers to rely on us to solve their complex challenges, minimize their supply chain risk and deliver full system solutions for their supply chain. These capabilities include, among others:

• Our engineering services include the design, development, and fabrication of customized stress testing platforms to simulate a product’s end application, such as thermal cycling and vibration, in order to ensure reliable performance and avoid catastrophic failure when the product is placed in service.

• Our vertical manufacturing model offers customers the ability to simplify their supply chain by utilizing a single supplier for their critical components including complex printed circuit board assembly (“PCBA”), precision metalworking, and interconnect solutions. This service model allows us to control the cost, lead time, and quality of these critical components which are then integrated into full system assemblies and minimizes our customers’ supply chain risk.

• We provide direct order fulfillment services for our customers by integrating with their configuration management process to obtain their customer orders, customize the product to the specific requirements, functionally test the product and provide verification data, and direct ship to their end customer in order to reduce time, cost, and complexity within our customer's supply chain.

• We are the only EMS provider with an on-site laboratory that has been approved by the Defense Logistics Agency (“DLA”) for their Qualified Testing Supplier List (“QTSL”) program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis. In addition, this advanced laboratory is utilized for complex design analysis and manufacturing process development to solve challenges and accelerate our customers’ time to market.

We are a 100% U.S. manufacturer which attracts customers who are unlikely to utilize offshore suppliers due to the proprietary nature of their products, governmental restrictions or volume considerations. Our locations include:

• Newark, New York - Located approximately one hour east of Rochester, New York, our Newark location is our corporate headquarters and is the largest manufacturing location providing complex circuit board manufacturing, interconnect solutions, and system-level assemblies along with an on-site material analysis laboratory for advanced manufacturing process development.

• Rochester, New York - Focuses on precision metalworking services including complex metal chassis and assemblies.

• Albuquerque, New Mexico - Specializes in the aerospace and defense markets with complex circuit board and system-level assemblies along with a state of the art analysis and testing laboratory which conducts counterfeit component analysis and complex design analysis.

We excel at complex, highly engineered products that require sophisticated manufacturing support where quality and reliability are of paramount importance. With our customers at the center of everything we do, we have created a high-intensity, rapid response culture capable of reacting and adapting to their ever-changing needs.  Our customer-centric approach offers a high degree of flexibility while simultaneously complying with rigorous quality and on-time delivery standards.

We proactively invest in areas we view as important for our continued long-term growth. All of our locations are ISO 9001:2008 certified and ITAR registered. We are Nadcap accredited and AS9100D and AS9100C certified at our Newark and Albuquerque locations, respectively, to support the stringent quality requirements of the aerospace industry. Our Newark location is ISO 13485 certified to serve the medical sector and is an approved supplier by the National Security Agency (“NSA”) under the COMSEC standard regarding communications security. Our analysis & testing laboratory in Albuquerque is ISO 17025 accredited, an IPC-approved Validation Services Test Laboratory, and is the only on-site EMS laboratory that has been approved by the DLA for their QTSL program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis. Albuquerque also performs work per NASA-STD-8739 and J-STD-001ES space standards.

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The technical expertise of our experienced workforce enables us to build some of the most advanced electronic, wire and cable, interconnect solutions, and precision metal systems sought by original equipment manufacturers (“OEMs”).

Employees are our single greatest resource. Our total employees numbered 850, all of which are full time employees, at June 28, 2019. Total employment increased by 52 employees during the three months ended June 28, 2019, our third quarter of fiscal 2019. Some of our full-time employees are temporary employees. We make a concerted effort to engage our employees in initiatives that improve our business and provide opportunities for growth, and we believe that our employee relations are good. We have access to large and technically qualified workforces in close proximity to our operating locations in Rochester, NY and Albuquerque, NM.

Three Months Results

A summary of selected income statement amounts for the three months ended follows:

	Three Months Ended
Income Statement Data	June 28, 2019		June 29, 2018
(in thousands)
Net sales	$	40,324	$	29,782
Gross profit	5,605		3,359
Selling and administrative expenses	3,721		2,833
Interest and financing expense	452		322
Income before income taxes	1,432		204
Income tax expense	221		—
Net income	$	1,211	$	204

A summary of sales, according to the market sector within which our customers operate, follows:

	Three Months Ended
% of Sales by Sector	June 28, 2019	June 29, 2018
Aerospace & Defense	61%	60%
Medical	22%	22%
Industrial	17%	18%
	100%	100%

Revenue increased in the third quarter of fiscal 2019 by $10.5 million or 35% as compared to the third quarter of the prior fiscal year. Revenues from the aerospace & defense sector increased $7.6 million, revenue from the medical sector increased $1.9 million and revenue from the industrial sector increased $1.0 million.

Various increases and decreases in sales to our aerospace & defense customers resulted in a net increase of $7.6 million in the third quarter of fiscal 2019. Ramping up of production of various customers resulted in an increase of revenue of $5.1 million and increases in customer demand resulted in an additional $3.2 million increase in revenue. These increases were partially offset by decreases related to contracts ending of $0.5 million.

The medical sector saw an increase of $1.9 million in the third quarter of fiscal 2019 compared to the same period of the prior fiscal year. We saw increases related to new programs ramping up with three customers amounting to $1.8 million. One customer had material constraints removed during the period, which resulted in increased revenue of $0.5 million. These increases were partially offset by net reductions of $0.5 million in demand from multiple customers. We continue to expect some volatility in the medical sector going forward.

The net increase in the industrial sector of $1.0 million resulted primarily from the production ramp up of new programs with two customers, which amounted to $1.0 million. The remaining change was minimal and was due to several customers whose end markets have grown, partially offset by decreases in demand from other customers.

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Gross profit as a percent of sales for the third quarter of fiscal 2019increased to 13.9% of sales versus 11.3% of sales in the third quarter of the prior fiscal year. Customer mix had the most significant impact on gross profit. In addition, the growth in sales allowed for more absorption of overhead costs.

Selling and administrative (“S&A”) expense increased$0.9 million and represented 9.2% of sales in the third quarter of fiscal 2019 compared to 9.5% of sales in the same quarter of the prior fiscal year. The increase in S&A expense was primarily due to higher wage and related expenses.

Interest expense increased by $0.1 million in the third quarter of fiscal 2019 compared to the same quarter of the prior fiscal year. The weighted average interest rate on our debt was consistent during the third quarter of fiscal 2019 compared to the third quarter of the prior fiscal year. Our average outstanding debt balances increased by $7.8 million in the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 because of higher balances on the revolving credit facility and equipment line advances and term loans to fund capital purchases. Cash paid for interest on credit facility debt was approximately $0.3 million for each of the third quarter of fiscal 2019 and fiscal 2018. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

With respect to tax payments, in the near term, we expect to be largely sheltered by sizable net operating loss (“NOL”) carryforwards for federal income tax purposes. In the quarter ended June 28, 2019, we did not pay any taxes. At the end of fiscal 2018, the gross NOL carryforwards amounted to approximately $29.7 million. The NOL carryforwards expire in varying amounts between 2022 and 2035, unless utilized prior to these dates.

Year to Date Results

A summary of selected income statement amounts for the nine months ended follows:

	Nine Months Ended
	June 28, 2019		June 29, 2018
(in thousands)
Net sales	$	113,059	$	82,706
Gross profit	15,251		9,661
Selling and administrative expenses	10,402		8,543
Interest and financing expense	1,160		834
Income before income taxes	3,689		284
Income tax expense/(benefit)	736		(1,005		)
Net income	$	2,953	$	1,289

A summary of sales, according to the market sector within which our customers operate, follows:

	Nine Months Ended
% of Sales by Sector	June 28, 2019	June 29, 2018
Aerospace & Defense	59%	62%
Medical	22%	21%
Industrial	19%	17%
	100%	100%

Revenue increased in the first nine months of fiscal 2019 by $30.4 million or 37% as compared to the first nine months of the prior fiscal year. Revenues from the aerospace & defense sector increased $16.3 million, revenue from the medical sector increased$7.8 million and revenue from the industrial sector increased $6.3 million.

Various increases and decreases in sales to our aerospace & defense customers resulted in a net increase of $16.3 million in the first nine months of fiscal 2019. We saw an increase of $11.1 million related to production ramp up from multiple customers. Various increases and decreases in demand from existing customers resulted in a net increase of $8.8 million. The remaining net decrease of $3.6 million was due to disengagement with two customers and additional programs ending.

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Revenues in the medical sector increased by $7.8 million in the first nine months of fiscal 2019 compared to the same period of the prior fiscal year. We saw an increase of $7.2 million related to production ramp up for three customers and an increase in demand from another customer of $3.0 million. These increases were partially offset by volume reductions from multiple customers of $2.4 million. We expect some volatility in the medical sector going forward.

The net increase in the industrial sector of $6.3 million resulted primarily from the production ramp up of new programs with three customers, which amounted to $5.7 million. The remaining increase was due to several customers whose end markets have grown, partially offset by decreases in demand from other customers.

Gross profit for the first nine months of fiscal 2019increased to 13.5% of sales versus 11.7% in the first nine months of the prior fiscal year. Customer mix had the most significant impact on gross profit. In addition, the growth in sales allowed for more absorption of overhead costs.

Selling and administrative (“S&A”) expense increased$1.9 million and represented 9.2% of sales in the first nine months of fiscal 2019 compared to 10.3% of sales in the first nine months of the prior fiscal year. The increase in S&A expense was primarily due to higher wage and related expenses.

Interest expense increased by $0.3 million in the first nine months of fiscal 2019 compared to the first nine months of the prior fiscal year. The weighted average interest rate on our debt was 0.64% higher during the first nine months of fiscal 2019 compared to the first nine months of the prior fiscal year. Our average outstanding debt balances increased by $6.1 million in the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018 because of higher balances on the revolving credit facility and equipment line advances and term loans to fund capital purchases. Cash paid for interest on credit facility debt was approximately $0.9 million and $0.6 million for the first nine months of fiscal 2019 and fiscal 2018, respectively. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

With respect to tax payments, in the near term, we expect to be largely sheltered by sizable NOL carryforwards for federal income tax purposes. In the nine months endedJune 28, 2019, we paid minimal taxes. At the end of fiscal 2018, the gross NOL carryforwards amounted to approximately $29.7 million. The NOL carryforwards expire in varying amounts between 2022 and 2035, unless utilized prior to these dates.

Liquidity and Capital Resources

Capital Resources

As of June 28, 2019, there were $0.9 million of outstanding capital expenditure commitments for manufacturing equipment.  We generally fund capital expenditures with cash flows from operations, our revolving credit facility and our equipment line advances. Based on our current expectations, we believe that our projected cash flows provided by operations and potential borrowings under the revolving credit facility and equipment line advances, are sufficient to meet our working capital, debt service and capital expenditure requirements for the next twelve months.

Our cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft.

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Summary of Cash Flows

A summary of selected cash flow amounts for the nine months endedJune 28, 2019 and June 29, 2018 follows:

	Nine Months Ended
Cash Flow Data	June 28, 2019			June 29, 2018
(in thousands)
Cash, beginning of period	$	—		$	—
Net cash provided by/(used in):
Operating activities	(9,242		)	(3,748		)
Investing activities	(1,099		)	(49		)
Financing activities	10,341			3,797
Net cash change for the period	—			—
Cash, end of period	$	—		$	—

Operating activities

Cash flows from operations, before considering changes in our working capital accounts, provided $6.1 million and $2.4 million for the first nine months of fiscal2019 and fiscal 2018, respectively. Net income of $3.0 million in the first nine months of fiscal2019 improved compared to the same period of the prior fiscal year mainly due to increased sales. Net income was $1.3 million during the first nine months of the prior fiscal year, largely due to the income tax benefit of $1.0 million as a result of the Tax Act.

Working capital used cash flows of $15.3 million in the first nine months of fiscal2019 and used $6.1 million in the first nine months of fiscal2018. The change in working capital in the first nine months of fiscal2019 was primarily due to increases in inventory of $14.5 million, increases in accounts receivable of $1.4 million, increases in unbilled contract revenue of $3.0 million due to the implementation of ASC 606, and a decrease in book overdraft of $0.6 million. These changes were partially offset by increases in accounts payable of $1.3 million, increases in accrued expenses of $1.4 million and increases in customer deposits of $2.2 million. Inventory and customer deposit increases were driven by the higher customer demand to meet increased backlog and securing materials for future production. The increase in accounts receivable was primarily due to increases in sales. The increase in accounts payable was due primarily to an increase of inventory purchases, as well as timing of purchases and payments. The increase in accrued expenses was due to an increase in payroll and related costs due to timing.

Investing activities

Cash flows used in investing activities were $1.1 million for the first nine months of fiscal2019.  Cash flows used in investing activities were minimal for the first nine months of fiscal2018.  Cash flows used in each of the first nine months of fiscal2019 and fiscal 2018 consisted of purchases of equipment. Cash flows used in the first nine months of fiscal2018 also consisted of capitalized software costs resulting from the ongoing implementation of a new enterprise resource planning (“ERP”) system, these purchases were offset by the proceeds from the Rochester sale-leaseback transaction.

Financing activities

Cash flows provided by financing activities were $10.3 million for the first nine months of fiscal2019 and $3.8 million for the first nine months of fiscal2018.  During the first nine months of fiscal2019, net borrowings under all credit facilities were $10.5 million, with $11.0 million of net borrowings under the Revolver, as defined below, repayments of $0.9 million for term debt, and $0.4 million of new borrowings related to equipment line advances. During the first nine months of fiscal2018, net borrowings under all credit facilities were $4.0 million, with $5.8 million of net borrowings under the Revolver, as defined below, repayments of $2.7 million for term debt, and $0.8 million of new borrowings related to equipment line advances. Term debt repayments in the first nine months of fiscal 2018, included more than normal principal repayments as proceeds from the Rochester sale-leaseback transaction were used to pay down term debt.

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Credit Facilities

At June 28, 2019, borrowings outstanding under the revolving credit facility (the “Revolver”) under the Eighth Amendment to the Fifth Amended and Restated Credit Facility Agreement (which amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Credit Facility, as amended”) amounted to $24.0 million, and the upper limit was $27.0 million.  We believe that our liquidity is sufficient to satisfy anticipated operating requirements during the next twelve months.

The Credit Facility, as amended, contains various affirmative and negative covenants including financial covenants. As of June 28, 2019, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended June 28, 2019. The Credit Facility, as amended, also provides for customary events of default, subject in certain cases to customary cure periods, in which events, the outstanding balance and any unpaid interest would become due and payable.

Pursuant to the Credit Facility, as amended, the Fixed Charge Coverage Ratio covenant of a minimum of 1.10 was the only covenant in effect at June 28, 2019. The Fixed Charge Coverage Ratio was calculated as 2.22 at June 28, 2019. The Company was in compliance with the financial debt covenant at June 28, 2019.

Detailed information regarding our borrowings at June 28, 2019 is provided in Note 6—Credit Facilities.

Off-Balance Sheet Arrangements

IEC is not a party to any material off-balance sheet arrangements.

Application of Critical Accounting Policies

Our application of critical accounting policies is disclosed in our Annual Report on Form 10-K filed for the fiscal year ended September 30, 2018.  During the nine months ended June 28, 2019, the following critical accounting policies were updated as a result of the adoption of FASB Accounting Standard Update 2014-09, “Revenue from Contracts with Customers” (“ASC 606”) and are affected significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition: Revenue is derived primarily from the sale of electronics components that are built to customer specifications. For revenue recognized over time, the Company uses an input measure to determine progress towards completion. Under this method, sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion. If the Company has an enforceable right to payment for work completed to date, with a recapture of costs incurred plus an applicable margin, and the goods do not have an alternative future use once the manufacturing process has commenced, then the Company records an unbilled revenue associated with non-cancellable customer orders. Similarly, the Company records an unbilled revenue related to its WIP inventory when the manufacturing process has commenced and there is a non-cancellable customer purchase order.

Estimation of the percentage of completion in satisfying its performance obligation: The Company records an unbilled contract revenue for revenue related to its WIP when the manufacturing process has commenced and there is a non-cancellable customer purchase order. The Company uses direct manufacturing labor inputs to estimate the percentage of completion in satisfying its performance obligation associated with WIP inventory. If assumptions change related to the estimate of the performance obligation associated with WIP inventory, this could have a material impact on the revenue and corresponding margin recognized.

Recently Issued Accounting Standards

See Note 1—Our Business and Summary of Significant Accounting Policies for further information concerning recently issued accounting pronouncements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

As a result of its financing activities, the Company is exposed to changes in interest rates that may adversely affect operating results. The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial

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instruments to manage the impact of this risk.  The Company may use derivatives only for the purpose of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate nor does the Company use derivatives instruments where it does not have underlying exposure.  The Company did not have any derivative financial instruments at June 28, 2019 or September 30, 2018.

At June 28, 2019, the Company had $28.3 million of debt, all comprised of variable interest rates.  Interest rates on variable loans are based on London interbank offered rate (“LIBOR”). The credit facilities are more fully described in Note 6—Credit Facilities.  Interest rates based on LIBOR currently adjust daily, causing interest on such loans to vary from period to period.  A sensitivity analysis as of June 28, 2019 indicated that a one-percentage point increase or decrease in our variable interest rates, which represents more than a 10% change, would increase or decrease the Company’s annual interest expense by approximately $0.3 million.

The Company is exposed to credit risk to the extent of non-performance by M&T Bank under the Credit Agreement, as amended.  M&T Bank’s credit rating (reaffirmed A by Fitch in September 2018) is monitored by the Company, and IEC expects that M&T Bank will perform in accordance with the terms of the Credit Agreement, as amended.

Item 4.    Controls and Procedures

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial

Officer (our principal financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 28, 2019, the end of the period covered by this Form 10-Q.  Based on that evaluation, our Chief Executive Officer concluded that, as of June 28, 2019, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

The Company is in the process of implementing a financial reporting system, Epicor ERP Software (“Epicor”), as part of a multi-year plan to integrate and upgrade our systems and processes.  During the nine months ended June 28, 2019, the Company began implementation of Epicor by converting one legacy ERP system to Epicor. The implementation of other legacy ERP systems to Epicor is occurring in phases and is expected to be completed after fiscal 2019.  

