IEC ELECTRONICS CORP (Form: 10-Q, Received: 08/05/2015 10:25:49)

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 26, 2015

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

For the transition period from ____ to ____

Commission File Number 0-6508

IEC ELECTRONICS CORP.

(Exact name of registrant as specified in its charter)



Delaware		13-3458955
(State or other jurisdiction of		(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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

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



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

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 – 10,188,308 shares as of July 31, 2015

TABLE OF CONTENTS



Part I	FINANCIAL INFORMATION	3
Item 1.	Condensed Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
Part II	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
SIGNATURES		41
INDEX TO EXHIBITS		42

Part I FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 26, 2015 and SEPTEMBER 30, 2014

(in thousands, except share and per share data)



	June 26, 2015			September 30, 2014
	(unaudited)			(restated)
ASSETS
Current assets:
Cash	$	290		$	1,980
Accounts receivable, net of allowance	21,024			22,347
Inventories, net	27,434			22,526
Other current assets	1,952			3,597
Total current assets	50,700			50,450

Fixed assets, net	16,956			17,850
Intangible assets, net	144			2,392
Goodwill	101			2,005
Other long term assets	161			299

Total assets	$	68,062		$	72,996

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	14,148		$	2,908
Accounts payable	17,695			17,732
Accrued payroll and related expenses	2,177			3,203
Other accrued expenses	1,075			1,008
Customer deposits	5,070			1,553
Total current liabilities	40,165			26,404

Long-term debt	18,867			28,479
Other long-term liabilities	584			708
Total liabilities	59,616			55,591

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: 11,207,612 and 11,146,571 shares, respectively
Outstanding: 10,187,808 and 10,126,767 shares, respectively	112			111
Additional paid-in capital	45,765			44,302
Retained earnings/(accumulated deficit)	(35,902		)	(25,554		)
Treasury stock, at cost: 1,019,804 shares	(1,529		)	(1,454		)
Total stockholders' equity	8,446			17,405

Total liabilities and stockholders' equity	$	68,062		$	72,996

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

NINE MONTHS ENDED JUNE 26, 2015 and JUNE 27, 2014

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



	Three Months Ended						Nine Months Ended
	June 26, 2015			June 27, 2014			June 26, 2015			June 27, 2014
				(restated)						(restated)
Net sales	$	34,444		$	32,992		$	98,276		$	99,934
Cost of sales	29,741			29,197			87,757			88,118
Gross profit	4,703			3,795			10,519			11,816

Selling and administrative expenses	4,049			3,195			14,346			10,938
Impairment of goodwill and other intangibles	4,057			—			4,057			—
Restatement and related expenses	298			102			948			2,516
Operating profit/(loss)	(3,701		)	498			(8,832		)	(1,638		)

Interest and financing expense	316			558			1,516			1,410
Other expense/(income)	—			—			—			18
Income/(loss) before income taxes	(4,017		)	(60		)	(10,348		)	(3,066		)

Provision for/(benefit from) income taxes	—			—			—			13,039
Net income/(loss)	$	(4,017	)	$	(60	)	$	(10,348	)	$	(16,105	)

Net income/(loss) per common and common equivalent share:
Basic	$	(0.39	)	$	(0.01	)	$	(1.03	)	$	(1.64	)
Diluted	(0.39		)	(0.01		)	(1.03		)	(1.64		)

Weighted average number of common and common equivalent shares outstanding:
Basic	10,199,431			9,838,872			10,049,395			9,816,974
Diluted	10,199,431			9,838,872			10,049,395			9,816,974

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY

NINE MONTHS ENDED JUNE 26, 2015 and JUNE 27, 2014

(unaudited; in thousands)



	Common Stock, par $0.01		Additional Paid-In Capital			Retained Earnings/ (Accumulated Deficit)			Treasury Stock, at cost			Total Stockholders' Equity
						(restated)
Balances, September 30, 2013	$	110	$	43,802		$	(10,483	)	$	(1,435	)	$	31,994

Net loss	—		—			(16,105		)	—			(16,105		)
Stock-based compensation	—		378			—			—			378
Restricted (non-vested) stock grants, net of forfeitures	1		(1		)	—			—			—
Exercise of stock options	—		32			—			(15		)	17
Shares withheld for payment of taxes upon vesting of restricted stock	—		(79		)	—			—			(79		)

Balances, June 27, 2014, restated	$	111	$	44,132		$	(26,588	)	$	(1,450	)	$	16,205



	Common Stock, par $0.01			Additional Paid-In Capital			Retained Earnings/ (Accumulated Deficit)			Treasury Stock, at cost			Total Stockholders' Equity

Balances, September 30, 2014, restated	$	111		$	44,302		$	(25,554	)	$	(1,454	)	$	17,405

Net loss	—			—			(10,348		)	—			(10,348		)
Stock-based compensation	—			1,990			—			—			1,990
Restricted (non-vested) stock grants, net of forfeitures	2			(2		)	—			—			—
Exercise of stock options	—			78			—			(75		)	3
Shares withheld for payment of taxes upon vesting of restricted stock	(1		)	(603		)	—			—			(604		)

Balances, June 26, 2015	$	112		$	45,765		$	(35,902	)	$	(1,529	)	$	8,446

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS

NINE MONTHS ENDED JUNE 26, 2015 and JUNE 27, 2014

(unaudited; in thousands)



	Nine Months Ended
	June 26, 2015			June 27, 2014
				(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	(10,348	)	$	(16,105	)
Non-cash adjustments:
Stock-based compensation	1,990			378
Depreciation and amortization	3,488			3,625
Impairment of goodwill & other intangibles	4,057			—
Reserve for doubtful accounts	(87		)	220
Deferred tax expense/benefit	—			13,034
Changes in assets and liabilities:
Accounts receivable	1,410			4,480
Inventory	(4,908		)	1,195
Other current assets	947			(1,497		)
Other long term assets	130			81
Accounts payable	(59		)	(2,634		)
Accrued expenses	(959		)	541
Customer deposits	3,517			741
Other long term liabilities	(124		)	(14		)
Net cash flows from operating activities	(946		)	4,045

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(2,469		)	(3,806		)
Grant proceeds from outside parties	698			—
Proceeds from (net cost of) disposal of fixed assets	—			323
Net cash flows from investing activities	(1,771		)	(3,483		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from revolving line of credit	49,578			43,513
Repayments of revolving line of credit	(45,769		)	(44,971		)
Borrowings under other loan agreements	—			1,300
Repayments under other loan agreements	(2,181		)	(2,160		)
Debt issuance costs	—			(2		)
Proceeds from exercise of stock options	3			17
Shares withheld for payment of taxes upon vesting of restricted stock	(604		)	(79		)
Net cash flows from financing activities	1,027			(2,382		)

Net increase/(decrease) in cash and cash equivalents	(1,690		)	(1,820		)
Cash and cash equivalents, beginning of period	1,980			2,499
Cash and cash equivalents, end of period	$	290		$	679

Supplemental cash flow information:
Interest paid	$	1,184		$	1,177
Income taxes paid	—			12

Non-cash transactions
Fixed assets purchased with extended payment terms	22			466

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. ("IEC", "we", "our", “us”, “Company”) is a provider of electronic contract manufacturing services (“EMS”) to companies in various industries that require advanced technology. We specialize in the custom manufacture of high reliability, complex circuit boards and system-level assemblies; a wide array of cable and wire harness assemblies capable of withstanding extreme environments; and precision metal components.

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 end generally on the Friday closest to the last day of the calendar quarter.

Consolidation

The consolidated financial statements include the accounts of IEC and its wholly owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”); IEC Electronics Corp-Albuquerque ("Albuquerque"); Dynamic Research and Testing Laboratories, LLC (“DRTL”); and Southern California Braiding, Inc. (“SCB”). The Celmet unit ("Celmet") operates as a division of IEC. All significant intercompany transactions and accounts are eliminated in consolidation.

Unaudited Financial Statements

The accompanying unaudited financial statements for the nine months ended June 26, 2015 and June 27, 2014 have been prepared in accordance with GAAP for interim financial information. In the opinion of management, all adjustments required for a fair presentation of the information have been made. The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K/A for the fiscal year ended September 30, 2014 .

Cash and Cash Equivalents

The Company's cash and cash equivalents principally represent deposit accounts with Manufacturers and Traders Trust Company ("M&T Bank" and "M&T"), a banking corporation headquartered in Buffalo, NY.

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 likelihood of collection is remote.

Inventory Valuation

Inventories are stated at the lower of cost or market 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 lower of cost or market.

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

Intangible Assets

Intangible assets (other than goodwill) are those that lack physical substance and are not financial assets. Such assets held by IEC were acquired in connection with business combinations and represent economic benefits associated with acquired customer relationships, a non-compete agreement, and a property tax abatement. Values assigned to individual intangible assets are amortized using the straight-line method over their estimated useful lives.

Reviewing Long-Lived Assets for Potential Impairment

The Company tests long-lived assets (PP&E and definitive-lived assets) for recoverability whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying value of an asset exceeds the 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.

Goodwill

Goodwill represents the excess of cost over fair value of net assets acquired in a business combination. Historically, most of IEC's recorded goodwill related to SCB, which was acquired in December 2010. A lesser portion relates to Celmet, which was acquired in July 2010.

Goodwill is not amortized but is reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. The Company performs its annual impairment test for SCB goodwill during the third quarter. The Company may elect to precede a quantitative review for impairment with a qualitative assessment of the likelihood that fair value of a particular reporting unit exceeds carrying value. If the qualitative assessment leads to a conclusion that it is more than 50 percent likely that fair value of the reporting units exceeds its carrying value, then no further testing is required. In the event of a less favorable outcome, the Company is required to proceed with quantitative testing.

The quantitative process entails comparing the overall fair value of the unit to which goodwill relates to its carrying value. If the fair value of the unit exceeds its carrying value, no further assessment of potential impairment is required. If the fair value of the unit is less than its carrying value, a valuation of the unit's individual assets and liabilities is required to determine whether or not goodwill is impaired. Goodwill impairment losses are charged to earnings.

Legal Contingencies

When legal proceedings are brought or claims are made against us and the outcome is uncertain, ASC 450-10 (Contingencies) requires that we 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 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.

Grants from Outside Parties

Grants from outside parties are recorded as other long-term liabilities and are amortized over the same period during which the associated fixed assets are depreciated.

Derivative Financial Instruments

The Company actively monitors its exposure to interest rate risk and from time to time uses derivative financial instruments to manage the impact of this risk. The Company uses derivatives only for purposes 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 derivative instruments where it does not have underlying exposures. The Company manages its hedging position and monitors the credit ratings of counterparties and does not anticipate losses due to counterparty nonperformance. Management believes its use of derivative instruments to manage risk is in the Company’s best interest. However, the Company’s use of derivative financial instruments may result in short-term gains or losses and increased earnings volatility. The Company’s instruments are recorded in the consolidated balance sheets at fair value in other assets or other long-term liabilities.

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, borrowings and an interest rate swap agreement. IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable and accrued liabilities.

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 the first nine months of fiscal 2015 or fiscal 2014 .

Revenue Recognition

The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work. Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. 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 5% of total revenue in the first nine months of fiscal 2015 or fiscal 2014 .

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

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 a discounted stock purchase price. Compensation expense related to the discount is recognized as employees contribute to the plan. On May 21, 2013, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the Prior Restatement further discussed below (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC until the Company filed its Form 10-K on December 24, 2013). Operation of the ESPP was resumed effective October 1, 2014. On February 13, 2015, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the 2014 Restatements described in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC).

Restatement and Related Expenses

The Company restated its consolidated financial statements for the fiscal year ended September 30, 2012, and the interim fiscal quarters and year to date periods within the year ended September 30, 2012, included in the Company’s Annual Report on Form10-K/A and the fiscal quarter ended December 28, 2012, as reported in the Company’s Quarterly Report on Form 10-Q/A for that fiscal quarter (the "Prior Restatement"). The Company also restated its consolidated financial statements for the fiscal year ended September 30, 2014 and its interim financial statements for each quarterly period within the year ended September 30, 2014, included in the Company's Annual Report on Form 10-K/A to correct an error in the valuation allowance on deferred income tax assets as well as an error in the estimate of excess and obsolete inventory reserves (the "2014 Restatements"). The Prior Restatement and the 2014 Restatements together are referred to as the "Restatements".

Restatement and related expenses represents third-party expenses arising from the Restatements. These expenses include legal and accounting fees incurred by the Company from external counsel and independent accountants directly attributable to the Restatements as well as other matters arising from the Prior Restatement including those more fully described in Note 17—Litigation . The Company receives insurance reimbursement for certain expenses related to the Prior Restatement which may result in a benefit in a given period.

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 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 or penalties incurred are reported as interest expense. The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are fiscal 2010 through fiscal 2014. The federal income tax audit for fiscal 2011 concluded in fiscal 2013 and did not have a material impact on the financial statements.

Earnings Per Share

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 restricted (non-vested) stock, and anticipated issuance through the employee stock purchase plan. Options and restricted stock are primarily held by directors, officers and certain employees. A summary of shares used in earnings per share (“EPS”) calculations follows.



	Three Months Ended		Nine Months Ended
Shares for EPS Calculation	June 26, 2015	June 27, 2014	June 26, 2015	June 27, 2014

Weighted average shares outstanding	10,199,431	9,838,872	10,049,395	9,816,974
Incremental shares	—	—	—	—
Diluted shares	10,199,431	9,838,872	10,049,395	9,816,974

Anti-dilutive shares excluded	734,605	504,738	734,605	504,738

As a result of the net loss for the three and nine months ended June 26, 2015 and June 27, 2014 , the Company calculated diluted earnings per share using weighted average basic shares outstanding, as using diluted shares would be anti-dilutive to loss per share.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“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. 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.

Recently Issued Accounting Standards

FASB ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force),” was issued July 2013 and is effective for fiscal years beginning after December 15, 2013. ASU 2013-11 provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. The Company adopted this ASU in the first quarter of fiscal 2015 and there was no impact upon adoption.

FASB ASU 2014-09, "Revenue from Contracts with Customers," was issued May 2014 and updates the principles for recognizing revenue. The ASU will supersede most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. This ASU also amends the required disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that period. Early adoption is permitted for annual periods beginning after December 15, 2016. The Company is determining its implementation approach and evaluating the potential impacts of the new standard on its existing revenue recognition policies and procedures.

FASB ASU 2014-12, "Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period," was issued June 2014. This guidance was issued to resolve diversity in accounting for performance targets. A performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition and should not be reflected in the award’s grant date fair value. Compensation cost should be recognized over the required service period, if it is probable that the performance condition will be achieved. The guidance is

effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. The Company does not anticipate a significant impact upon adoption.

FASB ASU 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which was issued September 2014. This provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not anticipate a significant impact upon adoption.

FASB ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs” was issued in April 2015. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU applies to all entities and is effective for public business entities for annual periods ending after December 15, 2015, and interim periods thereafter, with early adoption permitted. The guidance should be applied on a retrospective basis. The Company does not anticipate a significant impact upon adoption.

FASB ASU 2015-11, "Simplifying the Measurement of Inventory" was issued on July 22, 2015. This requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. For public business entities, the ASU is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Upon transition, entities must disclose the nature of and reason for the accounting change. The Company does not anticipate a significant impact upon adoption.

NOTE 2—RESTATEMENT OF DEFERRED TAX ASSET VALUATION ALLOWANCE AND EXCESS AND OBSOLETE INVENTORY RESERVE

The Consolidated Balance Sheet at September 30, 2014 and Consolidated Statements of Income, Changes in Stockholders’ Equity and Cash Flows for the year then ended and the fiscal quarters ended December 27, 2013, March 28, 2014 and June 27, 2014 have been restated.

The summary impacts of the restatement adjustments on the Company’s previously reported consolidated net loss for the three and nine months ended June 27, 2014 follows:



	Three Months Ended			Nine Months Ended
	June 27, 2014			June 27, 2014
(in thousands)
Net income/(loss) - Previously reported	$	22		$	(1,646	)
Deferred tax asset valuation allowance adjustment	3			(14,016		)
Excess and obsolete inventory reserve adjustment	(85		)	(443		)
Net income/(loss) - Restated	$	(60	)	$	(16,105	)

The impacts of the restatement adjustments on the Company’s previously reported consolidated income statement for the three and nine months ended June 27, 2014 follows:



	Three Months Ended								Nine Months Ended
	June 27, 2014								June 27, 2014
	As Reported		Adjustment			Restated			As Reported			Adjustment			Restated
(in thousands, except per share data)
Cost of sales	$	29,112	$	85		$	29,197		$	87,675		$	443		$	88,118
Gross profit	3,880		(85		)	3,795			12,259			(443		)	11,816
Operating profit /(loss)	583		(85		)	498			(1,195		)	(443		)	(1,638		)
Income/(loss) before income taxes	25		(85		)	(60		)	(2,623		)	(443		)	(3,066		)
Provision for /(benefit from) income taxes	3		(3		)	—			(977		)	14,016			13,039
Net income /(loss)	22		(82		)	(60		)	(1,646		)	(14,459		)	(16,105		)
Net income /(loss) per share	$	—	$	(0.01	)	$	(0.01	)	$	(0.17	)	$	(1.47	)	$	(1.64	)

While closing the first quarter of fiscal 2015, the Company revisited its assessment of realizability of deferred tax assets and identified an error in interpretation of the guidance for the valuation allowance on deferred tax assets.

The Company performed a realizability assessment for the fourth quarter of fiscal 2014 and came to the conclusion that there was no additional valuation allowance required on federal deferred tax assets; however, due to a change in New York State tax laws which reduces the State tax rate for qualified manufacturers to 0% for IEC's fiscal year ended September 30, 2015, the valuation allowance was increased by $1.1 million to fully reserve for New York State deferred tax assets.

This conclusion regarding federal deferred tax assets at the time of the fourth quarter of fiscal 2014 assessment was based on the Company's evaluation of the negative and positive evidence available at that time. The Company's cumulative loss in recent years was considered; however, the Company determined that the goodwill and intangibles impairment charge taken in the fourth quarter of fiscal 2013 should be excluded when weighing the evidence. Positive evidence included taxable income each year beginning in 2004 through 2013, forecasted results and backlog. At the time of our Original 2014 Form 10-K filing, there was forecasted pre-tax income for fiscal 2015 and earnings growth was forecasted in subsequent years. The Company's Federal net operating losses ("NOLs") do not begin to expire until 2022. As aggregate future taxable income was expected to exceed Federal NOLs, it was concluded that realizability of these was more likely than not. In addition, future taxable income was expected to exceed the amount of Federal NOLs and deferred tax assets expected to reverse in future years combined. As such, there was no additional valuation allowance recorded for federal deferred tax assets.

During the process of closing the first quarter of fiscal 2015, the Company revisited its determination regarding the valuation of its deferred tax assets. After consulting applicable accounting guidance and interpretations thereof, the Company determined that the impairment charge should not have been excluded from the cumulative loss calculation. Once a cumulative three year loss is identified, it is very difficult to overcome this negative evidence. IEC did not believe there was enough positive evidence to outweigh the cumulative three year loss. Based on this interpretation, the Company recorded a full valuation allowance beginning in the second quarter of fiscal 2014, which is when the Company first accumulated a three year loss. As such, an error in the valuation allowance on deferred income tax assets was identified resulting in an understatement of tax expense and overstatement of deferred tax assets. The Company determined this error was material and required restatement of its consolidated financial statements for fiscal 2014 as well as the second, third and fourth quarters of fiscal 2014.

The Company also performed additional analysis related to its excess and obsolete inventory reserves. This analysis identified an error in the Albuquerque and SCB operating locations. The Company discovered that not all pertinent information was factored into the excess and obsolete inventory reserve estimates during fiscal 2014.

During fiscal 2014, given the time that had passed since SCB was acquired in December 2010, the Company should have factored in the age of SCB's inventory and its demand when estimating its excess and obsolete inventory reserve. Instead, the Company employed an approach that factored in the usage of the inventory since the SCB acquisition date and estimated a general reserve for remaining inventory. The restated excess and obsolete inventory reserve for SCB is based on an analysis that appropriately incorporates the age of SCB's inventory and its demand and involves the review of specific inventory items with a large extended value. This additional analysis was performed consistently for all items, regardless of whether they were purchased before or after the date the Company acquired SCB.

The Albuquerque excess and obsolete inventory reserve as originally reported did not take into consideration facts and circumstances related to certain customer programs. The Company's methodology was applied consistently, however, the rigor

around the analysis of excess inventory did not take into account certain customer information that was available at the time. As a result, the Company concluded the inventory on hand for these customer programs was not adequately reserved for.

NOTE 3—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary follows of activity in the allowance for doubtful accounts during the nine months ended June 26, 2015 and June 27, 2014 .



	Nine Months Ended
Allowance for Doubtful Accounts	June 26, 2015			June 27, 2014
(in thousands)
Allowance, beginning of period	$	525		$	452
Provision for doubtful accounts	(23		)	257
Write-offs	(64		)	(37		)
Allowance, end of period	$	438		$	672

NOTE 4—INVENTORIES

A summary of inventory by category at period end follows:



Inventories	June 26, 2015			September 30, 2014
(in thousands)				(restated)
Raw materials	$	21,147		$	16,769
Work-in-process	8,163			7,906
Finished goods	2,149			757
Total inventories	31,459			25,432
Reserve for excess/obsolete inventory	(4,025		)	(2,906		)
Inventories, net	$	27,434		$	22,526

The Company has restated its excess and obsolete inventory reserve for the fiscal year ended September 30, 2014 and interim quarterly periods during the fiscal year then ended. The restatement is further discussed in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve .

NOTE 5—FIXED ASSETS

A summary of fixed assets and accumulated depreciation at period end follows:



Fixed Assets	June 26, 2015			September 30, 2014
(in thousands)
Land and improvements	$	1,601		$	1,601
Buildings and improvements	14,008			13,452
Leasehold improvements	1,487			1,458
Machinery and equipment	27,967			26,996
Furniture and fixtures	7,571			7,207
Construction in progress	952			381
Total fixed assets, at cost	53,586			51,095
Accumulated depreciation	(36,534		)	(33,245		)
Accumulated impairment - building and improvements	$	(96	)	$	—
Fixed assets, net	$	16,956		$	17,850

Depreciation expense during the three and nine months ended June 26, 2015 and June 27, 2014 follows:



	Three Months Ended				Nine Months Ended
	June 26, 2015		June 27, 2014		June 26, 2015		June 27, 2014
(in thousands)
Depreciation expense	$	1,049	$	1,141	$	3,289	$	3,406

During the third quarter of fiscal 2015, the Company received an offer to purchase substantially all the assets and assume certain liabilities of the SCB reporting unit for approximately $2.5 million. At June 26, 2015 , the Company was actively considering options regarding SCB which included rehabilitating, selling or shutting down operations. The Company's SCB assets did not meet the criteria to be deemed held for sale as of the end of the third quarter as there was not an approved plan to sell such assets. However, the willingness to accept the offer is considered to be an indication of fair value and as such, an impairment charge of $0.1 million was taken to adjust the reporting unit's fixed assets to fair value. Further information regarding the agreement to sell certain assets and liabilities of the SCB reporting unit (the "Asset Purchase Agreement") is disclosed in Note 19—Subsequent Events .

NOTE 6—INTANGIBLE ASSETS

IEC's intangible assets (other than goodwill) were acquired in connection with purchases of SCB in the first quarter of fiscal 2011 and Albuquerque in fiscal 2010.

Among SCB’s key attributes as an acquisition candidate were the relationships established with a number of military and defense contractors. The anticipated profitability of those relationships was considered by IEC in arriving at an amount to offer for SCB and also became the basis for allocating a portion of the purchase price to a related customer relationship intangible asset. Based upon several key assumptions and a detailed analysis of value, $5.9 million was allocated to this intangible asset. The asset was being amortized over its 15 -year estimated useful life, using the straight-line method.

