10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2013

[ ] 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  August 6, 2013, 7,500,954 shares of Common Stock of MRV Communications, Inc. were outstanding.

1

MRV Communications, Inc.

Form 10-Q for the Quarter Ended June 30, 2013

Index

		Page Number
PART I	Financial Information	3
Item 1.	Unaudited Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2013 and 2012	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2013 and 2012	3
	Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012	5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2013 and 2012	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	36
PART II	Other Information	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 6.	Exhibits	39
	Signatures	40

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PART I - FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements

MRV Communications, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

	Three months ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue:
Product revenue	$	26,432		$	26,598		$	54,504		$	50,040
Service revenue	11,743			11,028			22,576			21,001
Total revenue	38,175			37,626			77,080			71,041
Cost of sales	24,803			24,314			50,681			45,048
Gross profit	13,372			13,312			26,399			25,993
Operating expenses:
Product development and engineering	4,454			3,389			9,102			7,088
Selling, general and administrative	9,453			11,167			21,845			23,794
Total operating expenses	13,907			14,556			30,947			30,882
Operating loss	(535		)	(1,244		)	(4,548		)	(4,889		)
Interest expense	(241		)	(191		)	(373		)	(399		)
Gain from settlement of deferred consideration obligation	—			2,314			—			2,314
Other (loss) income, net	(102		)	(82		)	(85		)	80
Income (loss) from continuing operations before income taxes	(878		)	797			(5,006		)	(2,894		)
Provision (benefit) for income taxes	115			296			421			(1,221		)
Income (loss) from continuing operations	(993		)	501			(5,427		)	(1,673		)
Income (loss) from discontinued operations, net of income taxes of $0 in 2013 and $2,542 in 2012	—			(2,615		)	—			3,171
Net income (loss)	$	(993	)	$	(2,114	)	$	(5,427	)	$	1,498
Net income (loss) per share — basic (1):
From continuing operations	$	(0.13	)	$	0.06		$	(0.72	)	$	(0.21	)
From discontinued operations	$	—		$	(0.33	)	$	—		$	0.40
Net income (loss) per share — basic	$	(0.13	)	$	(0.27	)	$	(0.72	)	$	0.19
Net Income (loss) per share — diluted (1):
From continuing operations	$	(0.13	)	$	0.06		$	(0.72	)	$	(0.21	)
From discontinued operations	$	—		$	(0.33	)	$	—		$	0.40
Net income (loss) per share — diluted	$	(0.13	)	$	(0.27	)	$	(0.72	)	$	0.19
Weighted average number of shares:
Basic	7,585			7,887			7,570			7,887
Diluted	7,585			7,887			7,570			7,899

________________________________________

(1) Amounts may not add due to rounding.

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

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MRV Communications, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net (loss) income		($993	)		($2,114	)		($5,427	)		$1,498
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss)	440			(2,843		)	(395		)	(617		)
Foreign currency translation effect realized upon divestiture of subsidiary	—			—			—			(12,599		)
Total other comprehensive income (loss), net of tax	440			(2,843		)	(395		)	(13,216		)
Total comprehensive (loss) income		($553	)		($4,957	)		($5,822	)		($11,718	)

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

4

MRV Communications, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par values)

	June 30, 2013			December 31, 2012
Assets	(unaudited)
Current assets:
Cash and cash equivalents		$35,948			$40,609
Restricted time deposits	243			240
Accounts receivable, net	33,297			32,237
Other receivables	14,616			18,287
Inventories	19,760			22,444
Deferred income taxes	1,395			1,145
Other current assets	5,260			4,629
Total current assets	110,519			119,591
Property and equipment, net	5,038			3,735
Deferred income taxes, net of current portion	3,940			3,711
Intangibles, net	400			400
Other assets	690			1,128
Total assets		$120,587			$128,565
Liabilities and stockholders' equity
Current liabilities:
Short-term debt		$2,809			$5,267
Deferred consideration payable	233			233
Accounts payable	18,343			20,478
Accrued liabilities	18,105			16,652
Deferred revenue	8,632			7,290
Other current liabilities	940			560
Total current liabilities	49,062			50,480
Other long-term liabilities	5,495			5,184
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 — 8,128 shares in 2013 and 8,061 shares in 2012
Outstanding — 7,520 shares in 2013 and 7,594 in 2012	271			270
Additional paid-in capital	1,281,475			1,281,170
Accumulated deficit	(1,206,941		)	(1,201,515		)
Treasury stock — 608 shares in 2013 and 467 shares in 2012	(7,884		)	(6,528		)
Accumulated other comprehensive income	(891		)	(496		)
Total stockholders' equity	66,030			72,901
Total liabilities and stockholders' equity		$120,587			$128,565

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

5

MRV Communications, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

	Six months ended June 30,
	2013			2012
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net (loss) income		($5,427	)		$1,498
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	784			1,131
Share-based compensation expense	302			492
Provision for doubtful accounts	250			14
Deferred income taxes	(164		)	(269		)
Gain from settlement of deferred consideration obligation	—			(2,314		)
Loss on disposition of property and equipment	17			17
Gain on sale of subsidiary	—			(7,936		)
Impairment of goodwill and other intangibles	—			3,711
Changes in operating assets and liabilities:
Accounts receivable	(1,593		)	10,786
Inventories	2,512			(3,087		)
Other assets	3,281			(556		)
Accounts payable	(1,818		)	(5,933		)
Accrued liabilities	1,928			(438		)
Income tax payable	(12		)	(1,914		)
Deferred revenue	973			1,814
Other current liabilities	172			(163		)
Net cash provided by (used in) operating activities	1,205			(3,147		)
Cash flows from investing activities:
Purchases of property and equipment	(2,116		)	(1,858		)
Proceeds from sale of property and equipment	—			96
Purchases of intangibles	—			(400		)
Proceeds from sale of subsidiaries, net of cash acquired	—			16,791
Release of restricted time deposits	(4		)	(1,036		)
Net cash (used in) provided by investing activities	(2,120		)	13,593
Cash flows from financing activities:
Net proceeds from exercise of stock options	—			1
Purchase of treasury shares	(1,356		)	—
Borrowings on short-term debt	3,102			10,759
Payments on short-term debt	(5,535		)	(13,391		)
Borrowing on long-term obligations	—			427
Dividend payment	—			(47,325		)
Payments on long-term obligations	—			(200		)
Net cash used in financing activities	(3,789		)	(49,729		)
Effect of exchange rate changes on cash and cash equivalents	43			(1,061		)
Net decrease in cash and cash equivalents	(4,661		)	(40,344		)
Cash and cash equivalents, beginning of year (1)	40,609			83,716
Cash and cash equivalents, end of period		$35,948			$43,372

Supplement disclosure on following page.

6

	Six months ended June 30,
	2013		2012
	(unaudited)		(unaudited)
Supplemental disclosure of cash flow information:
Cash paid during year for interest — continuing operations	$	169	$	311
Cash paid during year for interest — discontinued operations	—		10
Cash paid during year for interest — Total	$	169	$	321
Cash paid during year for income taxes — continuing operations	$	—	$	(5	)
Cash paid during year for income taxes — discontinued operations	—		3,127
Cash paid during year for income taxes — Total	$	—	$	3,122

(1) The Cash and cash equivalents at the beginning of the periods presented include $25,126 from discontinued operations for June 30, 2012.

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

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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”, "we", "our", the “Company”, and "us") and its wholly-owned subsidiaries supply communications equipment and services to carriers, governments and enterprise customers worldwide. We conduct our business along two principal segments: (a) Network Equipment; and (b) Network Integration. Our Network Equipment segment provides communications equipment that facilitates access, transport, aggregation and management of voice, data and video traffic in networks, data centers and laboratories used by telecommunications service providers, cable operators, enterprise customers and governments worldwide. Our Network Integration segment operates primarily in Italy, servicing Tier One carriers, regional carriers, large enterprises, and government institutions. Network Integration provides network system design, integration and distribution services that include products manufactured by third-party vendors. We market and sell our products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators.

Basis of Presentation

The consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. MRV consolidates the financial results of less than majority-owned subsidiaries when it has effective control, voting control, or has provided the entity's working capital. When investment by others in these enterprises reduces the Company's voting control below 50%, MRV discontinues consolidation and uses the cost or equity method of accounting for these investments, unless otherwise required.

The consolidated financial statements included herein have been prepared by MRV, and are unaudited, 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 (“GAAP”) have been condensed or omitted pursuant to such rules and regulations although MRV believes that the disclosures are adequate to make the information presented not misleading. The information included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (this “Form 10-Q”) should be read in conjunction with “Selected Financial Data,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) filed with the SEC.

Restricted time deposits represent investments that are restricted as to withdrawal. Restricted time deposits generally secure standby letters of credit, bank lines of credit, or bank loans. Investments in and releases of restricted time deposits are included in investing activities on the Company's Statement of Cash Flows unless the time deposits relate to an underlying bank loan and will be used to repay the loan, in which case the related cash flows are treated as financing activities.

In the opinion of MRV's management, these unaudited statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position of MRV as of June 30, 2013, and the results of its operations and comprehensive income (loss) for the three and six months ended June 30, 2013 and 2012 and its cash flows for the six months ended June 30, 2013 and 2012. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the full year or any future periods.

On March 29, 2012, we sold all of the issued and outstanding capital stock of CES Electronic Systems SA (“CES”). On October12, 2012, the Company completed the sale of all of the shares of its subsidiary Alcadon - MRV AB ("Alcadon"). On October 16, 2012, the Company completed the sale of its subsidiary Pedrena Enterprises B.V., a Dutch company ("Pedrena"). Pedrena is the parent company of Interdata, which is in turn, the parent company of J3TEL. The Company has reclassified the historical results of CES, Alcadon and Pedrena as discontinued operations in this Form 10-Q for all periods presented. Accordingly, the related assets and liabilities of these three entities have been removed from the Company's balance sheets. Cash flows from discontinued operations of these three entities

8

are presented combined with the cash flows from continuing operations in the accompanying Statement of Cash Flows for the six months ended June 30, 2012. See Note 13 "Discontinued Operations" to the Financial Statements in Item 1 of this Form 10-Q for further discussion.

2. Cash and Cash Equivalents and Restricted Time Deposits

MRV treats 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. MRV maintains cash balances and investments in qualified financial institutions, and at various times such amounts are in excess of federal insured limits.

3. Fair Value Measurement

MRV's financial instruments, including cash and cash equivalents, restricted time deposits, accounts receivable, accounts payable, accrued liabilities and short-term debt obligations, are carried at cost, which approximates their fair market value.

ASC 820-10Fair Value Measurementsdefines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820-10 establishes 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 that the Company has the ability to access; Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs; Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

All of MRV's assets and a majority of its liabilities that are measured at fair value are measured using the unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. Under this standard, 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.

During 2013 the Company updated the estimated fair value of 250,000 warrants that will be issued to plaintiffs' counsel in a litigation matter originally recorded as a liability in 2012. In calculating the fair value, the Company used Black Scholes with level 2 inputs including a volatility of 45% based on the Company's historical quoted prices and peer company data, the risk free interest rate of 1.4% and the 5 years expected term of the warrants. The resulting fair value was $3.58 per warrant.

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 institutions and accounts receivable due from customers. MRV evaluates the collectability of accounts receivable based on a combination of factors. If the Company 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 it reasonably believes to be collectable from the customer. For all other customers, the Company records allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment, and historical experience. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future.

The following table summarizes the changes in the allowance for doubtful accounts during the six months ended June 30, 2013(in thousands):

	Six months ended
	June 30, 2013
Balance at beginning of period		$1,733
Charged to expense	250
Write-offs	(3		)
Foreign currency translation adjustment	(21		)
Balance at end of period		$1,959

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5. Inventories

Inventories are stated at the lower of cost or market and consist of materials, labor and overhead. Cost is determined by the first in, first out method. Inventories, net of reserves, consisted of the following (in thousands):

	June 30, 2013		December 31, 2012
Raw materials		$5,740		$4,348
Work-in process	1,051		1,368
Finished goods	12,969		16,728
Total		$19,760		$22,444

6. Intangible Assets

The balance of intangible assets was $0.4 million as of June 30, 2013 and December 31, 2012. This asset, which represents a software license agreement, was not placed in service as of June 30, 2013, therefore amortization of intangible assets was zero for the six months ended June 30, 2013 and June 30, 2012. The term of the license agreement is indefinite and once placed in service, the Company plans to amortize the cost over the estimated useful life, which is approximately seven years.

7. Product Warranty

As of June 30, 2013 and December 31, 2012, MRV's product warranty liability recorded in accrued liabilities was $0.9 million and $1.0 million, respectively. MRV accrues for warranty costs as part of cost of goods sold 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 change in product warranty liability during the six months ended June 30, 2013 (in thousands):

	Six months ended
	June 30, 2013
Beginning balance		$1,006
Cost of warranty claims	(168		)
Accruals for product warranties	37
Total		$875

8. Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of shares of common stock ("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 income (loss) per share. Diluted net income 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 also 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.

Outstanding stock options to purchase 0.4 million shares were excluded from the computation of dilutive shares for the three months ended June 30,2013 because of the net loss. Outstanding stock options to purchase 0.5 million shares were excluded in the computation of dilutive shares for the three months ended June 30, 2012 because of the net loss. In addition, for the three months ended June 30,2013 there were no potentially dilutive shares, and in 2012, there were 6,357 potentially dilutive shares excluded from the calculation of diluted net loss per share because they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

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Outstanding stock options to purchase 0.4 million shares were excluded from the computation of dilutive shares for the six months ended June 30,2013 because of the net loss. Outstanding stock options to purchase 0.5 million shares were included in the computation of dilutive shares for the six months ended June 30, 2012 because of the net income. In addition, for the six months ended June 30,2013 there were no potentially dilutive shares, and in 2012, there were 6,407 potentially dilutive shares excluded from the calculation of diluted net loss per share because they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

9. Share-Based Compensation

MRV records share-based compensation expense in accordance with ASC Topic 718Compensation - Stock Compensation. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the six months ended June 30, 2013 and 2012 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Cost of goods sold		$26		$8		$43		$20
Product development and engineering	15		10		25		21
Selling, general and administrative	42		214		234		403
Total share-based compensation expense (1)		$83		$232		$302		$444

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

The Company granted 80,242 stock options during the six months ended June 30,2013 and the related fair value was $4.89 per share. The fair value of 90,387 restricted shares granted during the six months ended June 30, 2013 was $9.99 per share. The Company granted 17,736 stock options during the six months ended June 30,2012 and the related fair value was $9.60 per share. The fair value of 39,325 restricted shares granted during the six months ended June 30, 2012 was $16.20 per share. As of June 30, 2013, the total unrecorded deferred share-based compensation balance for unvested securities, net of expected forfeitures, was$1.0 million, which is expected to be amortized over a weighted-average period of1.8 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. In 2012 MRV assumed volatility to approximate historical volatility. In 2013, MRV based volatility on the Company's historical quoted prices and peer company data,as this was determined to be a preferable method. The following weighted average assumptions were used for estimating the fair value of options modified during the six months ended June 30, 2013 and 2012, respectively:

Six months ended June 30,	2013		2012
Risk-free interest rate	1.2	%	0.8	%
Dividend yield	—		—
Volatility	51.9	%	89.0	%
Expected life (in years)	5.7		5.5

10. Segment Reporting and Geographic Information

MRV operates its business in two segments: Network Equipment and Network Integration. Network Equipment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products, and Network Integration provides value-added integration and support services for customers' networks.

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The accounting policies of the segments are the same as those described in the summary of significant accounting polices disclosed in MRV's2012Form 10-K. MRV evaluates segment performance based on revenues, gross profit and operating income (loss) of each segment. As such, there are no separately identifiable Statements of Operations data below operating income (loss).

The following table summarizes revenues by segment, including intersegment revenues (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Network Equipment		$21,100			$21,519			$42,046			$41,938
Network Integration	17,135			19,560			35,117			35,075
Before intersegment adjustments	38,235			41,079			77,163			77,013
Intersegment adjustments	(60		)	(3,453		)	(83		)	(5,972		)
Total		$38,175			$37,626			$77,080			$71,041

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. Network Integration revenue primarily consists of value-added integration and support service revenue, related third-party product sales (including third-party product sales through distribution) and fiber optic components sold as part of system solutions.

One customer accounted for $22.2 million and $20.2 million of revenue in Network Integration revenue, or 29% and 28% of total revenue, for the six months ended June 30, 2013 and 2012, respectively.

The same customer in Network Integration accounted for 20% and 21% of net accounts receivable as of June 30, 2013, and December 31, 2012, respectively. Another Network Integration customer accounted for 12% and 9% of accounts receivable as of June 30, 2013, and December 31, 2012, respectively.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Americas		$14,531		$13,035		$28,281		$25,883
Europe	21,869		23,277		45,290		42,906
Asia Pacific	1,775		1,314		3,509		2,252
Total		$38,175		$37,626		$77,080		$71,041

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

	June 30, 2013		December 31, 2012
Americas		$3,474		$2,099
Europe	1,524		1,590
Asia Pacific	40		46
Total		$5,038		$3,735

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The following table provides selected Statement of Operations information by business segment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Gross profit
Network Equipment	$	11,183		$	9,993		$	21,949		$	20,037
Network Integration	2,187			3,169			4,444			5,661
Total before intersegment adjustments	13,370			13,162			26,393			25,698
Corporate unallocated and intersegment adjustments(1)	2			150			6			295
Total	$	13,372		$	13,312		$	26,399		$	25,993
Depreciation expense
Network Equipment	$	283		$	230		$	583		$	459
Network Integration	52			57			105			116
Corporate	48			47			96			95
Total	$	383		$	334		$	784		$	670
Operating income (loss)
Network Equipment	$	(296	)	$	(337	)	$	(1,415	)	$	(1,767	)
Network Integration	675			1,605			1,366			2,675
Total before intersegment adjustments	379			1,268			(49		)	908
Corporate unallocated operating loss and adjustments (1)	(914		)	(2,512		)	(4,499		)	(5,797		)
Total	$	(535	)	$	(1,244	)	$	(4,548	)	$	(4,889	)

(1) Adjustments reflect the elimination of intersegment revenue and profit in inventory.

The following tables provide selected Balance Sheet and Statement of Cash Flow information by business segment (in thousands):

	Six months ended
	June 30,
	2013		2012
Additions to Fixed Assets
Network Equipment	$	2,064	$	440
Network Integration	46		52
Corporate	6		76
Discontinued operations	—		1,290
Total	$	2,116	$	1,858

	June 30, 2013		December 31, 2012
Total Assets
Network Equipment		$45,249		$44,445
Network Integration	45,071		47,400
Corporate and intersegment eliminations	30,267		36,720
Total		$120,587		$128,565

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11. Indemnification Obligations

In connection with the sale by MRV of Source Photonics, Inc. and related entities 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, indemnification obligations related to intellectual property extend until the third anniversary of the closing, indemnification obligations related to employee benefits, environmental liabilities and taxes extend until their applicable statute of limitations has expired 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. In connection with the sale by MRV of CES in March 2012, MRV agreed to indemnify the buyer for the representations and warranties made in the sale purchase agreement, and we have purchased an insurance policy to protect us against any claims of indemnification related to the representations and warranties. Our sale purchase agreements for the sale of Pedrena and Alcadon include customary indemnification obligations. In addition, in connection with the sale of Pedrena the Company and the buyer entered into a Representations and Warranties Agreement that contains an arrangement whereby if the Company does not obtain a representations and warranties insurance policy within 90 days of close of the sale transaction, and if the Company's cash falls below $20 million prior to December 31, 2013, the Company will deposit 1.5 million euros (or $2.0 million U.S. equivalent as of December 31, 2012) in an escrow account to secure its indemnification obligations under the Representations and Warranties Agreement. The Company has elected not to obtain the insurance policy.

12. Litigation

In connection with the Company's past stock option grant practices, MRV and certain of its former directors and officers have been subjected to a number of stockholder lawsuits. In June 2008, the Company announced that our Board of Directors, based on information provided by management, and in consultation with management, concluded that the financial statements and the related reports of our independent public accountants should not be relied upon due to the Company's intention to restate its financial results from 2002 through 2008 to correct its accounting for option grants and other issues and a restatement of the Company's financial statements was filed in its Annual Report on Form 10-K for the year ended December 31, 2008 in October 2009.

From June to August 2008, five purported stockholder derivative and securities class action lawsuits were filed in the U.S. District Court in the Central District of California and one derivative lawsuit was filed in the Superior Court of the State of California against the Company and certain of our former officers and directors. The five lawsuits filed in the Central District of California were consolidated. Claims were asserted under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder. In November 2010, the judge overseeing the securities class action lawsuits gave final approval to a stipulated $10.0 million settlement agreement, which was covered by our director and officer insurance policies. The federal and state derivative lawsuits were not settled and continued to be litigated.

As of January 4, 2013, all pending litigation in the federal and state derivative actions was stayed by agreement of the parties pending final Federal Court approval of a settlement between derivative plaintiffs, individual defendants and the Company. On April 8, 2013 the Federal Court preliminarily approved a Stipulation of Settlement (the "Settlement Stipulation"), which includes, among other things, (a) a release of all claims relating to the derivative lawsuits for the Company, the individual defendants and the plaintiffs; (b) a provision that $2.5 million in cash be paid to the Company by the Company's insurance carriers; (c) a payment of attorney's fees to plaintiffs' counsel of up to $0.5 million in cash and 250,000five-year term warrants to purchase the Company's Common Stock at a strike price equal to the closing price of the Company's Common Stock on the day the Court's judgment approving the settlement becomes final (as defined in the Settlement Stipulation); and (d) continued payment by the Company of applicable reasonable attorneys' fees for the individual defendants. On June 6, 2013 the Federal Court granted final approval of the Settlement and on June 13, 2013 entered Judgment dismissing the federal derivative action with prejudice. On June 24, 2013, the State Court entered a dismissal with prejudice of the state derivative action. The Company is now required to undertake certain corporate governance reform actions within 120 days, many of which have already been implemented.

A majority of the costs related to the Company's and defendants' defense of these actions was paid by the Company's insurance carriers under its director and officer insurance policies, including the securities class action settlement. Insurance proceeds paid to the Company upon settlement of the derivative litigation were $1.0 million. However, MRV has paid and accrued $1.8 million in payment for services of defense counsel and other parties through June 30, 2013 above the insured amount. We have agreed to pay reasonable attorney fees and expenses for the

14

individual defendants in the Stipulation, and will continue to incur our own legal expenses until this matter is finally resolved and non-appealable. Any such future obligations are not determinable at this time.

From time to time, MRV has received 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. The Company has been involved in such discussions with Alcatel-Lucent SA, International Business Machines, Ortel Communications,Ltd., Nortel Networks Corporation, Rockwell Automation,Inc., The Lemelson Foundation, Finisar Corporation and Apcon,Inc. in the past.

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

13. Discontinued Operations

On March 29, 2012, the Company sold all of the issued and outstanding capital stock of CES. Prior to its disposition, CES was part of Network Equipment. The historical financial results of CES prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded net income of $6.0 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to CES.

On October12, 2012, the Company completed the sale of all of the shares of its subsidiary, Alcadon. Prior to its disposition, Alcadon was part of Network Integration. The historical financial results of Alcadon prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded a net loss of $2.1 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to Alcadon.

On October 16, 2012, the Company completed the sale of all of the shares of its subsidiary, Pedrena. Pedrena is the parent company of Interdata, and Interdata in turn is the parent company of J3TEL. Prior to its disposition, Pedrena was part of Network Integration. The historical financial results of Pedrena prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded a net loss of $0.7 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to Pedrena.

In 2012 we entered into distribution agreements with Alcadon and Pedrena whereby the Company continues to sell its products to both disposed entities. The amount of intercompany revenue that was previously eliminated from the Company's financial statements in consolidation for the three months ended June 30, 2012 was $1.6 million and $1.7 million for Alcadon and Pedrena, respectively. The amount of intercompany revenue that was previously eliminated from the Company's financial statements in consolidation for the six months ended June 30, 2012 was $2.7 million and $3.0 million million for Alcadon and Pedrena, respectively.