As part of the Epicor implementation, certain changes to our processes and procedures have and will continue to occur.  These changes will result in changes to our internal control over financial reporting.  While Epicor is designed to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolve.

During the quarter ended June 28, 2019, there have been no other changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of control systems

IEC’s management does not expect that our disclosure controls and internal controls will prevent all errors and fraud. Because of inherent limitations in any such control system (e.g. faulty judgments, human error, information technology system error, or intentional circumvention), there can be no assurance that the objectives of a control system will be met under all circumstances. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The benefits of a control system also must be considered relative to the costs of the system and management’s judgments regarding the likelihood of potential events. In summary, there can be no assurance that any control system will succeed in achieving its goals under all possible future conditions, and as a result of these inherent limitations, misstatements due to error or fraud may occur and may or may not be detected.

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Part II         OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, we may be involved in legal actions in the ordinary course of our business, but management does not believe that any such proceedings individually or in the aggregate, will have a material effect on our condensed consolidated financial statements.

Item 1A.   Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2018 filed with the SEC on November 29, 2018.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Mine Safety Disclosures

Not Applicable

Item 5.    Other Information

None

Item 6.    Exhibits

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Ninth Amendment to Fifth Amended and Restated Credit Facility dated as of July 9, 2019 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 10, 2019)
10.2*#	Form of Restricted Stock Award Agreement pursuant to the 2019 Stock Incentive Plan
10.3*#	Form of Incentive Stock Option Award Agreement pursuant to the 2019 Stock Incentive Plan
10.4*#	Form of Director Restricted Stock Award Agreement pursuant to the 2019 Stock Incentive Plan
10.5*#	Form of Restricted Stock Unit Award Agreement (Time Vesting) pursuant to the 2019 Stock Incentive Plan
10.6*#	Form of Performance Restricted Stock Unit Award Agreement pursuant to the 2019 Stock Incentive Plan
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following items from this Quarterly Report on Form 10-Q formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Income Statements (unaudited), (iii) Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements.

# Filed herewith.

* Management contract or compensatory plan.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		IEC Electronics Corp.
		(Registrant)
August 7, 2019	By:	/s/ Thomas L. Barbato
		Thomas L. Barbato
		Senior Vice President and Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial and Accounting Officer)

35

EX-10.2

Exhibit 10.2

IEC ELECTRONICS CORP.

2019 STOCK INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Award Agreement”) is made and entered into as of [_______________], 20__ (the “Date of Grant”), by and between IEC Electronics Corp. (the “Company”) and ___________________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the IEC Electronics Corp. 2019 Stock Incentive Plan (the “Plan”).

1.Award. The Company hereby grants to the Participant an Award (the “Award”) of Restricted Stock of [________] shares of Stock (the “Restricted Stock”), subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2.Restrictions on Transfer. Except as otherwise provided in this Award Agreement, until the shares of Restricted Stock vest, the shares of Restricted Stock may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, and they shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the shares of Restricted Stock contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the shares of Restricted Stock, shall be null and void and without effect.

3.Vesting. Except as otherwise provided by the Participant’s employment agreement (if any), subject to the provisions of the Plan and this Award Agreement, and subject to the Participant’s continued employment with the Company or any of its Affiliates through such date, [________] of the shares of Restricted Stock will vest on [________] (each such date a “Vesting Date”).

4.Acceleration of Vesting. Notwithstanding the provisions of Section 3 above, the restrictions set forth in this Award Agreement will immediately lapse and the shares of Restricted Stock will immediately vest upon the occurrence of any of the following events prior to the Vesting Date: (a) the Participant’s death; (b) the Participant’s Disability; (c) the Participant’s Retirement (as defined below); (d) a Change in Control if either (i) the employment of the Participant is terminated or (ii) the acquirer does not agree to assume or substitute the shares of Restricted Stock for similar awards on shares of acquirer’s common stock; or (e) the occurrence of any other event or condition for which the Participant’s employment agreement (if any) provides for accelerated vesting. “Retirement” means termination of employment with the Company or any of its Affiliates if such termination of employment constitutes normal retirement, early retirement, disability retirement or other retirement as provided for at the time of such termination of employment under the applicable retirement program then maintained by the Company or any of its Affiliates provided that the Participant does not continue in the employment of the Company or any of its Affiliates.

5.Termination of Employment; Detrimental Activities.

(a)Except as otherwise provided by the Participant’s employment agreement (if any), all rights in and to any and all shares of Restricted Stock granted pursuant to this Award Agreement, which have not vested as described in Section 3 or 4 above, shall be forfeited upon: (i) the Participant’s termination of employment with the Company and its Affiliates for any reason, whether with or without Cause, other than

Exhibit 10.2

the Participant’s death, Disability or Retirement or a Change in Control; or (ii) a determination by the Committee that the Participant engaged in Detrimental Activity. “Detrimental Activity” shall include: (A) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or any Affiliate, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or any Affiliate; (B) the disclosure to anyone outside the Company or any of its Affiliates, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material relating to the business of the Company or any of its Affiliates, acquired by the Participant either during or after employment with the Company or an Affiliate; (C) activity that results in termination of the Participant’s employment for Cause; (D) a violation of any rules, policies, procedures or guidelines of the Company or an Affiliate, including, but not limited to, the Company’s Code of Business Conduct and Ethics; (E) any attempt, directly or indirectly, to induce any employee of the Company or any Affiliate to be employed or perform services elsewhere or any attempt, directly or indirectly, to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or any Affiliate; or (F) any other conduct or act determined by the Board to be injurious, detrimental or prejudicial to any interest of the Company or any Affiliate.

(b)Notwithstanding the foregoing, nothing in Section 5(a) above: (i) prohibits the Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice and the Securities and Exchange Commission, in accordance with the provisions and rules of Section 21F of the Exchange Act, Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) requires notification or prior approval by the Company of any such report; provided that, the Participant is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.

6.Recoupment.

(a)Recoupment. As provided by Section 6.9 of the Plan, notwithstanding anything in the Plan or this Award Agreement, the Company will be entitled to the extent required by applicable law (including, without limitation, Section 10D of the Exchange Act and any regulations promulgated with respect thereto) or Exchange listing conditions, in each case as in effect from time to time, to recoup compensation of whatever kind paid under this Award Agreement by the Company at any time.

(b)Repayment of Gain; Setoff. If the Participant engages in Detrimental Activity prior to or during the six months after shares of Stock vest pursuant to Section 3 or 4 above, such shares may be forfeited within two years thereafter. In the event of any such forfeiture, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the forfeiture in such manner and on such terms and conditions as may be required, and the Company shall be entitled to setoff against the amount of any such gain any amount owed to the Participant by the Company or any Affiliate.

7.Withholding of Taxes. The Company and its Affiliates shall have the right, in its discretion, to deduct from the Participant’s remuneration or withhold shares of Stock that would otherwise be issuable or deliverable to the Participant as a result of vesting in satisfaction of the federal, state, local or foreign

Exhibit 10.2

income or other taxes required by law to be withheld with respect to such issuance or vesting (or such higher amount that would not have an adverse tax effect). Shares of Stock tendered as payment of required tax withholding shall be valued at the fair market value of the Company’s Stock on the date such tax withholding obligation arises. It shall be a condition to the obligation of the Company to release the shares of Stock from the vesting of the Restricted Stock that the Participant pay to the Company or an Affiliate, upon its demand, such amount as may be requested by the Company or the Affiliate for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to release the shares of Stock.

8.Stock Certificates; Legends. The Company may issue stock certificates or evidence the Participant’s interest by using a restricted book entry account with the Company’s transfer agent. A legend may be placed on any certificate or other document delivered to the Participant indicating restrictions on transferability of the shares of Restricted Stock pursuant to this Award Agreement or any other restrictions that the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, and any applicable federal or state securities laws or any stock exchange on which the shares of Stock are then listed or quoted.

9.Miscellaneous.

(a)Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares to be issued pursuant to an Award is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b)Incorporation of Plan. The shares of Restricted Stock are subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Participant for review. In the event of any conflict between the Plan and this Award Agreement, the Plan shall control.

(c)Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the shares of Restricted Stock or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(d)Amendment. This Award Agreement may be amended from time to time by the Committee, in its sole discretion, in any manner that the Committee deems necessary or appropriate; provided, however, that no such amendment shall adversely affect in a material manner any right of the Participant under the Award without the written consent of the Participant.

(e)Capital Changes and Adjustments. If any change is made to the outstanding shares of Stock or the capital structure of the Company, if required, the shares of Restricted Stock shall be adjusted in any manner as contemplated by Section 12 of the Plan.

Exhibit 10.2

(f)No Right of Employment. Nothing contained herein shall confer upon the Participant any right to continued employment by the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates, which is hereby reserved, to terminate the employment of the Participant at any time for any reason whatsoever.

(g)Rights as a Stockholder. Upon grant of the Award and subject to the restrictions contained in Sections 2, 3, 4, 5, 6 and 7, the Participant shall be the record owner of the shares of Restricted Stock and shall have all the rights of a stockholder of the Company with respect to the shares of Restricted Stock, including the right to vote the shares of Restricted Stock and receive all dividends and other distributions paid or made with respect thereto.

(h)Notices. Any notices necessary or required to be given under this Award Agreement: (i) to the Company shall be sufficiently given if in writing, and personally delivered to the Secretary of the Company or mailed to its principal office, 105 Norton Street, P.O. Box 271, Newark, New York 14513; or (ii) to the Participant shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known address of the Participant, or to such other address as the Participant shall have specified in writing to the Company.

(i)Successors and Assigns. This Award Agreement shall bind and inure to the benefit of the Company and the successors and assigns of the Company and to the Participant and to the Participant’s heirs, executors, administrators, successors and assigns.

(j)Governing Law. All questions pertaining to the interpretation, validity, enforcement and performance of this Award Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the choice of law principles thereof.

(k)Participant Acknowledgement. By signing this Award Agreement, the Participant acknowledges that the Participant has received a copy of the Plan, has had an opportunity to review the Plan and this Award Agreement in their entirety, understands all provisions of the Plan and this Award Agreement, and agrees to be bound by, and to comply with, all the terms and provisions of the Plan and this Award Agreement.

(l)Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

*    *    *    *    *

Exhibit 10.2

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed effective as of the Date of Grant set forth above.

IEC ELECTRONICS CORP.
By:
	[________]
Its:	President & Chief Executive Officer
Date:

ACCEPTANCE

I, ___________________, hereby certify that I have read and fully understand the foregoing Award Agreement. I hereby execute this Award Agreement to indicate my acceptance of the shares of Restricted Stock and my intent to comply with the terms thereof.

Participant

Street Address

City	State	Zip Code
Date:

EX-10.3

Exhibit 10.3

IEC ELECTRONICS CORP.

2019 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AWARD AGREEMENT

    This Incentive Stock Option Award Agreement (this “Award Agreement”) is made and entered into as of [__________], 20__ (the “Date of Grant”), by and between IEC Electronics Corp. (the “Company”) and [_______________________] (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the IEC Electronics Corp. 2019 Stock Incentive Plan (the “Plan”).

1.Award. The Company hereby grants to the Participant an award of Incentive Stock Options (the “Option”) to purchase up to [_________] shares of Stock at an exercise price of $[______] per share (the “Exercise Price”) subject to the provisions of the Plan and to the terms and conditions of this Award Agreement. The Option is intended to be an “incentive stock option” as defined in Section 422 of the Code.

2.Vesting. Except as otherwise provided by the Participant’s employment agreement (if any), subject to the provisions of the Plan and this Award Agreement, and subject to the Participant’s continued service with the Company or any of its Affiliates through such date, [________] of the Option shall vest on [________] (each such date a “Vesting Date”).

3.Acceleration of Vesting. Notwithstanding the provisions of Section 2 above, the Option will immediately vest:

(a)in the event of a Change in Control if either:

(i)the employment of the Participant is terminated without Cause within two years of such Change in Control; or

(ii)the acquirer does not agree to assume or substitute the Option for similar awards on shares of acquirer’s common stock; or

(b)upon the occurrence of any other event or condition for which the Participant’s employment agreement (if any) provides for accelerated vesting.

4.Exercise.

(a)Prior to the expiration of the Option pursuant to the terms of this Award Agreement, the Participant may exercise the Option from time to time to the extent it has vested by tendering to the Company written notice of exercise (in the form attached to this Award Agreement, or such other form provided by the Company for such purpose), which notice may require the Participant to certify in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and this Award Agreement (including Section 8 below), together with payment in full of the Exercise Price for the shares of Stock being acquired thereunder by any of the following methods, subject to the Committee’s discretion:

(i)cash, wire transfer or check made payable to the Company;

Exhibit 10.3

(ii)tendering (actually or by attestation) to the Company a number of previously acquired shares of Stock that have been held by the Participant for at least six months (or such shorter period, if any, determined by the Committee in consideration of applicable accounting standards) and that have a fair market value equal to the applicable portion of the Exercise Price being so paid;

(iii)authorizing a third party to sell, on behalf of the Participant, the appropriate number of shares of Stock otherwise issuable to the Participant upon exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise; or

(iv)any combination of the foregoing.

In the event the Option is exercised by any person or persons other than the Participant, the notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. In no event shall the Option be exercised for a fractional share of Stock.

(b)Upon exercise, the shares of Stock covered by the exercise of the Option (less the number of shares of Stock withheld to pay the exercise price pursuant to Section 4(a)(iii)) will be issued to the Participant on, or as soon as practicable after, the exercise date, with the appropriate legends, if any, affixed thereto. The issuance of shares of Stock upon exercise of the Option may be made by crediting the shares of Stock to an account for the benefit of the Participant or by such other permissible manner chosen by the Company

5.Expiration. Each vested Option is exercisable until 5:00 p.m. (Eastern Time) on the date that is seven years from the Date of Grant (the “Expiration Date”), unless terminated sooner in accordance with Section 7, or unless the Committee provides otherwise.

6.Restrictions on Transfer. The Option shall be exercisable during the Participant’s lifetime only by the Participant and may not be sold, exchanged, transferred, pledged, hypothecated, or otherwise disposed of, except by will or the laws of descent and distribution, and they shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect.

7.Termination of Employment. Except as otherwise provided by the Participant’s employment agreement (if any), upon the Participant’s termination of employment with the Company and its Affiliates, the following provisions shall apply:

(a)Death. If the Participant’s termination of employment is on account of death, all rights in and to the Option granted pursuant to this Award Agreement which have not vested as described in Sections 2 and 3 shall be forfeited, and the Option, to the extent vested, may be exercised in whole or in part by the Participant’s designated beneficiary at any time on or before the earlier of (A) the Expiration Date or (B) the first anniversary of the date of such termination of employment.

(b)Disability. If the Participant’s termination of employment is on account of Disability, all rights in and to the Option granted pursuant to this Award Agreement which have not vested as described in Sections 2 and 3 shall be forfeited, and the Option, to the extent vested, may be exercised in whole or in part by the Participant at any time on or before the earlier of (A) the Expiration Date or (B) the first anniversary of the date of such termination of employment.

Exhibit 10.3

(c)Cause. If the Participant’s termination of employment is for Cause, all rights in and to the Option granted pursuant to this Award Agreement, whether vested or unvested as described in Sections 2 and 3, shall be forfeited on the date of such termination of employment.

(d)Other Reasons. If the Participant’s termination of employment is for any reason other than death, Disability or Cause, all rights in and to the Option granted pursuant to this Award Agreement which have not vested as described in Sections 2 and 3 shall be forfeited, and the Option, to the extent vested, may be exercised in whole or in part by the Participant at any time on or before the earlier of (A) the Expiration Date or (B) three months after the date of such termination of employment.

(e)Death after termination of employment. If the Participant’s termination of employment is for any reason other than death or for Cause, and the Participant dies after such termination of employment but before the date the Option must be exercised pursuant to this Section 7, all rights in and to the Option granted pursuant to this Award Agreement which have not vested as described in Sections 2 and 3 shall be forfeited, and the Option, to the extent vested on the date of the Participant’s death, may be exercised in whole or in part by the Participant’s designated beneficiary at any time on or before the earlier of (A) the Expiration Date or (B) the first anniversary of the date of death.

8.Detrimental Activities.

(a)The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Option at any time upon a determination by the Committee that the Participant is not in compliance with all applicable provisions of this Award Agreement and the Plan or that the Participant engaged in Detrimental Activity. “Detrimental Activity” shall include: (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or any Affiliate, or which organization of business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to in conflict with the interests of the Company or any Affiliate; (ii) the disclosure to anyone outside the Company or any of its Affiliates, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material relating to the business of the Company or any of its Affiliates, acquired by the Participant either during or after employment with the Company or an Affiliate; (iii) activity that results in termination of the Participant’s employment for Cause; (iv) a violation of any rules, policies, procedures or guidelines of the Company or an Affiliate, including, but not limited to, the Company’s Code of Business Conduct and Ethics; (v) any attempt, directly or indirectly, to induce any employee of the Company or any Affiliate to be employed or perform services elsewhere or any attempt, directly or indirectly, to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or any Affiliate; or (vi) any other conduct or act determined by the Board to be injurious, detrimental or prejudicial to any interest of the Company or any Affiliate.

(b)Notwithstanding the foregoing, nothing in Section 8(a) above: (i) prohibits the Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice and the Securities and Exchange Commission, in accordance with the provisions and rules of Section 21F of the Exchange Act, Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) requires notification or prior approval by the Company of any such report; provided that, the Participant is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose

Exhibit 10.3

of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.

9.Recoupment.

