Edgar Filing: Reis, Inc.

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 001-12917

REIS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland				13-3926898
(State or Other Jurisdiction of Incorporation or Organization)				(I.R.S. Employer Identification No.)


530 Fifth Avenue, New York, NY				10036
(Address of Principal Executive Offices)				(Zip Code)

(212) 921-1122

(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 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 þ No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes þ No ¨

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


Large accelerated filer ¨	Accelerated filer þ	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 Act). Yes ¨ No þ

The number of the Registrant’s shares of common stock outstanding was 10,891,820 as of April 29, 2013.

TABLE OF CONTENTS


		Page Number
PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Consolidated Balance Sheets at March 31, 2013 (unaudited) and December 31, 2012		3
	Consolidated Statements of Operations (unaudited) For the Three Months Ended March 31, 2013 and 2012		4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the Three Months Ended March 31, 2013		5
	Consolidated Statements of Cash Flows (unaudited) For the Three Months Ended March 31, 2013 and 2012		6
	Notes to Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30
Item 4T.	Controls and Procedures		30

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings		30
Item 1A.	Risk Factors		32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3.	Defaults Upon Senior Securities		32
Item 4.	Mine Safety Disclosures		32
Item 5.	Other Information		32
Item 6.	Exhibits		32
	Signatures		33

Part I. Financial Information

Item 1. Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,658,903	$	4,960,850
Restricted cash and investments		216,285		216,125
Accounts receivable, net		5,937,109		10,694,201
Prepaid and other assets		1,107,877		1,438,829

Total current assets		13,920,174		17,310,005
Furniture, fixtures and equipment, net of accumulated depreciation of $1,889,123 and $1,828,199, respectively		782,078		738,490
Intangible assets, net of accumulated amortization of $25,202,014 and $24,067,250, respectively		16,284,307		16,332,596
Deferred tax asset, net		8,798,420		8,557,420
Goodwill		54,824,648		54,824,648
Other assets		248,730		271,257

Total assets	$	94,858,357	$	98,034,416


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of debt	$	—	$	—
Accrued expenses and other liabilities		2,382,630		3,902,206
Liability for option cancellations		385,497		296,523
Deferred revenue		16,879,672		18,230,332
Liabilities attributable to discontinued operations		458,346		460,251

Total current liabilities		20,106,145		22,889,312
Other long-term liabilities		563,112		588,484

Total liabilities		20,669,257		23,477,796

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,891,820 and 10,782,643 shares issued and outstanding, respectively		217,836		215,652
Additional paid in capital		101,382,834		102,002,972
Retained earnings (deficit)		(27,411,570)		(27,662,004)

Total stockholders’ equity		74,189,100		74,556,620

Total liabilities and stockholders’ equity	$	94,858,357	$	98,034,416

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended March 31,
	2013		2012

Subscription revenue	$	8,234,328	$	7,298,372
Cost of sales of subscription revenue		1,681,404		1,845,714

Gross profit		6,552,924		5,452,658

Operating expenses:
Sales and marketing		1,968,966		1,729,319
Product development		721,566		513,594
General and administrative expenses		3,169,311		2,952,268

Total operating expenses		5,859,843		5,195,181

Other income (expenses):
Interest and other income		2,198		16,065
Interest expense		(28,213)		(53,163)

Total other income (expenses)		(26,015)		(37,098)

Income before income taxes and discontinued operations		667,066		220,379
Income tax expense		265,000		84,000

Income from continuing operations		402,066		136,379
(Loss) from discontinued operations, net of income tax (benefit) of $(99,000) and $(79,000), respectively		(151,632)		(14,345,255)

Net income (loss)	$	250,434	$	(14,208,876)


Per share amounts – basic:
Income from continuing operations	$	0.04	$	0.01

Net income (loss)	$	0.02	$	(1.34)


Per share amounts – diluted:
Income from continuing operations	$	0.04	$	0.01

Net income (loss)	$	0.02	$	(1.29)


Weighted average number of common shares outstanding:
Basic		10,828,396		10,623,575

Diluted		11,347,751		11,011,394

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(Unaudited)


							Retained		Total
	Common Shares				Paid in		Earnings		Stockholders’
	Shares		Amount		Capital		(Deficit)		Equity

Balance, January 1, 2013		10,782,643	$	215,652	$	102,002,972	$	(27,662,004)	$	74,556,620

Shares issued for vested employees restricted stock units		109,177		2,184		(2,184)		—		—
Stock based compensation, net		—		—		(617,954)		—		(617,954)
Net income		—		—		—		250,434		250,434

Balance, March 31, 2013		10,891,820	$	217,836	$	101,382,834	$	(27,411,570)	$	74,189,100

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Three Months Ended March 31,
	2013		2012

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	250,434	$	(14,208,876)
Adjustments to reconcile to net cash provided by operating activities:
Deferred tax provision		166,000		5,000
Depreciation		78,496		84,731
Amortization of intangible assets		1,134,764		1,272,521
Stock based compensation charges		491,521		557,557
Changes in assets and liabilities:
Restricted cash and investments		(160)		(214)
Accounts receivable, net		4,757,092		3,348,239
Prepaid and other assets		(53,521)		3,001,680
Accrued expenses and other liabilities		(1,546,853)		9,688,673
Liability for option cancellations		88,974		(11,166)
Deferred revenue		(1,350,660)		(949,079)

Net cash provided by operating activities		4,016,087		2,789,066


CASH FLOWS FROM INVESTING ACTIVITIES:
Web site and database development costs		(1,086,475)		(938,521)
Furniture, fixtures and equipment additions		(122,084)		(36,122)

Net cash (used in) investing activities		(1,208,559)		(974,643)


CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt		—		(1,896,979)
Payments for restricted stock units		(1,109,475)		(751,377)

Net cash (used in) financing activities		(1,109,475)		(2,648,356)

Net increase (decrease) in cash and cash equivalents		1,698,053		(833,933)
Cash and cash equivalents, beginning of period		4,960,850		22,152,802

Cash and cash equivalents, end of period	$	6,658,903	$	21,318,869


SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	—	$	26,527

Cash paid during the period for income taxes, net of refunds	$	15,183	$	9,639


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for vested employee restricted stock units	$	2,184	$	2,308

Disposal of fully depreciated furniture, fixtures and equipment	$	17,572	$	19,638

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	*Organization and Business*

Reis, Inc. is a Maryland corporation. The primary business of Reis, Inc. and its consolidated subsidiaries (“Reis” or the “Company”) is providing commercial real estate market information and analytical tools for its subscribers, through its Reis Services subsidiary. For disclosure and financial reporting purposes, this business is referred to as the Reis Services segment.

Reis Services

Reis Services, including its predecessors, was founded in 1980. Reis maintains a proprietary database containing detailed information on commercial properties in metropolitan markets and neighborhoods throughout the U.S. The database contains information on apartment, office, retail, warehouse/distribution, flex/research & development and self storage properties, and is used by real estate investors, lenders and other professionals to make informed buying, selling and financing decisions. In addition, Reis data is used by debt and equity investors to assess, quantify and manage the risks of default and loss associated with individual mortgages, properties, portfolios and real estate backed securities. Reis currently provides its information services to many of the nation’s leading lending institutions, equity investors, brokers and appraisers.

Reis, through its flagship institutional product, Reis SE, and through its small business product, ReisReports, provides online access to a proprietary database of commercial real estate information and analytical tools designed to facilitate debt and equity transactions as well as ongoing asset and portfolio evaluations. Depending on the product, users have access to market trends and forecasts at metropolitan and neighborhood levels throughout the U.S. and/or detailed building-specific information such as rents, vacancy rates, lease terms, property sales, new construction listings and property valuation estimates. Reis’s products are designed to meet the demand for timely and accurate information to support the decision-making of property owners, developers, builders, banks and non-bank lenders, equity investors and service providers. These real estate professionals require access to timely information on both the performance and pricing of assets, including detailed data on market transactions, supply, absorption, rents and sale prices. This information is critical to all aspects of valuing assets and financing their acquisition, development and construction.