The Company recorded an impairment of the customer relationship intangible asset of $2.4 million in the fourth quarter of fiscal 2013 and a further impairment charge of $2.0 million in the third quarter of fiscal 2015.

In connection with the SCB acquisition, IEC also allocated $100 thousand to an intangible asset representing the estimated value of a five -year, non-compete agreement entered into with SCB’s selling shareholders. This intangible asset was being amortized evenly over its contractual life, however the remaining balance was impaired in the third quarter of fiscal 2015.

During the third quarter of fiscal 2015, the Company received an offer to purchase substantially all the assets and assume certain liabilities of SCB for approximately $2.5 million . At June 26, 2015 , the Company was actively considering options regarding SCB which included rehabilitating, selling or shutting down operations. The Company's SCB assets did not meet the criteria to be deemed held for sale as of the end of the third quarter as there was not an approved plan to sell such assets. However, the Company's willingness to accept the offer is considered to be an indication of fair value and as such, impairment charges were taken to adjust SCB's assets to fair value. Further information regarding the agreement to sell certain assets and liabilities of SCB (the "Asset Purchase Agreement") is disclosed in Note 19—Subsequent Events .

As for Albuquerque, its building and land were acquired subject to an Industrial Revenue Bond (“IRB”) that exempts the property from real estate taxes for the term of the IRB. The tax abatement was valued at $360 thousand at the date of acquisition, and such value is being amortized over the 9.2 year exemption period that remained as of the acquisition date. No impairment has been taken for this asset since the Albuquerque acquisition.

A summary of intangible assets by category and accumulated amortization at period end follows:



Intangible Assets	June 26, 2015			September 30, 2014
(in thousands)
Customer relationships - SCB	$	5,900		$	5,900
Property tax abatement - Albuquerque	360			360
Non-compete agreement - SCB	100			100
Total intangibles	6,360			6,360
Accumulated amortization	(1,747		)	(1,556		)
Accumulated impairment - customer relationships	(4,460		)	(2,412		)
Accumulated impairment - Non-compete agreement	(9		)	—
Intangible assets, net	$	144		$	2,392

Amortization expense during the three and nine months ended June 26, 2015 and June 27, 2014 follows:



	Three Months Ended				Nine Months Ended
Amortization Expense	June 26, 2015		June 27, 2014		June 26, 2015		June 27, 2014
(in thousands)
Intangible amortization expense	$	64	$	64	$	191	$	191

A summary of amortization expense for the next five years follows:



Future Amortization	Estimated future amortization
(in thousands)
Twelve months ended March,
2016	$	39
2017	39
2018	39
2019	27
2020	—
2021 and thereafter	—

NOTE 7—GOODWILL

Goodwill balances resulting from the acquisitions of SCB in the first quarter of fiscal 2011 and Celmet in fiscal 2010 were $13.7 million and $0.1 million , respectively, prior to the impairments described below.

Since its acquisition, SCB has operated as a reporting unit of the Company, primarily in the aerospace & defense (previously disclosed as military & aerospace) market sector. As previously disclosed, due to changing circumstances, the Company determined it was necessary to perform a quantitative assessment which resulted in a goodwill impairment charge of $11.8 million recorded in the fourth quarter of fiscal 2013.

A further impairment charge of $1.9 million was recorded in the third quarter of fiscal 2015 to reduce the value of the goodwill to zero . During the third quarter of fiscal 2015, the Company received an offer to purchase substantially all the assets and assume certain liabilities of SCB for approximately $2.5 million . At June 26, 2015 , the Company was actively considering options regarding SCB which included rehabilitating, selling or shutting down operations. The Company's SCB assets did not meet the criteria to be deemed held for sale as of the end of the third quarter as there was not an approved plan to sell such assets. However, the Company's willingness to accept the offer is considered to be an indication of fair value and as such, impairment charges were taken to adjust SCB's assets to fair value. Further information regarding the Asset Purchase Agreement is disclosed in Note 19—Subsequent Events .

As for the goodwill from the Celmet acquisition, there has been no impairment since acquisition date.

A summary of the total goodwill and accumulated impairment at period end follows:



Goodwill	June 26, 2015			September 30, 2014
(in thousands)
Goodwill	$	13,810		$	13,810
Accumulated impairment	(13,709		)	(11,805		)
Goodwill, net	$	101		$	2,005

NOTE 8—CREDIT FACILITIES

A summary of borrowings at period end follows:



	Fixed/		June 26, 2015					September 30, 2014
	Variable					Interest					Interest
Debt	Rate	Maturity Date	Balance			Rate (1)		Balance			Rate (1)
(in thousands)
M&T credit facilities:
Revolving Credit Facility	v	1/18/2016	$	11,240		4.44	%	$	7,431		4.44	%
Term Loan A	f	2/1/2022	7,315			3.98		8,148			3.98
Term Loan B	v	2/1/2023	10,733			3.43		11,783			3.41
Albuquerque Mortgage Loan	v	2/1/2018	2,533			4.69		2,733			4.69
Celmet Building Term Loan	f	11/7/2018	1,094			4.72		1,192			4.72

Other credit facilities:
Albuquerque Industrial Revenue Bond	f	3/1/2019	100			5.63		100			5.63

Total debt			33,015					31,387
Less: current portion			(14,148		)			(2,908		)
Long-term debt			$	18,867				$	28,479

(1) Rates noted are before impact of interest rate swap.

M&T Bank Credit Facilities

On January 18, 2013, the Company and M&T Bank entered into the Fourth Amended and Restated Credit Facility Agreement (“2013 Credit Agreement”), replacing a prior agreement dated December 17, 2010. Variable rate debt under the 2013 Credit Agreement accrues interest at Libor plus the applicable marginal interest rate that fluctuates based on the Company's Debt to EBITDARS Ratio, as defined below. Borrowings under the 2013 Credit Agreement are secured by, among other things, the assets of IEC and its subsidiaries. The 2013 Credit Agreement as amended prohibits the Company from paying dividends or repurchasing or redeeming its common stock without first obtaining the consent of M&T Bank.

Individual debt facilities provided under the 2013 Credit Agreement as amended by the first two amendments, both of which occurred prior to fiscal 2014, are described below:


a)	Revolving Credit Facility (“Revolver”) : Up to $20 million is available through January 18, 2016 . The maximum amount the Company may borrow is determined based on a borrowing base calculation as defined in the 2013 Credit Agreement as described below.


b)	Term Loan A : $10.0 million was borrowed on January 18, 2013. Principal is being repaid in 108 monthly installments of $93 thousand .


c)	Term Loan B: $14.0 million was borrowed on January 18, 2013. Principal is being repaid in 120 monthly installments of $117 thousand .


d)	Albuquerque Mortgage Loan : $4.0 million was borrowed on December 16, 2009. The loan is secured by real property in Albuquerque, NM, and principal is being repaid in monthly installments of $22 thousand plus a balloon payment due at maturity.


e)	Celmet Building Term Loan: $1.3 million was borrowed on November 8, 2013 pursuant to an amendment to the 2013 Credit Agreement. The proceeds were used to reimburse the Company’s cost of purchasing the Rochester, New York facility. Principal is being repaid in 59 monthly installments of $11 thousand plus a balloon payment due at maturity.

Borrowing Base

The maximum amount the Company may borrow under the Revolver is the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories or (ii) $20 million. At the Company's election, another 35% of eligible inventories may be included in the borrowing base for limited periods of time during which a higher rate of interest is charged on the Revolver. Borrowings based on inventory balances are further limited to a cap of $3.75 million , or when subject to the higher percentage limit, $4.75 million .

The Sixth Amendment removed the provision in the 2013 Credit Agreement that allowed for borrowing at an increased interest rate margin based on 85% of eligible accounts plus 70% of eligible inventories up to a maximum of $4.75 million.

At June 26, 2015 , the upper limit on Revolver borrowings was $19.5 million . Average available balances on the Revolver amounted to $9.9 million and $10.8 million during the nine months ended June 26, 2015 and June 27, 2014 , respectively.

Interest Rates

For the variable rate debt, the interest rate is Libor plus the applicable margin interest rate that is based on the Company's Debt to EBITDARS Ratio, as defined below. Changes to applicable margins and unused fees resulting from the Debt to EBITDARS Ratio generally become effective mid-way through the subsequent quarter. The Second Amendment to the 2013 Credit Agreement entered into on August 6, 2013 (the "Second Amendment") modified the ranges of applicable margins and unused fees by increasing both the lower and upper limit of each range with respect to the applicable debt facility.

The higher Debt to EBITDARS Ratio calculated as of June 28, 2013, in conjunction with the Second Amendment resulted in an increase of 0.25% in the effective rate applicable to Term Loan B and Albuquerque Mortgage Loan and the unused commitment fee for the Revolver remained unchanged.

The Fourth Amendment to the 2013 Credit Agreement (the "Fourth Amendment") fixed the applicable margin for the Revolver at 4.25% , for the Albuquerque Mortgage Loan at 4.50% and Term Loan B at 3.25% and the unused fee at 0.50% , in each case for the period December 13, 2013 through December 13, 2014 and if the Company was not compliant with financial covenants on December 13, 2014, during the period of non-compliance. The Fifth Amendment further fixed the applicable margins at the rates noted in the Fourth Amendment through March 27, 2015 and if the Company was not compliant with financial covenants on March 27, 2015, during the period of non-compliance. Additionally, the Sixth Amendment to the 2013 Credit Agreement entered into on May 8, 2015 (the "Sixth Amendment") further fixed each facility’s applicable margin at the rates established under the Fourth and Fifth Amendments through March 31, 2016, and thereafter if the Company is not then in compliance with its financial covenants. The applicable unused line fee of 0.50% also was extended through March 31, 2016, and thereafter if the Company is not in compliance with its financial covenants.

The Company incurs quarterly unused commitment fees ranging from 0.125% to 0.500% of the excess of $20.0 million over average borrowings under the Revolver. Fees incurred amounted to $38.2 thousand and $40.5 thousand during the nine months ended June 26, 2015 and June 27, 2014 , respectively. The fee percentage varies based on the Company's Debt to EBITDARS Ratio, as defined below.

Interest Rate Swap

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T Bank entered into an interest rate swap arrangement (“Swap Transaction”). The Swap Transaction is for a notional amount of $14.0 million with an effective date of February 1, 2013 and a termination date of February 1, 2023. The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on the loan’s outstanding principal. Pursuant to the Swap Transaction, the Company’s one month Libor rate is swapped for a fixed rate of 1.32% . When the swap fixed rate is added to the Term Loan B spread of 2.50% , the Company’s interest rate applicable to Term Loan B is effectively fixed at 3.82% . The Fourth Amendment and Fifth Amendment temporarily modified the Term Loan B spread to 3.25% which results in an effectively fixed rate of 4.57% .

Financial Covenants

The 2013 Credit Agreement also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDARS ("Quarterly EBITDARS"), (ii) a ratio of total debt to twelve month EBITDARS (“Debt to EBITDARS Ratio”) that is below a specified limit, and (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Debt to EBITDARS Ratio is the ratio of debt to earnings before interest, taxes, depreciation, amortization, rent expense and non-cash stock compensation expense. The Fixed Charge Coverage Ratio compares (i) 12 month EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus cash taxes paid, to (ii) the sum of interest expense, principal payments, sale-leaseback payments and dividends, if any (fixed charges).

On May 15, 2013 we obtained an amendment to the 2013 Credit Agreement (the “First Amendment”) which modified the Debt to EBITDARS Ratio and Fixed Charge Coverage Ratio covenants. The Second Amendment, obtained on August 6, 2013 modified the Debt to EBITDARS Ratio. On December 13, 2013 we obtained the Fourth Amendment and on February 4, 2014 we obtained a further amendment to the 2013 Credit Agreement (the “Fifth Amendment”) which further modified the ratios.

The Second Amendment also amended two definitions used in the calculation of the financial covenants, including: (i) the definition of net income, to add back, through the fiscal quarter ending June 27, 2014, up to $1.1 million of legal and accounting fees associated with the restatement, and (ii) the definition of interest expense as related to Rate Management Transactions (defined in the 2013 Credit Agreement), to be “the net cash cost or benefit associated with Rate Management Transactions net cash benefit or loss”.

Pursuant to the Sixth Amendment, M&T agreed to (i) modify the financial covenants related to Quarterly EBITDARS, the Debt to EBITDARS Ratio and the Fixed Coverage Charge Ratio and (ii) waive events of default arising from the Company’s non-compliance with these covenants during the fiscal quarters ended December 26, 2014 and March 27, 2015. The Sixth Amendment also amended the definition of EBITDARS under the 2013 Credit Agreement to add back a maximum amount of professional services fees and expenses incurred and paid or to be paid prior to September 30, 2015. EBITDARS as amended and restated means, for the applicable period, earnings before interest, taxes, depreciation, amortization, plus (i) payments due under the M&T sale-leaseback arrangement, (ii) non-cash stock option expense and (iii) professional services fees and expenses incurred and paid or to be paid prior to September 30, 2015, up to a maximum of (a) for the fiscal quarter ended December 26, 2014, $235,112, (b) for the fiscal quarter ending March 27, 2015, $2,652,659, (c) for the fiscal quarter ending June 26, 2015, $200,000 plus costs incurred and paid by Borrower during such Fiscal Quarter in connection with mortgages, environmental site assessments, title insurance and appraisals ("Costs") and (d) for the fiscal quarter ending September 30, 2015, $200,000 plus costs incurred and paid by Borrower during such Fiscal Quarter, all on a consolidated basis and determined in accordance with GAAP on a consistent basis.

Covenant Ratios in effect at June 26, 2015, after the 6th Amendment, are as follows:



Ÿ	Debt to EBITDARS Ratio:
	2013 Credit Agreement, after Sixth Amendment:
	3/28/15 through and including 6/26/15	< 5.75 to 1.00
	6/27/15 through and including 9/30/15	< 5.75 to 1.00
	10/1/15 through and including 12/25/15	< 5.50 to 1.00
	12/26/15 through and including 3/25/16	< 5.00 to 1.00
	3/26/16 through and including 6/24/16	< 4.50 to 1.00
	6/25/16 through and including 9/30/16	< 4.00 to 1.00
	10/1/16 and thereafter	< 3.50 to 1.00



Ÿ	Fixed Charge Coverage Ratio:
	2013 Credit Agreement, after Sixth Amendment:
	3/28/15 through and including 6/26/15	> 0.60 to 1.00
	6/27/15 through and including 9/30/15	> 0.45 to 1.00
	10/1/15 through and including 12/25/15	> 0.75 to 1.00
	12/26/15 through and including 3/25/16	> 1.00 to 1.00
	3/26/16 through and including 6/24/16	> 1.10 to 1.00
	6/ /25/16 and thereafter	> 1.25 to 1.00

The Sixth Amendment also modified the Quarterly EBITDARS covenant to be equal to or greater than $1.25 million for the fiscal quarter ending June 26, 2015, and $1.5 million for each fiscal quarter thereafter.

A summary of financial covenant compliance follows:



	Quarterly EBITDARS	Debt to EBITDARS Ratio	Fixed Charge Coverage Ratio
Fiscal Quarters
Third 2015	Compliant	Compliant	Compliant
Second 2015	Waived	Waived	Waived
First 2015	Waived	Waived	Waived

Fourth 2014	Compliant	Not Measured	Not Measured
Third 2014	Compliant	Not Measured	Not Measured
Second 2014	Waived	Not Measured	Not Measured
First 2014	Waived	Not Measured	Not Measured

As a result of the 2014 Restatements as described in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve , the Company was in default of the Credit Agreement for failure to deliver financial statements prepared in accordance with GAAP. The Company received a waiver from M&T regarding this event of default.

Other Borrowings

Albuquerque Industrial Revenue Bond : When IEC acquired Albuquerque, the Company assumed responsibility for a $100 thousand Industrial Revenue Bond issued by the City of Albuquerque. Interest on the bond is paid semiannually, and principal is due in its entirety at maturity.

Contractual Principal Payments

A summary of contractual principal payments under IEC's borrowings for the next five years taking into consideration the 2013 Credit Agreement follows:



Debt Repayment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ended March 27,
2016 ⁽¹⁾	$	14,148
2017	2,908
2018	4,641
2019	3,315
2020 and thereafter	8,003
	$	33,015

⁽¹⁾ Includes Revolver balance of $11.2 million at June 26, 2015

NOTE 9—DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Risk Management

As described in Note 8—Credit Facilities , we are party to the Swap Transaction. The fair value of the Swap Transaction represented an asset of $0.1 million and $0.2 million at June 26, 2015 and September 30, 2014 , respectively, and was estimated based on Level 2 inputs. The Company did not designate the Swap Transaction as a cash flow hedge at inception and therefore, the gains or losses from the changes in fair value of the derivative instrument are recognized in earnings for the period ended June 26, 2015 within interest expense.

The fair value of the Swap Transaction of $0.1 million and $0.2 million is recorded in other long term assets in the Consolidated Balance Sheet at June 26, 2015 and September 30, 2014 , respectively.

NOTE 10—FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Carried at Fair Value

The Company’s Swap Transaction is recorded on the balance sheet as either an asset or a liability measured at fair value. The Company estimates the fair value of its Swap Transaction based on Level 2 valuation inputs, including fixed interest rates, Libor implied forward interest rates and the remaining time to maturity. At June 26, 2015 , the Swap Transaction was an asset with a fair value of $0.1 million .

Financial Instruments Carried at Historical Cost

The Company’s long-term debt is not quoted. Fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

The Company’s debt is carried at historical cost on the balance sheet. A summary of the fair value and carrying value of fixed rate debt at period end follows:



	June 26, 2015		September 30, 2014

	Fair Value	Carrying Value	Fair Value	Carrying Value
(in thousands)
Term Loan A	6,309	7,315	6,924	8,148
Celmet Building Term Loan	966	1,094	1,035	1,192

The fair value of the remainder of the Company’s debt approximated carrying value at June 26, 2015 and September 30, 2014 as it is variable rate debt.

NOTE 11—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.

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



	Nine Months Ended
Warranty Reserve	June 26, 2015			June 27, 2014
(in thousands)
Reserve, beginning of period	$	251		$	219
Provision	287			235
Warranty costs	(237		)	(221		)
Reserve, end of period	$	301		$	233

NOTE 12—DEFERRED GRANTS

The Company received grants for certain facility improvements from state and local agencies in which the Company operates. These grants reimburse the Company for a portion of the actual cost or provide in kind services in support of capital projects. There were no deferred grants recorded in fiscal 2015 and $0.7 million of deferred grants recorded during the year ended September 30, 2014, from such grant programs.

One of the Company’s grants is a loan to grant agreement. The Company has signed a promissory note in the principal amount of $0.1 million , which will be forgiven if certain employment targets at the Newark, NY facility are obtained at future dates. If the employment targets are not obtained, the Company is obligated to repay a portion of the loan with interest. As the

Company intends to comply with these agreements, the Company has recorded the funds received as a deferred amount within other long-term liabilities on the balance sheet.

The Company received a government grant in the amount of $0.7 million for the purchase of equipment upgrades to accommodate existing and anticipated business growth. Required employment targets at the Newark, NY facility for this grant were met as of September 30, 2014 and the Company has no further obligations under this grant.

The Company is also the recipient of matching grants from two local governmental agencies related to certain renovations for one of its operating locations. One agency is contributing in kind services and property of $0.1 million while the other is contributing cash of $0.1 million to match expenditures by the Company of at least the same amount.

The grants will be amortized over the useful lives of the related fixed assets when there is reasonable assurance that the Company will meet the employment targets. The Company recorded amortization of $123 thousand and $14 thousand for the deferred grants for the nine months ended June 26, 2015 and June 27, 2014 , respectively.

NOTE 13—STOCK-BASED COMPENSATION

The 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) was approved by the Company’s stockholders at the January 2011 Annual Meeting of the Shareholders. This plan replaced IEC’s 2001 Stock Option and Incentive Plan (“2001 Plan”), which expired in December 2011. The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, 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. Under the 2010 Plan, up to 2,000,000 common shares may be issued over a term of ten years .

Stock-based awards granted through December 2011, were made under the 2001 Plan. Awards granted after December 2011, were made under the 2010 Plan and future awards will be made under the 2010 Plan.

Stock-based compensation expense recorded under the plans totaled $2.0 million and $0.4 million for the nine months ended June 26, 2015 and June 27, 2014 , respectively. At June 26, 2015 there were 907,389 shares available to be issued from the 2010 Plan. On February 2, 2015, the Company announced its shareholders elected all seven Vintage Opportunity Fund, LP-nominated directors to the Company’s Board of Directors. This change in the Company's Board of Directors was a change in control event which triggered automatic vesting for all awards outstanding under the 2010 and 2001 Plans. On the change in control date 390,882 shares of restricted stock and 119,500 stock options vested which resulted in stock-based compensation expense of $1.8 million.

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 2001 Plan, 2010 Plan and employee stock purchase plan is provided below.

Stock Options

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

Assumptions used in the Black-Scholes model and the estimated value of options granted during the nine months ended June 26, 2015 and June 27, 2014 are included in the table below:



	Nine Months Ended
Valuation of Options	June 26, 2015			June 27, 2014

Assumptions for Black-Scholes:
Risk-free interest rate	1.29		%	1.31		%
Expected term in years	4.5			4.1
Volatility	40		%	49		%
Expected annual dividends	none			none

Value of options granted:
Number of options granted	517,145			45,500
Weighted average fair value per share	$	1.44		$	1.62
Fair value of options granted (000's)	$	745		$	74

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



	Nine Months Ended
	June 26, 2015				June 27, 2014
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price

Outstanding, beginning of period	234,000		$	4.48	246,383		$	4.38
Granted	517,145		4.14		45,500		4.12
Exercised	(25,932	)	1.87		(18,093	)	1.49
Shares withheld for payment of exercise price upon exercise of stock option	(16,068	)	1.88		(3,407	)	1.69
Forfeited	(8,300	)	6.04		(23,283	)	5.71
Expired	(9,200	)	6.06		(2,850	)	5.04
Outstanding, end of period	691,645		$	4.35	244,250		$	4.51

For options expected to vest
Number expected to vest	519,399		$	4.44	220,987		$	4.49
Weighted average remaining term, in years	5.5				3.4
Intrinsic value (000s)			$	213			$	176

For exercisable options
Number exercisable	205,500		$	5.01	125,650		$	3.59
Weighted average remaining term, in years	3.6				2.0
Intrinsic value (000s)			$	70			$	166

For non-exercisable options
Expense not yet recognized (000s)			$	660			$	171
Weighted average years to be recognized	3.8				2.6

For options exercised
Intrinsic value (000s)			$	119			$	59

Changes in the number of non-vested options outstanding, together with other related data, follows:



	Nine Months Ended
	June 26, 2015				June 27, 2014
Stock Options	Number of Options		Wgtd. Avg. Grant Date Fair Value		Number of Options		Wgtd. Avg. Grant Date Fair Value

Non-vested, beginning of period	112,350		$	2.15	138,350		$	2.51
Granted	517,145		1.44		45,500		1.62
Vested	(135,050	)	2.08		(41,967	)	2.51
Forfeited	(8,300	)	2.35		(23,283	)	2.30
Non-vested, end of period	486,145		$	1.42	118,600		$	2.20

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 or five years ( three years in the case of directors), holders have all the rights and privileges of any other IEC common stockholder. 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 26, 2015				June 27, 2014
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	322,873		$	4.97	275,474		$	5.96
Granted	171,155		5.02		155,703		4.05
Vested	(316,539	)	5.08		(80,971	)	5.74
Shares withheld for payment of taxes upon vesting of restricted stock	(133,329	)	4.53		(18,615	)	4.28
Forfeited	(1,200	)	3.91		(71,103	)	5.88
Outstanding, end of period	42,960		$	4.22	260,488		$	5.15

For non-vested shares
Expense not yet recognized (000s)			$	180			$	725
Weighted average remaining years for vesting			2.1				3.0

For shares vested
Aggregate fair value on vesting dates (000s)			$	2,062			$	421

Employee Stock Purchase Plan

The Company administers an employee stock purchase plan (“ESPP”) that provides for a discounted stock purchase price. On May 21, 2013, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the Prior Restatement (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC until the Company filed its Form 10-K on December 24, 2013). The ESPP was reinstated effective October 1, 2014. On February 13, 2015, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the 2014 Restatements described in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve (including unavailability of the registration statement covering shares offered under the plan due to the failure of the Company to be current in its filings with the SEC).