14. Accounts Receivable Factoring

The Company has agreements with unrelated third parties for the factoring of specific accounts receivable in Italy in order to reduce the amount of working capital required to fund such receivables. As of June 30, 2013, the Company's credit facility agreements permit the factoring of up to €23.0 million, or $29.5 million, worth of receivables in operations outside of the United States. The factoring of accounts receivable under these agreements is accounted for as a sale in accordance with ASC 860 Transfers and Servicing. Proceeds on the transfer reflect the face value of the account less a discount. The discount is recorded as a charge in "interest" in the consolidated statement of income in the period of the sale. Net funds received reduced accounts receivable outstanding while increasing cash. The Company has no significant retained interests or servicing liabilities related to the accounts receivable that have been sold in Italy.

At June 30, 2013, and December 31, 2012, the face amount of total outstanding accounts receivable pursuant to these agreements was $26.3 million and $29.5 million, respectively. The related outstanding balances due from the factor were $14.4 million and $13.3 million as of June 30, 2013 and December 31, 2012, respectively. The related losses on sale were $0.1 million and $0.1 million for the three months ended June 30, 2013 and June 30, 2012, and $0.1 million and $0.1 million for the six months ended June 30, 2013 and June 30, 2012.

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15. Share Repurchase

On December 3, 2012, the Company announced that the Board of Directors approved a repurchase of shares of Common Stock of the Company in an amount up to $10.0 million under a stock repurchase program that expires on December 31, 2013. Under this program the Company purchased 141,412 shares at an average price of $9.59 per share and a total cost of approximately $1.4 million during the six months ended June 30,2013. For the program to date as of June 30, 2013, the Company has purchased 181,717 shares at an average price of $9.93 per share and a total cost of approximately $1.8 million leaving $8.2 million for future purchases.

16. Dividend

On May 1, 2012, the Company's Board of Directors declared a dividend and payment to option holders totaling approximately $47.3 million, or $0.30 per share of the Company's Issued Common Stock. The dividend was paid on May 25, 2012 to holders of record as of the close of business on May 16, 2012. The Board also approved a staggered cash payment to option holders equal to the loss in the Black-Scholes fair value of their options as a result of the dividend. Restricted stockholders received per share payments in the same amount as the Company's stock holders promptly following payment of the dividend. Option holders who provided service to the Company at the time of the payment of the dividend received 50 percent of the payment amount in respect of their vested options promptly following payment of the dividend, and received 50 percent of the payment amount 12 months following, conditioned upon continuous service to MRV, subject to certain acceleration conditions such as involuntary termination without cause, death or disability, change of control, or a sale of the business unit in which the option holder is employed. Option holders with unvested options received the cash payment 12 months following as well, subject to the same conditions described above.

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 Financial Statements and Notes thereto included elsewhere in this Form10-Q, and Items 6, 7 and 8 of our2012Form10-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. Forward-looking statements are statements other than statements of historical fact and may be identified by use of such terms as “expects,”“anticipates,”“intends,”“potential,”“estimates,”“believes,”“may,”“should,”“could,”“will,”“would,” and words of similar import.

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

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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 2012 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

We supply communications equipment and services to carriers, governments and enterprise customers worldwide. We conduct our business along two principal segments: Network Equipment and Network Integration. We evaluate segment performance based on the revenues, gross profit and operating expenses of each segment. We do not evaluate segment performance on additional financial information. As such, there are no separately identifiable Statements of Operations data below operating income. Our Network Equipment segment provides communications equipment that facilitates access, transport, aggregation and management of voice, data and video traffic in networks, data centers and laboratories used by telecommunications service providers, cable operators, enterprise customers and governments worldwide. Our Network Integration segment operates primarily in Italy, servicing Tier One carriers, regional carriers, large enterprises, and government institutions. Network Integration provides network system design, integration and distribution services that include products manufactured by third party vendors. We market and sell our products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators.

We believe that the softness in the global markets has affected our revenues and operating results, particularly in the Italian market.  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.

Our business involves reliance on foreign-based offices. Some 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 United Kingdom. For the six months ended June 30, 2013, and 2012, foreign revenue constituted 64.0% and 71.0%, respectively, of our total revenue. The majority of our foreign sales are to customers located in the European region, with the remaining foreign sales primarily to customers in the Asia Pacific region.

On March 29, 2012, we sold all of the issued and outstanding capital stock of CES. On October12, 2012, we completed the sale of all of the shares of our subsidiary Alcadon. On October 16, 2012, we completed the sale of our subsidiary Pedrena. We have reclassified the historical results of CES, Alcadon and Pedrena as discontinued operations in this Form 10-Q for all periods presented. Accordingly, the related assets and liabilities of these three entities have been removed from the Company's balance sheets. Cash flows from discontinued operations are presented combined with the cash flows from continuing operations in the accompanying Statement of Cash Flows. See Note 13 "Discontinued Operations" to the Financial Statements in Item 1 of this Form 10-Q for further discussion.

At June 30, 2013 we had $35.9 million in cash and cash equivalents, $0.2 million in restricted time deposits, and $2.8 million in short-term debt. In April 2013, $2.7 million, which was held in an escrow account related to the sale of CES, was released to the Company and converted to cash.

Critical Accounting Policies

Our discussion and analysis of the Company's financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). We follow accounting standards set by the Financial Accounting Standards Board (“FASB”) to ensure we

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consistently report our financial condition, results of operations, and cash flows in conformity with GAAP. References to GAAP issued by the FASB in this Form 10-Q are to the FASB Accounting Standards of Codification.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider 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.

Revenue Recognition.    Our major revenue-generating products consist of switches and routers, console management, physical layer products, and fiber optic components. We generally recognize product revenue, net of sales discounts, returns and allowances, in accordance with ASC 605 Revenue Recognition, 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. Network Integration resells third party products. We recognize revenue on these sales on a gross basis, as a principal, because we are the primary obligor in the arrangement, we are exposed to inventory and credit risk, we negotiate the selling prices, and we sell the products as part of a solution in which we provide services. Sales of services and system support are deferred and recognized ratably over the contract period in accordance with ASC 605-20 Services. 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 in accordance with ASC 605. 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 cost 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 or materially altered after January 1, 2011. In October 2009, the FASB amended ASC 605-25 and ASC 985 and we adopted the amendments prospectively effective January 1, 2011. In accordance with the amendments, 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 selling price of each

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deliverable. In accordance with the amendments, we no longer apply the software revenue guidance in ASC Subtopic985-605 to tangible products containing software components and non-software components that function together to deliver the tangible product's essential functionality.

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 high credit quality institutions and accounts receivable due from customers. We perform ongoing credit evaluations of our customers and maintain reserves for potential credit losses.

Inventory.    We make ongoing estimates relating to the market 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 market 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.

Software Development Costs. In accordance with ASC 985-20 Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, development costs related to software products are expensed as incurred until the technological feasibility of the product has been established. Technological feasibility occurs when a working model is completed or a detail program design exists. After technological feasibility is established, additional costs are capitalized.

We believe our process for internally developed software is essentially completed concurrent with the establishment of technological feasibility, and, accordingly, no software development costs for internally developed software have been capitalized to date.

Internal Use Software Development. In accordance with ASC 350-40 Intangibles - Goodwill and Other, Internal-Use Software, any software that we acquire, internally develop, or modify solely to meet our internal needs, and for which we have no substantive plan to market the software externally, is capitalized. During the six months ended June 30, 2013, we have been implementing a new enterprise-wide software for which we are capitalizing the development costs.

Income Taxes. As part of the process of preparing our financial statements, we estimate the income taxes in each of the jurisdictions in which we operate. 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 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 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

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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 Statements of Operations.

Share-Based Compensation.    We determine the fair value of stock options using the Black-Scholes valuation model as permitted under ASC 718 Compensation - Stock Compensation. 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.)

Currency Rate Fluctuations

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, including the euro, the Taiwan dollar and the Israeli new shekel. For the six months ended June 30,2013 and 2012, 64% and 71% of revenue, respectively, and 39% and 36% of operating expenses, respectively, were incurred at subsidiaries with a reporting currency other than the U.S. dollar. For the six months ended June 30,2013, these currencies remained relatively consistent against the U.S. dollar compared to the six months ended June 30,2012, so revenue and expenses in these currencies translated into relatively the same dollars that they would have in the prior period. The Company's Taiwan subsidiary, Appointech, Inc., is included in Network Equipment that also includes our Optical Communications Systems ("OCS") division. Relative to OCS, the revenues and related operating gross profit and operating expenses are not material and the change in foreign currency does not have a material impact on the results for the six months ended June 30, 2013 compared to the six months ended June 30,2012. 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.

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Management Discussion Snapshot

The following table sets forth, for the periods indicated, certain consolidated and segment Statements of Operations data (dollars in thousands):

	Three months ended June 30,										Six months ended June 30,
	2013					2012					2013					2012
	$			% (1)		$			% (1)		$			%(1)		$			% (1)
Revenue(1) (2)		$38,175		100	%		$37,626		100	%		$77,080		100	%	$	71,041		100	%
Network Equipment	21,100			55		21,519			57		42,046			55		41,938			59
Network Integration	17,135			45		19,560			52		35,117			46		35,075			49
Gross profit (3)	13,372			35		13,312			35		26,399			34		25,993			37
Network Equipment	11,183			53		9,993			46		21,949			52		20,037			48
Network Integration	2,187			13		3,169			16		4,444			13		5,661			16
Operating expenses (4)	13,907			36		14,556			39		30,947			40		30,882			43
Network Equipment	11,480			54		10,330			48		23,364			56		21,804			52
Network Integration	1,511			9		1,565			8		3,078			9		2,986			9
Operating loss (3) (4)	(535		)	(1	)	(1,244		)	(3	)	(4,548		)	(6	)	(4,889		)	(7	)
Network Equipment	(296		)	(1	)	(337		)	(2	)	(1,415		)	(3	)	(1,767		)	(4	)
Network Integration	675			4		1,605			8		1,366			4		2,675			8

___________________________________

(1) Consolidated Statements of Operations data and segment revenue data express percentages as a percentage of consolidated revenue. Other Statements of Operations data by segment express percentages as a percentage of applicable segment revenue.

(2) Revenue information by segment includes intersegment revenue reflecting sales of Network Equipment to Network Integration.

(3) Consolidated gross profit data reflects adjustments for intersegment eliminations.

(4) Consolidated operating expenses include corporate unallocated operating expenses.

On March 29, 2012, the Company sold all of the issued and outstanding capital stock of CES. Prior to its disposition, CES was part of Network Equipment. The historical financial results of CES prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded net income of $6.0 million from discontinued operations, net of income tax expense for thesix months ended June 30, 2012, and nothing for the three months ended June 30, 2012 related to CES.

On October12, 2012, the Company completed the sale of all of the shares of its subsidiary Alcadon. Prior to its disposition, Alcadon was part of Network Integration. The historical financial results of Alcadon prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded a net loss of $2.9 million and $2.1 million from discontinued operations, net of income tax expense for the three and six months endedJune 30, 2012 related to Alcadon.

On October 16, 2012, the Company completed the sale of all of the shares of its subsidiary Pedrena, parent of Interdata. Prior to its disposition, Pedrena was part of Network Integration. The historical financial results of Pedrena prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded net income of $0.3 million and a net loss of $0.7 million from discontinued operations, net of income tax expense for the three and six months endedJune 30, 2012, respectively related to Pedrena.

The Company has distribution agreements with Alcadon and Pedrena whereby the Company continues to sell its products to Pedrena and Alcadon. The amount of intercompany revenue that was previously eliminated from the Company's financial statements in consolidation for the three months ended June 30, 2012 for Pedrena and Alcadon was $1.6 million and $1.7 million, respectively. The amount of intercompany revenue that was previously eliminated

21

from the Company's financial statements in consolidation for the six months ended June 30, 2012 for Pedrena and Alcadon was $2.7 million and $3.0 million, respectively.

22

Three months ended June 30,2013 Compared to the three months ended June 30,2012

Revenue

The following table summarizes revenue by segment, including intersegment sales (dollars in thousands):

							Favorable/(Unfavorable)
Three months ended June 30:	2013			2012			$ Change			% Change		% Change constant currency(1)
Network Equipment	$	21,100		$	21,519		$	(419	)	(2	)%	(2	)%
Network Integration	17,135			19,560			(2,425		)	(12	)	(14	)
Before intersegment adjustments	38,235			41,079			(2,844		)	(7	)	(8	)
Intersegment adjustments (2)	(60		)	(3,453		)	3,393			(98	)	(98	)
Total	$	38,175		$	37,626		$	549		1	%	1	%

___________________________________

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the elimination of intersegment revenue. In 2012, the intersegment adjustment included $2.4 million for Network Equipment sales to Alcadon and Interdata.

Consolidated revenue for the second quarter of 2013increased $0.5 million, or 1%, compared to the second quarter of 2012, due primarily to a $2.4 million, or (12)%, decrease in Network Integration revenue, a $3.4 milliondecrease in intersegment sales, which are eliminated in consolidation, and to a lesser extent a $0.4 million, or (2)%, decrease in Network Equipment revenue. Our former subsidiaries, Alcadon and Pedrena, were sold in the fourth quarter of 2012. Since Alcadon and Pedrena were still our subsidiaries in the second quarter of 2012, revenue of $3.3 million from these former subsidiaries was reported as intersegment sales that was included in Network Equipment and eliminated in determining consolidated revenue. In the fourth quarter of 2012, after the two subsidiaries were sold, we continued to sell product to these former subsidiaries, and those sales are now reported as trade sales with no adjustment required.

Network Equipment.    Revenue generated from Network Equipment decreased $0.4 million, or (2)%, in the second quarter of 2013 compared to the second quarter of 2012. The decrease is primarily due to lower service revenues and lower product revenue in Europe at our OCS division. Revenue for our optical and carrier Ethernet networking products and related components decreased compared to prior year that was partially offset by an increase in some of our more mature product categories. Service revenues were down 10% compared to last year primarily due to the final roll off of older deferred service contracts that were using a grandfathered revenue recognition methodology. Geographically, after giving effect to the change in European intersegment sales, the decrease in revenues at Network Equipment was attributable to a $2.4 million decrease in Europe that was partially offset by strong performance in our other major regions. The cause of the poor performance in Europe is a combination of economic conditions and under performance by our European team. Within our Americas and Asia Pacific markets we have seen strength in the mobile backhaul, data center, content provider and business Ethernet sectors. The foreign exchange impact to Network Equipment was not material due to Appointech being the only activity subject to foreign exchange fluctuations.

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

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					Favorable/(Unfavorable)
Three months ended June 30:	2013		2012		$ Change			% Change
Revenue, excluding intersegment sales:
Americas		$14,530		$13,034		$1,496		11	%
Europe	4,734		3,717		1,017			27
Asia Pacific	1,776		1,314		462			35
Total external sales	21,040		18,065		2,975			16
Sales to Network Integration:
Europe	60		3,454		(3,394		)	(98	)
Total intersegment sales	60		3,454		(3,394		)	(98	)
Total Network Equipment revenue		$21,100		$21,519		($419	)	(2	)%

Network Integration.    Revenue generated from Network Integration decreased $2.4 million, or (12)%, in the second quarter of 2013 compared to the second quarter of 2012. The decrease is due a $3.4 million decrease in product that was partially offset by a $1.0 million increase in service revenues at Tecnonet. The Italian public telecommunications market has been negatively impacted by the current political climate and difficult economic conditions in Italy. New product orders were delayed and product pricing was under pressure. The service revenue growth is the result of an increased focus on this aspect of the business that has higher margins and greater potential for growth given the current market conditions. Total revenue from this segment would have been $0.3 million, or (2)%lower in the second quarter of 2013, compared to the prior second quarter of 2012, had foreign currency exchange rates remained the same as they were in the second quarter of 2012. All revenue in Network Integration was generated in Italy.

Gross Profit

The following table summarizes gross profit by segment (dollars in thousands):

					Favorable/(Unfavorable)
Three months ended June 30:	2013		2012		$ Change			% Change		% Change constant currency (1)
Network Equipment		$11,183		$9,993		$1,190		12	%	12	%
Network Integration	2,187		3,169		(982		)	(31	)	(32	)
Before intersegment adjustments	13,370		13,162		208			2		1
Adjustments (2)	2		150		(148		)	(99	)	(100	)
Total		$13,372		$13,312		$60		—	%	—	%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the change in the elimination of intersegment profit in ending inventory in order to reconcile to consolidated gross profit.

Consolidated gross profit increased $0.1 million in the second quarter of 2013 compared to the prior year second quarter, principally due to the 1%increase in revenue. Gross profit as a percentage of revenue (gross margin) remained unchanged at 35% in the second quarter of 2013 and the prior year. Consolidated product to service revenue mix in the second quarter of 2013 remained consistent with the second quarter of 2012. As explained below, an increase in Network Equipment gross margin was offset by the decrease in Network Integration gross margin. In the second quarter of 2013, the foreign currency exchange rates remained relatively the same as in the second quarter of 2012.

Network Equipment.  The $1.2 million, or 12%, increase in gross profit for Network Equipment in the second quarter of 2013, compared to the second quarter of the prior year, was due to a 2%decrease in revenue, as well as an increase in average gross margin from 46% to 53% that was primarily due to a $0.6 million increase resulting from sales of higher margin products, and a $0.3 million decrease in service center and logistics costs, as well as a $0.5 million decline in write-offs of excess inventory. Partially offsetting these positive factors affecting gross margin was the reduction of $0.2 million in gross profit resulting from the 2% revenue decline. The mix of product and service

24

revenue in the second quarter of 2013 remained consistent as compared to the second quarter of the prior year, and all of the OCS gross margin improvement came from product revenues.

Network Integration.  Gross profit in the second quarter of 2013 as compared to the second quarter of 2012 for Network Integration decreased $1.0 million, or (31)%. The decrease was driven by a decrease in average gross margin from 16% to 13% due to gross margin declines at Tecnonet. Tecnonet gross margins declined mainly due to a decrease in product gross margins primarily caused by competitive pricing pressure arising from the difficult economic conditions in Italy. Tecnonet primarily serves as a reseller of the third party equipment it installs and services, and as a result, it has been experiencing significant gross margin pressure on its product sales to major telecommunication carriers. The decline in product gross margins was partially offset by an increase in service gross margins mainly due to volume efficiency and a favorable shift in revenue mix toward internally supported services. Given the struggles facing the Italian economy, we expect to continue to see pricing pressure on our product revenues.

Operating Expenses

The following table summarizes operating expenses by segment (dollars in thousands):

					(Favorable)/Unfavorable
Three months ended June 30:	2013		2012		$ Change			% Change		% Change constant currency (1)
Network Equipment		$11,480		$10,330		$1,150		11	%	11	%
Network Integration	1,511		1,565		(54		)	(3	)%	(5	)%
Total segment operating expenses	12,991		11,895		1,096			9	%	9	%
Corporate unallocated operating expenses and adjustments (2)	916		2,661		(1,745		)	(66	)%	(66	)%
Total		$13,907		$14,556		($649	)	(4	)%	(5	)%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Corporate unallocated operating expenses include unallocated product development, and selling, general and administrative expenses.

Consolidated operating expenses in the secondquarter of 2013 were $13.9 million, or 36% of revenue, compared to $14.6 million, or 39% of revenue, in the second quarter of 2012, a decrease of $0.6 million, or (4)%. The increase is primarily due to an increase at Network Equipment ($1.2 million), offset by decreases at Network Integration ($0.1 million) and Corporate unallocated operating expenses ($1.7 million) as discussed below.

Network Equipment.    Operating expenses in Network Equipment for the second quarter of 2013 were $11.5 million, or 54% of revenue, compared to $10.3 million, or 48% of revenue in the secondquarter of 2012. The $1.2 million, or 11%, increase was planned for and was primarily due to a $1.1 million increase in salaries for newly hired engineers and outside engineering support cost, and $0.5 million increase in consulting and support costs for the implementation of an enterprise-wide business software system. Partially offsetting these increases was $0.3 million in lower sales and administrative salaries due a prior year reduction in workforce and vacant sales and administrative positions that we intend to fill and other general support costs. We do not expect to continue to incur support costs for the implementation of the business software system at the same level in the future, and we anticipate continue to benefit from the prior year workforce reduction.

Network Integration.    Operating expenses in Network Integration for the secondquarter of 2013 were $1.5 million, or 9% of revenue, compared to $1.6 million, or 8% of revenue, in the secondquarter of 2012. The $0.1 milliondecrease was mainly due to lower advertising costs in the second quarter of 2013.

Corporate. Corporate expenses decreased by $1.7 million in the second quarter of 2013 compared to the second quarter of 2012. This decrease was due to the receipt of a $1.0 million insurance payment upon settlement of the derivative litigation (See Note 12, Litigation), a $0.4 million decrease in Corporate labor costs due to headcount reduction and lower bonus payments, a $0.2 million decrease in professional consulting services to support the transition of the Corporate structure, and a $0.3 million decrease in other costs due to a lower Black-Scholes valuation of the

25

warrants to be issued in settlement of the derivative litigation. These positive variances were partially offset by $0.2 million in additional legal fees resulting from additional fees related to an OCS employee matter.

Operating Income (Loss)

The following table summarizes operating income (loss) by segment (dollars in thousands):

							Favorable/(Unfavorable)
Three months ended June 30:	2013			2012			$ Change			% Change		% Change constant currency(1)
Network Equipment		($296	)		($337	)		$41		(12	)%	(13	)%
Network Integration	675			1,605			(930		)	(58	)	(59	)
Total segment operating income (loss)	379			1,268			(889		)	(70	)	(71	)
Corporate unallocated and adjustments (2)	(914		)	(2,512		)	1,598			64		(64	)
Total		($535	)		($1,244	)		$709		(57	)%	(56	)%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the elimination of intersegment revenue and profit in inventory in order to reconcile to consolidated operating income (loss).

The $0.1 million, or 0%, increase in gross profit and the $0.6 million, or (4)%, decrease in operating expenses primarily led to a $0.7 milliondecrease in our operating loss. The resulting increase in operating margins changed from (3)% in the first quarter of 2012 to (1)% in the first quarter of 2013.

Network Equipment.   Network Equipment reported an operating loss of $0.3 million and $0.3 million in the secondquarter of 2013 and 2012, respectively. The negligible change in loss was due to a $1.2 millionincrease in gross profit partially offset by a $1.2 million planned increase in operating expenses. Operating margin was (1)% in 2013 and (2)% in 2012.

Network Integration.   Network Integration reported operating income of $0.7 million for the second quarter of 2013, compared to $1.6 million in the second quarter of 2012. The $0.9 milliondecrease was due to the $1.0 milliondecrease in gross profit and offset by a $0.1 milliondecrease in operating expenses. Network Integration operating margin was 4% in the second quarter of 2013 compared to 8% in the second quarter of 2012.

Interest Expense and Other Income, Net

Interest expense was $0.2 million in the second quarter of 2013 compared to $0.2 million in the second quarter of 2012. Other income, net, principally includes interest income on cash, cash equivalents and investments and gains and losses on foreign currency transactions and the litigation settlement. In the second quarter of 2012, we recognized a $2.3 million gain on settlement of litigation that had been previously reserved

Provision for Income Taxes

The tax provision for the second quarters of 2013 and 2012 was $0.1 million and $0.3 million , respectively. 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. The income tax expense on an operating loss of $0.9 million in the second quarter of 2013 is due to income tax associated with our foreign subsidiaries that do not benefit from our federal net operating loss carryforwards.

Tax Loss Carryforwards

As of December 31, 2012, we had net operating losses ("NOLs") of $173.7 million, $112.0 million, and $90.8 million for federal, state, and foreign income tax purposes, respectively. Additionally, the Company had capital loss carryforwards of $110.3 million and $47.1 million for federal and state tax purposes, respectively. Under the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change

26

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, 2013, the U.S. federal and state NOLs continued to carry a full valuation allowance.

