10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2016

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______________ to ______________

Commission file number: 001-11174

MRV COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-1340090
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)

20415 Nordhoff Street, Chatsworth, CA 91311

(Address of principal executive offices, zip code)

(818) 773-0900

(Registrant's telephone number, including area code)

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes [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.

Large accelerated filer  [ ]	Accelerated filer  [x]
Non-accelerated filer [ ]	Smaller reporting company [ ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]   No [x]

As of May 3, 2016, 6,892,027 shares of Common Stock of MRV Communications, Inc. were outstanding.

1

MRV Communications, Inc.

Form 10-Q for the Quarter Ended March 31, 2016

Index

		Page
PART I	Financial Information	3
Item 1.	Unaudited Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015	3
	Condensed Consolidated Statements of Comprehensive Income (loss) for the three months ended March 31, 2016 and 2015	4
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
PART II	Other Information	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information
Item 6.	Exhibits	28
	Signatures	29

2

PART I - FINANCIAL INFORMATION

Item 1.         Condensed Consolidated Financial Statements

MRV Communications, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

	Three Months Ended   March 31,
	2016			2015
Revenue:
Product revenue	$	16,007		$	19,467
Service revenue	2,875			2,718
Total revenue	18,882			22,185
Cost of Revenue:
Cost of product	7,595			9,617
Cost of services	1,484			1,024
Total cost of revenue	9,079			10,641
Gross profit	9,803			11,544
Operating expenses:
Product development and engineering	5,344			5,125
Selling, general and administrative	8,017			7,736
Total operating expenses	13,361			12,861
Operating loss	(3,558		)	(1,317		)
Interest expense	—			(14		)
Other (expense) income, net	(277		)	81
Loss from continuing operations before provision for income taxes	(3,835		)	(1,250		)
Provision for income taxes	61			50
Loss from continuing operations	(3,896		)	(1,300		)
Income from discontinued operations, net of income taxes of $138 in 2015	—			232
Net loss	$	(3,896	)	$	(1,068	)
Net income (loss) per share — basic
From continuing operations	$	(0.56	)	$	(0.18	)
From discontinued operations	—			0.03
Net loss per share — basic	$	(0.56	)	$	(0.15	)
Net income (loss) per share — diluted
From continuing operations	$	(0.56	)	$	(0.18	)
From discontinued operations	—			0.03
Net loss per share — diluted	$	(0.56	)	$	(0.15	)
Weighted average number of shares:
Basic	6,981			7,131
Diluted	6,981			7,131

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

3

MRV Communications, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)

	Three Months Ended   March 31,
	2016			2015
Net Loss	$	(3,896	)	$	(1,068	)
Other comprehensive loss, net of tax
Foreign currency translation gain (loss)	80			(2,656		)
Total comprehensive Loss	$	(3,816	)	$	(3,724	)

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

4

MRV Communications, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)

(unaudited)

	March 31, 2016			December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	26,928		$	26,169
Restricted time deposits	5,170			5,190
Accounts receivable, net	14,518			14,837
Inventories, net	10,030			10,226
Other current assets	2,045			6,851
Total current assets	58,691			63,273
Property and equipment, net	3,894			4,050
Intangible asset, net	1,092			1,153
Other assets	547			608
Total assets	$	64,224		$	69,084
Liabilities and stockholders' equity
Current liabilities:
Deferred consideration payable	$	233		$	233
Accounts payable	5,555			5,749
Accrued liabilities	9,188			9,972
Deferred revenue	7,172			7,642
Other current liabilities	170			196
Total current liabilities	22,318			23,792
Other long-term liabilities	3,993			3,846
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.01 par value: Authorized — 1,000 shares; no shares issued or outstanding	—			—
Common Stock, $0.0017 par value:
Authorized — 16,000 shares
Issued — 8,337 shares in 2016 and 8,341 shares in 2015
Outstanding — 6,973 shares in 2016 and 6,982 in 2015	270			270
Additional paid-in capital	1,286,121			1,285,787
Accumulated deficit	(1,231,567		)	(1,227,671		)
Treasury stock — 1,364 shares in 2016 and 1,359 shares in 2015	(15,406		)	(15,355		)
Accumulated other comprehensive loss	(1,505		)	(1,585		)
Total stockholders' equity	37,913			41,446
Total liabilities and stockholders' equity	$	64,224		$	69,084

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

5

MRV Communications, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Three Months Ended   March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(3,896	)	$	(1,068	)
Income from discontinued operations, net of taxes	—			(232		)
Loss from continuing operations	(3,896		)	(1,300		)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	500			500
Share-based compensation expense	347			206
Provision for doubtful accounts	7			37
Deferred income taxes	19			(41		)
Gain on disposition of property and equipment	—			(2		)
Changes in operating assets and liabilities:
Accounts and other receivables	313			(3,098		)
Inventories	156			976
Other assets	447			536
Accounts payable	(196		)	(1,070		)
Accrued liabilities	(491		)	180
Deferred revenue	(793		)	657
Other current liabilities	(136		)	(95		)
Cash used in operating activities - continuing operations	(3,723		)	(2,514		)
Cash provided by operating activities - discontinued operations	—			1,452
Net cash used in operating activities	(3,723		)	(1,062		)
Cash flows from investing activities:
Purchases of property and equipment	(282		)	(222		)
Proceeds from sale of Tecnonet	4,789			—
Proceeds from sale of property and equipment	—			9
Release of restricted time deposits	20			11
Cash provided by (used in) Investing activities - continuing operations	4,527			(202		)
Cash used in Investing activities - discontinued operations	—			(42		)
Net cash provided by (used in) investing activities	4,527			(244		)
Cash flows from financing activities:
Proceeds from exercise of stock options	—			116
Purchase of treasury shares	(51		)	(3,597		)
Cash used in Financing activities - continuing operations	(51		)	(3,481		)
Cash used in Financing activities - discontinued operations	—			(2,812		)
Net cash used in financing activities	(51		)	(6,293		)
Effect of exchange rate changes on cash and cash equivalents	6			(608		)
Net increase (decrease) in cash and cash equivalents	759			(8,207		)
Cash and cash equivalents, beginning of period	26,169			22,422
Cash and cash equivalents, end of period	26,928			14,215
Less: cash and cash equivalents of discontinued operations, end of period	—			4,398
Cash and cash equivalents, end of period	$	26,928		$	9,817
Supplemental disclosure of cash flow information:
Cash paid during period for interest - totals	$	—		$	35
Cash paid during period for income taxes - totals	$	60		$	—

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

6

MRV Communications, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of significant accounting policies

Organization and nature of operations

MRV Communications, Inc. ("MRV" or the "Company"), a Delaware corporation, is a global supplier of communications solutions to telecommunications service providers, data center operators, enterprises and governments throughout the world. MRV's products enable customers to provide high-bandwidth data and video services and mobile communications services more efficiently and cost effectively. MRV markets and sells its products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators. Until the third quarter of 2015, MRV conducted its business along two principal segments: the Network Equipment segment and the Network Integration segment. MRV's Network Equipment segment designs, manufactures, sells, and services equipment used by commercial customers, governments, and telecommunications service providers. Products include switches, optical transport platforms, physical layer products and out-of-band management products, and specialized networking products. The Network Integration segment, which primarily operated in Italy and provided network system design, integration and distribution services that includes products manufactured by third-party vendors, was sold in December 2015.

On December 3, 2015, the Company completed the sale of all of the shares of its wholly owned subsidiary, Tecnonet S.p.A.(Tecnonet), pursuant to a shares purchase agreement, dated as of August 10, 2015 (the "Purchase Agreement") with Maticmind S.p.A, ("the purchaser”), a company incorporated under the laws of Italy. Tecnonet was the last business unit in our Network Integration segment.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

The condensed consolidated unaudited financial statements included herein have been prepared by MRV pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The information included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, (this “Form 10-Q”) should be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, (the “2015 Form 10-K”) filed with the SEC.

In the opinion of MRV's management, the unaudited interim financial information contained herein includes all normal recurring adjustments, necessary to present fairly the financial position of MRV as of March 31, 2016, and the results of its operations and comprehensive loss, and cash flows for the three months endedMarch 31, 2016 and 2015. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the full year or any future periods.

Reclassification

Prior Period Reclassifications. On December 3, 2015, the Company completed the sale of Tecnonet. The results of operations for Tecnonet have been reclassified and presented as discontinued operations in this Form 10-Q for all periods presented. Cash flows from discontinued operations are presented separately from the cash flows from continuing operations in the accompanying Statement of Cash Flows. (See Note 15, Discontinued Operations)

Recently Issued Accounting Standards

We consider the applicability and impact of all Accounting Standards Updates (“ASUs”). The ASUs not listed below were assessed and determined by management to be either not applicable or are expected to have minimal impact on our consolidated financial position and/or results of operations.

7

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. ASU 2014-09 was originally effective for interim and annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which defers the effective date to annual reporting periods beginning after December 15, 2017. Early application is permitted after December 15, 2016. Management is currently evaluating the potential impact that adopting ASU 2014-09 will have on its consolidated financial statements and footnote disclosures. The Company anticipates concluding its evaluation by December 31, 2016 and plans to adopt ASU 2014-09 on January 1, 2018.

In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, “Compensation - Stock Compensation” (“ASC 718”), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (i) prospectively to all awards granted or modified after the effective date; or (ii) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Management is currently evaluating the potential impact of that adopting ASU 2014-12 will have on its consolidated financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the Company in its fourth quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2014-15 will have on its consolidated financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory" (“ASU 2015-11”). ASU 2015-11 simplifies the guidance on the subsequent measurement if inventory, excluding inventory measured using the last-in, first out of the retail inventory method. Under the new standard, inventory should be at the lower of cost and net realizable value. ASU 2015-11 will be effective for the Company in the first quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-11 will have on its consolidated financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). The amendments in ASU 2015-17 simplify the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current. ASU 2015-17 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-17 will have on its consolidated financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"). The amendments in ASU 2016-02 require companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations generated by contracts longer than a year. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The guidance is required to be applied using the modified retrospective transition approach. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-02 will have on its consolidated financial statements and footnote disclosures.

8

In March 2016, the FASB issued ASU No. 2016-09, "Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting" ("ASU 2016-09"). The amendments in ASU 2016-09 simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-09 will have on its consolidated financial statements and footnote disclosures.

2. Cash and Cash Equivalents and Restricted Time Deposits

MRV accounts for highly liquid investments with an original maturity of 90 days or less as cash equivalents. Investments with maturities of less than one year are considered short-term and are included on the balance sheet in restricted time deposits. MRV maintains cash balances and investments in qualified financial institutions, and at various times such amounts are in excess of federally insured limits. As of March 31, 2016 and December 31, 2015, the Company's U.S. entities held $22.4 million and $21.6 million in cash and cash equivalents. The remaining $4.5 million and $4.6 million, respectively, were held by the Company's foreign subsidiaries in foreign bank deposit accounts.

Restricted time deposits represent investments that are restricted as to withdrawal or use and from time to time may include certificates of deposit. Restricted time deposits generally secure standby letters of credit, bank lines of credit, or bank loans. When investments in restricted time deposits are directly related to an underlying bank loan and the restricted funds will be used to repay the loans, the investment and the subsequent release of the restricted time deposit are treated as investing activities in the Company's Consolidated Statements of Cash Flows. The other investments in and releases of restricted time deposits are included in investing activities because the funds are invested in certificates of deposit. As of March 31, 2016 and December 31, 2015, the Company held a $5.0 million certificate of deposit, which matures in June 2016, with a highly rated financial institution.

3. Fair Value Measurement

MRV's financial instruments, including cash and cash equivalents, restricted time deposits, accounts receivable, other receivables and accounts payable are carried at cost, which approximates their fair value. The fair values of accounts receivable, other receivables and accounts payable approximate their carrying amounts due to their short-term nature.

The Company follows a framework for measuring fair value using a three-level hierarchy that prioritizes the use of observable inputs. The fair value hierarchy is divided into three levels based on the source of inputs as follows: Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs for similar instruments; Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Under this framework, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Management has not elected the fair value option for non-financial assets and liabilities.

As of March 31, 2016 and December 31, 2015, the Company had cash equivalents consisting of money market funds of $1.8 million that were classified as Level 1 investments and were quoted at market price. Cash equivalents included in the condensed consolidated balance sheets are as follows (in thousands):

	Cost		Fair Value
March 31, 2016	$	1,808	$	1,808
December 31, 2015	$	1,807	$	1,807

9

4. Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents placed with high credit quality financial institutions and accounts receivable due from customers.

Management evaluates the collectability of accounts receivable based on a combination of factors. If management becomes aware of a customer's inability to meet its financial obligations after a sale has occurred, the Company records an allowance to reduce the net receivable to the amount that management reasonably believes to be collectable from the customer. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future. Accounts receivable are charged off at the point they are considered uncollectible.

The following table summarizes the changes in the allowance for doubtful accounts during the three months endedMarch 31, 2016(in thousands):

Balance at beginning of period	$	1,060
Charged (reversed) to expense	7
Write-offs, net of amounts recovered	(17		)
Foreign currency translation adjustment	4
Balance at end of period	$	1,054

5. Inventories

Inventories are stated at the lower of cost or market and consist of materials, labor and overhead. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.

Inventories, net of reserves, consisted of the following (in thousands) at March 31, 2016 and December 31, 2015:

	March 31, 2016		December 31, 2015
Raw materials	$	3,090	$	3,132
Work-in process	869		839
Finished goods	6,071		6,255
Total	$	10,030	$	10,226

6. Intangible Assets

Intangible assets, net of amortization, consisted of intellectual property and totaled $1.1 million and $1.2 million as of March 31, 2016 and December 31, 2015. A portion of these assets, approximating $0.7 million, net of amortization, represents software license agreements and were placed into service as of March 31, 2016. Amortization of intangible assets was $61 thousand and $28 thousand for the three months ended March 31, 2016 and 2015, respectively. The terms of the some of these license agreements provide for use of the licensed software into perpetuity while others are definite. The Company plans to amortize the cost of the license agreements over the estimated useful life, which can range between three to five years. As of March 31, 2016, intangible assets not yet placed into service totaled approximately $0.4 million.

10

The following table illustrates the estimated future amortization expense of intangible assets as of March 31, 2016 (in thousands):

Fiscal Year Ending December 31,	Estimated Amortization Expense
2016	$	225
2017	280
2018	214
2019	214
2020	117
Thereafter	42
Total	$	1,092

7. Product Warranty

As of March 31, 2016, and December 31, 2015, MRV's product warranty liability recorded in accrued liabilities was $0.6 million. MRV accrues for warranty costs as part of cost of sales based on associated material product costs, technical support labor costs and associated overhead. The products sold are generally covered by a warranty for periods of 90 days to three years.