Employees currently receive a 10% discount on stock purchases through the ESPP. Employee contributions to the plan, net of withdrawals were $8.0 thousand for the nine months ended June 26, 2015 . Compensation expense recognized under the ESPP was $1.0 thousand for the nine months ended June 26, 2015 . There were no employee contributions or compensation expense recognized under the ESPP during the nine months ended June 27, 2014 .

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. In connection with the restatement of the Company’s financial statements described herein (including unavailability of the registration statement covering shares offered under the 2010 Plan due to the failure of the Company to be current in its filings with the SEC until the Company filed its Form 10-K on December 24, 2013), the Company determined not to pay, and has not paid, any meeting fees in stock during the period since May 21, 2013 through the third quarter of fiscal 2015.

NOTE 14—RETIREMENT PLAN

The Company administers a retirement savings plan for the benefit of its eligible employees and their beneficiaries under the provisions of Sections 401(a) and (k) of the Internal Revenue Code. Eligible employees may contribute a portion of their compensation to the plan, and the Company is permitted to make discretionary contributions as determined by the Board of Directors. During the the first nine months of fiscal 2015, the Company contributed 25% of the first 6% contributed by all employees at all locations. During the first nine months of fiscal 2014, for its Albuquerque operating location only, the Company contributed 25% of the first 6% contributed by employees. Contributions during the nine months ended June 26, 2015 and June 27, 2014 totaled $200 thousand and $27 thousand , respectively.

NOTE 15—INCOME TAXES

Provision for income taxes during the three and nine months ended June 26, 2015 and June 27, 2014 follows:



	Three Months Ended				Nine Months Ended
Income Tax Provision/Benefit	June 26, 2015		June 27, 2014		June 26, 2015		June 27, 2014
(in thousands)			(restated)				(restated)
Provision for/(benefit from) income taxes	$	—	$	—	$	—	$	13,039

The Company restated to record a full valuation allowance on all deferred tax assets during the second quarter of fiscal 2014. The restatement is further discussed in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve .

Although we have recorded a full valuation allowance for all deferred tax assets, including net operating loss carryforwards ("NOLs"), these NOLs remain available to the Company to offset taxable income and reduce tax payments. IEC has federal NOLs for income tax purposes of approximately $16.3 million at September 30, 2014 , expiring mainly in years 2021 through 2025, with a small portion expiring in 2034.

At September 30, 2014 , the Company also had state NOLs of $27.7 million , expiring mainly in years 2021 through 2025 and $1.2 million of New York State investment tax and other credit carryforwards, expiring in various years through 2028. The credits cannot be utilized until the New York NOL is exhausted. Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufacturers in New York state to 0% beginning in fiscal 2015 for IEC. As a result of this legislation, it is more likely than not that the New York state NOLs and credits will not be realized.

Due to the Company's NOLs, a provision for pre-tax income was not recorded in the second quarter of fiscal 2015.

NOTE 16—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 26, 2015	June 27, 2014	June 26, 2015	June 27, 2014

Aerospace & Defense (previously Military & Aerospace)	35%	50%	40%	50%
Medical	32%	22%	30%	19%
Industrial	30%	22%	27%	25%
Communications & Other	3%	6%	3%	6%
	100%	100%	100%	100%

Three individual customers each represented 10% or more of sales for the nine months ended June 26, 2015 . One customer in the industrial sector represented 18% of sales, two customers in the medical sector represented 13% and 11% of sales. Two individual customers represented 10% or more of sales for the nine months ended June 27, 2014 . One customer in the Industrial sector represented 15% of sales and one customer in the Medical sector represented 12% of sales for the nine months ended June 27, 2014 .

Three individual customers represented 10% or more of receivables and accounted for 43% of outstanding balances at June 26, 2015 . Three individual customers represented 10% or more of receivables and accounted for 37% of the outstanding balances at June 27, 2014 .

NOTE 17—LITIGATION

In connection with the Prior Restatement, the Audit Committee conducted an independent review of the underlying facts and circumstances, and the Company is responding to a formal investigation by the staff of the SEC relating to the Prior Restatement and other matters. The Company is unable to predict what action, if any, might be taken in the future by the SEC or its staff as a result of the investigation or what impact the cost of responding to the SEC might have on the Company’s financial position, results of operations, or cash flows.

From time to time, the Company may be involved in other legal action in the ordinary course of its business, but management does not believe that any such other proceedings commenced through the date of the financial statements included in this Form 10-Q, individually or in the aggregate, will have material adverse effect on the Company’s consolidated financial position.

NOTE 18—COMMITMENTS AND CONTINGENCIES

Purchase Commitments

During August 2011, one of IEC's operating units entered into a five -year agreement with one of its suppliers to purchase a minimum volume of materials in exchange for receiving favorable pricing on the unit's purchases. The agreement was subsequently amended to extend through September 30, 2018. In the event the unit's cumulative purchases do not equal or exceed stated minimums, the supplier has a right to terminate the agreement and the IEC unit would be obligated to pay an early termination fee that declines from $365 thousand to zero over the term of the agreement. As of the date of this Form 10-Q, the Company expects to exceed the minimum purchase requirements under the agreement, thereby avoiding any termination fee.

NOTE 19—SUBSEQUENT EVENTS

Subsequent to third quarter of fiscal 2015, the Company sold its Southern California Braiding Company, Inc. (SCB) business to DCX-Chol Enterprises, Inc. ("DCX"), a provider of engineered high performance interconnect products, for a purchase price of approximately $2.5 million. As previously disclosed, Southern California Braiding, Inc., a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), effective as of July 9, 2015, by and between SCB and DCX, whereby DCX purchased the multi-conductor stranded copper cable and harness assemblies manufacturing and servicing business previously operated by SCB. Prior to this transaction, there was not a material relationship between the Company and DCX or between DCX and any officer, director or affiliate of the Company.

Pursuant to the Asset Purchase Agreement, SCB sold substantially all of its assets to DCX for a net cash payment of $2.3 million and the assumption by DCX of certain obligations and liabilities of SCB. The cash payment is net of certain pro rations and transaction costs. The Asset Purchase Agreement contains indemnification obligations of each party with respect to breaches of representations, warranties and covenants and certain other specified matters.

The Company is still evaluating whether SCB will be reported as discontinued operations in subsequent periods. A summary of SCB's operating results and total assets follows:



	Three Months Ended			Nine Months Ended
	June 26, 2015		June 27, 2014	June 26, 2015		June 27, 2014
	(unaudited)		(restated)	(unaudited)		(restated)
Net sales	1,867		3,819	5,215		10,698
Gross profit	14		663	(583	)	1,632
Income/(loss) before income taxes	(4,389	)	286	(5,727	)	(33	)


	June 26, 2015		September 30, 2014
	(unaudited)		(restated)
Total Assets	3,584		9,567

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 consolidated financial statements and notes. All references to Notes are to the accompanying consolidated financial statements and Notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”).

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 certain statements that are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, and are made in reliance upon the protections provided by such Acts for forward-looking statements. These forward-looking statements (such as when we describe what we “believe”, “expect” or “anticipate” will occur, and other similar statements) include, but are not limited to, statements regarding future sales and operating results, future prospects, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements.

The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views expressed or implied in our forward-looking statements: additional information that may arise as a result of the 2014 Restatements; our ability to successfully remediate material weaknesses in our internal controls; litigation and governmental investigations or proceedings arising out of or relating to accounting and financial reporting matters; 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 types and mix of sales to our customers; our ability to assimilate acquired businesses and to achieve the anticipated benefits of such acquisitions; 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; natural disasters; and other factors that we may not have currently identified or quantified. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock.

Except as required by law, all forward looking statements included in this Form 10-Q are made only as of the date of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. New risks and uncertainties arise from time to time and we cannot predict those events or how they may affect us. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained elsewhere in this report and in any documents incorporated herein by reference. In particular, you should consider the Risk Factors identified in Item 1 of the Company’s Annual Report on Form 10-K/A for the fiscal year ended September 30, 2014 and in the Company’s subsequently filed SEC reports. You should read this document and the documents that we incorporate by reference into this Report on 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.

Overview

IEC Electronics Corp. conducts business directly, as well as through its subsidiaries and divisions, Wire and Cable, Albuquerque, SCB, Celmet and DRTL described in Note 1—Our Business and Summary of Significant Accounting Policies – Our Business and Consolidation.

We are a provider of electronic contract manufacturing services (“EMS”) to companies in various industries that require advanced technology for mission-critical applications. We specialize in the custom manufacture of high reliability, complex circuit board and system-level assemblies; a wide array of cable and wire harness assemblies, precision metal assemblies and provide laboratory services for advanced research and testing. We excel where quality and reliability are of paramount importance and when low-to-medium volume, high-mix production is the norm. We utilize state-of-the-art, automated circuit board assembly equipment together with a full complement of high-reliability manufacturing stress testing methods. With our customers at the center of everything we do, we believe 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. While many EMS services are viewed as commodities, we believe we set ourselves apart through an uncommon mix of capabilities including:


•	A technology center that combines dedicated prototype manufacturing with an on-site laboratory capable of solving our customers' complex design and reliability issues, enabling the seamless transition concept to production.


•	An in-house engineering development team capable of designing and building custom, functional testing systems to certify the reliability of our customers' complex system-level products and support of end-order fulfillment.


•	A testing services laboratory that enables us to provide our customers with complex failure analysis of electronic components as well as component risk mitigation planning for obsolete and suspect parts utilized in life threatening and mission-critical systems.


•	A Lean/Six Sigma continuous improvement program supported by a team of Six Sigma Blackbelts delivering best-in-class results.


•	Proprietary software-driven Web Portal which provides customers real-time access to their critical, project specific data.

We primarily serve the aerospace & defense (previously discussed as military & aerospace), medical, industrial and communications markets. We focus on developing relationships with customers who manufacture advanced technology products and who are unlikely to utilize offshore suppliers due to the proprietary nature of their products, governmental restrictions or volume considerations.

IEC is ISO 9001:2008 certified. Four of our units (IEC and Wire and Cable in Newark, NY; Albuquerque in NM; and SCB in Bell Gardens, CA) are AS9100 certified to serve the military and commercial aerospace market sector, and are ITAR registered. In addition, the Company’s locations in Newark, NY and Albuquerque, NM are Nadcap accredited for electronics manufacturing to support the most stringent quality requirements of the aerospace industry and the Newark, NY location is ISO 13485 certified to serve the medical market sector. Our Newark, NY location is also an NSA approved supplier under the COMSEC standard and its environmental systems are ISO 14001:2004 certified. DRTL in Albuquerque, NM is ISO 17025 accredited, which is the international standard covering testing and calibration laboratories. Albuquerque and SCB also perform work per NASA-STD-8739 and J-STD-001ES space standards.

Prior Restatement

The Company previously disclosed in its Annual Report on Form 10-K/A and Quarterly Report on Form 10-Q/A, both filed with the SEC on July 3, 2013, that it restated its financial statements for the periods described therein because the Company was incorrectly accounting for work-in-process inventory at one of its subsidiaries, SCB (the "Prior Restatement"). The Company restated: (i) its previously issued consolidated financial statements for the fiscal year ended September 30, 2012 (“FY 2012”), as included in the Company’s Annual Report on Form 10-K for FY 2012, as well as the unaudited interim consolidated financial statements as of and for the fiscal quarter and year-to-date periods ended December 30, 2011 (“Q1-2012”), March 30, 2012 (“Q2-2012”) and June 29, 2012 (“Q3-2012”) (collectively, the “2012 Restated Periods”) as included in its Quarterly Reports on Form 10-Q for Q-1 2012, Q-2 2012 and Q-3 2012, and (ii) its previously issued financial statements for the quarter ended December 28, 2012 (“Q1-2013”) as included in its Quarterly Report on Form 10-Q for Q1-2013.

2014 Restatements

As discussed further in this Management’s Discussion and Analysis and in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve , we restated our previously issued consolidated financial statements for fiscal year ended September 30, 2014 (“FY 2014”) and our unaudited interim financial statements for the fiscal quarters ended March 28, 2014 (“Q2-2014”) and June 27, 2014 (“Q3-2014”) due to an error in the valuation allowance on deferred income tax assets resulting in an understatement of income tax expense and a corresponding overstatement of deferred income tax assets during Q2-2014 of approximately $14.0 million. Income tax expense was overstated and deferred income tax assets were understated by $3.0 thousand and $1.8 million in Q3-2014 and the fiscal quarter ended September 30, 2014 ("Q4-2014"), respectively. In FY 2014, income tax expense was understated and deferred income tax assets were overstated by approximately $12.3 million.

In addition, we restated our previously issued consolidated financial statements for FY 2014, and the unaudited interim financial statements for Q3-2014, Q2-2014 and the fiscal quarter ended December 27, 2013 ("Q1-2014") due to an error in the estimation of the excess and obsolete inventory reserve at two operating locations, which resulted in an understatement of cost of goods sold and overstatement of inventory. Cost of goods sold was understated by approximately $0.2 million, $0.1 million, $0.1 million and $0.3 million in Q1-2014, Q2-2014, Q3-2014 and Q4-2014, respectively. Inventory was overstated by approximately $0.2 million, $0.4 million, $0.4 million and $0.7 million as of the end of Q1-2014, Q2-2014, Q3-2014 and Q4-2014, respectively. For FY 2014, cost of goods sold was understated and inventory was overstated by approximately

$0.7 million. We refer to the restatements related to the deferred tax asset valuation allowance and excess and obsolete inventory reserve as the 2014 Restatements and together with the Prior Restatement, the Restatements.

Three Months Results

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



	Three Months Ended
Income Statement Data	June 26, 2015			June 27, 2014
(in thousands)				(restated)
Net sales	$	34,444		$	32,992

Gross profit	4,703			3,795
Selling and administrative expenses	4,049			3,195
Impairment of goodwill and other intangibles	4,057			—
Restatement and related expenses	298			102
Interest and financing expense	316			558
Other expense/(income)	—			—
Income/(loss) before income taxes	(4,017		)	(60		)
Provision for/(benefit from) income taxes	—			—
Net income/(loss)	$	(4,017	)	$	(60	)

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



	Three Months Ended
% of Sales by Sector	June 26, 2015	June 27, 2014

Aerospace & Defense (previously Military & Aerospace)	35%	50%
Medical	32%	22%
Industrial	30%	22%
Communications & Other	3%	6%
	100%	100%

Revenue increased in the third quarter of fiscal 2015 by $1.5 million or 4.4% as compared to the third quarter of the prior fiscal year. Increases in the medical market sector and industrial market sector of $3.9 million and $2.8 million , respectively were partially offset by decreases in the aerospace & defense market sector of $4.2 million and the communications & other market sector of $1.1 million .

Revenue for the medical market sector increased $3.9 million primarily due to increases in demand. Higher demand from our medical customer that was awaiting FDA approval in fiscal 2014 caused an increase of $4.3 million. In the third quarter of the prior fiscal year, the hold was lifted and the customer's testing was completed in the fourth quarter. We began shipping production orders late in the fourth quarter of fiscal 2014 and volume continued to increase throughout the first three quarters of fiscal 2015. Revenue for another medical customer decreased $1.2 million due to lower demand. The remaining increase was due to revenue from new programs with existing customers of $0.5 million and increased demand of $0.3 million at another customer.

The net increase in the industrial market sector of $2.8 million resulted primarily from new programs with three existing customers. We expect the volume for some of these new programs to decrease as our customers plan to source a portion of the programs from another contract manufacturer. Revenue from one new customer increased revenue by $0.2 million. These increases were partially offset by a net decrease in revenue at three other customers caused by fluctuations in demand.

Various decreases and increases for our aerospace & defense customers resulted in a net decrease of $4.2 million . Programs frequently fluctuate in demand or end and are replaced by new programs. Aggregate decreases of $6.8 million were partially offset by increases from other customers. Lower demand from several of our customers caused decreases of $4.0 million. A

portion of this demand decrease is attributable to lower quality and on time delivery ratings with two customers of our SCB location. The loss of two programs caused a $0.4 million decrease and the winding down of two other programs caused an additional decrease of $0.4 million. A program for an existing customer that occurred in 2014 and is not expected to recur caused a decrease of $0.4 million. Two lost customers, one of which was due to a customer facility shut down, caused an additional decrease of $0.4 million. Our decision to end certain programs with two customers due primarily to lack of profitability caused an aggregate decrease of $1.2 million.

The decreases for some of our aerospace & defense customers were partially offset by increases at several other customers. Higher demand at existing customers resulting in an increase of $2.1 million. New programs from existing customers increased revenue by $0.5 million. An increase of $0.3 million was due to a program for an existing customer in fiscal 2015 that did not occur in fiscal 2014 and is not expected to recur in the future.

The net decrease in the communications & other market sector was $1.1 million compared to the third quarter of the prior fiscal year. Lower demand from two customers caused a decrease of $1.1 million. Our decision to end a customer relationships due to lack of profitability resulted in an additional decrease of $0.6 million. Higher demand at existing customers as well as revenue from a new customer offset $0.5 million of the decreases.

Our third quarter gross profit increased $0.9 million to 13.7% of sales from 11.5% of sales in the third quarter of the prior fiscal year. Gross profit improvement was driven largely by lower labor costs. Improvements in process and an increased focus on labor efficiency lowered headcount and reduced overtime. Increased revenue allowed better leverage of our overhead. In addition to the improvements in labor and overhead costs, we also experienced a slight improvement in reducing material costs as a percent of revenue.

Selling and administrative ("S&A") expenses are presented excluding restatement and related expenses as well as the impairment of goodwill and other intangible assets as discussed below. S&A expense increased $0.9 million, and represented 11.8% of sales in the third quarter of fiscal 2015, compared to 9.7% of sales in the same quarter of the prior fiscal year. The increase in S&A expenses was primarily due to increased payroll and related benefits as well as an increase in bad debt expense. Payroll and related benefits increased $0.4 million primarily related to increased medical insurance and temporary wage expense, primarily due to additional finance resources required for the 2014 Restatement and proxy contest. We realized income of $0.2 million in the same quarter of the prior fiscal year for bad debt versus less than $0.1 million of expense in the third quarter of fiscal 2015. During the third fiscal quarter of fiscal 2015, we incurred expenses related to the divestiture of Southern California Braiding, which closed subsequent to the end of the third fiscal quarter as further discussed in Note 8—Credit Facilities . In addition, $0.1 million of costs associated with the lender requirements related to the Sixth Amendment to the 2013 Credit Agreement were incurred during the third quarter of fiscal 2015.

During the third quarter of fiscal 2015, we recorded an impairment charge of $4.1 million to our SCB reporting unit which fully impaired goodwill and intangibles and impaired fixed assets by $0.1 million. IEC received an offer to purchase substantially all the assets and the assume certain liabilities of SCB for approximately $2.5 million during the third quartet of fiscal 2015. As we were willing to accept $2.5 million, we considered this to be an indication of fair value and as such, adjusted the reporting unit's assets to fair value.

Restatement and related expenses of $0.3 million in the third quarter of fiscal 2015 represent third party legal and accounting fees directly attributable to the Restatements as well as other matters arising from the Prior Restatement including those more fully described in Note 17—Litigation . We anticipate continued legal expenses due to the Prior Restatement and other matters (including the formal SEC investigation) for the foreseeable future. While we anticipate certain of these expenses will continue to be reimbursed, any such reimbursement for future expenses will vary with the circumstances under which such expenses are incurred and their respective amounts. In the current fiscal year, we have also incurred restatement and related expenses related to fees for the reaudit of fiscal 2014 due to the 2014 Restatements.

Interest expense decreased by $0.2 million compared to the same quarter of the prior fiscal year. The net impact of adjusting the interest rate swap to fair value contributed $0.2 million to the decrease in expense in the third quarter of the current fiscal year compared to the prior fiscal year. The weighted average interest rate on IEC's debt, excluding the impact of the interest rate swap, was 0.08% higher during the third quarter of fiscal 2015 than in the third quarter of the prior fiscal year. Our average outstanding debt balances increased by $1.3 million in the third quarter of fiscal 2015 compared to the third fiscal 2014. During the third quarter of the current fiscal year there was a decrease in debt covenant waiver fees compared to the same quarter of the prior fiscal year. Cash paid for interest was approximately $0.4 million for both the third quarter of fiscal 2015 and fiscal 2014. Detailed information regarding our borrowings, including a summary of modifications to the Fourth Amended and Restated Credit Facility Agreement and debt covenant compliance, is provided in Note 8—Credit Facilities .

There was no material income tax expense or benefit in the third quarter of fiscal 2015 as we have net operating loss (“NOL”) carryforwards to offset any current tax expense and a full valuation on all deferred tax assets. The full valuation allowance was recorded in the second quarter of fiscal 2014.

With respect to tax payments, in the near term IEC expects to be sheltered by sizable NOL carryforwards for federal income tax purposes. At the end of fiscal 2014, the NOL carryforwards amounted to approximately $16.3 million. The NOL carryforwards expire in varying amounts between 2021 and 2025, with a small portion expiring in 2034, unless utilized prior to these dates.

Nine Months Results

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



	Nine Months Ended
Income Statement Data	June 26, 2015			June 27, 2014
(in thousands)				(restated)
Net sales	$	98,276		$	99,934

Gross profit	10,519			11,816
Selling and administrative expenses	14,346			10,938
Impairment of goodwill and other intangibles	4,057			—
Restatement and related expenses	948			2,516
Interest and financing expense	1,516			1,410
Other expense/(income)	—			18
Income/(loss) before income taxes	(10,348		)	(3,066		)
Provision for/(benefit from) income taxes	—			13,039
Net income/(loss)	$	(10,348	)	$	(16,105	)

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



	Nine Months Ended
% of Sales by Sector	June 26, 2015	June 27, 2014

Aerospace & Defense (previously Military & Aerospace)	40%	50%
Medical	30%	19%
Industrial	27%	25%
Communications & Other	3%	6%
	100%	100%

Revenue decreased in the first nine months of fiscal 2015 by $1.7 million or 1.7% as compared to the first nine months of the prior fiscal year. Decreases in the aerospace & defense and communications & other market sectors were $10.4 million and $3.5 million , respectively. These decreases were partially offset by increases in the medical and industrial market sectors. The medical market sector increased $10.9 million and the industrial market sector increased $1.4 million .

Various decreases and increases for our aerospace & defense customers resulted in a net decrease of $10.4 million . Programs frequently fluctuate in demand or end and are replaced by new programs. Aggregate decreases of $17.2 million were partially offset by increases from other customers. Lower demand at several of our customers caused a decrease of $10.7 million. A portion of this demand decrease is attributable to lower quality and on time delivery ratings with two customers of our SCB location. The loss of five programs caused a decrease of $2.0 million and the winding down of two programs caused $1.1 million of the decrease. Our decision to end certain programs with customers due primarily to lack of profitability caused an aggregate decrease of $1.8 million. Two lost customers, one of which was due to a customer facility shut down, caused a decrease of $0.8 million. In addition, one time orders fulfilled in the first nine months of the prior year caused a revenue decrease of $0.8 million.