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Six Months Ended June 30,2013 Compared To Six Months Ended June 30,2012

Revenue

The following table summarizes revenue by segment, including intersegment sales (dollars in thousands):

							Favorable/(Unfavorable)
Six Months Ended June 30:	2013			2012			$ Change		% Change		% Change constant currency(1)
Network Equipment group		$42,046			$41,938			$108	—	%	—	%
Network Integration group	35,117			35,075			42		—		(1	)
Before intersegment adjustments	77,163			77,013			150		—		—
Intersegment adjustments (2)	(83		)	(5,972		)	5,889		(99	)	(99	)
Total		$77,080			$71,041			$6,039	9	%	8	%

___________________________________

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the elimination of intersegment revenue.

Consolidated revenue for the six months ended June 30,2013increased $6.0 million, or 9%, compared to the comparable period of 2012, due primarily to a $5.9 million, or 8% decrease in Intersegment adjustments, which are eliminated in consolidation, as well as to a $0.1 millionincrease in Network Equipment revenue. Our former subsidiaries, Alcadon and Pedrena, were sold in the fourth quarter of 2012. Since Alcadon and Peddrena were still our subsidiaries in the second quarter 2012, the revenue of $5.7 million from these former subsidiaries was reported as intersegment sales that were included in Network Equipment and eliminated in determining consolidated revenue. In the fourth quarter of 2012, after the two subsidiaries were sold, we continued to sell product to these former subsidiaries, and those sales are now reported as trade sales with no adjustment required. Consolidated revenue would have been $0.4 millionlower if foreign currency exchange rates had remained the same as they were in the first six months of 2012.

Network Equipment Group.    Revenue generated from the Network Equipment group increased $0.1 million in the six months ended June 30,2013 compared to the six months ended June 30,2012. Our OCS division revenues increased primarily due to an increase in product revenues that were partially offset by a decrease in service revenue. Geographically, OCS Americas and Asia Pacific sales increased $3.7 million that was partially offset by a $3.5 million decrease in Europe where economic conditions continue to impact regional performance.

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

					Favorable/(Unfavorable)
Six Months Ended June 30:	2013		2012		$ Change			% Change
Revenue, excluding intersegment sales:
Americas		$28,280		$25,883		$2,397		9	%
Europe	10,173		7,831		2,342			30
Asia Pacific	3,510		2,252		1,258			56
Total external sales	41,963		35,966		5,997			17
Sales to Network Integration group:
Europe	83		5,972		(5,889		)	(99	)
Total intersegment sales	83		5,972		(5,889		)	(99	)
Total Network Equipment revenue		$42,046		$41,938		$108		—	%

Network Integration Group.    Revenue generated from the Network Integration group was slightly higher in the first six months of 2013 compared to the first six months of 2012. At Tecnonet, product revenue was down 9% for the first six months of 2013 as compared to the first six months of the prior year, but service revenue increased by 12%.

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The competition within the Italian telecom market has increased as Italy continues to work through its economic and political difficulties. As Tecnonet is only a reseller of third party equipment, this competitive environment has hit Tecnonet's product revenue side of the business harder than its higher margin service business. We anticipate that product revenue will continue to be under pressure. Revenue would have been $0.4 millionlower in 2013 had foreign currency exchange rates remained the same as they were in 2012. All revenue in the Network Integration group was generated in Italy.

Gross Profit

The following table summarizes gross profit by segment (dollars in thousands):

					Favorable/(Unfavorable)
Six Months Ended June 30:	2013		2012		$ Change			% Change		% Change constant currency (1)
Network Equipment group		$21,949		$20,037		$1,912		10	%	10	%
Network Integration group	4,444		5,661		(1,217		)	(21	)	(23	)
Before intersegment adjustments	26,393		25,698		695			3		2
Adjustments (2)	6		295		(289		)	(98	)	(98	)
Total		$26,399		$25,993		$406		2	%	1	%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the change in the elimination of intersegment profit in ending inventory in order to reconcile to consolidated gross profit.

Consolidated gross profit increased $0.4 million, or 2% for the six months ended June 30, 2013 from the prior year period, due to the 9%increase in revenue and a decrease in gross margin from 37% to 34%. The decline in average gross margins was due to decline in gross margin in Network Integration. Gross profit would have been $0.1 millionlower if foreign currency exchange rates had remained the same as they were in the first six months of 2012.

Network Equipment Group.    The $1.9 million, or 10%, increase in gross profit for the Network Equipment group for the six months ended June 30, 2013 from the prior year period was due to an increase in average gross margin from 48% to 52%. The increase in average gross margin for the first six months of 2013 as compared to the first six months of prior year was due to a decrease in labor and overhead of $0.6 million, a favorable change in product revenue mix of $0.2 million, $0.2 million of reduced logistics and service costs, and a decrease in inventory write-offs $0.9 million, all of which primarily occurred at OCS. The mix of product and service revenues for the first six months of 2013 and 2012 remained consistent, and gross margin in both revenue streams improved during the first six months of 2013. Gross profit would have been flat in 2013 had foreign currency exchange rates remained the same as they were in 2012.

Network Integration Group.    Gross profit for the Network Integration group decreased $1.2 million, or 21% for the first six months in 2013 as compared to first six months in 2012. The decrease was primarily due to a decrease in average gross margins from 16% in the first six months of the prior year to 13% in the first six months of 2013. The decline of average gross margins is due to significantly lower product gross margins in the first six month of 2013 at Tecnonet. As previously discussed, this decline in product gross margins is the result Tecnonet competing as a reseller of third party product in the Italian telecommunications market that is experiencing intense competition on price. The decline in product margins was partially offset by an increase in service revenue gross margins during the first six months of 2013 as compared to the first six months of prior year. This improvement in service revenue is due to improved support efficiencies and a favorable change in support revenue mix toward internally supported services that have higher gross margin than service revenues with outsourced support. Gross profit would have been $0.1 millionlower in 2013 had foreign currency exchange rates remained the same as they were in 2012.

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Operating Expenses

The following table summarizes operating expenses by segment (dollars in thousands):

					(Favorable)/Unfavorable
Six Months Ended June 30:	2013		2012		$ Change			% Change		% Change constant currency (1)
Network Equipment group		$23,364		$21,804		$1,560		7	%	7	%
Network Integration group	3,078		2,986		92			3	%	2	%
Total segment operating expenses	26,442		24,790		1,652			7	%	7	%
Corporate unallocated operating expenses and adjustments (2)	4,505		6,092		(1,587		)	(26	)%	(26	)%
Total		$30,947		$30,882		$65		—	%	—	%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Corporate unallocated operating expenses include unallocated product development, and selling, general and administrative expenses.

Consolidated operating expenses were $30.9 million, or 40% of revenue, for the first six months of 2013 compared to $30.9 million, or 43% of revenue, for the prior year period, an increase of $0.1 million, or 0%, that included $1.2 million and $1.0 million in unique costs (see below) related to investment in the core business, derivative litigation, and legal support costs for the first six months of 2013 and 2012, respectively. Excluding these charges, operating expenses in the first six months of 2013 were $29.7 million, or 39% of revenue, compared to $29.9 million, or 42% of revenue, in 2012, a decrease of $0.2 million, or 1%.

Although operating expenses increased by $0.1 million in the first six months of 2013 as compared to the first six months of 2012, in both 2013 and 2012, the Company incurred additional expense of $1.2 million and $1.0 million, respectively, related to specific matters that were unique to each year. In 2013, there was a total of $1.2 million of these additional expenses, including $1.0 million in legal and support costs relating to a former employee matter, financial consulting fees incurred to provide interim support during the transition of the Corporate office of $0.4 million, $0.7 million of implementation and consulting costs for the implementation of our new enterprise-wide business software solution, and legal and settlement costs for the derivative litigation of $0.1 million. These were partially offset by insurance proceeds paid to the company upon settlement of the derivative litigation of $1.0 million. All of the additional costs incurred in the first six months of 2013, except the $0.7 million in consultation and implementation costs, were incurred at our Corporate office. In the first six months of 2012, we incurred $1.0 of additional costs at our Corporate office including $0.8 million of severance costs for our former Chief Financial Officer and Vice President, Finance and $0.2 million of financial consulting fees for interim support during the transition of the Corporate office. If the respective additional costs are excluded from the operating expenses for the first six months of 2013 and the prior year, operating expense would have been $29.7 million and $29.9 for the first six months of 2013 and the prior year, respectively. The Company does not anticipate the additional net costs for the first six months of 2013 will be incurred at the same levels in the future.

Network Equipment Group.    Operating expenses in the Network Equipment group for the first six months of 2013 were $23.4 million, or 56% of revenue, compared to $21.8 million, or 52% of revenue in the prior year period of 2012, a increase of $1.6 million, or 7%. If the consulting costs of $0.7 million for the implementation of our new enterprise-wide business software are excluded from the first six months of 2013, the increase in operating expenses would have been $0.9 million. This increase is due to the planned investment of $2.0 million for additional engineers and engineering support to drive new product development. Partially offsetting the increased R&D costs was a reduction of $0.4 million in external consulting expenses, $0.3 million in lower auditing and accounting fees, and a reduction of $0.4 million in sales and administrative labor relating to vacancies and prior year workforce reductions.

Network Integration Group.    Operating expenses in the Network Integration group for the first six months of 2013 were $3.1 million, or 9% of revenue, compared to $3.0 million, or 9% of revenue, for the prior year period. The $0.1 million, or 3%, increase in operating expense was primarily due to $0.1 million of additional sales and administrative labor costs. Operating expenses would have remained unchanged in the first six months of 2013 had foreign currency exchange rates remained the same as they were in the prior year period.

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Corporate. Operating expenses decreased $1.6 million in the first six months of 2013 compared to the first six months of 2012. If $0.4 million of the additional costs discussed above are excluded, Corporate operating expenses decreased $1.2 million. This decrease is primarily due to $0.7 million in lower labor costs due to a prior year reduction in workforce and restructuring of the Corporate office, $0.2 million in lower audit and accounting support fees, and $0.3 million lower professional fees and support costs.

Operating Income (Loss)

The following table summarizes operating income (loss) by segment (dollars in thousands):

							Favorable/(Unfavorable)
Six Months Ended June 30:	2013			2012			$ Change			% Change		% Change constant currency(1)
Network Equipment group		($1,415	)		($1,767	)		$352		(20	)%	(20	)%
Network Integration group	1,366			2,675			(1,309		)	(49	)	(50	)
Total segment operating income (loss)	(49		)	908			(957		)	(105	)	(107	)
Corporate unallocated and adjustments (2)	(4,499		)	(5,797		)	1,298			22		(22	)
Total		($4,548	)		($4,889	)		$341		(7	)%	(7	)%

(1) Percentage information in constant currencies in the table above and in the text below excludes the effect of foreign currency translation on reported results. Constant currency results were calculated by translating the current year results at prior year average exchange rates.

(2) Adjustments represent the elimination of intersegment revenue and profit in inventory in order to reconcile to consolidated operating income (loss).

The $0.4 million, or 2%, increase in gross profit partially offset by the $0.1 million, or 0%, increase in operating expenses primarily led to a $0.3 millionincrease in operating income. If the additional operating expenses for the first six months of 2013 and 2012, as discussed above, are excluded, our operating loss would have decreased $0.5 million. Our operating loss would have been $0.02 millionlower in the first six months of 2013 had foreign currency exchange rates remained the same as they were in the prior year period. Operating losses included share-based compensation expense of $0.3 million and $0.4 million in the first six months of 2013 and 2012, respectively.

Network Equipment Group.    The Network Equipment group reported an operating loss of $1.4 million and an operating loss of $1.8 million in the first six months of 2013 and 2012, respectively. The reduced loss was due to a $1.9 millionincrease in gross profit partially offset by a $1.6 millionincrease in operating expenses. Operating margin was (3)% in the first six months of 2013 and (4)% in 2012, respectively. Operating losses would have been flat in the first six months of 2013 had foreign currency exchange rates remained the same as they were in the prior year period.

Network Integration Group.    The Network Integration group reported operating income of $1.4 million for the first six months of 2013, compared to operating income of $2.7 million for the prior year period. The $1.3 million, or 49%decrease was due to the $1.2 milliondecrease in gross profit and a $0.1 millionincrease in operating expenses. The Network Integration group operating margin was 4% in the first six months of 2013 compared to 8% in the first six months of 2012. Operating income would have been $0.02 millionlower in the first six months of 2013 had foreign currency exchange rates remained the same as they were in the prior year period

Interest Expense and Other Income, Net

Interest expense was $0.4 million in both the six months ended June 30,2013 and the six months ended six months ended June 30,2012, respectively. Other income, net, principally includes interest income on cash, cash equivalents and investments and gains and losses on foreign currency transactions and litigation settlement. In the second quarter of 2012, we recognized a $2.3 million gain on settlement of litigation that had been previously reserved.

Provision for Income Taxes

The tax provisions for the six months ended June 30,2013 and 2012 were $0.4 million compared to a $(1.2) million benefit, respectively. 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. The income tax expense on

31

an operating loss of $5.0 million in the six months ended June 30,2013 is due to income tax associated with our foreign subsidiaries that do not benefit from our federal net operating loss carryforwards.

Tax Loss Carryforwards

As of December 31, 2012, we had NOLs of $173.7 million, $112.0 million, and $90.8 million forfederal, state, and foreign income tax purposes, respectively. Additionally, the Company had capital loss carryforwards of $110.3 million and $47.1 million for federal and state tax purposes, 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, 2013, the U.S. federal and state NOLs had a full valuation allowance.

Liquidity and Capital Resources

During the six months ended June 30, 2013, the Company's cash and restricted time deposits and escrow accounts decreased from $40.8 million to $36.2 million, a decrease of $4.6 million. Our cash outflows included a net loss adjusted for non-cash expenses of $4.2 million including depreciation and amortization, share-based compensation, and deferred taxes. These operating outflows were offset with cash inflows from working capital of $5.4 million, including a $3.3 million decrease in other assets primarily resulting from the receipt of escrowed funds due from the sale of CES in 2012, a $2.5 million decrease in inventory due to improved management of inventory as well as timing of customer acceptance for larger Italian contracts, a $1.9 million increase in accrued liabilities as a result of additional accruals for non-income taxes, a $1.0 million increase in deferred revenue as a result of a seasonal increase in service revenues, offset by a $1.8 million decrease in accounts payable that occurred due to a decrease in materials purchases, resulting from lower sales in the current quarter compared to the fourth quarter of 2012, and an accounts receivable increase of $1.6 million resulting from a temporary shift from financing certain Italian carrier receivables to traditional lines of credit versus factoring. These net cash inflows from operations were offset by cash used in investing and financing activities. We used $2.1 million of cash for purchases of property and equipment and purchased 141,412 shares of the Company's Common Stock for $1.4 million. (See Note 15, Share Repurchase). In addition, we made payments on short-term debt of $5.5 million, which partially offset additional borrowings of $3.1 million.

We periodically review our capital position and consider returning capital to stockholders through special dividends or share repurchases when our cash on hand exceeds our foreseeable cash needs. We also review the capital needs of our business units and make decisions regarding investing in our businesses. We continue to execute on a plan to complete upgrades to our systems and equipment needed to support our growth objectives in the carrier Ethernet and optical transport markets among others. As of June 30, 2013, we had used approximately $2.1 million of $4.6 million in cash earmarked for these initiatives during 2013. We believe that cash on hand and cash flows from operations 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.

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The following table summarizes MRV's cash position including cash and cash equivalents, restricted time deposits and our short-term debt position (in thousands):

	June 30, 2013		December 31, 2012
Cash
Cash and cash equivalents		$35,948		$40,609
Restricted time deposits	243		240
	36,191		40,849
Short-term debt	2,809		5,267
Cash in excess of debt		$33,382		$35,582
Ratio of cash to debt(1)	12.9		7.8

(1) Determined by dividing total cash by total debt.

Short-term Debt

Our short-term debt is related to Tecnonet, our Italian Network Integration subsidiary. Customer accounts receivables of Tecnonet have been pledged as collateral on the related borrowings. These borrowings were substantially reduced during the quarter ending June 30, 2013 as the Company becomes more strategic in its financing arrangements and supplier selection.

The following table summarizes our short-term debt (dollars in thousands):

	June 30, 2013		December 31, 2012		Increase (decrease)
Lines of credit secured by accounts receivable		$2,809		$5,267		($2,458	)
Total short-term debt		$2,809		$5,267		($2,458	)

The decrease in short-term debt at June 30, 2013 includes payments of $5.5 million, partially offset by additional borrowings of $3.1 million and the impact of changes in foreign currency exchange rates.

Working Capital

The following table summarizes our working capital position (dollars in thousands). While overall working capital decreased $7.7 million, it was primarily due to improvements in accounts receivable collections, a reduction in inventory balances and to strategic decisions made to reduce the Company's reliance on short-term debt at Tecnonet while continuing to service its customers with innovative products at payments terms favorable to the Company.

	June 30, 2013		December 31, 2012
Current assets		$110,519		$119,591
Current liabilities	49,062		50,480
Working capital		$61,457		$69,111
Current ratio(1)	2.3		2.4

(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

33

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 quarter ended June 30, 2013, there were no material changes in our contractual obligations.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our 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.

Interest Rates.    Our investments and short-term borrowings 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. Our variable-rate short-term borrowings are also subject to limited interest rate risk because of their short-term maturities. Through certain foreign offices, and from time to time, we enter into interest rate swap contracts. As of June 30, 2013, we did not have any interest rate swap contracts outstanding. The economic purpose of entering into interest rate swap contracts is to protect our variable interest debt from significant interest rate fluctuations.

Foreign Exchange Rates.    We operate on an international basis with a significant portion of our 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.

Through certain foreign offices, and from time to time, we enter into foreign exchange contracts in an effort to minimize the currency exchange risk related to accounts receivable or purchase commitments denominated in foreign currencies. These contracts cover periods commensurate with known or expected exposures, generally less than three months. As of June 30, 2013, we did not have any foreign exchange contracts outstanding.

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 euro, the Taiwan dollar, and the Israeli new shekel. Additionally, Tecnonet, which has a functional currency of the euro, has certain of its lines of credit denominated in U.S. dollars. 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 and results of operations of subsidiaries with functional currencies other than the U.S. dollar, we recognize a translation gain or loss in other comprehensive income. Approximately 63.0% of our cost of sales and operating expenses are reported by these subsidiaries. These currencies were generally stronger against the U.S. dollar for the six months ended June 30,2013 compared to the same period for 2012, so revenues and expenses in these countries translated into more dollars than they would have in the first six months of 2012. For the six months ended June 30,2013, we had approximately:

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• $33.7 million in cost of goods and operating expenses recorded in euros;

• $0.7 million in cost of goods and operating expenses recorded in Taiwan dollars.

Had rates of these various foreign currencies been 10% higher relative to the U.S. dollar during the six months ended June 30, 2013, our costs would have increased to approximately:

• $37.1 million cost of goods and operating expenses recorded in euros;

• $0.8 million in cost of goods and operating expenses recorded in Taiwan dollars.

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).

	June 30, 2013		December 31, 2012
U.S. dollars		$34,606		$37,620
Euros	587		1,008
Taiwan dollars	22		51
Israeli new shekels	528		1,631
Other	205		299
Total cash and cash equivalents		$35,948		$40,609

Macro-economic uncertainties. We believe that the downturn in global markets has affected our revenues and operating results, particularly in the Italian and other European markets, and that conditions may worsen.  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.  Accordingly, we are unable to determine the resulting magnitude of impact, including timing and length of impact, on our revenue and operating results.  

Valuation and qualifying accounts. 

Accounts Receivable Reserve	Six months ended
	June 30, 2013
Balance at beginning of period		$1,733
Charged to expense	250
Write-offs	(3		)
Foreign currency translation adjustment	(21		)
Balance at end of period		$1,959

Product Warranty Reserve	Six months ended
	June 30, 2013
Beginning balance		$1,006
Cost of warranty claims	(168		)
Accruals for product warranties	37
Foreign currency translation adjustment	—
Total		$875

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Item 4. Controls and Procedures.

As of the end of the period covered by this report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) pursuant to the Exchange Act. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report on Form 10-Q, the Company's disclosure controls and procedures were effective.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the following fiscal quarter, we will be implementing a new enterprise-wide business software. As such, management will be updating its processes, control documentation, and test controls to determine if new controls are designed appropriately and operate as management has intended.

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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 are party to the litigation set forth below, and if one or more of the matters listed below or otherwise is ultimately determined not in our favor, it could have a material adverse effect on our consolidated financial position or results of operations in the period in which they occur.

In connection with the Company's past stock option grant practices, MRV and certain of its former directors and officers have been subjected to a number of stockholder lawsuits. In June 2008, the Company announced that our Board of Directors, based on information provided by management, and in consultation with management, concluded that the financial statements and the related reports of our independent public accountants should not be relied upon due to the Company's intention to restate its financial results from 2002 through 2008 to correct its accounting for option grants and other issues and a restatement of the Company's financial statements was filed in its Annual Report on Form 10-K for the year ended December 31, 2008 in October 2009.

From June to August 2008, five purported stockholder derivative and securities class action lawsuits were filed in the U.S. District Court in the Central District of California and one derivative lawsuit was filed in the Superior Court of the State of California against the Company and certain of our former officers and directors. The five lawsuits filed in the Central District of California were consolidated. Claims were asserted under Section 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. In November 2010, the judge overseeing the securities class action lawsuits gave final approval to a stipulated $10 million settlement agreement, which was covered by our director and officer insurance policies. The federal and state derivative lawsuits were not settled and continued to be litigated.

As of January 4, 2013, all pending litigation in the federal and state derivative actions was stayed by agreement of the parties pending final Federal Court approval of a settlement between derivative plaintiffs, individual defendants and the Company. On April 8, 2013 the Federal Court preliminarily approved a Stipulation of Settlement (the "Settlement Stipulation"), which includes, among other things, (a) a release of all claims relating to the derivative lawsuits for the Company, the individual defendants and the plaintiffs; (b) a provision that $2.5 million in cash be paid to the Company by the Company's insurance carriers; (c) a payment of attorney's fees to plaintiffs' counsel of up to $500,000 in cash and 250,000 five-year term warrants to purchase the Company's Common Stock at a strike price equal to the closing price of the Company's Common Stock on the day the Court's judgment approving the settlement becomes final (as defined in the Settlement Stipulation); and (d) continued payment by the Company of applicable reasonable attorneys' fees for the individual defendants. On June 6, 2013, the Federal Court granted final approval of the Settlement and on June 13, 2013 entered Judgment dismissing the federal derivative action with prejudice. On June 24, 2013, the State Court entered a dismissal with prejudice of the state derivative action. The Company is now required to undertake certain corporate governance reform actions within 120 days, many of which have already been implemented.

A majority of the costs related to the Company's and defendants' defense of these actions was paid by the Company's insurance carriers under its director and officer insurance policies, including the securities class action settlement. Insurance proceeds paid to the Company upon settlement of the derivative litigation were $1.0 million. However, MRV has paid and accrued $1.8 million in payment for services of defense counsel and other parties through June 30, 2013 above the insured amount. We have agreed to pay reasonable attorney fees and expenses for the individual defendants in the Stipulation, and will continue to incur our own legal expenses until this matter is finally resolved and non-appealable. Any such future obligations are not determinable at this time.

From time to time, MRV has received 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. The Company has been involved in such discussions with Alcatel-Lucent SA, Apcon, Inc., Finisar Corporation, International Business Machines, Mediacom Broadband LLC, Ortel Communications, Ltd., Nortel Networks Corporation, Rockwell Automation, Inc. and The Lemelson Foundation in the past.

37

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

Item 1A. Risk Factors

We may experience difficulties implementing our new enterprise-wide business software.

