Income Taxes

The following table provides details of income taxes for the three and six months ended June 30, 2016 and 2015 (in thousands, except percentages):



	Three months ended						Six months ended
	June 30,						June 30,
	2016			2015			2016			2015
Loss before provision for income taxes	$	(1,987	)	$	(1,048	)	$	(5,822	)	$	(2,298	)
Provision for income taxes	36			77			97			127
Effective tax rate	(2		)%	(7		)%	(2		)%	(6		)%

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 is primarily due to state minimum income taxes that do not benefit from our state net operating loss carryforwards and to income tax in foreign jurisdictions without 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 June 30, 2016, the federal, state and foreign NOLs had a full valuation allowance.

NOL Rights Plan

On January 26, 2016, in an effort to protect the Company from potential adverse consequences arising from an ownership change under the Internal Revenue Code, including a significant reduction in the annual utilization of the Company’s net operating loss carryforwards, built-in losses and the impairment or loss of the NOLs and built-in losses prior to their use, the Company's Board of Directors approved the adoption of the Rights Agreement with American Stock Transfer & Trust Company, LLC, ("Rights Plan"). Pursuant to the Rights Plan, the Company declared a dividend distribution of one preferred stock purchase right (each a “Right” and collectively, the "Rights") for each outstanding share of the Company’s common stock to stockholders of record as of the close of business on February 10, 2016 (the Record Date"). Except in certain circumstances set forth in the Rights Plan, each Right entitles the holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, $0.01 par value, of the Company (“Preferred Stock”) at a price of $68.64, subject to adjustment. The NOL Rights Plan was ratified by the Company's stockholders on June 15, 2016, at the Company's annual meeting of stockholders.

The Rights initially trade together with the common stock and are not exercisable. Subject to certain exceptions specified in the Rights Plan, the Rights will separate from the common stock and become exercisable following the earlier to of (i) the tenth calendar day after a public announcement or filing that a person or group has become an “Acquiring Person,” which is defined as a person who has acquired, or obtained the right to acquire, beneficial ownership of 4.99% or more of the common stock then outstanding, subject to certain exceptions, or (ii) the tenth calendar day (or such later date as may be determined by the Board of Directors) after any person or group commences a tender or exchange offer, the consummation of which would result in a person or group becoming an Acquiring Person. If a person or group becomes an Acquiring Person, each Right will entitle its holders (other than such Acquiring Person) to purchase one share at a price of $68.64, subject to adjustment. At any time after a person becomes an Acquiring Person, the Board of Directors may exchange all or part of the outstanding Rights (other than those held by an Acquiring Person) for shares of common stock at an exchange rate of one share of common stock for each Right. The Company will promptly give public notice of any exchange (although failure to give notice will not affect the validity of the exchange).

The Rights will expire upon certain events described in the Rights Plan, including the time at which the Rights are redeemed in accordance with the Agreement, the time at which the Rights are exchanged in accordance with the Agreement, or the time at which the Board Directors determines that the NOLs are fully utilized or no longer available under Section 382 of the Code. However, in no event will the Rights Plan expire later than the close of business on January 26, 2019. Until the close of business on the tenth calendar day after the day a public announcement or a filing is made indicating that a person or group has become an Acquiring Person, the Company may in its sole and absolute discretion amend the Rights or the Rights Plan without the approval of any holders of the Rights or shares of common stock in any manner, including without limitation, amendments that increase or decrease the purchase price or redemption price or accelerate or extend the final expiration date or the period in which the Rights may be redeemed. The Company may also amend the Rights Plan after the close of business on the tenth calendar day after the day such public announcement or filing is made to cure ambiguities, to correct defective or inconsistent provisions, to shorten or lengthen time periods under the Rights Plan or in any other manner that does not adversely affect the interests of holders of the Rights. No amendment of the Rights Plan may extend its expiration date.