These decreases were partially offset by increases at several other customers. New programs and increased demand from existing customers increased revenue by $2.5 million and $2.3 million, respectively. Revenue of $1.6 million in the first nine months of fiscal 2015 was due to a program for an existing customer that did not occur in fiscal 2014 and is not expected to recur in the future.

Revenue for the communications & other market sector decreased $3.5 million . The decision to end two customer relationships, one of which was due to lack of profitability, resulted in an aggregate decrease of $2.6 million. Lower demand from one customer due to a shift in their business model decreased revenue by $1.4 million. Lower demand from two other customers decreased revenue by $0.4 million. These decreases were partially offset by increased demand from existing customers of $0.7 million and revenue from a new customer of $0.2 million.

The net increase in the medical market sector was $10.9 million . Higher demand from our medical customer that was awaiting FDA approval in fiscal 2014 caused an increase of $8.8 million in the first nine months of fiscal 2015. In the second quarter of the prior fiscal year, this customer was seeking FDA approval for modifications to its existing programs which caused the programs to be put on hold. The hold was lifted during the third quarter of fiscal 2014 and the customer's testing was completed in the fourth quarter. We began shipping production orders late in the fourth quarter of fiscal 2014 and volume continued to increase in the first nine months of fiscal 2015. Revenue for another medical customer increased $1.1 million due to higher demand. New programs at an existing customer caused increases of $0.9 million and fluctuations in demand caused the remaining net increase.

The net increase in the industrial market sector of $1.4 million resulted from increases of $3.8 million partially offset by lower customer demand. New programs with existing customers resulted in an increase of $3.1 million. We expect the volume for some of these new programs to decrease as our customers plan to source a portion of the programs from another contract manufacturer. Demand for existing programs at other customers increased revenue by $0.3 million and new customer increased revenue $0.2 million. Demand fluctuations from four of our customers caused a decrease of $1.2 million. In addition, $0.8 million of the decrease was due to a one time order in the prior fiscal year.

Gross profit in the first nine months of fiscal 2015 decreased $1.3 million over the first nine months of the prior fiscal year, and represents 10.7% of revenue compared to 11.8% of revenue in the same period of the prior fiscal year. This decrease is primarily due to lower leverage of overhead at our Albuquerque and SCB operating locations as well as higher excess and obsolete inventory expense at one of our operating locations. Additional stock-based compensation attributed to the change in control resulting from the proxy contest caused gross profit to decrease $0.7 million or 0.7 percentage points. The remaining difference can be attributed to better performance at our remaining operating locations, primarily as a result of improved labor management, leveraging of overhead due to increased revenue mainly from our medical market sector and improved material cost reductions.

Selling and administrative ("S&A") expenses are presented excluding restatement and related expenses and impairment of goodwill and other intangibles discussed below. S&A expenses increased $3.4 million, and represented 14.6% of sales over the first nine months of fiscal 2015, compared to 10.9% of sales in the same period in prior fiscal year. The increase in S&A expenses was primarily due to expenses related to the proxy contest and resulting change of control. These costs totaled $3.3 million and include stock based compensation of $1.1 million, legal and other expenses incurred by the Company and Vintage Opportunity Fund, LP of $1.5 million and severance costs of $0.8 million. Excluding these costs, S&A expense increased $0.1 million, and represented 11.2% of sales over the first nine months of fiscal 2015, compared to 11.0% of sales in the same period of the prior fiscal year.

During the third quarter of fiscal 2015, we recorded an impairment charge of $4.1 million to our SCB reporting unit which fully impaired goodwill and intangibles and impaired fixed assets by $0.1 million. IEC received an offer to purchase substantially all the assets and the assume certain liabilities of SCB for approximately $2.5 million during the third quarter of fiscal 2015. As we were willing to accept $2.5 million, we considered this to be an indication of fair value and as such, adjusted the reporting unit's assets to fair value.

Restatement and related expenses of $0.9 million in the first nine months of fiscal 2015 represent third party legal and accounting fees directly attributable to the Restatements as well as other matters arising from the Prior Restatement including those more fully described in Note 17—Litigation . We anticipate continued legal expenses due to the Prior Restatement and other matters (including the formal SEC investigation) for the foreseeable future. While we anticipate certain of these expenses will continue to be reimbursed, any such reimbursement for future expenses will vary with the circumstances under which such expenses are incurred and their respective amounts. $0.6 million of Restatement and related expenses in the first nine months of fiscal 2015 were for the reaudit of fiscal 2014 due to the 2014 Restatements.

Interest expense in the first nine months of fiscal 2015 increased by $0.1 million compared to the same period of the prior fiscal year. The increase is due to the net impact of adjusting the interest rate swap to fair value and an increase in the covenant waiver fee in the first nine months of the current fiscal year compared to the prior fiscal year period. The weighted average

interest rate on IEC's debt, excluding the impact of the interest rate swap, was consistent in the first nine months of the prior fiscal year. Our average outstanding debt balances declined from $35.4 million for the first nine months of fiscal 2014 to $32.1 million for the first nine months of fiscal 2015. Average borrowings in the first nine months of fiscal 2015 were lower than the same period of the prior fiscal year due to repayments on term debt. Cash paid for interest was approximately $1.2 million for the first nine months of both fiscal 2015 and fiscal 2014. Detailed information regarding our borrowings, including a summary of modifications in the Fourth Amended and Restated Credit Facility Agreement and debt covenant compliance, is provided in Note 8—Credit Facilities .

There was no material income tax expense or benefit in the first nine months of fiscal 2015 as we have NOL carryforwards to offset any current tax expense and a full valuation on all deferred tax assets. As part of our 2014 Restatements as described in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve , a full valuation allowance was recorded in the second quarter of fiscal 2014.

With respect to tax payments, in the near term IEC expects to be sheltered by sizable NOL carryforwards for federal income tax purposes. At the end of fiscal 2014, the carryforwards amounted to approximately $16.3 million. The carryforwards expire in varying amounts between 2021 and 2025, with a small portion expiring in 2034, unless utilized prior to these dates.

Liquidity and Capital Resources

Capital Resources

As of June 26, 2015 outstanding capital expenditure commitments were $0.1 million for manufacturing equipment and building improvements. We generally fund capital expenditures with cash flow from operations and our revolving credit facility.

Summary of Cash Flows

A summary of selected cash flow amounts for the nine months ended follows:



	Nine Months Ended
Cash Flow Data	June 26, 2015			June 27, 2014
(in thousands)				(restated)
Cash and cash equivalents, beginning of period	$	1,980		$	2,499
Net cash flow from:
Operating activities	(946		)	4,045
Investing activities	(1,771		)	(3,483		)
Financing activities	1,027			(2,382		)
Net (decrease) increase in cash and cash equivalents	(1,690		)	(1,820		)
Cash and cash equivalents at end of period	$	290		$	679

Operating activities

Cash flows used by operations, before considering changes in IEC’s working capital accounts, was $0.9 million for the first nine months of fiscal 2015. Cash flow provided by operations, before considering changes in working capital, in the first nine months of fiscal 2014 was $1.2 million . There was an improvement in net loss of $5.8 million compared to the first nine months of the prior fiscal year, however non-cash expenses were lower in the first nine months of fiscal 2015. Deferred tax expense decreased by $13.0 million compared to fiscal 2014 due to a recording a full valuation allowance on deferred tax asset in the second quarter of fiscal 2014 as further discussed in Note 2—Restatement of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve . In the first nine months of fiscal 2015, a $4.1 million impairment charge was taken. Stock based compensation was also higher in the first nine months of fiscal 2015 by $1.6 million as a result of the change in control resulting from the proxy contest.

Working capital did not provide or use cash flows in the first nine months of fiscal 2015 and provided cash flows of $2.9 million in the first nine months of fiscal 2014. The change in working capital in the first nine months of fiscal 2015 was primarily due to an increase in inventory of $4.9 million , partially offset by an increase in customer deposits of $3.5 million . Approximately $2.9 million of the inventory increase was driven by purchases related to materials management programs for several customers, most of which is offset by customer deposits. Increases in inventory were also caused by increased demand including the ramp in production of relatively new customers in our medical market sector, maintaining higher levels of finished goods for certain customers at their request and delays in some smaller programs. A decrease in accounts receivable

contributed $1.4 million to cash flow provided by operations, mainly due to lower sales volume in the last two month of the third fiscal quarter of 2015 compared to the last two months of the fourth fiscal quarter of 2014 as well as improved collection of receivables. An increase in other current assets was offset by increased other accrued expenses, both primarily attributable to Restatement and related expenses and the partial reimbursement of those expenses.

Investing activities

Cash flows used in investing activities were $1.8 million and $3.5 million for the first nine months of fiscal 2015 and 2014, respectively. Cash flows used in the first nine months of fiscal 2015 primarily consisted of the purchases of equipment and, to a lesser extent, building improvements totaling $2.5 million , partially offset by cash received from a community development block grant of $0.7 million . The community development block grant was initiated in fiscal 2012 but not completed and submitted for reimbursement until September 2014. Cash used in the first nine months of fiscal 2014 primarily consisted of the Celmet building purchase of $1.3 million and purchases of equipment.

Financing activities

Cash flows provided by financing activities were $1.0 million for the first nine months of fiscal 2015 and cash flows used in financing activities were $2.4 million for the first nine months of fiscal 2014. During the first nine months of fiscal 2015, net borrowings under all credit facilities were $1.6 million , with $3.8 million of net borrowings under the revolver and repayments of $2.2 million for term debt. In the first nine months of fiscal 2014, net cash flows reduced outstanding credit facilities by $2.3 million , due to net repayments funded by operations.

Credit Facilities

At June 26, 2015 , borrowings outstanding under the revolving credit facility (“Revolver”) amounted to $11.2 million , and the maximum available was $19.5 million . Borrowings on the Revolver during the current fiscal year were used to fund working capital changes discussed above. The Company believes that its liquidity is sufficient to satisfy anticipated operating requirements during the next twelve months. The Company plans to extend the maturity of its revolver, which is currently set to mature in January 2016. Should we be unable to extend the maturity or refinance our debt, we may not be able to fund our operating requirements.

The 2013 Credit Agreement also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDARS ("Quarterly EBITDARS") , (ii) a ratio of total debt to twelve month EBITDARS (“Debt to EBITDARS Ratio”) that is below a specified limit, and (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Debt to EBITDARS Ratio is the ratio of debt to earnings before interest, taxes, depreciation, amortization, rent expense and non-cash stock compensation expense. The Fixed Charge Coverage Ratio compares (i) 12 month EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus cash taxes paid, to (ii) the sum of interest expense, principal payments, sale-leaseback payments and dividends, if any (fixed charges). Subsequent amendments to the 2013 Credit Agreement modified financial covenants and related definitions, as described in Note 8—Credit Facilities .

A summary of financial covenant compliance follows:



	Quarterly EBITDARS	Debt to EBITDARS Ratio	Fixed Charge Coverage Ratio
Fiscal Quarters
Third 2015	Compliant	Compliant	Compliant
Second 2015	Waived	Waived	Waived
First 2015	Waived	Waived	Waived

Fourth 2014	Compliant	Not Measured	Not Measured
Third 2014	Compliant	Not Measured	Not Measured
Second 2014	Waived	Not Measured	Not Measured
First 2014	Waived	Not Measured	Not Measured

The calculation of debt covenants follows:

Limit at

Calculated Amount At

Debt Covenant

June 26,
2015

September 30,
2014

June 26,
2015

September 30,
2014

(restated)

Quarterly EBITDARS (000s)

Minimum $1,250

Minimum $1,500

1,806

2,641

Debt to EBITDARS Ratio

Maximum 5.75x

Not Measured

5.1x

Not Measured

(a)

Fixed Charge Coverage Ratio (b)

Minimum 0.6x

Not Measured

0.9x

Not Measured

(a)


(a)	Compliance waived.


(b)	The ratio compares (i) 12-month EBITDA plus non-cash stock compensation expense, plus permitted fiscal 2013 restatement related expenses minus unfinanced capital expenditures minus cash taxes paid ("Adjusted EBITDA"), to (ii) the sum of interest expense, principal payments, sale-leaseback payments and dividends, if any (fixed charges).

A reconciliation of EBITDARS to Net income follows:



	Three Months Ended
	June 26, 2015			September 30, 2014
(in thousands)				(restated)
Net income/(loss)	$	(4,017	)	$	1,034
Restatement related expenses (a)	—			—
Asset impairment (b)	4,057			—
Restatement and related expenses	200			—
Lender requirement expenses	100			—
Provision for/(benefit from) income taxes	—			(161		)
Depreciation and amortization expense	1,112			1,218
Interest expense	316			386
Non-cash stock compensation	38			164
EBITDARS	$	1,806		$	2,641

A reconciliation of Adjusted EBITDA to Net income follows:



	Three Months Ended
	June 26, 2015			September 30, 2014
(in thousands)				(restated)
Net income/(loss)	(4,017		)	$	1,034
Restatement related expenses (a)	—			—
Asset impairment (b)	4,057			—
Restatement related expenses (a)	200			—
Lender requirement expenses	100			—
Provision for/(benefit from) income taxes	—			(161		)
Depreciation and amortization expense	1,112			1,218
Interest expense	316			386
Non-cash stock compensation	38			164
Unfinanced capital expenditures	(563		)	(512		)
Income taxes paid	—			(3		)
Adjusted EBITDA	$	1,243		$	2,126

EBITDARS and Adjusted EBITDA are non-GAAP financial measures. They should not be considered in isolation or as a measure of the Company’s profitability or liquidity; are in addition to, and are not a substitute for, financial measures under GAAP. EBITDARS and Adjusted EBITDA may be different from non-GAAP financial measures used by other companies, and

may not be comparable to similarly titled measures reported by other companies. Non-GAAP financial measures have limitations since they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP.

EBITDARS and Adjusted EBITDA do not take into account working capital requirements, capital expenditures, debt service requirements and other commitments, and accordingly, EBITDARS and Adjusted EBITDA are not necessarily indicative of amounts that may be available for discretionary use. We present EBITDARS and Adjusted EBITDA because certain covenants in our credit facilities are tied to these measures. We also view EBITDARS and Adjusted EBITDA as useful measures of operating performance given our large net operating loss carryforward and because, as supplemental measures: (i) they are a basis upon which we assess our liquidity position and performance and (ii) we believe that investors will find the data useful in assessing our ability to service and/or incur indebtedness. We believe that EBITDARS and Adjusted EBITDA, when considered with both our GAAP results and the reconciliation to net income, provide a more complete understanding of our business than could be obtained absent this disclosure.

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 are disclosed in our 2014 Annual Report on Form 10-K/A filed for the fiscal year ended September 30, 2014 . During the nine months ended June 26, 2015 there have been no material changes to these policies.

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 uses derivative financial instruments to manage the impact of this risk. The Company uses derivatives only for the purpose of managing risk associated with underlying exposure. 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 manages its hedging position and monitors the credit ratings of counterparties and does not anticipate losses due to counterparty nonperformance. Management believes its use of derivative instruments to manage risk is in the Company’s best interest. However, the Company’s use of derivative financial instruments may result in short-term gains or losses and increased volatility.

At June 26, 2015 , the Company had $33.0 million of debt, comprised of $24.5 million with variable interest rates and $8.5 million with fixed interest rates. Interest rates on variable loans are based on London interbank offered rate (“Libor”). The Company is party to a swap transaction that effectively fixes an additional $10.7 million of debt, which increased the portion of debt with effectively fixed interest rates from $8.5 million to $19.2 million at June 26, 2015 . The credit facilities and related swap transaction are more fully described in Note 8—Credit Facilities and Note 9—Derivative Financial Instruments . The rates effectively fixed by the swap transaction continue to vary due to the variable margin based on financial covenant metrics. 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 26, 2015 indicates 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 $0.2 million. The rates and sensitivity analysis noted above exclude the impact of the swap transaction.

The Company is exposed to credit risk to the extent of non-performance by M&T Bank under the 2013 Credit Agreement and the Swap Transaction. M&T Bank's credit rating (reaffirmed A- by Fitch in October 2014) is monitored by the Company, and IEC expects that M&T Bank will perform in accordance with the terms of the 2013 Credit Agreement and the Swap Transaction.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

IEC’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 26, 2015 , the end of the period covered by this Form 10-Q. Based on that evaluation, solely as a result of the material weaknesses discussed in greater detail in our Form 10-K/A filed with the SEC on May 11, 2015 (the “2014 Form 10-K/A”), our Chief Executive Officer and Chief Financial Officer concluded that as of June 26, 2015 , the Company’s disclosure controls and procedures were not effective. To address these material weaknesses, we have implemented certain remedial measures, as described in our 2014 Form 10-K/A.

Changes in internal control over financial reporting

Management identified material weaknesses in our internal control over financial reporting related to an error in the valuation allowance on deferred income tax assets and an error in estimated excess and obsolete inventory reserves, as discussed in greater detail in Item 9A of our 2014 Form 10-K/A. To address these material weaknesses, we have implemented certain remedial measures, as described in Item 9A of our 2014 Form 10-K/A, which description is incorporated by reference herein. The material weaknesses cannot be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Except as described above, during the nine months ended June 26, 2015 , there were no changes in our internal controls that materially affected, or are 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.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Except as set forth below, there have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K/A for the year ended September 30, 2014 filed with the Securities and Exchange Commission on May 11, 2015.

OUR OPERATING RESULTS AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO EXTEND THE MATURITY DATE OF THE REVOLVER OR REFINANCE THE REVOLVER ON FAVORABLE TERMS. The Revolver matures on January 18, 2016 , and all amounts outstanding under the Revolver will be due and payable upon maturity. At June 26, 2015 , borrowings outstanding under the Revolver amounted to $11.2 million . We anticipate that we will be able to enter into a new revolving credit facility with M&T Bank or extend the maturity date of the Revolver prior to January 18, 2016. If we are unable to enter into a new revolving credit facility with M&T Bank or extend the maturity date of the Revolver prior to the maturity date, we anticipate that we would be able enter into a new revolving credit facility with a different lender. However, there can be no assurance financing will be available when needed and, if such financing is available, it may only available on terms that are less favorable to us. Our financial condition, results of operations and future prospects could be adversely impacted if we are unable to obtain financing on favorable terms.

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

For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits located immediately following the signature page to this Report. The Index to Exhibits is incorporated herein by reference.

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 5, 2015	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		Chief Executive Officer and President

August 5, 2015	By:	/s/ Michael T. Williams
		Michael T. Williams
		Vice President of Finance and Chief Financial Officer

IEC ELECTRONICS CORP.

Form 10-Q for Quarter Ended June 26, 2015

INDEX TO EXHIBITS



Exhibit No.		Description

2.1		Asset Purchase Agreement, effective July 9, 2015 between Southern California Braiding, Inc. and DCX-Chol Enterprises, Inc.
10.1		Sixth Amendment to Fourth Amended and Restated Credit Facility Agreement, as of May 8, 2015, between IEC Electronics Corp. and Manufacturers and Traders Trust Company (incorporated by reference in Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q filed on May 11, 2015).
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, 18 U.S.C. Section 1350
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.

Exhibit 2.1

asset PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made as of July 9, 2015, between Southern California Braiding, Inc., a Delaware corporation (“ Seller ”), and DCX-Chol Enterprises, Inc., a Colorado corporation (“ Purchaser ”).

RECITALS

Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, the Purchased Assets (as defined below), on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties intending to be legally bound agree as follows:


ARTICLE 1

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below.

1.1 “ Affiliate ” means, with respect to any Person: (a) any Person directly or indirectly Controlling, Controlled by or under common Control with such Person; (b) any Person owning or Controlling twenty percent (20%) or more of the outstanding voting interest of such Person; (c) any officer, director or general partner of such Person; or (d) any natural person who is a family member of that Person. When an Affiliate is an officer, director, partner or family member of a Person, any entity for which the Affiliate acts also shall be considered an Affiliate.

1.2 “ Agreement ” has the meaning given to such term in the Preamble.

1.3 “ Allocation ” has the meaning given to such term in Section 4.2.

1.4 “ Applicable Laws ” means all laws, statutes, constitutions, rules, regulations, principles of common law, resolutions, codes, ordinances, requirements, judgments, orders, decrees, injunctions, and writs of any Governmental Body that are applicable to Seller or its operations.

1.5 “ Assignment and Assumption Agreement ” has the meaning given to such term in Section 5.2.

1.6 “ Assumed Contracts ” has the meaning given to such term in Section 3.1.

1.7 “ Assumed Obligations ” has the meaning given to such term in Section 3.1.

1.8 “ Balance Sheet ” has the meaning given to such term in Section 6.5.

1.9 “ Balance Sheet Date ” has the meaning given to such term in Section 6.5.

1.10 “ Bill of Sale ” has the meaning given to such term in Section 5.2.

1.11 “ Books and Records ” has the meaning given to such term in Section 2.2.

1.12 “ Business Day ” means any day other than a Saturday, Sunday or other day on which the banking institutions in Los Angeles, California are required or authorized to be closed.

1.13 “ Claims ” has the meaning given to such term in Section 11.1.

1.14 “ Closing ” has the meaning given to such term in Section 5.1.

1.15 “ Closing Date ” has the meaning given to such term in Section 5.1.

1.16 “ Contracts ” means any contract or agreement, whether written or oral, and other loan agreements, credit agreements, promissory notes, factoring agreements, letters of credit, reimbursement agreements, purchase orders, sales orders, leases, license agreements, etc., excluding any Employee Benefit Plan.

1.17 “ Control ” (including, with correlative meaning, the terms “Controlled by” and “under common Control with”): when used with respect to a Person, means, the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.

1.18 “ Current Employees ” has the meaning given to such term in Section 6.13.

1.19 “ Customer Prepaids ” the meaning given to such term in Section 2.2.

1.20 “ Customers ” means all clients and customers of Seller.

1.21 “ Direct Claim ” has the meaning given to such term in Section 11.3.

1.22 “ Disclosure Schedule ” means the Disclosure Schedule delivered by Seller to Purchaser as of the date of this Agreement.

1.23 “ Domain Name Transfer Agreement ” has the meaning given to such term in Section 5.2.

1.24 “ Employee Benefit Plan ” means any retirement, medical insurance, bonus, incentive, deferred compensation, severance or vacation plans, or any other employee benefit plans, programs, policies or arrangements covering directors, employees, consultants (or former directors, employees or consultants) of Seller, Parent or an Affiliate of Parent maintained or contributed to by Seller or to which Seller is a party or by which Seller is obligated to make payments thereunder relating to Seller’s operations.

1.25 “ Encumbrances ” means any lien, security interest, encumbrance, prior assignment, title retention right, or other similar restrictions.

1.26 “ Environmental, Health, and Safety Requirements ” means all federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of law, in each case as currently in effect or in effect during the operation of Seller’s business, all judicial and administrative orders and determinations, all contractual obligations and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any Hazardous Substance, each as amended and as now in effect.

1.27 “ Excluded Assets ” has the meaning given to such term in Section 2.3.

1.28 “ Excluded Liabilities ” has the meaning given to such term in Section 3.2.

1.29 “ Fundamental Representations ” has the meaning given to such term in Section 11.4.

1.30 “ Financial Statements ” has the meaning given to such term in Section 6.5.

1.31 “ GAAP ” means Generally Accepted Accounting Principles in effect in the United States of America from time to time.

1.32 “ Government Contract ” means each Contract that the Seller is a party to with any Governmental Body.