Discontinued Operations – Residential Development Activities

Reis was originally formed on January 8, 1997 as Wellsford Real Properties, Inc. (“Wellsford”). Wellsford acquired the Reis Services business by merger in May 2007 (the “Merger”). Wellsford’s primary operating activities immediately prior to the Merger, and conducted through its subsidiaries, were the development, construction and sale of its three residential projects and its approximate 23% ownership interest in the Reis Services business. The Company completed the sale of the remaining units at its Colorado project in September 2009, sold its Claverack, New York project in bulk in February 2010, sold its remaining project in East Lyme, Connecticut in bulk in April 2011, and settled construction defect litigation at the aforementioned Colorado project in 2012.

See Note 3 for additional information regarding the Company’s segments.

2.	*Summary of Significant Accounting Policies*

Basis of Presentation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries. Investments in entities where the Company does not have a controlling interest are accounted for under the equity method of accounting. These investments were initially recorded at cost and were subsequently adjusted for the Company’s proportionate share of the investment’s income (loss) and additional contributions or distributions. All inter-company accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

Discontinued Operations

The Company determined, as a result of the April 2011 sale of property in East Lyme, Connecticut, that the Residential Development Activities segment, including certain general and administrative costs that supported that segment’s operations, should be presented as a discontinued operation. As a result of this determination and the fact that the historic operations and cash flows can be clearly distinguished, the operating results of the Residential Development Activities segment and related general and administrative costs are aggregated for separate presentation apart from continuing operating results of the Company in the consolidated financial statements for all periods presented.

Quarterly Reporting

The accompanying consolidated financial statements and notes of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared under Generally Accepted Accounting Principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s balance sheets, statements of operations, statement of changes in stockholders’ equity and statements of cash flows have been included and are of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 13, 2013. The consolidated statements of operations and changes in cash flows for the three months ended March 31, 2013 and 2012 are not necessarily indicative of full year results.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

From time to time, the Company has been, is or may in the future be a defendant in various legal actions arising in the normal course of business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. The outcome of any litigation is uncertain; it is possible that a judgment in any legal actions to which the Company is a party, or which are proposed or threatened, will have a material adverse effect on the consolidated financial statements. See Note 11.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

3.	*Segment Information*

The Company is organized into two separately managed segments: the Reis Services segment and the discontinued Residential Development Activities segment. The following tables present condensed balance sheet and operating data for these segments:


(amounts in thousands)

Condensed Balance Sheet Data March 31, 2013	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Assets
Current assets:
Cash and cash equivalents	$	6,597	$	—	$	62	$	6,659
Restricted cash and investments		216		—		—		216
Accounts receivable, net		5,937		—		—		5,937
Prepaid and other assets		315		—		793		1,108

Total current assets		13,065		—		855		13,920
Furniture, fixtures and equipment, net		751		—		31		782
Intangible assets, net		16,284		—		—		16,284
Deferred tax asset, net		—		—		8,798		8,798
Goodwill		57,203		—		(2,378)		54,825
Other assets		249		—		—		249

Total assets	$	87,552	$	—	$	7,306	$	94,858


Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	—	$	—	$	—	$	—
Accrued expenses and other liabilities		1,329		—		1,054		2,383
Liability for option cancellations		—		—		385		385
Deferred revenue		16,880		—		—		16,880
Liabilities attributable to discontinued operations		—		271		187		458

Total current liabilities		18,209		271		1,626		20,106
Other long-term liabilities		563		—		—		563
Deferred tax liability, net		16,591		—		(16,591)		—

Total liabilities		35,363		271		(14,965)		20,669
Total stockholders’ equity		52,189		(271)		22,271		74,189

Total liabilities and stockholders’ equity	$	87,552	$	—	$	7,306	$	94,858



(A) Includes the assets and liabilities of the Company’s discontinued Residential Development Activities segment, to the extent that such assets and liabilities existed at the date presented. (B) Includes cash, other assets and liabilities not specifically attributable to or allocable to a specific operating segment.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)


(amounts in thousands)

Condensed Balance Sheet Data December 31, 2012	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Assets
Current assets:
Cash and cash equivalents	$	4,212	$	—	$	749	$	4,961
Restricted cash and investments		216		—		—		216
Accounts receivable, net		10,694		—		—		10,694
Prepaid and other assets		219		—		1,220		1,439

Total current assets		15,341		—		1,969		17,310
Furniture, fixtures and equipment, net		705		—		33		738
Intangible assets, net		16,333		—		—		16,333
Deferred tax asset, net		—		—		8,557		8,557
Goodwill		57,203		—		(2,378)		54,825
Other assets		271		—		—		271

Total assets	$	89,853	$	—	$	8,181	$	98,034


Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	—	$	—	$	—	$	—
Accrued expenses and other liabilities		2,556		—		1,346		3,902
Liability for option cancellations		—		—		297		297
Deferred revenue		18,230		—		—		18,230
Liabilities attributable to discontinued operations		—		271		189		460

Total current liabilities		20,786		271		1,832		22,889
Other long-term liabilities		588		—		—		588
Deferred tax liability, net		15,786		—		(15,786)		—

Total liabilities		37,160		271		(13,954)		23,477
Total stockholders’ equity		52,693		(271)		22,135		74,557

Total liabilities and stockholders’ equity	$	89,853	$	—	$	8,181	$	98,034

(A)

Includes the assets and liabilities of the Company’s discontinued Residential Development Activities segment, to the extent that such assets and liabilities existed at the date presented.

(B)

Includes cash, other assets and liabilities not specifically attributable to or allocable to a specific operating segment.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)


(amounts in thousands)

Condensed Operating Data for the Three Months Ended March 31, 2013	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	8,234	$	—	$	—	$	8,234
Cost of sales of subscription revenue		1,681		—		—		1,681

Gross profit		6,553		—		—		6,553

Operating expenses:
Sales and marketing		1,969		—		—		1,969
Product development		722		—		—		722
General and administrative expenses		1,796		—		1,373		3,169

Total operating expenses		4,487		—		1,373		5,860
Other income (expenses):
Interest and other income		2		—		—		2
Interest expense		(28)		—		—		(28)

Total other income (expenses)		(26)		—		—		(26)

Income (loss) before income taxes and discontinued operations	$	2,040	$	—	$	(1,373)	$	667


(Loss) from discontinued operations, before income taxes	$	—	$	—	$	(251)	$	(251)


Condensed Operating Data for the Three Months Ended March 31, 2012	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	7,298	$	—	$	—	$	7,298
Cost of sales of subscription revenue		1,846		—		—		1,846

Gross profit		5,452		—		—		5,452

Operating expenses:
Sales and marketing		1,729		—		—		1,729
Product development		514		—		—		514
General and administrative expenses		1,643		—		1,309		2,952

Total operating expenses		3,886		—		1,309		5,195
Other income (expenses):
Interest and other income		15		—		1		16
Interest expense		(53)		—		—		(53)

Total other income (expenses)		(38)		—		1		(37)

Income (loss) before income taxes and discontinued operations	$	1,528	$	—	$	(1,308)	$	220


(Loss) from discontinued operations, before income taxes	$	—	$	(14,424)	$	—	$	(14,424)

(A)

Includes the results of the Company’s discontinued Residential Development Activities segment, to the extent that such operations existed during the period presented.

(B)

Includes interest and other income, depreciation expense and general and administrative expenses that have not been allocated to the operating segments.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Reis Services

See Note 1 for a description of Reis Services’s business and products at March 31, 2013.

No individual customer accounted for more than 3.6% and 4.5% of Reis Services’s revenues for the three months ended March 31, 2013 and 2012, respectively.

The balance of outstanding accounts receivables of Reis Services at March 31, 2013 and December 31, 2012 follows:


	March 31, 2013		December 31, 2012

Accounts receivables	$	5,998,000	$	10,763,000
Allowance for doubtful accounts		(61,000)		(69,000)

Accounts receivables, net	$	5,937,000	$	10,694,000

Five subscribers accounted for an aggregate of approximately 33.3% of Reis Services’s accounts receivable at March 31, 2013, including three subscribers at or in excess of 4.0% with the largest representing 19.9%. Through April 26, 2013, the Company received payments of approximately $3,170,000 or 52.9% against the March 31, 2013 accounts receivable balance.