The following table summarizes the activity related to the product warranty liability during the three months endedMarch 31, 2016 (in thousands):

Balance at beginning of the period	$	593
Cost of warranty claims	—
Accruals for product warranties	(3		)
Balance at end of the period	$	590

8. Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, including restricted shares which, although they are legally outstanding and have voting rights, are subject to vesting and are treated as common stock equivalents in calculating basic net income (loss) per share. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding and dilutive potential shares of common stock from stock options outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money options, which is calculated based on the average share price for each period using the treasury stock method.

Employee share options, non-vested shares and similar equity instruments granted by MRV are treated as potential shares of common stock outstanding in computing diluted net income per share. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service not yet recognized, and the amount of income tax benefits that would be realized and recorded in additional paid-in capital if the deduction for the award would reduce income taxes payable are assumed to be used to repurchase shares.

11

The following table sets forth the computation of net loss per common share – basic and diluted (in thousands, except per share amounts):

	Three months ended
	March 31
	2016			2015
Numerator:
Net loss	$	(3,896	)	$	(1,068	)
Denominator
Basic weighted average common shares outstanding	6,981			7,131
Effect of dilutive securities	—			—
Diluted weighted average common shares outstanding	6,981			7,131
Net loss per common share
Basic	$	(0.56	)	$	(0.15	)
Diluted	$	(0.56	)	$	(0.15	)

Outstanding stock options to purchase 386,729 and 326,070 shares were excluded from the computation of dilutive income (loss) per shares for the three months ended March 31, 2016 and 2015, respectively as they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

9. Share-Based Compensation

MRV records share-based compensation expense at fair value. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the three months endedMarch 31, 2016 and 2015 (in thousands):

	Three months ended
	March 31,
	2016		2015
Cost of goods sold	$	42	$	30
Product development and engineering	76		49
Selling, general and administrative	229		127
Total share-based compensation expense (1)	$	347	$	206

(1) Income tax benefits realized from stock option exercises and similar awards were immaterial in all periods.

No stock options or restricted shares were granted during the three months ended March 31, 2016 and 2015.

As of March 31, 2016, the total unrecognized share-based compensation balance for unvested options, net of expected forfeitures, was $1.5 million and is expected to be amortized over a weighted-average period of 1.9 years.

Valuation Assumptions

MRV uses the Black-Scholes option pricing model to estimate the fair value of stock option awards or related modifications. The Black-Scholes model requires the use of subjective and complex assumptions, including the option's expected life and the underlying stock price volatility. MRV bases volatility on the Company's historical quoted prices and peer company data.

10. Geographic Information

Following the completion of the sale of the Tecnonet business unit on December 3, 2015, MRV now has one reportable segment: Network Equipment.

12

The Network Equipment segment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products. Network Equipment revenue primarily consists of optical communication systems that include metro ethernet equipment, optical transport equipment, lab automation equipment, out-of-band network equipment, and the related service revenue and fiber optic components sold as part of system solutions.

Revenues:

The following table summarizes external revenue by geographic region (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	9,041	$	10,251
Americas (Excluding the U.S.)	1,290		2,763
Europe	3,197		4,230
Asia Pacific	5,354		4,941
Total	$	18,882	$	22,185

Revenues from the United States and Australia accounted for 73% and 66% of our consolidated revenues for the three months ended March 31, 2016 and 2015, respectively.

Significant Customers:

Revenue from one customer accounted for 17% and 20% of our consolidated revenue for the three months ended March 31, 2016, and 2015, respectively. As of March 31, 2016 and December 31, 2015, amounts due from this customer accounted for 15% of our consolidated gross accounts receivables. Revenue from another customer accounted for 14% and 11% of our consolidated revenue for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016 and December 31, 2015, amounts due from this customer accounted for 7% and 5% of our consolidated gross accounts receivables, respectively.

Long-lived Assets:

The following table summarizes long-lived assets, consisting of property and equipment, by geographic region (in thousands):

	March 31, 2016		December 31, 2015
Americas	$	2,762	$	2,808
Europe	1,115		1,223
Asia Pacific	17		19
Total	$	3,894	$	4,050

11. Indemnification Obligations

In connection with the sale by MRV of Source Photonics Inc. (SPI) in October 2010, MRV agreed to indemnify the buyer against certain claims brought after the closing for prior-occurring events. Most of the indemnification obligations have expired, however any indemnification obligations related to intellectual property extend until the third anniversary of the closing, indemnification related to employee benefits, environmental liabilities and taxes extend until their applicable statute of limitations has run plus 90 days, and indemnification obligations are not time limited for title and ownership representations. These indemnification obligations are subject to a $1.0 million deductible and a $20.0 million cap and we have purchased an insurance policy to protect against such obligations.

13

The Company has received a notice from SPI, advising the Company of a tax audit for periods including tax returns filed prior to the acquisition of SPI by the buyer. MRV believes that it has meritorious defenses to the extent a formal indemnification claim is asserted and has submitted the potential claim to its insurer. MRV intends to vigorously contest any claim; however, no formal legal proceeding has been commenced, and MRV can provide no assurance that such claim would not have a material adverse effect on its business, operating results or financial condition.

Our agreements for the sale of certain business; CES in March 2012, Alcadon and Interdata in October 2012, and Tecnonet in December 2015, include customary indemnification obligations running to the respective buyers.

In connection with the sale of CES, MRV agreed to indemnify the buyer for the representations and warranties made in the sale purchase agreement and purchased an insurance policy to protect against any claims of indemnification related to the representations and warranties.

In the normal course of business to facilitate sales of its products, MRV indemnifies other parties, including customers, lessors and parties to other transactions with us, with respect to certain matters. The Company has agreed to hold the other parties harmless against losses arising from a breach of representation or covenants, for intellectual property infringement, or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim.

In addition, the Company has indemnification obligations to its current and former officers, directors, employees and agents, as set forth in the Company's bylaws.

We cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these obligations. Over the last decade, the Company has not incurred any significant expense as a result of obligations of this type that were not otherwise covered by our insurance policies. Accordingly, the Company has not accrued any amounts for such indemnification obligations. However, there can be no assurances that expenses will not be incurred under these indemnification provisions in the future.

We have agreements whereby our officers and directors are indemnified for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we retain directors and officers insurance that reduces our exposure and enables us to recover portions of amounts paid. As a result of our insurance coverage, we believe the estimated fair value of these indemnification agreements is minimal.

Accordingly, no liabilities have been recorded for these agreements as of March 31, 2016, and December 31, 2015.

12. Litigation

We are subject to legal claims and litigation in the ordinary course of business, including but not limited to product liability, employment and intellectual property claims. The outcome of any such matters is currently not determinable. In addition, we were party to the litigation set forth below.

Nhan T. Vo, individually and on behalf of other aggrieved employees vs. the Company, Superior Court of California, County of Los Angeles. On June 27, 2013, the plaintiff in this matter filed a lawsuit against the Company alleging claims for failure to properly pay overtime or provide meal and rest breaks to its non-exempt employees in California, among other things. The complaint seeks an unspecified amount of damages and penalties under provisions of the Labor Code, including the Labor Code Private Attorneys General Act. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. Management believes it has accrued adequate reserves for this matter and does not expect the matter to have a material adverse effect on its business or financial condition. However, depending on the actual outcome of this case, further provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

14

In connection with the sale by MRV of Source Photonics, Inc. (“SPI”) in October 2010, MRV agreed to indemnify the buyer against certain claims brought after the closing for prior-occurring events. The Company has received a notice from SPI, advising the Company of a tax audit for periods including tax returns filed prior to the acquisition of SPI by the buyer. Management believes that it has meritorious defenses to the extent a formal indemnification claim is asserted and has submitted the potential claim to its insurer. MRV intends to vigorously contest any claim; however, no formal legal proceeding has been commenced, and MRV can provide no assurance that such claim would not have a material adverse effect on its business, operating results or financial condition.

From time to time, MRV receives notices from third parties alleging possible infringement of patents with respect to product features or manufacturing processes. Management believes such notices are common in the communications industry because of the large number of patents that have been filed on these subjects. The Company's policy is to discuss these notices with the parties in an effort to demonstrate that MRV's products and/or processes do not violate any patents. Management does not believe that any of these matters will result in a material adverse outcome.

MRV and its subsidiaries have from time to time been named as a defendant in other lawsuits involving matters that management considers routine to the nature of its business. Management is of the opinion that the ultimate outstanding resolution of such outstanding matters will not have a material adverse effect on our business, operating results and financial condition.

13. Share Repurchase

On March 15, 2016, the Company's Board of Directors approved a repurchase of shares of the Company's common stock in an amount up to $10.0 million under a stock repurchase program that expires on March 10, 2017. During the three months ended March 31, 2016, the Company repurchased 5,713 shares at a total cost of approximately $51 thousand, excluding commission, under this stock repurchase program. As of March 31, 2016, the Company had remaining authority to repurchase shares up to an additional $9.9 million, excluding commission, under this stock repurchase program prior to its expiration. Since April 1, 2016, the Company repurchased 64,510 shares at a total cost of approximately $0.6 million, excluding commission, under this stock repurchase program. Through May 3, 2016, the Company repurchased a total of 70,223 shares at a total cost of approximately $0.7 million, excluding commission, under this stock repurchase program, leaving remaining authority to repurchase shares up to an additional $9.3 million, excluding commission, under this stock repurchase program prior to its expiration.

14. Income Taxes

The following table provides details of income taxes for the three months ended March 31, 2016 and 2015 (in thousands, except percentages):

	Three months ended
	March 31,
	2016			2015
Loss before provision for income taxes	$	(3,835	)	$	(1,250	)
Provision for income taxes	61			50
Effective tax rate	(2		)%	(4		)%

The effective tax rate fluctuates based on the amount of pre-tax income or loss generated in the various jurisdictions where we conduct operations and pay income tax. The income tax expense of $0.1 million on our pre-tax loss of $3.8 million and $1.3 million for the three months ended March 31, 2016 and 2015, respectively, is primarily due to state minimum income taxes that do not benefit from our state net operating loss carryforwards.

As of December 31, 2015, MRV had federal, state, and foreign net operating loss ("NOL") carryforwards available of $182.5 million, $97.1 million and $97.4 million, respectively. Under the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change NOLs, capital loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. An ownership change is generally defined as a greater than 50% change in its equity ownership by value over a three-year period. We may experience an ownership change in the future as a result of subsequent shifts in our stock ownership. If we were to trigger an ownership change in the future, our ability to use any NOLs and capital loss carryforwards existing at that time could be limited. As of March 31, 2016, the federal, state and foreign NOLs had a full valuation allowance.

On January 26, 2016, the Company's Board of Directors approved the adoption of a "Rights Plan" in an effort to protect the Company from potential adverse consequences arising from an ownership change under the Internal Revenue Code, such adverse consequences including a significant reduction in the annual utilization of the Company’s net operating loss carryforwards and built-in losses. The Rights Plan has not yet been ratified by the stockholders of MRV.

15. Discontinued Operations

On December 3, 2015, the Company completed the sale of all of the shares of Tecnonet. On February 19, 2016, the Company received a payment of €4.3 million (approximately $4.8 million) representing the post-closing purchase price adjustment pursuant to the Purchase Agreement. The Company included the $4.8 million receivable representing the post-closing purchase price adjustment on its consolidated balance sheet within other current assets as of December 31, 2015. Prior to its disposition, Tecnonet was the last remaining business unit in our Network Integration segment. The historical financial results of Tecnonet, prior to its sale have been reclassified as discontinued operations for all periods presented. The Company reported net income of $0.2 million from discontinued operations, net of income tax expense, for the three months ended March 31, 2015, related to Tecnonet.

15

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this Form10-Q, and Items 6, 7 and 8 of our2015Form10-K. The discussion in this Form10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and may qualify for the safe harbor provided for in Section21E of the Exchange Act. We generally identify forward-looking statements as statements other than statements of historical fact and by use of such terms as “anticipate,”“appear,”“believe,”“contemplate,”“could,” “estimate,” “expect,”“intend,”“may,” “should,” “plan,”“project,”“target,” “foresee,” “goal,” “likely,” “will,” and “would,” or similar statements.

Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. In addition, the statements in this Form10-Q may involve certain risks, uncertainties and assumptions, the likelihood of which are difficult to assess and may not occur, including risks that each of its business segments may not make the expected progress in its respective market, or that management's long-term strategy may not achieve the expected results. Other risks and uncertainties relate to delayed lead times in receiving components and delayed delivery times to customers due to short-term capacity constraints, potential changes in relationships with MRV's customers and suppliers and their financial condition, MRV's success in developing, introducing and shipping product enhancements and new products, competition in our market segments, market acceptance of new products and our ability to succeed in entering new markets, continued market acceptance of existing products and continued success in selling the products of other companies, product price discounts and general pricing pressure in certain of our markets, the timing and amount of significant orders from customers, obsolete inventory or product returns, warranty and other claims on products, the continued ability of MRV to protect its intellectual property rights and avoid onerous licensing fees, changes in product mix, maturing product life cycles, implementation of operating cost structures that align with revenue growth, political instability in areas of the world in which MRV operates or sells its products and services, currency fluctuations, changes in accounting rules, general economic conditions, as well as changes in such conditions specific to our market segments, maintenance of our inventory and production backlog, supply constraints directly or indirectly caused by natural disasters, litigation, including but not limited to patent infringement claims and litigation related to MRV's historical stock option granting practices.

In light of the risks and uncertainties inherent whenever matters or events expected to occur or not occur in the future are discussed, there can be no assurance that the forward-looking information contained in this Form10-Q will in fact transpire or prove to be accurate. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on our behalf are expressly qualified in their entirety by this introduction. In light of the risks and uncertainties in all such projected operational matters, the inclusion of forward-looking statements in this Form10-Q should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved or that any of the Company's operating expectations will be realized. Revenue and results of operations are difficult to forecast and could differ materially from those projected in the forward-looking statements contained in this Form10-Q for the reasons detailed in Item 1A “Risk Factors” of Part I on the Company's 2015 Form 10-K and as set forth in item 1A of Part II of this Form 10-Q. Readers should not place undue reliance on forward-looking statements, which reflect management's view only as of the date of this Form10-Q. The Company undertakes no obligation to amend this Form10-Q or revise publicly these forward-looking statements (other than pursuant to requirements imposed on registrants pursuant to Item 1A under PartII of Form10-Q) to reflect subsequent events or circumstances. Readers should also carefully review the risk factors described in other documents the Company files from time to time with the SEC and the cautionary statements contained in our press releases when we provide forward-looking information.