1.33 “ Governmental Body ” means any (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature, (b) federal, state, local, municipal, foreign, supranational or other government or (c) governmental, self-regulatory or quasi-governmental authority of any nature (including any governmental division, department, agency, taxing authority, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal).

1.34 “ Hazardous Substance ” or “ Hazardous Substances ” means any substance that (a) requires removal or remediation under any Environmental, Health and Safety Requirement including, without limitation, petroleum and petroleum by-products, and is defined, listed or identified as “hazardous waste,” “hazardous material,” “toxic substance,” “contaminant,” “pollutant,” “oil,” or “hazardous substance” under such Environmental, Health and Safety Requirement, or (b) is toxic, explosive, corrosive, flammable, radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated as such under any Environmental, Health and Safety Requirement.

1.35 “ Indemnified Party ” has the meaning given to such term in Section 11.3.

1.36 “ Indemnifying Party ” has the meaning given to such term in Section 11.3.

1.37 “ Intangibles ” has the meaning given to such term in Section 2.2.

1.38 “ Intellectual Property ” means all rights in intellectual property of any type throughout the world, including without limitation, patents, trademarks, tradenames, service marks, copyrights, domain names, websites, trade secrets, know-how, and corporate or fictitious business names, whether registered or unregistered, and all applications for the foregoing, and all common law rights and goodwill associated with the foregoing.

1.39 “ Interim Financial Statements ” has the meaning given to such term in Section 6.5.

1.40 “ Knowledge ” means the actual knowledge of Jeffrey Schlarbaum, Michael Williams and Ben Dose, and the knowledge that such person would have if such person had made reasonable investigation and inquiry of the relevant personnel of Seller who would have knowledge of the matter that is the subject of the representation and warranty to which the Knowledge qualifier applies.

1.41 “ Landlord ” means SISBROS, Ltd. a California Limited Partnership.

1.42 “ Landlord Consent ” has the meaning given to such term in Section 5.2.

1.43 “ Lease ” means: (i) that certain Standard Industrial/Commercial Multi-Tenant Lease-Gross dated as of March 23, 2007; (ii) that certain Standard Industrial/Commercial Multi-Tenant Lease-Gross dated as of March 21, 2008; (iii) that certain Standard Industrial/Commercial Multi-Tenant Lease-Gross dated as of August 1, 2008; (iv) that certain Standard Industrial/Commercial Multi-Tenant Lease-Gross dated as of January 1, 2010; and (v) that certain Standard Industrial/Commercial Multi-Tenant Lease-Gross dated as of December 29, 2011, each as subsequently assigned to Seller, and each as amended by that certain First Amendment to Standard Industrial/Commercial Multi-Tenant Lease-Gross between Seller and Landlord dated as of August 8, 2013.

1.44 “ Liabilities ” means any and all debts, liabilities or obligations, whether fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured.

1.45 “ Material Adverse Effect ” means any event, circumstance, condition, fact, change, effect, development, or other matter which has had or could reasonably be expected to have (i) a material adverse effect on the business, assets, liabilities, properties, condition (financial or otherwise), results of operations of Seller taken as a whole or (ii) prevent or materially delay the consummation of the transactions contemplated by this Agreement and the other Transaction Documents; provided, however, that none of the following events, circumstances, conditions, facts, changes, effects or developments shall be deemed, either alone or in combination, to constitute a Material Adverse Effect: (i) any change or effect resulting from or arising out of the announcement of this Agreement or the pendency of the transactions contemplated by this Agreement, or any action taken with Purchaser’s prior written consent; (ii) any change or effect resulting from or arising out of actions required to be taken or required not to be taken by Seller under this Agreement; (iii) any change or effect resulting from or arising out of general economic conditions in the United States or globally, including changes in the credit, debt, capital or financial markets, or out of any acts of war, terrorism, military actions or the escalation thereof; (iv) any change or effect affecting generally the industries or markets in which Seller conducts business, or (v) any changes in Applicable Laws or accounting rules or principles, including changes in GAAP, unless, in the case of clauses (iii), (iv), or (v) above, such changes or effects would reasonably be expected to have a materially disproportionate adverse impact on the business, assets, liabilities, condition (financial or otherwise) or results of operations of Seller taken as a whole relative to other affected participants in the industries in which Seller operates.

1.46 “ Most Recent Balance Sheet ” has the meaning given to such term in Section 6.5.

1.47 “ Non-Competition Agreement ” has the meaning given to such term in Section 5.2.

1.48 “ Notice of Claim ” has the meaning given to such term in Section 11.3.

1.49 “ Off the Shelf Software ” means standard licenses purchased by the Seller for commercially available off-the-shelf software.

1.50 “ Ordinary Course of Business ” means the ordinary course of business of Seller consistent with past custom and practice (including with respect to quantity and frequency).

1.51 “ Organizational Documents ” has the meaning given to such term in Section 2.3.

1.52 “ OSHA ” has the meaning given to such term in Section 6.13.

1.53 “ Parent ” means IEC Electronics Corp., a Delaware corporation.

1.54 “ Parent Guaranty ” has the meaning given to such term in Section 5.2.

1.55 “ Permitted Encumbrances ” means (a) Encumbrances granted in the Lease and in the leases of equipment included in the Assumed Contracts; (b) liens for Taxes not yet due and payable; (c) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the Ordinary Course of Business; and (e) zoning ordinances and development and building regulations or requirements adopted by any Governmental Body having jurisdiction thereto now or hereinafter in force and effect that relate to the Premises.

1.56 “ Person ” means any individual, corporation, partnership, joint venture, limited liability company, trust, Governmental Body or other organization.

1.57 “ Personal Property ” has the meaning given to such term in Section 2.2.

1.58 “ Premises ” has the meaning given to such term in Section 6.7.

1.59 “ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

1.60 “ Purchased Assets ” has the meaning given to such term in Section 2.2.

1.61 “ Purchaser ” has the meaning given to such term in the Preamble.

1.62 “ Purchaser Indemnified Parties ” has the meaning given to such term in Section 11.1.

1.63 “ Retained Employee ” means Ben Dose.

1.64 “ Seller ” has the meaning given to such term in the Preamble.

1.65 “ Seller Products ” means all products designed, manufactured, marketed and sold by Seller on or prior to the Closing Date.

1.66 “ Seller Indemnified Parties ” has the meaning given to such term in Section 11.2.

1.67 “ Seller Intellectual Property ” has the meaning given to such term in Section 6.14.

1.68 “ Seller Prepaid Expenses ” the meaning given to such term in Section 2.2.

1.69 “ Taxes ” shall mean all federal, provincial, local, or foreign taxes of any kind or nature, including, without limitation, taxes based on net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, unemployment, social

security, worker’s compensation, escheatment, unclaimed property or other taxes, assessments, customs, duties, fees, levies, or other charges by any Governmental Body of any nature whatever, including any interest and penalties imposed with respect to any of the foregoing and including Liability for any of the foregoing as a transferee, successor, by contract or otherwise.

1.70 “ Tax Returns ” means any return, declaration, report, claim, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

1.71 “ Third Party Claim ” has the meaning given to such term in Section 11.3.

1.72 “ Transaction Documents ” means this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Domain Name Transfer Agreement, the Non-Competition Agreement and the other agreements entered or executed by Seller, Purchaser or Parent in connection with this Agreement or such other agreements.

1.73 “ Transfer Taxes ” has the meaning given to such term in Section 4.4.

1.74 “ Transferred Employees ” has the meaning given to such term in Section 9.1.

1.75 “ Year End Financial Statements ” has the meaning given to such term in Section 6.5.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of Assets . Subject to the terms and conditions set forth in this Agreement, on the Closing Date, Seller shall sell, transfer, assign and deliver to Purchaser, and Purchaser shall purchase and accept from Seller, all of the Purchased Assets.

2.2 Purchased Assets . Subject to Section 2.3, the “ Purchased Assets ” shall be all of the assets, properties, intellectual property, permits, licenses and claims of Seller used in or relating to Seller’s operations, including, without limitation, the following:

(a) all equipment, vehicles, rolling stock, tools, spare parts, furniture, appliances, fixtures and supplies and all computers, printers, copiers, fax, telephone, and other office equipment, wherever located, used or held for use by Seller in conducting its operations, whether or not reflected in the Financial Statements and whether or not they have been expensed or fully depreciated, including, without limitation, such items of personal property of Seller substantially as listed and described in Section 2.2(a) of the Disclosure Schedule (the “ Personal Property ”);

(b) all of Seller’s rights, title and interest in and to and under all of the Assumed Contracts;

(c) All prepayments and deposits of Seller paid or deposited by Seller or with third parties under the Assumed Contracts, including, without limitation, those as described in Section 2.2(c) of the Disclosure Schedule (the “ Seller Prepaid Expenses ”);

(d) To the extent transferable, all permits, licenses, franchises, product registrations, filings, authorizations, approvals and indicia of authority (and pending applications for any thereof) granted by a Governmental Body to own the Purchased Assets and conduct the Seller’s operations,

all of which are identified in Section 2.2(d) of the Disclosure Schedule, including all CAGE codes (the “ Permits and Licenses ”);

(e) all records, documents, lists and files relating to Seller, its operations or the Purchased Assets, including, without limitation, executed originals (or copies of executed originals when executed originals are not available) of all Assumed Contracts, price lists, lists of accounts, clients, Customers, suppliers, employees, contractors, consultants and other personnel, shipping records, Customer records, business and marketing plans, sales brochures and catalogs and other sales literature and materials and historical Customer data, in each case, whether in hard copy, electronic form or otherwise (the “ Books and Records ”). For the avoidance of doubt, Books and Records do not include any records or documents to the extent relating to the Excluded Assets, Excluded Liabilities, corporate seals, organizational documents, minute books, stock books, Tax Returns, accounting records, financial records, all bank account records, documents subject to attorney-client privilege, books of account, other records having to do with the corporate organization of Seller, all employee-related or employee benefit-related files or records, other than personnel files of Transferred Employees, and any other books and records which Seller is prohibited from disclosing or transferring to Purchaser under applicable Law and is required by Applicable Laws to retain (collectively, the “ Excluded Records ”).

(f) All right, title, claim and interest of Seller in and to any Seller Intellectual Property;

(g) To the extent transferable, all of Seller’s rights, title and interest in and to and under all of the Seller’s employees’ confidentiality obligations arising under Seller’s employee handbook relating to the Purchased Assets “ Handbook Confidentiality Rights ”);

(h) The computer software listed on Section 2.2(h) of the Disclosure Schedule (the “ Transferred Software ”);

(i) All other intangible assets, rights and claims of Seller of every kind and nature, including, without limitation, associated goodwill, and business information currently used by Seller in connection with its operations, including but not limited to all technologies, methods, formulations, data bases, trade secrets, inventions, know-how, Customer lists and files, advertising and marketing programs and plans, telephone numbers, fax numbers, email addresses and website addresses and URLs (the “ Intangibles ”);

(j) All cash, cash equivalents and securities, wherever located, representing deposits and pre-payments made by Customers and clients of Seller paid under the Assumed Contracts, including, without limitation, those cash, cash equivalents and securities as described in Section 2.2(j) of the Disclosure Schedule (the “ Customer Prepaids ”);

(k) all express or implied guarantees, warranties, representations, covenants, indemnities and similar rights from third parties related to the Purchased Assets;

(l) All other assets, properties and rights of every kind and nature owned or held by Seller or in which Seller has an interest on the Closing Date, known or unknown, fixed or unfixed, choate or inchoate, accrued, absolute, contingent or otherwise, which are used or held for use by the Seller, whether or not specifically referred to in this Agreement, other than the Excluded Assets; and

(m) All goodwill relating to the foregoing assets and the Seller.

2.3 Excluded Assets . Notwithstanding the foregoing, the Purchased Assets shall not include any of the following assets of Seller, which shall be excluded from the sale hereunder (the “ Excluded Assets ”):

(a) Seller’s Certificate of Incorporation, bylaws and other organizational or charter documents (the “ Organizational Documents ”); provided, that copies thereof shall be delivered to Purchaser on or prior to the Closing and such copies may be retained by the Purchaser;

(b) the Contracts which are not Assumed Contracts;

(d) the Excluded Records; provided, that provided, that copies thereof delivered to Purchaser on or prior to the Closing may be retained and used by the Purchaser as appropriate to own and operate the Purchased Assets after the Closing;

(e) all cash and cash equivalents (other than the Customer Prepaids);

(f) the rights that accrue to all bank accounts of Seller;

(g) all insurance policies and all benefits, proceeds or other amounts payable to Seller or its Affiliates under any such policy of insurance maintained by Seller;

(h) any reserves or prepaid expenses related to Excluded Assets and Excluded Liabilities (such as prepaid legal expenses or insurance premiums), other than the Seller Prepaid Expenses;

(i) any and all names, symbols, trademarks, service marks or logos used by Seller (other than Southern California Braiding and variants thereof and any fictitious business names of Seller) in connection with the Purchased Assets to the extent they include the names “IEC Electronics Corporation,” “IEC Electronics” or any variants thereof, or any other names, symbols, trademarks, service marks or logos that are proprietary to Parent or their Affiliates (other than Seller) or used at any facility operated by Seller, Parent, or their Affiliates, and all Intellectual Property relating thereto;

(j) assets owned and provided by vendors of services or goods to Seller that do not relate to the Assumed Contracts;

(k) all intercompany payables owed by the Seller to any Affiliate of the Seller, including Parent;

(l) all funds and accounts of all employee retirement, deferred compensation, health,

welfare or other Employee Benefit Plans and programs and any rights of Sellers with respect to such plans and programs;

(m) personal items belonging to employees employed by Seller;

(n) rights of recovery, rights of set off, claims and causes of action arising out of periods prior to the Closing Date;

(o) all Tax and other refunds arising out of periods prior to the Closing;

(p) all rights of Sellers under this Agreement and its related documents; and

(q) those items, if any, listed on Section 2.3(q) of the Disclosure Schedule.

2.4 Customer Inventory . At Closing, Seller will transfer to Purchaser, and Purchaser shall accept, possession of all materials and supplies of Seller’s customers that are located at the Premises.

ARTICLE 3

ASSUMED OBLIGATIONS

3.1 Assumed Obligations . Effective as of the Closing, Purchaser shall assume, perform and discharge, when due and on a timely basis only the following obligations of Seller (collectively, the “ Assumed Obligations ”):

(a) those Liabilities of Seller under the Contracts that are listed in Section Schedule 3.1(a) of the Disclosure Schedule (collectively, the “ Assumed Contracts ”) that arise after the Closing, other than any Liabilities that arise out of Seller’s performance or non-performance under the Assumed Contracts prior to the Closing.

3.2 Excluded Liabilities . Except for the Assumed Obligations, Purchaser shall not assume and shall not be liable or responsible for any Liabilities of Seller or any Affiliate of Seller, or any claim against any of the foregoing, of any kind, whether known or unknown, contingent, absolute, or otherwise (the “ Excluded Liabilities ”). Seller, shall be solely liable for, and shall perform and discharge, when due and on a timely basis, all Excluded Liabilities, including, without limitation, any obligations under any Contracts that are not Assumed Contracts . The Excluded Liabilities include, but are not limited to, the following Liabilities and obligations of Seller:

(a) Any Liabilities under any Contracts that are not included in the Assumed Contracts;

(b) Any Liabilities arising from or in connection with any breach or default (or alleged breach or default) by Seller under any Contract or any Assumed Contract;

(c) Any Liabilities (including Liabilities with respect to Taxes of another Person, whether by contract or otherwise) for Taxes (i) of Seller, and (ii) imposed on or with respect to Seller or the Purchased Assets for any taxable period (or portion thereof) ending on or prior to the Closing Date or on Seller after the Closing Date and (iii) charges related to or arising from the sale of the Purchased Assets contemplated hereby, except as set forth in Section 4.4 with respect to Transfer Taxes;

(d) For damage or injury (real or alleged) to person or property arising from the ownership, possession or use of any Purchased Assets prior to Closing;

(e) Except to the extent arising out of a breach of Purchaser’s obligations set forth in Section 9.1 of this Agreement, to Seller’s employees (which for clarity shall exclude the Transferred Employees after the Closing), including but not limited to, those for accident, disability, health (including unfunded medical liabilities) and worker’s compensation insurance or benefits, and all other Liabilities to employees arising from events or occurrences prior to the Closing, or arising from or relating to claims or Liabilities for benefits or pay under any employee benefit plan, compensation

policy, individual employment contract or collective bargaining agreement, or any severance payment, through the Closing or after the Closing;

(f) With respect to any Proceeding, pending or threatened either on or prior to or after the Closing with respect to matters occurring prior to Closing, whether or not identified in Section 6.10 of the Disclosure Schedule;

(g) Arising from or in connection with any administrative ruling or other order, stipulation or decree of any Governmental Body, or the violation of any federal, state or local act, statute, rule or regulation, decree or ordinance prior to Closing;

(h) Arising from or relating to (i) any failure to comply with Environmental Health, and Safety Requirements on or prior to the Closing and/or (ii) acts or omissions that occurred on or prior to the Closing that result in actual Liability pursuant to any Environmental Law;

(i) Any obligations giving rise to the Permitted Encumbrances described in clauses (b) and (c) of the definition of Permitted Encumbrances to the extent relating to any period before the Closing; or

(j) Arising with respect to any Employee Benefit Plans.

3.3 Contracts Requiring Third Party Consent; Novation of Government Contracts .

(a) Notwithstanding anything to the contrary in this Agreement, to the extent that the assignment hereunder of any Contracts included in the Purchased Assets shall require the consent of any third party which has not been obtained at the time of Closing, neither this Agreement nor any action taken pursuant to its provisions shall constitute an assignment if such assignment or attempted assignment would constitute a breach thereof or result in the loss or diminution thereof; provided, however, that for each such Contract identified by Purchaser, Seller shall use commercially reasonable efforts to obtain the consent with respect to any Contracts of such other party to such assignment to Purchaser as soon as practicable following the Closing Date. If any such Contract is not assigned, Seller shall hire Purchaser as a subcontractor to perform the obligations under such Contracts if Seller is permitted to do so under such Contract without the consent of the other parties thereto. Pursuant to the sub-contractor relationship, Purchaser shall be entitled to receive all payments due under such Contracts with respect to work performed after Closing after such payments are received by Seller, and Purchaser shall bear all expenses incurred with respect to work performed after Closing. In the event Purchaser is hired by Seller as a sub-contractor, Seller shall have no duty whatsoever to Purchaser under such arrangement other than the safekeeping, accounting and delivery of payments received by Seller. Seller does not warrant or guaranty the payment under such Contracts and shall have no duty to pursue collection of same. In the event that any such Contract does not permit a sub-contractor relationship, Purchaser and Seller shall execute such documents as may be necessary to accomplish performance of the Contract while retaining for Purchaser’s account the financial, accounting and economic results associated with such Contract. This Section 3.3 shall not in any way modify, limit or otherwise affect the representations, warranties, covenants and indemnification obligations of either Party under this Agreement or increase or decrease the Assumed Obligations or Excluded Liabilities.

(b) With regard to the Government Contracts that are included in the Purchased Assets, after the Closing, and without limiting Section 3.3(a), Each Party shall cooperate with the other and do all things reasonably necessary or appropriate, including signing a novation agreement and

providing all required supporting documentation relating to Seller (including written consents of the board of directors and sole shareholder of Seller, a legal opinion of each Party’s counsel regarding the sale and transfer of such Government Contracts, the Party’s balance sheet prior to and after the Closing and all other information, materials or documents required by the applicable Governmental Body) as reasonably requested by Purchaser or its counsel in order to procure the consent of the applicable Governmental Body to the assignment of such Government Contracts hereunder in accordance with Applicable Laws.

ARTICLE 4

CONSIDERATION; TRANSFER TAXES; ALLOCATION AND PRORATION

4.1 Consideration . In consideration of the Purchased Assets and the other agreements made by Seller under this Agreement, at the Closing, in addition to assuming the Assumed Obligations, Purchaser shall pay and provide to Seller a cash sum in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000) (the “ Purchase Price ”) minus the Net Deposit Amount (as defined below) of $145,738, plus $8,665 as reimbursement to Seller for the July rent for the Premises, plus $18,863 (which represents the Continued Plan Amount (as defined in Section 9.1(d)), and minus $7,673 (which represents one-half of the Deductible Amounts (as defined in Section 9.1(c)) for a net cash payment at Closing in the amount of Two Million Three Hundred Seventy Four Thousand One Hundred Seventeen Dollars ($2,374,117) (the “ Net Cash Payment ”). As used herein, “ Net Deposit Amount ” shall be the amount of the Customer Prepaids minus the amount of the Seller Prepaid Expenses. The foregoing adjustments made to determine the Net Cash Payment (collectively, the “ Adjustments ”) do not reflect an adjustment to the Purchase Price but are implemented as an accommodation to eliminate the need for multiple wire transfers between Seller and Purchaser relating to the Adjustments. Any inaccuracies in the amount of any of the Adjustments discovered by either party within ninety (90) days of Closing shall be reconciled on a dollar-for-dollar basis. The Net Cash Payment, the Adjustments and such other adjustments and payments (reflected in the Settlement Statement) shall be paid by wire transfer in immediately available funds in accordance with the Settlement Statement executed by the parties of even date herewith to the accounts designated therein.

4.2 Purchase Price Allocation . The Purchase Price and any other amounts properly treated as consideration for Tax purposes shall be allocated by Purchaser and Seller in accordance with Section 1060 of the Code as set forth in Exhibit 4.4 hereto (the “ Allocation ”). Seller and Purchaser agree (a) to report the U.S. federal, state and local income and other Tax consequences of the transactions contemplated hereby in accordance with the Allocation; and (b) not to take any position inconsistent therewith, including upon examination of any Tax return, refund claim, litigation, investigation or otherwise, unless required by Applicable Laws or with the consent of the other party.

4.3 Pro-Rations .

(a) Any and all real and personal property Taxes applicable to the Purchased Assets for the current taxable period will be pro-rated to (and including) the Closing Date, and such Taxes shall be allocated between the Seller and Purchaser based upon the total amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period (with Purchaser paying the total amount due to the tax jurisdiction and the Seller reimbursing Purchaser in accordance with this Section 4.3 within ten (10) days of delivery of Purchaser’s notice of payment due).

(b) All utilities, telephone, internet and other similar charges that are billed periodically based on usage shall be pro-rated to (and including) the Closing Date.

4.4 Transfer Taxes . Purchaser and Seller shall each be responsible for fifty percent (50%) of the payment of all transfer, conveyance, excise, sales and use, stamp, documentary and similar Taxes, including any interest, penalties, fines, additions to Tax or additional amount imposed by any Governmental Body in connection with the foregoing, filing and recordation fees and similar charges (“ Transfer Taxes ”) relating to the sale or the transfer of the Purchased Assets hereunder. Seller shall timely file all Tax returns required to be filed in connection with the Transfer Taxes and timely pay all Transfer Taxes due and payable to the appropriate taxing authority.

ARTICLE 5

THE CLOSING

5.1 Closing Date . Subject to the satisfaction or waiver of the conditions to closing set forth in Article 9 as provided herein, the closing of the transactions contemplated in this Agreement (the “ Closing ”) shall occur on the date hereof in accordance with Article 9 (the date of the final Closing, the “ Closing Date ”). The Closing shall be effective as of 11:59 p.m. on the Closing Date. Simultaneously with the Closing, Seller shall deliver the Personal Property and other Purchased Assets and will put Purchaser into full possession and enjoyment of Purchased Assets.