At March 31, 2013, no subscribers accounted for more than 5.3% of deferred revenue.

Discontinued Operations – Residential Development Activities

(Loss) from discontinued operations is comprised of the following:


(amounts in thousands)	For the Three Months Ended March 31,
	2013		2012

Litigation charge, net of recoveries (see Note 11)	$	—	$	(14,216)
Other income (expense), net		(251)		(208)

(Loss) from discontinued operations before income tax		(251)		(14,424)
Income tax expense (benefit) on discontinued operations		(99)		(79)

(Loss) income from discontinued operations, net of income tax expense (benefit)	$	(152)	$	(14,345)

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259 unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, one of its subsidiaries (Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”)), and the construction manager/general contractor for the project (Tri-Star Construction West, LLC (“Tri-Star”)) were found jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. The Company recorded a charge of $14,216,000 during the first quarter of 2012. On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis reached a settlement with the plaintiff, the Gold Peak homeowners association, providing for a total payment by Reis of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge. In December 2012, the Company recovered $712,500, which offset a portion of the previously recorded charge, resulting in the net litigation charge for the year ended December 31, 2012 of approximately $11,547,000. No recoveries occurred during the three months ended March 31, 2013. For additional information pertaining to the Gold Peak litigation, see Note 11.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

4.	*Restricted Cash and Investments*

Restricted cash and investments represents a security deposit for the 530 Fifth Avenue corporate office space. The Company provided the lessor a bank-issued letter of credit, which is fully collateralized by a certificate of deposit issued by that bank. The restricted cash balance was approximately $216,000 at March 31, 2013 and December 31, 2012.

5.	*Intangible Assets*

The amount of identified intangible assets, including the respective amounts of accumulated amortization, are as follows:


	March 31, 2013		December 31, 2012
Database	$	15,703,000	$	15,175,000
Accumulated amortization		(12,057,000)		(11,691,000)

Database, net		3,646,000		3,484,000

Customer relationships		14,100,000		14,100,000
Accumulated amortization		(5,688,000)		(5,444,000)

Customer relationships, net		8,412,000		8,656,000

Web site		8,883,000		8,325,000
Accumulated amortization		(5,669,000)		(5,220,000)

Web site, net		3,214,000		3,105,000

Acquired below market lease		2,800,000		2,800,000
Accumulated amortization		(1,788,000)		(1,712,000)

Acquired below market lease, net		1,012,000		1,088,000

Intangibles, net	$	16,284,000	$	16,333,000

The Company capitalized approximately $528,000 and $448,000 to the database intangible asset and $558,000 and $490,000 to the web site intangible asset during the three months ended March 31, 2013 and 2012, respectively.

Amortization expense for intangible assets aggregated approximately $1,135,000 for the three months ended March 31, 2013, of which approximately $366,000 related to the database, which is charged to cost of sales, approximately $244,000 related to customer relationships, which is charged to sales and marketing expense, approximately $449,000, related to web site development, which is charged to product development expense, and approximately $76,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,273,000 for the three months ended March 31, 2012, of which approximately $655,000 related to the database, approximately $246,000 related to customer relationships, approximately $295,000 related to web site development, and approximately $77,000 related to the value ascribed to the below market terms of the office lease.

6.	*Debt*

In October 2012, Reis Services, as borrower, and the Company, as guarantor, entered into a loan and security agreement with Capital One, National Association, as lender, for a $10,000,000 revolving credit facility (the “Revolver”). The Revolver has a three year term expiring on October 16, 2015, and any borrowings bear interest at a rate of LIBOR + 2.00% per annum (for LIBOR loans) or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans) and is subject to an unused facility fee of 0.25% per annum. The Company paid a commitment fee of $50,000 in connection with the closing. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the agreement.

No debt was outstanding at March 31, 2013 and December 31, 2012.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

7.	*Income Taxes*

The components of the income tax expense (benefit) are as follows:


	For the Three Months Ended March 31,
	2013		2012
Current Federal alternative minimum tax (“AMT”) expense	$	—	$	—
Deferred Federal tax expense		138,000		4,000
Deferred state and local tax expense		28,000		1,000

Consolidated income tax expense, including taxes attributable to discontinued operations (A)		166,000		5,000
Less deferred income tax (benefit) attributable to discontinued operations		(99,000)		(79,000)

Income tax expense (B)	$	265,000	$	84,000


(A) Includes income taxes attributable to income from discontinued operations. (B) Reflects the tax expense from continuing operations as reported on the consolidated statements of income for the periods presented.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $9,456,000 and $9,622,000 at March 31, 2013 and December 31, 2012, respectively, of which $658,000 and $1,065,000 is reflected as a net current asset and $8,798,000 and $8,557,000 is reflected as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryfowards aggregating approximately $67,994,000 at December 31, 2012. These NOLs include NOLs generated subsequent to the Merger, losses from Private Reis prior to the Merger, losses obtained from the Company’s 1998 merger with Value Property Trust (“VLP”) and the Company’s operating losses prior to the Merger. Approximately $27,259,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $40,735,000 is not subject to such a limitation. There is an annual limitation on the use of NOLs after an ownership change, pursuant to Section 382 of the Internal Revenue Code. As a result of the Merger, the Company experienced such an ownership change which resulted in a new annual limitation of $2,779,000. However, because of the accumulation of annual limitations, it is expected that the use of NOLs will not be limited by expiration. A substantial NOL was realized during the year ended December 31, 2012 as a result of the Gold Peak litigation settlement, discussed in Note 11.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately $15,217,000 at March 31, 2013 and December 31, 2012, was necessary. The allowance relates primarily to NOL carryforwards and AMT credits. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2013 and in subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

8.	*Stockholders’ Equity*

Between December 2008 and August 2011, the Company’s board of directors (the “Board”) authorized the repurchase of up to an aggregate amount of $5,000,000 of the Company’s common stock, of which approximately $551,000 remained available for repurchases as of March 31, 2013. The stock repurchases are permitted from time to time in the open market or through privately negotiated transactions. Depending on market conditions, financial developments and other factors, additional amounts may be authorized by the Board whereby future purchases could be commenced or suspended at any time, or from time to time, without prior notice. The Company may make purchases pursuant to a trading plan under Securities Exchange Act Rule 10b5-1, permitting open market purchases of common stock during blackout periods consistent with the Company’s “Policies for Transactions in Reis Stock and Insider Trading and Tipping.”

During the first quarter of 2013 and 2012, the Company did not repurchase any shares of common stock.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

9.	*Stock Plans and Other Incentives*

The Company has adopted certain incentive plans for the purpose of attracting and retaining the Company’s directors, officers and employees by having the ability to issue options, restricted stock units (“RSUs”), or stock awards. Awards granted under the Company’s incentive plans expire ten years from the date of grant and vest over periods ranging generally from three to five years for employees.

Option Awards

The following table presents option activity and other plan data for the three months ended March 31, 2013 and 2012:


	For the Three Months Ended March 31,
	2013				2012
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price

Outstanding at beginning of period		645,448	$	8.94		663,172	$	8.82
Granted		—	$	—		—	$	—
Exercised		—	$	—		—	$	—
Cancelled through cash settlement		—	$	—		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—

Outstanding at end of period		645,448	$	8.94		663,172	$	8.82

Options exercisable at end of period		420,488	$	9.43		361,172	$	9.10

Options exercisable which can be settled in cash		35,448	$	4.67		53,172	$	4.60

Certain outstanding options allow the option holder to receive from the Company, in cancellation of the holder’s option, a cash payment with respect to each cancelled option equal to the amount, if any, by which the fair market value of the share of stock underlying the option exceeds the exercise price of such option. The Company accounts for these options as liability awards. This liability is adjusted at the end of each reporting period to reflect: (1) the net cash payments to option holders made during each period; (2) the impact of the exercise and expiration of options; and (3) changes in the market price of the Company’s common stock. Changes in the settlement value of option awards treated under the liability method are reflected as income or expense in the statements of operations.