(a)Recoupment. As provided by Section 6.9 of the Plan, notwithstanding anything in the Plan or this Award Agreement, the Company will be entitled to the extent required by applicable law (including, without limitation, Section 10D of the Exchange Act and any regulations promulgated with respect thereto) or Exchange listing conditions, in each case as in effect from time to time, to recoup compensation of whatever kind paid under this Award Agreement by the Company at any time.

(b)Repayment of Gain; Setoff. If the Participant engages in Detrimental Activity prior to or during the six months after shares of Stock are issued pursuant to Section 4(b) above, such issuance may be rescinded within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded issuance, in such manner and on such terms and conditions as may be required, and the Company shall be entitled to setoff against the amount of any such gain any amount owed to the Participant by the Company or any Affiliate.

10.Withholding of Taxes. In order to exercise the Option, the Participant (or any other person or persons exercising the Option) shall make appropriate arrangements with the Company to the extent necessary for the satisfaction of all federal, state, local or foreign income or other tax withholding requirements, if any, applicable to the exercise of the Option.

11.Disqualifying Disposition. The Participant shall notify the Company in writing within 30 days of making a Disqualifying Disposition (as defined below) of any shares of Stock received pursuant to the exercise of the Option, and shall provide the Company with any information that the Company shall request concerning any such Disqualifying Disposition. “Disqualifying Disposition” means any disposition (including any sale) of the shares of Stock before the later of (a) the second anniversary of the Date of Grant and (b) the first anniversary of the date on which the Participant acquired such shares by exercising the Option, provided that such holding period requirements terminate upon the death of the Participant.

12.Miscellaneous.

(a)Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares of Stock to be issued pursuant to the Option is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b)Incorporation of Plan. The Option is subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Participant for review. In the event of any conflict between the Plan and this Award Agreement, the Plan shall control.

(c)Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and

Exhibit 10.3

absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the Option or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(d)Amendment. This Award Agreement may be amended from time to time by the Committee, in its sole discretion, in any manner that the Committee deems necessary or appropriate; provided, however, that no such amendment shall adversely affect in a material manner any right of the Participant under the Option without the written consent of the Participant.

(e)Capital Changes and Adjustments. The Option shall be adjusted by the Committee at the same time as adjustments are made in accordance with Section 12 of the Plan in a manner similar to, and subject to, the same requirements under Section 12 of the Plan; provided, however, any adjustment shall be made in a manner that complies with Section 424(a) of the Code.

(f)No Right of Employment. Nothing contained herein shall confer upon the Participant any right to continued employment by the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates, which is hereby reserved, to terminate the employment of the Participant at any time for any reason whatsoever.

(g)No Stockholder Rights. Until the Participant is the holder of record of the shares of Stock issued upon exercise of the Option, the Participant shall have no rights of a stockholder of the Company with respect to the shares of Stock underlying the Option, and in particular shall not be entitled to vote the underlying shares of Stock or to receive any dividends paid with respect to the shares of Stock underlying the Option.

(h)Notices. Any notices necessary or required to be given under this Award Agreement: (i) to the Company shall be sufficiently given if in writing, and personally delivered to the Secretary of the Company or mailed to its principal office, 105 Norton Street, P.O. Box 271, Newark, New York 14513; or (ii) to the Participant shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known address of the Participant, or to such other address as the Participant shall have specified in writing to the Company.

(i)Successors and Assigns. This Award Agreement shall bind and inure to the benefit of the Company and the successors and assigns of the Company and to the Participant and to the Participant’s heirs, executors, administrators, successors and assigns.

(j)Governing Law. All questions pertaining to the interpretation, validity, enforcement and performance of this Award Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the choice of law principles thereof.

(k)Section 409A. The Option granted under this Award Agreement is intended to be exempt from the requirements of Section 409A and the Plan and this Award Agreement shall be interpreted and administered in accordance with such intention. Notwithstanding the foregoing, the Company makes no representations that the Option is exempt from Section 409A, and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of a violation of Section 409A.

Exhibit 10.3

(l)Participant Acknowledgment. By signing this Award Agreement, the Participant acknowledges that the Participant has received a copy of the Plan, has had an opportunity to review the Plan and this Award Agreement in their entirety, understands all provisions of the Plan and this Award Agreement, and agrees to be bound by, and to comply with, all the terms and provisions of the Plan and this Award Agreement.

(m)Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

*    *    *    *    *

Exhibit 10.3

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed effective as of the Date of Grant set forth above.

IEC ELECTRONICS CORP.
By:
	[________]
Its:	President & CEO
Date:

ACCEPTANCE

I, ___________________, hereby certify that I have read and fully understand the foregoing Award Agreement. I acknowledge that I have been apprised that it is the intent of the Company that Participants obtain and retain an equity interest in the Company. I hereby execute this Award Agreement to indicate my acceptance of the Option and my intent to comply with the terms thereof.

Participant

Street Address

City	State	Zip Code
Date:

Exhibit 10.3

_____________, 20___

IEC Electronics Corp.

Attention: Secretary

105 Norton Street

Newark, NY 14513

Dear Sir:

This is to notify you that I hereby elect to exercise the Option granted to me under the Incentive Stock Option Award Agreement (the “Award Agreement”), dated ____________________, 20__, issued to me pursuant to the 2019 Stock Incentive Plan (the “Plan”) with respect to ________ shares of common stock of IEC Electronics Corp. (the “Company”). The Exercise Price pursuant to the Award Agreement as adjusted (if applicable) is $____________ per share or $__________ in the aggregate.

In payment of the full Exercise Price, I enclose (please complete as appropriate):

a.my check payable to IEC Electronics Corp. in the amount of $__________.

b. __________ shares of common stock of the Company owned by me for at least six months, free of any liens or encumbrances and having a fair market value of $_________.

c. an authorization letter which gives irrevocable instructions to the Company to deliver the stock certificates representing the shares for which the option is being exercised directly to ______________ (name and address of broker) together with a copy of the instructions to _______________ (name of broker) to sell such shares and promptly deliver to the Company the portion of the proceeds equal to the total purchase price and withholding taxes due, if any.

I hereby certify that I am in compliance with the terms and conditions of the Plan and the Award Agreement and, in particular, that I have not engaged in any Detrimental Activity as defined in Section 8 of the Award Agreement. I understand, acknowledge and agree that in the event I engage in Detrimental Activity during the period specified in Section 9(b) of the Award Agreement, the exercise of the Option may be rescinded by the Company and I may become obligated to pay the Company the amount of any gain realized or payment received as a result of the rescinded exercise, all as set forth in Section 9 of the Award Agreement.

Very truly yours,

Participant’s Signature

EX-10.4

Exhibit 10.4

IEC ELECTRONICS CORP.

2019 STOCK INCENTIVE PLAN

DIRECTOR RESTRICTED STOCK AWARD AGREEMENT

This Director Restricted Stock Award Agreement (this “Award Agreement”) is made and entered into as of [_______________], 20__ (the “Date of Grant”), by and between IEC Electronics Corp. (the “Company”) and ___________________ (the “Director”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the IEC Electronics Corp. 2019 Stock Incentive Plan (the “Plan”).

1.Award. The Company hereby grants to the Director an Award (the “Award”) of Restricted Stock of [________] shares of Stock (the “Restricted Stock”), subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2.Vesting and Payment. Subject to the provisions of the Plan and this Award Agreement, and subject to the Director’s continued membership on the Board through such date, the shares of Restricted Stock will vest as follows: [________] (each such date a “Vesting Date”).

3.Lapse of Restrictions and Acceleration of Vesting. Notwithstanding the provisions of Section 2 above, the restrictions set forth in this Award Agreement will immediately lapse and the shares of Restricted Stock will immediately vest upon the occurrence of any of the following events prior to the Vesting Date: (a) the Director’s death; (b) the Director’s Disability; or (c) a Change in Control if either (i) the service of the Director is terminated or (ii) the acquirer does not agree to assume or substitute the shares of Restricted Stock for similar awards on shares of acquirer’s common stock.

4.Restrictions on Transfer. Except as otherwise provided in this Award Agreement, until the shares of Restricted Stock vest, the shares of Restricted Stock may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, and they shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the shares of Restricted Stock contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the shares of Restricted Stock, shall be null and void and without effect.

5.Termination of Services; Detrimental Activities.

(a)All rights in and to any and all shares of Restricted Stock granted pursuant to this Award Agreement, which have not vested as described in Section 2 or 3 above, shall be forfeited upon: (i) the Director’s termination of Board membership for any reason, other than the Director’s death or Disability or a Change in Control; or (ii) a determination by the Board that the Director engaged in Detrimental Activity. “Detrimental Activity” shall include: (A) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or any Affiliate, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or any Affiliate; (B) the disclosure to anyone outside the Company or any of its Affiliates, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material relating to the business of the Company or any of its Affiliates, acquired by the Director either during or after service to the Company or an Affiliate; (C) a violation of any rules, policies, procedures or guidelines of the Company or an Affiliate,

Exhibit 10.4

including, but not limited to, the Company’s Code of Business Conduct and Ethics; (D) any attempt, directly or indirectly, to induce any employee of the Company or any Affiliate to be employed or perform services elsewhere or any attempt, directly or indirectly, to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or any Affiliate; or (E) any other conduct or act determined by the Board to be injurious, detrimental or prejudicial to any interest of the Company or any Affiliate.

(b)Permissible Actions. Notwithstanding the foregoing, nothing in Section 5(a) above: (i) prohibits the Director from making reports of possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice and the Securities Exchange Commission, in accordance with the provisions and rules of Section 21F of the Exchange Act or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) requires notification or prior approval by the Company of any such report; provided that, the Director is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Director shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.

6.Stock Certificates.

(a)Certificate; Book Entry. The Company, in its discretion, shall issue the shares of Restricted Stock either (i) in certificate form or (ii) in book entry form, registered in the name of the Director, with legends, or notations, as applicable, referring to the terms, conditions and restrictions applicable to the shares of Restricted Stock.

(b)Legend. The Director agrees that any certificate issued for the shares of Restricted Stock prior to the lapse of any outstanding restrictions relating thereto shall be inscribed with the following legend, and any book entry shall bear a similar notation:

THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER (THE “RESTRICTIONS”), CONTAINED IN THE IEC ELECTRONICS CORP. 2019 STOCK INCENTIVE PLAN, AND IN A DIRECTOR RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY. ANY ATTEMPT TO DISPOSE OF THESE SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND VOID AND WITHOUT EFFECT.

(c)Custody. The Company may retain physical custody of the certificates representing the shares of Restricted Stock, or control of the applicable book entry account, until all of the restrictions on transfer pursuant to this Award Agreement lapse or shall have been removed; and the Director shall not retain physical custody of any certificates representing unvested shares of Restricted Stock issued to the Director.

(d)Removal of Legend. Upon the lapse of restrictions relating to any shares of Restricted Stock, the Company shall, as applicable, either remove the notations on any such shares of Restricted Stock

Exhibit 10.4

issued in book-entry form or deliver to the Director or the Director’s personal representative a stock certificate representing a number of shares of Stock, free of the restrictive legend described above, equal to the number of shares of Restricted Stock with respect to which such restrictions have lapsed. If certificates representing such shares of Restricted Stock shall have heretofore been delivered to the Director, such certificates shall be returned to the Company, complete with any necessary signatures or instruments of transfer prior to the issuance by the Company of such unlegended shares of Stock.

(e)Forfeited Shares. Any shares of Restricted Stock forfeited pursuant to this Award Agreement shall be transferred to, and reacquired by, the Company without payment of any consideration by the Company, and neither the Company nor any of the Director’s successors, heirs, assigns or personal representatives shall thereafter have any further rights or interests in such shares. If certificates for any such shares of Restricted Stock containing restrictive legends shall have theretofore been delivered to the Director (or the Director’s legatees or personal representative), such certificates shall be returned to the Company, complete with any necessary signatures or instruments of transfer.

(f)Stock Power; Power of Attorney. Concurrently with the execution and delivery of this Award Agreement, the Director shall deliver to the Company an executed stock power in the form attached hereto as Exhibit A, in blank, with respect to such shares of Restricted Stock. The Director, by acceptance of the Award, shall be deemed to appoint, and does so appoint by execution of this Award Agreement, the Company and each of its authorized representatives as the Director’s attorney(s)-in-fact to effect any transfer of forfeited shares of Restricted Stock.

7.Miscellaneous.

(a)Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares to be issued pursuant to an Award is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b)Incorporation of Plan. The shares of Restricted Stock are subject to the Plan and any interpretations by the Board under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Director acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Director for review. In the event of any conflict between the Plan and this Award Agreement, the Plan shall control.

(c)Administration, Interpretation, Etc. Any action taken or decision made by the Company or the Board arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Director and all persons claiming under or through the Director. By receipt of the shares of Restricted Stock or other benefit under the Plan, the Director and each person claiming under or through the Director shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company or the Board.

(d)Amendment. This Award Agreement may be amended from time to time by the Board, in its sole discretion, in any manner that the Board deems necessary or appropriate; provided, however, that no such amendment shall adversely affect in a material manner any right of the Director under the Award without the written consent of the Director.

Exhibit 10.4

(e)Shares Issued Upon Changes in Capitalization. The restrictions imposed under this Award Agreement shall apply as well to all shares or other securities issued in respect of the shares of Restricted Stock in connection with any stock split, stock dividend, stock distribution, recapitalization, reclassification, merger, consolidation or reorganization.

(f)Rights as a Stockholder. Upon grant of the Award and subject to the restrictions contained in Sections 2, 3, 4, 5 and 6, the Director shall be the record owner of the shares of Restricted Stock and shall have all the rights of a stockholder of the Company with respect to the shares of Restricted Stock, including the right to vote the shares of Restricted Stock and receive all dividends and other distributions paid or made with respect thereto.

(g)Notices. Any notices necessary or required to be given under this Award Agreement: (i) to the Company shall be sufficiently given if in writing, and personally delivered to the Secretary of the Company or mailed to its principal office, 105 Norton Street, P.O. Box 271, Newark, New York 14513; or (ii) to the Director shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known address of the Director, or to such other address as the Director shall have specified in writing to the Company.

(h)Successors and Assigns. This Award Agreement shall bind and inure to the benefit of the Company and the successors and assigns of the Company and to the Director and to the Director’s heirs, executors, administrators, successors and assigns.

(i)Governing Law. All questions pertaining to the interpretation, validity, enforcement and performance of this Award Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the choice of law principles thereof.

(j)Director Acknowledgement. By signing the Award Agreement, the Director acknowledges that the Director has received a copy of the Plan, has had an opportunity to review the Plan and this Award Agreement in their entirety, understands all provisions of the Plan and this Award Agreement, and agrees to be bound by, and to comply with, all the terms and provisions of the Plan and this Award Agreement.

(k)Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

*    *    *    *    *

Exhibit 10.4

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed effective as of the Date of Grant set forth above.

IEC ELECTRONICS CORP.
By:
	[________]
Its:	President & Chief Executive Officer
Date:

ACCEPTANCE

I, ___________________, hereby certify that I have read and fully understand the foregoing Award Agreement. I hereby execute this Award Agreement to indicate my acceptance of the shares of Restricted Stock and my intent to comply with the terms thereof.

Director

Street Address

City	State	Zip Code
Date:

Exhibit 10.4

EXHIBIT A

STOCK POWER

For Value Received, the undersigned hereby sells, assigns and

transfers unto IEC Electronics Corp. (the “Corporation”)

__________ Shares of the Common Stock of the Corporation standing in my name on the books of said Corporation represented by Certificate(s) No(s)._______, and does hereby

irrevocably constitute and appoint

__________________________________________________________

attorney to transfer the said stock on the books of said Corporation

with full power of substitution in the premises.

Dated:__________________

_______________________________________                                                                    

EX-10.5

Exhibit 10.5

IEC ELECTRONICS CORP.

2019 STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (this “Award Agreement”) is made and entered into as of [_______________], 20__ (the “Date of Grant”), by and between IEC Electronics Corp. (the “Company”) and ___________________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the IEC Electronics Corp. 2019 Stock Incentive Plan (the “Plan”).

1.Award. The Company hereby grants to the Participant an Award (the “Award”) of Restricted Stock Units (the “RSUs”) covering [____________] shares of Stock, subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2.Vesting and Payment. Except as otherwise provided by the Participant’s employment agreement (if any), subject to the provisions of the Plan and this Award Agreement, and subject to the Participant’s continued service with the Company or any of its Affiliates through such date, the RSUs will vest on [________] (the “Vesting Date”). Upon vesting, each vested RSU will convert at that time into the right to receive one share of Stock, which, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be issued to the Participant on, or as soon as practicable after, the Vesting Date, but no later than the later of (i) December 31 of the year in which the Vesting Date occurs, and (ii) the 15th day of the third calendar month following the Vesting Date.

3.Acceleration of Vesting and Payment.

(a)Notwithstanding the provisions of Section 2 above, the RSUs will immediately vest upon the occurrence of any of the following events prior to the Vesting Date: (i) the Participant’s death; (ii) the Participant’s Disability; (iii) a Change in Control if either (A) the employment of the Participant is terminated without Cause within two years of such Change in Control or (B) the acquirer does not agree to assume or substitute the RSUs for similar awards on shares of acquirer’s common stock; or (iv) the occurrence of any other event or condition for which the Participant’s employment agreement (if any) provides for accelerated vesting.

(b)In the event of accelerated vesting pursuant to Section 3(a), the number of shares of Stock from the conversion of the RSUs, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be paid to the Participant at the time specified by Section 2 above as if no acceleration had occurred, unless otherwise specifically provided by the Participant’s employment agreement (if any), in which case the vested RSUs shall be paid at the time specified by the Participant’s employment agreement. Notwithstanding the foregoing, in the event of a Change in Control that satisfies Section 3(a)(iii) above that is a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company, each as defined by Section 409A, the number of shares of Stock from the conversion of the RSUs, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be issued no later than 30 days after such Change in Control so long as such payment is permissible under Section 409A.