5.2 Deliveries by Seller at Closing . At or before the Closing, Seller shall deliver the following to Purchaser:

(a) a Bill of Sale, in the form attached as Exhibit A hereto, executed by Seller (the “ Bill of Sale ”);

(b) an Assignment and Assumption Agreement with respect to the Assumed Obligations, in the form attached as Exhibit B hereto, executed by Seller (the “ Assignment and Assumption Agreement ”);

(c) a Domain Name Transfer Agreement in the form attached hereto as Exhibit D , executed by Seller (the “ Domain Name Transfer Agreement ”);

(d) the Non-Competition Agreement in the form attached hereto as Exhibit D (the “ Non-Competition Agreement ”), executed by Seller and Parent;

(e) the Guaranty in the form attached hereto as Exhibit E (the “ Parent Guaranty ”), executed by Parent;

(f) releases and termination statements executed by Manufacturers and Traders Trust Company (the “ Bank ”) and corresponding discharge letters from the Bank in favor of Seller and Purchaser, in form and substance reasonably acceptable to Purchaser;

(g) all Books and Records;

(h) a Certificate of Existence, Authority and Incumbency in the form attached hereto as Exhibit F-1 , executed by the President and Secretary of Seller and the Secretary of Parent (the “ Seller’s Incumbency and Authority Certificate ”);

(i) a properly completed and executed affidavit described in Treasury Regulation Section 1.1445-2(b)(2)(i) (the “ FIRPTA Certificate ”);

(j) an Assignment and Assumption of Lease, executed by Seller (the “ Assignment and Assumption of Lease ”) and a Consent of the Landlord to the assignment of the Lease to Purchaser acceptable to Purchaser, executed by the Landlord and Seller (the “ Landlord Consent ”); and

(k) such other documents as are reasonably requested by Purchaser or its counsel.

5.3 Deliveries by Purchaser at Closing . At or before the Closing, Purchaser shall deliver, or cause to be delivered:

(a) the Purchase Price in immediately available funds;

(b) the Assignment and Assumption Agreement, executed by Purchaser;

(d) the Non-Competition Agreement, executed by Purchaser;

(e) a Certificate of Existence, Authority and Incumbency, the form attached hereto as Exhibit F-2 , executed by the President and Secretary of Purchaser (the “ Purchaser’s Incumbency and Authority Certificate ”);

(f) the Assignment and Assumption of Lease and the Landlord Consent, executed by Purchaser; and

(g) such other documents as are reasonably requested by Seller or its counsel.

ARTICLE 6

REPRESENTATIONS AND WARRANTITES OF SELLER

Except as set forth in Section 12.4, as of the Closing, Seller represents and warrants the following to Purchaser, the truth and accuracy of each of which is a material inducement to Purchaser to enter into this Agreement and the other Transaction Documents. Seller acknowledges that Purchaser is relying exclusively on the representations and warranties made in this Article in executing this Agreement and the other Transaction Documents and not on any written, oral or other information whatsoever.

6.1 Organization; Authorization and Enforcement .

(a) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. Seller is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required, and each such jurisdiction is set forth in Section 6.1 of the Disclosure Schedule. Seller has full company power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it. Seller has no subsidiaries and has never had any subsidiaries or any other ownership interest in any other entity.

(b) Seller has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which Seller is a party, and to perform its respective obligations under this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. This Agreement and the other Transaction Documents to which Seller are a party have been duly authorized by all required company action on the part of Seller. This Agreement and the other Transaction Documents to which Seller or Parent is a party, when duly executed and delivered by Purchaser, Seller and/or Parent, as applicable, will constitute the valid and binding agreement of Seller and Parent, enforceable against Seller and Parent in accordance with their terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditor’s rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

6.2 Absence of Restrictions and Conflicts; Consents .

(a) Except as set forth in Section 6.2 of the Disclosure Schedule, the execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated by this Agreement and the other Transaction Documents and the fulfillment of and compliance with the terms and conditions of this Agreement and the other Transaction Documents do not and will not, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under (i) Seller’s Organizational Documents, (ii) any judgment, decree or order any court or Governmental Body to which Seller or Parent is a party or by which Seller or Parent are bound, (iii) any Assumed Contract to which Seller or Parent is a party or by which Seller or Parent is bound, or (iv) any Applicable Laws applicable to Seller or Parent; and

(b) Except as set forth in Section 6.2 of the Disclosure Schedule, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Body with any other Person, including, but not limited to, any Customer, vendor or supplier of Seller, with respect to Seller or Parent or the Purchased Assets is required in connection with the execution, delivery or performance of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated by this Agreement and the other Transaction Documents by Seller or Parent.

6.3 Ownership of Seller . Parent is the sole record or beneficial shareholder of Seller. There are no outstanding warrants, options or other rights, commitments, contracts or understandings to purchase or acquire any equity securities or other ownership interests of Seller, and there are no outstanding debt securities of Seller convertible, exercisable or exchangeable into equity securities of Seller.

6.4 Title to and Sufficiency of Purchased Assets .

(a) Seller has good, valid and marketable title to the Purchased Assets, subject to Permitted Encumbrances. Seller is the only record and beneficial owner of the Purchased Assets, and, holds Seller’s interest in the Purchased Assets free and clear of any Encumbrance whatsoever, subject to the Permitted Encumbrances.

(b) There are no outstanding options, warrants, rights, privileges or other arrangements, preemptive or otherwise, entitling any Person to acquire any interest in any of the Purchased Assets.

(c) There are no claims, pending or threatened, of or by third parties that, with the passage of time, or giving of notice, or both, will create an Encumbrance on any item included in or comprising the Purchased Assets, other than the Permitted Encumbrances.

(d) Other than any Purchased Asset that may be in transit and any Purchased Asset that is licensed or leased by Seller, all the Purchased Assets are in the exclusive possession and control of Seller and Seller has the unencumbered right to use, and to sell to Purchaser in accordance with the terms and subject to all of the conditions contained in this Agreement, all of the Purchased Assets without interference from, and free of the rights and claims of, any Person.

(e) The Purchased Assets and the Excluded Assets include all assets, privileges and interests necessary to permit Purchaser to conduct the operations of Seller in all material respects after the Closing, substantially in the same manner as Seller’s operations were conducted before the Closing.

6.5 Financial Statements; Undisclosed Liabilities .

(a) Attached as Section 6.5(a) of the Disclosure Schedule are true, correct and complete copies of the audited balance sheet of Seller as of September 30, 2012, September 30, 2013 and September 30, 2014, and the unaudited balance sheet of Seller as of May 22, 2015 (the September 30, 2014 balance sheet is sometimes referred to herein as the “ Balance Sheet ,” and the date thereof is sometimes referred to as the “ Balance Sheet Date ”) and the related audited statements of income and cash flows for the fiscal years then ended (collectively, the “ Year End Financial Statements ”); and (ii) the unaudited balance sheet of Seller as of May 22, 2015 (the “ Most Recent Balance Sheet ”), and the related unaudited statements of income and cash flows for the periods then ended; (collectively, the “ Interim Financial Statements ” and, together with the Year End Financial Statements, the “ Financial Statements ”).

(b) Except as set forth in Section 6.5(b) of the Disclosure Schedule, the Year-End Financial Statements fairly present in all material respects the financial position of Seller as of the dates and the results of operations for the respective periods reported therein. The Interim Financial Statements fairly present in all material respects the financial position of Seller as of the dates and the results of operations for the respective periods reported therein.

(c) The Financial Statements have been prepared from the Books and Records of Seller and in accordance with GAAP, as consistently applied by Seller in accordance with past practices (provided, however, that the Interim Financial Statements do not contain notes and are subject to normal year-end adjustments none of which would individually or in the aggregate, have a Material Adverse Effect).

(d) None of the Financial Statements contain any material, non-recurring items, except as expressly set forth therein.

(e) To Seller’s Knowledge, Seller has no material Liabilities required by GAAP to be reflected in a balance sheet or the notes thereto, except for (a) Liabilities set forth on the face of the Most Recent Balance Sheet, or the notes thereto, and (b) Liabilities that have arisen after the date of the Most Recent Balance Sheet in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement, or violation of Applicable Laws).

6.6 Absence of Material Changes . Except as set forth in Section 6.6 of the Disclosure Schedule, since the date of the Most Recent Balance Sheet, Seller and its operations have been operated in the Ordinary Course of Business, and that since the date of the Most Recent Balance Sheet, there have not been any Material Adverse Effect, and Seller has not:

(a) taken any action or entered into or amended, terminated, granted a waiver under or given a consent with respect to any transaction, agreement or commitment other than in the Ordinary Course of Business;

(b) waived any claims or rights of material value;

(c) (i) granted any severance or termination pay to (or amended any existing Contract with) any current or former director, officer, employee or consultant of the Seller, (ii) increased, or accelerated, the compensation or benefits payable under any existing severance or termination pay policies or employment Contracts, (iii) entered into any employment, deferred compensation or other similar Contract (or any amendment to any such existing Contract) with any director, officer, employee or consultant of the Seller, (iv) established, adopted or amended (except as required by Applicable Laws) any collective bargaining, stock option, restricted stock, bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, or any other benefit plan or arrangement covering any employees, officers, consultants or directors of the Seller, or (v) increased, or accelerated, compensation, bonus or other benefits payable to any employees, officers, consultants or directors of the Seller other than in the case of this clause (v) in accordance with the Seller’s Ordinary Course of Business;

(d) threatened, commenced or settled any Proceeding;

(e) incurred any indebtedness for borrowed money;

(f) paid, discharged, settled or satisfied any material Claims, liabilities or obligations (absolute, accrued, contingent or otherwise) other than the payment, discharge or satisfaction in the Ordinary Course of Business of trade payables or any other liability reflected or reserved against in the Most Recent Balance Sheet;

(g) purchased or sold, transferred, exchanged, licensed or otherwise disposed of any material properties or assets other than sales of inventory in the Ordinary Course of Business;

(h) disclosed to any Person without obtaining an appropriate confidentiality agreement from any such Person any trade secret, source code, formula, process or know-how not theretofore a matter of public knowledge;

(i) permitted any insurance policy naming Seller as a beneficiary or loss payee to expire, or to be canceled or terminated; or

(j) agreed, whether in writing or otherwise, to take any of the foregoing actions, other than negotiations with Purchaser regarding the transactions contemplated by this Agreement.

6.7 Real Property .

(a) Seller does not own any real property. The sole locations at which Seller has any offices or facilities and from which Seller conducts its operations are located at 7434, 7436, 7438, 7450-7460 and 7532 Scout Avenue, Bell Gardens, California (the “ Premises ”). Seller leases the Premises pursuant to the Lease. Other than the Premises, Seller does not lease or otherwise use or occupy or conduct its operations in any other location or facility. Seller has provided to Purchaser a true, correct and complete copy of the Lease, including all amendments, supplements, estoppel certificates and nondisturbance, subordination and attornment agreements and all settlement agreements relating thereto.

(b) To Seller’s Knowledge, the Lease is a valid and binding obligation of Seller and, to Seller’s Knowledge, the Landlord and is in full force and effect.

(c) Neither Seller, nor to Seller’s Knowledge, any other party to the Lease is in default with respect to any term or condition of the Lease, and to Seller’s Knowledge, no event has occurred that (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default thereunder, cause the acceleration of any obligation of Seller or any other party to the Lease, or create any Encumbrance upon any of the Purchased Assets.

(d) All of the buildings, fixtures and other improvements or activities located on the Premises are in good operating condition and repair, reasonable wear and tear excepted, and do not violate any applicable code, zoning ordinance or other Applicable Laws, or violate any provision of the Lease in any material respect.

6.8 Tangible Personal Property . Section 2.2(a) of the Disclosure Schedule sets forth a complete list of each item of Personal Property owned or leased or otherwise used by the Seller in the conduct of its operations (other than the Excluded Assets). All such Personal Property are in good condition and repair, ordinary wear and tear excepted. At Closing, all such Personal Property shall be free and clear of Encumbrances, except Permitted Encumbrances. There are no claims, pending or to Seller’s Knowledge threatened, of or by third parties that, with the passage of time, or giving of notice, or both, will create an Encumbrance on any item included in or comprising the Personal Property or on any other assets of Seller, except the Permitted Encumbrances.

6.9 Contracts .

(a) Section 6.9(a) of the Disclosure Schedule sets forth a list of all Contracts to which Seller is a party or by which its operations is bound, including the Assumed Contracts. Each Assumed Contract is a valid and binding obligation of the Seller and to Seller’s Knowledge, each Assumed Contract is a valid and binding obligation of the other party or parties to such Assumed Contract, is enforceable in accordance with its terms, and is in full force and effect.

(b) Except as set forth in Section 6.9(b) of the Disclosure Schedule, (i) Seller is not a party to any Contract with Parent or any Affiliate of Parent and (ii), Seller does not have any Liabilities to Parent or any Affiliate of Parent, and neither Parent nor any Affiliate of Parent has any Liabilities to Seller.

(c) Neither Seller, nor to Seller’s Knowledge, any other party to any Assumed Contract, is in default with respect to any term or condition of such Assumed Contract, and to Seller’s

Knowledge, no event has occurred that (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default thereunder, cause the acceleration of any obligation of Seller or any other party to such Assumed Contract, or create any Encumbrance upon any of the Purchased Assets.

(d) Except as specifically identified as such on Section 6.9(d) of the Disclosure Schedule, no Government Contract is premised on Seller’s small business status, small disadvantaged business status, protégé status or other preferential status. With respect to each Government Contract, to Seller’s Knowledge, there are no pending or threatened: (i) civil fraud or criminal investigations by any government investigative agency, (ii) suspension or debarment proceedings (or equivalent proceedings) against Seller, (iii) requests by the government for a contract price adjustment based on a claim disallowance by the Office of Inspector General or Defense Contract Audit Agency or similar agency, or claim of defective pricing, or (iv) disputes between Seller and the government. With respect to any Government Contract which expired, or was terminated, or for which final payment was made within three (3) years prior to the date hereof there are no requests by any state, local or foreign government or any agency or department thereof for a contract price adjustment based upon a claim of defective pricing. Seller has not taken any action and is not a party to any Proceeding that would reasonably be extended to give rise to Liability under the civil or criminal False Claims Act or a claim for price adjustment under the Truth in Negotiations Act. Seller has complied, in all material respects, with all terms and conditions of each Government Contract and government bid to which it is a party and has complied, in all material respects, with all statutory and regulatory requirements, related cost principles and cost accounting standards, where and as applicable to each Government Contract and government bid. During the last five (5) years, Seller has not made any voluntary disclosure in writing to any Governmental Body with respect to any material alleged irregularity, misstatement or omission arising under or relating to a Government Contract or government bid.

6.10 Legal Proceedings . Other than as set forth in Section 6.10 of the Disclosure Schedule, there are no Proceedings pending, or, to the Knowledge of Seller, threatened against, relating to Seller or its operations (or Parent or any Affiliate of Parent in relation to the Seller or Seller’s operations) before any court, arbitrator or administrative or other Governmental Body.

6.11 Environmental Matters .

(a) Seller has not used any premises or the Premises or the Purchased Assets to generate, manufacture, refine, transport, treat, store, handle, or dispose of any Hazardous Substances except in compliance, in all material respects, with Environmental Health, and Safety Requirements;

(b) Seller has not released any Hazardous Substances at the Premises in a manner or at levels requiring remedial action under Environmental Health, and Safety Requirements. To Seller’s Knowledge, the Premises are not contaminated with any Hazardous Substances in a manner or at levels requiring remedial action under Environmental Health, and Safety Requirements. There are no regulated hazardous waste treatment, storage or disposal facilities, as those terms are defined under applicable Environmental Health, and Safety Requirements, located at the Premises;

(c) Seller has not transported or disposed of, or allowed or directed any third Person to transport or dispose of, any waste containing Hazardous Substances except in material compliance with Environmental Health, and Safety Requirements;

(d) Except as set forth in the Executive Summary of that Phase I Environmental Site Assessment and Limited Compliance Review report, dated November 2010, in the form provided to Purchaser, Seller has not received a citation, directive, letter, notice of violation or other written communication from any Person or Governmental Body concerning the presence of any Hazardous Substances on the Premises or concerning Seller’s actual or potential Liability under any Environmental Health, and Safety Requirements resulting from such presence;

(e) To Seller’s Knowledge there are no Hazardous Substances present at adjacent properties which are migrating to, through, or under the Premises;

(f) No action has been commenced or threatened in writing regarding Seller’s compliance with or Liability under any Environmental Health, and Safety Requirements at or concerning the Premises; and

(g) Seller has provided to Purchaser complete copies of all environmental reports and studies conducted by or for Seller with respect to the Premises.

6.12 Licenses, Permits and Authorizations .

(a) Section 2.2(d) of the Disclosure Schedule contains a complete list of all Permits and Licenses of Seller. Other than the Permits and Licenses set forth in Section 2.2(d) of the Disclosure Schedule, there is no other permit, license or other authorization of a Governmental Body that is required for the ownership of the Purchased Assets or material to Seller’s operations.

(b) Seller has obtained and continues to have all Permits and Licenses and has made all filings with any Governmental Body which may be required under the terms of any Permit or License.

(c) Each of the Permits and Licenses are in full force and effect and no material violations are recorded with respect to any Permit or License, and no proceeding is pending, or, to Seller’s Knowledge, threatened in writing, to revoke or limit any Permit or License.

6.13 Labor Matters .

(a) Section 6.13(a) of the Disclosure Schedule contains a true and complete list of the persons employed by Seller as of the date of this Agreement (the “ Current Employees ”), their respective dates of hire by Seller, current positions, current compensation under Seller’s existing employment policies, and the amount and nature of any severance obligations that Seller would have to them in the event of their termination of employment by Seller.

(b) No material grievance exists between Seller and any of the Current Employees. Seller is not delinquent in the payments to any of the Current Employees for any wages, salaries, commissions, bonuses or other direct or indirect compensation for any services performed by them to the date of this Agreement or for any amounts required to be reimbursed to the Current Employees. Seller has delivered or made available to Purchaser true and complete copies of all handbooks and manuals. Seller is in material compliance with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practices. There is no collective bargaining agreement in effect with respect to the Current Employees. Seller has not experienced any strike or work stoppage or other industrial dispute involving its employees in the past five (5) years.

(c) Seller is and will be in full compliance with the Worker Adjustment and Retraining Notification Act of 1989 (the “ WARN Act ”, codified at 29 USC §2101 et seq.) and any applicable state laws of a similar nature, including the prompt and correct furnishing of all notices required to be given thereunder in connection with any “plant closing” or “mass layoff” to “affected employees”, “representatives” and any state dislocated worker unit and local government officials. No reduction in the notification period under the WARN Act is being relied upon by Seller.

(d) There have been no federal Occupational Safety and Health Administration (“ OSHA ”) inspections, or inspections by any comparable state or local agencies of Seller within the last three (3) years. There have been no OSHA citations or citations by comparable state and local authorities received by Seller within the last three (3) years. Seller has complied in all material respects with the Occupational Safety and Health Act and has accurately completed reports and timely filed all reports required by OSHA relating to Seller.

(e) Section 6.13(e) of the Disclosure Schedule sets forth a list of (i) each employee who is eligible to request leave under the United States Family and Medical Leave Act or otherwise (“ Leave ”) as of the Closing Date and the amount of Leave utilized by each such employee during the current leave year; (ii) each employee who will be on Leave at the Closing Date and his or her job title and description, salary and benefits; and (iii) each employee who has requested Leave to begin after the Closing Date, a description of the leave requested and a copy of all notices provided to such employee regarding such leave.

6.14 Intellectual Property .

(a) Section 6.14(a) of the Disclosure Schedule sets forth a true, correct and complete list of all Intellectual Property owned by Seller (“ Seller Owned Intellectual Property ”) or licensed to Seller (“ Licensed Intellectual Property ,” and together with the Seller Owned Intellectual Property, the “ Seller Intellectual Property ”), except for Off the Shelf Software, and all agreements between Seller and third parties relating to the development or use of Seller Intellectual Property, except for Off the Shelf Software. All necessary registration, maintenance and renewal fees due prior to the Closing in connection with any Seller Owned Intellectual Property that are registered with a Governmental Body have been made and all necessary documents, recordations, certifications and renewals in connection with such registered Seller Owned Intellectual Property have been filed with the relevant Governmental Body for the purpose of maintaining such registered Seller Intellectual Property. Seller has not used the Off the Shelf Software in excess of the number of permitted users for such Off the Shelf Software.

(b) All of the Seller Owned Intellectual Property is valid, subsisting and enforceable, free and clear of all Encumbrances, and Seller has taken all necessary and customary actions to maintain and protect the Seller Owned Intellectual Property.

(c) (i) There are no claims against Seller that were either made within the past four (4) years or are presently pending or, to Seller’s Knowledge, threatened, contesting the validity, use, ownership, enforceability or registrability of any Seller Intellectual Property; (ii) to Seller’s Knowledge, Seller has not infringed, misappropriated, acted adversely to, or otherwise conflicted with, and Seller’s operations as currently conducted, do not and will not infringe, misappropriate, act adversely toward or otherwise conflict with, any Intellectual Property of any other Person, and Seller is not aware of any facts which indicate a likelihood of any of the foregoing, and no claim is pending or threatened against Seller alleging any of the foregoing; and (iii) to Seller’s Knowledge, no other

Person is engaging in any activity or using any intellectual property that infringes, dilutes, misappropriates or otherwise violates or conflicts with Seller Intellectual Property. Purchaser’s use of the Seller Owned Intellectual Property after the Closing, and to Seller’s Knowledge Purchaser’s use of the Licensed Intellectual Property after the Closing, in substantially the same manner used by Seller prior to the Closing will not infringe, misappropriate, act adversely toward or otherwise conflict with, any Intellectual Property of any other Person.

(d) Subject to Section 12.4, Seller has taken reasonable steps to maintain the confidentiality of its trade secrets and other confidential Seller Intellectual Property; provided, however, that Seller has not entered into any confidentiality or invention assignment agreements with its Current Employees. Seller has taken reasonable steps to protect its rights in its confidential information and any trade secret or confidential information of third parties used by Seller, and, except under confidentiality obligations, there has not been any material disclosure by Seller of any confidential information or any such trade secret or confidential information of third parties.

(e) Seller’s employees have signed an acknowledgment and agreement to be bound by Seller’s employee handbook which contains a confidentiality obligation on the part of Seller’s employees.

6.15 Compliance with Applicable Law .

(a) Seller has complied in all material respects with all Applicable Laws.

(b) Without limiting the generality of Section 6.15(a), except as set forth in Section 6.15(b) of the Disclosure Schedule, Seller is in compliance in all material respects with all applicable U.S. and foreign import and export laws and regulations, including to the extent applicable to Seller those specified in (i) the International Traffic in Arms Regulations (ITAR), 22 CFR Part 120 et seq., including the manufacture, brokering, sale or export of “defense articles” or the furnishing or export of “defense services” or “technical data” to foreign nationals in the United States or abroad, as those terms are defined in 22 CFR Sections 120.6. 120.9 and 120.10, respectively, (ii) the Export Administration Regulations (EAR), 15 CFR Part 730 et seq., and (iii) the regulations of the United States Treasury Office of Foreign Asset Control (OFAC), 31 Part 500 et seq. Except as set forth in Section 6.15(b) of the Disclosure Schedule, Seller has not, since its inception, violated in any material respect any U.S. or foreign import, export or re-export laws or regulations or any U.S. or foreign sanctions, unlawful boycotts or embargoes, or been the subject of an investigation or other inquiry concerning imports, exports, re-exports, sanctions, embargoes or unlawful boycotts or subject to civil or criminal penalties imposed by a Governmental Body, or made a voluntary disclosure with respect to violations or alleged violations of those laws or regulations.

6.16 Taxes .

(a) All Tax Returns required to have been filed by or with respect to Seller or its assets have been duly and timely filed (taking into account applicable extensions of time to file) by Seller and Parent, and each such Tax Return correctly and completely reflects all Liabilities for Taxes in all material respects and correctly and completely in all material respects reflects all other information required to be reported thereon. Seller is not the beneficiary of any extension of time within which to file any Tax Return. No power of attorney has been granted by Seller with respect to any matter relating to Taxes which is currently in force.