Overview

At MRV, we design, develop and sell products and services that enable our customers to build reliable, scalable and cost effective networks.

We develop our products and services to meet the needs of telecommunications service providers and cable operators (collectively “Service Providers”), data center operators, government entities and enterprises, including the education, financial, healthcare and equipment manufacturing segments in the Americas, EMEA and APAC.

Our technologies, platforms and expertise enable our customers to overcome the challenge of orchestrating the ever-increasing need for capacity while improving service delivery and lowering network costs for critical applications such as high-capacity business services, mobile backhaul and data center connectivity.

16

Until the third quarter of 2015, we operated our business along two principal segments: Network Equipment and Network Integration. Our Network Integration segment, which consisted of Tecnonet as its sole business unit, operated primarily in Italy, servicing Tier One service providers, regional carriers, large enterprises, and government institutions. Tecnonet is a supplier of a wide range of communications equipment from leading global manufacturers, as well as telecommunications solutions and services, including network infrastructure, unified communications, mobility and wireless, network security, cloud computing services, managed call center services, network integration, and optimization. On December 3, 2015, the Company completed the sale of all of the shares of Tecnonet.

The sale of Tecnonet is reported as discontinued operations requiring retrospective restatement of prior periods to classify the results of operations for Tecnonet as discontinued operations in this Form 10-Q for all periods presented. Cash flows from discontinued operations are presented separately from the cash flows from continuing operations in the accompanying Statement of Cash Flows. (See Note 15, Discontinued Operations)

Our business involves reliance on foreign-based offices. Several of our divisions, outside subcontractors and suppliers are located in foreign countries including; Argentina, Australia, Canada, Denmark, Germany, Israel, Italy, Netherlands, Philippines, Poland, Russia, Taiwan, Thailand, and the United Kingdom. For the three months ended March 31, 2016, and 2015, external revenues from foreign subsidiaries accounted for 21%, and 22%, respectively, of our total revenue. The majority of our foreign sales are to customers located in the Asia Pacific region, with remaining foreign sales primarily to customers in the Europe.

As of March 31, 2016, the Company had $26.9 million in cash and cash equivalents and $5.2 million in restricted time deposits.

On March 15, 2016, the Company's Board of Directors approved a repurchase of shares of the Company's Common Stock in an amount up to $10.0 million under a share repurchase plan that expires on March 10, 2017. During the three months ended March 31, 2016, the Company repurchased 5,713 shares at a total cost of approximately $51 thousand excluding commission under this share repurchase plan. As of March 31, 2016, the Company had remaining authority to repurchase shares up to an additional $9.9 million excluding commission under this share repurchase plan prior to its expiration. Since April 1, 2016 the Company repurchased 64,510 shares at a total cost of approximately $0.6 million excluding commission under this Stock Repurchase Program. The Company has repurchased a total of 70,223 shares at a total cost of approximately $0.7 million excluding commission under this share repurchase plan through May 3, 2016, leaving remaining authority to repurchase shares up to an additional $9.3 million excluding commission under this Stock Repurchase Program prior to its expiration.

Critical Accounting Policies

Management's Discussion and Analysis of the Company's financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

The preparation of these financial statements requires management to make estimates, assumptions and judgments that can affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management believes that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and considers these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory reserves and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date.

Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

17

Revenue Recognition.    Our major revenue-generating products consist of switches and routers, console management, physical layer products, and fiber optic components. We recognize product revenue, net of sales discounts, returns and allowances, when persuasive evidence of an arrangement exists, delivery has occurred and all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection is considered reasonably assured. Products are generally shipped "FOB shipping point," with no right of return and revenue is recognized upon shipment. If revenue is to be recognized upon delivery, such delivery date is tracked through information provided by the third party shipping company we use to deliver the product to the customer. Sales of services and system support are deferred and recognized ratably over the contract period. Sales to end customers with contingencies, such as rights of return, rotation rights, conditional acceptance provisions and price protection, are infrequent and insignificant and are deferred until the contingencies have been satisfied or the contingent period has lapsed. For sales to distributors, we generally recognize revenue when product is sold to the distributor rather than when the product is sold by the distributor to the end user. In certain circumstances, distributors have limited rights of return, including stock rotation rights, and/or are entitled to price protection, where a rebate credit may be provided to the customer if we lower our price on products held in the distributor's inventory. We estimate and establish allowances for expected future product returns and credits. We record a reduction in revenue for estimated future product returns and future credits to be issued to the customer in the period in which revenue is recognized, and for future credits to be issued in relation to price protection at the time we make changes to our distributor price book. We monitor product returns and potential price adjustments on an ongoing basis and estimate future returns and credits based on historical sales returns, analysis of credit memo data, and other factors known at the time of revenue recognition.

We generally warrant our products against defects in materials and workmanship for 90 days to three year periods. The estimated costs of warranty obligations and sales returns and other allowances are recognized at the time of revenue recognition based on contract terms and prior claims experience.

Accounting for Multiple-Element Arrangements entered into prior to January 1, 2011. Arrangements with customers may include multiple deliverables involving combinations of equipment, services and software. In accordance with ASC 605-25 Multiple-Element Arrangements, the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element is met. Fair value for each element is established based on the sales price charged when the same element is sold separately. If multiple element arrangements include software or software-related elements, we apply the provisions of ASC 985-605 Software to the software and software-related elements, or to the entire arrangement if the software is essential to the functionality of the non-software elements.

Accounting for Multiple-Element Arrangements entered into after January 1, 2011. We allocate arrangement consideration at the inception of the arrangement to all deliverables using the relative selling price method. The selling price we use for each deliverable is based on (a) vendor-specific objective evidence if available; (b) third-party evidence if vendor-specific objective evidence is not available; or (c) estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. We allocate discounts in the arrangement proportionally on the basis of the fair value of each deliverable.

Allowance for Doubtful Accounts. We make ongoing estimates relating to the collectability of our accounts receivable and maintain a reserve for estimated losses resulting from the inability of customers to meet their financial obligations to us. In determining the amount of the reserve, we consider our historical level of credit losses and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Because we cannot precisely predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers deteriorates, resulting in their inability to make payments, a larger reserve may be required. In the event we determine that a change in the allowance is appropriate, we would record a credit or a charge to selling, general and administrative expense in the period in which we make such a determination.

Concentration of Credit Risk.    Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents placed with financial institutions and accounts receivable due from customers. We perform ongoing credit evaluations of our customers and maintain reserves for potential credit losses.

18

Inventory.    We make ongoing estimates relating to the net realizable value of inventories, based upon our assumptions about future demand and market conditions. If we estimate that the net realizable value of our inventory is less than the cost of the inventory recorded on our books, we record an adjustment to the cost basis equal to the difference between the cost of the inventory and the estimated net realizable market value. This adjustment is recorded as a charge to cost of goods sold, and includes estimates for excess quantities and obsolete inventory. If changes in market conditions result in reductions in the estimated net realizable value of our inventory below previous estimates, we would make further adjustments in the period in which we make such a determination and record a charge to cost of goods sold. At the time of recording the adjustment, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration of, or increase in, that newly established cost basis.

Intangibles. We make judgments about the recoverability of intangible assets with finite lives whenever events or changes in circumstances indicate that impairment may exist. Recoverability of intangible assets with finite lives is measured by comparing the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. Our ongoing consideration of all the factors described previously could result in additional impairment charges in the future, which could adversely affect our net income.

Income Taxes. As part of the process of preparing our annual financial statements, we estimate the income taxes in each of the jurisdictions in which we operate based on the estimated annual effective tax rate by jurisdiction. This process involves estimating the current income tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for income tax and accounting purposes. These differences result in deferred income tax assets and liabilities, which are included in our Consolidated Balance Sheets. We assess the likelihood that our deferred income tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense within the income tax provision in the Condensed Consolidated Statements of Operations.

We utilize significant management judgment to determine the provision for income taxes, deferred income tax assets and liabilities, including uncertain tax positions, and any valuation allowance recorded against net deferred income tax assets. Management periodically evaluates the deferred income tax assets as to whether it is likely that the deferred income tax assets will be realized. We establish a valuation allowance on the deferred income tax asset at the time we determine the asset is not likely to be realized. If we later determine that it is more-likely-than-not that a deferred tax asset will be realized, we release the valuation allowance and record a credit within the Condensed Consolidated Statements of Operations.

Share-Based Compensation.    We determine the fair value of stock options using the Black-Scholes valuation model. The assumptions used in calculating the fair value of share-based payment awards represent our best estimates. Our estimates may be impacted by certain variables including stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, and the related income tax impact. (See Note 9 “Share-Based Compensation” to the Financial Statements in Item 1, Part 1 of this Form 10-Q for further discussion.)

For further information around our critical accounting policies, please refer to “Critical Accounting Policies” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K.

Currency Rate Fluctuations

Changes in the relative value of non-U.S. currencies to the U.S. dollar affect our results. We conduct a significant portion of our business in foreign currencies, the Israeli new shekel and to a lesser extent, the Taiwan dollar. For the three months ended March 31,2016 and 2015, 21% and 22% of external revenue, respectively, and 35% of operating expenses, were generated and incurred at foreign subsidiaries. For the three months ended March 31, 2016, the exchange rates for the Taiwan dollar weakened 5% against the U.S. dollar compared to the three months ended March 31, 2015, so revenue and expenses in these currencies translated into slightly fewer dollars than they would have in the prior period. For the three months ended March 31, 2016, the exchange rates for the Israeli new shekel strengthened 1% against the U.S. dollar compared to the three months ended March 31, 2015, so revenue and expenses in these currencies translated into slightly higher dollars than they would have in the prior period. Additional discussion of foreign currency risk and other market risk is included in Part I, Item 3 “Quantitative and Qualitative Disclosures About Market Risk” of this Form 10-Q.

19

Results of Operations

The following table sets forth, for the periods indicated, certain consolidated statements of operations data (dollars in thousands):

	Three Months Ended   March 31,
	2016			2015
Revenue:
Product revenue	$	16,007		$	19,467
Service revenue	2,875			2,718
Total revenue	18,882			22,185
Cost of Revenue:
Cost of product	7,595			9,617
Cost of services	1,484			1,024
Total cost of revenue	9,079			10,641
Gross profit	9,803			11,544
Operating expenses:
Product development and engineering	5,344			5,125
Selling, general and administrative	8,017			7,736
Total operating expenses	13,361			12,861
Operating loss	(3,558		)	(1,317		)
Interest expense	—			(14		)
Other income (expense), net	(277		)	81
Loss from continuing operations before provision for income taxes	(3,835		)	(1,250		)
Provision for income taxes	61			50
Loss from continuing operations	(3,896		)	(1,300		)
Income from discontinued operations, net of income taxes of $138 in 2015	—			232
Net loss	$	(3,896	)	$	(1,068	)

Discontinued Operations

On December 3, 2015, the Company completed the sale of all of the shares of Tecnonet. On February 19, 2016, the Company received a payment of €4.3 million (approximately $4.8 million) representing the post-closing purchase price adjustment pursuant to the Purchase Agreement.

The Company reported net income of $0.2 million from discontinued operations, net of income tax expense, for the three months ended March 31, 2015, related to Tecnonet.

20

Three months ended March 31,2016 Compared to the Three months ended March 31,2015

Three months ended March 31:	2016			2015			$ Change			% Change
Revenue:
Product revenue	$	16,007		$	19,467		$	(3,460	)	(18	)%
Service revenue	2,875			2,718			157			6	%
Total revenue	18,882			22,185			(3,303		)	(15	)%
Cost of Revenue:
Cost of product	7,595			9,617			(2,022		)	(21	)%
Cost of services	1,484			1,024			460			45	%
Total cost of revenue	9,079			10,641			(1,562		)	(15	)%
Gross profit	9,803			11,544			(1,741		)	(15	)%
Operating expenses:
Product development and engineering	5,344			5,125			219			4	%
Selling, general and administrative	8,017			7,736			281			4	%
Total operating expenses	13,361			12,861			500			4	%
Operating loss	(3,558		)	(1,317		)	(2,241		)	170	%
Interest expense	—			(14		)	14			(100	)%
Other income (expense), net	(277		)	81			(358		)	(442	)%
Loss from continuing operations before provision for income taxes	(3,835		)	(1,250		)	(2,585		)	207	%
Provision for income taxes	61			50			11			22	%
Loss from continuing operations	(3,896		)	(1,300		)	(2,596		)	200	%
Income from discontinued operations, net of income taxes of $138 in 2015	—			232			(232		)	(100	)%
Net loss	$	(3,896	)	$	(1,068	)	$	(2,828	)	265	%

Revenue

Revenue decreased $3.3 million, or 15% for the three months ended March 31, 2016 compared to the three months ended March 31, 2015, primarily due to a $3.5 million, or 18%, decrease in product revenue, offset by the $0.2 million, or 6% increase in service revenue. The decrease in product revenue was primarily driven by decreased revenues in the Americas and Europe due to reduced sales of legacy lab automation products and reduced purchasing from some of our larger run-rate customers. Conversely, we experienced improvement in Asia Pacific as we saw an increase in order demand in Australia from certain Tier 1 and Tier 2 customers. The $0.2 million increase in service revenues was driven by better penetration rates, along with increased engineering fees, related to deployment of our end-to-end solutions.

The following table summarizes revenue by geographic region (in thousands):

Three months ended March 31:	2016		2015		$ change			% change
Revenue:
United States	$	9,041	$	10,251	$	(1,210	)	(12	)%
Americas (Excluding the U.S.)	1,290		2,763		(1,473		)	(53	)%
Europe	3,197		4,230		(1,033		)	(24	)%
Asia Pacific	5,354		4,941		413			8	%
Total revenue	$	18,882	$	22,185	$	(3,303	)	(15	)%

Gross Profit

The Company's cost of revenue consists of raw materials, compensation expense including non-cash stock-based compensation expense, depreciation expense and other manufacturing overhead costs, expenses associated with excess and obsolete inventories, and product warranty costs. Historically, our cost of revenue as a percentage of revenue, which we refer to as our gross margin, has fluctuated significantly due to product mix, manufacturing yields and sales volumes, and inventory and specific product warranty charges.