We have implemented a new enterprise-wide business software (“ERP”) to improve our operational

efficiency. The ERP is designed to accurately maintain our financial reporting data and provide information to our management team important to the operation of our business. Our ERP will require, the investment of significant human and financial resources. The implementation of this new ERP software involves numerous risks, including disruption to our normal accounting procedures and internal control over financial reporting, inaccuracies in the conversion of electronic data, difficulties integrating the systems and processes, additional costs to continue to refine the software's functionality, and disruption of our financial reporting process. We may not be able to successfully implement the ERP without experiencing significant delays, increased costs, or other difficulties. Any significant disruption or deficiency in the design or implementation of the ERP could adversely affect our business.

For a more complete understanding of the risks associated with an investment in our securities, you should carefully consider and evaluate all of the information in this Form 10-Q, in combination with the more detailed description of our business in our 2012 Form 10-K.

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

Issuer Purchases of Equity Securities

The following table sets forth information regarding our repurchase of our Common Stock during the quarter ending June 30, 2013 pursuant to the repurchase program of up to $10 million of the Company's Common Stock approved by our Board of Directors in December 2012. This repurchase program expires December 31, 2013.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Maximum Amount Remaining for Purchase Under the Repurchase Program
April 1, 2013 to April 30, 2013	10,017		$10.38		$8,945,104
May 1, 2013 to May 31, 2013	52,045		$9.14		$8,469,412
June 1, 2013 to June 30, 2013	29,200		$8.99		$8,206,904

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Part II, Item 5  - Other Information

Executive Management Incentive Plan

On June 20, 2013, the Company's Compensation Committee approved certain changes to the Company's Executive Management Incentive Plan (the "2013 EMIP"). The terms of the 2013 EMIP were extended to include David Stehlin, the Company's Chief Executive Officer and Stephen Garcia, the Company's Chief Financial Officer.  The Compensation Committee established a target bonus for Mr. Stehlin under the 2013 EMIP equal to 80% of his annual base salary and a target bonus for Mr. Garcia under the 2013 EMIP equal to 60% of his annual base salary. Bonuses payable to Mr.  Stehlin and Mr. Garcia under the 2013 EMIP are based 50% on operating income, operating cash flow and revenue objectives based on the Company's approved consolidated operating plan, and 50% based on Compensation Committee approved strategic objectives.  Based on actual performance, Mr. Stehlin and Mr. Garcia may receive between 0% and 150% of his target bonus amount under the 2013 EMIP.

Item 6. Exhibits

(a)    Exhibits

No.	Description
4.1	Warrant Agreement dated as of July 16, 2013 between MRV Communications, Inc. and American Stock Transfer & Trust Company, LLC (filed herewith)
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)
99.1	Executive Management Incentive Plan - CEO
99.2	Executive Management Incentive Plan - CFO
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)

39

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 9, 2013.

MRV COMMUNICATIONS, INC.

By: /s/ David S. Stehlin

David S. Stehlin

Chief Executive Officer

Principal Executive Officer

By: /s/ Stephen A. Garcia

Stephen A. Garcia

Chief Financial Officer

Principal Financial Officer

40

EX-4.1

EXECUTION COPY

WARRANT AGREEMENT

Dated as of July 16, 2013

Between

MRV Communications, Inc. and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,

as Warrant Agent

Warrants for Common Stock of

MRV Communications, Inc.

52567531.13

TABLE OF CONTENTS

Page

ARTICLE IDEFINITIONS1

SECTION 1.01.Definitions1

SECTION 1.02.Other Definitions3

SECTION 1.03.Rules of Construction3

ARTICLE IIWARRANT CERTIFICATES                                4

SECTION 2.01.Form and Dating4

SECTION 2.02.Execution and Countersignature4

SECTION 2.03.Certificate Register5

SECTION 2.04.Transfer and Exchange5

SECTION 2.05.Certificated Warrants7

SECTION 2.06.Replacement Certificates8

SECTION 2.07.Outstanding Warrants8

SECTION 2.08.Cancellation8

SECTION 2.09.CUSIP Numbers8

ARTICLE IIIEXERCISE TERMS8

SECTION 3.01.Exercise8

SECTION 3.02.Exercise Periods9

SECTION 3.03.Expiration9

SECTION 3.04.Manner of Exercise9

SECTION 3.05.Issuance of Warrant Shares10

SECTION 3.06.Fractional Warrant Shares11

SECTION 3.07.Reservation of Warrant Shares11

ARTICLE IVADJUSTMENT AND NOTICE PROVISIONS11

SECTION 4.01.Adjustment of Exercise Price                        11

SECTION 4.02.No Adjustment to Exercise Price12

SECTION 4.03.Adjustment to Number of Shares12

SECTION 4.04.Reorganizations13

SECTION 4.05.Exercise Price Not Less Than Par Value14

SECTION 4.06.Notice of Certain Action14

SECTION 4.07.Notice of Adjustments                            15

52567531.13-i-

TABLE OF CONTENTS

(continued)

Page

SECTION 4.08.Adjustment to Warrant Certificate15

ARTICLE VREGISTRATION RIGHTS15

SECTION 5.01.Effectiveness of Registration Statement15

SECTION 5.02.Suspension16

SECTION 5.03.Blue Sky16

SECTION 5.04.Additional Acts16

SECTION 5.05.Expenses17

ARTICLE VIWARRANT AGENT17

SECTION 6.01.Appointment of Warrant Agent17

SECTION 6.02.Rights and Duties of Warrant Agent17

SECTION 6.03.Individual Rights of Warrant Agent18

SECTION 6.04.Warrant Agent's Disclaimer18

SECTION 6.05.Compensation and Indemnity18

SECTION 6.06.Successor Warrant Agent19

ARTICLE VIIMISCELLANEOUS20

SECTION 7.01.Persons Benefiting20

SECTION 7.02.Rights of Holders20

SECTION 7.03.Amendment20

SECTION 7.04.Notices21

SECTION 7.05.Governing Law22

SECTION 7.06.Successors22

SECTION 7.07.Multiple Originals22

SECTION 7.08.Table of Contents22

SECTION 7.09.Severability22

-ii-

WARRANT AGREEMENT dated as of July 16, 2013 (this “Agreement”), between MRV COMMUNICATIONS, INC., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, as Warrant Agent (the “Warrant Agent”).

The Company desires to issue the warrants (the “Warrants”) described herein. The Warrants will initially entitle the holders thereof (the “Holders”) to purchase 250,000 shares of its common stock, par value $0.0017 per share (the “Common Stock”) (the shares of Common Stock issuable on exercise of the Warrants being referred to herein as the “Warrant Shares”). The Warrants are being issued in connection with the settlement of certain litigation previously pending against the Company in the federal District Court and the California Superior Court, in accordance with the Stipulation of Settlement, dated as of March 1, 2013, between the Company and the participants in such settlement (the “Settlement Agreement”) and pursuant to Section 3(a)(10) of the Securities Act.

The Company desires the Warrant Agent to act on behalf of the Company in connection with the issuance of the Warrants as provided herein and the Warrant Agent is willing to so act.

Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of Warrants:

ARTICLE I

Definitions

SECTION 1.01.Definitions.

“Affiliate” of any Person means (i) any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with such Person, or (ii) any other Person who is a director or executive officer of such Person. For purposes hereof, (a) “control” of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise and (b) beneficial ownership of securities representing 10% or more of the voting power of all outstanding securities of a Person shall be deemed to represent control of such Person; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Board” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board of Directors.

“Business Day” means each day that is not a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York.

“Certificated Warrants” means Warrants in fully registered definitive form, whether held by Warrant Holders in certificated form or held in book entry position on the records of the Warrant Agent.

“Current Market Value” per share of Common Stock at any date means the average of the daily Closing Prices for each Business Day during the period commencing 20 Business Days before such date and ending on the date one Business Day prior to such date. The Closing Price

52567531.13

for each day (the “Closing Price”) shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices, in either case on The New York Stock Exchange (the “NYSE”) or The Nasdaq National Market (the “NNM”), as applicable, or, if the Common Stock is not listed or admitted to trading on the NYSE or the NNM, the principal national securities exchange or quotation system on which the Common Stock is quoted or listed or admitted to trading or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the Financial Industry Regulatory Authority selected from time to time by the Company for that purpose. If no such prices are available, the Current Market Price per share shall be the fair value of a share of Common Stock as reasonably determined in good faith by the Board (which shall be evidenced by an Officers' Certificate delivered to the Warrant Agent).

“Depository” means The Depository Trust Company, its nominees and their respective successors.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Exercise Date” means, for a given Warrant, the day on which such Warrant is exercised pursuant to Section 3.04.

“Issue Date” means the date on which the Warrants are initially issued.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, any Vice President, the Treasurer, any Assistant Treasurer, the Controller, or the Secretary or an Assistant Secretary of such Person.

“Officers' Certificate” means a certificate signed by two Officers.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Warrant Agent. Such counsel may be an employee of or counsel to the Company or the Warrant Agent.

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Plaintiff's Lead Counsel” means Robins Geller Rudman & Dowd, Plaintiff's Lead Counsel for the action entitled In re MRV Communications, Inc. Derivative Litigation and Ke v. Margalit.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Warrant Certificates” mean the Global Warrants or the Certificated Warrants issued by the Company under this Agreement representing the Warrants.

“Warrant Custodian” means the custodian with respect to a Global Warrant (as appointed by the Depository) or any successor Person thereto and shall initially be the Warrant Agent.

SECTION 1.02.Other Definitions.

Term	Defined in Section
“Agreement”	Recitals
“Agent Members”	2.01(b)
“Certificate Register”	2.03
“Common Shelf Registration Statement”	5.01
“Common Stock”	Recitals
“Company”	Recitals
“Exercise Price”	3.01
“Expiration Date”	3.02(b)
“Global Warrant”	2.01(a)
“Holders”	Recitals
“Stock Transfer Agent”	3.05
“Reorganization”	4.04
“Warrant”	Recitals
“Warrant Shares”	Recitals
“Warrant Agent”	Recitals

SECTION 1.03.Rules of Construction. Unless the text otherwise requires:

(i) a defined term has the meaning assigned to it herein;

(ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time;

(iii) “including” means including, without limitation; and

(iv) words in the singular include the plural and words in the plural include the singular.

ARTICLE II

Warrant Certificates

SECTION 2.01.Form and Dating.

(a)Warrants.The Warrants shall be issued initially in definitive, fully registered form on the books of the Warrant Agent (each, a Certificated Warrant) and/or in the form of one or more permanent Global Warrants, in definitive, fully registered form with the global securities legend set forth in Exhibit A hereto (each, a “Global Warrant”), which shall be deposited on behalf of the Holders with the Warrant Agent, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and countersigned by the Warrant Agent as hereinafter provided.

(b)Book-Entry Provisions.(i)This Section 2.01(b) shall apply only to a Global Warrant deposited with or on behalf of the Depository.

The Company shall execute and the Warrant Agent shall, in accordance with Section 2.02, countersign and deliver initially one or more Global Warrants that (A) shall be registered in the name of the Depository for such Global Warrant or Global Warrants or the nominee of the Depository and (B) shall be delivered by the Warrant Agent to the Depository or pursuant to the Depository's instructions or held by the Warrant Agent as custodian for the Depository.

(ii) Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Agreement with respect to any Global Warrant held on their behalf by the Depository or by the Warrant Agent as the custodian of the Depository or under such Global Warrant, and the Depository may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of such Global Warrant for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of the Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Warrant.

(c)Certificated Securities.Except as provided in Section 2.04 or 2.05, owners of beneficial interests in Global Warrants will not be entitled to receive physical delivery of Certificated Warrants.

SECTION 2.02.Execution and Countersignature.Two Officers shall sign the Warrant Certificates for the Company by manual, portable document format (PDF) or facsimile signature.

If an Officer whose signature is on a Warrant Certificate no longer holds that office at the time the Warrant Agent countersigns the Warrant Certificate, the Warrants evidenced by such Warrant Certificate shall be valid nevertheless.

The Warrant Agent may appoint an agent reasonably acceptable to the Company to countersign the Warrant Certificates. Unless limited by the terms of such appointment, such agent may countersign Warrant Certificates whenever the Warrant Agent may do so. Each reference in this Agreement to countersignature by the Warrant Agent includes countersignature by such agent. Such agent will have the same rights as the Warrant Agent for service of notices and demands. At any time and from time to time after the execution of this Agreement, the Warrant Agent or an agent reasonably acceptable to the Company shall upon receipt of a written order of the Company signed by two Officers of the Company register on the Certificate Register (as defined in Section 2.03) or issue a Warrant Certificate evidencing the number of Warrants specified in such order; provided, however, that the Warrant Agent shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such registration or countersignature of Warrants. Such order shall specify the number of Warrants to be registered on the Certificate Register or evidenced on the Warrant Certificate to be countersigned, the date on which such Warrant Certificate is to be registered or countersigned and the number of Warrants then authorized.

The Warrants (whether or not evidenced by a Warrant Certificate) shall not be valid until registered on the Certificate Register.

SECTION 2.03.Certificate Register. The Warrant Agent shall keep a register (the “Certificate Register”) of the Warrants (and Warrant Certificates, if applicable) and of their transfer and exchange. The Certificate Register shall show the names and addresses of the respective Holders and the date and number of Warrants owned by such Holders (as evidenced on the face of each of the Warrant Certificates, if applicable). The Company and the Warrant Agent may deem and treat the Person in whose name a Warrant is registered as the absolute owner of such Warrant for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary.

SECTION 2.04.Transfer and Exchange.

(a)Transfer and Exchange of Warrants.

(i)The transfer and exchange of Global Warrants or beneficial interests therein shall be

effected through the Depository, in accordance with this Agreement (including applicable restrictions on transfer set forth herein) and the procedures of the Depository therefor.

(ii)Notwithstanding any other provisions of this Agreement (other than the provisions set forth in Section 2.05), a Global Warrant may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the

Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(iii)In the event that a Global Warrant is exchanged and transferred for Warrants in definitive registered form pursuant to Section 2.05, such Warrants may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.04.

(iv)The Warrant Agent shall register the transfer, from time to time, of any Certificated Warrant upon the Certificate Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by the appropriate instructions for transfer. Upon any such transfer, a new Certificated Warrant(s) representing an equal aggregate number of Certificated Warrants shall be issued and the transferred certificate shall be cancelled.

(b)Cancellation or Adjustment of Global Warrant.At such time as all beneficial interests in a Global Warrant have been exchanged for Certificated Warrants, redeemed, repurchased or canceled, such Global Warrant shall be returned to the Depository for cancellation or retained and canceled by the Warrant Agent. At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exchanged for Certificated Warrants, redeemed, repurchased or canceled, the number of Warrants represented by such Global Warrant shall be reduced and an adjustment shall be made on the books and records of the Warrant Agent (if it is then the Warrant Custodian for such Global Warrant) with respect to such Global Warrant, by the Warrant Agent, to reflect such reduction.

(c) Obligations with Respect to Transfers and Exchanges of Warrants.

(i)To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall register Certificated Warrants and Global Warrants as required pursuant to the provisions of Section 2.02 and this Section 2.04.

(ii)Any service charge for any registration of transfer or exchange, or any transfer tax, assessments, or similar governmental charge payable in connection therewith, shall be paid by the Holder.

(iii)Prior to the due presentation for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the Person in whose name a Warrant is registered as the absolute owner of such Warrant, and neither the Company nor the Warrant Agent shall be affected by notice to the contrary.

(iv)All Warrants issued upon any transfer or exchange pursuant to the terms of this Agreement shall be the valid obligations of the Company, entitled to the same benefits under this Agreement as the Warrants surrendered upon such transfer or exchange.

(d)No Obligation of the Warrant Agent. (i) The Warrant Agent shall have no responsibility or obligation to any beneficial owner of a Global Warrant, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the

Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in

the Warrants or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository or its nominee) of any notice or the payment of any amount, under or with respect to such Warrants. All notices and communications to be given to the Holders and all payments to be made to Holders under the Warrants shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Warrant). The rights of beneficial owners in any Global Warrant shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Warrant Agent may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

(ii) The Warrant Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Agreement or under applicable law with respect to any transfer of any interest in any Warrant (including any transfers between or among the Depository participants, members or beneficial owners in any Global Warrant) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Agreement, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

SECTION 2.05.Certificated Warrants.

(a)A Global Warrant deposited with the Depository or with the Warrant Agent as custodian for the Depository pursuant to Section 2.01 shall be transferred to the beneficial owners thereof in the form of Certificated Warrants in a number equal to the number of Warrants represented by such Global Warrant, in exchange for such Global Warrant, only if such transfer complies with Section 2.04 and (i) the Depository notifies the Company that it is unwilling or unable to continue as depositary for such Global Warrant or if at any time the Depository ceases to be a “clearing agency” registered under the Exchange Act and, in each such case, a successor depositary is not appointed by the Company within 90 days of such notice or

(ii) the Company, in its sole discretion, notifies the Warrant Agent in writing that it elects to cause the issuance of Certificated Warrants under this Agreement.

(b)Any Global Warrant that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Warrant Agent, to be so transferred, in whole or from time to time in part, without charge, and the Warrant Agent shall countersign and deliver, upon such transfer of each portion of such Global Warrant, an equal number of Certificated Warrants.

(c)Subject to the provisions of Section 2.05(b), the registered Holder of a Global Warrant may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Warrants.

(d)In the event of the occurrence of either of the events specified in Section 2.05(a), the Company will promptly make available to the Warrant Agent a reasonable supply of Certificated Warrants in definitive, fully registered form.

SECTION 2.06.Replacement Certificates.If a mutilated Warrant Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant Certificate claims that the Warrant Certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Warrant Agent shall countersign a replacement Warrant Certificate if the reasonable requirements of the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in effect in the State of New York are met. If required by the Warrant Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Warrant Agent to protect the Company and the Warrant Agent from any loss which either of them may suffer if a Warrant Certificate is replaced. The Company and the Warrant Agent may charge the Holder for their

expenses in replacing a Warrant Certificate. Every replacement Warrant Certificate evidences an additional obligation of the Company.

SECTION 2.07.Outstanding Warrants. Warrants outstanding at any time are all Warrants evidenced on all Warrant Certificates authenticated by the Warrant Agent except for those canceled by it and those delivered to it for cancellation. A Warrant does not cease to be outstanding because an Affiliate of the Company holds the Warrant. A Warrant ceases to be outstanding if the Company holds the Warrant.

If a Warrant Certificate is replaced pursuant to Section 2.06, the Warrants evidenced thereby cease to be outstanding unless the Warrant Agent and the Company receive proof satisfactory to them that the replaced Warrant Certificate is held by a bona fide purchaser.

SECTION 2.08.Cancellation.(a)In the event the Company shall purchase or otherwise acquire Certificated Warrants, the same shall thereupon be delivered to the Warrant Agent for cancellation.

(b) The Warrant Agent and no one else shall cancel all Warrant Certificates surrendered for transfer, exchange, replacement, exercise or cancellation unless the Company directs the Warrant Agent to deliver canceled Warrant Certificates to the Company. The Company may not issue new Warrant Certificates to replace Warrant Certificates to the extent they evidence Warrants which have been exercised or Warrants which the Company has purchased or otherwise acquired.

SECTION 2.09.CUSIP Numbers. The Company in issuing the Warrants may use “CUSIP” numbers (if then generally in use) and, if so, the Warrant Agent may use “CUSIP” numbers in notices as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Warrant Certificates or as contained in any notice and that reliance may be placed only on the other identification numbers printed on the Warrant Certificates.

ARTICLE III

Exercise Terms

SECTION 3.01.Exercise. Each Warrant shall initially entitle the Holder thereof, subject to adjustment pursuant to the terms of this Agreement, to purchase one share of Common Stock for each Warrant evidenced thereby, at an exercise price (the “Exercise Price”) of $8.80 per share.

SECTION 3.02.Exercise Periods.A Warrant may be exercised, at any time or from time to time after the Issue Date and prior to the Expiration Date (as defined below), subject to the provisions of Section 3.03, provided, however that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions, as set forth in Section 3.05 below.

SECTION 3.03.Expiration. A Warrant shall terminate and become void as of the earlier of (i) the close of business on July 12, 2018 (the “Expiration Date”), (ii) upon the closing of a Reorganization (as defined below) pursuant to Section 4.04(b) or (iii) the date such Warrant is exercised.

SECTION 3.04.Manner of Exercise. Warrants may be exercised upon surrender to the Warrant Agent at the office of the Warrant Agent of the related Warrant Certificate, together with the form of election attached thereto to purchase Common Stock on the reverse thereof duly filled in and signed by the Holder thereof, and (ii) by instructing the Warrant Agent to issue Warrant Shares then issuable upon exercise of all or any part of the Warrant Certificate on a net basis such that, without payment of any cash consideration or other immediately available funds, the Holder surrenders the Warrant Certificate in exchange for the number of Warrant Shares computed using the following formula:

X = Y(A-B)/A

Where:

X = the number of Warrant Shares to be issued to the Holder

Y = the number of shares of Common Stock for which the Warrant is exercisable at the Exercise Price (as adjusted to the date of such calculation, and prior to giving effect to the 'cashless exercise' provisions of this Section 3.04)

A = Current Market Value B = the Exercise Price Sample Calculation:

By way of example and for illustrative purposes only, applying the formula outlined above, if a Holder holds Warrants to purchase 100,000 shares of Common Stock, with an assumed exercise price of $10.00 per share of Common Stock and an assumed Current Market Value of $12.00 per share, and such Holder elects to exercise all such Warrants, the Holder would receive 16,666 Warrant Shares and a certain amount of cash pursuant to Section 3.06. The sample calculation assumes the following:

Y = 100,000 A = $12.00 B= $10.00

Utilizing the formula above X = Y(A-B)/A

X = 100,000 ($12-$10)/$12 X = 16,666

Subject to Section 3.02, the rights represented by the Warrants shall be exercisable at the election of the Holders thereof either in full at any time or from time to time in part and in the event that a Warrant Certificate is surrendered for exercise of less than all the Warrants represented by such Warrant Certificate at any time prior to the Expiration Date, a new Warrant Certificate representing the remaining Warrants shall be issued. The Warrant Agent shall countersign and deliver the required new Warrant Certificates, and the Company, at the Warrant Agent's request, shall supply the Warrant Agent with Warrant Certificates duly signed on behalf of the Company for such purpose.

SECTION 3.05.Issuance of Warrant Shares.Subject to Section 2.05, upon the surrender of Warrant Certificates as set forth in Section 3.04 above, the Company shall issue and cause the Warrant Agent or, if appointed, a transfer agent for the Common Stock (“Stock Transfer Agent”) to countersign and deliver to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities to which it is entitled, registered or otherwise, to the Person or Persons entitled to receive the same (including any depositary institution so designated by a Holder), together with cash as provided in Section 3.06 in respect of any fractional Warrant Shares otherwise issuable upon such exercise. Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such

Warrant Certificates, as aforesaid; provided, however, that if, at such date, the transfer books for the Warrant Shares shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened and until such date the Company shall be under no duty to deliver any certificates for such Warrant Shares; providedfurther, however, that such transfer books, unless otherwise required by law, shall not be closed at any one time for a period longer than five (5) calendar days. Notwithstanding the foregoing, the Company shall not be obligated to deliver any Warrant Shares pursuant to the exercise of a Warrant and shall have no obligation to settle such Warrant exercise unless (i) a registration statement under the Securities Act with respect to the Warrant Shares underlying the Warrant is then effective and a prospectus relating thereto is current, or (ii) the exercise of the Warrants is exempt from the registration requirements of the Securities Act. No Warrant shall be exercisable and the Company shall not be obligated to issue Warrant Shares upon exercise of a Warrant

unless the Warrant Shares issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the Holder of the Warrant.

SECTION 3.06.Fractional Warrant Shares. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant Shares which may be purchasable pursuant thereto. If any fraction of a Warrant Share would, except for the provisions of this Section 3.06, be issuable upon the exercise of any Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share, as determined on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent.