(b) All Taxes owed by Seller (whether or not shown on any Tax Return) and by Parent in relation to Seller have been timely paid. All premiums, contributions and assessments relating to workers compensation or similar have been timely made. The provision for Taxes on the Financial Statements is sufficient for all accrued and unpaid Taxes, whether or not due and payable and whether or not disputed, of Seller as of the date thereof, and Seller has not incurred or become subject to any Tax since the date of the Financial Statements except for Taxes incurred in the Ordinary Course of Business. Seller has adequately provided for, in books of account and related records, Liability for all unpaid Taxes of Seller, being current Taxes not yet due and payable.

(d) Seller has withheld and timely paid all Taxes required to have been withheld and paid and has complied with all information reporting and backup withholding requirements, in all material respects.

(e) There is no audit, claim, action, suit, proceeding or investigation currently pending against Seller (nor Parent to the extent relating to Seller) in respect of any Taxes nor has Seller (nor Parent to the extent relating to Seller) been informed in writing of the commencement or anticipated commencement of any such activity. To Seller’s Knowledge, no such activity has been threatened by any Governmental Body. There are no Encumbrances on any of the assets of Seller that arose in connection with any failure (or alleged failure) to pay any Tax, except for Permitted Encumbrances. Seller (or Parent to the extent relating to Seller) has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(f) Seller has not received notice (either in writing or verbally, formally or informally) from any jurisdiction or taxing authority that it has not filed a Tax Return or paid Taxes required to be filed or paid by it.

(g) Seller will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Code §481(c) (or any corresponding or similar provision of state, local or foreign income Tax law); (ii) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax law); (iii) installment sale or “open transaction” made prior to the Closing Date; (iv) prepaid amount received on or prior to the Closing Date or (v) election under Section 108(i) of the Code.

6.17 Insurance .

(a) Seller has maintained in effect and presently has in effect all errors and omissions, directors and officers, workers compensation, employee professional liability and fiduciary liability insurance policies, and all other insurance policies, required by law and reasonably appropriate in connection its operations. Set forth in Section 6.17 of the Disclosure Schedule is a true and complete list of each insurance policy related to the Seller’s operations (including policies providing property, casualty, liability, errors and omissions, and workers compensation coverage). Also set forth in Section 6.17 of the Disclosure Schedule is a list of all claims that have been tendered by the Company under any such insurance policies in the past three (3) years and a summary or the disposition of such claims.

(b) With respect to each such insurance policy: (i) such policy is valid, legally binding, enforceable in accordance with its terms, and in full force and effect in all respects as to Seller, and all premiums due thereunder have been paid, and no notice of cancellation or termination has been received by Seller with respect to such policies; (ii) to Seller’s Knowledge, such policy is valid, legally binding, enforceable in accordance with its terms, and in full force and effect in all respects as to the applicable insurance carrier: (iii) to Seller’s Knowledge, no event has occurred which would permit termination, modification, or acceleration, under such policy; and (iii) to Seller’s Knowledge, no other party to such policy has repudiated any provision thereof.

6.18 Employee Benefits .

(a) Section 6.18 of the Disclosure Schedule lists each Employee Benefit Plan of Seller.

(b) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan and complies in form and in operation in all material respects with the applicable requirements of Applicable Laws, and Seller is not in default under any Employee Benefit Plan.

(c) All contributions (including all employer contributions and employee salary reduction contributions) that are due have been made to each such Employee Benefit Plan. All premiums or other payments that are due have been paid with respect to each such Employee Benefit Plan.

6.19 Customers and Suppliers . Section 6.19 of the Disclosure Schedule contains a true, correct and complete list of the names and addresses of the Seller’s largest Customers with respect to revenues that comprise at least eighty percent (80%) of Seller’s aggregate revenues (the “ Top Customers ”) and largest suppliers with respect to expenditures that comprise at least eighty percent (80%) of Seller’s aggregate vendor expenses (the “ Top Suppliers ”) for the period between January 1, 2015 and June 15, 2015. To Seller’s Knowledge, Seller maintains good commercial relations with each of its Top Customers and Top Suppliers and, to Seller’s Knowledge, no event has occurred that could materially and adversely affect Seller’s relations with any such Top Customer or Top Supplier. Except as set forth in Section 6.10 of the Disclosure Schedule, no Top Customer or Top Supplier during the prior twelve (12) months has canceled or terminated in writing or, to Seller’s Knowledge, made any threat to cancel or otherwise terminate any Contracts with Seller or to decrease in any material respect such Top Customer’s usage of Seller’s services or products or such Top Supplier’s supply of services or products to Seller. Seller has not received any written notice and does not have any Knowledge to the effect that any current Top Customer or Top Supplier may terminate or materially alter its business relations with Seller, either as a result of the transactions contemplated hereby or otherwise.

6.20 Claims by Customers or Suppliers . Section 6.20 of the Disclosure Schedule sets forth an accurate and complete list of all claims for breach of Contract made by any Customer or supplier of Seller in writing in the two (2) years prior to the date hereof.

6.21 Inventory . Seller’s inventory consists of raw materials and supplies, manufactured and purchased parts, work in process and finished goods (collectively, “ WIP ”), all of which are usable (which for clarification does not mean that all WIP will be used or that all WIP is without defects) and, with respect to finished goods, saleable, in the Ordinary Course of Business, except (i) for WIP which have been written off or written down to net realizable value in the Financial Statements, and (ii) as set forth on Section 6.21 of the Disclosure Schedule. All of Seller’s inventory has been valued at cost.

6.22 Product Warranties; Product Liability; and Regulation .

(a) Section 6.22(a) of the Disclosure Schedule contains the standard forms of product warranty of Seller. Seller has not undertaken any performance obligations or made any warranties or guarantees with respect to the Purchased Assets or any Seller Products, other than those disclosed in Section 6.22(a) of the Disclosure Schedule or as set forth in the Assumed Contracts, and the aggregate cost to Seller to comply with the product warranties is properly reflected in the Seller’s Books and Records in accordance with GAAP. The reserves for product warranties reflected in the Most Recent Balance Sheet are reasonable and adequate to cover all warranty claims in the succeeding twelve (12) months. Except as described in Section 6.22(a) of the Disclosure Schedule, each Seller Products: (i) is, and at all times during the last two (2) years has been, in compliance, in all material respects, with all Applicable Laws; and (ii) is, and at all relevant times during the last two (2) years has been, fit for the ordinary purposes for which it is intended to be used in all material respects and conforms in all material respects to any promises or affirmations of fact made in the warranty or on the label for such product or in connection with its sale, whether through advertising or otherwise. There are no rights of return or other agreements between Seller and any customer of the Seller which would cause any material amount of sales reflected in Seller’s Financial Statements to fail to qualify as sales in accordance with GAAP or Seller’s revenue recognition policy as reflected in the Financial Statements.

(b) There is no patent design defect or, to Seller’s Knowledge, latent design defect with respect to any Seller Product, and each of the Seller Products contains warnings, in accordance with Applicable Laws with respect to its contents and use. Except as described in Section 6.22(b) of the Disclosure Schedule, since Seller’s inception, Seller has not recalled any products manufactured, serviced, distributed, leased, or sold by Seller and Seller has no Knowledge of a reasonable basis for any such recall on or after the Closing Date. There are no claims, actions or suits by any Person or Governmental Body and, to Seller’s Knowledge, there are no inquiries, proceedings or investigations by a Governmental Body pending against Seller, relating to any of the Seller Products that contain allegations that defects in such products (including defects in design or manufacture or improper labeling) caused (or pose an unreasonable risk of causing) bodily injury, death or property damage.

(c) During the last two (2) years, the design, content and labeling of all Seller Products, already sold, manufactured for sale or planned for manufacture comply in all material respects with all consumer protection safety regulations and other Applicable Laws, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been delivered to Seller or to Seller’s Knowledge filed or commenced against any of them alleging any failure to comply.

(d) Except as set forth on Section 6.22(d) of the Disclosure Schedule, each Seller Product manufactured, sold, leased, or delivered by Seller has been in conformity with all applicable contractual specifications and all express and implied warranties made by Seller (except to the extent non-conformity is not material), and Seller has no Liability (and there is no basis for any present or future Proceeding against it giving rise to any Liability for replacement or repair thereof or other damages in connection therewith). Seller (i) is in compliance with all applicable regulations, directives, advisory circulars or similar official documents (collectively, “ Aviation Regulations ”) issued by the Federal Aviation Administration, the European Aviation Safety Agency and/or foreign aviation authorities (collectively, “ Aviation Authorities ” ), (ii) has not violated in any material respect, or been to Seller’s Knowledge subject to an investigation with respect to, or made voluntary disclosures with respect to potential violations of any Aviation Regulations, and (iii) has received a citation from the Aviation Authorities for any discrepancies or violations during inspections or audits during the last two (2) years. To Seller’s Knowledge, no Person has written or issued any Service Bulletins or

any other Proceedings as to Seller or any products of Seller at any time during the last two (2) years, and no such Bulletins or other Proceedings are pending. No Aviation Authorities have issued any Air Worthiness Directives or similar directives as to Seller or any products of Seller at any time during the last two (2) years, and no such directives are pending. To the extent applicable to Seller, all security measures required by the Department of Defense Industrial Security Manual have been implemented in all material respects.

(e) All products sold by Seller pursuant to qualification requirements established by its customers were produced in a manner consistent in all material respects with such qualification requirements except for individual defective products produced in the Ordinary Course of Business. Seller has not received notice that any qualifications for its products as established by its customers have been revoked or terminated as a result of the failure of products manufactured by it to meet the specifications required by such qualifications and no such revocation or termination is, to Seller’s Knowledge, threatened or contemplated. Seller is currently not required to hold any security clearances to perform its obligations under any Government Contract.

6.23 Certain Payments . Neither Seller nor Parent or any director, officer, agent, employee or other Person acting on their behalf has used any funds in connection with or related to the Purchased Assets or the Seller for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to domestic or foreign government officials or others. Seller has reasonable financial controls to prevent such unlawful contributions, payments, gifts, entertainment or expenditures. Neither Seller nor, to Seller’s Knowledge, any director, officer, agent, employee or other Person acting on behalf of any of Seller, has accepted or received any unlawful contributions, payments, gifts or expenditures. Seller has at all times in the past four (4) years complied, and is in compliance, in all respects with the Foreign Corrupt Practices Act and all Applicable Laws relating to the prevention of corrupt practices and similar matters.

6.24 Brokerage and Finder’s Fees . There is no Liability on the part of Seller to any broker, finder or agent for brokerage fees, finder’s fees or commissions with respect to the transactions contemplated by this Agreement and no broker, finder or agent has any claim for any such brokerage fees, finder’s fees or commissions.

6.25 Disclosure . To Seller’s Knowledge, the representations and warranties made by Seller under Article 6 do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading, except as set forth on the disclosure schedules. To Seller’s Knowledge, copies of all documents heretofore or hereafter delivered or made available by Seller or its representatives to Purchaser or its representatives in connection with this Agreement and the other Transaction Documents were complete and accurate records of such documents in all material respects.

ARTICLE 7

DISCLAIMERS OF OTHER REPRESENTATIONS AND WARRANTIES

7.1 Disclaimer of Warranties . EACH OF SELLER AND PURCHASER ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 6 AND ARTICLE 8, NEITHER SELLER NOR PURCHASER MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, UNDER THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND ANY SUCH OTHER

REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED, EXCEPT ANY IMPLIED WARRANTIES THAT RELATE TO PRODUCTS DELIVERED OR INTENDED TO BE DELIVERED TO CUSTOMERS.

ARTICLE 8

REPRESENTATIONS AND WARRANTIES OF PURCHASER

As of the Closing, Purchaser represents and warrants to Seller as follows:

8.1 Authorization and Enforcement . Purchaser has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations under this Agreement and the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. This Agreement and the other Transaction Documents to which Purchaser is a party, have been duly authorized by all required company action on the part of Purchaser, and when duly executed and delivered by Purchaser, Seller and Parent, as applicable, will constitute the valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with their terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditor’s rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

8.2 Absence of Restrictions and Conflicts; Consents . The execution, delivery and performance of this Agreement and the other Transaction Documents to which Purchaser is a party, the consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which Purchaser is a party and the fulfillment of and compliance with the terms and conditions of this Agreement and the other Transaction Documents to which Purchaser is a party do not and will not, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under (i) Purchaser’s Organizational Documents, (ii) any judgment, decree or order any court or Governmental Body to which Purchaser is a party or by which Purchaser is bound, (iii) any Contract to which Purchaser is a party or by which Purchaser is bound, or (iv) any statute, law, regulation or rule applicable to Purchaser.

ARTICLE 9

EMPLOYEES; CERTIFICATES OF INSURANCE

9.1 Employees of Seller .

(a) Except for the Retained Employee and the other employees of Seller to whom Purchaser has elected not to make offers of employment who are identified in Schedule 9.1 hereto (the “ Excluded Employees ”), the parties acknowledge that Purchaser shall offer to hire and employ (on an “at will” or other basis, as elected by Purchaser), effective as of 11:59 p.m. on the Closing Date, all of the Current Employees (Current Employees who are offered employment by the Purchaser and who accept such offer (as evidenced by oral or written acceptance or such offer, or by the continued provision of services to Purchaser by such Current Employee after the Closing) referred to herein as the “ Transferred Employees ”), with compensation substantially similar to those provided by Seller prior to Closing and for positions comparable to the positions the Transferred Employees had with Seller and, subject to Section 9.1(d), standard employee benefits provided by Purchaser to its

employees. Immediately prior to the Closing, Seller will terminate the employment of the Transferred Employees. As of the Closing, Purchaser shall employ the Transferred Employees. Nothing herein shall be construed to prevent Purchaser from terminating the employment of any Transferred Employees at any time after the Closing for any reason or no reason at all or from amending or terminating any benefit plan in which the Transferred Employees participate at any time after the Closing. Furthermore, notwithstanding the foregoing, nothing contained herein shall be treated as an amendment to any particular Employee Benefit Plan of Purchaser or Seller or give any third party the right to enforce any of the provisions of this Agreement.

(b) To the extent permitted by Applicable Law and Purchaser’s Employee Benefit Plans, Purchaser will give each Transferred Employee full credit for all service credited by Seller, as if such service had been with Purchaser or its Affiliates, for purposes of eligibility to participate in, vesting and payment of benefits under (but not for purposes of determining the amount of any benefit under) any employee retirement or health benefit plans maintained by the Purchaser.

(c) To the extent permitted by any Applicable Laws and Purchaser’s Employee Benefit Plans, Purchaser will waive or cause to be waived any eligibility period, preexisting condition limitations, and evidence of insurability requirements under any such plans that provide welfare benefits. Purchaser will give credit (or cause its insurance carriers to give credit) to each Transferred Employee, on a dollar-for-dollar basis, toward the deductible and co-payment requirements of any group health plans for any such amounts paid by any Transferred Employee (or eligible dependent) under the Seller’s applicable group health plan for the plan year during which the Closing occurs (the “ Deductible Amounts ”); provided, that Seller and Purchaser shall each pay for one-half of such Deductible Amounts, and provided further that Seller has paid such amount to Purchaser on the date hereof pursuant to Section 4.1.

(d) From and after the Closing Date until July 31, 2015, Seller agrees that it will allow the Transferred Employees to participate in its medical and dental plans that such Transferred Employees were participating in prior to the Closing (the “ Continued Plans ”); provided, that Purchaser shall reimburse Seller for all monthly premium payments relating to the Continued Plans for the period beginning on the first date following the Closing Date and ending on July 31, 2015 (the “ Continued Plan Amount ”) pursuant to Section 4.1. Beginning on August 1, 2015, Purchaser agrees to permit each Transferred Employee to enroll in Purchaser’s medical and dental plans pursuant Purchaser’s Employee Benefit Plans.

(e) From the Closing Date to December 31, 2015, Seller shall make the Retained Employee available to the Purchaser for forty (40) hours per week as a consultant to assist Purchaser in the transition of operations (the “ Services ”), provided that Retained Employee is an employee of Seller or its Affiliates. In exchange for the Services, the Purchaser shall pay a monthly fee to Seller (pro-rated for partial months) in an amount equal to $14,730 per month on the first date of each month. Purchaser shall be entitled to terminate the employment of the Retained Employee, with or without cause, upon 5 days’ prior written noticed delivered to the Seller, Parent and the Retained Employee. Purchaser acknowledges that Seller and its Affiliates are not engaged in the business of providing the Services and that the Services are provided as an accommodation in connection with the transactions contemplated by this Agreement. Seller and its Affiliates make no warranties, express or implied, with respect to the Services. None of Sellers or its Affiliates or any of their respective officers, directors, managers, employees, agents, representatives, attorneys-in-fact, subcontractors or contractors shall be liable for any action taken or omitted to be taken by it or such Person under or in connection with the Services; provided, however, that the immediately preceding limitation shall

not apply to any losses, liabilities or damages incurred by Purchaser arising out of the gross negligence or intentional misconduct by Seller or its Affiliates in the performance or nonperformance of the Services. Notwithstanding the foregoing, the Retained Employee shall remain an employee of Seller who is on loan to Buyer on a temporary basis, and Seller shall be solely responsible for complying with (and shall comply with) all obligations of an employer under Applicable Laws, including wage withholdings and wage reporting and providing compensation, employee benefits and Workers’ Compensation insurance.

(f) Seller will pay its employees, including, without limitation, all Transferred Employees, all wages, severance, vacation pay or any other compensation due for services rendered prior to the Closing when due in accordance with Applicable Laws and the terms of any applicable plans, agreements, policies or arrangements.

(g) Notwithstanding anything herein to the contrary, this Section 9.1 is for the benefit of the Parties hereto, and shall not create any contractual right on behalf of any Transferred Employee or the Retained Employee, none of whom shall constitute third-party beneficiaries under this Agreement. Likewise, nothing in this Section 9.1 shall constitute any contract or guarantee of continuing employment for any Transferred Employee. Further, nothing herein shall be treated as an amendment to any particular Employee Benefit Plan.

ARTICLE 10

[RESERVED]

ARTICLE 11

INDEMNIFICATION

11.1 Indemnification by Seller and Owners . Seller shall indemnify, defend and hold Purchaser, and its Affiliates and their respective shareholders, members, managers, officers, directors, employees, agents, successors and assigns (the “ Purchaser Indemnified Parties ”) harmless against and in respect of any and all claims, demands, losses, costs, expenses (including expert witness fees, and attorney’s fees), obligations, Liabilities judgments, damages, recoveries, and deficiencies, including interest, penalties (collectively, “ Claims ”) that Purchaser Indemnified Parties shall incur or suffer that arise from, result from, or relate to:

(n) any Excluded Liabilities;

(o) without limiting the generality of Section 11.1(a), all Proceedings identified in Section 6.10 of the Disclosure Schedule;

(p) any breach of any representation, warranty or covenant or non-fulfillment of any agreement on the part of Seller under this Agreement or the other Transaction Documents or from any misrepresentation in or material omission from any certificate or other instrument provided by Seller to Purchaser pursuant to or in connection with this Agreement or the other Transaction Documents, or any claim made by third parties that if true, would constitute any such misrepresentation, breach of warranty, covenant or non-fulfillment;

(q) any noncompliance with Division Six of the California Commercial Code (Bulk Sales) (the “ Bulk Sales Law ”) or fraudulent transfer law in respect of the transactions contemplated in this Agreement;

(r) any failure to obtain the tax clearance certificate from the California Employment Development Department prior to the Closing;

(s) any failure to obtain the tax clearance certificate issued by the California Board of Equalization prior to the Closing;

(t) Seller’s ownership or operation of the Purchased Assets and Excluded Assets prior to the Closing; and/or

(u) the ownership or operation of Seller (excluding (for the avoidance of doubt) the Purchased Assets and the Transferred Employees) after the Closing.

11.2 Indemnification by Purchaser . Purchaser shall indemnify, defend, and hold harmless Seller and its Affiliates and their respective managers, officers, directors, employees, agents, successors and assigns (the “ Seller Indemnified Parties ”) from and against, and to the extent of, any and all Claims that Seller Indemnified Parties shall incur or suffer that arise from, result from, or relate to (a) any breach of any representation, warranty or covenant or non-fulfillment of any agreement of Purchaser under this Agreement, or any claim made by third parties that if true, would constitute any such breach; (b) the Assumed Obligations; or (c) the Purchaser’s ownership or operation of Purchased Assets after the Closing. For purposes of this Agreement, the reference to “ownership” of the Purchased Assets in the preceding clause (c) shall not in any way ameliorate or otherwise affect Seller’s representations and warranties relating to Seller’s ownership of or title to the Purchased Assets set forth in Article 6 above.

11.3 Indemnification Procedure .

(a) Promptly following receipt by a Purchaser Indemnified Party or Seller Indemnified Party, as the case may be (the “ Indemnified Party ”) of notice by a third party (including any Governmental Body) of any complaint, dispute or claim or the commencement of any audit, investigation, action or proceeding with respect to which such Indemnified Party may be entitled to indemnification pursuant hereto (a “ Third Party Claim ”), such Indemnified Party shall promptly provide written notice thereof to the party obligated to indemnify under this Agreement (the “ Indemnifying Party ”); provided, however, that the failure to so notify the Indemnifying Party shall relieve the Indemnifying Party from Liability hereunder with respect to such Third Party Claim only if, and only to the extent that, such failure to so notify the Indemnifying Party results in the forfeiture by the Indemnifying Party of rights and defenses otherwise available to the Indemnifying Party with respect to such Third Party Claim or otherwise prejudices the Indemnifying Party. The Indemnifying Party shall have the right, upon written notice delivered to the Indemnified Party within twenty (20) days thereafter to assume and control the defense of such Third Party Claim, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of the fees and disbursements of such counsel; provided that if (i) there is an actual conflict of interest arising from the joint representation of the Indemnifying Party and the Indemnified Parties by the same counsel which would prejudice the Indemnified Party, (ii) the claim for indemnification is with respect to a criminal proceeding, action, indictment, allegation or investigation against the Indemnified Party, (iii) if the Indemnifying Party has assumed the defense of a Third Party Claim but has not diligently continued to prosecute or defend such Third Party Claim, and has not cured such deficiency in the

prosecution or defense of such Third Party Claim within thirty (30) days of receipt of written notice of such deficiency by the Indemnified Party, or (iv) the claim seeks an injunction or other equitable relief against the Indemnified Party; then the Indemnified Party may assume and control the prosecution or defense of the Third Party Claim, and (A) the Indemnifying Party shall not be entitled to assume the defense of any such claim or action, (B) the Indemnified Party shall have the right to conduct and control the defense of such action or claim with counsel of its choosing and the reasonable legal and other expenses incurred by the Indemnified Party shall be borne by the Indemnifying Party, and (C) the Indemnifying Party shall be bound by any defense or settlement that the Indemnified Party shall make in respect to such action or claim. If notice is given to an Indemnifying Party of the commencement of any Third Party Claim and the Indemnifying Party does not, within thirty (30) days after the Indemnified Party’s notice is given, give notice to the Indemnified Party of its election to assume the defense of such Third Party Claim, the Indemnifying Party will be bound by any determination made in such Third Party Claim or any compromise or settlement effected by the Indemnified Party. Subject to the foregoing provisions in this Section 11.3(a), in any Third Party Claim for which indemnification is being sought hereunder the Indemnified Party or the Indemnifying Party, whichever is not assuming the defense of such Third Party Claim, shall have the right to participate in such matter and to retain its own counsel at such Party’s own expense. The Indemnifying Party or the Indemnified Party (as the case may be) shall at all times use reasonable efforts to keep the Indemnifying Party or Indemnified Party (as the case may be) reasonably apprised of the status of the defense of any matter the defense of which it is maintaining and to cooperate in good faith with each other with respect to the defense of any such matter.