4.Restrictions on Transfer. Except as otherwise provided in this Award Agreement, until the RSUs vest and are paid in shares of Stock, the RSUs and underlying shares of Stock may not be sold,

Exhibit 10.5

exchanged, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, and they shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the RSUs or underlying shares of Stock contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the RSUs, shall be null and void and without effect.

5.Termination of Employment; Detrimental Activities.

(a)Except as otherwise provided by the Participant’s employment agreement (if any), all rights in and to any and all RSUs granted pursuant to this Award Agreement, and to any shares of Stock into which they would convert, which have not vested as described in Section 2 or 3 above, shall be forfeited upon: (i) the Participant’s termination of employment with the Company and its Affiliates for any reason, whether with or without Cause, other than the Participant’s death or Disability or a Change in Control; or (ii) a determination by the Committee that the Participant engaged in Detrimental Activity. “Detrimental Activity” shall include: (A) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or any Affiliate, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or any Affiliate; (B) the disclosure to anyone outside the Company or any of its Affiliates, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material relating to the business of the Company or any of its Affiliates, acquired by the Participant either during or after employment with the Company or an Affiliate; (C) activity that results in termination of the Participant’s employment for Cause; (D) a violation of any rules, policies, procedures or guidelines of the Company or an Affiliate, including, but not limited to, the Company’s Code of Business Conduct and Ethics; (E) any attempt, directly or indirectly, to induce any employee of the Company or any Affiliate to be employed or perform services elsewhere or any attempt, directly or indirectly, to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or any Affiliate; or (F) any other conduct or act determined by the Board to be injurious, detrimental or prejudicial to any interest of the Company or any Affiliate.

(b)Permissible Actions. Notwithstanding the foregoing, nothing in Section 5(a) above: (i) prohibits the Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice and the Securities Exchange Commission, in accordance with the provisions and rules of Section 21F of the Exchange Act, Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) requires notification or prior approval by the Company of any such report; provided that, the Participant is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.

6.Recoupment.

(a)Recoupment. As provided by Section 6.9 of the Plan, notwithstanding anything in the Plan or this Award Agreement, the Company will be entitled to the extent required by applicable law (including, without limitation, Section 10D of the Exchange Act and any regulations promulgated with respect

Exhibit 10.5

thereto) or Exchange listing conditions, in each case as in effect from time to time, to recoup compensation of whatever kind paid under this Award Agreement by the Company at any time.

(b)Repayment of Gain; Setoff. If the Participant engages in Detrimental Activity prior to or during the six months after shares of Stock are issued pursuant to Section 2 or 3 above, such issuance may be rescinded within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded issuance in such manner and on such terms and conditions as may be required, and the Company shall be entitled to setoff against the amount of any such gain any amount owed to the Participant by the Company or any Affiliate.

7.Withholding of Taxes. The Company and its Affiliates shall have the right, in its discretion, to withhold cash from the Participant’s remuneration or deduct shares of Stock that would otherwise be distributed pursuant to this Award Agreement from any payment made under this Award Agreement in satisfaction of the federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment (or such higher amount that would not have an adverse tax effect). Shares of Stock tendered as payment of required tax withholding shall be valued at the fair market value of the Company’s Stock on the date such tax withholding obligation arises. It shall be a condition to the obligation of the Company to issue shares of Stock or other property, or any combination thereof, upon payment of the Award, that the Participant pay to the Company or an Affiliate, upon its demand, such amount as may be requested by the Company or the Affiliate for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue or pay shares of Stock or other property, or any combination thereof.

8.Miscellaneous.

(a)Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares to be issued pursuant to an Award is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b)Issuance of Stock. The issuance of shares of Stock from the conversion of RSUs may be made by crediting the shares of Stock to an account for the benefit of the Participant or by such other permissible manner chosen by the Company.

(c)Incorporation of Plan. The RSUs are subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Participant for review. In the event of any conflict between the Plan and this Award Agreement, the Plan shall control.

(d)Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the RSUs or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to

Exhibit 10.5

have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(e)Amendment. This Award Agreement may be amended from time to time by the Committee, in its sole discretion, in any manner that the Committee deems necessary or appropriate; provided, however, that no such amendment shall adversely affect in a material manner any right of the Participant under the Award without the written consent of the Participant.

(f)Capital Changes and Adjustments. The RSUs shall be adjusted by the Committee at the same time as adjustments are made in accordance with Section 12 of the Plan in a manner similar to, and subject to, the same requirements under Section 12 of the Plan.

(g)No Right of Employment. Nothing contained herein shall confer upon the Participant any right to continued employment by the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates, which is hereby reserved, to terminate the employment of the Participant at any time for any reason whatsoever.

(h)No Stockholder Rights. Until the shares of Stock from the payment of the RSUs have been issued to the Participant, the Participant shall have no rights of a stockholder of the Company with respect to the shares of Stock underlying the RSUs, and in particular shall not be entitled to vote the underlying shares of Stock or to receive any dividends or dividend equivalents paid or made with respect to the shares of Stock underlying the RSUs.

(i)Notices. Any notices necessary or required to be given under this Award Agreement: (i) to the Company shall be sufficiently given if in writing, and personally delivered to the Secretary of the Company or mailed to its principal office, 105 Norton Street, P.O. Box 271, Newark, New York 14513; or (ii) to the Participant shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known address of the Participant, or to such other address as the Participant shall have specified in writing to the Company.

(j)Successors and Assigns. This Award Agreement shall bind and inure to the benefit of the Company and the successors and assigns of the Company and to the Participant and to the Participant’s heirs, executors, administrators, successors and assigns.

(k)Governing Law. All questions pertaining to the interpretation, validity, enforcement and performance of this Award Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the choice of law principles thereof.

(l)Section 409A. The RSUs granted under this Award Agreement are intended to comply with the requirements of Section 409A and the Plan and this Award Agreement shall be interpreted and administered in accordance with such intention. Notwithstanding the foregoing, the Company makes no representations that the RSUs comply with Section 409A, and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A. References to a Participant’s “termination of employment” and similar terms used in this Award Agreement mean, to the extent necessary to comply with Section 409A, the date that the Participant first incurs a “separation from service” within the meaning of Section 409A. Notwithstanding anything in this Award Agreement to the contrary, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Section 409A, and the payment of the RSUs under this Award Agreement as a result of such separation from service is

Exhibit 10.5

required to be delayed by six months pursuant to Section 409A, then the Company will make such payment on the date that is the first day of the seventh month following the Participant’s separation from service.

(m)Participant Acknowledgement. By signing the Award Agreement, the Participant acknowledges that Participant has received a copy of the Plan, has had an opportunity to review the Plan and this Award Agreement in their entirety, understands all provisions of the Plan and this Award Agreement, and agrees to be bound by, and to comply with, all the terms and provisions of the Plan and this Award Agreement.

(n)Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

*    *    *    *    *

Exhibit 10.5

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed effective as of the Date of Grant set forth above.

IEC ELECTRONICS CORP.
By:
	Chair, Compensation Committee
Date:

ACCEPTANCE

I, ___________________, hereby certify that I have read and fully understand the foregoing Award Agreement. I hereby execute this Award Agreement to indicate my acceptance of the RSUs and my intent to comply with the terms thereof.

Participant

Street Address

City	State	Zip Code
Date:

EX-10.6

Exhibit 10.6

IEC ELECTRONICS CORP.

2019 STOCK INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT

This Performance Restricted Stock Unit Award Agreement (this “Award Agreement”) is made and entered into as of [_______________], 20__ (the “Date of Grant”), by and between IEC Electronics Corp. (the “Company”) and ___________________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the IEC Electronics Corp. 2019 Stock Incentive Plan (the “Plan”).

1.Award. The Company hereby grants to the Participant an Award (the “Award”) of Restricted Stock Units (the “PSUs”) covering [____________] shares of Stock, subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2.Vesting and Payment. Except as otherwise provided by the Participant’s employment agreement (if any), subject to the provisions of the Plan and this Award Agreement, and subject to the Participant’s continued service with the Company or any of its Affiliates through the end of the Performance Period, the number of PSUs that will vest shall be based on the level of achievement of the performance goal(s) set forth on Exhibit A to this Award Agreement for the Performance Period set forth on Exhibit A, rounded to the nearest whole PSU. Upon vesting, each vested PSU will convert at that time into the right to receive one share of Stock, which, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be issued to the Participant no later than the later of (i) December 31 of the year in which the Performance Period ends, and (ii) the 15th day of the third calendar month following the last day of the Performance Period.

3.Acceleration of Vesting and Payment.

(a)Notwithstanding the provisions of Section 2 above and Exhibit A, the PSUs will immediately vest upon the occurrence of any of the following events prior to the Vesting Date: (i) the Participant’s death; (ii) the Participant’s Disability; (iii) a Change in Control if either (A) the employment of the Participant is terminated without Cause within two years of such Change in Control or (B) the acquirer does not agree to assume or substitute the PSUs for similar awards on shares of acquirer’s common stock; or (iv) the occurrence of any other event or condition for which the Participant’s employment agreement (if any) provides for accelerated vesting. In the event of accelerated vesting due to (i), (ii) or (iv) above, the number of PSUs that shall vest and convert into the right to receive shares of Stock shall be equal to the target level of performance under Exhibit A. In the event of accelerated vesting due to (iii) above, the number of PSUs that shall vest and convert into the right to receive shares of Stock shall be based upon the degree of performance attainment through the date of such Change in Control or associated termination of employment without Cause, as applicable, with such amount either paid in full or paid pro rata based on the period of time elapsed in the Performance Period as of the applicable date, as determined by the Committee in its sole discretion.

(b)In the event of accelerated vesting pursuant to Section 3(a), the number of shares of Stock from the conversion of the PSUs, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be paid to the Participant at the time specified by Section 2 above as if no acceleration had occurred, unless otherwise specifically provided by the Participant’s employment agreement (if any), in which case the PSUs that vest shall be paid in the amount and at the time

Exhibit 10.6

specified by the Participant’s employment agreement. Notwithstanding the foregoing, in the event of a Change in Control that satisfies Section 3(a)(iii) above that is a “change in ownership,” a “change in effective control” or a “change in ownership of a substantial portion of the assets” of the Company, each as defined by Section 409A, the number of shares of Stock from the conversion of the PSUs, less the number of shares of Stock (if any) withheld to satisfy tax withholding pursuant to Section 7 below, will be issued no later than 30 days after such Change in Control so long as such payment is permissible under Section 409A.

4.Restrictions on Transfer. Except as otherwise provided in this Award Agreement, until the PSUs vest and are paid in shares of Stock, the PSUs and underlying shares of Stock may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, and they shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the PSUs or underlying shares of Stock contrary to the provisions hereof, and the levy of any execution, attachment, or similar process upon the PSUs, shall be null and void and without effect.

5.Forfeiture; Termination of Employment; Detrimental Activities.

(a)Except as otherwise provided by the Participant’s employment agreement (if any), all rights in and to any and all PSUs granted pursuant to this Award Agreement, and to any shares of Stock into which they would convert, which have not vested as described in Section 2 or 3 above, shall be forfeited: (i) if the performance targets for the Performance Period are not met; (ii) upon the Participant’s termination of employment with the Company and its Affiliates for any reason, whether with or without Cause, other than the Participant’s death or Disability or a Change in Control; or (iii) upon a determination by the Committee that the Participant engaged in Detrimental Activity. “Detrimental Activity” shall include: (A) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or any Affiliate, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or any Affiliate; (B) the disclosure to anyone outside the Company or any of its Affiliates, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material relating to the business of the Company or any of its Affiliates, acquired by the Participant either during or after employment with the Company or an Affiliate; (C) activity that results in termination of the Participant’s employment for Cause; (D) a violation of any rules, policies, procedures or guidelines of the Company or an Affiliate, including, but not limited to, the Company’s Code of Business Conduct and Ethics; (E) any attempt, directly or indirectly, to induce any employee of the Company or any Affiliate to be employed or perform services elsewhere or any attempt, directly or indirectly, to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or any Affiliate; or (F) any other conduct or act determined by the Board to be injurious, detrimental or prejudicial to any interest of the Company or any Affiliate.

(b)Permissible Actions. Notwithstanding the foregoing, nothing in Section 5(a) above: (i) prohibits the Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice and the Securities Exchange Commission, in accordance with the provisions and rules of Section 21F of the Exchange Act, Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) requires notification or prior approval by the Company of any such report; provided that, the Participant is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a

Exhibit 10.6

federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.

6.Recoupment.

(a)Recoupment. As provided by Section 6.9 of the Plan, notwithstanding anything in the Plan or this Award Agreement, the Company will be entitled to the extent required by applicable law (including, without limitation, Section 10D of the Exchange Act and any regulations promulgated with respect thereto) or Exchange listing conditions, in each case as in effect from time to time, to recoup compensation of whatever kind paid under this Award Agreement by the Company at any time.

(b)Repayment of Gain; Setoff. If the Participant engages in Detrimental Activity prior to or during the six months after shares of Stock are issued pursuant to Section 2 or 3 above, such issuance may be rescinded within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded issuance in such manner and on such terms and conditions as may be required, and the Company shall be entitled to setoff against the amount of any such gain any amount owed to the Participant by the Company or any Affiliate.

7.Withholding of Taxes. The Company and its Affiliates shall have the right, in its discretion, to withhold cash from the Participant’s remuneration or deduct shares of Stock that would otherwise be distributed pursuant to this Award Agreement from any payment made under this Award Agreement in satisfaction of the federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment (or such higher amount that would not have an adverse tax effect). Shares of Stock tendered as payment of required tax withholding shall be valued at the fair market value of the Company’s Stock on the date such tax withholding obligation arises. It shall be a condition to the obligation of the Company to issue shares of Stock or other property, or any combination thereof, upon payment of the Award, that the Participant pay to the Company or an Affiliate, upon its demand, such amount as may be requested by the Company or the Affiliate for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue or pay shares of Stock or other property, or any combination thereof.

8.Miscellaneous.

(a)Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares to be issued pursuant to an Award is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b)Issuance of Stock. The issuance of shares of Stock from the conversion of PSUs may be made by crediting the shares of Stock to an account for the benefit of the Participant or by such other permissible manner chosen by the Company.

(c)Incorporation of Plan. The PSUs are subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to

Exhibit 10.6

the Participant for review. In the event of any conflict between the Plan and this Award Agreement, the Plan shall control.

(d)Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the PSUs or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(e)Amendment. This Award Agreement may be amended from time to time by the Committee, in its sole discretion, in any manner that the Committee deems necessary or appropriate; provided, however, that no such amendment shall adversely affect in a material manner any right of the Participant under the Award without the written consent of the Participant.

(f)Capital Changes and Adjustments. The PSUs shall be adjusted by the Committee at the same time as adjustments are made in accordance with Section 12 of the Plan in a manner similar to, and subject to, the same requirements under Section 12 of the Plan.

(g)No Right of Employment. Nothing contained herein shall confer upon the Participant any right to continued employment by the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates, which is hereby reserved, to terminate the employment of the Participant at any time for any reason whatsoever.

(h)No Stockholder Rights. Until the shares of Stock from the payment of the PSUs have been issued to the Participant, the Participant shall have no rights of a stockholder of the Company with respect to the shares of Stock underlying the PSUs, and in particular shall not be entitled to vote the underlying shares of Stock or to receive any dividends or dividend equivalents paid or made with respect to the shares of Stock underlying the PSUs.

(i)Notices. Any notices necessary or required to be given under this Award Agreement: (i) to the Company shall be sufficiently given if in writing, and personally delivered to the Secretary of the Company or mailed to its principal office, 105 Norton Street, P.O. Box 271, Newark, New York 14513; or (ii) to the Participant shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known address of the Participant, or to such other address as the Participant shall have specified in writing to the Company.

(j)Successors and Assigns. This Award Agreement shall bind and inure to the benefit of the Company and the successors and assigns of the Company and to the Participant and to the Participant’s heirs, executors, administrators, successors and assigns.

(k)Governing Law. All questions pertaining to the interpretation, validity, enforcement and performance of this Award Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York, without giving effect to the choice of law principles thereof.

(l)Section 409A. The PSUs granted under this Award Agreement are intended to comply with the requirements of Section 409A and the Plan and this Award Agreement shall be interpreted and

Exhibit 10.6

administered in accordance with such intention. Notwithstanding the foregoing, the Company makes no representations that the PSUs comply with Section 409A, and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A. References to a Participant’s “termination of employment” and similar terms used in this Award Agreement mean, to the extent necessary to comply with Section 409A, the date that the Participant first incurs a “separation from service” within the meaning of Section 409A. Notwithstanding anything in this Award Agreement to the contrary, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Section 409A, and the payment of the PSUs under this Award Agreement as a result of such separation from service is required to be delayed by six months pursuant to Section 409A, then the Company will make such payment on the date that is the first day of the seventh month following the Participant’s separation from service.

(m)Participant Acknowledgement. By signing the Award Agreement, the Participant acknowledges that Participant has received a copy of the Plan, has had an opportunity to review the Plan and this Award Agreement in their entirety, understands all provisions of the Plan and this Award Agreement, and agrees to be bound by, and to comply with, all the terms and provisions of the Plan and this Award Agreement.

(n)Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.

*    *    *    *    *

Exhibit 10.6

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed effective as of the Date of Grant set forth above.

IEC ELECTRONICS CORP.
By:
	Chair, Compensation Committee
Date:

ACCEPTANCE

I, ___________________, hereby certify that I have read and fully understand the foregoing Award Agreement. I hereby execute this Award Agreement to indicate my acceptance of the PSUs and my intent to comply with the terms thereof.