SECTION 3.07.Reservation of Warrant Shares. The Company shall at all times keep reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient to provide for the exercise of all outstanding Warrants. The registrar for the Common Stock (the “Registrar”) shall at all times until the Expiration Date reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Stock Transfer Agent. The Company will supply such Stock Transfer Agent with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 3.06. The Company will furnish to such Stock Transfer Agent a copy of all notices of adjustments (and certificates related thereto) transmitted to each Holder.

The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive rights, and free from all liens, taxes, charges and security interests with respect to the issue thereof.

ARTICLE IV

Adjustment and Notice Provisions

SECTION 4.01.Adjustment of Exercise Price.Subject to the provisions of this Article IV, the Exercise Price in effect from time to time shall be subject to adjustment as follows:

(a)In case the Company shall (i) declare a dividend payable in Common Stock or make some other distribution on the outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of its Common Stock into a greater number of shares or (iii) combine or reclassify the outstanding shares of its Common Stock into a smaller number of shares, the Exercise Price, in effect immediately after the record date for such dividend or distribution or the effective date of such

division, reclassification or combination shall be proportionately adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common

Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. Such adjustment shall be made successively whenever any event specified above shall occur.

For illustrative purposes only, if the Company were to institute a one-for-two stock split (by means of a stock dividend of one (1) share of Common Stock for each outstanding share of Common Stock), and assuming prior to such stock split, (i) there were two million (2,000,000) shares of Common Stock outstanding, and (ii) the Exercise Price was $10.00, then following such stock split the Exercise Price is computed as follows:

X = Y(A/B)

Where:

X = the adjusted Exercise Price

Y = the Exercise Price at the time of the stock split, or $10.00

A = the number of shares of Common Stock outstanding immediately prior to the stock split, or one million (1,000,000) shares

B = the number of shares of Common Stock outstanding immediately after the stock split, or two million (2,000,000) shares.

Sample Calculation:

X = $10 (1,000,000/2,000,000)

X = $5.00

(b)All calculations under this Section 4.01 shall be made to the nearest thousandth of a cent.

SECTION 4.02.No Adjustment to Exercise Price. No adjustment in the Exercise Price in accordance with the provisions of paragraph (a) of Section 4.01 hereof need be made if such adjustment would amount to a change in such Exercise Price of less than one (1) percent of the Exercise Price prior to such adjustment; provided, however, that the amount by which any adjustment is not made by reason of the provision of this Section 4.02 shall be carried forward and taken into account at the time of any subsequent adjustment in the Exercise Price.

SECTION 4.03.Adjustment to Number of Shares. Upon each adjustment of the Exercise Price pursuant to Paragraph (a) of Section 4.01, each Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest hundredth of a share) obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment upon exercise of the Warrant by the Exercise

Price in effect immediately prior to such adjustment and dividing the product so obtained by the Exercise Price in effect immediately after such adjustment.

For illustrative purposes only, using the assumptions in the example set forth in Section 4.01(a) above,

if a Holder had Warrants to purchase 100,000 shares of Common Stock at the Exercise Price, the number of shares of Common Stock for the which Warrant would be exercisable following the adjustment to the Exercise Price in Section 4.01(a) would be calculated as follows:

X = (Y * A) /B

Where:

X = the number of shares of Common Stock that the Holder would have the right to purchase at the adjusted Exercise Price (pursuant to Section 4.01(a))

Y = the number of shares of Common Stock purchasable immediately prior to the Exercise Price adjustment, or 100,000 shares

A = the Exercise Price in effect immediately prior to such adjustment pursuant to Section 4.01(a), or $10.00

B = the Exercise Price in effect immediately after such adjustment pursuant to Section 4.01(a), or $5.00

Sample Calculation:

X = (100,000 * $10.00)/$5.00

X = 200,000 shares of Common Stock

SECTION 4.04.Reorganizations.

(a)Except as provided in Section 4.04(b), in case of any capital reorganization involving the outstanding shares of Common Stock, consolidation or merger of the Company (other than in the cases referred to in Section 4.01 hereof or the consolidation or merger of the Company with or into another corporation in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding shares of Common Stock or the conversion of such outstanding shares of Common Stock into shares of other stock or other securities or property) (a “Reorganization”), the Holders of Warrants which have not been exercised (or otherwise expired or been terminated) shall have the right to receive, upon exercise of the Warrants, the kind and amount of shares of stock and other securities and property receivable upon such Reorganization by a Holder of the number of shares of Common Stock into which such Warrants so exercised might have been exercised immediately prior to such Reorganization. Unless Section 4.04 (b) is applicable to a Reorganization, or unless the

surviving or acquiring Person in such Reorganization automatically assumes the Company's obligations hereunder as a matter of law, the Company shall provide that the surviving or acquiring Person in such Reorganization will enter into an agreement with the Warrant Agent confirming the Holders' rights pursuant to this Section 4.04(a) and providing for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in the Article IV.

(b)In the event of a Reorganization where consideration to the holders of Common Stock in exchange for their shares is payable solely in cash, then (i) the Warrants shall terminate upon the closing of the Reorganization and (ii) each Holder of Warrants shall receive, upon surrender of his Warrant Certificates, an amount in cash equal to the greater of: (A) the number of Warrants tendered by such Holder multiplied by

the amount, if any, by which the per share consideration paid to holders of Common Stock exceeds the then current Exercise Price; and (B) the number of Warrants tendered by such Holder multiplied by the 'value' of a Warrant as of the date of consummation of such Reorganization, such 'value' to be equal to the Black Scholes Value, calculated by a nationally-recognized valuation expert or firm mutually agreed to by the Company and the Plaintiff's Lead Counsel not later than 10 days after notice of a Reorganization to Plaintiff's Lead Counsel. Notwithstanding the foregoing, in no event shall the closing of the Reorganization be delayed in the event that such value has not been finalized. “Black-Scholes Value” shall be determined in accordance with the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of the Common Stock for the trading day immediately preceding the date of consummation of the applicable Reorganization, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of the Warrant as of the date of such request and (iii) an expected volatility equal to the MRV 100 day volatility obtained from the HVT function on Bloomberg L.P. determined as of the trading day immediately following the public announcement of the applicable Reorganization.

(c)In the event of a Reorganization, the Company shall at its sole expense mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement.

SECTION 4.05.Exercise Price Not Less Than Par Value.In no event shall the Exercise Price be adjusted below the par value per share of the Common Stock.

SECTION 4.06.Notice of Certain Action. In the event the Company shall:

(a)declare any dividend payable in stock to the holders of its Common Stock or make any other distribution in property other than cash to the holders of its Common Stock; or

(b)offer to the holders of its Common Stock as such rights to subscribe for or purchase any shares of any class of stock or any other rights or options; or

(c)effect any reclassification of its Common Stock (other than a reclassification involving merely the subdivision or combination of outstanding shares of Common Stock), Reorganization or the liquidation, dissolution or winding up of the Company;

then, in each such case, the Company shall cause notice of such proposed action to be given to the Warrant Agent. Such notice shall specify the date on which the books of the Company shall close, or a record be taken, for determining holders of Common Stock entitled to receive such stock dividend or other distribution or such rights or options, or the date on which such reclassification, Reorganization, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that stockholders shall be entitled to receive securities or other property deliverable upon such action, if applicable and if any such date has been fixed. The Company shall also cause the Warrant Agent to mail copies of such notice to each Holder of a Warrant Certificate in the manner specified in Section 7.04 hereof unless such notice is otherwise available on the SEC's Electronic Data Gathering, Analysis and Retrieval System or similar system. Such notice shall be mailed, in the case of any action covered by Subsection 4.06(a) or 4.06(b) above, at least ten days prior to the record date for determining holders of the Common Stock for purposes of receiving such payment or offer, and in the case of any action covered by Subsection 4.06(c) above, at least ten days prior to the earlier of the date upon which such action is to take place or any record date to determine holders of Common Stock entitled to receive such securities or other property.

SECTION 4.07.Notice of Adjustments.Whenever any adjustment is made pursuant to this Article IV, the Company shall cause notice of such adjustment to be mailed to the Warrant Agent within fifteen days thereafter, such notice to include in reasonable detail

(i) the events precipitating the adjustment, (ii) the computation of any adjustments, and (iii) the Exercise Price, the number of shares or the securities or other property purchasable upon exercise of each Warrant after giving effect to such adjustment. The Warrant Agent shall be entitled to rely on such notice and any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such notice. The Warrant Agent shall within fifteen days after receipt of such notice from the Company (which notice must specifically direct the Warrant Agent to perform the mailing) cause a similar notice to be mailed to each Holder.

SECTION 4.08.Adjustment to Warrant Certificate.The form of Warrant Certificate need not be changed because of any adjustment made pursuant to this Article IV, and Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock issuable upon exercise of the Warrants as are stated in the Warrant Certificates initially issued pursuant to this Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed.

ARTICLE V

Registration Rights

SECTION 5.01.Effectiveness of Registration Statement. Subject to Section 5.02, no later than 5 Business Days from Issue Date, the Company shall use its reasonable best efforts

to cause to be filed pursuant to Rule 415 (or any successor provision) of the Securities Act, and shall use its reasonable best efforts to cause to be effective, a shelf registration statement covering the issuance of Warrant Shares to the Holders upon exercise of the Warrants by the Holders thereof (the “Common Shelf Registration Statement”). The Company shall use its reasonable best efforts to cause the Common Shelf Registration Statement to remain effective until the earlier of (i) such time as all Warrants have been exercised, (ii) the closing of the Reorganization and (iii) the Expiration Date. The Company shall promptly inform the Warrant Agent of any change in the status of the effectiveness or availability of the Common Shelf Registration Statement. Notwithstanding the foregoing, in no event shall the Company be required to file a Common Shelf Registration Statement if an Opinion of Counsel addressed to the Company states that the exercise of the Warrants are exempt from the registration requirements of the Securities Act. The Company shall use its reasonable best efforts to furnish such an Opinion of Counsel no less than 15 business days prior to the Issuance Date. If the Company does not maintain an effective registration statement covering the Warrant Shares issuable upon exercise of the Warrants, Holders of Warrants shall have the right to exercise such Warrants pursuant to Section 3.04. The date that notice of cashless exercise is received by the Warrant Agent shall be conclusively determined by the Warrant Agent. The Company shall provide the Warrant Agent with an Opinion of Counsel for the Company stating that (i) the exercise of the Warrants on a cashless basis in accordance with this Section 5.01 is not required to be registered under the Securities Act and (ii) the Warrant Shares issued upon such exercise shall be freely tradable under United States federal securities laws by anyone who is not an affiliate (as such term is defined in Rule 144 under the Securities Act) of the Company and, accordingly, shall not be required to bear a restrictive legend.

SECTION 5.02.Suspension.The Company shall be entitled to suspend the availability of the Common Shelf Registration Statement from time to time during any consecutive 365-day period for a total not to exceed 20 days during such consecutive 365-day period if the Board determines in the exercise of its reasonable judgment that such suspension is necessary in order to comply with applicable laws and provides

notice that such determination was made to the Holders of the Warrants; provided, however, that (i) if the Company exercises such right in the 45 consecutive-day period immediately prior to the Expiration Date, the Expiration Date shall be delayed by the number of days during such 45-day period for which the availability of the Common Shelf Registration Statement was suspended and (ii) in no event shall the Company be required to disclose the business purpose for such suspension if the Company determines in good faith that such business purpose must remain confidential.

SECTION 5.03.Blue Sky. The Company shall use its best efforts to register or qualify the Warrant Shares under all applicable securities laws, blue sky laws or similar laws of all jurisdictions in the United States in which any holder of Warrants may or may be deemed to purchase Warrant Shares upon the exercise of Warrants and shall use its best efforts to maintain such registration or qualification for so long as it is required to cause the Common Shelf Registration Statement to remain effective under the Securities Act pursuant to Section 5.01; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.03 or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject.

SECTION 5.04.Additional Acts.If the issuance or sale of any Common Stock issuable upon the exercise of the Warrants requires registration or approval of any governmental authority (other than the registration requirements under the Securities Act), or the taking of any other action under the laws of the United States or any political subdivision thereof before such securities may be validly offered or sold in compliance with such laws, then the Company covenants that it will, in good faith and as expeditiously as reasonably possible, use its reasonable best efforts to secure and maintain such registration or approval or to take such other action, as the case may be. If applicable, the Company shall promptly notify the Warrant Agent in writing when (i) the Company has obtained all such governmental approvals and authorizations and (ii) such approvals and authorizations thereafter cease to be in effect.

SECTION 5.05.Expenses. All expenses incident to the Company's performance of or compliance with its obligations under this Article V relating to the issuance of the Warrant Shares will be borne by the Company, including without limitation: (i) all SEC, stock exchange or Financial Industry Regulatory Authority registration and filing fees, (ii) all reasonable fees and expenses incurred in connection with the compliance with state securities or blue sky laws,

(iii) all expenses of any Persons incurred by or on behalf of the Company in preparing or assisting in preparing, printing and distributing the Common Shelf Registration Statement or any other registration statement, prospectus, any amendments or supplements thereto and other documents relating to the performance of and compliance with this Article V, (iv) the fees and disbursements of counsel for the Company and the Warrant Agent as agreed and (v) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or comfort letters required by or incident to such performance and compliance.

ARTICLE VI

Warrant Agent

SECTION 6.01.Appointment of Warrant Agent.The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the provisions of this Agreement and the Warrant Agent hereby accepts such appointment.

SECTION 6.02.Rights and Duties of Warrant Agent. (a) Agent for the Company. In acting under this Warrant Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as

agent of the Company and does not assume any obligation or relationship or agency or trust for or with any of the holders of Warrant Certificates or beneficial owners of Warrants. All fees and expenses due the Warrant Agent shall be paid to the Warrant Agent by the Company. The Warrant Agent shall have no duty to determine which costs, if any, under this Agreement shall be borne by the Holders or by the Company.

(a)Counsel. The Warrant Agent may consult with counsel satisfactory to it (who may be counsel to the Company), and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel.

(b)Documents.The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties.

(c)No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are specifically set forth herein and in the Warrant Certificates, and no implied duties or obligations of the Warrant Agent shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability for which it does not receive indemnity if such indemnity is reasonably requested. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any of the Warrant Certificates countersigned by the Warrant Agent and delivered by it to the Holders or on behalf of the Holders pursuant to this Agreement or for the application by the Company of the proceeds of the Warrants. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained herein or in the Warrant Certificates or in the case of the receipt of any written demand from a Holder with respect to such default, including any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise.

(d)Not Responsible for Adjustments or Validity of Stock.The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require an adjustment of the number of shares of Common Stock issuable upon exercise of each Warrant or the Exercise Price, or with respect to the nature or extent of any adjustment when made, or with respect to the method employed, or herein or in any supplemental agreement provided to be employed, in making the same. The Warrant Agent shall not be accountable with respect to the validity or value of any shares of Common Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or upon any adjustment pursuant to Article IV, and it makes no representation with respect thereto. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates upon the surrender of any Warrant Certificate for the purpose of exercise or upon any adjustment pursuant to Article IV, or to comply with any of the covenants of the Company contained in Article IV.

SECTION 6.03.Individual Rights of Warrant Agent. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or its Affiliates or become pecuniarily interested in transactions in which the Company or its Affiliates may be interested, or contract with or lend money to the Company or its Affiliates or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

SECTION 6.04.Warrant Agent's Disclaimer.The Warrant Agent shall not be responsible for and makes no representation as to the validity or adequacy of this Agreement or

the Warrant Certificates and it shall not be responsible for any statement in this Agreement or the Warrant Certificates other than its countersignature thereon.

SECTION 6.05.Compensation and Indemnity.The Company agrees that the Warrant Agent is entitled, from time to time, reasonable compensation for its services as agreed and to reimbursement for all reasonable out-of-pocket expenses incurred by it, including the reasonable compensation and expenses of the Warrant Agent's agents and counsel as agreed. The Company shall indemnify the Warrant Agent, its officers, directors, agents and counsel against any loss, liability or expense (including reasonable agents' and attorneys' fees and expenses) incurred by it without gross negligence or bad faith on its part arising out of or in connection with the acceptance or performance of its duties under this Agreement. The Warrant Agent shall notify the Company promptly of any claim for which it may seek indemnity. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Warrant Agent through willful misconduct, gross negligence or bad faith. The Company's payment obligations pursuant to this Section 6.05 shall survive the termination of this Agreement.

SECTION 6.06.Successor Warrant Agent.

(a)The Company To Provide and Maintain Warrant Agent. The Company agrees for the benefit of the Holders that there shall at all times be a competent and reputable Warrant Agent hereunder until all the Warrants have been exercised or are no longer exercisable.

(b)Resignation and Removal. The Warrant Agent may at any time resign by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall not be less than 60 days after the date on which such notice is given unless the Company otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of the Company and specifying such removal and the date when it shall become effective, which date shall not be less than 60 days after such notice is given unless the Warrant Agent otherwise agrees. Any removal under this Section 6.06 shall take effect upon the appointment by the Company as hereinafter provided of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent.

(c)The Company To Appoint Successor. In the event that at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or shall commence a voluntary case under the Federal bankruptcy laws, as now or hereafter constituted, or under any other applicable U.S. Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Warrant Agent or its property or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the

Warrant Agent in an involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law, or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant Agent or of its property or affairs, or any public officer shall take charge or control of the Warrant Agent or of its property or affairs for the purpose of rehabilitation, conservation, winding up or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the successor

Warrant Agent of such appointment, the Warrant Agent shall cease to be Warrant Agent hereunder; provided, however, that in the event of the resignation of the Warrant Agent under this subsection (c), such resignation shall be effective on the earlier of (i) the date specified in the Warrant Agent's notice of resignation and (ii) the appointment and acceptance of a successor Warrant Agent hereunder.

(d)Successor To Expressly Assume Duties.Any successor warrant agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder, and thereupon such successor warrant agent, without any further act, deed or conveyance, shall become vested with all the rights and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor warrant agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder.

(e)Successor by Merger.Any corporation into which the Warrant Agent hereunder may be merged or consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or otherwise transfer all or substantially all of its assets and business; provided, however, that it shall be qualified as aforesaid, shall be the successor warrant agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto.

ARTICLE VII

Miscellaneous

SECTION 7.01.Persons Benefiting. Nothing in this Agreement is intended or shall be construed to confer upon any Person other than the Company, the Warrant Agent and the Holders any right, remedy or claim under or by reason of this Agreement or any part hereof.

SECTION 7.02.Rights of Holders.Holders of unexercised Warrants are not entitled to (i) receive dividends or other distributions, (ii) receive notice of or vote at any meeting of the stockholders, (iii) consent to any action of the stockholders, (iv) receive notice of any other proceedings of the Company, (v) exercise any preemptive right or (vi) exercise any other rights whatsoever as stockholders of the Company.

SECTION 7.03.Amendment.This Agreement may be amended by the parties hereto without the consent of any Holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the Company and the Warrant Agent may deem necessary or desirable (including without limitation any addition or modification to provide for compliance with the transfer restrictions set forth herein); provided, however, that such action shall not adversely affect the rights of any of the Holders. Any amendment or supplement to this Agreement that has an adverse effect on the interests of the Holders shall require the written consent of the Holders of a majority of the then outstanding Warrants. The consent of each Holder affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Warrant Shares issuable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided herein). In determining whether the Holders of the required number of Warrants have concurred in any direction, waiver or consent, Warrants owned by the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Warrant Agent shall be protected in relying on any such direction, waiver or consent, only Warrants which the Warrant Agent knows are so owned shall be so disregarded. Also, subject to the foregoing, only Warrants outstanding at the time shall be considered in any such determination.

SECTION 7.04.Notices.Any notice or communication shall be in writing and delivered in Person or mailed by first-class mail addressed as follows:

if to the Company:

MRV Communications, Inc. 20415 Nordhoff Street

Chatsworth, CA 91311

Telephone:(818) 773-0900

Facsimile:(818) 473-4257 Attention:Stephen A. Garcia

Chief Financial Officer

With a copy to:

Fulbright & Jaworski L.L.P. 666 Fifth Avenue

New York, NY 10103 Telephone:(212) 318-3000

Facsimile:(212) 318-3400 Attention:Steven Suzzan

if to the Warrant Agent:

American Stock Transfer & Trust Company, LLC 6201 15th Avenue

Brooklyn, NY 11219

Telephone:(718) 921-8200

Facsimile:(718) 331-1852 Attention:Sharon Best-Jhagroo

with a copy to:

American Stock Transfer & Trust Company, LLC 6201 15th Avenue

Brooklyn, NY 11219

Telephone:(718) 921-8200

Facsimile:(718) 331-1852 Attention:General Counsel

The Company or the Warrant Agent by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder's address as it appears on the Certificate Register and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 7.05.Governing Law. The laws of the State of New York shall govern this Agreement and the Warrant Certificates.

SECTION 7.06.Successors.All agreements of the Company in this Agreement and the Warrant Certificates shall bind its successors. All agreements of the Warrant Agent in this Agreement shall bind its successors.

SECTION 7.07.Multiple Originals. The parties may sign any number of copies of this Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Agreement.

SECTION 7.08.Table of Contents.The table of contents and headings of the Articles and Sections of this Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

SECTION 7.09.Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction.

IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to be duly executed as of the date first written above.

MRV COMMUNICATIONS, INC.,

By: Name: Title:

AMERICAN STOCK TRANSFER & TRUST

COMPANY, LLC, as Warrant Agent,

By:     /s/ Michael S. Nespoli     Name: Michael A. Nespoli

Title: Executive Director

52567531.13

IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to be duly executed as of the date first written above.

MRV COMMUNICATIONS, INC.,

By:     /s/ Stephen A. Garcia

Name: Stephen A. Garcia

Title: Chief Financial Officer

AMERICAN STOCK TRANSFER & TRUST COMPANY,

By:    

Name:

Title:

52567531.!3

23

EXHIBIT A

[FORM OF face OF WARRANT CERTIFICATE]

[Global Securities Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO ON THE REVERSE HEREOF.

No. []Certificate for [] Warrants

WARRANTS TO PURCHASE COMMON STOCK OF MRV COMMUNICATIONS, INC.

THIS CERTIFIES THAT [ ], or its registered assigns, is the registered holder of the number of Warrants set forth above (the “Warrants”). Each Warrant entitles the holder thereof (the “Holder”), at its option and subject to the provisions contained herein and in the Warrant Agreement referred to below, to purchase from MRV COMMUNICATIONS, INC., a Delaware corporation (the “Company”), [ ] shares of common stock, par value of $0.0017 per share, of the Company (the “Common Stock”) at the per share exercise price of $8.80 (the “Exercise Price”). This Warrant Certificate shall terminate and become void as of the close of business on July 12, 2018 (the “Expiration Date”) or upon the exercise hereof as to all the shares of Common Stock subject hereto. The number of shares issuable upon exercise of the Warrants and the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Warrant Agreement.

This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of July 16, 2013 (the “Warrant Agreement”), between the Company and American Stock Transfer & Trust Company, LLC (the “Warrant Agent”, which term includes any successor Warrant Agent under the Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement, to all of which terms and provisions the Holder

of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms used but not defined herein shall have the meanings

ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Warrant Agent, American Stock Transfer & Trust Company, LLC, Attention: Corporate Trust Department.

Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in part by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly executed to the Warrant Agent for the account of the Company at the office of the Warrant Agent.

As provided in the Warrant Agreement and subject to the terms and conditions therein set forth, the Warrants shall be exercisable at any time and from time to time on any Business Day after the Issue Date; provided, however, that Holders of Warrants will be able to exercise their Warrants only if (x) the Common Shelf Registration Statement relating to the Common Stock underlying the Warrants is effective or there is an Opinion of Counsel setting forth that the exercise of such Warrants is exempt from the registration requirements of the Securities Act of 1933 and (y) such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside; provided further, however, that no Warrant shall be exercisable after July 12, 2018.

The Company covenants that it will, in good faith and as expeditiously as reasonably possible, use its reasonable best efforts to secure, and maintain until the Expiration Date, the effectiveness of such registration relating to the Common Stock underlying the Warrants, and to provide that such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside.