21

Gross profit decreased $1.7 million, or 15%, for the three months ended March 31, 2016, compared to the three months ended March 31, 2015, principally due to a $3.5 million, or 18%, decrease in product revenue. The combined gross profit margin for product and service revenues remained relatively consistent at 51.9% for the three months ended March 31, 2016, compared to 52.0% for the three months ended March 31, 2015. The gross profit margin for product revenues increased 1.9 percentage points to 52.5% for the three months ended March 31, 2016, compared to 50.6% for the three months ended March 31, 2015, while the gross profit margin for service revenues decreased 13.9 percentage points to 48.4% for the three months ended March 31, 2016, compared to 62.3% for the three months ended March 31, 2015. The improvement in product gross profit margin was primarily a result of the revenue mix shift toward products that generally have higher margins, in addition to improvements made in our supply chain related to a re-alignment of outsourcing and contract manufacturing efforts that have afforded us savings in our internal overhead. The deterioration in service revenue gross profit margin was primarily attributable to a charge of approximately $0.3 million for excess and obsolete inventory along with a $0.1 million increase in labor expense that was directly related to improvement efforts related to customer support and maintenance to enhance our customer experience.

Operating Expenses

Operating expenses were $13.4 million, or 71% of revenue, for the three months ended March 31, 2016, compared to $12.9 million, or 58% of revenue, for the three months ended March 31, 2015. The $0.5 million, or 4% increase in operating expenses for the three months ended March 31, 2016, compared to the three months ended March 31, 2015, were primarily driven by $0.3 million increase in labor expenses related to product development and engineering reflecting the continued development, design, testing and enhancement to our existing and future products and product lines, in addition to $0.3 million increase in labor expense for general and administrative charges related to increased corporate headcount. These increases were offset by the $0.3 million decrease in sales commissions which were directly impacted by the reduced revenues for the three months ended March 31, 2016, compared to the three months ended March 31, 2015.

Operating Loss

The Company reported operating loss of $3.6 million for the three months ended March 31, 2016 compared to an operating loss of $1.3 million for three months ended March 31, 2015. The $2.2 million decline in operating results was primarily the result of $3.3 million, or 15%, decrease in revenues along with the $0.5 million, or 4% planned increase in operating expenses. Our operating margin declined to (19)% for the three months ended March 31, 2016 compared to (6)% operating margin for the three months ended March 31, 2015. Operating loss included share-based compensation expense of $0.3 million and $0.2 million for the three months ended March 31, 2016 and 2015, respectively.

Provision for Income Taxes

The provision for income taxes for both the three months ended March 31, 2016 and 2015, was $0.1 million and was computed based on an estimated annual effective tax rate for the Company in each of the various tax jurisdictions we operate. Our income tax provision fluctuates based on the amount of pre-tax income or loss generated in the various jurisdictions where we conduct operations and pay income tax.

Tax Loss Carryforwards

As of December 31, 2015, MRV had federal, state, and foreign net operating loss ("NOL") carryforwards available of $182.5 million, $97.1 million and $97.4 million, respectively. Under the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change NOLs, capital loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. An ownership change is generally defined as a greater than 50% change in its equity ownership by value over a three-year period. We may experience an ownership change in the future as a result of subsequent shifts in our stock ownership. If we were to trigger an ownership change in the future, our ability to use any NOLs and capital loss carryforwards existing at that time could be limited. As of March 31, 2016, the US federal and state NOLs had a full valuation allowance.

22

Discontinued Operations

On December 3, 2015, the Company completed the sale of all of the shares of Tecnonet. On February 19, 2016, the Company received a payment of €4.3 million (approximately $4.8 million) representing the post-closing purchase price adjustment pursuant to the Purchase Agreement. The Company included the $4.8 million receivable representing the post-closing purchase price adjustment on its consolidated balance sheet within other current assets as of December 31, 2015. Prior to its disposition, Tecnonet was the last remaining business unit in our Network Integration segment. The historical financial results of Tecnonet, prior to its sale have been reclassified as discontinued operations for all periods presented. The Company reported net income of $0.2 million from discontinued operations, net of income tax expense for the three months ended March 31, 2015, related to Tecnonet.

Liquidity and Capital Resources

During the three months endedMarch 31, 2016, the Company's cash increased approximately $0.8 million to $26.9 million from $26.2 million. There were net cash outflows from working capital of approximately $0.7 million, including a $0.7 million decrease in accounts payable and accrued liabilities due to timing of payments and a $0.8 million decrease in deferred revenue due to timing of shipments, offset by a $0.4 million increase in other assets, a $0.3 million increase in accounts and other receivables due to timing of cash receipts, and a $0.2 million increase in inventory due to timing of shipments. Net cash provided by investing activities included $4.8 million in proceeds from the sale of the Tecnonet, offset by $0.3 million in purchases of property, plant, and equipment.

We periodically review our capital position and consider returning capital to stockholders through special dividends or share repurchases when cash on hand exceeds our foreseeable cash needs. We also periodically review the capital needs of our business units. We plan to invest approximately $1.5 million over the next 12 months to upgrade our infrastructure and equipment needed to support the Company's growth objectives in the carrier Ethernet and optical transport markets among others. We believe that cash on hand and existing financing will be sufficient to satisfy current operating needs, capital expenditures, and product development and engineering requirements for at least the next 12 months. We may seek to obtain additional debt or equity financing if we believe it appropriate. We may limit our ability to use available NOLs and capital loss carryforwards if we seek financing through issuance of additional equity securities.

Working Capital

The following table summarizes our working capital position (in thousands).

	March 31, 2016		December 31, 2015
Current assets	$	58,691	$	63,273
Current liabilities	22,318		23,792
Working capital	$	36,373	$	39,481
Current ratio(1)	2.6		2.7

(1) Determined by dividing total current assets by total current liabilities.

Off-Balance Sheet Arrangements

We do not have transactions, arrangements or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources. We have no special purpose or limited purpose entities that provided off-balance sheet financing, liquidity or market or credit risk support, engaged in leasing, hedging, research and development services, or other relationships that expose us to liability that is not reflected on the face of the financials.

Contractual Obligations

During the three months ended March 31, 2016, there were no material changes in our contractual obligations.

23

Internet Access to Our Financial Documents

We maintain a website at www.mrv.com. We make available, free of charge, either by direct access or hyperlink, our Annual Reports on Form10-K, Quarterly Reports on Form10-Q, Current Reports on Form8-K and amendments to those reports filed or furnished pursuant to Section13(a)or 15(d)of the Exchange Act as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our reports filed with, or furnished to, the SEC are also available directly at the SEC's website at www.sec.gov.

24

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our Condensed Consolidated Financial Statements through adverse changes in financial market prices and rates and inflation. Our market risk exposure results primarily from fluctuations in foreign exchange and interest rates. We manage our exposure to these market risks through our regular operating and financing activities and, in certain instances, through the use of derivative financial instruments. These derivative instruments are used to manage risks of volatility in interest and foreign exchange rate movements on certain assets, liabilities or anticipated transactions and create a relationship in which gains or losses on derivative instruments are expected to counter-balance the losses or gains on the assets, liabilities or anticipated transactions exposed to such market risks. As of March 31, 2016, we did not have any such derivative financial instruments outstanding.

Interest Rates.    Our investments expose us to interest rate fluctuations. Our cash and short-term investments are subject to limited interest rate risk, and are primarily maintained in money market funds and bank deposits.

Foreign Exchange Rates.    We operate on an international basis with revenues and expenses transacted in currencies other than the U.S. dollar. Fluctuation in the value of these foreign currencies affects our results and will cause U.S. dollar translation of such currencies to vary from one period to another. We cannot predict the effect of exchange rate fluctuations upon future operating results. However, because we have revenues and expenses in each of these foreign currencies, the effect on our results of operations from currency fluctuations is reduced.

Certain assets and liabilities, including certain bank accounts, accounts receivables, and accounts payables of some of our business units, exist in currencies other than the functional currency of the related business units and are sensitive to foreign currency exchange rate fluctuations. These currencies principally include the U.S. dollar, the Taiwan dollar, and the Israeli new shekel. When these transactions are settled in a currency other than the functional currency, we recognize a foreign currency transaction gain or loss.

When we translate the financial position or results of operations of subsidiaries with functional currencies other than the U.S. dollar, we recognize a foreign currency translation gain or loss as a component of other comprehensive income (loss). Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our results. We conduct a significant portion of our business in foreign currencies, the Israeli new shekel and the Taiwan dollar. For the three months ended March 31, 2016 and 2015, 21% and 22% of external revenue, respectively, and 35% of operating expenses, were incurred at foreign subsidiaries. For the three months ended March 31, 2016, the exchange rates for the Taiwan dollar weakened 5% against the U.S. dollar compared to the three months ended March 31, 2015, so revenue and expenses in these currencies translated into slightly fewer dollars than they would have in the prior period. For the three months ended March 31, 2016, the exchange rates for the Israeli new shekel strengthened 1% against the U.S. dollar compared to the three months ended March 31, 2015, so revenue and expenses in these currencies translated into slightly higher dollars than they would have in the prior period.

Fluctuations in currency exchange rates of foreign currencies have an impact on the U.S. dollar equivalent of such currencies included in cash and cash equivalents reported in our financial statements.

The following table summarizes cash and cash equivalents held in various currencies and translated into U.S. dollars (in thousands):

	March 31, 2016		December 31, 2015
U.S. dollars	$	24,344	$	23,461
Euros	109		171
Taiwan dollars	27		141
Israeli new shekels	1,305		1,723
Other	1,143		673
Total cash and cash equivalents	$	26,928	$	26,169

25

Macro-economic uncertainties.  We believe that the past few years of sustained softness in the global economy has affected our revenues and operating results. When economic uncertainties increase, our customers often take a more cautious approach in their capital expenditures, resulting in order delays, slowing deployments, and lengthening sales cycles. This may lead to increased competition for projects and price pressures resulting in lower gross margins. Despite these economic uncertainties, we believe that our customers need to continue investing in their networks to meet the growth in consumer and enterprise use of high-bandwidth communications services. We believe in our longer term market opportunities, but we are uncertain how long the downturn in economic conditions will continue and how our customers will interpret and react to market conditions.

Item 4. Controls and Procedures

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined under Rule 13a-15(e) of the Exchange Act).

Based upon that evaluation the Company’s Chief Executive Officer and its Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

There was no change in our internal control over financial reporting during the three months ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to legal claims and litigation in the ordinary course of business, including but not limited to product liability, employment and intellectual property claims. The outcome of any such matters is currently not determinable. In addition, we were party to the litigation set forth below.

Nhan T. Vo, individually and on behalf of other aggrieved employees vs. the Company, Superior Court of California, County of Los Angeles. On June 27, 2013, the plaintiff in this matter filed a lawsuit against the Company alleging claims for failure to properly pay overtime or provide meal and rest breaks to its non-exempt employees in California, among other things. The complaint seeks an unspecified amount of damages and penalties under provisions of the Labor Code, including the Labor Code Private Attorneys General Act. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. Management believes it has accrued adequate reserves for this matter and does not expect the matter to have a material adverse effect on its business or financial condition. However, depending on the actual outcome of this case, further provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

In connection with the sale by MRV of Source Photonics, Inc. (“SPI”) in October 2010, MRV agreed to indemnify the buyer against certain claims brought after the closing for prior-occurring events. The Company has received a notice from SPI, advising the Company of a tax audit for periods including tax returns filed prior to the acquisition of SPI by the buyer. Management believes that it has meritorious defenses to the extent a formal indemnification claim is asserted and has submitted the potential claim to its insurer. MRV intends to vigorously contest any claim; however, no formal legal proceeding has been commenced, and MRV can provide no assurance that such claim would not have a material adverse effect on its business, operating results or financial condition.

From time to time, MRV receives notices from third parties alleging possible infringement of patents with respect to product features or manufacturing processes. Management believes such notices are common in the communications industry because of the large number of patents that have been filed on these subjects. The Company's policy is to discuss these notices with the parties in an effort to demonstrate that MRV's products and/or processes do not violate any patents. Management does not believe that any of these matters will result in a material adverse outcome.

MRV and its subsidiaries have from time to time been named as a defendant in other lawsuits involving matters that management considers routine to the nature of its business. Management is of the opinion that the ultimate outstanding resolution of such outstanding matters will not have a material adverse effect on our business, operating results and financial condition.

26

Item 1A. Risk Factors

There have been no material changes in the Company's risk factors that have been previously disclosed in Part I, Item 1A of the Company's 2015 Annual Report on Form 10-K.

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

Issuer Purchases of Equity Securities

On March 15, 2016, the Company's Board of Directors approved a repurchase of shares of the Company's common stock in an amount up to $10.0 million under a stock repurchase program that expires on March 10, 2017. During the three months ended March 31, 2016, the Company repurchased 5,713 shares at a total cost of approximately $51 thousand, excluding commission, under this stock repurchase program. As of March 31, 2016, the Company had remaining authority to repurchase shares up to an additional $9.9 million, excluding commission, under this stock repurchase program prior to its expiration.

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum amount remaining for purchase under the repurchase plan
January 1, 2016 to July 31, 2016	—	$	—	—	$	—
February 1, 2016 to February 29, 2016	—	$	—	—	$	—
March 1, 2016 to March 31, 2016	5,713	$	8.91	5,713	$	9,949,104
Total	5,713	$	8.91	5,713

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Effective May 5, 2016, the Company entered into a Change In Control Agreement with Stephen G. Krulik (the “Agreement”) under which Mr. Krulik, in his position as Chief Financial Officer, Treasurer and Corporate Secretary of the Company, will be entitled certain compensation if his employment is terminated pursuant to a Severance Event (as defined below). The material terms of the Agreement are summarized below; however, this summary is qualified in its entirety by the Agreement, which is included as an exhibit to this quarterly report on Form 10-Q.

Krulik Agreement

Effective May 5, 2016, the Company entered into a Change In Control Agreement with Stephen G. Krulik under which Mr. Krulik, in his position as Chief Financial Officer, Treasurer and Corporate Secretary of the Company, will be entitled certain compensation if his employment is terminated pursuant to a Severance Event. A Severance Event means a termination of Mr. Krulik’s employment with the Company and its subsidiaries by the Company without Cause (as defined in the Agreement), or by Mr. Krulik for Good Reason (as defined in the Agreement), in either case occurring within twelve months following the date of a Change in Control (as defined in the Agreement).