Participant

Street Address

City	State	Zip Code
Date:

Exhibit 10.6

EXHIBIT A

PERFORMANCE GOAL AND AWARD DETERMINATION

[________]

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey T. Schlarbaum, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the three and nine months ended June 28, 2019 of IEC Electronics Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 7, 2019	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		President & Chief Executive Officer
		(On behalf of the Registrant and as Principal Executive Officer and Principal Financial Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas L. Barbato, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the three and nine months ended June 28, 2019 of IEC Electronics Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 7, 2019	/s/ Thomas L. Barbato
	Thomas L. Barbato
	Senior Vice President and Chief Financial Officer
	(On behalf of the Registrant and as Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the the Quarterly Report of IEC Electronics Corp. (the "Company") on Form 10-Q for the three and nine months endedJune 28, 2019 as filed with the Securities and Exchange Commission on the day hereof (the "Report"), I, Jeffrey T. Schlarbaum, President & Chief Executive Officer of the Company and I, Thomas L. Barbato, Senior Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 7, 2019	/s/ Jeffrey T. Schlarbaum
	Jeffrey T. Schlarbaum
	President & Chief Executive Officer
	(On behalf of the Registrant and as Principal Executive Officer and Principal Financial Officer)

Dated: August 7, 2019	/s/ Thomas L. Barbato
	Thomas L. Barbato
	Senior Vice President and Chief Financial Officer
	(On behalf of the Registrant and as Principal Financial and Accounting Officer)

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 28, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Entity Registrant Name	IEC ELECTRONICS CORP
Entity Central Index Key	0000049728
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		10,334,583
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 28, 2019
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands	Jun. 28, 2019	Sep. 30, 2018
Current assets:
Cash	$ 0	$ 0
Accounts receivable, net of allowance	26,612	25,168
Unbilled contract revenue	7,305	0
Inventories	44,889	34,126
Other current assets	1,893	1,747
Total current assets	80,699	61,041
Property, plant and equipment, net	19,331	20,110
Deferred income taxes	7,999	8,855
Other long-term assets	862	442
Total assets	108,891	90,448
Current liabilities:
Current portion of long-term debt	1,371	1,449
Current portion of capital lease obligation	331	306
Current portion of capital lease obligation	29,510	28,689
Accounts payable	3,165	1,796
Accrued payroll and related expenses	543	458
Customer deposits	9,750	7,595
Total current liabilities	44,670	40,293
Long-term debt	26,622	16,002
Long-term capital lease obligation	6,772	7,027
Other long-term liabilities	1,558	1,750
Total liabilities	79,622	65,072
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value: 500,000 shares authorized; none issued or outstanding	0	0
Common stock, $0.01 par value: Authorized: 50,000,000 shares; Issued: 11,372,111 and 11,330,151 shares, respectively; Outstanding: 10,316,623 and 10,274,663 shares, respectively	103	102
Additional paid-in capital	47,824	47,326
Accumulated deficit	(17,069)	(20,463)
Treasury stock, at cost: 1,055,488 shares	(1,589)	(1,589)
Total stockholders’ equity	29,269	25,376
Total liabilities and stockholders’ equity	$ 108,891	$ 90,448

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Jun. 28, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	11,387,974	11,304,393
Common stock, shares outstanding	10,332,486	10,248,905
Treasury stock, shares	1,055,488	1,055,488

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Income Statement [Abstract]
Net sales	$ 40,324	$ 29,782	$ 113,059	$ 82,706
Cost of sales	34,719	26,423	97,808	73,045
Gross profit	5,605	3,359	15,251	9,661
Selling and administrative expenses	3,721	2,833	10,402	8,543
Operating income	1,884	526	4,849	1,118
Interest and financing expense	452	322	1,160	834
Income before income taxes	1,432	204	3,689	284
Income tax expense/(benefit)	221	0	736	(1,005)
Net Income (Loss) Attributable to Parent, Diluted		204	2,953	1,289
Net income/(loss)	$ 1,211	$ 204	$ 2,953	$ 1,289
Weighted average number of shares outstanding:
Basic (in shares)	10,332,548	10,243,286	10,294,173	10,221,869
Diluted (in shares)	10,642,403	10,556,764	10,556,953	10,467,112
Basic net income (loss) per share (in usd per share)	$ 0.12	$ 0.02	$ 0.28	$ 0.12
Diluted net income (loss) per share (in usd per share)	$ 0.11	$ 0.02	$ 0.28	$ 0.12

XML

CONDENSED CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock, at cost
Beginning balance (shares) at Sep. 30, 2017		10,197,078
Beginning Balance at Sep. 30, 2017	$ 14,429	$ 102	$ 46,789	$ (30,873)	$ (1,589)
Net income	(494)
Employee stock plan purchases	69		69
Restricted stock vested, net of shares withheld for payment of taxes (shares)					3,498
Restricted stock vested, net of shares withheld for payment of taxes	0	0	$ 0
Employee stock plan purchases (shares)			5,483
Employee stock plan purchases	24		$ 24
Ending Balance at Dec. 29, 2017	14,028	$ 102	46,882	(31,367)	$ (1,589)
Ending balance (shares) at Dec. 29, 2017		10,206,059
Beginning balance (shares) at Sep. 30, 2017		10,197,078
Beginning Balance at Sep. 30, 2017	14,429	$ 102	46,789	(30,873)	(1,589)
Net income	1,289
Net income	$ 1,289
Exercise of stock options, net of shares surrendered (shares)	1,400
Ending Balance at Jun. 29, 2018	$ 16,115	$ 102	47,186	(29,584)	(1,589)
Ending balance (shares) at Jun. 29, 2018		10,248,083
Beginning balance (shares) at Dec. 29, 2017		10,206,059
Beginning Balance at Dec. 29, 2017	14,028	$ 102	46,882	(31,367)	$ (1,589)
Net income	1,579
Employee stock plan purchases	129		129
Restricted stock vested, net of shares withheld for payment of taxes (shares)					30,530
Restricted stock vested, net of shares withheld for payment of taxes	0		0
Ending Balance at Mar. 30, 2018	15,736	$ 102	47,011	(29,788)	$ (1,589)
Ending balance (shares) at Mar. 30, 2018		10,236,589
Net income	204
Net income	204
Employee stock plan purchases	$ 149		$ 149
Restricted stock vested, net of shares withheld for payment of taxes (shares)					3,529
Exercise of stock options, net of shares surrendered (shares)	1,400
Employee stock plan purchases (shares)			6,565
Employee stock plan purchases	$ 26		$ 26
Ending Balance at Jun. 29, 2018	$ 16,115	$ 102	47,186	(29,584)	$ (1,589)
Ending balance (shares) at Jun. 29, 2018		10,248,083
Beginning balance (shares) at Sep. 30, 2018	10,248,905	10,248,905
Beginning Balance at Sep. 30, 2018	$ 25,376	$ 102	47,326	(20,463)	(1,589)
Net income	1,072			1,072
Employee stock plan purchases	146		146
Restricted stock vested, net of shares withheld for payment of taxes (shares)		4,439
Restricted stock vested, net of shares withheld for payment of taxes	0	$ 0	0
Exercise of stock options, net of shares surrendered (shares)		2,553
Exercise of stock options, net of shares surrendered	0
Employee stock plan purchases (shares)		5,674
Employee stock plan purchases	20		20
Ending Balance at Dec. 28, 2018	$ 27,055	$ 102	47,492	(18,950)	(1,589)
Ending balance (shares) at Dec. 28, 2018		10,261,571
Beginning balance (shares) at Sep. 30, 2018	10,248,905	10,248,905
Beginning Balance at Sep. 30, 2018	$ 25,376	$ 102	47,326	(20,463)	(1,589)
Net income	2,953
Net income	$ 2,953
Exercise of stock options, net of shares surrendered (shares)	34,000
Ending Balance at Jun. 28, 2019	$ 29,269	$ 103	47,824	(17,069)	(1,589)
Ending balance (shares) at Jun. 28, 2019	10,332,486	10,332,486
Beginning balance (shares) at Dec. 28, 2018		10,261,571
Beginning Balance at Dec. 28, 2018	$ 27,055	$ 102	47,492	(18,950)	(1,589)
Net income	670			670
Employee stock plan purchases	152		152
Restricted stock vested, net of shares withheld for payment of taxes (shares)		38,636
Restricted stock vested, net of shares withheld for payment of taxes	1	$ 1
Exercise of stock options, net of shares surrendered (shares)		11,654
Exercise of stock options, net of shares surrendered	51		51
Ending Balance at Mar. 29, 2019	27,929	$ 103	47,695	(18,280)	(1,589)
Ending balance (shares) at Mar. 29, 2019		10,311,861
Net income				1,211
Net income	1,211
Employee stock plan purchases	117		117
Restricted stock vested, net of shares withheld for payment of taxes (shares)		2,458
Restricted stock vested, net of shares withheld for payment of taxes	(14)		(14)
Restricted stock units vested, net of shares withheld for payment of taxes (shares)		5,277
Restricted stock units vested, net of shares withheld for payment of taxes	(34)		(34)
Exercise of stock options, net of shares surrendered (shares)		7,500
Exercise of stock options, net of shares surrendered	27		27
Employee stock plan purchases (shares)		5,390
Employee stock plan purchases	33		33
Ending Balance at Jun. 28, 2019	$ 29,269	$ 103	$ 47,824	$ (17,069)	$ (1,589)
Ending balance (shares) at Jun. 28, 2019	10,332,486	10,332,486

XML

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 2,953	$ 1,289
Non-cash adjustments:
Stock-based compensation	415	347
Depreciation and amortization	2,047	1,708
Change in reserve for doubtful accounts	(30)	(42)
Inventory Write-down	19	143
Increase (Decrease) in Deferred Income Taxes	732	(1,010)
Amortization of Deferred Charges	(85)	(54)
Increase (Decrease) in Operating Capital [Abstract]
Accounts receivable	(1,414)	(1,739)
Unbilled contract revenue	(2,972)	0
Inventory	(14,485)	(10,612)
Other current assets	(146)	(204)
Other long-term assets	(436)	4
Accounts payable	1,293	3,268
Change in book overdraft position	(602)	1,268
Accrued expenses	1,389	1,171
Customer deposits	2,155	790
Other long-term liabilities	(75)	(75)
Net cash flows used in operating activities	(9,242)	(3,748)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(1,119)	(2,001)
Proceeds from disposal of property, plant and equipment	20	5
Proceeds from sale-leaseback	0	1,947
Net cash flows used in investing activities	(1,099)	(49)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from revolving credit facility	57,343	47,402
Repayments of revolving credit facility	(46,331)	(41,609)
Borrowings under other loan agreements	391	836
Repayments under other loan agreements	(889)	(2,665)
Repayments under capital lease	(230)	(172)
Debt issuance costs	(27)	(45)
Proceeds from exercise of stock options	79	0
Proceeds from employee stock plan purchases	53	50
Cash paid for taxes upon vesting of restricted stock	(48)	0
Net cash flows provided by financing activities	10,341	3,797
Net cash change for the period	0	0
Cash, beginning of period	0	0
Cash, end of period	0	0
Supplemental Cash Flow Information [Abstract]
Interest paid	1,183	807
Income taxes paid	3	4
Property, plant and equipment additions financed through capital lease	$ 0	$ 2,000

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. (“IEC,” or the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking.  As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, and ISO 13485, and we are Nadcap accredited.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its web site at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ending September 30, 2019 (“fiscal 2019”), the fiscal quarters ended on December 28, 2018, March 29, 2019 and June 28, 2019. For the fiscal year ended September 30, 2018 (“fiscal 2018”), the fiscal quarters ended on December 29, 2017, March 30, 2018 and June 29, 2018.

Consolidation

The condensed consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc. The Rochester unit operates as a division of IEC. All intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

The accompanying unaudited condensed consolidated financial statements for the three and nine months endedJune 28, 2019 and June 29, 2018 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include certain of the information the footnotes require by GAAP for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY. The Company’s cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft. Book overdrafts are presented in accounts payable in the condensed consolidated balance sheets. Book overdrafts were $2.0 million and $2.6 million as of June 28, 2019 and September 30, 2018, respectively. Changes in the book overdrafts are presented within net cash flows provided by operating activities within the condensed consolidated statements of cash flows.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that the likelihood of collection is remote.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or net realizable value.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) 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, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7
Software	3 to 10

Reviewing Long-Lived Assets for Potential Impairment

ASC 360 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definite lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were recorded by IEC for long-lived assets during either of the three or nine months ended June 28, 2019 and June 29, 2018.

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450 (Contingencies) requires the Company to determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable, accrued liabilities and borrowings.

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the three and nine months endedJune 28, 2019 and June 29, 2018.

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price.

Income Taxes and Deferred Taxes

ASC 740 (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, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred tax balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense. The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2014 through fiscal year ended September 30, 2018.

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.  Furthermore, the Company’s Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities. 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Significant items subject to such estimates include: allowance for doubtful accounts, excess and obsolete inventory reserve, warranty reserves, the valuation of deferred income tax assets and revenue recognition related to the accounts for over time contracts. Actual results may differ from management’s estimates.

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Segments

The Company’s results of operations for the three and nine months endedJune 28, 2019 and June 29, 2018 represent a single operating and reporting segment, referred to as contract manufacturing within the EMS industry. The Company strategically directs production between its various manufacturing facilities based on a number of considerations to best meet its customers’ requirements. The Company shares resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources.  The Company’s operations as a whole reflect the level at which the business is managed and how the Company’s chief operating decision maker assesses performance internally.

Recently Issued Accounting Standards Adopted

FASB Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASC 606”) was issued in May 2014 and updated the principles for recognizing revenue. This ASU superseded most of the existing revenue recognition requirements in GAAP. Under the new standard, revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that generally requires companies to use more judgment and make more estimates than under previous guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of the transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. Additionally, disclosures required for revenue recognition include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. Such disclosures are more extensive than what was required under previous GAAP.

The guidance was effective for the Company beginning with the first quarter of fiscal 2019. The Company evaluated the guidance and approved a transition method during fiscal 2018. The Company assessed the impact of the new guidance, which resulted in a change of the Company’s revenue recognition model for electronics manufacturing services from “point in time” upon physical delivery to an “over time” model. The Company implemented ASC 606 using the modified retrospective approach with the cumulative effect on accumulated deficit on adoption of $0.4 million, net of taxes recognized on October 1, 2018. The implementation of ASC 606 is more fully described in Note 2—Revenue Recognition.

Recently Issued Accounting Standards Not Yet Adopted

FASB ASU 2016-02, “Leases” (Topic 842) was issued in February 2016. This update supersedes ASC 840 (Leases) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease for finance leases and operating leases, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842 (Leases),” and ASU 2018-11, “Leases (Topic 842),” Targeted Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which provides certain narrow-scope improvements to Topic 842 as it relates to lessors. The ASUs related to Topic 842 will be effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is in the process of finalizing the analysis of its lease portfolio, implementing systems and processes and updating its accounting policies to comply with Topic 842.

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REVENUE RECOGNITION

9 Months Ended

Jun. 28, 2019

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

NOTE 2—REVENUE RECOGNITION

ASC 606: Revenue from Contracts with Customers

General Description of the New Guidance

Effective October 1, 2018, the Company applied the modified retrospective approach for its adoption of ASC 606. The primary impact of the new standard resulted in a change in the timing of the Company’s revenue recognition for some customer contracts for our custom manufacturing services to recognizing revenue over time as products are manufactured, as opposed to the prior revenue recognition of point in time. The transitional adjustment resulted in the recognition of unbilled revenue with a corresponding reduction in finished goods and work-in-process inventory (“WIP inventory”). The Company recognized the cumulative effect of initially applying the new revenue standard, totaling $0.4 million, net of tax, as an adjustment to its opening accumulated deficit balance at October 1, 2018 included in stockholders’ equity. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Satisfaction of Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Many of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company primarily provides contract manufacturing services to its customers. The customer provides a design, the Company procures materials and manufactures to that design and ships the product to the customer. Revenue is derived primarily from the manufacturing of these electronics components that are built to customer specifications.

The Company's performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods and services transferred to customers at a point in time accounted for 52.3% and 50.8% of the Company's revenue for the three and nine months endedJune 28, 2019, respectively. Revenue on these contracts is recognized when obligations under the terms of the customer contract are satisfied; generally this occurs with the transfer of control upon shipment. If there is no enforceable right to payment for work completed to date, or the Company does not recapture costs incurred plus an applicable margin, then the Company records revenue upon shipment to the customer.

Revenue from goods and services transferred to customers over time accounted for 47.7% and 49.2% of our revenue for the three and nine months endedJune 28, 2019, respectively. For revenue recognized over time, the Company uses an input measure to determine progress towards completion. Under this method, sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion. If the Company has an enforceable right to payment for work completed to date, with a recapture of costs incurred plus an applicable margin, and the goods do not have an alternative future use once the manufacturing process has commenced, then the Company records an unbilled revenue associated with non-cancellable customer orders.

The Company derives revenue from engineering and design services. Service revenue is generally recognized once the service has been rendered.  For material management arrangements, revenue is generally recognized as services are rendered.  Under such arrangements, some or all of the following services may be provided: design, bid, procurement, testing, storage or other activities relating to materials the customer expects to incorporate into products that it manufactures.  Value-added support services revenue, including material management and repair work revenue, amounted to less than 3% of total revenue in each of the three and nine months endedJune 28, 2019 and June 29, 2018.

Returns and Discounts

The Company does not offer its customers a right of return. Rather, the Company warrants that each unit received by the customer will meet the agreed upon technical and quality specifications and requirements. Only when the delivered units do not meet these requirements can the customer return the non-compliant units as a corrective action under the warranty. The remedy offered to the customer is repair of the returned units or replacement if repair is not viable. Accordingly, the Company records a warranty reserve and any warranty activities are not considered to be a separate performance obligation. Historically, warranty reserves have not been material.

Provisions for discounts, allowances, estimated returns and other adjustments are recorded in the period the related sales are recognized.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in net sales in the accompanying condensed consolidated statements of operations. Shipping and handling costs incurred by the Company for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying condensed consolidated statements of operations.

Contract Assets

Contract assets consist of unbilled contract amounts resulting from sales under contracts when the revenue recognized exceeds the amount billed to the customer.