At March 31, 2013, the liability for option cancellations was approximately $385,000 based upon the difference in the closing stock price of the Company’s common stock at March 31, 2013 of $15.54 per share and the individual exercise prices of the outstanding 35,448 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2012, the liability for option cancellations was approximately $297,000 based upon the difference in the closing stock price of the Company at December 31, 2012 of $13.03 per share and the individual exercise prices of the outstanding 35,448 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded compensation expense (benefit) of approximately $89,000 and $(11,000) for the three months ended March 31, 2013 and 2012, respectively, in general and administrative expenses in the consolidated statements of operations related to the respective changes in the amount of the liability for option cancellations.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

RSU Awards

The following table presents the changes in RSUs outstanding for the three months ended March 31, 2013 and 2012:


	For the Three Months Ended March 31,
	2013		2012

Outstanding at beginning of period		469,848		590,662
Granted		94,884		151,343
Common stock delivered (A)(B)		(180,074)		(189,551)
Forfeited		(1,800)		—

Outstanding at end of period		382,858		552,454


Intrinsic value (C)	$	5,950,000	$	4,922,000


(A) Includes 70,897 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $1,109,000 in the first quarter of 2013. A net of 109,177 shares of common stock were delivered in the first quarter of 2013. (B) Includes 74,149 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $751,000 in 2012. A net of 115,402 shares of common stock were delivered in the first quarter of 2012. (C) For purposes of this calculation, the Company’s closing stock prices were $15.54 and $8.91 per share on March 31, 2013 and 2012, respectively.

In February 2013, an aggregate of 91,356 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $16.20 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). In February 2012, an aggregate of 143,783 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $10.05 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). The awards granted to employees in the first quarter of 2013 and 2012 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods.

In January 2013, an aggregate of 3,528 RSUs were granted to non-employee directors (with a grant date fair value of $13.03 per RSU) related to the equity component of their compensation. In January 2012, an aggregate of 7,560 RSUs were granted to non-employee directors (with an average grant date fair value of $9.12 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but are not deliverable to non-employee directors until six months after termination of their service as a director.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $492,000 and $557,000, including approximately $46,000 and $69,000 related to non-employee director equity compensation, for the three months ended March 31, 2013 and 2012, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations.

10.

Earnings Per Common Share

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share is based upon the increased number of common shares that would be outstanding assuming the exercise of dilutive common share options and the consideration of restricted stock awards. The following table details the computation of earnings per common share, basic and diluted:

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Earnings Per Common Share (continued)


	For the Three Months Ended March 31,
	2013		2012
Numerator for basic per share calculation:
Income from continuing operations for basic calculation	$	402,066	$	136,379
(Loss) from discontinued operations, net of income tax expense		(151,632)		(14,345,255)

Net income (loss) for basic calculation	$	250,434	$	(14,208,876)


Numerator for diluted per share calculation:
Income from continuing operations	$	402,066	$	136,379
Adjustments to income from continuing operations for the income statement impact of dilutive securities		—		(11,166)

Income from continuing operations for dilution calculation		402,066		125,213
(Loss) from discontinued operations, net of income tax expense		(151,632)		(14,345,255)

Net income (loss) for dilution calculation	$	250,434	$	(14,220,042)


Denominator:
Weighted average common shares – basic		10,828,396		10,623,575
Effect of dilutive securities:
RSUs		292,981		341,011
Stock options		226,374		46,808

Weighted average common shares – diluted		11,347,751		11,011,394


Per common share amounts – basic:
Income from continuing operations	$	0.04	$	0.01
(Loss) from discontinued operations		(0.02)		(1.35)

Net income (loss)	$	0.02	$	(1.34)


Per common share amounts – diluted:
Income from continuing operations	$	0.04	$	0.01
(Loss) from discontinued operations		(0.02)		(1.30)

Net income (loss)	$	0.02	$	(1.29)

Potentially dilutive securities include all stock based awards. For the three months ended March 31, 2013, certain equity awards and option awards accounted for under the liability method, were antidilutive. For the three months ended March 31, 2012, only certain equity awards were antidilutive.

11.

Commitments and Contingencies

Reis has purchased insurance with respect to construction defect and completed operations at its past real estate projects. Reis has, from time to time, been exposed to various claims associated with the development, construction and sale of condominium units, single family homes or lots. Claims related to dissatisfaction by homeowners and homeowners associations with the construction of condominiums, homes and amenities by us and/or our developer partners in any condominium or subdivision development, or other matters, may result in litigation costs, remediation costs, warranty expenses or settlement costs which could be material to the Company’s reportable discontinued operating income (loss), or its consolidated financial position or cash flows. It would not have any effect on the Company’s income from continuing operations.

Reis, Inc. and two of its subsidiaries (GP LLC and Wellsford Park Highlands Corp. (“WPHC”)) were the subject of a suit brought by the homeowners association at the Company’s former 259-unit Gold Peak condominium project outside of Denver, Colorado. This suit was filed in District Court in Douglas County, Colorado on October 19, 2010, seeking monetary damages (not quantified

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

at the time) relating to design and construction defects at the Gold Peak project. Tri-Star, the construction manager/general contractor for the project (not affiliated with Reis) and two former senior officers of Reis, Inc. (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) were also named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012 finding Reis, GP LLC and Tri-Star jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000.

In connection with the development of Gold Peak, the Company purchased a commercial general liability “WRAP” insurance policy from a predecessor of ACE Westchester (“ACE”) covering the Company (including its subsidiaries) and its former officers, Tri-Star and Tri-Star’s subcontractors. The Company, upon advice of counsel and based on a reading of the policy, has taken the position that a total of $9,000,000 (and possibly $12,000,000) of coverage is available for this claim. ACE has taken the position that only $3,000,000 of coverage (including defense costs) was provided. The Company has filed suit against ACE, alleging failure to cover this claim, bad faith and other related causes of action. In particular, the Gold Peak litigation could have been settled for $12,000,000 or less prior to the trial. The Company takes the position that ACE is liable for all damages stemming from this failure to engage and settle. Additionally, the Company has added claims against multiple additional insurance companies under policies maintained by the Company, including Reis’s directors’ and officers’ insurance policy, and against Reis’s former insurance broker. The Company has also brought separate claims against Tri-Star, the subcontractors, the architect and a third party inspector engaged at Gold Peak, relating to those parties’ actions on the project, and is considering other recovery actions.

$18,200,000 judgment, plus other costs of approximately $756,000. As of March 31, 2012, the Company, in accordance with the applicable accounting literature, could no longer conclude that $3,000,000 of insurance was probable of being recovered. These charges were reflected in discontinued operations and negatively impacted consolidated net income (loss), but did not impact income from continuing operations.

On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis reached a settlement with the plaintiff, providing for a total payment by Reis of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. In reaching the decision to settle, Reis’s management and Board considered, among other factors: (1) the amount of the settlement versus the potential for an ultimately greater judgment after appeal, including additional costs and post-judgment interest; (2) the benefits of the clarity of settling the case at this time versus continuing uncertainty; and (3) the strong cash flow generation of Reis Services’s core business. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge. In December 2012, the Company recovered $712,500, which offset a portion of the previously recorded charge, resulting in the net litigation charge for the year ended December 31, 2012 of approximately $11,547,000. No recoveries occurred during the three months ended March 31, 2013.

Reis continues to consider its options with respect to contribution or other actions against potentially responsible third parties and/or co-defendants in the lawsuit, and will pursue all reasonable efforts to mitigate the effects of this settlement. There is no assurance that the Company will be successful in these additional recovery efforts.

The Company is not a party to any other litigation that could reasonably be foreseen to be material to the Company.

12.

Fair Value of Financial Instruments

At March 31, 2013 and December 31, 2012, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments, excluding debt, were not materially different from their recorded values at March 31, 2013 and December 31, 2012. There was no balance outstanding under the Revolver at March 31, 2013 and December 31, 2012. See Note 6 for the additional information about the Company’s debt.

