MRV to Review Historical Option Practices and to Review Accounting for Earnouts and Profit Sharing in Two European Subsidiaries and Expects to Restate Financial Statements

Business Wire, June 6, 2008

CHATSWORTH, Calif. -- MRV COMMUNICATIONS, INC. (Nasdaq:MRVC) today announced that as a result of the recent discovery and preliminary analysis by management of information relating to the company's stock option practices during the period from 2002 through the first quarter of 2004, the company's board of directors has established a special committee of independent directors to review the company's historical stock option practices and related accounting. The special committee will be assisted by independent legal counsel and outside accounting experts.

Beginning in the middle of 2006 through early 2007, MRV conducted an informal and voluntary review of its share-based award practices and concluded that there was no evidence that grant dates of options were designed to occur on dates with more favorable exercise prices (i.e., on dates with lower market prices). However, based on the information now being reviewed, management has determined that it is likely that the conclusions reached from the earlier review were incorrect with respect to certain options granted during the period from 2002 through the first quarter of 2004. Management has so informed MRV's board of directors, which, in turn, has established the special committee to review the company's historical stock option practices and related accounting and the bases upon which the earlier conclusions were made.

The information related to the stock option granting practices of 2002 to 2004 was discovered in the course of reviewing transactions related to two of MRV's European subsidiaries, Turnkey Communications in Switzerland and EDSLan SpA in Italy. However, the stock option grants in question are not limited to these two subsidiaries. For Turnkey, the transaction issues relate to the accounting of earn-out formulae for certain employees and co-founders and for EDSLan, the transaction issues relate to the accrual of expenses for profit sharing arrangements with the former owners of the subsidiary who continued to manage it after MRV's incremental acquisition of the equity of EDSLan to date. The review of the special committee is also expected to encompass a reconsideration and investigation of these transactions.

The option practices under review occurred during periods prior to the 2006 adoption of MRV's stock option policy, which is most recently described in MRV's 2007 Annual Report of Form 10-K, as amended, filed with the Securities and Exchange Commission ("SEC") on April 29, 2008. Although the special committee's review has just begun, management's preliminary analysis is that, pursuant to the requirements of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) that was in effect during the periods under review, the actual accounting measurement dates for certain stock option grants from 2002 to the first quarter of 2004 differed from the stated dates of grant previously used in accounting for such grants. The differences in these measurement dates result in non-cash, stock-based compensation charges that were not recorded in the Company's financial statements during the applicable periods. The compensation expense is charged to results of operations over the vesting period which is generally four years. Accordingly, the grants during this period would impact the financial statements for the period from 2002 to 2008. These charges have the effect of increasing reported losses and decreasing retained earnings from amounts reported in the Company's historical financial statements.

Based on the analyses of the above issues conducted by management to date and as a result of the adjustments required from such analyses, MRV expects to restate its financial statements for the impacted periods.

MRV's management and members of the board's audit committee have discussed the matters disclosed in this press release with Ernst & Young LLP, MRV's independent registered public accounting firm.

Based on the information provided by management, on June 5, 2008 MRV's board, in consultation with management, determined that financial statements and the related reports of MRV's independent public accountants, earnings press releases, and similar communications previously issued by MRV should not be relied upon as a consequence of the pending restatement of its historical financial statements.

As the special committee's review is just beginning, the aggregate amount of additional non-cash stock-based compensation expense has not been determined, nor has the amount of such expenses or accruals to be recorded in any specific period or in any future period been determined. Additional information may become available through the inquiry of the special committee, which could cause potential unrecorded compensation expenses and other accruals to change as well cause as the fiscal years impacted to change from the information upon which the board's decision of June 5, 2008 on these matters was based. Further, the special committee's review may lead to the discovery of additional related or unrelated transactions that require additional adjustments. The tax consequences that may result from these matters have not yet been determined and any additional tax liabilities could also have a material adverse impact on MRV's financial position or liquidity. Once the special committee's review is complete, the company will make a final determination as to the amount of unrecorded stock-based compensation costs and other accruals that should be recorded in the Company's financial statements and the periods affected.