Practical Expedients and Exemptions

The Company generally expenses incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are recorded in selling and administrative expense in the condensed consolidated statements of operations.

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Disaggregated Revenue

The table below shows net sales from contracts with customers by market sector. See additional information regarding market sectors in Note 10—Market Sectors and Major Customers.

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Point in Time		Over Time		Net Sales		Point in Time		Over Time		Net Sales
(in thousands)
Aerospace & Defense	$	11,300	$	13,298	$	24,598	$	30,950	$	35,755	$	66,705
Medical	5,127		3,744		8,871		12,441		12,432		24,873
Industrial	4,657		2,198		6,855		14,063		7,418		21,481
	$	21,084	$	19,240	$	40,324	$	57,454	$	55,605	$	113,059

Impact of adoption of ASC 606

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of October 1, 2018: 

	Balances Without Adoption of ASC 606			Effect of Change			Adjusted
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	4,333		$	4,333
Inventories	34,126			(3,768		)	30,358
Deferred income taxes	8,855			(124		)	8,731
Stockholders’ Equity:
Accumulated deficit	(20,463		)	441			(20,022		)

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of June 28, 2019: 

	Balances Without Adoption of ASC 606			Effect of Change			As Reported
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	7,305		$	7,305
Inventories	51,086			(6,197		)	44,889
Deferred income taxes	8,242			(243		)	7,999
Stockholders’ Equity:
Accumulated deficit	(17,934		)	865			(17,069		)

The following table presents the impacted financial statement line items under ASC 605 "Revenue Recognition" and ASC 606 in the condensed consolidated statements of operations for the three and nine months ended June 28, 2019:

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Balances Without Adoption of ASC 606		Effect of Change		As Reported		Balances Without Adoption of ASC 606		Effect of Change		As Reported
Net sales	$	39,062	$	1,262	$	40,324	$	110,087	$	2,972	$	113,059
Cost of sales	33,604		1,115		34,719		95,379		2,429		97,808
Gross profit	5,458		147		5,605		14,708		543		15,251
Income tax expense	189		32		221		617		119		736
Net income	1,096		115		1,211		2,529		424		2,953

For each of the three and nine months endedJune 28, 2019 and June 29, 2018, less than 1% of net sales were shipped to locations outside the United States.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS

9 Months Ended

Jun. 28, 2019

Receivables [Abstract]

ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 3—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary follows of activity in the allowance for doubtful accounts during the nine months endedJune 28, 2019 and June 29, 2018:

	Nine Months Ended
Allowance for doubtful accounts	June 28, 2019			June 29, 2018
(in thousands)
Allowance, beginning of period	$	85		$	75
Change in provision for doubtful accounts	(30		)	(42		)
Write-offs	—			—
Allowance, end of period	$	55		$	33

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INVENTORIES

9 Months Ended

Jun. 28, 2019

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 4—INVENTORIES

A summary of inventory by category at period end follows:

Inventories	June 28, 2019		September 30, 2018
(in thousands)
Raw materials	$	28,737	$	21,323
Work-in-process	12,793		11,263
Finished goods	3,359		1,540
Total inventories	$	44,889	$	34,126

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PROPERTY, PLANT & EQUIPMENT, NET

9 Months Ended

Jun. 28, 2019

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT & EQUIPMENT, NET

NOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant and Equipment	June 28, 2019			September 30, 2018
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	7,397			7,314
Building under capital lease	7,750			7,750
Machinery and equipment	31,593			30,969
Furniture and fixtures	7,923			7,877
Software	5,215			—
Construction in progress	557			5,360
Total property, plant and equipment, at cost	61,223			60,058
Accumulated depreciation	(41,892		)	(39,948		)
Property, plant and equipment, net	$	19,331		$	20,110

Depreciation expense during the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Depreciation expense	$	707	$	567	$	2,008	$	1,729

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CREDIT FACILITIES

9 Months Ended

Jun. 28, 2019

Debt Disclosure [Abstract]

CREDIT FACILITIES

NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:   

			June 28, 2019					September 30, 2018
Debt	Fixed/Variable Rate	Maturity Date	Balance			Interest Rate		Balance			Interest Rate
(in thousands)
M&T Bank credit facilities:
Revolving Credit Facility	v	5/5/2022	$	24,008		4.94	%	$	12,996		5.26	%
Term Loan B	v	5/5/2022	2,993			5.19		3,636			5.36
Equipment Line Advances	v	Various	—			—		314			5.56
Equipment Line Term Note	v	Various	1,254			5.28		794			5.56
Total debt, gross			28,255					17,740
Unamortized debt issuance costs			(262		)			(289		)
Total debt, net			27,993					17,451
Less: current portion			(1,371		)			(1,449		)
Long-term debt			$	26,622				$	16,002

M&T Bank Credit Facilities

During the quarter ended March 29, 2019, the Company and M&T Bank entered into the Seventh and Eighth Amendments to the Fifth Amended and Restated Credit Facility Agreement, which amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Credit Facility, as amended”). Among other things, the Seventh Amendment increased the Company’s revolving credit commitment to $27.0 and added a monthly information requirement for backlog conversion ratio metrics. The Eighth Amendment modified the definition of “Borrowing Base” to increase the amount of certain availability limits contained within the definition.

The Credit Facility, as amended, is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility, as amended, are described below:

a) Revolving Credit Facility (“Revolver”): At June 28, 2019, up to $27.0 million is available through May 5, 2022. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

b) Term Loan B:$14.0 million was borrowed on January 18, 2013. Principal was being repaid in 120 equal monthly installments of $117 thousand. As part of an amendment to the Credit Facility, as amended, the principal was modified from $8.0 million to $6.0 million and principal is being repaid in equal monthly installments of $71 thousand plus a balloon payment of $0.6 million. The maturity date of the loan is May 5, 2022.

c) Equipment Line Advances: Up to $1.5 million is available through May 5, 2022. Interest only is paid until maturity. Principal is due in three or six months after borrowing or can be converted to an Equipment Line Term Loan. On September 18, 2018, $0.3 million was borrowed and upon maturity at March 18, 2019, was converted into an Equipment Line Term Loan. On November 6, 2018, an additional $0.4 million was borrowed and upon maturity at May 6, 2019, was converted into an Equipment Line Term Note.

d) Equipment Line Term Note: On July 26, 2018, $0.8 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $21 thousand and matures July 26, 2021. On September 27, 2018, $0.1 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $2 thousand and matures September 29, 2021. On March 18, 2019, $0.3 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $9 thousand and matures March 18, 2022. On May 6, 2019, $0.4 million was converted from an Equipment Line Advance, principal is being repaid in 36 equal monthly installments of $11 thousand and matures May 6, 2022.

Borrowing Base

At June 28, 2019, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $14.0 million) or (ii) $27.0 million. At September 30, 2018, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $8.0 million) or (ii) $22.0 million.

At June 28, 2019, the upper limit on Revolver borrowings was $27.0 million with $3.0 million available. At September 30, 2018, the upper limit on Revolver borrowings was $22.0 million with $9.0 million available. Average Revolver balances amounted to $20.0 million and $11.8 million during the nine months endedJune 28, 2019 and June 29, 2018, respectively.

Interest Rates

Under the Credit Facility, as amended, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At June 28, 2019, the applicable marginal interest rate was 2.50% for the Revolver and 2.75% for Term Loan B and Equipment Line Advances. At September 30, 2018, the applicable marginal interest rate was 3.00% for the Revolver and 3.25% for Term Loan B and Equipment Line Advances. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.25% to 0.375% of the excess of $27.0 million over average borrowings under the Revolver. Fees incurred amounted to $2.6 thousand and $15.3 thousand during the three and nine months endedJune 28, 2019, respectively. Fees incurred amounted to $5.3 thousand and $16.5 thousand during the three and nine months endedJune 29, 2018, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Credit Facility, as amended, contains various affirmative and negative covenants including financial covenants. As of June 28, 2019, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended June 28, 2019 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at June 28, 2019. The Credit Facility, as amended, also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at June 28, 2019.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at June 28, 2019 for the next three years taking into consideration the Credit Facility, as amended, is as follows:

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ending June
2020		$	1,371
2021		1,371
2022	(1)	25,513
		$	28,255

⁽¹⁾ Includes Revolver balance of $24.0 million at June 28, 2019.

As more fully described in Note 14—Subsequent Events, effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Ninth Amendment”), that amended the Credit Facility, as amended.

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WARRANTY RESERVES

9 Months Ended

Jun. 29, 2018

Product Warranties Disclosures [Abstract]

WARRANTY RESERVES

NOTE 7—WARRANTY RESERVES

IEC generally warrants its products and workmanship for up to twelve months from date of sale.  As an offset to warranty claims, the Company is sometimes able to obtain reimbursement from suppliers for warranty-related costs or losses.  Based on historical warranty claims experience and in consideration of sales trends, a reserve is maintained for estimated future warranty costs to be incurred on products and services sold through the balance sheet date. The warranty reserve is included in other accrued expenses on the condensed consolidated balance sheets.

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Nine Months Ended
Warranty Reserve	June 28, 2019			June 29, 2018
(in thousands)
Reserve, beginning of period	$	173		$	153
Provision	65			213
Warranty costs	(89		)	(199		)
Reserve, end of period	$	149		$	167

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STOCK-BASED COMPENSATION

9 Months Ended

Jun. 28, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

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 replaced 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 and the 2019 Plan, totaled $0.1 million and $0.4 million for the three and nine months endedJune 28, 2019, respectively. Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.1 million and $0.3 million for the three and nine months endedJune 29, 2018, respectively.

At June 28, 2019, there were 776,775 remaining shares of common stock available to be issued under the 2019 Plan and 89,701 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 and 2019 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 nine months endedJune 28, 2019 and June 29, 2018 follows in the table below.

	Nine Months Ended
Valuation of Options	June 28, 2019			June 29, 2018
Assumptions for Black-Scholes:
Risk-free interest rate	2.35		%	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	20,000			20,000
Weighted average fair value per share	$	2.33		$	1.53
Fair value of options granted (000s)	$	47		$	31

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

	Nine Months Ended
	June 28, 2019				June 29, 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	20,000		6.12		20,000		4.00
Exercised	(34,000	)	4.46		(1,400	)	4.08
Forfeited	(24,250	)	3.70		(90,000	)	4.75
Expired	(5,750	)	4.06		(10,500	)	5.24
Outstanding, end of period	693,145		$	4.40	661,145		$	4.18
For options expected to vest
Number expected to vest	685,354		$	4.39	653,922		$	4.18
Weighted average remaining contractual term, in years	3.4				3.7
Intrinsic value (000s)			$	1,306			$	1,009
For exercisable options
Number exercisable	533,645		$	4.18	450,358		$	4.28
Weighted average remaining contractual term, in years	2.7				3.4
Intrinsic value (000s)			$	1,132			$	721
For non-exercisable options
Expense not yet recognized (000s)			$	232			$	205
Weighted average years to be recognized	3.1				1.5
For options exercised
Intrinsic value (000s)			$	77			$	2

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: 

	Nine Months Ended
	June 28, 2019				June 29, 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	32,385		7.09		44,878		4.29
Vested	(49,511	)	4.08		(39,300	)	4.10
Forfeited	(1,400	)	4.13		(9,490	)	4.20
Outstanding, end of period	84,707		$	5.23	105,783		$	4.09
For non-vested shares
Expense not yet recognized (000s)			$	365			$	353
Weighted average remaining years for vesting	2.2				1.9
For shares vested
Aggregate fair value on vesting dates (000s)			$	333			$	173

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:

	Nine Months Ended
	June 28, 2019				June 29, 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	63,011		7.09		102,864		4.28
Vested	(12,258	)	4.64		—		—
Forfeited	—		—		(151,341	)	4.08
Outstanding, end of period	221,245		$	4.81	219,522		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	573			$	371
Weighted average remaining years for vesting	2.4				2.5

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INCOME TAXES

9 Months Ended

Jun. 28, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9—INCOME TAXES

The income tax expense/(benefit) during each of the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Income tax expense/(benefit)	$	221	$	—	$	736	$	(1,005	)

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate was phased in, resulting in a U.S. statutory federal tax rate of approximately 24.2% for fiscal 2018, and 21% for subsequent fiscal years. The Tax Act eliminated the domestic manufacturing deduction and moved to a territorial system. In addition, previously paid federal alternative minimum tax (“AMT”) are now refundable regardless of whether there is future income tax liability before AMT credits.

The Company concluded that the Tax Act caused the Company’s U.S. deferred tax assets and liabilities to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are revalued and any change is adjusted through the provision for income tax expense in the reporting period of the enactment.

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including discrete items, changes in the mix and amount of pre-tax income, changes in tax laws, business reorganizations, and settlements with taxing authorities, if any.

For the nine months endedJune 29, 2018, the impact of the Tax Act resulted in the Company recording a net tax benefit of approximately $1.0 million, resulting from the release of the valuation allowance on the Company’s AMT credits.

The Company's estimated annual effective tax rate for fiscal 2019 is comprised of the federal tax rate of 21% plus the state tax rate of 1.58%, which is adjusted for permanent book tax differences. During the three and nine months endedJune 28, 2019, the permanent items included meals and entertainment and stock based compensation. There were no material discrete items recognized in the three and nine months endedJune 28, 2019.

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MARKET SECTORS AND MAJOR CUSTOMERS

9 Months Ended

Jun. 28, 2019

Risks and Uncertainties [Abstract]

MARKET SECTORS AND MAJOR CUSTOMERS

NOTE 10—MARKET SECTORS AND MAJOR CUSTOMERS

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Nine Months Ended
% of Sales by Sector	June 28, 2019	June 29, 2018	June 28, 2019	June 29, 2018
Aerospace & Defense	61%	60%	59%	62%
Medical	22%	22%	22%	21%
Industrial	17%	18%	19%	17%
	100%	100%	100%	100%

One individual customer represented 10% or more of sales for the three months ended June 28, 2019. This customer was from the aerospace & defense sector and represented 24% of sales. One individual customer represented 10% or more of sales for the nine months ended June 28, 2019. This customer was from the aerospace & defense sector and represented 22% of sales.

Two individual customers each represented 10% or more of sales for the three months ended June 29, 2018. One customer was from the aerospace & defense sector and represented 25% of sales, while one was from the medical sector and represented 11% of sales for the three months ended June 29, 2018. Two individual customers each represented 10% or more of sales for the nine months ended June 29, 2018. One customer was from the aerospace & defense sector and represented 23% of sales, while one customer was from the medical sector and represented 11% of sales for the six months ended June 29, 2018.

One individual customer represented 10% or more of receivables and accounted for 26% of the outstanding balance at June 28, 2019. Three individual customers represented 10% or more of receivables and accounted for 55% of the outstanding balance at September 30, 2018.

Credit risk associated with individual customers is periodically evaluated by analyzing the entity’s financial condition and payment history.  Customers generally are not required to post collateral.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jun. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11—COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be involved in legal actions in the ordinary course of its business, but management does not believe that any such proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s condensed consolidated financial statements.

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CAPITAL LEASE

9 Months Ended

Jun. 28, 2019

Leases [Abstract]

CAPITAL LEASE

NOTE 12—CAPITAL LEASE

Leases

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ending June
2020	$	669
2021	683
2022	696
2023	711
2024 and thereafter	6,900
Total capital lease payments	9,659
Less: amounts representing interest	(2,556		)
Present value of minimum lease payment	$	7,103

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INCOME (LOSS) PER SHARE

9 Months Ended

Jun. 28, 2019

Earnings Per Share [Abstract]

INCOME (LOSS) PER SHARE

NOTE 13—NET INCOME PER SHARE

The Company applies the two-class method to calculate and present net income per share. Certain of the Company's restricted (non-vested) share awards contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net income per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends.

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as unvested restricted stock and restricted stock units.  Options, restricted stock and restricted stock units are primarily held by directors, officers and certain employees. 

The Company uses the two-class method to calculate net income per share as both classes share the same rights in dividends. Therefore, basic and diluted earnings per share (“EPS”) are the same for both classes of ordinary shares.

A summary of shares used in the EPS calculations follows (in thousands except share and per share data):

	Three Months Ended				Nine Months Ended
Earnings Per Share	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Basic net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Less: Income attributable to non-vested shares	10		2		25		13
Net income available to common stockholders	$	1,201	$	202	$	2,928	$	1,276
Weighted average common shares outstanding	10,332,548		10,243,286		10,294,173		10,221,869
Basic net income per share	$	0.12	$	0.02	$	0.28	$	0.12
Diluted net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Shares used in computing basic net income per share	10,332,548		10,243,286		10,294,173		10,221,869
Dilutive effect of non-vested shares	309,855		313,478		262,780		245,243
Shares used in computing diluted net income per share	10,642,403		10,556,764		10,556,953		10,467,112
Diluted net income per share	$	0.11	$	0.02	$	0.28	$	0.12

The diluted weighted average share calculations do not include the following shares, which are not dilutive to the EPS calculations.

	Three Months Ended		Nine Months Ended
	June 28, 2019	June 29, 2018	June 28, 2019	June 29, 2018
Anti-dilutive shares excluded	52,523	39,335	39,872	171,791

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SUBSEQUENT EVENTS

9 Months Ended

Jun. 28, 2019

Subsequent Events [Abstract]

Subsequent Events

NOTE 14—SUBSEQUENT EVENTS

Effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to the Credit Facility, as amended. The Ninth Amendment increased the Company’s revolving credit commitment to $35.0 million. In addition, the Ninth Amendment modified the definition of “Borrowing Base” to increase the amount of certain availability limits contained within the definition.

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

Our Business

Our Business

IEC Electronics Corp. (“IEC,” or the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking.  As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, and ISO 13485, and we are Nadcap accredited.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its web site at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ending September 30, 2019 (“fiscal 2019”), the fiscal quarters ended on December 28, 2018, March 29, 2019 and June 28, 2019. For the fiscal year ended September 30, 2018 (“fiscal 2018”), the fiscal quarters ended on December 29, 2017, March 30, 2018 and June 29, 2018.