27

The Agreement provides that if a Severance Event occurs, than Mr. Krulik will be entitled to certain compensation. Such compensation consists of any accrued and unpaid compensation of Mr. Krulik’s previously earned based salary, any unpaid amount of a bonus earned by Mr. Krulik during the previous year, any vested payments and benefits accrued by Mr. Krulik under any employee benefits plan, severance equal to nine months of Mr. Krulik’s base salary as of the Severance Event, and, if Mr. Krulik timely elects, up to nine months of COBRA group health plan continuation coverage. In addition, if a Change in Control occurs, all of Mr. Krulik’s outstanding stock option, restricted stock and other equity compensation awards will be subject to the vesting and other terms and provisions of the applicable award agreement and Company plan.

Item 6. Exhibits

(a)    Exhibits

No.	Description
10.1	MRV Communications, Inc. Change in Control Agreement, dated as of May 5, 2016, by and between MRV Communications, Inc. and Stephen G. Krulik
31.1	Certification of the Principal Executive Officer required by Rule 13a-14(a) of the Exchange Act (filed herewith)
31.2	Certification of the Principal Financial Officer required by Rule 13a-14(a) of the Exchange Act (filed herewith)
32.1	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith)
32.2	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (furnished herewith)
101.INS	XBRL Instance Document (filed herewith)
101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith)
101.CAL	XBRL Taxonomy Calculation Linkbase Document (filed herewith)
101.LAB	XBRL Taxonomy Label Linkbase Document (filed herewith)
101.PRE	XBRL Taxonomy Presentation Linkbase Document (filed herewith)
101.DEF	XBRL Taxonomy Extension Definition Document (filed herewith)

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized on May 5, 2016.

MRV COMMUNICATIONS, INC.

By: /s/ Mark J. Bonney

Mark J. Bonney

Chief Executive Officer

Principal Executive Officer

By: /s/ Stephen G. Krulik

Stephen G. Krulik

Chief Financial Officer

Principal Financial and Accounting Officer

29

EX-10.1

Exhibit 10.1

MRV COMMUNICATIONS, INC.

CHANGE IN CONTROL AGREEMENT

AGREEMENT made as of the 5^th day of May, 2016, by and between MRV COMMUNICATIONS, INC. (the “Company”) and Stephen G. Krulik (the “Employee”).

WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and

WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Employee, to their assigned duties without distraction;

NOW, THEREFORE, the Company and the Employee agree as follows:

1.Definitions. For the purposes of this Agreement, the following terms shall have the meanings ascribed to them below.

(a)“Cause” means (a) if there is an employment or other services agreement between the Employee and the Company or a subsidiary that defines the term "cause" (or a term of like import), the Employee’s engaging in conduct that constitutes "cause" (or a term of like import) within the meaning of that agreement, or (b) if there is no employment or other services agreement between the Employee and the Company or a subsidiary that defines the term "cause" (or a term of like import), (1) the Employee’s repeated failure (other than temporarily while physically or mentally incapacitated) or refusal to perform the duties of his or her employment or other service if such failure or refusal shall not have ceased or been remedied within fifteen days following written warning from the Company or a subsidiary; (2) the Employee’s conviction of or plea of no contest to a felony; (3) the Employee’s breach of a fiduciary trust (including, without limitation, misappropriation of funds, material misrepresentation (other than as a result of a good faith mistake) of the Company's financial performance, operating results or financial condition to the Board or any officer, use of the Company's or a subsidiary's assets to pursue other interests, or diversion of any business opportunity belonging to the Company or a subsidiary to or for the benefit of the Employee or a third party); (4) material unauthorized disclosure by the Employee to any person of any confidential information or trade secrets of the Company or any of its subsidiaries; (5) the Employee’s engaging in conduct or activities materially damaging to the property, business or reputation of the Company or a subsidiary or to the ability of the Employee to perform the duties of his or her employment or other services; (6) any act or omission by the Employee involving gross malfeasance or gross negligence in the performance of the Employee’s duties to the material detriment of the Company or a subsidiary; or (7) the Employee’s failure to comply in all material respects with the policies of the Company or a subsidiary or with any non-competition, non-solicitation or other restrictive covenants made by the Employee to the Company or a subsidiary; in each of such cases as determined by the Board or the Compensation Committee acting in its good faith discretion.

(b)“Change in Control” means any of the following events:

(i)the acquisition by any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) a subsidiary of the Company, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) of beneficial ownership (within the meaning of Rule l3d-3 under the Exchange Act), of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities, other than an acquisition directly from the Company; or

(ii)the consummation of a merger, consolidation or other form of reorganization involving the Company unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such merger, consolidation or reorganization beneficially own more than 50% of the combined voting power of the securities of the Company (or the surviving entity or any parent thereof, as the case may be) that are outstanding immediately after such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities of the Company immediately prior to such merger, consolidation or reorganization; or

(iii)the consummation of a complete liquidation or dissolution of the Company, or of a sale or disposition of all or substantially all of the Company's assets (whether in one transaction or a series of related transactions), unless all or substantially all of the persons who were the beneficial owners of the voting securities of the Company immediately prior to such sale or disposition beneficially own more than 50% of the combined voting power of the securities of the person or entity that acquires such assets that are outstanding immediately after such sale or disposition.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the then outstanding Voting Securities is acquired by (1) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, (2) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition, or (3) any Person who, as of the date hereof, owns more than 25% of the outstanding Voting Securities.

(c)“Company” means MRV Communications, Inc. and any direct or indirect successor to the business of the Company.

(d)“Good Reason” means, without the written consent of the Executive:

(i) a material diminution in Employee’s duties or responsibilities;

(ii)any reduction in the Employee’s annual base salary in effect immediately prior to the Change in Control; or

(iii)the Company's requiring the Employee to be based at any office or location more than fifty (50) miles from the office where the Employee was employed immediately prior to the Change in Control.

Notwithstanding the foregoing, the Employee will not have “Good Reason” to terminate his employment merely because the Employee is no longer an Employee of a public company and/or has a change in title, duties, authority, responsibilities or reporting structure as a result of the Change in Control transaction (including having a reporting relationship within a larger company). In order to terminate employment for Good Reason, the Employee must, within 90 days after the occurrence of the event or condition giving rise to Good Reason, furnish written notice to the Company indicating Employee’s intention to terminate employment for Good Reason and describing the act(s) and/or omission(s) that the Employee deems to constitute Good Reason. The Company shall have 30 days after receipt of such notice to review and correct the situation (and thus prevent Employee’s termination for Good Reason) and, if the Company fails to do so, the Employee will then have 30 days within which to terminate for Good Reason.

(e)“Severance Event” means a termination of the Employee’s employment with the Company and its subsidiaries (1) by the Company without Cause, or (2) by the Employee for Good Reason, in either case occurring within twelve (12) months following the date of a Change in Control.

2.Change in Control Severance Protection. If a Severance Event occurs, then the Employee will be entitled to receive any accrued and unpaid compensation, consisting of the unpaid amount, if any, of Employee’s previously earned base salary; the unpaid amount, if any, of a bonus earned by the Employee for the preceding year; and any vested payments and benefits accrued by the Employee under and in accordance with the terms of any employee plan in which the Employee was a participant. In addition, subject to the provisions hereof, including, as applicable, the release and other conditions set forth in Section 4 and the non-duplication provisions of Section 6, the Employee will be entitled to receive the following payments and benefits:

(a)a single sum cash payment equal to nine months of Employee’s base salary as of the date that Employee’s employment with the Company ceases; and

(b)if the Employee (and/or the Employee’s covered spouse and/or dependents) timely elects COBRA group health plan continuation coverage, the Company will pay the full amount of the premiums for the number of months of salary comprising the severance payment described in Section 2(a) above, but in no event later than the date the Employee becomes eligible to receive corresponding coverage under a new employer’s group health plan.

3.Equity Awards. If a Change in Control occurs, then all outstanding stock option, restricted stock and other equity compensation awards will be subject to the vesting and other terms and provisions of the applicable award agreement and Company plan.

4.Release of Claims and Other Conditions; Timing of Payments. The Employee’s right to receive and retain any severance payments or benefits pursuant to Section 2 may be conditioned upon the Employee’s delivery to the Company of a signed release of claims (substantially in the form attached hereto as Exhibit A) within 60 days after the date of the Severance Event and the Employee’s not revoking such release. If the Company decides to impose the release condition, it must furnish written notification of its decision to the Employee within five days after the date of the Severance Event. Severance payments and benefits that are subject to a release condition under this paragraph will be made on the day following the date on which the release condition is satisfied, provided that, if the 60-day period during which the release condition may be satisfied straddles two calendar years, payment will be made on the later of the date on which the release condition is satisfied and January 2 of the calendar year following the calendar year in which the Severance Event occurs. On the deferred payment date, the Employee will receive a catch-up payment equal to the aggregate amount that otherwise would have been received by such date if there had been no deferral. If the Company does not provide the written release notice to the Employee within five days after the date of the Severance Event, then the severance amounts payable to the Employee under Section 2 shall be made or begin within ten business days after the date of the Severance Event. Notwithstanding the foregoing, (i) if the release condition is timely invoked by the Company and not satisfied by the Employee, the Company will be entitled to recoup the amount of any premiums it may have paid for group health continuation coverage under Section 2(b); and (ii) the Employee will not be entitled to payments or benefits described in Section 2 if, at any time from the date hereof until the date of the Change in Control, the Employee fails to use Employee’s best efforts to perform the duties and responsibilities of the Employee’s employment with the Company (including participating positively and constructively with respect to the discussions, negotiation of and process leading up to a possible Change in Control), all to the reasonable satisfaction of the Board.

5.Golden Parachute Tax Limitation. If, when combined with the payments and benefits the Employee is entitled to receive under any other agreement, plan, program or arrangement of the Company, the Employee would be subject to excise tax under Section 4999 of the Code or the Company would be denied a deduction under Section 280G of the Code, then the severance amounts otherwise payable to the Employee under this Agreement will be reduced by the minimum amount necessary to ensure that the Employee will not be subject to such excise tax and the Company’s deduction will not be so denied.

6.Effect of Other Agreements. Notwithstanding the any other provision hereof, if the Employee is entitled to receive separation payments or benefits pursuant to another agreement with the Company or an affiliate or pursuant to applicable law, then the separation payments and benefits otherwise payable to the Employee under Section 2 of this Agreement shall be reduced by any corresponding payments and benefits that the Employee receives or will receive pursuant to such other agreement or applicable law, in order to avoid duplication.

7.Not a Contract of Employment. This Agreement shall not be deemed to constitute a contract of employment between the Employee and the Company. Unless the Employee is employed pursuant to an employment agreement for a specified period of time, the Employee is employed on an at-will basis. Nothing contained herein shall be deemed to give the Employee a right to be retained in the employ or other service of the Company or to interfere with the right of the Company to terminate the Employee’s employment at any time.

8.Governing Law. This Agreement shall be governed by the laws of the state of New York, excluding its conflict of law rules.

9.Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which taken together shall constitute one and the same agreement, and any party hereto may execute this Agreement by signing any such counterpart.

10.Tax Withholding; Section 409A Compliance.

(a)Withholding. The payment of any amount pursuant to this Agreement shall be subject to all applicable tax withholding.

(b)Section 409A. It is intended that any amounts payable to the Employee under this Agreement will be exempt from the provisions of Section 409A of the Internal Revenue Code of 1986 and the regulations issued thereunder (“Section 409A”). Nevertheless, if and to the extent that a payment under the Agreement is deemed to be subject to Section 409A (a “Covered Payment”), then, for the purposes of the Agreement and Section 409A:

(i)Each Covered Payment will be treated as a separate payment under Section 409A.

(ii)The term “termination of employment” or words of like import shall be deemed to mean a “separation from service” within the meaning of Section 409A.

(iii)If the Employee is treated as a “specified employee” within the meaning of Section 409A at the time of the termination of the Employee’s employment, then any Covered Payment that would otherwise be due within six months after such termination of employment will be delayed until the first business day of the seventh month following the date of termination or, if earlier, the date of the Employee’s death, to the extent such delay is required by Section 409A. On the delayed payment date, the Employee (or, if applicable, the deceased Employee’s estate) will receive a catch-up payment equal to the aggregate amount of the Covered Payments that were delayed pursuant to the preceding sentence.

(iv)Notwithstanding the foregoing, the Employee shall be solely responsible for, and the Company shall have no liability for or with respect to any taxes, acceleration of taxes, interest or penalties arising under Section 409A.

11.Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior and/or contemporaneous understandings, agreements or representations, written or oral, relating to the subject matter hereof. This Agreement may be amended only by a written instrument signed by both parties.

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

MRV COMMUNICATIONS, INC.		EMPLOYEE
By:	/s/ Mark J. Bonney	By:	/s/ Stephen G. Krulik
Name:	Mark J. Bonney		Stephen G. Krulik
Title:	Chief Executive Officer

EXHIBIT A

RELEASE AGREEMENT

This Release Agreement (“Agreement”) is made as of • by and between • (“Employee”) and MRV COMMUNICATIONS, INC. (the “Company”). Capitalized terms used but not defined herein shall have the meanings ascribed to them by the Change in Control Agreement made by and between the Company and the Employee as of the 5th day of May, 2016 (the “Change in Control Agreement”).