As provided in the Warrant Agreement, the number of shares of Common Stock issuable upon the exercise of the Warrants and the Exercise Price are subject to adjustment upon the happening of certain events.

Upon any partial exercise of the Warrants, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate representing those Warrants which were not exercised. This Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Warrant Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant Certificates evidencing an equal number of Warrants. No fractional Warrant Shares will be issued upon the exercise of the Warrants, but the Company shall pay an amount in cash equal to the Current Market Value per Warrant Share on the day immediately preceding the date the Warrant is exercised, multiplied by the fraction of a Warrant Share that would be issuable on the exercise of any Warrant.

All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable.

The holder in whose name the Warrant Certificate is registered may be deemed and treated by the Company and the Warrant Agent as the absolute owner of the Warrant Certificate for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary.

The Warrants do not entitle any Holder hereof to any of the rights of a stockholder of the Company.

This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent.

MRV COMMUNICATIONS, INC.,

By: Name:

Title:

AMERICAN STOCK TRANSFER & TRUST

COMPANY, LLC, as Warrant Agent,

By: Name:

Title: DATED:

Countersigned:

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,

As Warrant Agent,

By:

Authorized Signatory

FORM OF ELECTION TO PURCHASE WARRANT SHARES

(to be executed only upon exercise of Warrants) MRV COMMUNICATIONS, INC.

The undersigned hereby irrevocably elects to exerciseWarrants to acquire shares of Common Stock, par value $0.0017 per share, of MRV COMMUNICATIONS, INC., at an exercise price per share of Common Stock of $8.80 and otherwise on the terms and conditions specified in the Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to MRV COMMUNICATIONS, INC. and directs that the Warrant Shares deliverable upon the exercise of such Warrants in accordance with Section 3.04 be registered or placed in the name and at the address specified below and delivered thereto.

The undersigned elects to hold Warrant Shares through:

If through the Depository Trust Company, whose nominee is Cede & Co.:

Name of Direct Participant in the Depositary: Address:

Telephone: Fax:

Social Security or Other Identification Number:

Account from which Warrant Share are Being Delivered: Depositary Account No.:

Contact Name, Address and Telephone:

If through the American Stock Transfer & Trust Company, LLC in certificated form:

Name of Registered Holder: Address:

Telephone: Fax:

Social Security or Other Identification Number: Contact Name, Address and Telephone:

Date:

2

(Signature of Owner)

(Street Address)

(City) (State) (Zip Code) Medallion Guarantee by:

2 The signature must correspond with the name as written upon the face of the Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be medallion guaranteed by an eligible guarantor institution.

FORM OF WARRANT TRANSFER

Forvaluereceived,theundersignedhereby sells,assignsandtransfersunto

the right to purchase() shares of Common Stock, par value $0.0017 per share, of MRV Communications, Inc. (the “Company”) pursuant to the attached Warrant Certificate and does hereby irrevocably constitute and appoint

attorney to transfer the Warrant, or such portion as is transferred hereby, on the books of the Company with full power of substitution in the premises. The undersigned requests said attorney to issue to the transferee a Warrant Certificate evidencing such transfer and to issue to the undersigned a new Warrant Certificate evidencing the right to purchase shares of Common Stock for the balance not so transferred, if any.

Date:

3

(Signature of Owner)

(Street Address)

(City) (State) (Zip Code) Medallion Guarantee by:

3 The signature must correspond with the name as written upon the face of the Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be medallion guaranteed by an eligible guarantor institution.

Name in which new Warrant(s) should be registered:

(Name)

(Street Address)

(City) (State) (Zip Code)

(social security or identifying number)

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY4

The following increases or decreases in this Global Security have been made:

Date of Exchange

Decrease in Number of Warrants in this Global Warrant

Certificate

Increase in Number of Warrants in this Global Warrant

Certificate

Number of Warrants in this Global Warrant Certificate Following Such Change

Signature of Authorized Officer of

Warrant Agent

4To be included only if Warrants are in global form.

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

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

I, David S. Stehlin, certify that:

1. I have reviewed this Quarterly Report of MRV Communications, Inc. on Form 10-Q for the period ended June 30, 2013;

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:	August 9, 2013
/s/ David S. Stehlin
David S. Stehlin
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 A. Garcia, certify that:

1. I have reviewed this Quarterly Report of MRV Communications, Inc. on Form 10-Q for the period ended June 30, 2013;

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:	August 9, 2013
/s/ Stephen A. Garcia
Stephen A. Garcia
Chief Financial Officer
(Principal Financial 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 June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David S. Stehlin, 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.

		MRV COMMUNICATIONS, INC.
Date:	August 9, 2013	/s/ David S. Stehlin
		David S. Stehlin
		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 June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen A. Garcia, 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.

		MRV COMMUNICATIONS, INC.
Date:	August 9, 2013	/s/ Stephen A. Garcia
		Stephen A. Garcia
		Chief Financial Officer
		(Principal Financial Officer)

EX-99.1

1

2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN

CEO & CFO

Your cash bonus for 2013 will be determined in accordance with the 2013 Executive Management Incentive Plan (“EMIP”) of MRV Communications, Inc. and certain of its subsidiaries (together, the “Company”). The amount of your bonus will be subject to the achievement of certain financial and key operational goals during 2013. This document sets forth the material terms of the EMIP. The Company's Board of Directors (the “Board”) has full authority and discretion to interpret and administer the provisions of the EMIP. The Board may delegate its authority and discretion to the Compensation Committee of the Board (the “Committee”). Any determination made by the Board and/or the Committee in connection with the interpretation and administration of the EMIP will be final and conclusive. The terms of your participation in the EMIP are confidential and we expect you not to share those terms with anyone outside of your supervisor, HR department, your immediate family and professional advisers.

• Target Bonus. Your target bonus for 2013 is a dollar amount equal to a designated percentage of your 2013 base salary. Your designated percentage will be separately communicated to you and should remain private. As an example, if your base salary is $150,000 and if your designated percentage is 30%, your target bonus for 2013 is $45,000. We use these amounts as an example throughout this document.

• Target, Threshold and Maximum Bonus Opportunity. The amount of your bonus for 2013 will depend on whether and the extent to which the Company's performance goals are achieved. (These goals are described in the paragraphs that follow.) If the Company achieves the targeted levels of performance for all of the performance goals, your bonus would be 100% of your target bonus amount--$45,000 in the above example. If the Company's performance is below the target levels but equal to or more than specified threshold levels, your bonus would be at least 50% of your target bonus amount--$22,500 in the above example. If the Company's performance is greater than the targeted levels, you would receive a bonus of as much as 137.5% of your target bonus amount--$61,875 in the above example. If the Company's performance for the year or quarter is below the threshold levels, your payout percentage will be 0% and you would receive no bonus.

• Performance Goals--General. The EMIP performance goals for 2013 are divided into two categories: (1) financial performance (“Financial”), and (2) performance of specified strategic and operational goals (“Strategic”). The Financial and Strategic performance goals are weighted equally so that 50% of your target bonus ($22,500 in the above example) will be based on achievement of the Financial goals and 50% ($22,500 in the above example) will be based on achievement of the Strategic goals. Using the above example, if the Company achieves the target levels of Financial performance but only achieves the threshold levels of Strategic performance, the bonus for the year would be $33,750, consisting of $22,500 for meeting the Financial performance targets ($22,500 target bonus x 100% performance payout percentage) and $11,250 for meeting the threshold level of the Strategic goals ($22,500 target bonus x 50% performance payout percentage).

• Financial Performance Goals; EBITDA Gateway. The EMIP uses three factors to measure Financial performance: EBITDA (subject to certain adjustments for extraordinary items), Revenue, and Gross Profit (revenue less cost of goods sold and cost of sales). The EBITDA factor serves as a “gateway” in the sense

that, unless the Company meets the targeted level of EBITDA for the year or quarter, you will not be eligible to receive any amount of the Financial performance-based bonus (regardless of the levels of achievement of the Revenue and Gross Profit goals). For example, the annual EBITDA target for 2013 is $XXXXX million, and no annual Financial performance-based bonus will be earned if the actual 2013 EBITDA is less than $XXXX million.

• Application of Financial Performance Goals. If the EBITDA target is met, the Financial performance-based portion of your bonus will be based on the achievement of the Revenue and Gross Profit goals, with a 50% weighting for each. For example, if your target bonus is $45,000, then $22,500 will be subject to the achievement of Financial performance goals. Of that $22,500, $11,250 is subject to achievement of the Company's Revenue goals, and the other $11,250 is tied to achievement of the Company's Gross Profit goals.

• Strategic Performance Goals. The EMIP uses three criteria to measure Strategic performance: one based on winning large accounts, another based on timely introduction of new products, and the third based on implementation of the new Enterprise Resource Planning (“ERP”) system. These criteria are weighted 35%, 35% and 30%, respectively. Continuing with the above example, if the number of new accounts meets the target level, then your bonus attributable to new accounts would be $7,875 ($22,500 Strategic target bonus x 35% weighting x 100% target performance percentage). Similar calculations will be made for the other two criteria in order to determine the amount of the Strategic performance-based portion of your bonus. More specifics about the Strategic performance criteria and the threshold, target and maximum performance levels for each of those criteria are set forth in the last chart below, under the heading “Strategic Goals and Objectives.

• Payments for Achievement of Quarterly Financial Performance Targets. You may be eligible to receive up to 30% of your Financial performance-based target bonus after completion of the first, second and third calendar quarters, at the rate of 10% per quarter. Using the above example, if your Financial performance-based target bonus is $22,500, then you could be eligible to receive quarterly payments of up to $6,750 (30% x $22,500), at the rate of $2,250 per quarter. In order to receive a quarterly payment, the Company's EBITDA for the quarter must be at least equal to that quarter's target EBITDA level, and the Company's Revenue or Gross Profit for the quarter must be at least equal to the target level for the quarter. However, if a Revenue or Gross Profit Financial performance target is missed in one quarter but is made up (on a cumulative basis) in the next quarter, then half of the first quarter's target bonus attributable to the missed performance goal will be payable after the end of the following quarter. Further, if the EBITDA target was missed in a quarter, and if the performance level in the following quarter is at least equal to the cumulative EBITDA target for both quarters, then half of the payment that would have been earned for the first quarter related to Revenue and Gross Profit performance for the first quarter will be payable after the end of the following quarter. Although there is no quarterly bonus tied to the fourth quarter performance targets, up to half of the bonus for performance targets in the third quarter of 2013 can be made up in the fourth quarter of 2013 as described above. For example, if the EBITDA and Revenue performance targets are met for the first calendar quarter and the Gross Profit target for the quarter is not met, you would receive a payment of $1,125 for the first quarter's performance. If the second quarter's target Revenue is met and if the sum of the first and second quarter Gross Profit is at least equal to the sum of the Gross Profit targets for both quarters, then the bonus paid after the end of the second quarter would be $2,812.50--$2,250 for the second quarter performance plus $562.50 (50% x the $1,125 target Gross Profit bonus amount that was missed in the first quarter).

• Payments for Achievement of Annual Financial Performance Targets. You may be eligible to receive the remaining 70% of your Financial performance-based target bonus after completion of fiscal year 2013. Using the above example, the annual portion of your Financial performance-based target bonus would be $15,750 (70% x $22,500). If Revenue for 2013 is equal to the Revenue target, and if the Company's Gross Profit for the year is only equal to the threshold amount, the Financial performance-based portion of your 2013 bonus would be $11,812.50 (100% x $7,875 for target Revenue performance, and 50% x $7,875 for threshold Gross Profit performance). The Revenue and Gross Profit target, threshold and maximum performance levels are shown in the first table below (under the heading “2013 Annual Financial Performance Targets”).

• Timing of Bonus Payments; Employment Condition. Quarterly bonus payments, if any, will be made in the next reasonable payroll period following the filing of the Company's quarterly financial statements with the Securities and Exchange Commission. The annual bonus payments will be payable on or before March 15, 2014. You must be employed at the conclusion of the covered EMIP periods (quarterly or annual) in order to earn the bonus otherwise payable for that period.

• No Guarantees. Participation in the 2013 EMIP does not guarantee your eligibility to participate, or guarantee you any level of participation, in any successor or similar plan for future years. Neither the EMIP itself nor your participation in the EMIP will give you any right to continued employment with the Company nor limit the ability of the Company to terminate or modify the terms of your employment.

The following pages contain additional details, charts and other information regarding your 2013 EMIP bonus opportunity. If you have any questions regarding the operation of the 2013 EMIP, either generally or in your own situation, please contact Jackie Hickey at (978) 674-6815.

Financial Goals: 50% of the total potential bonus

Strategic Goals: 50% of the total potential bonus

Note: No Financial performance-based bonus is earned for a quarter or for the year if the EBITDA target for the quarter or the year, as the case may be, is not met. The EBITDA targets are set forth at the bottom of the second table below (under the heading “2013 Quarterly Financial Targets”). For EMIP purposes, EBITDA is subject to adjustment for unbudgeted LTIP amortization expense, the costs or gains from extraordinary litigation, or future unknown litigation, gains, losses and/or transaction costs for any sale process, and foreign currency exchange gains or losses.

2013 ANNUAL FINANCIAL PERFORMANCE TARGETS

50% of your total target bonus is tied to Financial performance, which is divided equally between Revenue and Gross Profit. The threshold, target and maximum levels for annual Revenue and Gross Profit for the Company are set forth in the following table. The payout percentages (applied to your Financial performance target bonus amount) are set forth in the third table below under the heading “Financial Payout Scale”).

2013 QUARTERLY FINANCIAL TARGETS AND EBITDA THRESHOLDS

The quarterly performance targets are set forth in the following table, and you may receive a bonus for achievement of one metric even if the other metric is not achieved, so long as the EBITDA target has been met. If a performance goal (e.g., Revenue) for one quarter is missed and if the performance level in the following quarter is at least equal to the cumulative target level for both quarters, then half of the payment that would have been earned for the first quarter will be payable after the end of the following quarter. Further, if the EBITDA target was missed in a quarter, and if the performance level in the following quarter is at least equal to the cumulative EBITDA target for both quarters, then half of the payment that would have been earned for the first quarter related to Revenue and Gross Profit performance for the first quarter will be payable after the end of the following quarter. Although there is no

quarterly bonus tied to the fourth quarter performance targets, up to half of the bonus for performance targets in the third quarter of 2013 can be made up in the fourth quarter of 2014 as described above.

Annual Payout Scale

The following table sets forth the performance payout percentages related to achievement of threshold, target and maximum performance levels. As indicated in the table, no bonus is earned with respect to a particular performance goal if the threshold level for that goal is not achieved. The payout percentages for threshold, target and maximum performance will be 50%, 100% and 150%, respectively. If actual performance is between target and extended performance, or if actual performance is between threshold and target, the payout percentage will be determined by linear interpolation. For example, if the actual annual performance level is 95% of target, the payout percentage would be 75%; and, if the actual performance level is 107.5%, the payout percentage would be for 125%. The amount of the bonus payable with respect to either goal (Revenue or Gross Profit) is equal to the product of the applicable payout percentage (based on the level of performance) multiplied by the amount of your target bonus tied to that goal.

STRATEGIC GOALS & OBJECTIVES:

50% of the total target bonus is subject to the achievement of the Company's Strategic goals. The payout percentages for threshold, target and maximum performance are 50%, 100% and 125%, respectively. Achievement of the Strategic goals and objectives and the level of achievement is determined at year-end by the Company's Board of Directors. Strategic performance-based bonuses are payable on or before March 15, 2014. No quarterly installments are made with respect to the Strategic performance-based bonus.

The EMIP uses three measures of Strategic performance. The three performance measures, their respective weightings, and the payout percentages for target, threshold and maximum levels of achievement and the payout percentages for each level are set forth in the following table.

STRATEGIC PERFORMANCE BONUS CRITERIA

Goals & Objectives	Percent Weighting	On-going goal due to role (Y/N)	Specific Notes
Goal #1	35%
Goal #2	35%
Goal #3	30%

2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN

APPENDIX A

I have read, understand and agree to the terms and conditions of the Management Incentive Plan. Below are the agreed upon goals that must be met in order to earn that portion of my incentive program. I agree to the goals below.

Employee Name: David StehlinEmployee Title: CEO

Target % of Base: 80%Total on-target amount: $280,000

Functional Team: G&ADirect Manager: David Stehlin

Dave Stehlin Ken Traub .

Employee NameChairman

/s/ Dave Stehlin /s/ Ken Traub . Employee Signature/DateChairman /Date

/s/ Jackie Hickey .

Human Resources Signature/Date

Stephen A. Garcia Dave Stehlin .

Employee NameManager Name

/s/ Stephen A. Garcia /s/ Dave Stehlin . Employee Signature/DateManager Signature/Date

/s/ Jackie Hickey .

Human Resources Signature/Date

EX-99.2

1

2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN

CEO & CFO

Your cash bonus for 2013 will be determined in accordance with the 2013 Executive Management Incentive Plan (“EMIP”) of MRV Communications, Inc. and certain of its subsidiaries (together, the “Company”). The amount of your bonus will be subject to the achievement of certain financial and key operational goals during 2013. This document sets forth the material terms of the EMIP. The Company's Board of Directors (the “Board”) has full authority and discretion to interpret and administer the provisions of the EMIP. The Board may delegate its authority and discretion to the Compensation Committee of the Board (the “Committee”). Any determination made by the Board and/or the Committee in connection with the interpretation and administration of the EMIP will be final and conclusive. The terms of your participation in the EMIP are confidential and we expect you not to share those terms with anyone outside of your supervisor, HR department, your immediate family and professional advisers.

• Target Bonus. Your target bonus for 2013 is a dollar amount equal to a designated percentage of your 2013 base salary. Your designated percentage will be separately communicated to you and should remain private. As an example, if your base salary is $150,000 and if your designated percentage is 30%, your target bonus for 2013 is $45,000. We use these amounts as an example throughout this document.

• Target, Threshold and Maximum Bonus Opportunity. The amount of your bonus for 2013 will depend on whether and the extent to which the Company's performance goals are achieved. (These goals are described in the paragraphs that follow.) If the Company achieves the targeted levels of performance for all of the performance goals, your bonus would be 100% of your target bonus amount--$45,000 in the above example. If the Company's performance is below the target levels but equal to or more than specified threshold levels, your bonus would be at least 50% of your target bonus amount--$22,500 in the above example. If the Company's performance is greater than the targeted levels, you would receive a bonus of as much as 137.5% of your target bonus amount--$61,875 in the above example. If the Company's performance for the year or quarter is below the threshold levels, your payout percentage will be 0% and you would receive no bonus.

• Performance Goals--General. The EMIP performance goals for 2013 are divided into two categories: (1) financial performance (“Financial”), and (2) performance of specified strategic and operational goals (“Strategic”). The Financial and Strategic performance goals are weighted equally so that 50% of your target bonus ($22,500 in the above example) will be based on achievement of the Financial goals and 50% ($22,500 in the above example) will be based on achievement of the Strategic goals. Using the above example, if the Company achieves the target levels of Financial performance but only achieves the threshold levels of Strategic performance, the bonus for the year would be $33,750, consisting of $22,500 for meeting the Financial performance targets ($22,500 target bonus x 100% performance payout percentage) and $11,250 for meeting the threshold level of the Strategic goals ($22,500 target bonus x 50% performance payout percentage).

• Financial Performance Goals; EBITDA Gateway. The EMIP uses three factors to measure Financial performance: EBITDA (subject to certain adjustments for extraordinary items), Revenue, and Gross Profit (revenue less cost of goods sold and cost of sales). The EBITDA factor serves as a “gateway” in the sense

that, unless the Company meets the targeted level of EBITDA for the year or quarter, you will not be eligible to receive any amount of the Financial performance-based bonus (regardless of the levels of achievement of the Revenue and Gross Profit goals). For example, the annual EBITDA target for 2013 is $XXXXX million, and no annual Financial performance-based bonus will be earned if the actual 2013 EBITDA is less than $XXXX million.

• Application of Financial Performance Goals. If the EBITDA target is met, the Financial performance-based portion of your bonus will be based on the achievement of the Revenue and Gross Profit goals, with a 50% weighting for each. For example, if your target bonus is $45,000, then $22,500 will be subject to the achievement of Financial performance goals. Of that $22,500, $11,250 is subject to achievement of the Company's Revenue goals, and the other $11,250 is tied to achievement of the Company's Gross Profit goals.

• Strategic Performance Goals. The EMIP uses three criteria to measure Strategic performance: one based on winning large accounts, another based on timely introduction of new products, and the third based on implementation of the new Enterprise Resource Planning (“ERP”) system. These criteria are weighted 35%, 35% and 30%, respectively. Continuing with the above example, if the number of new accounts meets the target level, then your bonus attributable to new accounts would be $7,875 ($22,500 Strategic target bonus x 35% weighting x 100% target performance percentage). Similar calculations will be made for the other two criteria in order to determine the amount of the Strategic performance-based portion of your bonus. More specifics about the Strategic performance criteria and the threshold, target and maximum performance levels for each of those criteria are set forth in the last chart below, under the heading “Strategic Goals and Objectives.

• Payments for Achievement of Quarterly Financial Performance Targets. You may be eligible to receive up to 30% of your Financial performance-based target bonus after completion of the first, second and third calendar quarters, at the rate of 10% per quarter. Using the above example, if your Financial performance-based target bonus is $22,500, then you could be eligible to receive quarterly payments of up to $6,750 (30% x $22,500), at the rate of $2,250 per quarter. In order to receive a quarterly payment, the Company's EBITDA for the quarter must be at least equal to that quarter's target EBITDA level, and the Company's Revenue or Gross Profit for the quarter must be at least equal to the target level for the quarter. However, if a Revenue or Gross Profit Financial performance target is missed in one quarter but is made up (on a cumulative basis) in the next quarter, then half of the first quarter's target bonus attributable to the missed performance goal will be payable after the end of the following quarter. Further, if the EBITDA target was missed in a quarter, and if the performance level in the following quarter is at least equal to the cumulative EBITDA target for both quarters, then half of the payment that would have been earned for the first quarter related to Revenue and Gross Profit performance for the first quarter will be payable after the end of the following quarter. Although there is no quarterly bonus tied to the fourth quarter performance targets, up to half of the bonus for performance targets in the third quarter of 2013 can be made up in the fourth quarter of 2013 as described above. For example, if the EBITDA and Revenue performance targets are met for the first calendar quarter and the Gross Profit target for the quarter is not met, you would receive a payment of $1,125 for the first quarter's performance. If the second quarter's target Revenue is met and if the sum of the first and second quarter Gross Profit is at least equal to the sum of the Gross Profit targets for both quarters, then the bonus paid after the end of the second quarter would be $2,812.50--$2,250 for the second quarter performance plus $562.50 (50% x the $1,125 target Gross Profit bonus amount that was missed in the first quarter).

• Payments for Achievement of Annual Financial Performance Targets. You may be eligible to receive the remaining 70% of your Financial performance-based target bonus after completion of fiscal year 2013. Using the above example, the annual portion of your Financial performance-based target bonus would be $15,750 (70% x $22,500). If Revenue for 2013 is equal to the Revenue target, and if the Company's Gross Profit for the year is only equal to the threshold amount, the Financial performance-based portion of your 2013 bonus would be $11,812.50 (100% x $7,875 for target Revenue performance, and 50% x $7,875 for threshold Gross Profit performance). The Revenue and Gross Profit target, threshold and maximum performance levels are shown in the first table below (under the heading “2013 Annual Financial Performance Targets”).

• Timing of Bonus Payments; Employment Condition. Quarterly bonus payments, if any, will be made in the next reasonable payroll period following the filing of the Company's quarterly financial statements with the Securities and Exchange Commission. The annual bonus payments will be payable on or before March 15, 2014. You must be employed at the conclusion of the covered EMIP periods (quarterly or annual) in order to earn the bonus otherwise payable for that period.