Consolidation

Consolidation

The condensed consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc. The Rochester unit operates as a division of IEC. All intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

Unaudited Financial Statements

The accompanying unaudited condensed consolidated financial statements for the three and nine months endedJune 28, 2019 and June 29, 2018 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include certain of the information the footnotes require by GAAP for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Cash

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY. The Company’s cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft. Book overdrafts are presented in accounts payable in the condensed consolidated balance sheets. Book overdrafts were $2.0 million and $2.6 million as of June 28, 2019 and September 30, 2018, respectively. Changes in the book overdrafts are presented within net cash flows provided by operating activities within the condensed consolidated statements of cash flows.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that the likelihood of collection is remote.

Inventory Valuation

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or net realizable value.

Property, Plant and Equipment

.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7
Software	3 to 10

Reviewing Long-Lived Assets for Potential Impairment

Reviewing Long-Lived Assets for Potential Impairment

ASC 360 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definite lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were recorded by IEC for long-lived assets during either of the three or nine months ended June 28, 2019 and June 29, 2018.

Leases

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

Legal Contingencies

When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450 (Contingencies) requires the Company to determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Customer Deposits

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Fair Value Measurements

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable, accrued liabilities and borrowings.

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the three and nine months endedJune 28, 2019 and June 29, 2018.

Stock-Based Compensation

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price.

Legal Expenses Accrual

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Income Taxes and Deferred Taxes

Income Taxes and Deferred Taxes

ASC 740 (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, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred tax balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense. The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2014 through fiscal year ended September 30, 2018.

Dividends

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.  Furthermore, the Company’s Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities. 

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Significant items subject to such estimates include: allowance for doubtful accounts, excess and obsolete inventory reserve, warranty reserves, the valuation of deferred income tax assets and revenue recognition related to the accounts for over time contracts. Actual results may differ from management’s estimates.

Statements of Cash Flows

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Segment Reporting, Policy [Policy Text Block]

Segments

The Company’s results of operations for the three and nine months endedJune 28, 2019 and June 29, 2018 represent a single operating and reporting segment, referred to as contract manufacturing within the EMS industry. The Company strategically directs production between its various manufacturing facilities based on a number of considerations to best meet its customers’ requirements. The Company shares resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources.  The Company’s operations as a whole reflect the level at which the business is managed and how the Company’s chief operating decision maker assesses performance internally.

Recently Issued Accounting Standards

Recently Issued Accounting Standards Adopted

FASB Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASC 606”) was issued in May 2014 and updated the principles for recognizing revenue. This ASU superseded most of the existing revenue recognition requirements in GAAP. Under the new standard, revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that generally requires companies to use more judgment and make more estimates than under previous guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of the transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. Additionally, disclosures required for revenue recognition include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. Such disclosures are more extensive than what was required under previous GAAP.

The guidance was effective for the Company beginning with the first quarter of fiscal 2019. The Company evaluated the guidance and approved a transition method during fiscal 2018. The Company assessed the impact of the new guidance, which resulted in a change of the Company’s revenue recognition model for electronics manufacturing services from “point in time” upon physical delivery to an “over time” model. The Company implemented ASC 606 using the modified retrospective approach with the cumulative effect on accumulated deficit on adoption of $0.4 million, net of taxes recognized on October 1, 2018. The implementation of ASC 606 is more fully described in Note 2—Revenue Recognition.

Recently Issued Accounting Standards Not Yet Adopted

FASB ASU 2016-02, “Leases” (Topic 842) was issued in February 2016. This update supersedes ASC 840 (Leases) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease for finance leases and operating leases, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842 (Leases),” and ASU 2018-11, “Leases (Topic 842),” Targeted Improvements, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which provides certain narrow-scope improvements to Topic 842 as it relates to lessors. The ASUs related to Topic 842 will be effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is in the process of finalizing the analysis of its lease portfolio, implementing systems and processes and updating its accounting policies to comply with Topic 842.

Earnings Per Share

The Company applies the two-class method to calculate and present net income per share. Certain of the Company's restricted (non-vested) share awards contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net income per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends.

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as unvested restricted stock and restricted stock units.  Options, restricted stock and restricted stock units are primarily held by directors, officers and certain employees. 

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Jun. 28, 2019

Accounting Policies [Abstract]

Property, Plant and Equipment

.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7
Software	3 to 10

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant and Equipment	June 28, 2019			September 30, 2018
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	7,397			7,314
Building under capital lease	7,750			7,750
Machinery and equipment	31,593			30,969
Furniture and fixtures	7,923			7,877
Software	5,215			—
Construction in progress	557			5,360
Total property, plant and equipment, at cost	61,223			60,058
Accumulated depreciation	(41,892		)	(39,948		)
Property, plant and equipment, net	$	19,331		$	20,110

Depreciation expense during the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Depreciation expense	$	707	$	567	$	2,008	$	1,729

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REVENUE RECOGNITION (Tables)

9 Months Ended

Jun. 28, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Net Sales from Contracts with Customers by Market Sector

The table below shows net sales from contracts with customers by market sector. See additional information regarding market sectors in Note 10—Market Sectors and Major Customers.

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Point in Time		Over Time		Net Sales		Point in Time		Over Time		Net Sales
(in thousands)
Aerospace & Defense	$	11,300	$	13,298	$	24,598	$	30,950	$	35,755	$	66,705
Medical	5,127		3,744		8,871		12,441		12,432		24,873
Industrial	4,657		2,198		6,855		14,063		7,418		21,481
	$	21,084	$	19,240	$	40,324	$	57,454	$	55,605	$	113,059

Schedule of Impact of Topic 606 Adoption on Consolidated Financial Statements

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of October 1, 2018: 

	Balances Without Adoption of ASC 606			Effect of Change			Adjusted
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	4,333		$	4,333
Inventories	34,126			(3,768		)	30,358
Deferred income taxes	8,855			(124		)	8,731
Stockholders’ Equity:
Accumulated deficit	(20,463		)	441			(20,022		)

The following table presents the impacted financial statement line items in the condensed consolidated balance sheet as of June 28, 2019: 

	Balances Without Adoption of ASC 606			Effect of Change			As Reported
(in thousands)
Assets:
Unbilled contract revenue	$	—		$	7,305		$	7,305
Inventories	51,086			(6,197		)	44,889
Deferred income taxes	8,242			(243		)	7,999
Stockholders’ Equity:
Accumulated deficit	(17,934		)	865			(17,069		)

The following table presents the impacted financial statement line items under ASC 605 "Revenue Recognition" and ASC 606 in the condensed consolidated statements of operations for the three and nine months ended June 28, 2019:

	Three Months Ended						Nine Months Ended
	June 28, 2019						June 28, 2019
	Balances Without Adoption of ASC 606		Effect of Change		As Reported		Balances Without Adoption of ASC 606		Effect of Change		As Reported
Net sales	$	39,062	$	1,262	$	40,324	$	110,087	$	2,972	$	113,059
Cost of sales	33,604		1,115		34,719		95,379		2,429		97,808
Gross profit	5,458		147		5,605		14,708		543		15,251
Income tax expense	189		32		221		617		119		736
Net income	1,096		115		1,211		2,529		424		2,953

For each of the three and nine months endedJune 28, 2019 and June 29, 2018, less than 1% of net sales were shipped to locations outside the United States.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Tables)

9 Months Ended

Jun. 28, 2019

Receivables [Abstract]

Allowance for Credit Losses on Financing Receivables

A summary follows of activity in the allowance for doubtful accounts during the nine months endedJune 28, 2019 and June 29, 2018:

	Nine Months Ended
Allowance for doubtful accounts	June 28, 2019			June 29, 2018
(in thousands)
Allowance, beginning of period	$	85		$	75
Change in provision for doubtful accounts	(30		)	(42		)
Write-offs	—			—
Allowance, end of period	$	55		$	33

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INVENTORIES (Tables)

9 Months Ended

Jun. 28, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory

A summary of inventory by category at period end follows:

Inventories	June 28, 2019		September 30, 2018
(in thousands)
Raw materials	$	28,737	$	21,323
Work-in-process	12,793		11,263
Finished goods	3,359		1,540
Total inventories	$	44,889	$	34,126

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PROPERTY, PLANT & EQUIPMENT (Tables)

9 Months Ended

Jun. 28, 2019

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7
Software	3 to 10

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant and Equipment	June 28, 2019			September 30, 2018
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	7,397			7,314
Building under capital lease	7,750			7,750
Machinery and equipment	31,593			30,969
Furniture and fixtures	7,923			7,877
Software	5,215			—
Construction in progress	557			5,360
Total property, plant and equipment, at cost	61,223			60,058
Accumulated depreciation	(41,892		)	(39,948		)
Property, plant and equipment, net	$	19,331		$	20,110

Depreciation expense during the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Depreciation expense	$	707	$	567	$	2,008	$	1,729

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CREDIT FACILITIES (Tables)

9 Months Ended

Jun. 28, 2019

Debt Disclosure [Abstract]

Schedule of Debt

A summary of borrowings at period end follows:   

			June 28, 2019					September 30, 2018
Debt	Fixed/Variable Rate	Maturity Date	Balance			Interest Rate		Balance			Interest Rate
(in thousands)
M&T Bank credit facilities:
Revolving Credit Facility	v	5/5/2022	$	24,008		4.94	%	$	12,996		5.26	%
Term Loan B	v	5/5/2022	2,993			5.19		3,636			5.36
Equipment Line Advances	v	Various	—			—		314			5.56
Equipment Line Term Note	v	Various	1,254			5.28		794			5.56
Total debt, gross			28,255					17,740
Unamortized debt issuance costs			(262		)			(289		)
Total debt, net			27,993					17,451
Less: current portion			(1,371		)			(1,449		)
Long-term debt			$	26,622				$	16,002

Schedule of Maturities of Long-term Debt

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ending June
2020		$	1,371
2021		1,371
2022	(1)	25,513
		$	28,255

⁽¹⁾ Includes Revolver balance of $24.0 million at June 28, 2019

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WARRANTY RESERVES (Tables)

9 Months Ended

Jun. 28, 2019

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Nine Months Ended
Warranty Reserve	June 28, 2019			June 29, 2018
(in thousands)
Reserve, beginning of period	$	173		$	153
Provision	65			213
Warranty costs	(89		)	(199		)
Reserve, end of period	$	149		$	167

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Jun. 28, 2019

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

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:

	Nine Months Ended
	June 28, 2019				June 29, 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	63,011		7.09		102,864		4.28
Vested	(12,258	)	4.64		—		—
Forfeited	—		—		(151,341	)	4.08
Outstanding, end of period	221,245		$	4.81	219,522		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	573			$	371
Weighted average remaining years for vesting	2.4				2.5

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

Assumptions used in the Black-Scholes model and the estimated value of options granted during the nine months endedJune 28, 2019 and June 29, 2018 follows in the table below.

	Nine Months Ended
Valuation of Options	June 28, 2019			June 29, 2018
Assumptions for Black-Scholes:
Risk-free interest rate	2.35		%	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	20,000			20,000
Weighted average fair value per share	$	2.33		$	1.53
Fair value of options granted (000s)	$	47		$	31

Changes in Number of Options Outstanding with Other Related Data

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

	Nine Months Ended
	June 28, 2019				June 29, 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	20,000		6.12		20,000		4.00
Exercised	(34,000	)	4.46		(1,400	)	4.08
Forfeited	(24,250	)	3.70		(90,000	)	4.75
Expired	(5,750	)	4.06		(10,500	)	5.24
Outstanding, end of period	693,145		$	4.40	661,145		$	4.18
For options expected to vest
Number expected to vest	685,354		$	4.39	653,922		$	4.18
Weighted average remaining contractual term, in years	3.4				3.7
Intrinsic value (000s)			$	1,306			$	1,009
For exercisable options
Number exercisable	533,645		$	4.18	450,358		$	4.28
Weighted average remaining contractual term, in years	2.7				3.4
Intrinsic value (000s)			$	1,132			$	721
For non-exercisable options
Expense not yet recognized (000s)			$	232			$	205
Weighted average years to be recognized	3.1				1.5
For options exercised
Intrinsic value (000s)			$	77			$	2

Changes in Number of Restricted Non-vested Stock Outstanding with Other Related Data

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

	Nine Months Ended
	June 28, 2019				June 29, 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	32,385		7.09		44,878		4.29
Vested	(49,511	)	4.08		(39,300	)	4.10
Forfeited	(1,400	)	4.13		(9,490	)	4.20
Outstanding, end of period	84,707		$	5.23	105,783		$	4.09
For non-vested shares
Expense not yet recognized (000s)			$	365			$	353
Weighted average remaining years for vesting	2.2				1.9
For shares vested
Aggregate fair value on vesting dates (000s)			$	333			$	173

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INCOME TAXES (Tables)

9 Months Ended

Jun. 28, 2019

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

during each of the three and nine months endedJune 28, 2019 and June 29, 2018 follows:

	Three Months Ended				Nine Months Ended
	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
(in thousands)
Income tax expense/(benefit)	$	221	$	—	$	736	$	(1,005	)

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MARKET SECTORS AND MAJOR CUSTOMERS (Tables)

9 Months Ended

Jun. 28, 2019

Risks and Uncertainties [Abstract]

Schedules of Concentration of Risk, by Risk Factor

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Nine Months Ended
% of Sales by Sector	June 28, 2019	June 29, 2018	June 28, 2019	June 29, 2018
Aerospace & Defense	61%	60%	59%	62%
Medical	22%	22%	22%	21%
Industrial	17%	18%	19%	17%
	100%	100%	100%	100%

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CAPITAL LEASE (Tables)

9 Months Ended

Jun. 28, 2019

Leases [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ending June
2020	$	669
2021	683
2022	696
2023	711
2024 and thereafter	6,900
Total capital lease payments	9,659
Less: amounts representing interest	(2,556		)
Present value of minimum lease payment	$	7,103

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INCOME (LOSS) PER SHARE (Tables)

9 Months Ended

Jun. 28, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

A summary of shares used in the EPS calculations follows (in thousands except share and per share data):

	Three Months Ended				Nine Months Ended
Earnings Per Share	June 28, 2019		June 29, 2018		June 28, 2019		June 29, 2018
Basic net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Less: Income attributable to non-vested shares	10		2		25		13
Net income available to common stockholders	$	1,201	$	202	$	2,928	$	1,276
Weighted average common shares outstanding	10,332,548		10,243,286		10,294,173		10,221,869
Basic net income per share	$	0.12	$	0.02	$	0.28	$	0.12
Diluted net income per share:
Net income	$	1,211	$	204	$	2,953	$	1,289
Shares used in computing basic net income per share	10,332,548		10,243,286		10,294,173		10,221,869
Dilutive effect of non-vested shares	309,855		313,478		262,780		245,243
Shares used in computing diluted net income per share	10,642,403		10,556,764		10,556,953		10,467,112
Diluted net income per share	$	0.11	$	0.02	$	0.28	$	0.12

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details)	9 Months Ended
	Jun. 28, 2019
Land improvements [Member]
Estimated useful lives	10 years
Buildings and improvements [Member] | Minimum [Member]
Estimated useful lives	5 years
Buildings and improvements [Member] | Maximum [Member]
Estimated useful lives	40 years
Machinery and equipment [Member] | Minimum [Member]
Estimated useful lives	3 years
Machinery and equipment [Member] | Maximum [Member]
Estimated useful lives	5 years
Furniture and fixtures [Member] | Minimum [Member]
Estimated useful lives	3 years
Furniture and fixtures [Member] | Maximum [Member]
Estimated useful lives	7 years
Software and Software Development Costs [Member] | Minimum [Member]
Estimated useful lives	3 years
Software and Software Development Costs [Member] | Maximum [Member]
Estimated useful lives	10 years

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($)	9 Months Ended
	Jun. 28, 2019	Oct. 01, 2018	Sep. 30, 2018
Accounting Policies [Abstract]
Asset impairment charges	$ 0
Bank Overdrafts	$ 2,000,000		$ 2,600,000
Restricted stock vested, net of shares withheld for payment of taxes		$ 441,000
ASC 606
Restricted stock vested, net of shares withheld for payment of taxes		$ (400,000)

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REVENUE RECOGNITION - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Oct. 01, 2018
Disaggregation of Revenue [Line Items]
Impact of adoption of ASC 606, net of taxes			$ 441
Product Concentration Risk [Member] | Sales Revenue, Net [Member] | Value-added support services revenue, including material management and repair work revenue [Member]
Disaggregation of Revenue [Line Items]
Percentage of sales revenue	3.00%	5.00%
Point in Time | Product Concentration Risk [Member] | Sales Revenue, Net [Member]
Disaggregation of Revenue [Line Items]
Percentage of sales revenue	52.30%
Over Time | Product Concentration Risk [Member] | Sales Revenue, Net [Member]
Disaggregation of Revenue [Line Items]
Percentage of sales revenue	47.70%
ASC 606
Disaggregation of Revenue [Line Items]
Impact of adoption of ASC 606, net of taxes			$ (400)

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REVENUE RECOGNITION - Schedule of Net Sales from Contracts with Customers by Market Sector (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Disaggregation of Revenue [Line Items]
Net sales	$ 40,324	$ 29,782	$ 113,059	$ 82,706
Aerospace & Defense
Disaggregation of Revenue [Line Items]
Net sales	24,598		66,705
Medical
Disaggregation of Revenue [Line Items]
Net sales	8,871		24,873
Industrial
Disaggregation of Revenue [Line Items]
Net sales	6,855		21,481
Point in Time
Disaggregation of Revenue [Line Items]
Net sales	21,084		57,454
Point in Time | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Net sales	11,300		30,950
Point in Time | Medical
Disaggregation of Revenue [Line Items]
Net sales	5,127		12,441
Point in Time | Industrial
Disaggregation of Revenue [Line Items]
Net sales	4,657		14,063
Over Time
Disaggregation of Revenue [Line Items]
Net sales	19,240		55,605
Over Time | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Net sales	13,298		35,755
Over Time | Medical
Disaggregation of Revenue [Line Items]
Net sales	3,744		12,432
Over Time | Industrial
Disaggregation of Revenue [Line Items]
Net sales	$ 2,198		$ 7,418