1.    This will confirm that a Severance Event has occurred. In accordance with the Change in Control Agreement, the Company has timely notified the Employee that the Employee’s right to receive and retain certain severance payments and benefits under Section 2 of the Change in Control Agreement is conditioned upon the timely receipt by the Company of a release by the Employee which is no longer subject to revocation. Accordingly, in consideration of the severance payments and benefits under the Change in Control Agreement and other good and valuable consideration, Employee for himself/herself and for the executors and administrators of the Employee’s estate, and the Employee’s heirs, successors and assigns, hereby releases and forever discharges the Company and its officers, directors, employees and stockholders (the “Released Parties”) from any and all claims, actions, causes of action, suits, sums of money, debts, dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, demands or damages of any nature whatsoever or by reason of any matter, cause or thing regardless of whether known or unknown at present, which against the Company or any of its officers, directors, employees or stockholders Employee ever had, now has or may have arising out of or relating to the Employee’s employment with the Company or the termination of such employment occurring or existing at any time prior to and including the date of this Release (collectively defined herein as “Claims”). This Release includes, but is not limited to, all Claims the Employee might have under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§2000e, et. seq.; 42 U.S.C. §§1981, et. seq.; the Americans with Disabilities Act, 29 U.S.C. §§2000e, et. seq.; the Age Discrimination in Employment Act; the Older Workers Benefits Protection Act; the federal Family and Medical Leave Act; Section 451 et. seq.; similar state or other laws that may be applicable, and any and all statutory and common law causes of action for defamation; slander; slanderper se; defamation per se; false light; tortious interference with prospective business relationships; assault; sexual assault; battery; sexual harassment; sexual discrimination; hostile work environment; discrimination; retaliation; workers’ compensation retaliation; wrongful termination; intentional infliction of emotional distress; breach of a duty or obligation of any kind or description, including any implied covenant of good faith and fair dealing; and for breach of contract or any tort whatsoever, as well as any expenses or attorney’s fees associated with such Claims. The parties acknowledge that this Release does not either affect the rights and responsibilities of the Equal Employment Opportunity Commission to enforce the Age Discrimination in Employment Act, or justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission under the Age Discrimination in Employment Act. In the event the Equal Employment Opportunity Commission commences a proceeding against the Company in which Employee is a named party, the Employee agrees to waive and forego any monetary claims which may be alleged by the Equal Employment Opportunity Commission to be owed to Executive. Notwithstanding the foregoing, nothing in the provisions of this Release shall act as a release by the Employee of any Claims against the Company with respect to (i) any amounts or benefits to which the Employee may become entitled to receive under the Change in Control Agreement, (ii) any right the Employee may have to indemnification under the terms of the Change in Control Agreement or under the terms of any other applicable indemnification agreement, the organizational documents of the Company, the terms of any insurance policy, the terms of any Company indemnification policy, the terms of applicable law or otherwise, (iii) the Employee’s rights under and in accordance with the terms of any employee benefit plan in which Employee participates, and (iii) any Claims arising with respect to acts, events or occurrences taking place after the date of this Release.

2.    EMPLOYEE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. [In giving this release, which includes claims which may be unknown to Employee at present, Employee acknowledges that he has read and understands Section 1542 of the California Civil Code, which states: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”] Employee hereby expressly waives and relinquishes all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to Employee’s release of any unknown or unsuspected claims Employee may have against the Released Parties.

3.    Employee has been advised to consult with an attorney prior to executing this Agreement. By executing this Agreement, Employee acknowledges that (a) Employee has been provided with an opportunity to consult with an attorney or other advisor of his/her choice regarding the terms of this Agreement, (b) this is a final offer and Employee has been given [21 or 45, as applicable] days in which to consider whether Employee wishes to enter into this Agreement, (c) Employee has elected to enter into this Agreement knowingly and voluntarily and (d) if Employee does so within fewer than [21]/[45] days from receipt of the final document the Employee has knowingly and voluntarily waived the remaining time. This Agreement shall be fully effective and binding upon all parties hereto immediately upon execution of this Agreement except as to rights or claims arising under the ADEA, in which case Employee has 7 days following execution of this Agreement to change his/her mind.

MRV COMMUNICATIONS, INC.	EMPLOYEE
By:	By:
Title:

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

REQUIRED BY RULE 13a-14(a) OF THE EXCHANGE ACT

I, Mark J. Bonney, certify that:

1. I have reviewed this Quarterly Report of MRV Communications, Inc. on Form 10-Q for the period ended March 31, 2016;

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)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

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

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

5. The registrant’s other certifying officer 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 function):

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.

Date:	May 5, 2016
/s/ Mark J. Bonney
Mark J. Bonney
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

REQUIRED BY RULE 13a-14(a) OF THE EXCHANGE ACT

I, Stephen G. Krulik, certify that:

1. I have reviewed this Quarterly Report of MRV Communications, Inc. on Form 10-Q for the period ended March 31, 2016;

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)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

5. The registrant’s other certifying officer 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 function):

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.

Date:	May 5, 2016
/s/ Stephen G. Krulik
Stephen G. Krulik
Chief Financial Officer
(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of MRV Communications, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. Bonney, Chief Executive 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), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date:	May 5, 2016
/s/ Mark J. Bonney
Mark J. Bonney
Chief Executive Officer
(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of MRV Communications, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen G. Krulik, 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), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date:	May 5, 2016
/s/ Stephen G. Krulik
Stephen G. Krulik
Chief Financial Officer
(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 03, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	MRV COMMUNICATIONS INC
Entity Central Index Key	0000887969
Entity Filer Category	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		6,892,027

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue:
Product revenue	$ 16,007	$ 19,467
Service revenue	2,875	2,718
Total revenue	18,882	22,185
Cost of Revenue:
Cost of product	7,595	9,617
Cost of services	1,484	1,024
Total cost of revenue	9,079	10,641
Gross profit	9,803	11,544
Operating expenses:
Product development and engineering	5,344	5,125
Selling, general and administrative	8,017	7,736
Total operating expenses	13,361	12,861
Operating loss	(3,558)	(1,317)
Interest expense	0	(14)
Other (expense) income, net	(277)	81
Loss from continuing operations before provision for income taxes	(3,835)	(1,250)
Provision for income taxes	61	50
Loss from continuing operations	(3,896)	(1,300)
Income from discontinued operations, net of income taxes of $138 in 2015	0	232
Net loss	$ (3,896)	$ (1,068)
Net income (loss) per share — basic
From continuing operations (usd per share)	$ (0.56)	$ (0.18)
From discontinued operations (usd per share)	0.00	0.03
Net loss per share — basic (in usd per share)	(0.56)	(0.15)
Net income (loss) per share — diluted
From continuing operations (usd per share)	(0.56)	(0.18)
From discontinued operations (usd per share)	0.00	0.03
Net loss per share — diluted (in usd per share)	$ (0.56)	$ (0.15)
Weighted average number of shares:
Basic (in shares)	6,981	7,131
Diluted (in shares)	6,981	7,131

XML

Condensed Consolidated Statements of Operations Parenthetical - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Income tax netted from Income from Discontinued Operations	$ 0	$ 138

XML

Condensed Consolidated Statements of Comprehensive Loss (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net Loss	$ (3,896)	$ (1,068)
Other comprehensive loss, net of tax
Foreign currency translation gain (loss)	80	(2,656)
Total comprehensive Loss	$ (3,816)	$ (3,724)

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 26,928	$ 26,169
Restricted time deposits	5,170	5,190
Accounts receivable, net	14,518	14,837
Inventories, net	10,030	10,226
Other current assets	2,045	6,851
Total current assets	58,691	63,273
Property and equipment, net	3,894	4,050
Intangible asset, net	1,092	1,153
Other assets	547	608
Total assets	64,224	69,084
Current liabilities:
Deferred consideration payable	233	233
Accounts payable	5,555	5,749
Accrued liabilities	9,188	9,972
Deferred revenue	7,172	7,642
Other current liabilities	170	196
Total current liabilities	22,318	23,792
Other long-term liabilities	$ 3,993	$ 3,846
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.01 par value: Authorized — 1,000 shares; no shares issued or outstanding	$ 0	$ 0
Common Stock, $0.0017 par value: Authorized---16,000 shares; Issued---8,330 shares in 2015 and 8,242 shares in 2014; Outstanding — 6,972 shares in 2015 and 7,386 shares in 2014	270	270
Additional paid-in capital	1,286,121	1,285,787
Accumulated deficit	(1,231,567)	(1,227,671)
Treasury stock — 1,364 shares in 2016 and 1,359 shares in 2015	(15,406)	(15,355)
Accumulated other comprehensive loss	(1,505)	(1,585)
Total stockholders' equity	37,913	41,446
Total liabilities and stockholders' equity	$ 64,224	$ 69,084

XML

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	1,000,000	1,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.0017	$ 0.0017
Common stock, shares authorized (shares)	16,000,000	16,000,000
Common stock, shares issued (shares)	8,337,000	8,341,000
Common stock, shares outstanding (shares)	6,973,000	6,982,000
Treasury stock, shares (shares)	1,364,000	1,359,000

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (3,896)	$ (1,068)
Income from discontinued operations, net of taxes	0	(232)
Loss from continuing operations	(3,896)	(1,300)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	500	500
Share-based compensation expense	347	206
Provision for doubtful accounts	7	37
Deferred income taxes	19	(41)
Gain on disposition of property and equipment	0	(2)
Changes in operating assets and liabilities:
Accounts and other receivables	313	(3,098)
Inventories	156	976
Other assets	447	536
Accounts payable	(196)	(1,070)
Accrued liabilities	(491)	180
Deferred revenue	(793)	657
Other current liabilities	(136)	(95)
Cash used in operating activities - continuing operations	(3,723)	(2,514)
Cash provided by operating activities - discontinued operations	0	1,452
Net cash used in operating activities	(3,723)	(1,062)
Cash flows from investing activities:
Purchases of property and equipment	(282)	(222)
Proceeds from sale of Tecnonet	4,789	0
Proceeds from sale of property and equipment	0	9
Release of restricted time deposits	20	11
Cash provided by (used in) Investing activities - continuing operations	4,527	(202)
Cash used in Investing activities - discontinued operations	0	(42)
Net cash provided by (used in) investing activities	4,527	(244)
Cash flows from financing activities:
Proceeds from exercise of stock options	0	116
Purchase of treasury shares	(51)	(3,597)
Cash used in Financing activities - continuing operations	(51)	(3,481)
Cash used in Financing activities - discontinued operations	0	(2,812)
Net cash used in financing activities	(51)	(6,293)
Effect of exchange rate changes on cash and cash equivalents	6	(608)
Net increase (decrease) in cash and cash equivalents	759	(8,207)
Cash and cash equivalents, beginning of period	26,169	22,422
Cash and cash equivalents, end of period	26,928	14,215
Less: cash and cash equivalents of discontinued operations, end of period	0	4,398
Cash and cash equivalents, end of period	26,928	9,817
Supplemental disclosure of cash flow information:
Cash paid during period for interest - totals	0	35
Cash paid during period for income taxes - totals	$ 60	$ 0

XML

Organization and Summary of significant accounting policies

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of significant accounting policies

Organization and Summary of significant accounting policies

Organization and nature of operations

MRV Communications, Inc. ("MRV" or the "Company"), a Delaware corporation, is a global supplier of communications solutions to telecommunications service providers, data center operators, enterprises and governments throughout the world. MRV's products enable customers to provide high-bandwidth data and video services and mobile communications services more efficiently and cost effectively. MRV markets and sells its products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators. Until the third quarter of 2015, MRV conducted its business along two principal segments: the Network Equipment segment and the Network Integration segment. MRV's Network Equipment segment designs, manufactures, sells, and services equipment used by commercial customers, governments, and telecommunications service providers. Products include switches, optical transport platforms, physical layer products and out-of-band management products, and specialized networking products. The Network Integration segment, which primarily operated in Italy and provided network system design, integration and distribution services that includes products manufactured by third-party vendors, was sold in December 2015.

On December 3, 2015, the Company completed the sale of all of the shares of its wholly owned subsidiary, Tecnonet S.p.A.(Tecnonet), pursuant to a shares purchase agreement, dated as of August 10, 2015 (the "Purchase Agreement") with Maticmind S.p.A, ("the purchaser”), a company incorporated under the laws of Italy. Tecnonet was the last business unit in our Network Integration segment.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

The condensed consolidated unaudited financial statements included herein have been prepared by MRV pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The information included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, (this “Form 10-Q”) should be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, (the “2015 Form 10-K”) filed with the SEC.

In the opinion of MRV's management, the unaudited interim financial information contained herein includes all normal recurring adjustments, necessary to present fairly the financial position of MRV as of March 31, 2016, and the results of its operations and comprehensive loss, and cash flows for the three months endedMarch 31, 2016 and 2015. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the full year or any future periods.

Reclassification

Prior Period Reclassifications. On December 3, 2015, the Company completed the sale of Tecnonet. The results of operations for Tecnonet have been reclassified and presented as discontinued operations in this Form 10-Q for all periods presented. Cash flows from discontinued operations are presented separately from the cash flows from continuing operations in the accompanying Statement of Cash Flows. (See Note 15, Discontinued Operations)

Recently Issued Accounting Standards

We consider the applicability and impact of all Accounting Standards Updates (“ASUs”). The ASUs not listed below were assessed and determined by management to be either not applicable or are expected to have minimal impact on our consolidated financial position and/or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. ASU 2014-09 was originally effective for interim and annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which defers the effective date to annual reporting periods beginning after December 15, 2017. Early application is permitted after December 15, 2016. Management is currently evaluating the potential impact that adopting ASU 2014-09 will have on its consolidated financial statements and footnote disclosures. The Company anticipates concluding its evaluation by December 31, 2016 and plans to adopt ASU 2014-09 on January 1, 2018.

In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, “Compensation - Stock Compensation” (“ASC 718”), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (i) prospectively to all awards granted or modified after the effective date; or (ii) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Management is currently evaluating the potential impact of that adopting ASU 2014-12 will have on its consolidated financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the Company in its fourth quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2014-15 will have on its consolidated financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory" (“ASU 2015-11”). ASU 2015-11 simplifies the guidance on the subsequent measurement if inventory, excluding inventory measured using the last-in, first out of the retail inventory method. Under the new standard, inventory should be at the lower of cost and net realizable value. ASU 2015-11 will be effective for the Company in the first quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-11 will have on its consolidated financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). The amendments in ASU 2015-17 simplify the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current. ASU 2015-17 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-17 will have on its consolidated financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"). The amendments in ASU 2016-02 require companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations generated by contracts longer than a year. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The guidance is required to be applied using the modified retrospective transition approach. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-02 will have on its consolidated financial statements and footnote disclosures.

In March 2016, the FASB issued ASU No. 2016-09, "Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting" ("ASU 2016-09"). The amendments in ASU 2016-09 simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-09 will have on its consolidated financial statements and footnote disclosures.

XML

Cash and Cash Equivalents and Restricted Time Deposits

3 Months Ended

Mar. 31, 2016

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents and Restricted Time Deposits

Cash and Cash Equivalents and Restricted Time Deposits

MRV accounts for highly liquid investments with an original maturity of 90 days or less as cash equivalents. Investments with maturities of less than one year are considered short-term and are included on the balance sheet in restricted time deposits. MRV maintains cash balances and investments in qualified financial institutions, and at various times such amounts are in excess of federally insured limits. As of March 31, 2016 and December 31, 2015, the Company's U.S. entities held $22.4 million and $21.6 million in cash and cash equivalents. The remaining $4.5 million and $4.6 million, respectively, were held by the Company's foreign subsidiaries in foreign bank deposit accounts.