(b) No Indemnified Party may settle or compromise any Third Party Claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder without the prior written consent of the Indemnifying Party (which may not be unreasonably withheld or delayed), unless the Indemnifying Party fails to assume and maintain diligently the defense of such Third Party Claim pursuant to Section 11.3(a). An Indemnifying Party may not, without the prior written consent of the Indemnified Party, settle or compromise any Third Party Claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless such settlement, compromise or consent (i) includes an unconditional release of the Indemnified Party and its officers, shareholders, members, employees and affiliates from all Liability arising out of, or related to, such Third Party Claim, (ii) does not contain any admission or statement suggesting any wrongdoing or Liability on behalf of the Indemnified Party, and (iii) does not contain any equitable order, judgment or term that in any manner affects, restrains or interferes with the business of the Indemnified Party or any of the Indemnified Party’s affiliates and (iv) in the case of a Third Party Claim related to Taxes, could not cause an increase in the Taxes of Purchaser for any taxable period beginning after the Closing Date.

(c) In the event an Indemnified Party claims a right to payment pursuant hereto with respect to any matter not involving a Third Party Claim (a “ Direct Claim ”), such Indemnified Party shall send written notice of such claim to the appropriate Indemnifying Party (a “ Notice of Claim ”). Such Notice of Claim shall specify the basis for such Direct Claim. The failure by any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any Liability that it may have to such Indemnified Party with respect to any Direct Claim made pursuant to this Section 11.3(c), except to the extent such failure has prejudiced the Indemnifying Party, it being understood that Notices of Claim in respect of a breach of a representation or warranty must be delivered prior to the expiration of the survival period for such representation or warranty under Section 11.4. In the event the Indemnifying Party does not notify the Indemnified Party within thirty (30) days following its receipt of such Notice of Claim that the Indemnifying Party disputes its

Liability to the Indemnified Party under this Article 11 or the amount thereof, the Direct Claim specified by the Indemnified Party in such Notice of Claim shall be conclusively deemed a Liability of the Indemnifying Party under this Article 11.

11.4 Survival Period . The representations and warranties made by the parties herein shall not be extinguished by the Closing, but shall survive the Closing for, and all claims for indemnification in connection therewith shall be asserted not later than, the first Business Day that is eighteen (18) months following the Closing Date (subject to Section 9.6(c)); provided, however, that each of the representations and warranties contained in Section 6.1 (Organization; Authorization and Enforcement), Section 6.3 (Ownership of Seller), and Section 6.16 (Taxes) (the “ Fundamental Representations ”) shall survive the Closing and the period during which a claim for indemnification may be asserted in connection therewith shall continue until the expiration of the applicable statute of limitations applicable to the rights of any Person to bring any claim with respect to such matters. The covenants and agreements of the parties hereunder shall survive until the due performance or fulfillment thereof in accordance with the terms hereof. Notwithstanding the foregoing, if, prior to the close of business on the last day a claim for indemnification may be asserted hereunder, an Indemnifying Party shall have been properly notified of a claim for indemnity hereunder and such claim shall not have been finally resolved or disposed of at such date, such claim shall continue to survive and shall remain a basis for indemnity hereunder until such claim is finally resolved or disposed of in accordance with the terms hereof.

11.5 Investigations . The respective representations and warranties of a party contained in this Agreement or any certificate or other document delivered by such party at or prior to the Closing and the rights to indemnification set forth in this Article 11 shall not be deemed waived or otherwise affected by any investigation made, or Knowledge acquired, by the other party. Notwithstanding the foregoing provisions of this Section 11.5, except in the case of an act of fraud (other than negligent misrepresentation), Purchaser Indemnified Parties shall not be entitled to indemnification under this Article 11 with respect to claims under Section 11.1(c) for a breach of Seller’s representations and warranties in this Agreement if prior to the Closing Date, Neal Castleman or Brian Gamberg had actual knowledge of the facts and circumstances underlying such breach and that such facts and circumstances constituted a breach of such representations and warranties, demonstrated by Seller with written evidence, and proven by Seller a preponderance of the evidence that such written evidence was in the possession of Mr. Castleman or Mr. Gamberg.

11.6 Limitations . Notwithstanding any provision to the contrary in this Agreement:

(a) Threshold Amount . Subject to Section 11.6(c), Seller shall not be required to indemnify the Purchaser Indemnified Parties for any Claim for indemnification under Section 11.1(c) for a breach of a representation or warranty unless and until the aggregate of all such Claims exceeds Seventeen Thousand Five Hundred Dollars ($17,500) (the “ Threshold Amount ”), and then, Seller shall be obligated to indemnify the Purchaser Indemnified Parties for all such Claims in excess of the Threshold Amount.

(b) Cap . Subject to Section 11.6(c), the maximum amount of Claims that the Purchaser Indemnified Parties will be entitled to recover arising from a breach of a representation or warranty under Section 11.1(c) shall be One Million Seventy Two Thousand Five Hundred Dollars ($1,072,500) (the “ Cap ”).

(c) No Limits on Certain Claims . Notwithstanding any other provision in this Agreement to the contrary, the expiration of the representations and warranties as set forth in Section 11.4, the Threshold Amount and the Cap shall not be applicable to or limit (i) Claims made pursuant to Sections

11.1(a), (b), (d), (e) or (f); (ii) breaches of the Seller’s Fundamental Representations; (iii) any facts or circumstances which constitute fraud (excluding negligent misrepresentation) with respect to any representation or warranty of the Seller; or (iv) any breaches of any covenants or agreements.

(d) Exclusive Remedy; Indemnity Clauses Cumulative . Each of the parties hereto (on its own behalf and on behalf of its respective Indemnitees that may seek indemnification hereunder) hereby acknowledges and agrees that, except for any facts or circumstances which constitute fraud (excluding negligent misrepresentation) and except for the right to seek nonmonetary equitable or injunctive relief, the indemnification provided by this Article 11 shall be the sole and exclusive remedy of such party and its Indemnitees, and each of the parties hereto hereby waives any other remedy under law or in equity. Notwithstanding the foregoing provisions of this Section 11.6(d) and for the avoidance of doubt, the provisions of Sections 11.1(a) through (f) are not mutually exclusive, and Purchaser Indemnified Parties may make Claims under one of more of Sections 11.1(a) through (f).

11.7 Characterization of Indemnity Payments . Except as otherwise required by law, any payment made pursuant to this Article 11 shall be treated, for financial accounting and Tax purposes, as an adjustment to the Purchase Price.

ARTICLE 12

PUBLICITY; CHANGE OF SELLER’S NAME; CONFIDENTIALITY; COVENANTS

12.1 Publicity . Notwithstanding anything herein to the contrary, each of the parties agrees that, except as may be required to comply with the requirements of any Applicable Law, and the rules and regulations of any stock exchange upon which the securities of any of the parties or Parent is listed, no press release or similar public announcement or communication will be made or caused to be made concerning the execution or performance of this Agreement unless specifically approved in writing in advance by both Parties.

12.2 Change of Seller’s Name . Within thirty (30) days after the Closing, Seller shall file an amendment to its Certificate of Incorporation to change its company name to another name that is not similar to Seller’s name.

12.3 Confidentiality .

(a) As used herein, “ Confidential Information ” means any information concerning the businesses and affairs of the business of Seller that is not, as of the date of this Agreement, already generally available to the public and that is included in the Purchased Assets. After the Closing, Seller will treat and hold as strictly confidential all of the Confidential Information, refrain from using any of the Confidential Information except in connection herewith, and deliver promptly to Purchaser or destroy, at Purchaser’s request and option, all tangible embodiments (and all copies) of the Confidential Information that are in its or any of its Affiliates’ possession. If Seller is requested or legally required to disclose any Confidential Information, Seller will notify Purchaser promptly of the request or requirement so that Purchaser may seek an appropriate protective order or waive compliance with the provisions hereof. If, in the absence of a protective order or the receipt of a waiver hereunder, Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, Seller may disclose the Confidential Information to the tribunal; Seller shall use its reasonable efforts to obtain, at Purchaser’s request and

expense, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as Purchaser designates.

(b) The Parties acknowledge that the Excluded Records constitute “Confidential Information” under that certain Confidentiality Agreement, dated April 29, 2015 between the Parties (the “ Confidentiality Agreement ”) and, as such, the Excluded Records are afforded all of the protection afforded to “Confidential Information” pursuant to, and throughout the term of, the Confidentiality Agreement. The Parties acknowledge and agree that the terms of the Confidentiality Agreement survive the Closing and are not amended, modified or superseded by the terms of this Agreement. For clarification, the Parties acknowledge and agree that for purposes of the Confidentiality Agreement, after the Closing, the Books and Records and in the information contained therein that are included in the Purchased Assets shall constitute confidential information of Purchaser.

12.4 Employee Handbook . Notwithstanding anything to the contrary set forth in this Agreement, except as provided in Section 6.14(e), Purchaser acknowledges and agrees that Seller makes no representation or warranty whatsoever as to the Handbook Confidentiality Rights and the Handbook Confidentiality Rights shall not be included within the term Purchased Assets when used in Article 6.

12.5 Warranty Claims . Subject to Section 3.2 of this Agreement, from and after the Closing Date, Purchaser agrees to perform and discharge, as appropriate, any and all claims with respect to any product warranty or product return relating to products that were sold, leased or delivered by Seller prior to the Closing Date (“ Warranty Claim ”), in each case, in accordance with the Seller’s past practices. On a monthly basis, Purchaser will furnish to the Seller a written report separately setting forth: (i) the facts or circumstances giving rise to any actual or alleged Warranty Claim (including the identity of the third-party making such claim) since the last report, (ii) the product at issue with respect to such Warrant Claim, and (iii) the actual cost incurred by Purchaser (without a mark-up) in discharging the Warranty Claim (“ Warranty Costs ”). Purchaser agrees to pay all undisputed Warranty Costs set forth in the monthly report within thirty (30) days of its receipt of the report. Purchaser shall obtain Seller’s prior written consent prior to incurring a Warranty Cost in excess of $2,500 for any single Warranty Claim.

12.6 Transition Access for Accounting . After the Closing, Purchaser will (i) provide Seller with access to the Expandable system for a period of thirty (30) days after the Closing and (ii) upon Seller’s reasonable requests from time to time after such thirty (30) day period, the Purchaser shall provide Seller reports, data or other information from the Expandable system and any copies of any of the books and records relating to Seller’s operations prior to the Closing, including contracts, purchase orders, invoices, payroll, electronics files, that Seller requires in connection with its month-end and quarter-end closings, analysis related to financial reporting and Seller’s audit.

ARTICLE 13

CERTAIN TAX MATTERS

13.1 Certain Tax Matters .

(a) Seller shall timely file or cause to be timely filed when due (taking into account all extensions properly obtained) all Tax Returns that are required to be filed by or with respect to the Purchased Assets for periods (or portions thereof) ending on or before the Closing Date and Seller

shall remit, or cause to be remitted, any Taxes due in respect of such Tax Returns. Purchaser shall timely file or cause to be timely filed when due (taking into account all extensions properly obtained) all other Tax Returns that are required to be filed by or with respect to Seller’s operations and the Purchased Assets for periods (or portions thereof) ending on or after the Closing Date, and Purchaser shall remit, or cause to be remitted, any Taxes due in respect of such Tax Returns. Seller or Purchaser shall pay the other party for the Taxes for which Seller or Purchaser, respectively, is liable pursuant to this Agreement but which are payable with any Tax Return to be filed by the other party pursuant to this Section 13.1(a) upon the written request of the party entitled to payment, setting forth in reasonable detail the computation of the amount owed by Seller or Purchaser, as the case may be, but in no event earlier than ten (10) Business Days prior to the due date for paying such Taxes.

(b) Seller and Purchaser shall cooperate fully with each other, as and to the extent reasonably requested by Purchaser or Seller, in connection with any audit, litigation or other proceeding with respect to Taxes relating to Seller or the Purchased Assets with respect to any period prior to the Closing. Such cooperation shall include the retention and (upon Purchaser’s or Seller’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder or to testify at any proceeding. Each of Seller and Purchaser agrees, from and after the Closing, (i) to retain all books and records with respect to Tax matters relating to Seller or the Purchased Assets for any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and any extensions thereof) for the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other reasonable written notice prior to transferring, destroying or discarding any such books and records and, if Purchaser so requests, shall allow Purchaser to take possession of such books and records.

ARTICLE 14

MISCELLANEOUS

14.1 Cooperation . For a period of five (5) years after Closing, upon reasonable notice, during normal business hours and at the expense of the requesting party, each party will, to the extent necessary to facilitate concluding the transactions contemplated hereby, audits, compliance with Applicable Laws and the requirements of Government Bodies and the prosecution or defense of third party claims, and to the extent that it does not materially interfere with its business operations: (i) execute or cause to be executed documents and instruments reasonably requested by the other and relating to the transactions contemplated hereby; (ii) afford to the representatives of the other, including its counsel and accountants, reasonable access to such records and information as may be available relating to the Purchased Assets and the Transferred Employees for periods prior to Closing, and reasonable access to its officers and employees; and (iii) cooperate, and use its commercially reasonable efforts to cause its officers and employees to cooperate, with the other and with appropriate Government Bodies and other third parties, in furnishing information, evidence, testimony and other reasonable assistance.

14.2 Successors . Except as specifically set forth herein, the representations, warranties and agreements contained in this Agreement shall be binding on the parties’ successors, assigns, heirs and legal representatives and shall inure to the benefit of the respective successors and assigns of the parties hereto, as the case may be. Seller may not assign any of its rights or obligations under this Agreement. Purchaser may assign its rights and obligations under this Agreement.

14.3 Applicable Law; Venue . This Agreement shall, in all respects, be governed by the laws of California. Any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement shall be brought or otherwise commenced exclusively in any state or federal court located in the County of Los Angeles, State of California.

14.4 Severability . Nothing contained herein shall be construed so as to require the commission of any act contrary to law, and whenever there is any conflict between any provision contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail but the provision hereof which is affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law. Further, if any provision hereof shall be so curtailed, limited or held to be invalid, then the remainder hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

14.5 Notices . All notices to be given by any party to this Agreement to any other party hereto shall be in writing. Any notice given by any party to another party may be given by personal delivery or by depositing such notice in the United States mail, postage prepaid, certified, addressed to such party at the address below, or by facsimile and such notice so given shall be deemed given upon such personal delivery or five (5) days following deposit in the United States mail or upon actual receipt in the case of personal delivery or upon confirmation of transmission in the case of facsimile. Notices should be sent to:

If to Purchaser: DCX-Chol Enterprises, Inc.

12831 South Figueroa Street

Los Angeles, CA 90061

Facsimile: 310-516-1693

Attention: Neal Castleman, President

With a copy (which shall not constitute notice) to:

Silver Law Group, APLC

1100 Glendon Avenue, 14th Floor

Los Angeles, CA 90024

Facsimile: 310-500-3501

Attention: Perry S. Silver

If to Seller: Southern California Braiding, Inc.

c/o IEC Electronics Corp.

105 Norton Street

Newark, New York 14513

Facsimile: 315-332-4295

Attention: Jeffrey Schlarbaum, President and CEO

With a copy (which shall not constitute notice) to:

Harter Secrest & Emery LLP

1600 Bausch & Lomb Place

Rochester, NY 14604-2711

Facsimile: 585-232-2152

Attention: Gregory J. Coughlin

14.6 Further Assurances . Each of the parties hereto shall execute and deliver any and all additional papers, documents, and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of the parties hereto. If requested by Purchaser, Seller further agree to prosecute or otherwise enforce in their own name for the benefit of Purchaser any claims, rights, or benefits that are transferred to Purchaser under this Agreement and that require prosecution or enforcement in Seller’s name. Any prosecution or enforcement of claims, rights, or benefits under this paragraph shall be solely at Purchaser’s expense, unless the prosecution or enforcement is made necessary by a breach of this Agreement by Seller.

14.7 Time of the Essence . Time is of the essence hereof and of all the terms, provisions, covenants and conditions hereof.

14.8 Separate Counterparts; Facsimile . This document may be executed in one or more separate counterparts, each of which, when so executed, shall be deemed to be an original. Any executed original counterpart copy hereof, together with the original signature pages or any other executed counterpart copies hereof, shall constitute and be one and the same instrument. Executed signatures of this Agreement, including counterparts, may be delivered via facsimile or email, and such delivery shall have the same effect as the delivery of the original.

14.9 Entire Agreement . This Agreement, together with any related documents referred to herein, constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof, and any and all prior agreements (except for the Confidentiality Agreement), understandings or representations are hereby terminated and canceled in their entirety and are of no further force or effect.

14.10 Modification; Waivers . No amendment or modification to this Agreement shall be valid or binding unless it is in writing and executed by each of the parties hereto. No waiver of any provision of this Agreement shall be valid or binding unless it is signed by the party giving the waiver. No written waiver of a breach of any provision of this Agreement will constitute a waiver of another breach of the same provision or a breach of any other provision of this Agreement.

14.11 Captions; Construction . The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference. Should there be any conflict between any such caption and the section at the head of which it appears, the section and not such caption shall control and govern in the construction of this document.

14.12 No Obligation to Third Parties . The execution and delivery of this Agreement shall not be deemed to offer any rights upon, or obligate any of the parties hereto, to any Person other than Seller and Purchaser, except as otherwise provided herein.

14.13 Mutually Drafted . This Agreement shall be deemed to have been mutually drafted and shall be construed fairly and in accordance with its terms. No party shall be entitled to any presumption or construction in such party’s favor as a result of any party assuming the burden of memorializing all parties’ agreement or any part thereof.

14.14 Expenses . Except as otherwise provided herein, each party hereto shall pay its or his own expenses incidental to the preparation of this Agreement, the carrying out of the provisions hereof, and the consummation of the transaction hereby.

14.15 Advice of Counsel . THE PARTIES HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF, AND HAVE RECEIVED THE ADVICE OF, COUNSEL OF THEIR OWN CHOOSING IN REGARDS TO THIS AGREEMENT AND THE OTHER AGREEMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT.

14.16 Attorneys’ Fees . In the event that any suit in law or equity, arbitration or other formal proceeding is instituted by any party to enforce or interpret any part of this Agreement, or to recover damages for breach thereof, the prevailing party shall be entitled to recover costs of suit incurred therein, and to also recover as an element of such costs (but not as damages) reasonable attorneys’ fees incurred by such prevailing party.

14.17 Interpretation . In this Agreement, unless a clear contrary intention appears:

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement;

(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(e) All cross-references in this Agreement, unless specifically directed to another agreement or document, refer to provisions in this Agreement;

(f) reference to any law means such law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law means that provision of such law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; provided, that for purposes of Article 6 and Article 8, reference to any law or regulation means such law or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time through and including the Closing Date.

(g) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(h) “including” means including without limiting the generality of any description preceding such term; and

(i) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

14.18 Disclosure Schedules and Exhibits . The Disclosure Schedules and Exhibits are hereby incorporated into this Agreement and are hereby made a part hereof as if set out in full herein. Seller may, at its option, include in the Disclosure Schedule items that are not material in order to avoid any misunderstandings, and such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgement or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement. Information disclosed in a particular Section of the Disclosure Schedule shall constitute a disclosure under other Sections of the Disclosure Schedule to the extent that it is reasonably apparent that such disclosure also applies to such other Section.

[Signatures follow on next page]

IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as of the date first written above.

“SELLER”

SOUTHERN CALIFORNIA BRAIDING, INC.

By: ____________________________

Name: __________________________

Title: ___________________________

“PURCHASER”

DCX-CHOL ENTERPRISES, INC.

By: _____________________________

Name: ___________________________

Title: ____________________________

LIST OF EXHIBITS AND DISCLOSURE SCHEDULES

Exhibits

Exhibit 4.4 Purchase Price Allocation

Exhibit 9.1 Excluded Employees

Exhibit A Form of Bill of Sale

Exhibit B Form of Assignment and Assumption Agreement

Exhibit C Form of Domain Name Transfer Agreement

Exhibit D Form of Non-Competition Agreement

Exhibit E Form of Parent Guaranty

Exhibit F-1 Form of Seller’s Incumbency and Authority Certificate

Exhibit F-2 Form of Purchaser’s Incumbency and Authority Certificate

Disclosure Schedules

Section 2.2(a) List of Personal Property

Section 2.2(c) Seller Prepaid Expenses

Section 2.2(d) List of all Permits and Licenses

Section 2.2(h) Transferred Software

Section 2.2(j) Customer Prepaids


Section 2.3(d)	List of all General Receivables and Notes Receivables between Seller and Affiliates

Section 2.3(n) List of Contracts between Seller and Parent or Parent’s Affiliates

Section 2.3(q) Other Excluded Assets

Section 3.1 List of Assumed Contracts

Section 6.1 Organization; Authorization and Enforcement

Section 6.2 List of required third party consents

Section 6.4 List of all creditors who hold an Encumbrance


Section 6.5(a)	Annual Financial Statements for 2012, 2013 and 2014 and Interim Financial Statements as of May 22, 2015

Section 6.5(b) Exceptions to Financial Statements

Section 6.6 Absence of Material Changes

Section 6.9(a) List of all Contracts

Section 6.9(b) List of All Contracts with Parent or its Affiliates

Section 6.9(d) Government Contracts Based on Preferential Status

Section 6.10 Legal Proceedings

Section 6.13(a) List of Current Employees and position and compensation

Section 6.13(e) List of Current Employees on Leave

Section 6.14(a) List of all Seller Intellectual Property

Section 6.15(b) Compliance with Import/Export Laws

Section 6.17 List of all insurance policies and insurance claims

Section 6.18 List of all Employee Benefit Plans

Section 6.19 Top Customers and Top Suppliers

Section 6.20 List of all claims by Customers of suppliers in the past two (2) years

Section 6.21 Inventory

Section 6.22(a) Product Warranties

Section 6.22(b) Product Recalls

Section 6.22(d) Compliance with Contractual Specifications

Exhibit 4.4

Purchase Price Allocation

Exhibit 9.1

List of Excluded Employees

Exhibit A

Form of Bill of Sale

(See attached)

Exhibit B

Form of Assignment and Assumption Agreement

(See attached)

Exhibit C

Form of Domain Name Transfer Agreement

(See attached)

Exhibit D

Form of Non-Competition Agreement

(See attached)

Exhibit E

Form of Parent Guaranty

(See attached)

Exhibit F-1

Form of Seller’s Incumbency and Authority Certificate

(See attached)

Exhibit F-2

Form of Purchaser’s Incumbency and Authority Certificate

(See attached)

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 report on Form 10-Q for the three and nine months ended June 26, 2015 for 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 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 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 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 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 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 5, 2015	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		Chief Executive Officer and President

Exhibit 31.2

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

I, Michael T. Williams, certify that:


1.	I have reviewed this report on Form 10-Q for the three and nine months ended June 26, 2015 for 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 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 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 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 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 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 5, 2015	By:	/s/ Michael T. Williams
		Michael T. Williams
		Vice President of Finance and Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 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 quarter ended June 26, 2015 as filed with the Securities and Exchange Commission on the day hereof (the "Report"), I, Jeffrey T. Schlarbaum, Chief Executive Officer and President of the Company and Michael T. Williams, Vice President of Finance and Chief Financial Officer of the Company, 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 5, 2015	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		Chief Executive Officer and President



Dated: August 5, 2015	By:	/s/ Michael T. Williams
		Michael T. Williams
		Vice President of Finance and Chief Financial Officer