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

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Organization and Business

Reis, Inc. is a Maryland corporation. The primary business of Reis, Inc. and its consolidated subsidiaries, which we refer to as Reis or the Company, is providing commercial real estate market information and analytical tools for its subscribers, through its Reis Services subsidiary. For disclosure and financial reporting purposes, this business is referred to as the Reis Services segment.

Reis Services

Operations

As commercial real estate markets continue to grow in size and complexity, Reis, over the last 33 years, has invested in the databases, technologies and personnel critical to supporting the information needs of commercial real estate professionals. Specifically, Reis has:

•

developed expertise in data collection across multiple markets and property types;

•

invested in the analytical expertise to develop decision support systems that generate market trends and forecasts, property valuations, credit analytics, transaction support and risk management;

•

created product development expertise to collect market feedback and translate it into new products and reports; and

•

invested in a robust technology infrastructure to disseminate these tools to the wide variety of market participants.

These investments have established Reis as a leading provider of commercial real estate information and analytical tools to the investment community. Reis continues to develop and introduce new products, expand and add new markets and data, and find new ways to deliver existing information to meet client demand, as more fully described below under “— Products and Services.” The depth and breadth of Reis’s data and expertise are critical in allowing Reis to grow its business.

Proprietary Databases

Reis’s commercial real estate databases contain information on competitive, income-producing properties in the U.S. apartment, retail, office, warehouse/distribution, flex/research & development and self storage sectors. On an ongoing basis, Reis surveys and receives data downloads from building owners, leasing agents and managers which include key building performance statistics including, among others: occupancy rates; rents; rent discounts and other concessions; tenant improvement allowances; lease terms; and operating expenses. In addition, Reis processes multiple data sources on commercial real estate, including: public filings databases; tax assessor records; deed transfers; planning boards; and numerous local, regional and national publications and commercial real estate web sites. Reis screens and assembles large volumes of data into integrated supply and demand trends on a monthly basis at the neighborhood (submarket) and metropolitan market levels. All collected data are subjected to a rigorous quality assurance and validation process developed over many years. At the property level, surveyors compare the data collected in the current period with data previously collected on that property and similar properties. If any unusual changes in rents and vacancies are identified, follow-up procedures are performed for verification or clarification of the results. All aggregate market data at the submarket and market levels are also subjected to comprehensive quality controls. The following table lists the number of metropolitan markets for each of the six types of commercial real estate covered by Reis at March 31, 2013:


Number of metropolitan markets:
Apartment			200
Retail			190
Office			190
Warehouse/distribution			47
Flex/research & development			47
Self storage			50

Reis monitors over 6,700 market areas and segments at March 31, 2013. Reis programmatically expands its property level and market coverage by geography and property type. During 2012, Reis initiated coverage on the self storage sector and in February 2013, expanded its geographic coverage for this sector by adding an additional 20 markets, bringing its coverage to 50 markets in the U.S. In addition, as of May 1, 2013, Reis added 75 apartment markets, bringing its coverage to 275 apartment markets.

In addition to its core property database, Reis develops and maintains a new construction database that identifies and monitors projects that are being added to its covered markets. Detailed tracking of the supply side of the commercial real estate market is critical to projecting performance changes at the market and submarket levels. This database is updated weekly and reports relevant information such as project size, property type and location for projects that are planned, proposed or under construction.

Reis also maintains a sales comparables database containing transactions in 202 metropolitan markets. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available, for transactions valued at greater than $250,000 in each market Reis covers, for its six property types, as well as for hotel properties.

Products and Services

Reis SE, available through the www.reis.com web site, serves as the primary delivery platform for the thousands of reports containing Reis’s primary research data and forecasts, as well as a number of analytical tools. Access to Reis SE is by secure password only and can be customized to accommodate the needs of subscribers. For example, the product can be tailored to provide access to all or only selected markets, property types and report combinations. The Reis SE interface has been refined over the past several years, with a major redesign in 2012, to accommodate real estate professionals who need to perform market-based trend analysis, property specific research, comparable property analysis, and valuation and credit analysis estimates at the single property and portfolio levels.

On a monthly and quarterly basis, Reis updates thousands of neighborhood and city level reports that cover historical trends and current conditions. In all of our primary markets, five year forecasts are updated quarterly on all key real estate market indicators. Monthly and quarterly updates are supported by property, neighborhood and city data collected during the relevant reporting periods.

Reports are retrievable by street address, property type (apartment, office, retail, warehouse/distribution, flex/research & development and self storage) or market/submarket and are available as full color, presentation quality documents or in spreadsheet formats. These reports are used by Reis’s subscribers to assist in due diligence and to support commercial real estate transactions, including loan originations, underwriting, acquisitions, risk assessment (such as loan loss reserves and impairment analyses), portfolio monitoring and management, asset management, appraisal and market analysis.

Reis also has a product tailored to the needs of smaller enterprises and individuals, professional investors, brokers and appraisers, which we refer to as ReisReports, available at www.ReisReports.com. ReisReports utilizes the same proprietary database of information that supports our Reis SE subscribers. Depending on the package chosen by the ReisReports subscriber, content is available on a monthly or annual subscription basis at affordable price points.

Reis continues to develop new products and applications. As of May 1, 2013, Reis added an additional 75 markets to its apartment coverage; it also expects to introduce coverage on an additional property type late in 2013 or early in 2014. In the past, Reis has performed portfolio credit risk and valuation reviews for debt and equity investors. We are developing enhancements to our portfolio analytics services as heightened regulatory scrutiny increases the demand among lenders to assess the risk profile of their mortgage assets. In February 2013, we introduced Mobiuss Portfolio CRE. Mobiuss Portfolio CRE has been developed in conjunction with, and is being co-marketed with, Opera Solutions, LLC (Opera Solutions is a leader in “Big Data” science, predictive analytics and technological innovations). The product combines Reis’s unparalleled commercial real estate market information and forecasts with Opera Solutions’s cutting edge risk analytics and web-based technologies. Mobiuss Portfolio CRE will provide property and loan valuation, credit risk analytics, stress testing and benchmarking, and will be available to new and existing customers as an add on to Reis SE.

We are also expanding our revenue streams through licensing portions of our data to major business information vendors. To date, we have entered into data redistribution relationships with SNL Financial, FactSet, Capital IQ, Thomson Reuters and Bloomberg, and we continue to engage these partners to potentially expand the existing relationships, while seeking to add additional partners.

Cost of Service

Reis’s data is made available in five primary ways, with price points that are reflective of the level of content being made available:

•

annual and multi-year subscriptions to Reis SE ranging in price from $1,000 to over $1,000,000, depending upon the subscriber’s line of business and the combination of markets, property types and reports subscribed to, for which the subscriber is typically allowed to download an unlimited number of reports over the subscription period; renewals for Reis SE are negotiated in advance of the expiration of an existing contract based on factors such as a subscriber’s historical and projected report consumption;

•

capped Reis SE subscriptions generally ranging in price from $1,000 to $25,000, allowing clients to download a fixed retail value of reports over a period of up to twelve months;

•

individual reports, which can be purchased with a credit card, having retail prices up to $999 per report, are available to anyone who visits Reis’s retail web site or contacts Reis via telephone, fax or email; however, certain reports are only available with an annual subscription or capped subscription account;

•

custom data deliverables ranging in price from $1,000 for a specific data element to hundreds of thousands of dollars for custom portfolio valuation and credit analysis; and

•

subscriptions to ReisReports, which are charged to a credit card on a monthly basis, having a retail price ranging up to $150 per month depending on the package chosen by the subscriber; or if desired, annual pricing options are also available.

Other Reis Services Information

For additional information on the Reis Services business, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2012, which was filed with the Securities and Exchange Commission on March 13, 2013.

Discontinued Operations – Residential Development Activities

Reis was originally formed on January 8, 1997 as Wellsford Real Properties, Inc., which we refer to as Wellsford. Wellsford acquired the Reis Services business by merger in May 2007, which we refer to as the Merger. Wellsford’s primary operating activities immediately prior to the Merger, and conducted through its subsidiaries, were the development, construction and sale of its three residential projects and its approximate 23% ownership interest in the Reis Services business. The Company completed the sale of the remaining units at its Colorado project in September 2009, sold its Claverack, New York project in bulk in February 2010, sold its remaining project in East Lyme, Connecticut in bulk in April 2011, and settled construction defect litigation at the aforementioned Colorado project in 2012.