Restricted time deposits represent investments that are restricted as to withdrawal or use and from time to time may include certificates of deposit. Restricted time deposits generally secure standby letters of credit, bank lines of credit, or bank loans. When investments in restricted time deposits are directly related to an underlying bank loan and the restricted funds will be used to repay the loans, the investment and the subsequent release of the restricted time deposit are treated as investing activities in the Company's Consolidated Statements of Cash Flows. The other investments in and releases of restricted time deposits are included in investing activities because the funds are invested in certificates of deposit. As of March 31, 2016 and December 31, 2015, the Company held a $5.0 million certificate of deposit, which matures in June 2016, with a highly rated financial institution.

XML

Fair Value Measurement

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

MRV's financial instruments, including cash and cash equivalents, restricted time deposits, accounts receivable, other receivables and accounts payable are carried at cost, which approximates their fair value. The fair values of accounts receivable, other receivables and accounts payable approximate their carrying amounts due to their short-term nature.

The Company follows a framework for measuring fair value using a three-level hierarchy that prioritizes the use of observable inputs. The fair value hierarchy is divided into three levels based on the source of inputs as follows: Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs for similar instruments; Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Under this framework, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Management has not elected the fair value option for non-financial assets and liabilities.

As of March 31, 2016 and December 31, 2015, the Company had cash equivalents consisting of money market funds of $1.8 million that were classified as Level 1 investments and were quoted at market price. Cash equivalents included in the condensed consolidated balance sheets are as follows (in thousands):

	Cost		Fair Value
March 31, 2016	$	1,808	$	1,808
December 31, 2015	$	1,807	$	1,807

XML

Credit Risk

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Credit Risk

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents placed with high credit quality financial institutions and accounts receivable due from customers.

Management evaluates the collectability of accounts receivable based on a combination of factors. If management becomes aware of a customer's inability to meet its financial obligations after a sale has occurred, the Company records an allowance to reduce the net receivable to the amount that management reasonably believes to be collectable from the customer. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future. Accounts receivable are charged off at the point they are considered uncollectible.

The following table summarizes the changes in the allowance for doubtful accounts during the three months endedMarch 31, 2016(in thousands):

Balance at beginning of period	$	1,060
Charged (reversed) to expense	7
Write-offs, net of amounts recovered	(17		)
Foreign currency translation adjustment	4
Balance at end of period	$	1,054

XML

Inventories

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are stated at the lower of cost or market and consist of materials, labor and overhead. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis.

Inventories, net of reserves, consisted of the following (in thousands) at March 31, 2016 and December 31, 2015:

	March 31, 2016		December 31, 2015
Raw materials	$	3,090	$	3,132
Work-in process	869		839
Finished goods	6,071		6,255
Total	$	10,030	$	10,226

XML

Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

Intangible assets, net of amortization, consisted of intellectual property and totaled $1.1 million and $1.2 million as of March 31, 2016 and December 31, 2015. A portion of these assets, approximating $0.7 million, net of amortization, represents software license agreements and were placed into service as of March 31, 2016. Amortization of intangible assets was $61 thousand and $28 thousand for the three months ended March 31, 2016 and 2015, respectively. The terms of the some of these license agreements provide for use of the licensed software into perpetuity while others are definite. The Company plans to amortize the cost of the license agreements over the estimated useful life, which can range between three to five years. As of March 31, 2016, intangible assets not yet placed into service totaled approximately $0.4 million.

The following table illustrates the estimated future amortization expense of intangible assets as of March 31, 2016 (in thousands):

Fiscal Year Ending December 31,	Estimated Amortization Expense
2016	$	225
2017	280
2018	214
2019	214
2020	117
Thereafter	42
Total	$	1,092

XML

Product Warranty

3 Months Ended

Mar. 31, 2016

Product Warranties Disclosures [Abstract]

Product Warranty

Product Warranty

As of March 31, 2016, and December 31, 2015, MRV's product warranty liability recorded in accrued liabilities was $0.6 million. MRV accrues for warranty costs as part of cost of sales based on associated material product costs, technical support labor costs and associated overhead. The products sold are generally covered by a warranty for periods of 90 days to three years.

The following table summarizes the activity related to the product warranty liability during the three months endedMarch 31, 2016 (in thousands):

Balance at beginning of the period	$	593
Cost of warranty claims	—
Accruals for product warranties	(3		)
Balance at end of the period	$	590

XML

Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding, including restricted shares which, although they are legally outstanding and have voting rights, are subject to vesting and are treated as common stock equivalents in calculating basic net income (loss) per share. Diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding and dilutive potential shares of common stock from stock options outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money options, which is calculated based on the average share price for each period using the treasury stock method.

Employee share options, non-vested shares and similar equity instruments granted by MRV are treated as potential shares of common stock outstanding in computing diluted net income per share. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service not yet recognized, and the amount of income tax benefits that would be realized and recorded in additional paid-in capital if the deduction for the award would reduce income taxes payable are assumed to be used to repurchase shares.

The following table sets forth the computation of net loss per common share – basic and diluted (in thousands, except per share amounts):

	Three months ended
	March 31
	2016			2015
Numerator:
Net loss	$	(3,896	)	$	(1,068	)
Denominator
Basic weighted average common shares outstanding	6,981			7,131
Effect of dilutive securities	—			—
Diluted weighted average common shares outstanding	6,981			7,131
Net loss per common share
Basic	$	(0.56	)	$	(0.15	)
Diluted	$	(0.56	)	$	(0.15	)

Outstanding stock options to purchase 386,729 and 326,070 shares were excluded from the computation of dilutive income (loss) per shares for the three months ended March 31, 2016 and 2015, respectively as they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

XML

Share-Based Compensation

3 Months Ended

Mar. 31, 2016

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

Share-Based Compensation

Share-Based Compensation

MRV records share-based compensation expense at fair value. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the three months endedMarch 31, 2016 and 2015 (in thousands):

	Three months ended
	March 31,
	2016		2015
Cost of goods sold	$	42	$	30
Product development and engineering	76		49
Selling, general and administrative	229		127
Total share-based compensation expense (1)	$	347	$	206

(1) Income tax benefits realized from stock option exercises and similar awards were immaterial in all periods.

No stock options or restricted shares were granted during the three months ended March 31, 2016 and 2015.

As of March 31, 2016, the total unrecognized share-based compensation balance for unvested options, net of expected forfeitures, was $1.5 million and is expected to be amortized over a weighted-average period of 1.9 years.

Valuation Assumptions

MRV uses the Black-Scholes option pricing model to estimate the fair value of stock option awards or related modifications. The Black-Scholes model requires the use of subjective and complex assumptions, including the option's expected life and the underlying stock price volatility. MRV bases volatility on the Company's historical quoted prices and peer company data.

XML

Geographic Information

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Geographic Information

Geographic Information

Following the completion of the sale of the Tecnonet business unit on December 3, 2015, MRV now has one reportable segment: Network Equipment.

The Network Equipment segment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products. Network Equipment revenue primarily consists of optical communication systems that include metro ethernet equipment, optical transport equipment, lab automation equipment, out-of-band network equipment, and the related service revenue and fiber optic components sold as part of system solutions.

Revenues:

The following table summarizes external revenue by geographic region (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	9,041	$	10,251
Americas (Excluding the U.S.)	1,290		2,763
Europe	3,197		4,230
Asia Pacific	5,354		4,941
Total	$	18,882	$	22,185

Revenues from the United States and Australia accounted for 73% and 66% of our consolidated revenues for the three months ended March 31, 2016 and 2015, respectively.

Significant Customers:

Revenue from one customer accounted for 17% and 20% of our consolidated revenue for the three months ended March 31, 2016, and 2015, respectively. As of March 31, 2016 and December 31, 2015, amounts due from this customer accounted for 15% of our consolidated gross accounts receivables. Revenue from another customer accounted for 14% and 11% of our consolidated revenue for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016 and December 31, 2015, amounts due from this customer accounted for 7% and 5% of our consolidated gross accounts receivables, respectively.

Long-lived Assets:

The following table summarizes long-lived assets, consisting of property and equipment, by geographic region (in thousands):

	March 31, 2016		December 31, 2015
Americas	$	2,762	$	2,808
Europe	1,115		1,223
Asia Pacific	17		19
Total	$	3,894	$	4,050

XML

Indemnification Obligations

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Indemnification Obligations

Indemnification Obligations

In connection with the sale by MRV of Source Photonics Inc. (SPI) in October 2010, MRV agreed to indemnify the buyer against certain claims brought after the closing for prior-occurring events. Most of the indemnification obligations have expired, however any indemnification obligations related to intellectual property extend until the third anniversary of the closing, indemnification related to employee benefits, environmental liabilities and taxes extend until their applicable statute of limitations has run plus 90 days, and indemnification obligations are not time limited for title and ownership representations. These indemnification obligations are subject to a $1.0 million deductible and a $20.0 million cap and we have purchased an insurance policy to protect against such obligations.

The Company has received a notice from SPI, advising the Company of a tax audit for periods including tax returns filed prior to the acquisition of SPI by the buyer. MRV believes that it has meritorious defenses to the extent a formal indemnification claim is asserted and has submitted the potential claim to its insurer. MRV intends to vigorously contest any claim; however, no formal legal proceeding has been commenced, and MRV can provide no assurance that such claim would not have a material adverse effect on its business, operating results or financial condition.

Our agreements for the sale of certain business; CES in March 2012, Alcadon and Interdata in October 2012, and Tecnonet in December 2015, include customary indemnification obligations running to the respective buyers.

In connection with the sale of CES, MRV agreed to indemnify the buyer for the representations and warranties made in the sale purchase agreement and purchased an insurance policy to protect against any claims of indemnification related to the representations and warranties.

In the normal course of business to facilitate sales of its products, MRV indemnifies other parties, including customers, lessors and parties to other transactions with us, with respect to certain matters. The Company has agreed to hold the other parties harmless against losses arising from a breach of representation or covenants, for intellectual property infringement, or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim.

In addition, the Company has indemnification obligations to its current and former officers, directors, employees and agents, as set forth in the Company's bylaws.

We cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these obligations. Over the last decade, the Company has not incurred any significant expense as a result of obligations of this type that were not otherwise covered by our insurance policies. Accordingly, the Company has not accrued any amounts for such indemnification obligations. However, there can be no assurances that expenses will not be incurred under these indemnification provisions in the future.

We have agreements whereby our officers and directors are indemnified for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we retain directors and officers insurance that reduces our exposure and enables us to recover portions of amounts paid. As a result of our insurance coverage, we believe the estimated fair value of these indemnification agreements is minimal.

Accordingly, no liabilities have been recorded for these agreements as of March 31, 2016, and December 31, 2015.

XML

Litigation

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

We are subject to legal claims and litigation in the ordinary course of business, including but not limited to product liability, employment and intellectual property claims. The outcome of any such matters is currently not determinable. In addition, we were party to the litigation set forth below.

Nhan T. Vo, individually and on behalf of other aggrieved employees vs. the Company, Superior Court of California, County of Los Angeles. On June 27, 2013, the plaintiff in this matter filed a lawsuit against the Company alleging claims for failure to properly pay overtime or provide meal and rest breaks to its non-exempt employees in California, among other things. The complaint seeks an unspecified amount of damages and penalties under provisions of the Labor Code, including the Labor Code Private Attorneys General Act. The Company has filed an answer denying all allegations regarding the plaintiff’s claims and asserting various defenses. Management believes it has accrued adequate reserves for this matter and does not expect the matter to have a material adverse effect on its business or financial condition. However, depending on the actual outcome of this case, further provisions could be recorded in the future which may have a material adverse effect on the Company’s operating results.

In connection with the sale by MRV of Source Photonics, Inc. (“SPI”) in October 2010, MRV agreed to indemnify the buyer against certain claims brought after the closing for prior-occurring events. The Company has received a notice from SPI, advising the Company of a tax audit for periods including tax returns filed prior to the acquisition of SPI by the buyer. Management believes that it has meritorious defenses to the extent a formal indemnification claim is asserted and has submitted the potential claim to its insurer. MRV intends to vigorously contest any claim; however, no formal legal proceeding has been commenced, and MRV can provide no assurance that such claim would not have a material adverse effect on its business, operating results or financial condition.

From time to time, MRV receives notices from third parties alleging possible infringement of patents with respect to product features or manufacturing processes. Management believes such notices are common in the communications industry because of the large number of patents that have been filed on these subjects. The Company's policy is to discuss these notices with the parties in an effort to demonstrate that MRV's products and/or processes do not violate any patents. Management does not believe that any of these matters will result in a material adverse outcome.

MRV and its subsidiaries have from time to time been named as a defendant in other lawsuits involving matters that management considers routine to the nature of its business. Management is of the opinion that the ultimate outstanding resolution of such outstanding matters will not have a material adverse effect on our business, operating results and financial condition.

XML

Share Repurchase

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

Share Repurchase

Share Repurchase

On March 15, 2016, the Company's Board of Directors approved a repurchase of shares of the Company's common stock in an amount up to $10.0 million under a stock repurchase program that expires on March 10, 2017. During the three months ended March 31, 2016, the Company repurchased 5,713 shares at a total cost of approximately $51 thousand, excluding commission, under this stock repurchase program. As of March 31, 2016, the Company had remaining authority to repurchase shares up to an additional $9.9 million, excluding commission, under this stock repurchase program prior to its expiration. Since April 1, 2016, the Company repurchased 64,510 shares at a total cost of approximately $0.6 million, excluding commission, under this stock repurchase program. Through May 3, 2016, the Company repurchased a total of 70,223 shares at a total cost of approximately $0.7 million, excluding commission, under this stock repurchase program, leaving remaining authority to repurchase shares up to an additional $9.3 million, excluding commission, under this stock repurchase program prior to its expiration.

XML

Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table provides details of income taxes for the three months ended March 31, 2016 and 2015 (in thousands, except percentages):

	Three months ended
	March 31,
	2016			2015
Loss before provision for income taxes	$	(3,835	)	$	(1,250	)
Provision for income taxes	61			50
Effective tax rate	(2		)%	(4		)%

The effective tax rate fluctuates based on the amount of pre-tax income or loss generated in the various jurisdictions where we conduct operations and pay income tax. The income tax expense of $0.1 million on our pre-tax loss of $3.8 million and $1.3 million for the three months ended March 31, 2016 and 2015, respectively, is primarily due to state minimum income taxes that do not benefit from our state net operating loss carryforwards.