• No Guarantees. Participation in the 2013 EMIP does not guarantee your eligibility to participate, or guarantee you any level of participation, in any successor or similar plan for future years. Neither the EMIP itself nor your participation in the EMIP will give you any right to continued employment with the Company nor limit the ability of the Company to terminate or modify the terms of your employment.

The following pages contain additional details, charts and other information regarding your 2013 EMIP bonus opportunity. If you have any questions regarding the operation of the 2013 EMIP, either generally or in your own situation, please contact Jackie Hickey at (978) 674-6815.

Financial Goals: 50% of the total potential bonus

Strategic Goals: 50% of the total potential bonus

Note: No Financial performance-based bonus is earned for a quarter or for the year if the EBITDA target for the quarter or the year, as the case may be, is not met. The EBITDA targets are set forth at the bottom of the second table below (under the heading “2013 Quarterly Financial Targets”). For EMIP purposes, EBITDA is subject to adjustment for unbudgeted LTIP amortization expense, the costs or gains from extraordinary litigation, or future unknown litigation, gains, losses and/or transaction costs for any sale process, and foreign currency exchange gains or losses.

2013 ANNUAL FINANCIAL PERFORMANCE TARGETS

50% of your total target bonus is tied to Financial performance, which is divided equally between Revenue and Gross Profit. The threshold, target and maximum levels for annual Revenue and Gross Profit for the Company are set forth in the following table. The payout percentages (applied to your Financial performance target bonus amount) are set forth in the third table below under the heading “Financial Payout Scale”).

2013 QUARTERLY FINANCIAL TARGETS AND EBITDA THRESHOLDS

The quarterly performance targets are set forth in the following table, and you may receive a bonus for achievement of one metric even if the other metric is not achieved, so long as the EBITDA target has been met. If a performance goal (e.g., Revenue) for one quarter is missed and if the performance level in the following quarter is at least equal to the cumulative target level for both quarters, then half of the payment that would have been earned for the first quarter will be payable after the end of the following quarter. Further, if the EBITDA target was missed in a quarter, and if the performance level in the following quarter is at least equal to the cumulative EBITDA target for both quarters, then half of the payment that would have been earned for the first quarter related to Revenue and Gross Profit performance for the first quarter will be payable after the end of the following quarter. Although there is no

quarterly bonus tied to the fourth quarter performance targets, up to half of the bonus for performance targets in the third quarter of 2013 can be made up in the fourth quarter of 2014 as described above.

Annual Payout Scale

The following table sets forth the performance payout percentages related to achievement of threshold, target and maximum performance levels. As indicated in the table, no bonus is earned with respect to a particular performance goal if the threshold level for that goal is not achieved. The payout percentages for threshold, target and maximum performance will be 50%, 100% and 150%, respectively. If actual performance is between target and extended performance, or if actual performance is between threshold and target, the payout percentage will be determined by linear interpolation. For example, if the actual annual performance level is 95% of target, the payout percentage would be 75%; and, if the actual performance level is 107.5%, the payout percentage would be for 125%. The amount of the bonus payable with respect to either goal (Revenue or Gross Profit) is equal to the product of the applicable payout percentage (based on the level of performance) multiplied by the amount of your target bonus tied to that goal.

STRATEGIC GOALS & OBJECTIVES:

50% of the total target bonus is subject to the achievement of the Company's Strategic goals. The payout percentages for threshold, target and maximum performance are 50%, 100% and 125%, respectively. Achievement of the Strategic goals and objectives and the level of achievement is determined at year-end by the Company's Board of Directors. Strategic performance-based bonuses are payable on or before March 15, 2014. No quarterly installments are made with respect to the Strategic performance-based bonus.

The EMIP uses three measures of Strategic performance. The three performance measures, their respective weightings, and the payout percentages for target, threshold and maximum levels of achievement and the payout percentages for each level are set forth in the following table.

STRATEGIC PERFORMANCE BONUS CRITERIA

Goals & Objectives	Percent Weighting	On-going goal due to role (Y/N)	Specific Notes
Goal #1	35%
Goal #2	35%
Goal #3	30%

2013 EXECUTIVE MANAGEMENT INCENTIVE PLAN

APPENDIX A

I have read, understand and agree to the terms and conditions of the Management Incentive Plan. Below are the agreed upon goals that must be met in order to earn that portion of my incentive program. I agree to the goals below.

Employee Name: Steve GarciaEmployee Title: CFO

Target % of Base: 60%Total on-target amount: $159,000

Functional Team: G&ADirect Manager: David Stehlin

XML

Share-Based Compensation

6 Months Ended

Jun. 30, 2013

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

Share-Based Compensation

Share-Based Compensation

MRV records share-based compensation expense in accordance with ASC Topic 718Compensation - Stock Compensation. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the six months ended June 30, 2013 and 2012 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Cost of goods sold		$26		$8		$43		$20
Product development and engineering	15		10		25		21
Selling, general and administrative	42		214		234		403
Total share-based compensation expense (1)		$83		$232		$302		$444

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

The Company granted 80,242 stock options during the six months ended June 30,2013 and the related fair value was $4.89 per share. The fair value of 90,387 restricted shares granted during the six months ended June 30, 2013 was $9.99 per share. The Company granted 17,736 stock options during the six months ended June 30,2012 and the related fair value was $9.60 per share. The fair value of 39,325 restricted shares granted during the six months ended June 30, 2012 was $16.20 per share. As of June 30, 2013, the total unrecorded deferred share-based compensation balance for unvested securities, net of expected forfeitures, was$1.0 million, which is expected to be amortized over a weighted-average period of1.8 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. In 2012 MRV assumed volatility to approximate historical volatility. In 2013, MRV based volatility on the Company's historical quoted prices and peer company data,as this was determined to be a preferable method. The following weighted average assumptions were used for estimating the fair value of options modified during the six months ended June 30, 2013 and 2012, respectively:

Six months ended June 30,	2013		2012
Risk-free interest rate	1.2	%	0.8	%
Dividend yield	—		—
Volatility	51.9	%	89.0	%
Expected life (in years)	5.7		5.5

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Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement of Other Comprehensive Income [Abstract]
Net (loss) income	$ (993)	$ (2,114)	$ (5,427)	$ 1,498
Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss)	440	(2,843)	(395)	(617)
Foreign currency translation effect realized upon divestiture of subsidiary	0	0	0	(12,599)
Total other comprehensive income (loss), net of tax	440	(2,843)	(395)	(13,216)
Total comprehensive (loss) income	$ (553)	$ (4,957)	$ (5,822)	$ (11,718)

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Cash and Cash Equivalents, Restricted Time Deposits and Marketable Securities

6 Months Ended

Jun. 30, 2013

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents, Restricted Time Deposits and Marketable Securities

Cash and Cash Equivalents and Restricted Time Deposits

MRV treats 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. MRV maintains cash balances and investments in qualified financial institutions, and at various times such amounts are in excess of federal insured limits.

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Organization and Summary of significant accounting policies (Policies)

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. MRV consolidates the financial results of less than majority-owned subsidiaries when it has effective control, voting control, or has provided the entity's working capital. When investment by others in these enterprises reduces the Company's voting control below 50%, MRV discontinues consolidation and uses the cost or equity method of accounting for these investments, unless otherwise required.

The consolidated financial statements included herein have been prepared by MRV, and are unaudited, 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 (“GAAP”) have been condensed or omitted pursuant to such rules and regulations although MRV believes that the disclosures are adequate to make the information presented not misleading. The information included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (this “Form 10-Q”) should be read in conjunction with “Selected Financial Data,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) filed with the SEC.

Restricted Time Deposits

Restricted time deposits represent investments that are restricted as to withdrawal. Restricted time deposits generally secure standby letters of credit, bank lines of credit, or bank loans. Investments in and releases of restricted time deposits are included in investing activities on the Company's Statement of Cash Flows unless the time deposits relate to an underlying bank loan and will be used to repay the loan, in which case the related cash flows are treated as financing activities.

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 institutions and accounts receivable due from customers. MRV evaluates the collectability of accounts receivable based on a combination of factors. If the Company 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 it reasonably believes to be collectable from the customer. For all other customers, the Company records allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment, and historical experience. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future.

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Segment Reporting and Geographic Information

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Reporting and Geographic Information

Segment Reporting and Geographic Information

MRV operates its business in two segments: Network Equipment and Network Integration. Network Equipment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products, and Network Integration provides value-added integration and support services for customers' networks.

The accounting policies of the segments are the same as those described in the summary of significant accounting polices disclosed in MRV's2012Form 10-K. MRV evaluates segment performance based on revenues, gross profit and operating income (loss) of each segment. As such, there are no separately identifiable Statements of Operations data below operating income (loss).

The following table summarizes revenues by segment, including intersegment revenues (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Network Equipment		$21,100			$21,519			$42,046			$41,938
Network Integration	17,135			19,560			35,117			35,075
Before intersegment adjustments	38,235			41,079			77,163			77,013
Intersegment adjustments	(60		)	(3,453		)	(83		)	(5,972		)
Total		$38,175			$37,626			$77,080			$71,041

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. Network Integration revenue primarily consists of value-added integration and support service revenue, related third-party product sales (including third-party product sales through distribution) and fiber optic components sold as part of system solutions.

One customer accounted for $22.2 million and $20.2 million of revenue in Network Integration revenue, or 29% and 28% of total revenue, for the six months ended June 30, 2013 and 2012, respectively.

The same customer in Network Integration accounted for 20% and 21% of net accounts receivable as of June 30, 2013, and December 31, 2012, respectively. Another Network Integration customer accounted for 12% and 9% of accounts receivable as of June 30, 2013, and December 31, 2012, respectively.

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

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Americas		$14,531		$13,035		$28,281		$25,883
Europe	21,869		23,277		45,290		42,906
Asia Pacific	1,775		1,314		3,509		2,252
Total		$38,175		$37,626		$77,080		$71,041

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

	June 30, 2013		December 31, 2012
Americas		$3,474		$2,099
Europe	1,524		1,590
Asia Pacific	40		46
Total		$5,038		$3,735

The following table provides selected Statement of Operations information by business segment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Gross profit
Network Equipment	$	11,183		$	9,993		$	21,949		$	20,037
Network Integration	2,187			3,169			4,444			5,661
Total before intersegment adjustments	13,370			13,162			26,393			25,698
Corporate unallocated and intersegment adjustments(1)	2			150			6			295
Total	$	13,372		$	13,312		$	26,399		$	25,993
Depreciation expense
Network Equipment	$	283		$	230		$	583		$	459
Network Integration	52			57			105			116
Corporate	48			47			96			95
Total	$	383		$	334		$	784		$	670
Operating income (loss)
Network Equipment	$	(296	)	$	(337	)	$	(1,415	)	$	(1,767	)
Network Integration	675			1,605			1,366			2,675
Total before intersegment adjustments	379			1,268			(49		)	908
Corporate unallocated operating loss and adjustments (1)	(914		)	(2,512		)	(4,499		)	(5,797		)
Total	$	(535	)	$	(1,244	)	$	(4,548	)	$	(4,889	)

(1) Adjustments reflect the elimination of intersegment revenue and profit in inventory.

The following tables provide selected Balance Sheet and Statement of Cash Flow information by business segment (in thousands):

	Six months ended
	June 30,
	2013		2012
Additions to Fixed Assets
Network Equipment	$	2,064	$	440
Network Integration	46		52
Corporate	6		76
Discontinued operations	—		1,290
Total	$	2,116	$	1,858

	June 30, 2013		December 31, 2012
Total Assets
Network Equipment		$45,249		$44,445
Network Integration	45,071		47,400
Corporate and intersegment eliminations	30,267		36,720
Total		$120,587		$128,565

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Discontinued Operations (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net income (loss) from discontinued operations, net of income taxes	$ 0	$ (2,615,000)	$ 0	$ 3,171,000
CES [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net income (loss) from discontinued operations, net of income taxes				6,000,000
Alcadon [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net income (loss) from discontinued operations, net of income taxes				(2,100,000)
Amount of intercompany revenue that was previously eliminated from financial statements in consolidation		1,600,000	2,700,000
Interdata [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net income (loss) from discontinued operations, net of income taxes				(700,000)
Pedrena [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Amount of intercompany revenue that was previously eliminated from financial statements in consolidation		$ 1,700,000		$ 3,000,000

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Share-Based Compensation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total compensation cost not yet recognized	$ 1.0
Total compensation cost not yet recognized, period for recognition	1 year 9 months 18 days
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, grants during period (in shares)	80,242	17,736
Stock options, weighted-average fair value, grants during the period (dollars per share)	$ 4.89	$ 9.60
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock, grants during period (in shares)	90,387	39,325
Restricted stock, weighted-average fair value, grants during the period (dollars per share)	$ 9.99	$ 16.20

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Product Warranty (Tables)

6 Months Ended

Jun. 30, 2013

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

The following table summarizes the change in product warranty liability during the six months ended June 30, 2013 (in thousands):

	Six months ended
	June 30, 2013
Beginning balance		$1,006
Cost of warranty claims	(168		)
Accruals for product warranties	37
Total		$875

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Inventories (Tables)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories, net of reserves, consisted of the following (in thousands):

	June 30, 2013		December 31, 2012
Raw materials		$5,740		$4,348
Work-in process	1,051		1,368
Finished goods	12,969		16,728
Total		$19,760		$22,444

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Indemnification Obligations (Narrative) (Details) (Indemnification Agreement [Member]) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Source Photonics [Member] USD ($)	Jun. 30, 2013 Pedrena [Member] USD ($)	Jun. 30, 2013 Pedrena [Member] EUR (€)	Dec. 31, 2012 Pedrena [Member] USD ($)
Loss Contingencies [Line Items]
Indemnification claims deductible	$ 1.0
Indemnification claims cap	20.0
Representations and warranties agreement, term to obtain an insurance policy		90 days	90 days
Representations and warranties agreement, cash threshold		20
Representations and warranties agreement, potential escrow deposit			€ 1.5	$ 2.0

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Intangible Assets (Narrative) (Details) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible assets	$ 400,000	$ 400,000	$ 400,000
Amortization of intangible assets	$ 0	$ 0
Estimated useful life of finite-lived intangible assets	7 years

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Share-Based Compensation (Valuation Assumptions) (Details) (Stock Options [Member])	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.20%	0.80%
Dividend yield	0.00%	0.00%
Volatility	51.90%	89.00%
Expected life (in years)	5 years 8 months 12 days	5 years 6 months

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Accounts Receivable Factoring (Narrative) (Details) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 EUR (€)	Dec. 31, 2012 USD ($)
Receivables [Abstract]
Amount of factoring permitted per credit facility agreements	$ 29.5		$ 29.5		€ 23.0
Accounts receivables sold	26.3		26.3			29.5
Outstanding balances on accounts receivable	14.4		14.4			13.3
Related losses on sale	$ (0.1)	$ (0.1)	$ (0.1)	$ (0.1)

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Fair Value Measurement (Narrative) (Details)	6 Months Ended
	Jun. 30, 2013	Apr. 08, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Stipulation of settlement, payment to plaintiff, warrants	250,000	250,000
Expected volatility rate	45.00%
Risk free interest rate	1.40%
Stipulation of settlement, payment to plaintiff, warrants, term	5 years	5 years
Warrants, fair value per share	3.58

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Segment Reporting and Geographic Information (External Revenue and Long-Lived Assets by Geographic Region) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 38,175	$ 37,626	$ 77,080	$ 71,041
Long-Lived Assets	5,038		5,038		3,735
Americas
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	14,531	13,035	28,281	25,883
Long-Lived Assets	3,474		3,474		2,099
Europe
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	21,869	23,277	45,290	42,906
Long-Lived Assets	1,524		1,524		1,590
Asia Pacific
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,775	1,314	3,509	2,252
Long-Lived Assets	$ 40		$ 40		$ 46

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Credit Risk (Tables)

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Schedule of Allowance for Doubtful Accounts

The following table summarizes the changes in the allowance for doubtful accounts during the six months ended June 30, 2013(in thousands):

	Six months ended
	June 30, 2013
Balance at beginning of period		$1,733
Charged to expense	250
Write-offs	(3		)
Foreign currency translation adjustment	(21		)
Balance at end of period		$1,959

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Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (usd per share)	$ 0.0017	$ 0.0017
Common stock, shares authorized	16,000	16,000
Common stock, shares issued	8,128	8,061
Common stock, shares outstanding	7,520	7,594
Treasury stock, shares	608	467

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Condensed Consolidated Statements of Cash Flows (unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Statement of Cash Flows [Abstract]
Cash and cash equivalents from discontinued operations	$ 25,126

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Fair Value Measurement

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurment

Fair Value Measurement

MRV's financial instruments, including cash and cash equivalents, restricted time deposits, accounts receivable, accounts payable, accrued liabilities and short-term debt obligations, are carried at cost, which approximates their fair market value.

ASC 820-10Fair Value Measurementsdefines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820-10 establishes 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 that the Company has the ability to access; Level 2 - Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs; Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

All of MRV's assets and a majority of its liabilities that are measured at fair value are measured using the unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. Under this standard, 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.

During 2013 the Company updated the estimated fair value of 250,000 warrants that will be issued to plaintiffs' counsel in a litigation matter originally recorded as a liability in 2012. In calculating the fair value, the Company used Black Scholes with level 2 inputs including a volatility of 45% based on the Company's historical quoted prices and peer company data, the risk free interest rate of 1.4% and the 5 years expected term of the warrants. The resulting fair value was $3.58 per warrant.

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Organization and Summary of significant accounting policies

6 Months Ended

Jun. 30, 2013

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”, "we", "our", the “Company”, and "us") and its wholly-owned subsidiaries supply communications equipment and services to carriers, governments and enterprise customers worldwide. We conduct our business along two principal segments: (a) Network Equipment; and (b) Network Integration. Our Network Equipment segment provides communications equipment that facilitates access, transport, aggregation and management of voice, data and video traffic in networks, data centers and laboratories used by telecommunications service providers, cable operators, enterprise customers and governments worldwide. Our Network Integration segment operates primarily in Italy, servicing Tier One carriers, regional carriers, large enterprises, and government institutions. Network Integration provides network system design, integration and distribution services that include products manufactured by third-party vendors. We market and sell our products worldwide, through a variety of channels, which include a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators.

Basis of Presentation

The consolidated financial statements include the accounts of MRV and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. MRV consolidates the financial results of less than majority-owned subsidiaries when it has effective control, voting control, or has provided the entity's working capital. When investment by others in these enterprises reduces the Company's voting control below 50%, MRV discontinues consolidation and uses the cost or equity method of accounting for these investments, unless otherwise required.

The consolidated financial statements included herein have been prepared by MRV, and are unaudited, 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 (“GAAP”) have been condensed or omitted pursuant to such rules and regulations although MRV believes that the disclosures are adequate to make the information presented not misleading. The information included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (this “Form 10-Q”) should be read in conjunction with “Selected Financial Data,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and the Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) filed with the SEC.

Restricted time deposits represent investments that are restricted as to withdrawal. Restricted time deposits generally secure standby letters of credit, bank lines of credit, or bank loans. Investments in and releases of restricted time deposits are included in investing activities on the Company's Statement of Cash Flows unless the time deposits relate to an underlying bank loan and will be used to repay the loan, in which case the related cash flows are treated as financing activities.

In the opinion of MRV's management, these unaudited statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position of MRV as of June 30, 2013, and the results of its operations and comprehensive income (loss) for the three and six months ended June 30, 2013 and 2012 and its cash flows for the six months ended June 30, 2013 and 2012. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the full year or any future periods.

On March 29, 2012, we sold all of the issued and outstanding capital stock of CES Electronic Systems SA (“CES”). On October12, 2012, the Company completed the sale of all of the shares of its subsidiary Alcadon - MRV AB ("Alcadon"). On October 16, 2012, the Company completed the sale of its subsidiary Pedrena Enterprises B.V., a Dutch company ("Pedrena"). Pedrena is the parent company of Interdata, which is in turn, the parent company of J3TEL. The Company has reclassified the historical results of CES, Alcadon and Pedrena as discontinued operations in this Form 10-Q for all periods presented. Accordingly, the related assets and liabilities of these three entities have been removed from the Company's balance sheets. Cash flows from discontinued operations of these three entities are presented combined with the cash flows from continuing operations in the accompanying Statement of Cash Flows for the six months ended June 30, 2012. See Note 13 "Discontinued Operations" to the Financial Statements in Item 1 of this Form 10-Q for further discussion.

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Segment Reporting and Geographic Information (Narrative) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended				12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013 segments	Jun. 30, 2013 Major Customer, One [Member] Network Integration [Member]	Jun. 30, 2012 Major Customer, One [Member] Network Integration [Member]	Jun. 30, 2013 Major Customer, One [Member] Network Integration [Member] Customer Concentration Risk [Member] Accounts Receivable [Member]	Dec. 31, 2012 Major Customer, One [Member] Network Integration [Member] Customer Concentration Risk [Member] Accounts Receivable [Member]	Jun. 30, 2013 Major Customer, Two [Member] Network Integration [Member] Customer Concentration Risk [Member] Accounts Receivable [Member]	Dec. 31, 2012 Major Customer, Two [Member] Network Integration [Member] Customer Concentration Risk [Member] Accounts Receivable [Member]
Segment Reporting Information [Line Items]
Number of Business Segments	2
Amount of Revenue from One Customer		$ 22.2	$ 20.2
Percentage of Revenue from One Customer		29.00%	28.00%
Percentage of Accounts Receivable				20.00%	21.00%	12.00%	9.00%

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

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 six months ended June 30, 2013 and 2012 (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Cost of goods sold		$26		$8		$43		$20
Product development and engineering	15		10		25		21
Selling, general and administrative	42		214		234		403
Total share-based compensation expense (1)		$83		$232		$302		$444

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

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

The following weighted average assumptions were used for estimating the fair value of options modified during the six months ended June 30, 2013 and 2012, respectively:

Six months ended June 30,	2013		2012
Risk-free interest rate	1.2	%	0.8	%
Dividend yield	—		—
Volatility	51.9	%	89.0	%
Expected life (in years)	5.7		5.5

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Credit Risk (Changes in the Allowance for Doubtful Accounts) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance at beginning of period	$ 1,733
Charged to expense	250	14
Write-offs	(3)
Foreign currency translation adjustment	(21)
Balance at end of period	$ 1,959

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Net Income (Loss) Per Share (Narrative) (Details) (USD $)			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Stock Options [Member]	Jun. 30, 2012 Stock Options [Member]	Jun. 30, 2013 Stock Options [Member]	Jun. 30, 2012 Stock Options [Member]	Jun. 30, 2013 Potentially Dilutive Shares [Member]	Jun. 30, 2012 Potentially Dilutive Shares [Member]	Jun. 30, 2013 Potentially Dilutive Shares [Member]	Jun. 30, 2012 Potentially Dilutive Shares [Member]
Earnings Per Share [Abstract]
Common stock, par value (usd per share)	$ 0.0017	$ 0.0017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)			400,000	500,000	400,000		0	6,357	0	6,407
Outstanding securities included in computaion of dilutive shares (in shares)						500,000

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Share Repurchase (Narrative) (Details) (USD $)	0 Months Ended	6 Months Ended		7 Months Ended
	Dec. 03, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Equity [Abstract]
Stock repurchase program, authorized amount	$ 10,000,000
Treasury stock, shares acquired		141,412		181,717
Treasury stock acquired, average cost per share		$ 9.59		$ 9.93
Purchase of treasury shares		1,356,000	0	1,800,000
Stock repurchase program, remaining authorized repurchase amount		$ 8,200,000

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Segment Reporting and Geographic Information (Balance Sheet and Statement of Cash Flow Information) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Segment Reporting Information [Line Items]
Additions to Fixed Assets	$ 2,116	$ 1,858
Assets	120,587		128,565
Network Equipment [Member]
Segment Reporting Information [Line Items]
Additions to Fixed Assets	2,064	440
Assets	45,249		44,445
Network Integration [Member]
Segment Reporting Information [Line Items]
Additions to Fixed Assets	46	52
Assets	45,071		47,400
Corporate [Member]
Segment Reporting Information [Line Items]
Additions to Fixed Assets	6	76
Corporate Unallocated and Intersegment Adjustments [Member]
Segment Reporting Information [Line Items]
Assets	30,267		36,720
Discontinued Operations [Member]
Segment Reporting Information [Line Items]
Additions to Fixed Assets	$ 0	$ 1,290

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Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Income Statement [Abstract]
Income tax netted from Income from Discontinued Operations	$ 0	$ 2,293

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Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

Intangible Assets

The balance of intangible assets was $0.4 million as of June 30, 2013 and December 31, 2012. This asset, which represents a software license agreement, was not placed in service as of June 30, 2013, therefore amortization of intangible assets was zero for the six months ended June 30, 2013 and June 30, 2012. The term of the license agreement is indefinite and once placed in service, the Company plans to amortize the cost over the estimated useful life, which is approximately seven years.