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REVENUE RECOGNITION - Impact of Topic 606 on Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Sep. 30, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unbilled contract revenue	$ 7,305	$ 0
Inventories	44,889	34,126
Deferred income taxes	7,999	8,855
Accumulated deficit	(17,069)	$ (20,463)
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unbilled contract revenue	0
Inventories	51,086
Deferred income taxes	8,242
Accumulated deficit	(17,934)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ASC 606
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Unbilled contract revenue	7,305
Inventories	(6,197)
Accumulated deficit	$ 865

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REVENUE RECOGNITION - Impact of Topic 606 on Consolidated Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenues	$ 40,324	$ 29,782	$ 113,059	$ 82,706
Cost of sales	34,719	26,423	97,808	73,045
Gross profit	5,605	3,359	15,251	9,661
Income tax expense/(benefit)	221	0	736	(1,005)
Net income		$ 204	2,953	$ 1,289
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenues	39,062		110,087
Cost of sales	33,604		95,379
Gross profit	5,458		14,708
Income tax expense/(benefit)	189		617
Net income	1,096		2,529
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ASC 606
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenues	1,262		2,972
Cost of sales	1,115		2,429
Gross profit	147		543
Income tax expense/(benefit)	32		119
Net income	$ 115		$ 424

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details) - USD ($) $ in Thousands	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance, beginning of period	$ 85	$ 75
Change in provision for doubtful accounts	(30)	(42)
Write-offs	0	0
Allowance, end of period	$ 55	$ 33

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INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Sep. 30, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 28,737	$ 21,323
Work-in-process	12,793	11,263
Finished goods	3,359	1,540
Total inventories	$ 44,889	$ 34,126

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PROPERTY, PLANT & EQUIPMENT - Summary of Fixed Assets (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Sep. 30, 2018
Property, Plant and Equipment [Abstract]
Land and improvements	$ 788	$ 788
Buildings and improvements	7,397	7,314
Building under capital lease	7,750	7,750
Machinery and equipment	31,593	30,969
Furniture and fixtures	7,923	7,877
Capitalized Computer Software, Gross	5,215	0
Construction in progress	557	5,360
Total property, plant and equipment, at cost	61,223	60,058
Accumulated depreciation	(41,892)	(39,948)
Property, plant and equipment, net	$ 19,331	$ 20,110

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PROPERTY, PLANT & EQUIPMENT - Depreciation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 707	$ 567	$ 2,008	$ 1,729

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CREDIT FACILITIES - Summary of Borrowings (Details) - USD ($) $ in Thousands	9 Months Ended
	Jun. 28, 2019	Sep. 30, 2018	Sep. 30, 2017
Total debt, gross	$ 27,993	$ 17,451
Long-term Debt, Gross	28,255	17,740
Unamortized Debt Issuance Expense	(262)	(289)
Less: current portion	(1,371)	(1,449)
Long-term debt	$ 26,622	$ 16,002
Revolving Credit Facility [Member]
Maturity Date	May 05, 2022
Term Loan B [Member]
Fixed/Variable Rate	Variable Interest Rate
Maturity Date	May 05, 2022
Interest Rate	5.19%		5.3637%
Equipment Line Advances [Member]
Fixed/Variable Rate	Variable Interest Rate
Interest Rate	0.00%	5.56%
Equipment Line Advances Term Note [Member]
Fixed/Variable Rate	Variable Interest Rate
Interest Rate	5.2822%	5.56%
Equipment Line Advances Term Note [Member]
Total debt, gross	$ 1,254	$ 794
Equipment Line Advances [Member]
Total debt, gross	0	314
Term Loan B [Member]
Total debt, gross	$ 2,993	$ 3,636
Revolving Credit Facility [Member]
Fixed/Variable Rate	Variable Interest Rate
Maturity Date	May 05, 2022
Interest Rate	4.9375%	5.2605%
Total debt, gross	$ 24,008	$ 12,996

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CREDIT FACILITIES - Narrative (Details)							1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 18, 2019 USD ($)	Nov. 06, 2018 USD ($)	Sep. 27, 2018 USD ($)	Sep. 18, 2018 USD ($)	Jul. 26, 2018 USD ($)	Dec. 14, 2015	Jan. 31, 2013 USD ($)	Jun. 28, 2019 USD ($)	Jun. 29, 2018 USD ($)	Jun. 28, 2019 USD ($)	Jun. 29, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jan. 18, 2013 USD ($)
Line of Credit Facility [Line Items]
Maximum borrowing capacity								$ 27,000,000		$ 27,000,000
Advances from revolving credit facility										57,343,000	$ 47,402,000
Repayments of long-term debt								27,993,000		27,993,000		$ 17,451,000
Credit Agreement 2013 [Member] | Term Loan B [Member]
Line of Credit Facility [Line Items]
Long-term line of credit													$ 14,000,000
Repayment monthly installments							120 equal monthly installments
Line of credit facility, periodic payment, principal							$ 117,000			71,000
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid								600,000		600,000
Face amount								6,000,000		6,000,000			$ 8,000,000
Fifth Amendment [Member] | Term Loan B [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate						3.25%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity								27,000,000.0		$ 27,000,000.0
Maturity date										May 05, 2022
Repayments of long-term debt								$ 24,008,000		$ 24,008,000		12,996,000
Maximum borrowing capacity as percentage of eligible receivables								85.00%		85.00%
Maximum borrowing capacity based on eligible inventories								$ 14,000,000.0		$ 14,000,000.0
Current borrowing capacity								27,000,000.0		27,000,000.0		22,000,000.0
Line of Credit Facility, Remaining Borrowing Capacity								3,000,000		$ 3,000,000		9,000,000
Line of Credit Facility, Average Outstanding Amount								20,000,000	$ 11,800,000
Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Unused capacity, commitment fee percentage										0.25%
Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Unused capacity, commitment fee percentage										0.375%
Revolving Credit Facility [Member] | Credit Agreement 2013 [Member]
Line of Credit Facility [Line Items]
Average borrowing capacity								$ 27,000,000		$ 27,000,000
Commitment fee amount									$ 5,300		$ 16,500
Line of Credit Facility, Covenant, Minimum Fixed Charge Coverage Ratio								1.10		1.10
Revolving Credit Facility [Member] | Fifth Amendment [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate						3.00%
Equipment Line Advances [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity								$ 1,500,000		$ 1,500,000
Advances from revolving credit facility		$ 400,000		$ 300,000
Repayments of long-term debt								$ 0		$ 0		$ 314,000
Equipment Line Advances Term Note [Member]
Line of Credit Facility [Line Items]
Debt Conversion, Converted Instrument, Amount	$ 300,000		$ 100,000		$ 800,000
Debt instrument, periodic payment, principal	$ 9,000		$ 2,000		$ 21,000
Term Loan B [Member]
Line of Credit Facility [Line Items]
Maturity date										May 05, 2022

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CREDIT FACILITIES - Long-term Debt Maturities (Details) - USD ($) $ in Thousands		9 Months Ended
		Jun. 28, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
2019		$ 1,371
2020	[1]	1,371
2021		25,513
Total debt, net		$ 28,255	$ 17,740
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Maturity date		May 05, 2022

[1] Includes Revolver balance of $24.0 million at June 28, 2019. As more fully described in Note 14—Subsequent Events, effective as of July 8, 2019, the Company and M&T Bank entered into the Ninth Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Ninth Amendment”), that amended the Credit Facility, as amended.

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WARRANTY RESERVES (Details) - SEC Schedule, 12-09, Reserve, Warranty [Member] - USD ($) $ in Thousands	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
Warranty Reserve
Reserve, beginning of period	$ 173	$ 153
Provision	65	213
Warranty costs	(89)	(199)
Reserve, end of period	$ 149	$ 167

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STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	$ 100	$ 100	$ 400	$ 300
Shares available for issuance (in shares)	89,701		89,701
Number of options granted (in shares)			20,000	20,000
Compensation expense			$ 415	$ 347
Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period				3 years
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period				4 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period				5 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares, issuance term			10 years
Shares available for issuance (in shares)	776,775		776,775
2010 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award expiration period			7 years

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STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - USD ($)	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
Assumptions for Black-Scholes:
Risk-free interest rate	2.35%	2.31%
Expected term in years	5 years 6 months	5 years 6 months
Volatility	37.00%	38.00%
Expected annual dividends	$ 0	$ 0
Value of options granted:
Number of options granted (in shares)	20,000	20,000
Weighted average fair value per share (in dollars per share)	$ 2.33	$ 1.53
Fair value of options granted (000s)	$ 47,000	$ 31,000

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STOCK-BASED COMPENSATION - Summary of Stock Option Activity (Details) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 29, 2018 USD ($) $ / shares shares	Jun. 28, 2019 USD ($) $ / shares shares	Jun. 29, 2018 USD ($) $ / shares shares
Number of Options
Outstanding, beginning of period (in shares) | shares		737,145	743,045
Granted (in shares) | shares		20,000	20,000
Exercised (in shares) | shares	(1,400)	(34,000)	(1,400)
Forfeited (in shares) | shares		(24,250)	(90,000)
Expired (in shares) | shares		(5,750)	(10,500)
Outstanding, end of period (in shares) | shares	661,145	693,145	661,145
Wgtd. Avg. Exercise Price
Outstanding, beginning of period (in dollars per share) | $ / shares		$ 4.33	$ 4.27
Granted (in dollars per share) | $ / shares		6.12	4.00
Exercised (in dollars per share) | $ / shares		4.46	4.08
Forfeited (in dollars per share) | $ / shares		3.70	4.75
Expired (in dollars per share) | $ / shares		4.06	5.24
Outstanding, end of period (in dollars per share) | $ / shares	$ 4.18	$ 4.40	$ 4.18
For options expected to vest
Number expected to vest (in shares) | shares	653,922	685,354	653,922
Number expected to vest (in dollars per share) | $ / shares	$ 4.18	$ 4.39	$ 4.18
Weighted average remaining term, in years		3 years 5 months 9 days	3 years 8 months 12 days
Intrinsic value (000s) | $	$ 1,009	$ 1,306	$ 1,009
For exercisable options
Number exercisable (in shares) | shares	450,358	533,645	450,358
Number exercisable (in dollars per share) | $ / shares	$ 4.28	$ 4.18	$ 4.28
Weighted average remaining term, in years		2 years 8 months 1 day	3 years 5 months 1 day
Intrinsic value (000s) | $	$ 721	$ 1,132	$ 721
For non-exercisable options
Expense not yet recognized (000s) | $	$ 205	$ 232	$ 205
Weighted average years to be recognized		3 years 1 month 21 days	1 year 6 months
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value | $		$ 77	$ 2

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STOCK-BASED COMPENSATION - Changes in Non-Vested Options Outstanding (Details) - $ / shares	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
Number of Options
Granted (in shares)	20,000	20,000
Wgtd. Avg. Grant Date Fair Value
Granted (in dollars per share)	$ 2.33	$ 1.53

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STOCK-BASED COMPENSATION - Summary of Restricted Stock Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018
Number of Non-vested Shares [Roll Forward]
Vested (in shares)	(49,511)
Wgtd. Avg. Grant Date Fair Value [Roll Forward]
Granted (in dollars per share)	$ 7.09
Restricted Stock [Member]
Number of Non-vested Shares [Roll Forward]
Outstanding, beginning of period (in shares)	103,233	109,695
Granted (in shares)	32,385	44,878
Vested (in shares)		(39,300)
Forfeited (in shares)	(1,400)	(9,490)
Outstanding, end of period (in shares)	84,707	105,783
Wgtd. Avg. Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 4.08	$ 4.01
Granted (in dollars per share)		4.29
Vested (in dollars per share)		4.10
Forfeited (in dollars per share)	4.13	4.20
Outstanding, end of period (in dollars per share)	$ 5.23	$ 4.09
For non-vested shares
Expense not yet recognized (000s)	$ 365	$ 353
Weighted average remaining years for vesting	2 years 2 months 5 days	1 year 10 months 10 days
For shares vested
Aggregate fair value on vesting dates (000s)	$ 333	$ 173

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STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION - Schedule of Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Sep. 30, 2018	Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	20,000	20,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 7.09
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	(49,511)
Restricted Stock Units (RSUs) [Member] | Vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	221,245	219,522	170,492	267,999
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 4.81	$ 4.11	$ 3.96	$ 4.03
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	63,011	102,864
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 7.09	$ 4.28
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	(12,258)	0
Vested (in dollars per share)	$ 4.64	$ 0.00
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value	$ 0.00	$ 4.08
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	0	(151,341)
Restricted Stock Units (RSUs) [Member] | Non-vested [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expense not yet recognized (000s)	$ 573	$ 371
Weighted average remaining years for vesting	2 years 4 months 10 days	2 years 6 months

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INCOME TAXES - Tax Provision/Benefit (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Income Tax Disclosure [Abstract]
Income tax expense/(benefit)	$ 221	$ 0	$ 736	$ (1,005)

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INCOME TAXES - Narrative (Details)	3 Months Ended
	Jun. 28, 2019
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Percent	1.58%

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MARKET SECTORS AND MAJOR CUSTOMERS - Summary of Sales (Details) - Sales Revenue, Segment [Member]	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Concentration Risk [Line Items]
Percentage of sales revenue	100.00%	100.00%	100.00%	100.00%
Aerospace & Defense
Concentration Risk [Line Items]
Percentage of sales revenue	61.00%	60.00%	59.00%	62.00%
Medical
Concentration Risk [Line Items]
Percentage of sales revenue	22.00%	22.00%	22.00%	21.00%
Industrial
Concentration Risk [Line Items]
Percentage of sales revenue	17.00%	18.00%	19.00%	17.00%

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MARKET SECTORS AND MAJOR CUSTOMERS - Narrative (Details) - customer	3 Months Ended		9 Months Ended
	Jun. 28, 2019	Jun. 29, 2018	Jun. 28, 2019	Jun. 29, 2018
Concentration Risk [Line Items]
Concentration risk, number of customers	1	2	1	2
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk, number of customers			1	3
Concentration risk, percentage			26.00%	55.00%
Customer Number Two [Member] | Customer Concentration Risk [Member] | Sales [Member] | Aerospace and Defense [Member]
Concentration Risk [Line Items]
Concentration risk, number of customers				1
Customer Number Two [Member] | Customer Concentration Risk [Member] | Sales [Member] | Medical
Concentration Risk [Line Items]
Concentration risk, number of customers		1
Concentration risk, percentage		11.00%
Customer Number Three [Domain] | Customer Concentration Risk [Member] | Sales [Member] | Medical
Concentration Risk [Line Items]
Concentration risk, number of customers				1
Concentration risk, percentage				11.00%
Customer Number One [Member] | Customer Concentration Risk [Member] | Sales [Member] | Aerospace and Defense [Member]
Concentration Risk [Line Items]
Concentration risk, number of customers		1
Concentration risk, percentage	24.00%	25.00%	22.00%	23.00%

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CAPITAL LEASE - Narrative (Details) - USD ($) $ in Thousands	Jun. 28, 2019	Sep. 30, 2018
Leases [Abstract]
Value of assets acquired under the lease	$ 7,750	$ 7,750

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CAPITAL LEASE - Summary of Future Minimum Payments on Capital Leases (Details) $ in Thousands	Jun. 28, 2019 USD ($)
Leases [Abstract]
2019	$ 669
2020	683
2021	696
2022	711
2023 and thereafter	6,900
Total capital lease payments	9,659
Less: amounts representing interest	(2,556)
Present value of minimum lease payment	$ 7,103

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INCOME (LOSS) PER SHARE Earnings Per Share - Summary of Shares Used in EPS Calculation (Details) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Jun. 28, 2019 USD ($) $ / shares shares	Mar. 29, 2019 USD ($)	Dec. 28, 2018 USD ($)	Jun. 29, 2018 USD ($) $ / shares shares	Mar. 30, 2018 USD ($)	Dec. 29, 2017 USD ($)	Jun. 28, 2019 USD ($) $ / shares shares	Jun. 29, 2018 USD ($) $ / shares shares
Earnings Per Share [Abstract]
Common stock, number of classes	2						2
Basic net income per share:
Net income | $	$ 1,211	$ 670	$ 1,072	$ 204	$ 1,579	$ (494)	$ 2,953	$ 1,289
Less: Income attributable to non-vested shares | $	10			2			25	13
Net income available to common stockholders | $	$ 1,201			$ 202			$ 2,928	$ 1,276
Basic (in shares)	10,332,548			10,243,286			10,294,173	10,221,869
Basic net income (loss) per share (in usd per share) | $ / shares	$ 0.12			$ 0.02			$ 0.28	$ 0.12
Diluted net income per share:
Net income | $				$ 204			$ 2,953	$ 1,289
Shares used in computing basic net income (loss) per share(in shares)	10,332,548			10,243,286			10,294,173	10,221,869
Dilutive effect of non-vested shares	309,855			313,478			262,780	245,243
Shares used in computing diluted net income per share	10,642,403			10,556,764			10,556,953	10,467,112
Diluted net income (loss) per share (in usd per share) | $ / shares	$ 0.11			$ 0.02			$ 0.28	$ 0.12
Anti-dilutive shares excluded (in shares)	52,523			39,335			39,872	171,791

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SUBSEQUENT EVENTS (Details)	Jun. 28, 2019 USD ($)
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 27,000,000
Revolving Credit Facility [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity	$ 27,000,000.0
Maximum borrowing capacity as percentage of eligible receivables	85.00%
Maximum borrowing capacity based on eligible inventories	$ 14,000,000.0

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Label	Element	Value
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 441,000