Additional Segment Financial Information

See Note 3 of the consolidated financial statements included in this filing for additional information regarding all of the Company’s segments.

Selected Significant Accounting Policies

For a description of our selected significant accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, 2012.

Critical Business Metrics of the Reis Services Business

Management considers certain metrics in evaluating the performance of the Reis Services business. These metrics are revenue, EBITDA (which is defined as earnings before interest, taxes, depreciation and amortization) and EBITDA margin. Following is a presentation of these historical metrics for the Reis Services business (see below for a reconciliation of income from continuing operations to EBITDA and Adjusted EBITDA for both the Reis Services segment and on a consolidated basis for each of the periods presented here).


(amounts in thousands, excluding percentages)
	For the Three Months Ended March 31,				Increase		Percentage Increase
	2013		2012		Increase		Percentage Increase

Revenue	$	8,234	$	7,298	$	936		12.8%
EBITDA	$	3,277	$	2,921	$	356		12.2%
EBITDA margin		39.8%		40.0%
	For the Three Months Ended
	March 31, 2013		December 31, 2012		(Decrease)		Percentage (Decrease)

Revenue	$	8,234	$	8,581	$	(347)		(4.0)%
EBITDA	$	3,277	$	3,543	$	(266)		(7.5)%
EBITDA margin		39.8%		41.3%
	For the Three Months Ended
	March 31, 2013		December 31, 2012 Pro Forma Basis		Increase		Percentage Increase

Revenue	$	8,234	$	8,154	$	80		1.0%
EBITDA	$	3,277	$	3,116	$	161		5.2%
EBITDA Margin		39.8%		38.2%

Reis Services’s revenue for the three months ended March 31, 2013 was $8,234,000, an increase of approximately $936,000, or 12.8%, from the first quarter of 2012 to the first quarter of 2013. This revenue increase over the corresponding prior quarterly period is the twelfth consecutive quarterly increase in revenue over the prior year’s quarter. In general, the revenue increase reflects: (1) additional new Reis SE business; (2) revenue growth from ReisReports; and (3) revenue growth from our data redistribution initiatives. These results reflect not just a single strong revenue quarter, but also the momentum created by sustained contract growth during 2012 and into 2013. The Company’s overall renewal rate for the trailing twelve months ended March 31, 2013 was 91% as compared to 92% for the trailing twelve months ended March 31, 2012 (for institutional subscribers, renewal rates were 92% and 94% for the trailing twelve months ended March 31, 2013 and 2012, respectively).

On a consecutive quarter basis, revenue decreased by $347,000, or 4.0%, in the first quarter of 2013 from the fourth quarter of 2012. This decrease is the result of incremental revenue of $427,000 from one specific custom project recognized in the fourth quarter of 2012; there was no comparable custom project in the first quarter of 2013. As reported in our December 31, 2012 Form 10-K, management expected that there would be no comparable custom project of this magnitude in the first quarter of 2013 and, as a result, both revenue and EBITDA would decrease from the fourth quarter 2012 to the first quarter of 2013. The exclusion of the $427,000 of revenue from the fourth quarter 2012 associated with this custom project, would result in a revenue increase, on a pro forma basis, of $80,000, representing a 1.0% increase on a consecutive quarter basis.

Reis’s revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly. Therefore, increases in the dollar value of new contracts are spread evenly over the life of a contract, thereby moderating an immediate impact on revenue. Historically, the largest percentage of our contracts are executed in the fourth quarter of each year.

Our contract pricing model is based on actual and projected report consumption; we believe it is generally not as susceptible to economic downturns and personnel reductions at our subscribers as a model based upon individual user licenses. We typically impose contractual restrictions limiting our immediate exposure (during existing contract terms) to revenue reductions due to mergers and consolidations. However, we have been, and we may in the future be impacted by consolidation among our subscribers and potential subscribers, or in the event that subscribers enter bankruptcy or otherwise go out of business.

Two additional metrics management utilizes in understanding the business and future performance are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at March 31, 2013 and 2012, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2012 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.


	March 31,
	2013		2012

Deferred revenue (GAAP basis)	$	16,880,000	$	14,758,000
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)		17,575,000		11,212,000

Aggregate Revenue Under Contract	$	34,455,000	$	25,970,000


(A)		Amounts are billable subsequent to March 31 of each year and represent (i) non-cancellable contracts for subscribers with multi-year subscriptions where the future years are not yet billable, or (ii) subscribers with non-cancellable annual subscriptions with interim billing terms.

Included in Aggregate Revenue Under Contract at March 31, 2013 was approximately $23,315,000 related to amounts under contract for the forward twelve month period through March 31, 2014. The remainder reflects amounts under contract beyond March 31, 2014. The forward twelve month Aggregate Revenue Under Contract amount is approximately 72.5% of revenue on a trailing twelve month basis at March 31, 2013 of approximately $32,165,000. For comparison purposes, at March 31, 2012, the forward twelve month Aggregate Revenue Under Contract of $19,756,000 was approximately 70.9% of revenue on a trailing twelve month basis at March 31, 2012.

Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed; (2) the quantity and timing of contracts that are multi-year; and (3) the impact of recording revenue ratably over the life of a contract, which moderates the effect of price increases after the first year. Coupled with record new business and contract signings in 2012 and more multi-year contracts (in both number of contracts and gross dollar value) in 2012 than in any previous annual period, both deferred revenue and Aggregate Revenue Under Contract had substantial year over year increases.

EBITDA for the three months ended March 31, 2013 was $3,277,000, an increase of $356,000, or 12.2%, over the first quarter 2012 amount. This increase was primarily derived from the corresponding increases in revenue, as described above, while maintaining the Reis Services EBITDA margin at approximately 40%.

On a consecutive quarter basis, EBITDA decreased by $266,000, or 7.5%, in the first quarter of 2013 from the fourth quarter of 2012. EBITDA in the fourth quarter 2012 was similarly impacted by the incremental revenue generated by the aforementioned custom project. The exclusion of the $427,000 of revenue associated with this custom project would result in an EBITDA increase, on a pro forma basis, of $161,000, representing a 5.2% increase on a consecutive quarter basis (fourth quarter 2012 to first quarter 2013).

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock based compensation. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, senior management uses EBITDA and Adjusted EBITDA to measure operational and management performance. Management believes that EBITDA and Adjusted EBITDA are appropriate metrics that may be used by investors as supplemental financial measures to be considered in addition to the reported GAAP basis financial information to assist investors in evaluating and understanding (1) the performance of the Reis Services segment, the primary business of the Company and (2) the Company’s continuing consolidated results, from year to year or period to period, as applicable. Further, these measures provide the reader with the ability to understand our operational performance while isolating non-cash charges, such as depreciation and amortization expenses, as well as other non-operating items, such as interest income, interest expense and income taxes and, in the case of Adjusted EBITDA, isolates non-cash charges for stock based compensation. Management also believes that disclosing EBITDA and Adjusted EBITDA will provide better comparability to other companies in the information services sector. EBITDA and Adjusted EBITDA are presented both for the Reis Services business and on a consolidated basis. We believe that these metrics, for Reis Services, provide the reader with valuable information for evaluating the financial performance of the core Reis Services business, excluding public company costs, and to make assessments about the intrinsic value of that stand-alone business to a potential acquirer. Management primarily monitors and measures its performance, and is compensated, based on the results of the Reis Services business. EBITDA and Adjusted EBITDA, on a consolidated basis, allow the reader to make assessments about the current trading value of the Company’s common stock, including expenses related to operating as a public company. However, investors should not consider these measures in isolation or as substitutes for net income (loss), income from continuing operations, operating income, or any other measure for determining operating performance that is calculated in accordance with GAAP. In addition, because EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Reconciliations of EBITDA and Adjusted EBITDA to the most comparable GAAP financial measure, income from continuing operations, follow for each identified period on a segment basis (including the Reis Services segment), as well as on a consolidated basis:


(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2013	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	402
Income tax expense						265

Income (loss) before income taxes and discontinued operations	$	2,040	$	(1,373)		667
Add back:
Depreciation and amortization expense		1,211		2		1,213
Interest expense (income), net		26		—		26

EBITDA		3,277		(1,371)		1,906
Add back:
Stock based compensation expense, net		—		581		581

Adjusted EBITDA	$	3,277	$	(790)	$	2,487

Adjusted EBITDA margin – Reis Services and consolidated (B)		39.8%				30.2%


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2012	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	136
Income tax expense						84

Income (loss) before income taxes and discontinued operations	$	1,528	$	(1,308)		220
Add back:
Depreciation and amortization expense		1,355		1		1,356
Interest expense (income), net		38		(1)		37

EBITDA		2,921		(1,308)		1,613
Add back:
Stock based compensation expense, net		—		546		546

Adjusted EBITDA	$	2,921	$	(762)	$	2,159

Adjusted EBITDA margin – Reis Services and consolidated (B)		40.0%				29.6%


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended December 31, 2012	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	6,519
Income tax (benefit)						(5,427)

Income (loss) before income taxes and discontinued operations	$	2,337	$	(1,245)		1,092
Add back:
Depreciation and amortization expense		1,182		2		1,184
Interest expense (income), net		24		—		24

EBITDA		3,543		(1,243)		2,300
Add back:
Stock based compensation expense, net		—		505		505

Adjusted EBITDA	$	3,543	$	(738)	$	2,805

Adjusted EBITDA margin – Reis Services and consolidated (B)		41.3%				32.7%

(A)

Includes interest and other income, depreciation expense and general and administrative expenses (including public company related costs) that are not associated with the Reis Services segment. Since the reconciliations start with income from continuing operations, the effects of the discontinued operations (Residential Development Activities) are excluded from these reconciliations for all periods presented.

(B)

Reflects an adjusted EBITDA margin on the Reis Services segment and on a consolidated basis, both of which excludes the impact of discontinued operations.

Results of Operations

Comparison of the Results of Operations for the Three Months Ended March 31, 2013 and 2012

Subscription revenues and related cost of sales were approximately $8,234,000 and $1,681,000, respectively, for the three months ended March 31, 2013, resulting in a gross profit for the Reis Services segment of approximately $6,553,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $366,000 during this period. Subscription revenues and related cost of sales were approximately $7,298,000 and $1,846,000, respectively, for the three months ended March 31, 2012, resulting in a gross profit for the Reis Services segment of approximately $5,452,000. Amortization expense included in cost of sales was approximately $655,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The decrease in cost of sales of $165,000 is primarily a result of a reduction in amortization expense of $289,000 from the Merger related purchase price allocations for the database intangible asset becoming fully amortized in the 2012 second quarter, offset by an increase from employment related costs, specifically from hiring during 2012 and 2013, coupled with compensation increases and higher benefit costs over the 2012 period.

Sales and marketing expenses were approximately $1,969,000 and $1,729,000 for the three months ended March 31, 2013 and 2012, respectively, and solely represent costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $244,000 and $246,000 during the three months ended March 31, 2013 and 2012, respectively. The increase in sales and marketing expenses between the two periods of approximately $240,000 generally reflects increased employment related costs from hiring during 2012 and 2013, coupled with compensation increases and higher benefit costs over the 2012 period.

Product development expenses were approximately $722,000 and $514,000 for the three months ended March 31, 2013 and 2012, respectively, and solely represent costs of the Reis Services segment. Amortization expense included in product development expenses (for the web site intangible asset) was approximately $449,000 and $295,000 during the three months ended March 31, 2013 and 2012, respectively. Product development costs increased $208,000, primarily due to a net $154,000 increase in amortization expense for web site costs capitalized and amortization expense commencing in the period for significant product introductions and improvements in 2012, coupled with increased employment related costs from hiring during 2012 and compensation increases and higher benefit costs over the 2012 period.

General and administrative expenses of approximately $3,169,000 for the three months ended March 31, 2013 include current period expenses of approximately $2,434,000, depreciation and amortization expense of approximately $154,000 for lease value and furniture, fixtures and equipment, and approximately $581,000 of net non-cash compensation expense. The net non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately $492,000 and by an approximate $89,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $13.03 per share at December 31, 2012 to $15.54 per share at March 31, 2013. General and administrative expenses of approximately $2,952,000 for the three months ended March 31, 2012 include current period expenses of approximately $2,246,000, depreciation and amortization expense of approximately $160,000 for lease value and furniture, fixtures and equipment, and approximately $546,000 of net non-cash compensation expense. The net non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately $557,000, offset by an approximate $11,000 decrease in the liability for option cancellations due to a decrease in the market price of the Company’s common stock from $9.12 per share at December 31, 2011 to $8.91 per share at March 31, 2012. Excluding the non-cash expenses, the increase in general and administrative expenses of $188,000 is primarily a result of increased professional fees, compensation increases and higher benefit costs over the 2012 period.

Interest expense of $28,000 for the three months ended March 31, 2013 is comprised of unused facility fees and deferred financing cost amortization on the Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the three months ended March 31, 2013. Interest expense of $53,000 for the three months ended March 31, 2012 includes interest and deferred financing cost amortization on the outstanding debt balance during that period.

The aggregate income tax expense of $265,000 during the three months ended March 31, 2013 reflects deferred Federal tax expense of $220,000 and deferred state and local tax expense of $45,000. The aggregate income tax expense of $84,000 during the three months ended March 31, 2012 reflects deferred Federal tax expense of $74,000 and deferred state and local tax expense of $10,000.

The loss from discontinued operations was $152,000 and $14,345,000 for the three months ended March 31, 2013 and 2012, respectively. The loss in the 2013 period primarily reflects legal and professional fees in connection with our recovery efforts related to the Gold Peak settlement of $251,000, offset by an income tax benefit of $99,000. The loss in the 2012 period primarily is comprised of a charge of $14,216,000 related to the March 13, 2012 jury verdict rendered in the Gold Peak litigation, plus other costs, and is after an income tax benefit of $79,000.

Income Taxes

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately $15,217,000 at March 31, 2013 and December 31, 2012, was necessary. The allowance relates primarily to NOL carryforwards and AMT credits. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2013 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

Liquidity and Capital Resources

The core Reis Services business has traditionally generated significant cash annually; and we expect it to continue to do so. Cash and cash equivalents aggregated approximately $6,659,000 at March 31, 2013, an increase of $1,698,000 over the December 31, 2012 balance of approximately $4,961,000.

Our cash balance decreased significantly during the year ended December 31, 2012 from the $17,000,000 settlement of the Gold Peak litigation and the repayment of approximately $5,691,000 of outstanding debt. In addition to the cash generation of the Reis Services business, in October 2012, the Company obtained the three year $10,000,000 Revolver to provide working capital flexibility. Separately, the Company is seeking recovery under all available insurance policies, and is pursuing appropriate additional actions against other potentially responsible parties related to Gold Peak. To date, these efforts have resulted in the recovery of $712,500 of cash by December 31, 2012 and no amounts in the first quarter of 2013. There can be no assurance that the Company will recover any additional amounts in the short or long term from these efforts.

At March 31, 2013, the Company’s other short-term liquidity requirements include: current operating and capitalizable costs, including accounts payable and other accrued expenses; near-term product development and enhancement of the web site and databases; operating leases; insurance deductibles and legal costs related to discontinued operations; other costs, including public company expenses not included in the Reis Services segment; the resolution of open tax years with state and local tax authorties; the potential settlement of certain outstanding stock options in cash (the liability for which was approximately $385,000 at March 31, 2013 based upon the closing stock price of the Company at March 31, 2013 of $15.54 per share); and the payment of employee taxes on vested options, for which the employee used shares to settle his/her minimum withholding tax obligations with the Company. The Company expects to meet these short-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if necessary, with borrowings under the Revolver. There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, both related to the Gold Peak litigation; however, there can be

no assurance that the Company will recover any additional amounts in the short or long term. The Company expects that in 2013, it will be able to utilize its NOLs for Federal income tax purposes and that taxes to be paid will be for state and local income taxes and Federal AMT.

