STOCK-BASED COMPENSATION

12 Months Ended

Sep. 30, 2011

STOCK-BASED COMPENSATION

NOTE 10.  STOCK-BASED COMPENSATION

Under IEC's 2001 Stock Option and Incentive Plan, as amended from time to time, officers, key employees, directors and other individuals may be granted stock options, restricted (non-vested) stock and other types of equity awards.  The plan, which expires in December 2011, was approved by shareholders in February 2002.  Up to 3,100,000 common shares were authorized for issuance under the plan, and 209,869 and 458,606 shares remained available for grant at September 30, 2011 and 2010, respectively.

At the January 2011 Annual Meeting of Shareholders, a new plan entitled the 2010 Omnibus Incentive Compensation Plan was voted on and approved by our shareholders.   The plan, which will be administered by the Compensation Committee of the Board of Directors, provides for grant of 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.  Over a term of ten (10) years, up to 2,000,000 common shares may be issued.  Through September 30, 2011, no awards have been made under the 2010 Plan.

The Compensation Committee intends to continue making awards under the 2001 Plan for the remainder of its term, as long as shares remain available for grant.  Stock compensation expense recorded under the plans totaled $489 thousand in 2011 and $282 thousand in 2010, and related tax benefits were approximately $135 thousand and $45 thousand in the two years, respectively.  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 stock options and restricted shares under the 2001 Plan 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 plan is generally seven years.  A summary follows of assumptions used in the Black-Scholes model and the estimated value of options granted during the two most recent fiscal years.

	Years ended September 30,
Valuation of Options	2011			2010
Assumptions for Black-Scholes:
Risk-free interest rate		1.40	%		2.16	%
Expected term in years		4.8			4.9
Volatility		54	%		54	%
Expected annual dividends	none			none
Value of options granted:
Number of options granted		78,000			128,682
Weighted average fair value/share	$	2.80		$	2.24
Fair value of options granted (000's)	$	218		$	288

Changes in the number of options outstanding during the years ended September 30, 2011 and 2010, together with other related data, are summarized below.

	Years ended September 30,
	2011				2010
				Wgtd Avg.				Wgtd Avg.
	Number			Exercise	Number			Exercise
Stock Options	of Options			Price	of Options			Price
Outstanding at beginning of period		764,595		$1.66		973,722		$1.10
Granted		78,000		6.01		128,682		4.69
Exercised		(447,256	)	0.82		(231,467	)	0.85
Forfeited		(24,000	)	5.76		(106,342	)	2.02
Outstanding at end of period		371,339		$3.32		764,595		$1.66
For options expected to vest
Number expected to vest		371,339		$3.32		764,595		$1.66
Wgtd. avg. remaining term, in years		4.4				2.7
Excess of fair value at period end over cost of exercising (000s)				$654				$2,753
For exercisable options at period end
Number exercisable		133,833		$1.54		474,868		$0.80
Wgtd. avg. remaining term, in years		1.5				1.7
Excess of fair value at period end over cost of exercising (000s)				$474				$2,118
For non-exercisable options at period end
Expense not yet recognized (000s)				$328				$296
Wgtd. avg. years to become exercisable				1.9				1.9
For options exercised
Excess of fair value on dates of exercise over cost (000s)				$3,170				$928

Restricted (Non-vested) Stock

Holders of IEC restricted stock have voting and dividend rights as of the date of grant, but 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 years, holders have all the rights and privileges of any other IEC common shareholder.  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, balances and related data for the years ended September 30, 2011 and 2010 is presented below.

	Years ended September 30,
	2011				2010
	Number of			Wgtd Avg.	Number of			Wgtd Avg.
	Non-vested			Grant Date	Non-vested			Grant Date
Restricted (Non-vested) Stock	Shares			Fair Value	Shares			Fair Value
Outstanding at beginning of period		122,098		$4.10		37,000		$2.45
Granted		184,958		6.73		145,351		4.04
Becoming vested		(19,580	)	4.15		(27,000	)	2.10
Forfeited		(3,000	)	8.70		(33,253	)	3.63
Outstanding at end of period		284,476		$5.76		122,098		$4.10
For non-vested shares at period end
Expense not yet recognized (000s)				$1,248				$395
Wgtd. average remaining years for vesting				2.1				2.2
For shares becoming vested
Aggregate fair value on vesting dates (000s)				$135				$130