As of December 31, 2015, MRV had federal, state, and foreign net operating loss ("NOL") carryforwards available of $182.5 million, $97.1 million and $97.4 million, respectively. Under the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change NOLs, capital loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. An ownership change is generally defined as a greater than 50% change in its equity ownership by value over a three-year period. We may experience an ownership change in the future as a result of subsequent shifts in our stock ownership. If we were to trigger an ownership change in the future, our ability to use any NOLs and capital loss carryforwards existing at that time could be limited. As of March 31, 2016, the federal, state and foreign NOLs had a full valuation allowance.

On January 26, 2016, the Company's Board of Directors approved the adoption of a "Rights Plan" in an effort to protect the Company from potential adverse consequences arising from an ownership change under the Internal Revenue Code, such adverse consequences including a significant reduction in the annual utilization of the Company’s net operating loss carryforwards and built-in losses. The Rights Plan has not yet been ratified by the stockholders of MRV.

XML

Discontinued Operations

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On December 3, 2015, the Company completed the sale of all of the shares of Tecnonet. On February 19, 2016, the Company received a payment of €4.3 million (approximately $4.8 million) representing the post-closing purchase price adjustment pursuant to the Purchase Agreement. The Company included the $4.8 million receivable representing the post-closing purchase price adjustment on its consolidated balance sheet within other current assets as of December 31, 2015. Prior to its disposition, Tecnonet was the last remaining business unit in our Network Integration segment. The historical financial results of Tecnonet, prior to its sale have been reclassified as discontinued operations for all periods presented. The Company reported net income of $0.2 million from discontinued operations, net of income tax expense, for the three months ended March 31, 2015, related to Tecnonet.

XML

Organization and Summary of significant accounting policies (Policies)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

The condensed consolidated unaudited financial statements included herein have been prepared by MRV pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The information included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, (this “Form 10-Q”) should be read in conjunction with the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, (the “2015 Form 10-K”) filed with the SEC.

In the opinion of MRV's management, the unaudited interim financial information contained herein includes all normal recurring adjustments, necessary to present fairly the financial position of MRV as of March 31, 2016, and the results of its operations and comprehensive loss, and cash flows for the three months endedMarch 31, 2016 and 2015. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the full year or any future periods.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

We consider the applicability and impact of all Accounting Standards Updates (“ASUs”). The ASUs not listed below were assessed and determined by management to be either not applicable or are expected to have minimal impact on our consolidated financial position and/or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," ("ASU 2014-09"). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. ASU 2014-09 was originally effective for interim and annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date, which defers the effective date to annual reporting periods beginning after December 15, 2017. Early application is permitted after December 15, 2016. Management is currently evaluating the potential impact that adopting ASU 2014-09 will have on its consolidated financial statements and footnote disclosures. The Company anticipates concluding its evaluation by December 31, 2016 and plans to adopt ASU 2014-09 on January 1, 2018.

In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, “Compensation - Stock Compensation” (“ASC 718”), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (i) prospectively to all awards granted or modified after the effective date; or (ii) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. Management is currently evaluating the potential impact of that adopting ASU 2014-12 will have on its consolidated financial statements and footnote disclosures.

In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"). ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the Company in its fourth quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2014-15 will have on its consolidated financial statements and footnote disclosures.

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory" (“ASU 2015-11”). ASU 2015-11 simplifies the guidance on the subsequent measurement if inventory, excluding inventory measured using the last-in, first out of the retail inventory method. Under the new standard, inventory should be at the lower of cost and net realizable value. ASU 2015-11 will be effective for the Company in the first quarter of fiscal 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-11 will have on its consolidated financial statements and footnote disclosures.

In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). The amendments in ASU 2015-17 simplify the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current. ASU 2015-17 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the potential impact that adopting ASU 2015-17 will have on its consolidated financial statements and footnote disclosures.

In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"). The amendments in ASU 2016-02 require companies that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations generated by contracts longer than a year. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The guidance is required to be applied using the modified retrospective transition approach. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-02 will have on its consolidated financial statements and footnote disclosures.

In March 2016, the FASB issued ASU No. 2016-09, "Stock Compensation (Topic 718): Improvements to employee Share-Based Payment Accounting" ("ASU 2016-09"). The amendments in ASU 2016-09 simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the potential impact that adopting ASU 2016-09 will have on its consolidated financial statements and footnote disclosures.

Allowance for Doubtful Accounts Policy

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents placed with high credit quality financial institutions and accounts receivable due from customers.

Management evaluates the collectability of accounts receivable based on a combination of factors. If management becomes aware of a customer's inability to meet its financial obligations after a sale has occurred, the Company records an allowance to reduce the net receivable to the amount that management reasonably believes to be collectable from the customer. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future. Accounts receivable are charged off at the point they are considered uncollectible.

XML

Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping

Cash equivalents included in the condensed consolidated balance sheets are as follows (in thousands):

	Cost		Fair Value
March 31, 2016	$	1,808	$	1,808
December 31, 2015	$	1,807	$	1,807

XML

Credit Risk (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Schedule of Allowance for Doubtful Accounts

The following table summarizes the changes in the allowance for doubtful accounts during the three months endedMarch 31, 2016(in thousands):

Balance at beginning of period	$	1,060
Charged (reversed) to expense	7
Write-offs, net of amounts recovered	(17		)
Foreign currency translation adjustment	4
Balance at end of period	$	1,054

XML

Inventories (Tables)

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories, net of reserves, consisted of the following (in thousands) at March 31, 2016 and December 31, 2015:

	March 31, 2016		December 31, 2015
Raw materials	$	3,090	$	3,132
Work-in process	869		839
Finished goods	6,071		6,255
Total	$	10,030	$	10,226

XML

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The following table illustrates the estimated future amortization expense of intangible assets as of March 31, 2016 (in thousands):

Fiscal Year Ending December 31,	Estimated Amortization Expense
2016	$	225
2017	280
2018	214
2019	214
2020	117
Thereafter	42
Total	$	1,092

XML

Product Warranty (Tables)

3 Months Ended

Mar. 31, 2016

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

The following table summarizes the activity related to the product warranty liability during the three months endedMarch 31, 2016 (in thousands):

Balance at beginning of the period	$	593
Cost of warranty claims	—
Accruals for product warranties	(3		)
Balance at end of the period	$	590

XML

Net Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the computation of net loss per common share – basic and diluted (in thousands, except per share amounts):

	Three months ended
	March 31
	2016			2015
Numerator:
Net loss	$	(3,896	)	$	(1,068	)
Denominator
Basic weighted average common shares outstanding	6,981			7,131
Effect of dilutive securities	—			—
Diluted weighted average common shares outstanding	6,981			7,131
Net loss per common share
Basic	$	(0.56	)	$	(0.15	)
Diluted	$	(0.56	)	$	(0.15	)

XML

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

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

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the three months endedMarch 31, 2016 and 2015 (in thousands):

	Three months ended
	March 31,
	2016		2015
Cost of goods sold	$	42	$	30
Product development and engineering	76		49
Selling, general and administrative	229		127
Total share-based compensation expense (1)	$	347	$	206

(1) Income tax benefits realized from stock option exercises and similar awards were immaterial in all periods.

XML

Geographic Information (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

The following table summarizes external revenue by geographic region (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	9,041	$	10,251
Americas (Excluding the U.S.)	1,290		2,763
Europe	3,197		4,230
Asia Pacific	5,354		4,941
Total	$	18,882	$	22,185

The following table summarizes long-lived assets, consisting of property and equipment, by geographic region (in thousands):

	March 31, 2016		December 31, 2015
Americas	$	2,762	$	2,808
Europe	1,115		1,223
Asia Pacific	17		19
Total	$	3,894	$	4,050

XML

Income Taxes (Tables)

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Details of Income Taxes

The following table provides details of income taxes for the three months ended March 31, 2016 and 2015 (in thousands, except percentages):

	Three months ended
	March 31,
	2016			2015
Loss before provision for income taxes	$	(3,835	)	$	(1,250	)
Provision for income taxes	61			50
Effective tax rate	(2		)%	(4		)%

XML

Organization and Summary of significant accounting policies (Narrative) (Details) - segment	3 Months Ended	6 Months Ended
	Mar. 31, 2016	Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of business segments	1	2

XML

Cash and Cash Equivalents and Restricted Time Deposits (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 26,928	$ 26,169	$ 9,817
Certificate of deposit	5,170	5,190
United States [Member]
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	22,400	21,600
Foreign [Member]
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	4,500	4,600
Certificates of Deposit [Member]
Cash and Cash Equivalents [Line Items]
Certificate of deposit	$ 5,000	$ 5,000

XML

Fair Value Measurement (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	$ 1.8	$ 1.8

XML

Fair Value Measurement (Cash and Cash Equivalents) (Details) - Money Market Funds [Member] - Fair Value, Inputs, Level 1 [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	$ 1,800	$ 1,800
Cost [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	1,808	1,807
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	$ 1,808	$ 1,807

XML

Credit Risk (Changes in the Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance at beginning of period	$ 1,060
Provision for doubtful accounts	7	$ 37
Write-offs, net of amounts recovered	(17)
Foreign currency translation adjustment	4
Balance at end of period	$ 1,054

XML

Inventories (Net of Reserves) (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 3,090	$ 3,132
Work-in process	869	839
Finished goods	6,071	6,255
Total	$ 10,030	$ 10,226

XML

Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 1,092		$ 1,153
Amortization of intangible assets	61	$ 28
Developed Technology Rights, Placed in Service [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 700
Developed Technology Rights, Placed in Service [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of finite-lived intangible assets	3 years
Developed Technology Rights, Placed in Service [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of finite-lived intangible assets	5 years
Developed Technology Rights, Not Placed in Service [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets	$ 400

XML

Intangible Assets (Amortization Expense, Maturity Schedule) (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2016	$ 225
2017	280
2018	214
2019	214
2020	117
Thereafter	42
Total	$ 1,092

XML

Product Warranty (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Standard Product Warranty Period [Line Items]
Product warranty liability	$ 590	$ 593
Minimum [Member]
Standard Product Warranty Period [Line Items]
Standard product warranty period	90 days
Maximum [Member]
Standard Product Warranty Period [Line Items]
Standard product warranty period	3 years

XML

Product Warranty (Change in Product Warranty Liability) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Balance at beginning of the period	$ 593
Cost of warranty claims	0
Accruals for product warranties	(3)
Balance at end of the period	$ 590

XML

Net Income (Loss) Per Share (Narrative) (Details) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	386,729	326,070

XML

Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator:
Net loss	$ (3,896)	$ (1,068)
Denominator
Basic weighted average common shares outstanding (in shares)	6,981	7,131
Effect of dilutive securities (in shares)	0	0
Diluted weighted average common shares outstanding (in shares)	6,981	7,131
Net loss per common share
Net loss per share — basic (in usd per share)	$ (0.56)	$ (0.15)
Net loss per share — diluted (in usd per share)	$ (0.56)	$ (0.15)

XML

Share-Based Compensation (Share-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 347	$ 206
Cost of Goods Sold [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	42	30
Product Development and Engineering [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	76	49
Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation expense	$ 229	$ 127

XML

Share-Based Compensation (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total compensation cost not yet recognized	$ 1.5
Total compensation cost not yet recognized, period for recognition	1 year 10 months 10 days
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, grants during period (in shares)		0	0
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock, grants during period (in shares)		0	0

XML

Geographic Information (Narrative) (Details) $ in Thousands			3 Months Ended		6 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2016 USD ($) segment	Mar. 31, 2015 USD ($)	Jun. 30, 2015 segment
Segment Reporting Information [Line Items]
Number of business segments | segment			1		2
Revenue			$ 18,882	$ 22,185
Major Customer, One [Member] | Revenue [Member]
Segment Reporting Information [Line Items]
Concentration percentage			17.00%	20.00%
Major Customer, One [Member] | Accounts Receivable [Member]
Segment Reporting Information [Line Items]
Concentration percentage	15.00%	15.00%
Major Customer, Two [Member] | Revenue [Member]
Segment Reporting Information [Line Items]
Concentration percentage			14.00%	11.00%
Major Customer, Two [Member] | Accounts Receivable [Member]
Segment Reporting Information [Line Items]
Concentration percentage	7.00%	5.00%
United States [Member]
Segment Reporting Information [Line Items]
Revenue			$ 9,041	$ 10,251
Concentration percentage			73.00%	67.00%
Australia [Member]
Segment Reporting Information [Line Items]
Concentration percentage			66.00%	68.00%

XML

Geographic Information (External Revenue and Long-Lived Assets by Geographic Region) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 18,882	$ 22,185
Long-Lived Assets	3,894		$ 4,050
Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-Lived Assets	2,762		2,808
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	9,041	10,251
Americas (Excluding the U.S.) [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,290	2,763
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	3,197	4,230
Long-Lived Assets	1,115		1,223
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	5,354	$ 4,941
Long-Lived Assets	$ 17		$ 19

XML

Indemnification Obligations (Narrative) (Details) - Indemnification Agreement [Member] - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2014
Loss Contingencies [Line Items]
Loss contingency accrued	$ 0	$ 0
Source Photonics [Member]
Loss Contingencies [Line Items]
Days in excess of statute of limitations	90 days
Indemnification obligation deductible	$ 1,000,000
Indemnification obligation maximum possible loss	$ 20,000,000

XML

Share Repurchase (Narrative) (Details) - USD ($)	1 Months Ended	2 Months Ended	3 Months Ended
	May. 04, 2016	May. 04, 2016	Mar. 31, 2016	Mar. 31, 2015	May. 03, 2016	Mar. 15, 2016
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, authorized amount						$ 10,000,000.0
Treasury stock, shares acquired			5,713
Purchase of treasury shares			$ 51,000	$ 3,597,000
Stock repurchase program, remaining authorized repurchase amount			$ 9,900,000
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Treasury stock, shares acquired	64,510	70,223
Purchase of treasury shares	$ 600,000	$ 700,000
Stock repurchase program, remaining authorized repurchase amount					$ 9,300,000

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Loss before provision for income taxes	$ (3,835)	$ (1,250)
Provision for income taxes	$ 61	$ 50
Effective tax rate	(2.00%)	(4.00%)

XML

Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 61	$ 50
Loss before provision for income taxes	$ 3,835	$ 1,250
Federal net operating loss			$ 182,500
State net operating loss			97,100
Foreign net operating loss			$ 97,400

XML

Discontinued Operations (Details) - Tecnonet [Member] € in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2015 USD ($)	Feb. 19, 2016 EUR (€)	Feb. 19, 2016 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Working capital adjustment		€ 4.3	$ 4.8
Gain on sale	$ 0.2
Other Current Assets [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Receivables			$ 4.8