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Condensed Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 35,948	$ 40,609
Restricted time deposits	243	240
Accounts receivable, net	33,297	32,237
Other receivables	14,616	18,287
Inventories	19,760	22,444
Deferred income taxes	1,395	1,145
Other current assets	5,260	4,629
Total current assets	110,519	119,591
Property and equipment, net	5,038	3,735
Deferred income taxes, net of current portion	3,940	3,711
Intangibles, net	400	400
Other assets	690	1,128
Total assets	120,587	128,565
Current liabilities:
Short-term debt	2,809	5,267
Deferred consideration payable	233	233
Accounts payable	18,343	20,478
Accrued liabilities	18,105	16,652
Deferred revenue	8,632	7,290
Other current liabilities	940	560
Total current liabilities	49,062	50,480
Other long-term liabilities	5,495	5,184
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---8,128 shares in 2013 and 8,061 shares in 2012; Outstanding — 7,520 shares in 2013 and 7,594 shares in 2012	271	270
Additional paid-in capital	1,281,475	1,281,170
Accumulated deficit	(1,206,941)	(1,201,515)
Treasury stock — 608 shares in 2013 and 467 shares in 2012	(7,884)	(6,528)
Accumulated other comprehensive income	(891)	(496)
Total stockholders' equity	66,030	72,901
Total liabilities and stockholders' equity	$ 120,587	$ 128,565

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Condensed Consolidated Statements of Operations (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013	Jun. 30, 2012
Revenue:
Product revenue	$ 26,432		$ 26,598		$ 54,504	$ 50,040
Service revenue	11,743		11,028		22,576	21,001
Total revenue	38,175		37,626		77,080	71,041
Cost of sales	24,803		24,314		50,681	45,048
Gross profit	13,372		13,312		26,399	25,993
Operating expenses:
Product development and engineering	4,454		3,389		9,102	7,088
Selling, general and administrative	9,453		11,167		21,845	23,794
Total operating expenses	13,907		14,556		30,947	30,882
Operating loss	(535)		(1,244)		(4,548)	(4,889)
Interest expense	(241)		(191)		(373)	(399)
Gain from settlement of deferred consideration obligation	0		2,314		0	2,314
Other (loss) income, net	(102)		(82)		(85)	80
Income (loss) from continuing operations before income taxes	(878)		797		(5,006)	(2,894)
Provision (benefit) for income taxes	115		296		421	(1,221)
Income (loss) from continuing operations	(993)		501		(5,427)	(1,673)
Income (loss) from discontinued operations, net of income taxes of $0 in 2013 and $2,542 in 2012	0		(2,615)		0	3,171
Net income (loss)	$ (993)		$ (2,114)		$ (5,427)	$ 1,498
Net income (loss) per share — basic (1):
From continuing operations (in usd per share)	$ (0.13)	[1]	$ 0.06	[1]	$ (0.72)	$ (0.21)
From discontinued operations (in usd per share)	$ 0.00	[1]	$ (0.33)	[1]	$ 0.00	$ 0.40
Net income (loss) per share — basic (in usd per share)	$ (0.13)	[1]	$ (0.27)	[1]	$ (0.72)	$ 0.19
Net Income (loss) per share — diluted (1):
From continuing operations (in usd per share)	$ (0.13)	[1]	$ 0.06	[1]	$ (0.72)	$ (0.21)
From discontinued operations (in usd per share)	$ 0.00	[1]	$ (0.33)	[1]	$ 0.00	$ 0.40
Net income (loss) per share — diluted (in usd per share)	$ (0.13)	[1]	$ (0.27)	[1]	$ (0.72)	$ 0.19
Weighted average number of shares:
Basic (in shares)	7,585		7,887		7,570	7,887
Diluted (in shares)	7,585		7,887		7,570	7,899

[1] Amounts may not add due to rounding.

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Segment Reporting and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Reconciliation of Revenue from Segments to Consolidated

The following table summarizes revenues by segment, including intersegment revenues (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Network Equipment		$21,100			$21,519			$42,046			$41,938
Network Integration	17,135			19,560			35,117			35,075
Before intersegment adjustments	38,235			41,079			77,163			77,013
Intersegment adjustments	(60		)	(3,453		)	(83		)	(5,972		)
Total		$38,175			$37,626			$77,080			$71,041

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				Six months ended
	June 30,				June 30,
	2013		2012		2013		2012
Americas		$14,531		$13,035		$28,281		$25,883
Europe	21,869		23,277		45,290		42,906
Asia Pacific	1,775		1,314		3,509		2,252
Total		$38,175		$37,626		$77,080		$71,041

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

	June 30, 2013		December 31, 2012
Americas		$3,474		$2,099
Europe	1,524		1,590
Asia Pacific	40		46
Total		$5,038		$3,735

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

The following table provides selected Statement of Operations information by business segment (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Gross profit
Network Equipment	$	11,183		$	9,993		$	21,949		$	20,037
Network Integration	2,187			3,169			4,444			5,661
Total before intersegment adjustments	13,370			13,162			26,393			25,698
Corporate unallocated and intersegment adjustments(1)	2			150			6			295
Total	$	13,372		$	13,312		$	26,399		$	25,993
Depreciation expense
Network Equipment	$	283		$	230		$	583		$	459
Network Integration	52			57			105			116
Corporate	48			47			96			95
Total	$	383		$	334		$	784		$	670
Operating income (loss)
Network Equipment	$	(296	)	$	(337	)	$	(1,415	)	$	(1,767	)
Network Integration	675			1,605			1,366			2,675
Total before intersegment adjustments	379			1,268			(49		)	908
Corporate unallocated operating loss and adjustments (1)	(914		)	(2,512		)	(4,499		)	(5,797		)
Total	$	(535	)	$	(1,244	)	$	(4,548	)	$	(4,889	)

(1) Adjustments reflect the elimination of intersegment revenue and profit in inventory.

Reconciliation of Assets and Other Reconciling Items from Segment to Consolidated

The following tables provide selected Balance Sheet and Statement of Cash Flow information by business segment (in thousands):

	Six months ended
	June 30,
	2013		2012
Additions to Fixed Assets
Network Equipment	$	2,064	$	440
Network Integration	46		52
Corporate	6		76
Discontinued operations	—		1,290
Total	$	2,116	$	1,858

	June 30, 2013		December 31, 2012
Total Assets
Network Equipment		$45,249		$44,445
Network Integration	45,071		47,400
Corporate and intersegment eliminations	30,267		36,720
Total		$120,587		$128,565

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Share Repurchase

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Share Repurchase

Share Repurchase

On December 3, 2012, the Company announced that the Board of Directors approved a repurchase of shares of Common Stock of the Company in an amount up to $10.0 million under a stock repurchase program that expires on December 31, 2013. Under this program the Company purchased 141,412 shares at an average price of $9.59 per share and a total cost of approximately $1.4 million during the six months ended June 30,2013. For the program to date as of June 30, 2013, the Company has purchased 181,717 shares at an average price of $9.93 per share and a total cost of approximately $1.8 million leaving $8.2 million for future purchases.

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Segment Reporting and Geographic Information (Statement of Operations Information by Business Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Gross profit
Gross Profit	$ 13,372		$ 13,312		$ 26,399		$ 25,993
Depreciation expense
Depreciation expense	383		334		784		670
Operating income (loss)
Operating Income (Loss)	(535)		(1,244)		(4,548)		(4,889)
Total before intersegment adjustments [Member]
Gross profit
Gross Profit	13,370		13,162		26,393		25,698
Operating income (loss)
Operating Income (Loss)	379		1,268		(49)		908
Network Equipment [Member]
Gross profit
Gross Profit	11,183		9,993		21,949		20,037
Depreciation expense
Depreciation expense	283		230		583		459
Operating income (loss)
Operating Income (Loss)	(296)		(337)		(1,415)		(1,767)
Network Integration [Member]
Gross profit
Gross Profit	2,187		3,169		4,444		5,661
Depreciation expense
Depreciation expense	52		57		105		116
Operating income (loss)
Operating Income (Loss)	675		1,605		1,366		2,675
Corporate Unallocated and Intersegment Adjustments [Member]
Gross profit
Gross Profit	2	[1]	150	[1]	6	[1]	295	[1]
Operating income (loss)
Operating Income (Loss)	(914)	[1]	(2,512)	[1]	(4,499)	[1]	(5,797)	[1]
Corporate [Member]
Depreciation expense
Depreciation expense	$ 48		$ 47		$ 96		$ 95

[1] Adjustments reflect the elimination of intersegment revenue and profit in inventory.

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Share-Based Compensation (Share-Based Compensation Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 83	[1]	$ 232	[1]	$ 302	[1]	$ 444	[1]
Cost of Goods Sold [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	26		8		43		20
Product Development and Engineering [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	15		10		25		21
Selling, General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 42		$ 214		$ 234		$ 403

[1] Income tax benefits realized from stock option exercises and similar awards were immaterial in both periods.

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Product Warranty (Narrative) (Details) (USD $) In Thousands, unless otherwise specified			6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Minimum [Member]	Jun. 30, 2013 Maximum [Member]
Product Warranties Disclosures [Abstract]
Product warranty liability	$ 875	$ 1,006
Standard Product Warranty Period [Line Items]
Standard product warranty period			90 days	3 years

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Product Warranty (Change in Product Warranty Liability) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Beginning balance	$ 1,006
Cost of warranty claims	(168)
Accruals for product warranties	37
Total	$ 875

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Inventories

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are stated at the lower of cost or market and consist of materials, labor and overhead. Cost is determined by the first in, first out method. Inventories, net of reserves, consisted of the following (in thousands):

	June 30, 2013		December 31, 2012
Raw materials		$5,740		$4,348
Work-in process	1,051		1,368
Finished goods	12,969		16,728
Total		$19,760		$22,444

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Organization and Summary of significant accounting policies (Narrative) (Details)	6 Months Ended
	Jun. 30, 2013 segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of Business Segments	2

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Segment Reporting and Geographic Information (Revenues by Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	$ 38,175	$ 37,626	$ 77,080	$ 71,041
Before intersegment adjustments [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	38,235	41,079	77,163	77,013
Network Equipment [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	21,100	21,519	42,046	41,938
Network Integration [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	17,135	19,560	35,117	35,075
Intersegment adjustments [Member]
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenue	$ (60)	$ (3,453)	$ (83)	$ (5,972)

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2013

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 ("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 income (loss) per share. Diluted net income 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 also 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.

Outstanding stock options to purchase 0.4 million shares were excluded from the computation of dilutive shares for the three months ended June 30,2013 because of the net loss. Outstanding stock options to purchase 0.5 million shares were excluded in the computation of dilutive shares for the three months ended June 30, 2012 because of the net loss. In addition, for the three months ended June 30,2013 there were no potentially dilutive shares, and in 2012, there were 6,357 potentially dilutive shares excluded from the calculation of diluted net loss per share because they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

Outstanding stock options to purchase 0.4 million shares were excluded from the computation of dilutive shares for the six months ended June 30,2013 because of the net loss. Outstanding stock options to purchase 0.5 million shares were included in the computation of dilutive shares for the six months ended June 30, 2012 because of the net income. In addition, for the six months ended June 30,2013 there were no potentially dilutive shares, and in 2012, there were 6,407 potentially dilutive shares excluded from the calculation of diluted net loss per share because they were anti-dilutive. Treasury shares are excluded from the number of shares outstanding.

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Credit Risk

6 Months Ended

Jun. 30, 2013

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 institutions and accounts receivable due from customers. MRV evaluates the collectability of accounts receivable based on a combination of factors. If the Company 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 it reasonably believes to be collectable from the customer. For all other customers, the Company records allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment, and historical experience. If the financial conditions of MRV's customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future.

The following table summarizes the changes in the allowance for doubtful accounts during the six months ended June 30, 2013(in thousands):

	Six months ended
	June 30, 2013
Balance at beginning of period		$1,733
Charged to expense	250
Write-offs	(3		)
Foreign currency translation adjustment	(21		)
Balance at end of period		$1,959

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Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012
Cash flows from operating activities:
Net (loss) income	$ (5,427)		$ 1,498
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	784		1,131
Share-based compensation expense	302		492
Provision for doubtful accounts	250		14
Deferred income taxes	(164)		(269)
Gain from settlement of deferred consideration obligation	0		(2,314)
Loss on disposition of property and equipment	17		17
Gain on sale of subsidiary	0		(7,936)
Impairment of goodwill and other intangibles	0		3,711
Changes in operating assets and liabilities:
Accounts receivable	(1,593)		10,786
Inventories	2,512		(3,087)
Other assets	3,281		(556)
Accounts payable	(1,818)		(5,933)
Accrued liabilities	1,928		(438)
Income tax payable	(12)		(1,914)
Deferred revenue	973		1,814
Other current liabilities	172		(163)
Net cash provided by (used in) operating activities	1,205		(3,147)
Cash flows from investing activities:
Purchases of property and equipment	(2,116)		(1,858)
Proceeds from sale of property and equipment	0		96
Purchases of intangibles	0		(400)
Proceeds from sale of subsidiaries, net of cash acquired	0		16,791
Release of restricted time deposits	(4)		(1,036)
Net cash (used in) provided by investing activities	(2,120)		13,593
Cash flows from financing activities:
Net proceeds from exercise of stock options	0		1
Purchase of treasury shares	(1,356)		0
Borrowings on short-term debt	3,102		10,759
Payments on short-term debt	(5,535)		(13,391)
Borrowing on long-term obligations	0		427
Dividend payment	0		(47,325)
Payments on long-term obligations	0		(200)
Net cash used by financing activities	(3,789)		(49,729)
Effect of exchange rate changes on cash and cash equivalents	43		(1,061)
Net decrease in cash and cash equivalents	(4,661)		(40,344)
Cash and cash equivalents, beginning of year	40,609	[1]	83,716	[1]
Cash and cash equivalents, end of period	35,948		43,372
Supplemental disclosure of cash flow information:
Cash paid during year for interest — continuing operations	169		311
Cash paid during year for interest — discontinued operations	0		10
Cash paid during year for interest — Total	169		321
Cash paid during year for income taxes — continuing operations	0		(5)
Cash paid during year for income taxes — discontinued operations	0		3,127
Cash paid during year for income taxes — Total	$ 0		$ 3,122

[1] The Cash and cash equivalents at the beginning of the periods presented include $25,126 from discontinued operations for June 30, 2012.

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Litigation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	6 Months Ended		1 Months Ended	3 Months Ended
	Jun. 24, 2013	Jun. 30, 2013	Apr. 08, 2013	Nov. 30, 2010 Purported Stockholder Derivative and Securities Class Action Lawsuits [Member]	Aug. 31, 2008 U. S. District Court in the Central District of California [Member] Purported Stockholder Derivative and Securities Class Action Lawsuits [Member] claims	Aug. 31, 2008 Superior Court of the State of California [Member] Purported Stockholder Derivative and Securities Class Action Lawsuits [Member] claims
Loss Contingencies [Line Items]
Purported stockholder derivative and securities class action lawsuits					5	1
Litigation settlement, amount				$ (10.0)
Stipulation of settlement, insurance carriers payment			2.5
Stipulation of settlement, payment to plaintiff			0.5
Stipulation of settlement, payment to plaintiff, warrants		250,000	250,000
Stipulation of settlement, payment to plaintiff, warrants, term		5 years	5 years
Litigation settlement, corporate governance reform actions, implementation period	120 days
Litigation settlement, expense		$ 1.8

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Inventories (Net of Reserves) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Inventory Disclosure [Abstract]
Raw materials	$ 5,740	$ 4,348
Work-in process	1,051	1,368
Finished goods	12,969	16,728
Total	$ 19,760	$ 22,444

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Indemnification Obligations

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Indemnification Obligations

Indemnification Obligations

In connection with the sale by MRV of Source Photonics, Inc. and related entities 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, indemnification obligations related to intellectual property extend until the third anniversary of the closing, indemnification obligations related to employee benefits, environmental liabilities and taxes extend until their applicable statute of limitations has expired 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. In connection with the sale by MRV of CES in March 2012, MRV agreed to indemnify the buyer for the representations and warranties made in the sale purchase agreement, and we have purchased an insurance policy to protect us against any claims of indemnification related to the representations and warranties. Our sale purchase agreements for the sale of Pedrena and Alcadon include customary indemnification obligations. In addition, in connection with the sale of Pedrena the Company and the buyer entered into a Representations and Warranties Agreement that contains an arrangement whereby if the Company does not obtain a representations and warranties insurance policy within 90 days of close of the sale transaction, and if the Company's cash falls below $20 million prior to December 31, 2013, the Company will deposit 1.5 million euros (or $2.0 million U.S. equivalent as of December 31, 2012) in an escrow account to secure its indemnification obligations under the Representations and Warranties Agreement. The Company has elected not to obtain the insurance policy.

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Product Warranty

6 Months Ended

Jun. 30, 2013

Product Warranties Disclosures [Abstract]

Product Warranty

Product Warranty

As of June 30, 2013 and December 31, 2012, MRV's product warranty liability recorded in accrued liabilities was $0.9 million and $1.0 million, respectively. MRV accrues for warranty costs as part of cost of goods sold 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 change in product warranty liability during the six months ended June 30, 2013 (in thousands):

	Six months ended
	June 30, 2013
Beginning balance		$1,006
Cost of warranty claims	(168		)
Accruals for product warranties	37
Total		$875

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Accounts Receivable Factoring

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounts Receivable Factoring

Accounts Receivable Factoring

The Company has agreements with unrelated third parties for the factoring of specific accounts receivable in Italy in order to reduce the amount of working capital required to fund such receivables. As of June 30, 2013, the Company's credit facility agreements permit the factoring of up to €23.0 million, or $29.5 million, worth of receivables in operations outside of the United States. The factoring of accounts receivable under these agreements is accounted for as a sale in accordance with ASC 860 Transfers and Servicing. Proceeds on the transfer reflect the face value of the account less a discount. The discount is recorded as a charge in "interest" in the consolidated statement of income in the period of the sale. Net funds received reduced accounts receivable outstanding while increasing cash. The Company has no significant retained interests or servicing liabilities related to the accounts receivable that have been sold in Italy.

At June 30, 2013, and December 31, 2012, the face amount of total outstanding accounts receivable pursuant to these agreements was $26.3 million and $29.5 million, respectively. The related outstanding balances due from the factor were $14.4 million and $13.3 million as of June 30, 2013 and December 31, 2012, respectively. The related losses on sale were $0.1 million and $0.1 million for the three months ended June 30, 2013 and June 30, 2012, and $0.1 million and $0.1 million for the six months ended June 30, 2013 and June 30, 2012.

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Litigation

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

In connection with the Company's past stock option grant practices, MRV and certain of its former directors and officers have been subjected to a number of stockholder lawsuits. In June 2008, the Company announced that our Board of Directors, based on information provided by management, and in consultation with management, concluded that the financial statements and the related reports of our independent public accountants should not be relied upon due to the Company's intention to restate its financial results from 2002 through 2008 to correct its accounting for option grants and other issues and a restatement of the Company's financial statements was filed in its Annual Report on Form 10-K for the year ended December 31, 2008 in October 2009.

From June to August 2008, five purported stockholder derivative and securities class action lawsuits were filed in the U.S. District Court in the Central District of California and one derivative lawsuit was filed in the Superior Court of the State of California against the Company and certain of our former officers and directors. The five lawsuits filed in the Central District of California were consolidated. Claims were asserted under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder. In November 2010, the judge overseeing the securities class action lawsuits gave final approval to a stipulated $10.0 million settlement agreement, which was covered by our director and officer insurance policies. The federal and state derivative lawsuits were not settled and continued to be litigated.

As of January 4, 2013, all pending litigation in the federal and state derivative actions was stayed by agreement of the parties pending final Federal Court approval of a settlement between derivative plaintiffs, individual defendants and the Company. On April 8, 2013 the Federal Court preliminarily approved a Stipulation of Settlement (the "Settlement Stipulation"), which includes, among other things, (a) a release of all claims relating to the derivative lawsuits for the Company, the individual defendants and the plaintiffs; (b) a provision that $2.5 million in cash be paid to the Company by the Company's insurance carriers; (c) a payment of attorney's fees to plaintiffs' counsel of up to $0.5 million in cash and 250,000five-year term warrants to purchase the Company's Common Stock at a strike price equal to the closing price of the Company's Common Stock on the day the Court's judgment approving the settlement becomes final (as defined in the Settlement Stipulation); and (d) continued payment by the Company of applicable reasonable attorneys' fees for the individual defendants. On June 6, 2013 the Federal Court granted final approval of the Settlement and on June 13, 2013 entered Judgment dismissing the federal derivative action with prejudice. On June 24, 2013, the State Court entered a dismissal with prejudice of the state derivative action. The Company is now required to undertake certain corporate governance reform actions within 120 days, many of which have already been implemented.

A majority of the costs related to the Company's and defendants' defense of these actions was paid by the Company's insurance carriers under its director and officer insurance policies, including the securities class action settlement. Insurance proceeds paid to the Company upon settlement of the derivative litigation were $1.0 million. However, MRV has paid and accrued $1.8 million in payment for services of defense counsel and other parties through June 30, 2013 above the insured amount. We have agreed to pay reasonable attorney fees and expenses for the individual defendants in the Stipulation, and will continue to incur our own legal expenses until this matter is finally resolved and non-appealable. Any such future obligations are not determinable at this time.

From time to time, MRV has received 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. The Company has been involved in such discussions with Alcatel-Lucent SA, International Business Machines, Ortel Communications,Ltd., Nortel Networks Corporation, Rockwell Automation,Inc., The Lemelson Foundation, Finisar Corporation and Apcon,Inc. in the past.

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

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 06, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	MRV COMMUNICATIONS INC
Entity Central Index Key	0000887969
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,500,954

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Discontinued Operations

6 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On March 29, 2012, the Company sold all of the issued and outstanding capital stock of CES. Prior to its disposition, CES was part of Network Equipment. The historical financial results of CES prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded net income of $6.0 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to CES.

On October12, 2012, the Company completed the sale of all of the shares of its subsidiary, Alcadon. Prior to its disposition, Alcadon was part of Network Integration. The historical financial results of Alcadon prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded a net loss of $2.1 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to Alcadon.

On October 16, 2012, the Company completed the sale of all of the shares of its subsidiary, Pedrena. Pedrena is the parent company of Interdata, and Interdata in turn is the parent company of J3TEL. Prior to its disposition, Pedrena was part of Network Integration. The historical financial results of Pedrena prior to its sale have been reclassified as discontinued operations for all periods presented. The Company recorded a net loss of $0.7 million from discontinued operations, net of income tax expense for the six months ended June 30, 2012 related to Pedrena.

In 2012 we entered into distribution agreements with Alcadon and Pedrena whereby the Company continues to sell its products to both disposed entities. The amount of intercompany revenue that was previously eliminated from the Company's financial statements in consolidation for the three months ended June 30, 2012 was $1.6 million and $1.7 million for Alcadon and Pedrena, respectively. The amount of intercompany revenue that was previously eliminated from the Company's financial statements in consolidation for the six months ended June 30, 2012 was $2.7 million and $3.0 million million for Alcadon and Pedrena, respectively.