The Company’s long-term liquidity requirements include: future operating and capitalizable costs, including accounts payable and other accrued expenses; long-term product development and enhancements of the web sites and databases; operating leases and other capital expenditures; other costs, including public company expenses not included in the Reis Services segment; the resolution of open tax years with state and local tax authorities; the potential settlement of certain outstanding stock options in cash; the payment of employee taxes on vested options, for which the employee used shares to settle his/her minimum withholding tax obligations with the Company; and repurchases of additional shares of Reis common stock. The Company expects to meet these long-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if necessary, with borrowings under the Revolver. There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, both related to the Gold Peak litigation; however, there can be no assurance that the Company will recover any additional amounts in the short or long term. The Company has NOLs that it expects to be able to use beyond the next few years against future Federal, state and local taxable income, if any. Tax payments in 2013 and 2014 are expected to be for alternative state and local taxes, state and local taxes on income and Federal AMT, but not for Federal income taxes. Subsequent to 2014, tax payments are expected to be for alternative state and local taxes and Federal AMT, but not for Federal, state or local taxes on income.

Changes in Cash Flows

Cash flows for the three months ended March 31, 2013 and 2012 are summarized as follows:


	For the Three Months Ended March 31,
	2013		2012

Net cash provided by operating activities	$	4,016,087	$	2,789,066
Net cash (used in) investing activities		(1,208,559)		(974,643)
Net cash (used in) financing activities		(1,109,475)		(2,648,356)

Net increase (decrease) in cash and cash equivalents	$	1,698,053	$	(833,933)

Cash flows provided by operating activities increased $1,227,000 from $2,789,000 provided in the 2012 period to $4,016,000 provided in the 2013 period. This increase was the result of (1) increased operating cash flow from the Reis Services segment of $1,277,000 from $4,054,000 provided in the 2012 period to $5,331,000 provided in the 2013 period due to growth in revenue and EBITDA and the timing of accounts receivable collections.

Cash flows used in investing activities increased $234,000 from $975,000 used in the 2012 period to $1,209,000 used in the 2013 period. This change resulted from an increase of cash used in the 2013 period as compared to the 2012 period for web site and database development costs for continuing product development and enhancement initiatives.

Cash flows used in financing activities decreased $1,539,000 from $2,648,000 used in the 2012 period to $1,109,000 used in the 2013 period. During the 2012 period, $1,897,000 was repaid on the Bank Loan whereas in the 2013 period no debt payments were made. Payments for restricted stock unit settlements were approximately $1,109,000 and $751,000 in the 2013 and 2012 periods, respectively; the increase of $358,000 due to the higher average price of our common stock in 2013 than in 2012.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to the Company’s or management’s outlook or expectations for earnings, revenues, expenses, asset quality, or other future financial or business performance, strategies, prospects or expectations, or the impact of legal, regulatory or supervisory matters on our business, operations or performance. Specifically, forward-looking statements may include:

•

statements relating to future services and product development of the Reis Services segment;

•

statements relating to business prospects, potential acquisitions, uses of cash, revenue, expenses, income (loss), cash flows, valuation of assets and liabilities and other business metrics of the Company and its businesses, including EBITDA, Adjusted EBITDA and Aggregate Revenue Under Contract; and

•

statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions relating to future periods.

Forward-looking statements reflect management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. With respect to these forward-looking statements, management has made certain assumptions. Future performance cannot be assured. Actual results may differ materially from those contemplated by the forward-looking statements. Some factors that could cause actual results to differ include:

•

revenues and other performance measures such as income from continuing operations, EBITDA and Adjusted EBITDA may be lower than expected;

•

inability to retain and increase the Company’s subscriber base;

•

inability to execute properly on new products and services, or failure of subscribers to accept these products and services;

•

competition;

•

inability to attract and retain sales and senior management personnel;

•

inability to access adequate capital to fund operations and investments in our business;

•

difficulties in protecting the security, confidentiality, integrity and reliability of the Company’s data;

•

changes in accounting policies or practices;

•

legal and regulatory issues;

•

the results of pending, threatening or future litigation; and

•

the risk factors listed under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2012, which was filed with the Securities and Exchange Commission on March 13, 2013.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q. Except as required by law, the Company undertakes no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this quarterly report on Form 10-Q or to reflect the occurrence of unanticipated events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s primary market risk exposure has been to changes in interest rates. This risk may be managed by limiting the Company’s financing exposures, to the extent possible, by purchasing interest rate caps when deemed appropriate.

At March 31, 2013 and December 31, 2012, the Company’s only potential exposure to interest rates was on variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. During the three months ended March 31, 2013 and throughout 2012, the Company did not have any interest rate caps. No debt was outstanding at March 31, 2013 and December 31, 2012.

Reis holds cash and cash equivalents at various regional and national banking institutions. Management monitors the institutions that hold our cash and cash equivalents. Management’s emphasis is primarily on safety of principal. Management, in its discretion, has diversified Reis’s cash and cash equivalents among banking institutions to potentially minimize exposure to any one of these entities. To date, we have experienced no loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurances that access to invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

Cash balances held at banking institutions with which we do business generally exceed the Federal Deposit Insurance Corporation insurance limits. While management monitors the cash balances in these bank accounts, such cash balances could be impacted if the underlying banks fail or could be subject to other adverse conditions in the financial markets.

Item 4T. Controls and Procedures.

As of March 31, 2013, the Company 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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of March 31, 2013 were designed at a reasonable assurance level and were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings.

Reis, Inc. and two of its subsidiaries were the subject of a suit brought by the homeowners association at the Company’s former 259-unit Gold Peak condominium project outside of Denver, Colorado. This suit was filed in District Court in Douglas County, Colorado on October 19, 2010, seeking monetary damages (not quantified at the time) relating to design and construction defects at the Gold Peak project. Tri-Star Construction West, LLC (“Tri-Star”), the construction manager/general contractor for the project (not affiliated with Reis) and two former senior officers of Reis, Inc. (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) were also named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012 finding Reis, its subsidiary, Gold Peak at Palomino Park, LLC (“GP LLC”) and Tri-Star jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000.

Company, including Reis’s directors’ and officers’ insurance policy, and against Reis’s former insurance broker. The Company has also brought separate claims against Tri-Star, the subcontractors, the architect and a third party inspector engaged at Gold Peak, relating to those parties’ actions on the project, and is considering other recovery actions.

As of December 31, 2011, based on the best available information at that time, the Company recorded a charge of approximately $4,460,000 in discontinued operations, representing the low end of the Company’s expected range of net exposure. This amount reflected an aggregate minimum liability of approximately $7,740,000, less the then minimum expected insurance recovery of $3,000,000 and other previously reserved amounts. At March 31, 2012, as a result of the verdict, the Company recorded an additional charge of $14,216,000 in discontinued operations in the first quarter of 2012, to bring the Company’s liability up to the $18,200,000 judgment, plus other costs of approximately $756,000. As of March 31, 2012, the Company, in accordance with the applicable accounting literature, could no longer conclude that $3,000,000 of insurance was probable of being recovered. These charges were reflected in discontinued operations and negatively impacted consolidated net income (loss), but did not impact income from continuing operations.

The Company is not a party to any other litigation that could reasonably be foreseen to be material to the Company.

Item 1A. Risk Factors.

A wide range of risks may affect our business and financial results, now and in the future; however, we consider the risks described under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on March 13, 2013, to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

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

Issuer Purchases of Equity Securities

During the first quarter of 2013, the Company did not repurchase any shares of common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:


Exhibit No.		Description
31.1		Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Chief Executive Officer and Chief Financial Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive Data Files, formatted in extensible Business Reporting Language (XBRL).*


*		Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


REIS, INC.

By:		/s/ Mark P. Cantaluppi
		Mark P. Cantaluppi
		Vice President, Chief Financial Officer

Dated: May 2, 2013

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents