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, 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)


Condensed Operating Data for the Three Months Ended March 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	6,617	$	—	$	—	$	6,617
Cost of sales of subscription revenue		1,550		—		—		1,550

Gross profit		5,067		—		—		5,067

Operating expenses:
Sales and marketing		1,652		—		—		1,652
Product development		481		—		—		481
General and administrative expenses		1,549		—		1,226		2,775

Total operating expenses		3,682		—		1,226		4,908
Other income (expenses):
Interest and other income		18		—		1		19
Interest expense		(78)		—		—		(78)

Total other income (expenses)		(60)		—		1		(59)

Income (loss) before income taxes and discontinued operations	$	1,325	$	—	$	(1,225)	$	100


(Loss) from discontinued operations, before income taxes	$	—	$	(90)	$	—	$	(90)

(amounts in thousands)

Condensed Operating Data for the Reis Discontinued
Three Months Ended September 30, 2011 Services Operations (A) Other (B) Consolidated

Subscription revenue $ 6,747 $ — $ — $ 6,747
Cost of sales of subscription revenue 1,550 — — 1,550

Gross profit 5,197 — — 5,197

Operating expenses:
Sales and marketing 1,656 — — 1,656
Product development 574 — — 574
General and administrative expenses 1,563 — 1,070 2,633

Total operating expenses 3,793 — 1,070 4,863
Other income (expenses):
Interest and other income 18 — 2 20
Interest expense (65 ) — — (65 )

Total other income (expenses) (47 ) — 2 (45 )

Income (loss) before income taxes and discontinued operations $ 1,357 $ — $ (1,068 ) $ 289

Income from discontinued operations, before income taxes $ — $ 1 $ — $ 1

Condensed Operating Data for the Reis Discontinued
Three Months Ended September 30, 2010 Services Operations (A) Other (B) Consolidated

Subscription revenue $ 6,013 $ — $ — $ 6,013
Cost of sales of subscription revenue 1,403 — — 1,403

Gross profit 4,610 — — 4,610

Operating expenses:
Sales and marketing 1,369 — — 1,369
Product development 419 — — 419
General and administrative expenses 1,496 — 1,064 2,560

Total operating expenses 3,284 — 1,064 4,348
Other income (expenses):
Interest and other income 24 — 5 29
Interest expense (96 ) — — (96 )

Total other income (expenses) (72 ) — 5 (67 )

Income (loss) before income taxes and discontinued operations $ 1,254 $ — $ (1,059 ) $ 195

Income (loss) from discontinued operations, before income taxes $ — $ 1 $ (2 ) $ (1 )


(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)~~

(amounts in thousands)

Condensed Operating Data for the Reis Discontinued
Nine Months Ended September 30, 2011 Services Operations (A) Other (B) Consolidated

Subscription revenue $ 20,201 $ — $ — $ 20,201
Cost of sales of subscription revenue 4,623 — — 4,623

Gross profit 15,578 — — 15,578

Operating expenses:
Sales and marketing 4,989 — — 4,989
Product development 1,562 — — 1,562
General and administrative expenses 4,739 — 3,646 8,385

Total operating expenses 11,290 — 3,646 14,936
Other income (expenses):
Interest and other income 57 — 5 62
Interest expense (215 ) — — (215 )

Total other income (expenses) (158 ) — 5 (153 )

Income (loss) before income taxes and discontinued operations $ 4,130 $ — $ (3,641 ) $ 489

Income from discontinued operations, before income taxes $ — $ 1,253 $ — $ 1,253

Condensed Operating Data for the Reis Discontinued
Nine Months Ended September 30, 2010 Services Operations (A) Other (B) Consolidated

Subscription revenue $ 18,031 $ — $ — $ 18,031
Cost of sales of subscription revenue 4,402 — — 4,402

Gross profit 13,629 — — 13,629

Operating expenses:
Sales and marketing 4,360 — — 4,360
Product development 1,353 — — 1,353
General and administrative expenses 4,369 — 3,493 7,862

Total operating expenses 10,082 — 3,493 13,575
Other income (expenses):
Interest and other income 87 — 15 102
Interest expense (318 ) — — (318 )

Total other income (expenses) (231 ) — 15 (216 )

Income (loss) before income taxes and discontinued operations $ 3,316 $ — $ (3,478 ) $ (162 )

Income (loss) from discontinued operations, before income taxes $ — $ 512 $ (272 ) $ 240


~~(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 Services~~

		~~See Note 1 for a description of Reis Services’s business and products at September 30, 2011.~~

		~~No individual customer accounted for more than 4.9% and 2.5% of Reis Services’s revenues for the nine months ended September 30, 2011 and 2010, respectively.~~

Segment Information (continued)

Reis Services

See Note 1 for a description of Reis Services’s business and products at March 31, 2012.

No individual customer accounted for more than 4.5% and 4.7% of Reis Services’s revenues for the three months ended March 31, 2012 and 2011, respectively.

The balance of outstanding accounts receivables of Reis Services at March 31, 2012 and December 31, 2011 follows:


	March 31, 2012		December 31, 2011

Accounts receivables	$	5,317,000	$	8,629,000
Allowance for doubtful accounts		(68,000)		(32,000)

Accounts receivables, net	$	5,249,000	$	8,597,000

Seven subscribers accounted for an aggregate of approximately 32.7% of Reis Services’s accounts receivable at March 31, 2012, including four subscribers in excess of 4.0% with the largest representing 7.8%. Through April 30, 2012, the Company had received payments of approximately $2,769,000 or 52.1% against the March 31, 2012 accounts receivable balance.

At March 31, 2012, no subscribers accounted for more than 6.7% of deferred revenue.

Discontinued Operations – Residential Development Activities

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

		00000000		00000000
(amounts in thousands)

	For the Three Months Ended March 31,
	2012		2011

Revenue from sales of real estate	$	—	$	—
Cost of sales of real estate		—		—
Litigation charge		(14,216)		—
Other income (expense), net		(208)		(90)

(Loss) from discontinued operations before income tax		(14,424)		(90)
Income tax (benefit) on discontinued operations		(79)		—

(Loss) from discontinued operations, net of income tax expense	$	(14,345)	$	(90)

Gold Peak

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, jointly and severally with Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”) and two former officers, was found liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. For additional information pertaining to the Gold Peak litigation and the $14,216,000 charge recorded in the first quarter of 2012, see Note 11. Commitments and Contingencies.

REIS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Completed Real Estate Projects

In April 2011, the Company sold The Orchards, a single family home development in East Lyme, Connecticut (“East Lyme”), in a bulk transaction for a gross sales price of $1,800,000 for the 119 lots in inventory, plus the release of approximately $792,000 of project-related deposits and escrows held as restricted cash. Net cash received at closing, after selling expenses and closing adjustments, and including the cash received upon release of the deposits and escrows, aggregated approximately $2,600,000. Certain of the lots at East Lyme required remediation of pesticides which were used on the property when it was an apple orchard. Remediation was required prior to the development of those lots. The remediation plan, the cost of which was estimated by management to be approximately $1,000,000, had been approved by the health inspector for the municipality and the town planner. As a result of the sale, the Company was indemnified from any financial obligation related to the environmental remediation.

In February 2011, the Company received cash of approximately $455,000 in satisfaction of a mortgage note and accrued interest thereon from the sale of property in Claverack, New York in February 2010.

~~Segment Information (continued)~~

~~The balance of outstanding accounts receivable of Reis Services at September 30, 2011 and December 31, 2010, follows:~~

September 30, December 31,
2011 2010

Accounts receivable $ 4,534,000 $ 9,065,000
Allowance for doubtful accounts (44,000 ) (103,000 )

Accounts receivable, net $ 4,490,000 $ 8,962,000

Eight subscribers accounted for an aggregate of approximately 40.8% of Reis Services’s accounts receivable at September 30, 2011, with the largest representing 13.0%. As of October 31, 2011, the Company had received payments of approximately $1,307,000, or 28.8%, against the September 30, 2011 accounts receivable balance.

~~At September 30, 2011, no subscriber accounted for more than 4.4% of deferred revenue.~~

~~Discontinued Operations – Residential Development Activities~~

~~Income (loss) from discontinued operations is comprised of the following:~~

~~(amounts in thousands)~~

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2011 2010 2011 2010

Revenue from sales of real estate $ — $ 160 $ 1,800 $ 3,378
Cost of sales of real estate — (96 ) (558 ) (3,051 )
Other income (expense), net 1 (65 ) 11 (87 )

Income (loss) from discontinued operations before income tax 1 (1 ) 1,253 240
Income tax expense on discontinued operations — — — 97

Income (loss) from discontinued operations, net of income tax expense $ 1 $ (1 ) $ 1,253 $ 143

~~East Lyme~~

Prior to its sale in April 2011, the Company’s last remaining residential development was The Orchards, a single family home development in East Lyme, Connecticut, zoned for 161 single family homes on 224 acres (“East Lyme”).

The East Lyme project was sold in a bulk transaction for a gross sales price of $1,800,000 for the remaining 119 lots in inventory, plus the release of approximately $792,000 of project-related deposits and escrows held as restricted cash. Net cash received at closing, after selling expenses and closing adjustments, and including the cash received upon release of the deposits and escrows, aggregated approximately $2,600,000. As a result of this transaction, the Company recorded a gain in the second quarter of 2011 of approximately $1,242,000, which is included in income from discontinued operations. The Company sold two lots during the three months ended September 30, 2010 and sold two lots and one home during the nine months ended September 30, 2010.

Certain of the lots at East Lyme required remediation of pesticides which were used on the property when it was an apple orchard. Remediation would have been required prior to the development of those lots. The remediation plan, the cost of which was estimated by management to be approximately $1,000,000, had been approved by the health inspector for the municipality and the town planner. The estimated remediation cost was recognized in prior years and was reflected in liabilities attributable to discontinued operations in the December 31, 2010 consolidated balance sheet. As a result of the sale, the Company was indemnified from any financial obligation related to the environmental remediation and reversed this liability, which amount is included in the gain reported in the second quarter of 2011, as referred to above.

~~REIS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited) (continued)~~

~~Segment Information (continued)~~

~~Claverack~~

Prior to its sale in February 2010, the Company owned approximately 235 acres in Claverack, New York, which was subdivided into 48 developable single family home lots. In February 2010, the Company sold the Claverack project in a bulk transaction for a gross sales price of $2,750,000, which included two model homes, amenities, 46 additional lots and $450,000 of cash collateralizing certain road completion obligations. Net cash received at closing, after expenses, aggregated approximately $2,187,000. The remaining $450,000 of the purchase price was payable by the purchaser in February 2011 and had been secured by the outstanding road bond and a mortgage on the property. As a result of this transaction, the Company recorded a gain of approximately $263,000 in the first quarter of 2010, which is included in income from discontinued operations. In February 2011, the Company received cash of approximately $455,000 in full satisfaction of the mortgage note and accrued interest thereon.

~~Real Estate Contingencies~~

		Reis has purchased insurance with respect to construction defect and completed operations at its past real estate projects, including those projects described above. Reis is, from time to time, exposed to various claims associated with the development, construction and sale of condominium units, single family homes or lots. The impact of these claims on the Company has not been material to date. However, 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.

		In October 2010, the homeowners’ association at the Company’s former Gold Peak condominium project (located outside of Denver, Colorado), brought suit against the Company, two of its subsidiaries, and other contractors and individuals alleging design and construction defects. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19 million. Trial is scheduled for February 2012. In connection with the development of Gold Peak, the Company purchased a commercial general liability “wrap” insurance policy covering the Company, the general contractor and the subcontractors. The Company is taking action to ensure that all applicable insurance policies maintained by co-defendants or others are brought into the case. The Company believes that it and its co-defendants have valid defenses to some or all of the plaintiff’s allegations, that insurance (subject to limited self insurance retainage/deductibles (“SIRs”)) will cover some or all of any eventual settlement or judgment, and that the defendants other than the Company will likely be liable for some or all of any remaining settlement judgment amount.

		At this time, based on advice of counsel and the Company’s experience with similar prior actions, the low end of the expected range of exposure is believed to be equal to the amount of the Company’s SIRs plus other costs. Accordingly, the Company is maintaining a reserve of approximately $280,000, which liability is included in liabilities attributable to discontinued operations on the September 30, 2011 balance sheet. Although the Company does not believe that it will be required to pay any amount above the reserved amount, it is possible that a settlement or judgment in this matter could involve the payment by the Company of an amount that could be material to the Company’s reportable discontinued operating income (loss), its consolidated financial position or cash flows. It would not have any effect on the Company’s income from continuing operations.

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 balance of the restricted cash was approximately $216,000 and $215,000 at March 31, 2012 and December 31, 2011, respectively.

5.		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 balance of the restricted cash was approximately $215,000 and $214,000 at September 30, 2011 and December 31, 2010, respectively.

		In addition, the Company had approximately $791,000 of deposits and escrows related to residential development activities at December 31, 2010, which amount was included in assets attributable to discontinued operations in the consolidated balance sheet at that date. As a result of the April 2011 sale of the East Lyme project, the balance of deposits and escrows related to residential development activities was released and converted to cash, and accordingly, there was no balance at September 30, 2011. *Intangible Assets*

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


	March 31, 2012		December 31, 2011
Database	$	13,672,000	$	13,223,000
Accumulated amortization		(10,439,000)		(9,784,000)

Database, net		3,233,000		3,439,000

Customer relationships		14,100,000		14,100,000
Accumulated amortization		(4,708,000)		(4,462,000)

Customer relationships, net		9,392,000		9,638,000

Web site		6,960,000		6,470,000
Accumulated amortization		(4,079,000)		(3,784,000)

Web site, net		2,881,000		2,686,000

Acquired below market lease		2,800,000		2,800,000
Accumulated amortization		(1,485,000)		(1,408,000)

Acquired below market lease, net		1,315,000		1,392,000

Intangibles, net	$	16,821,000	$	17,155,000

The Company capitalized approximately $448,000 and $451,000 to the database intangible asset and $490,000 and $344,000 to the web site intangible asset during the three months ended March 31, 2012 and 2011, respectively.

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, which is charged to cost of sales, approximately $246,000 related to customer relationships, which is charged to sales and marketing expense, approximately $295,000 related to web site development, which is charged to product development expense, and approximately $77,000 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 $1,152,000 for the three months ended March 31, 2011, of which approximately $585,000 related to the database, approximately $249,000 related to customer relationships, approximately $242,000 related to web site development, and approximately $76,000 related to the value ascribed to the below market terms of the office lease.

REIS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

5.6.

~~Intangible Assets~~

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

September 30, December 31,
2011 2010

Database $ 12,822,000 $ 11,395,000
Accumulated amortization (9,152,000 ) (7,374,000 )

Database, net 3,670,000 4,021,000

Customer relationships 14,100,000 14,100,000
Accumulated amortization (4,214,000 ) (3,470,000 )

Customer relationships, net 9,886,000 10,630,000

Web site 6,102,000 5,173,000
Accumulated amortization (3,499,000 ) (2,941,000 )

Web site, net 2,603,000 2,232,000

Acquired below market lease 2,800,000 2,800,000
Accumulated amortization (1,333,000 ) (1,106,000 )

Acquired below market lease, net 1,467,000 1,694,000

Intangible assets, net $ 17,626,000 $ 18,577,000

The Company capitalized approximately $512,000 and $383,000 during the three months ended September 30, 2011 and 2010, respectively, and $1,427,000 and $949,000 during the nine months ended September 30, 2011 and 2010, respectively, to the database intangible asset. The Company capitalized approximately $421,000 and $351,000 during the three months ended September 30, 2011 and 2010, respectively, and $1,171,000 and $936,000 during the nine months ended September 30, 2011 and 2010, respectively, to the web site intangible asset.

Amortization expense for intangible assets aggregated approximately $1,232,000 and $3,549,000 for the three and nine months ended September 30, 2011, of which approximately $601,000 and $1,778,000 related to the database, which is charged to cost of sales, approximately $247,000 and $744,000 related to customer relationships, which is charged to sales and marketing expense, approximately $308,000 and $800,000 related to web site development, which is charged to product development expense, and approximately $76,000 and $227,000 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 $1,030,000 and $3,297,000 for the three and nine months ended September 30, 2010, of which approximately $526,000 and $1,681,000 related to the database, approximately $250,000 and $751,000 related to customer relationships, approximately $178,000 and $638,000 related to web site development, and approximately $76,000 and $227,000 related to the value ascribed to the below market terms of the office lease.

Debt

At March 31, 2012 and December 31, 2011, the Company’s debt consisted of the following:


	Maturity Date	Stated Interest Rate at March 31, 2012	March 31, 2012		December 31, 2011

Reis Services Bank Loan	September 2012	LIBOR + 1.50%	$	3,794,000	$	5,691,000

Total assets of Reis Services as a security interest for the Bank Loan			$	100,266,000	$	102,793,000

Reis Services Bank Loan

In connection with the Merger agreement, Private Reis entered into a credit agreement, dated October 11, 2006, with the Bank of Montreal, Chicago Branch, as administrative agent, and BMO Capital Markets, as lead arranger, which provided for a term loan of up to an aggregate of $20,000,000 and revolving loans up to an aggregate of $7,000,000. Loan proceeds were used to finance $25,000,000 of the cash portion of the Merger consideration. The interest rate was LIBOR + 1.50% at March 31, 2012 and December 31, 2011 (LIBOR was 0.24% and 0.30% at March 31, 2012 and December 31, 2011, respectively).

Reis Services is required to make principal payments on the term loan on a quarterly basis in increasing amounts pursuant to the payment schedule provided in the credit agreement. The final maturity date of all amounts borrowed pursuant to the credit agreement is September 30, 2012. At March 31, 2012 and December 31, 2011, the revolving loan portion had expired and the Company did not have the ability to borrow any other additional amounts under the Bank Loan.

~~At September 30, 2011 and December 31, 2010, the Company’s debt consisted of the following:~~

Stated Interest Rate at September 30, December 31,
Maturity Date September 30, 2011 2011 2010

Reis Services Bank Loan September 2012 LIBOR + 1.50% $ 7,074,000 $ 11,222,000
Other Reis Services debt Various Fixed/Various 6,000 28,000

Total debt $ 7,080,000 $ 11,250,000

Total assets of Reis Services as a security interest for the Bank Loan $ 99,072,000 $ 102,259,000

~~REIS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited) (continued)~~

~~Debt (continued)~~

~~Reis Services Bank Loan~~

In connection with the Merger agreement, Private Reis entered into a credit agreement, dated October 11, 2006, with the Bank of Montreal, Chicago Branch, as administrative agent, and BMO Capital Markets, as lead arranger, which provided for a term loan of up to an aggregate of $20,000,000 and revolving loans up to an aggregate of $7,000,000. Loan proceeds were used to finance $25,000,000 of the cash portion of the Merger consideration. The interest rate was LIBOR + 1.50% at September 30, 2011 and December 31, 2010 (LIBOR was 0.24% and 0.26% at September 30, 2011 and December 31, 2010, respectively).

Reis Services is required to (1) make principal payments on the term loan on a quarterly basis commencing on June 30, 2007 in increasing amounts pursuant to the payment schedule provided in the credit agreement and (2) permanently reduce the revolving loan commitments on a quarterly basis, which commenced on March 31, 2010. Additional principal payments are payable if Reis Services’s annual cash flow exceeds certain amounts, or if certain defined operating ratios are not met, all of which are defined in the credit agreement. The final maturity date of all amounts borrowed pursuant to the credit agreement is September 30, 2012. At September 30, 2011 and December 31, 2010, the Company did not have the ability to borrow any additional amounts under the Bank Loan.

In accordance with the terms of the credit agreement, beginning January 1, 2010 and through the maturity of the Bank Loan, the required leverage ratio was reduced to a maximum of 2.00 to 1.00 from a maximum of 2.50 to 1.00. In order to be in compliance with the leverage ratio test, management made a payment of $3,000,000 at March 31, 2010 in addition to the contractual minimum repayment of $1,000,000 due at that time. Although not required to do so, the Company made additional prepayments of $500,000 at the end of the second, third and fourth quarters of 2010 (aggregating $1,500,000), each of which was in excess of the minimum repayments due at such dates. All of the 2010 prepayments ratably reduced Reis Services’s future quarterly contractual minimum payments through maturity. No additional prepayments, in excess of minimum repayments, were made during the nine months ended September 30, 2011.

Income Taxes

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

	$84,000		$84,000		$84,000
		For the Three Months Ended March 31,
		2012		2011
Current Federal alternative minimum tax (“AMT”) expense		$	—	$	—
Deferred Federal tax expense			4,000		—
Deferred state and local tax expense			1,000		—

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

Income tax expense (B)		$	84,000	$	—

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

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2011 2010 2011 2010

Current state and local tax expense $ — $ — $ — $ —
Deferred Federal tax expense — 63,000 — 27,000
Deferred state and local tax expense — 16,000 — 7,000

Income tax expense, including taxes attributable to discontinued operations — 79,000 — 34,000
Less income tax expense attributable to discontinued operations (A) — — — (97,000 )

Income tax expense (benefit) (B) $ — $ 79,000 $ — $ (63,000 )

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 liability was approximately $67,000 at September 30, 2011 and December 31, 2010, respectively, and is reflected as a non-current liability in the accompanying consolidated balance sheets. The significant portion of the deferred tax items relates to: (1) the tax benefit of impairment charges before allowances at December 31, 2010; (2) net operating loss (“NOL”) carryforwards; (3) Federal alternative minimum tax (“AMT”) credit carryforwards; and (4) stock based compensation, 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 as it relates to deferred tax liabilities.

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 $4,003,000 and $4,008,000 at March 31, 2012 and December 31, 2011, respectively, of which $189,000 and $323,000 is reflected as a net current asset and $3,814,000 and $3,685,000 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 $56,014,000 at March 31, 2012 and December 31, 2011. 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 $28,755,000 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

REIS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
Income Taxes (continued)

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 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 $22,466,000 and $17,092,000 at March 31, 2012 and December 31, 2011, respectively, was necessary. The allowance relates primarily to NOL carryforwards, AMT credits and liability reserves. The increase in the valuation allowance in the first quarter of 2012 is attributable to providing a full allowance for the Gold Peak litigation charge recorded during March 2012. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2012 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

8.		*~~Income Taxes (continued)~~Stockholders’ Equity*

		A valuation allowance is required to reduce the 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 $7,550,000 and $8,254,000 at September 30, 2011 and December 31, 2010, respectively, was necessary. The allowance at September 30, 2011 and December 31, 2010 relates primarily to AMT credits and existing and expected NOL carryforwards, and in 2010, the excess of a portion of the tax basis of certain real estate development assets over their respective financial statement basis. The reduction in the allowance during the nine months ended September 30, 2011 results from the realization of a portion of the excess tax basis upon the sale of the East Lyme project, which was used to offset the Company’s pre-tax income in this period.

8.~~Stockholders’ Equity~~

Between December 2008 and June 2010, the ~~Board~~Company’s board of directors (the “Board”) authorized the repurchase of up to an aggregate amount of $4,000,000 of the Company’s common stock, which authorizations were fully utilized by December 2010. In August 2011, the Board authorized an additional $1,000,000 to make stock repurchases (of which ~~$612,000~~approximately $551,000 remained available as of ~~September 30,~~March 31, 2012 and December 31, 2011). 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 ~~three~~first quarter of 2012 and ~~nine months ended September 30,~~ 2011, the Company ~~repurchased 43,249~~did not repurchase any shares of common stock at an average price of $8.98 per share. During the three and nine months ended September 30, 2010, the Company purchased an aggregate of 20,250 and 49,191 shares of common stock, respectively, at an average price of $6.50 and $6.25 per share, respectively. From the inception of the share repurchase programs in December 2008 through September 30, 2011, the Company purchased an aggregate of 881,325 shares of common stock at an average price of $4.98 per share, for an aggregate of $4,388,000. Cumulatively, the Company repurchased approximately 8.02% of the common shares outstanding at the time of the Board’s initial authorization in December 2008.

9.~~Stock Plans and Other Incentives~~

stock.
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 ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 and ~~2010:~~

For the Nine Months Ended September 30,
2011 2010
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price

Outstanding at beginning of period 680,896 $ 8.73 473,620 $ 8.91
Granted — $ — 225,000 $ 8.03
Cancelled through cash settlement — $ — — $ —
Forfeited/cancelled/expired — $ — — $ —

Outstanding at end of period 680,896 $ 8.73 698,620 $ 8.63

Options exercisable at end of period 378,896 $ 8.92 319,620 $ 8.45

Options exercisable which can be settled in cash 70,896 $ 4.81 88,620 $ 4.73

2011:
   For the Three Months Ended March 31,
   2012    2011
           Options            Weighted-
Average
Exercise
Price            Options            Weighted-
Average
Exercise
Price
Outstanding at beginning of period
   663,172           $ 8.82         680,896         $ 8.73
Cancelled through cash settlement
   —           $ —         —         $ —
Forfeited/cancelled/expired
   —           $ —         —         $ —





Outstanding at end of period
   663,172           $ 8.82         680,896         $ 8.73





Options exercisable at end of period
   361,172           $ 9.10         301,896         $ 8.68








Options exercisable which can be settled in cash
   53,172           $         4.60         70,896         $         4.81








REIS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
Stock Plans and Other Incentives (continued)
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 income.
At March 31, 2012, the liability for option cancellations was approximately $229,000 based upon the difference in the closing stock price of the Company at March 31, 2012 of $8.91 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2011, the liability for option cancellations was approximately $241,000 based upon the difference in the closing stock price of the Company at December 31, 2011 of $9.12 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded a compensation (benefit) expense of approximately $(11,000) and $61,000 for the three months ended March 31, 2012 and 2011, respectively, in general and administrative expenses in the statements of operations related to the respective changes in the amount of the liability for option cancellations.
RSU Awards
The following table presents the changes in RSUs outstanding for the three months ended March 31, 2012 and 2011:

           For the Three Months Ended
March 31,
   2012    2011
Outstanding at beginning of period
   590,662          523,479
Granted
   151,343          225,580
Common stock delivered (A)(B)
   (189,551)         (149,496)
Forfeited
   —          —




Outstanding at end of period
   552,454          599,563




Intrinsic value at March 31, 2012 and 2011, respectively (C)
   $         4,922,000          $         4,731,000





~~Stock Plans and Other Incentives (continued)~~
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 September 30, 2011, the liability for option cancellations was approximately $287,000 based upon the difference in the closing stock price of the Company at September 30, 2011 of $8.86 per share and the individual exercise prices of the outstanding 70,896 “in-the-money” options that were accounted for as liability awards at that date. At December 31, 2010, the liability for option cancellations was approximately $158,000 based upon the difference in the closing stock price of the Company at December 31, 2010 of $7.03 per share and the individual exercise prices of the outstanding 70,896 “in-the-money” options that were accounted for as liability awards at that date. The Company recorded a reduction to compensation expense of approximately $76,000 for the three months ended September 30, 2011 and compensation expense of $7,000 for the three months ended September 30, 2010, and compensation expense of $130,000 and $21,000 for the nine months ended September 30, 2011 and 2010, respectively, in general and administrative expenses in the statements of operations related to the respective changes in the amount of the liability for option cancellations.
~~RSU Awards~~
~~The following table presents the changes in RSUs outstanding for the nine months ended September 30, 2011 and 2010:~~

For the Nine Months Ended
September 30,
2011 2010

Outstanding at beginning of period 523,479 507,668
Granted 243,499 283,355
Common stock delivered (A)(B) (177,828 ) (275,559 )
Forfeited — (1,800 )

Outstanding at end of period 589,150 513,664

Intrinsic value at September 30, 2011 and 2010, respectively (C)   $ 5,220,000   $ 3,282,000

(A)
   Includes ~~(i)~~74,149 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $751,000 in the first quarter of 2012. A net of 115,402 shares of common stock were delivered in the first quarter of 2012.
(B)
Includes 33,758 shares which were used to settle minimum employee withholding tax obligations for 14 employees of approximately $251,000 in the first quarter of 2011 (ii) 9,054 shares which were used to settle minimum employee withholding tax obligations for two employees of approximately $90,000 in the second quarter of 2011 and (iii) 1,207 shares which were used to settle minimum employee withholding tax obligations for one employee of approximately $11,000 in the third quarter of 2011. A net of ~~2,126 and 133,809~~115,738 shares of common stock were delivered in the ~~three and nine months ended September 30, 2011, respectively.~~
~~(B)~~ ~~Includes (i) 17,431 shares which were used to settle minimum employee withholding tax obligations for 12 employees of approximately $105,000 in the~~ first quarter of 2010, (ii) 16,870 shares which were used to settle minimum employee withholding tax obligations for 63 employees of approximately $105,000 in the second quarter of 2010 and (iii) 1,207 shares which were used to settle minimum employee withholding tax obligations for one employee of approximately $8,000 in the third quarter of 2010. A net of 2,126 and 240,051 shares of common stock were delivered in the three and nine months ended September 30, 2010, respectively.2011.
(C)
   For purposes of this calculation, the Company’s closing stock prices were ~~$8.86~~$8.91 and ~~$6.39~~$7.89 per share on ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively.

17
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 weighted average 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). In March 2011, an aggregate of 214,135 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $7.41 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 2012 and 2011 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 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 January 2011, an aggregate of 11,445 RSUs were granted to non-employee directors (with a grant date fair value of $7.03 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
REIS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
Stock Plans and Other Incentives (continued)
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 $557,000 and $485,000, including approximately $69,000 and $81,000 related to non-employee director equity compensation, for the three months ended March 31, 2012 and 2011, 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.
~~Stock Plans and Other Incentives (continued)~~Earnings Per Common Share
In March 2011, an aggregate of 214,135 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $7.41 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 and July 2010, an aggregate of 185,500 RSUs and 75,000 RSUs respectively, were granted to employees which vest one-third a year over three years and have a grant date fair value of $5.97 and $6.52 respectively, per RSU (which was determined based on the closing price of the Company’s common stock on the applicable date of grant). The awards granted in 2011 and 2010 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.
During the nine months ended September 30, 2011, an aggregate of 29,364 RSUs were granted to non-employee directors (with an average grant date fair value of $8.09 per RSU) related to the equity component of their compensation for the three months ended December 31, 2010, March 31, 2011 and June 30, 2011. During the nine months ended September 30, 2010, an aggregate of 23,355 RSUs were granted to non-employee directors (with an average grant date fair value of $6.07 per RSU) related to the equity component of their compensation for the three months ended December 31, 2009, March 31, 2010 and June 30, 2010. 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 $522,000 and $409,000, including approximately $69,000 and $63,000 related to non-employee director equity compensation, for the three months ended September 30, 2011 and 2010, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statement of operations. For the nine months ended September 30, 2011 and 2010, the Company recorded non-cash compensation expense of approximately $1,537,000 and $1,180,000, respectively, including approximately $226,000 and $159,000, respectively, related to non-employee director equity compensation.
~~10.~~~~Earnings Per Common Share~~
~~Basic earnings per common share are computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share are~~
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:
18

         For the Three Months Ended March 31,
   2012    2011
Numerator for basic per share calculation:

Income from continuing operations for basic calculation
   $ 136,379            $ 99,529
(Loss) from discontinued operations, net of income tax expense
   (14,345,255)           (89,730)




Net (loss) income for basic calculation
   $ (14,208,876)           $ 9,799




Numerator for diluted per share calculation:

Income from continuing operations
   $ 136,379            $ 99,529
Adjustments to income from continuing operations for the income statement impact of dilutive securities
   (11,166)           —




Income from continuing operations for dilution calculation
   125,213            99,529
(Loss) from discontinued operations, net of income tax expense
   (14,345,255)           (89,730)




Net (loss) income for dilution calculation
   $         (14,220,042)           $ 9,799




Denominator:

Weighted average common shares – basic
   10,623,575                    10,529,141
Effect of dilutive securities:

RSUs
   341,011            266,105
Stock options
   46,808            —




Weighted average common shares – diluted
   11,011,394            10,795,246




Per common share amounts – basic:

Income from continuing operations
   $ 0.01            $ 0.01
(Loss) from discontinued operations
   (1.35)           (0.01)




Net (loss) income
   $ (1.34)           $ —




Per common share amounts – diluted:

Income from continuing operations
   $ 0.01            $ 0.01
(Loss) from discontinued operations
   (1.30)           (0.01)




Net (loss) income
   $ (1.29)           $ —




~~REIS, INC.~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited) (continued)~~
~~Earnings Per Common Share (continued)~~

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2011 2010 2011 2010
Numerator for basic per share calculation:
Income (loss) from continuing operations for basic calculation $ 288,967 $ 115,357 $ 489,125 $ (98,872 )
Income (loss) from discontinued operations, net of income tax expense 1,231 (319 ) 1,253,481 143,237

Net income for basic calculation $ 290,198 $ 115,038 $ 1,742,606 $ 44,365

Numerator for diluted per share calculation
Income (loss) from continuing operations $ 288,967 $ 115,357 $ 489,125 $ (98,872 )
Adjustments to income (loss) from continuing operations for the income statement impact of dilutive securities (75,859 ) — — —

Income (loss) from continuing operations for dilution calculation 213,108 115,357 489,125 (98,872 )
Income (loss) from discontinued operations, net of income tax expense 1,231 (319 ) 1,253,481 143,237

Net income for dilution calculation $ 214,339 $ 115,038 $ 1,742,606 $ 44,365

Denominator:
Weighted average common shares – basic 10,599,031 10,594,443 10,572,288 10,504,098
Effect of dilutive securities:
RSUs 351,274 221,447 259,561 —
Stock options 46,852 — 3,753 —

Weighted average common shares – diluted 10,997,157 10,815,890 10,835,602 10,504,098

Per common share amounts – basic:
Income (loss) from continuing operations $ 0.03 $ 0.01 $ 0.05 $ (0.01 )
Income (loss) from discontinued operations — — 0.11 0.01

Net income $ 0.03 $ 0.01 $ 0.16 $ —

Per common share amounts – diluted:
Income (loss) from continuing operations $ 0.02 $ 0.01 $ 0.05 $ (0.01 )
Income (loss) from discontinued operations — — 0.11 0.01

Net income $ 0.02 $ 0.01 $ 0.16 $ —

Potentially dilutive securities include all stock based awards. For the three months ended ~~September 30, 2011, only~~March 31, 2012, certain equity awards were antidilutive. For the ~~nine~~three months ended ~~September 30,~~March 31, 2011, ~~and the three and nine months ended September 30, 2010,~~ certain equity awards, in addition to the option awards accounted for under the liability method, were antidilutive.

REIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
11.
Commitments and Contingencies
~~11.~~Litigation
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.
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 at the time) relating to alleged design and construction defects at the Gold Peak project. Tri-Star Construction, the construction manager/general contractor for the project (not affiliated with Reis) (“Tri-Star”) and two former officers of Reis, Inc. (one of whom was also a director) were 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. The jury found Reis, jointly and severally with GP LLC and the former officers, liable for an aggregate of $18,200,000.
In connection with the development of Gold Peak, the Company purchased a commercial general liability “WRAP” insurance policy from ACE Westchester (“ACE”) that covers 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 additional 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, co-defendants or others, including Reis’s directors’ and officers’ insurance policy. The Company has also brought separate claims against the architect and a third party inspector engaged at Gold Peak.
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 to be recovered. 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 $7,740,000, less the then minimum expected insurance recovery of $3,000,000 and other previously reserved amounts. These charges are reflected in discontinued operations and negatively impact net income (loss), but do not impact income from continuing operations.
On April 12, 2012, the Company, other defendants and the plaintiff homeowners’ association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court’s ruling on these post-trial motions, the Company will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner.
REIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
~~Fair Value~~Commitments and Contingencies (continued)
If Reis is required to pay all or substantially all of ~~Financial Instruments~~
the judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows.
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 ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments, excluding the Bank Loan, were not materially different from their recorded values at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010. Other than capital leases, all~~2011. All of the Company’s debt at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010~~2011 was floating rate based. Regarding the Bank Loan, the fair value of this debt is estimated to be approximately ~~$6,960,000~~$3,764,000 and ~~$10,905,000~~$5,628,000 at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, respectively, which is lower than the recorded amounts of ~~$7,074,000~~$3,794,000 and ~~$11,222,000~~$5,691,000 at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, respectively. The estimated fair value reflects the effect of higher interest rate spreads on debt being issued under current market conditions, as compared to the conditions that existed when the Bank Loan was obtained. See Note 6 for more information about the Company’s debt.

19
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 ~~either~~Reis or the Company, ~~or Reis, is a Maryland corporation. The Company’s primary business~~ 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 and flex/research & development 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 ~~new~~ 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 evaluations. Depending on the product, users have access to trend and forecast analysis 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, and equity investors. 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.
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.
Operations
As commercial real estate markets have grown in size and complexity, Reis, over the last 3032 years, has invested in the areas critical to supporting the information needs of real estate professionals in both the asset market and the space leasing market. In particular, Reis has:
developed expertise in data collection across multiple markets and property types;
• ~~developed expertise in data collection across multiple markets and property types;~~
• ~~invested in the analytical expertise to develop decision support systems around property valuation, 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.~~
invested in the analytical expertise to develop decision support systems around property valuation, 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 and anticipate 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.
20
Proprietary Databases
Reis’s commercial real estate databases contain information on competitive, income-producing properties in the U.S. apartment, retail, office, warehouse/distribution and flex/research & development 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 ~~covered by Reis~~ for each of the five types of commercial real estate ~~(after the announced expansion of coverage in October 2011):~~
currently covered by Reis:
Number of metropolitan markets:

Apartment
   200
Retail
   190
Office
   132
Warehouse/distribution
   47
Flex/research & development
   47
Including its programmatic expansion by geography and property type, most recently of retail shopping centers, warehouse/distribution and flex/research & development coverage, Reis monitors over 6,300 market areas and ~~segments.~~
~~In June 2011,~~ segments at March 31, 2012.
Reis entered into an exclusive market data agreement with the Self Storage Association in June 2011 and will introduce coverage of the U.S. self storage market in 2012. This will be the sixth major property type for which Reis will provide market data and analytics.
In addition to the core property database, Reis develops and maintains a new construction database that identifies and monitors projects that are being added to our 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 criteria 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 ~~204 of our covered~~203 metropolitan markets. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where ~~available. Prior to March 31, 2011, this database included transactions valued at $2,000,000 or greater. Beginning in April 2011, we have expanded the coverage to include~~available, for transactions valued at greater than $250,000 in the covered markets of our ~~covered markets. Additionally, during March 2011, we added~~five property types, as well as for hotel ~~transactions to our sales comparables coverage.~~
In October 2011, Reis introduced a new suite of reports focusing on two industrial property types: warehouse/distribution and flex/research & development. This launch disaggregates our industrial product offering to cover nearly 350 submarkets in 47 of the top metropolitan centers for each of these property types. For each metropolitan area, Reis provides a full suite of metro and submarket reports, including forecasts, and property-level rent, sales and construction comparables.
transactions.
Products and Services
Reis SE, available through thewww.reis.com web site, serves as a delivery platform for the thousands of reports containing Reis’s primary research data and forecasts, as well as a number of analytical tools. Access toReis SEis 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. TheReis SEinterface has been refined over the past several years 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.
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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 the 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 prior periods.
Reports are retrievable by street address, property type (apartment, office, retail, warehouse/distribution and flex/research & development) 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.
~~Other significant elements of~~
Reis SE~~include:~~
• ~~property comparables that allow users to identify buildings or new construction projects with similar characteristics (such as square footage, rents or sales price);~~
• ~~quarterly “First Glance” reports that provide an early assessment of the apartment, office and retail sectors across the U.S. and preliminary commentary on new construction activity;~~
• “Quarterly Briefings” — two conference calls each quarter attended by hundreds of subscribers, during which Reis provides an overview of its latest high-level findings and forecasts for the commercial real estate space and capital markets;
• ~~real estate news stories chosen by Reis analysts to provide information relevant to a particular market and property type; and~~
• ~~customizable email alerts that let users receive proactive updates on only those reports and markets that they designate.~~
~~During 2010, Reis completed the development of and launched~~also has a product tailored to the needs of smaller enterprises and individuals, professional investors, brokers and appraisers, which we refer to asReisReports, available atwww.ReisReports.com.ReisReportsutilizes the same proprietary database of information that supports ourReis SEsubscribers. Depending on the package chosen by theReisReportssubscriber, a set number of market reports is available on a monthly basis at an affordable price point.
Reis continues to develop new products and applications. ~~Current~~Our current initiatives include the launch of the next generation of our flagship product,Reis SE 2.0, and further expansion of both our geographic market coverage and property ~~types and broadening~~types. We are also actively seeking to expand our revenue streams through licensing of portions of our data to major business information vendors. We have, to date, entered into data redistribution relationships with ~~other business information vendors. During 2011, data redistribution agreements were executed with~~SNL Financial, FactSet, Capital IQ, Thomson Reuters and, ~~Thomson Reuters.~~
most recently, Bloomberg, and we continue to speak to additional potential partners.
Cost of Service
Reis’s data is made available in five primary ways: (1) annual and multi-year subscriptions toReis SE; (2) cappedReis SEsubscriptions allowing subscribers to download a limited retail value of ~~reports,~~reports; (3) online single report credit card ~~purchases,~~purchases; (4) custom data ~~requests~~requests; and (5) monthly subscriptions toReisReports, charged to a credit card. Annual subscription fees forReis SErange 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 a twelve month period. Capped subscriptions generally range from $1,000 to $25,000 and allow clients to download a fixed retail value of reports over a twelve month period. Sales of individual reports typically range from $150 to $695 per report and 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 by a subscription or capped subscription account. Custom data deliverables range in price from $1,000 for a specific data element to hundreds of thousands of dollars for custom portfolio valuation and credit analysis. Renewals are negotiated in advance of the expiration of an existing contract. Important factors in determining contract renewal rates include a subscriber’s historical and projected report consumption. The monthly fee forReisReportsis currently $75 or $125 depending on the package chosen by the ~~subscriber.~~
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, ~~2010,~~2011, which was filed with the Securities and Exchange Commission on March ~~11, 2011.~~
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8, 2012.
Discontinued Operations —– Residential Development Activities
~~The Company~~
Reis was originally formed on January 8, ~~1997. Reis~~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. ~~Prior to May 2007, Reis operated as Wellsford Real Properties, Inc., which we refer to as Wellsford.~~ 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 and sold its remaining project in East Lyme, Connecticut in bulk in April 2011.
~~Additional Segment Financial Information~~
~~See Note 3 of the consolidated financial statements included in this filing for additional information regarding 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, 2010 and Note 2 of the consolidated financial statements included in this filing.
~~Discontinued Operations~~
The Company has 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.~~
statements for all periods presented.
On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, jointly and severally with Gold Peak at Palomino Park LLC, the developer of the project, which we refer to as GP LLC, and two former officers, was found liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. For additional information pertaining to the Gold Peak litigation and the $14,216,000 charge recorded in the first quarter of 2012, see Note 11 included in the unaudited financial statements in Item 1 of this quarterly report on Form 10-Q.
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, 2011.
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 (for a reconciliation of income (loss) 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, see below).
~~(amounts in thousands, excluding percentages)~~

For the Three Months Ended
September 30, Percentage
2011 2010 Increase Increase
Revenue $ 6,747 $ 6,013 $ 734 12.2 %
EBITDA $ 2,722 $ 2,440 $ 282 11.6 %
EBITDA margin 40.3 %    40.6 %

For the Nine Months Ended
September 30, Percentage
2011 2010 Increase Increase
Revenue $ 20,201 $ 18,031 $ 2,170 12.0 %
EBITDA $ 8,089 $ 7,096 $ 993 14.0 %
EBITDA margin 40.0 %    39.4 %

For the Three Months Ended
September 30, June 30, Percentage
2011 2011 (Decrease) (Decrease)
Revenue $ 6,747 $ 6,837 $ (90 ) (1.3 )%
EBITDA $ 2,722 $ 2,748 $ (26 ) (0.9 )%
EBITDA margin 40.3 %    40.2 %
23
(amounts in thousands, excluding percentages)
   For the Three Months Ended
March 31,    Increase            Percentage
Increase
   2012    2011
Revenue
   $ 7,298              $ 6,617              $ 681               10.3%
EBITDA
   $ 2,921              $ 2,619              $ 302               11.5%
EBITDA margin
   40.0%           39.6%
   For the Three Months Ended
   March 31,
2012    December 31,
2011    Increase    Percentage
Increase
Revenue
   $ 7,298              $ 6,979              $ 319               4.6%
EBITDA
   $                 2,921              $                 2,748              $                     173              6.3%
EBITDA margin
   40.0%           39.4%
Reis Services’s revenue for the three months ended ~~September 30, 2011~~March 31, 2012 of ~~$6,747,000~~$7,298,000 was ~~achieved as a result of a strong sales environment which has supported gains~~the highest for any quarter in ~~renewal rates and increased new business.~~the Company’s history. Reis Services’s revenue increased by approximately ~~$734,000,~~$681,000, or ~~12.2%~~10.3%, from the ~~third~~first quarter of ~~2010~~2011 to the ~~third~~first quarter of ~~2011.~~2012. This revenue increase over the corresponding prior quarterly period is the ~~sixth consecutive~~eighth consecutively quarterly increase in revenue over the prior year’s quarter. ~~For the nine months ended September 30, 2011, Reis Services’s~~In addition, revenue ~~was~~increased by approximately ~~$20,201,000, an increase of approximately $2,170,000,~~$319,000 or ~~12.0%~~4.6%, from the ~~nine months ended September 30, 2010. These~~fourth quarter of 2011 to the first quarter of 2012. In general, these revenue increases reflect: (1) positive improvements in overall renewal rates as the trailing twelve month renewal rate improved to ~~93%~~92% at ~~September 30, 2011~~March 31, 2012 as compared to 90% for the trailing twelve months ended ~~September 30, 2010 and, for~~March 31, 2011 (for institutional subscribers, the renewal rates improved to ~~95%~~94% at ~~September 30, 2011~~March 31, 2012 from ~~92%~~93% at ~~September 30, 2010;~~March 31, 2011); (2) additional new business; (3) ~~sales~~revenue growth fromReisReports; (4) revenue growth from our data redistribution initiatives; and ~~(4)~~(5) the cumulative impact of the ~~strength~~increased volume of contract signings ~~from the third and fourth quarters of 2010~~in 2011 and into ~~2011.~~
On a consecutive quarter basis, Reis Services had a modest revenue decrease of approximately $90,000, or 1.3%, from the second quarter of 2011 to the third quarter of 2011. Though total revenue declined, core recurring revenue, comprised of subscription fees for~~Reis SEand monthly credit card payments for~~~~ReisReports~~, grew by 1.3% in the third quarter. The total revenue decrease, on a consecutive quarter basis, was fully attributable to a below-average amount of custom revenue in the third quarter of 2011 after posting above-average custom revenue in the second quarter of 2011, accounting for a $173,000 negative swing in consecutive quarter custom revenue. While custom revenue typically only accounts for a small portion of total Reis Services revenue in a fiscal year, contracts and revenue related to custom projects are not realized in a predictable, linear fashion; by nature, they are dependent upon timing and client need. If a normalized level of custom revenue had been generated in both of these quarters, total revenue would have increased on a consecutive quarter basis by 1.3%.
2012.
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. As a result, in times of favorable pricing, larger consecutive quarter revenue growth occurs in the fourth and first quarters.
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 ~~generally~~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 ~~believes are critical~~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 ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively. A comparison of these balances at ~~September 30~~March 31 of each year is more meaningful than a comparison to the December 31, ~~2010 balances.~~
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2011 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.
            Percentage
Increase
(Decrease)
   March 31,    Increase
(Decrease)
   2012    2011
Deferred revenue (GAAP basis)
   $             14,758,000       $             13,407,000       $             1,351,000         10.1%
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)
   11,212,000       11,656,000       (444,000)               (3.8)%







Aggregate Revenue Under Contract
   $ 25,970,000       $ 25,063,000       $ 907,000         3.6%










September 30, Percentage
2011 2010 Increase Increase
Deferred revenue (GAAP basis) $ 12,368,000 $ 10,275,000 $ 2,093,000 20.4 %
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A) 12,263,000 11,681,000 582,000 5.0 %

Aggregate Revenue Under Contract (B) $ 24,631,000 $ 21,956,000 $ 2,675,000 12.2 %

(A)

Amounts are billable ~~in the twelve month period~~ subsequent to ~~September 30~~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.
~~(B)~~ Included in Aggregate Revenue Under Contract at September 30, 2011 was approximately $18,508,000 related to amounts under contract for the forward twelve month period through September 30, 2012. The remainder reflects amounts under contract beyond September 30, 2012. The forward twelve month Aggregate Revenue Under Contract amount is approximately 70% of revenue on a trailing twelve month basis at September 30, 2011 of approximately $26,368,000.
Included in Aggregate Revenue Under Contract at March 31, 2012 was approximately $19,756,000 related to amounts under contract for the forward twelve month period through March 31, 2013. The ~~increases in both~~remainder reflects amounts under contract beyond March 31, 2013. The forward twelve month Aggregate Revenue Under Contract amount is approximately 70.9% of revenue on a trailing twelve month basis at March 31, 2012 of approximately $27,862,000. For comparison purposes, at March 31, 2011, the forward twelve month Aggregate Revenue Under Contract of $18,343,000 was approximately 74.0% of revenue on a trailing twelve month basis at March 31, 2011.
Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the ~~result~~timing and dollar value of ~~an improved sales environment for renewals (by consistent improvement~~contracts signed; (2) the quantity and timing of contracts that are multiyear; 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. These influences resulted in ~~renewal rates) and increased new business, as described above~~a 3.6% increase in ~~the revenue discussion. As we enter our heavy renewal period for the year both deferred revenue and~~ Aggregate Revenue Under Contract ~~will be replenished.~~
and a 10.1% increase in deferred revenue from March 31, 2011 to March 31, 2012.
EBITDA ~~of Reis Services~~ for the three months ended ~~September 30, 2011~~March 31, 2012 was ~~$2,722,000,~~$2,921,000, an increase of ~~$282,000,~~$302,000, or ~~11.6%~~11.5%, over the ~~third~~first quarter ~~2010~~2011 amount. On a consecutive quarter basis, EBITDA ~~of Reis Services for~~increased $173,000 or 6.3% in the ~~nine months ended September 30, 2011 was $8,089,000, an increase of $993,000, or 14.0%,~~first quarter 2012 over the ~~corresponding 2010 period.~~fourth quarter 2011. These increases ~~are directly impacted~~were primarily derived by the corresponding increases in revenue, as described above, ~~while~~and maintaining EBITDA margins ~~for the Reis Services segment~~ at approximately 40%. On a consecutive quarter basis, EBITDA of Reis Services decreased $26,000, or 0.9%, in the third quarter 2011 from the second quarter 2011. This decrease is directly attributable to the $90,000 revenue decline previously described in this section.
Reconciliations of Income ~~(Loss)~~ 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 ~~(loss)~~ from continuing operations,
operating income, ~~(loss),~~ 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 ~~(loss)~~ from continuing operations, follow for each identified period on a segment basis (including the Reis Services segment), as well as on a consolidated basis:
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(amounts in thousands)
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 March 31, 2011
By Segment
Reis Services Other (A) Consolidated
Income from continuing operations
$ 100
Income tax expense
—

Income (loss) before income taxes and discontinued operations
$ 1,325         $ (1,225)        100
Add back:

Depreciation and amortization expense
1,234         1         1,235
Interest expense (income), net
60         (1)        59

EBITDA
2,619         (1,225)        1,394
Add back:

Stock based compensation expense, net
—         546         546

Adjusted EBITDA
$ 2,619         $ (679)        $ 1,940

Adjusted EBITDA margin – Reis Services and consolidated (B)
39.6%      29.3%

Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Three Months Ended December 31, 2011
By Segment
Reis Services Other (A) Consolidated
Income from continuing operations
$ 4,372
Income tax (benefit)
(4,075)

Income (loss) before income taxes and discontinued operations
$ 1,370        $ (1,073)        297
Add back:

Depreciation and amortization expense
1,334        2         1,336
Interest expense, net
44        —         44

EBITDA
2,748        (1,071)        1,677
Add back:

Stock based compensation expense, net
—        537         537

Adjusted EBITDA
$ 2,748        $ (534)        $ 2,214

Adjusted EBITDA margin – Reis Services and consolidated (B)
39.4%      31.7%

~~(amounts in thousands)~~

Reconciliation of Income from Continuing Operations to EBITDA and By Segment
Adjusted EBITDA for the Three Months Ended September 30, 2011 Reis Services Other (A) Consolidated
Income from continuing operations $ 289
Income tax expense —

Income (loss) before income taxes $ 1,357 $ (1,068 ) 289
Add back:
Depreciation and amortization expense 1,318 1 1,319
Interest expense (income), net 47 (2 ) 45

EBITDA 2,722 (1,069 ) 1,653
Add back:
Stock based compensation expense, net — 446 446

Adjusted EBITDA $ 2,722 $ (623 ) $ 2,099

Reconciliation of Income from Continuing Operations to EBITDA and By Segment
Adjusted EBITDA for the Nine Months Ended September 30, 2011 Reis Services Other (A) Consolidated
Income from continuing operations $ 489
Income tax expense —

Income (loss) before income taxes and discontinued operations $ 4,130 $ (3,641 ) 489
Add back:
Depreciation and amortization expense 3,801 2 3,803
Interest expense, net 158 (5 ) 153

EBITDA 8,089 (3,644 ) 4,445
Add back:
Stock based compensation expense, net — 1,667 1,667

Adjusted EBITDA $ 8,089 $ (1,977 ) $ 6,112

Reconciliation of Income from Continuing Operations to EBITDA and By Segment
Adjusted EBITDA for the Three Months Ended September 30, 2010 Reis Services Other (A) Consolidated
Income from continuing operations $ 116
Income tax expense 79

Income (loss) before income taxes $ 1,254 $ (1,059 ) 195
Add back:
Depreciation and amortization expense 1,114 1 1,115
Interest expense (income), net 72 (5 ) 67

EBITDA 2,440 (1,063 ) 1,377
Add back:
Stock based compensation expense, net — 416 416

Adjusted EBITDA $ 2,440 $ (647 ) $ 1,793

Reconciliation of (Loss) from Continuing Operations to EBITDA and By Segment
Adjusted EBITDA for the Nine Months Ended September 30, 2010 Reis Services Other (A) Consolidated
(Loss) from continuing operations $ (99 )
Income tax (benefit) (63 )

Income (loss) before income taxes $ 3,316 $ (3,478 ) (162 )
Add back:
Depreciation and amortization expense 3,549 4 3,553
Interest expense (income), net 231 (15 ) 216

EBITDA 7,096 (3,489 ) 3,607
Add back:
Stock based compensation expense, net — 1,201 1,201

Adjusted EBITDA $ 7,096 $ (2,288 ) $ 4,808

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~~(amounts in thousands)~~

Reconciliation of Income from Continuing Operations to EBITDA and By Segment
Adjusted EBITDA for the Three Months Ended June 30, 2011 Reis Services Other (A) Consolidated
Income from continuing operations $ 100
Income tax expense —

Income (loss) before income taxes $ 1,448 $ (1,348 ) 100
Add back:
Depreciation and amortization expense 1,249 — 1,249
Interest expense (income), net 51 (2 ) 49

EBITDA 2,748 (1,350 ) 1,398
Add back:
Stock based compensation expense, net — 675 675

Adjusted EBITDA $ 2,748 $ (675 ) $ 2,073

(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 ~~(loss)~~ from continuing operations, the effects of the discontinued operations ~~(residential development activities)~~(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 ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~
Subscription revenues and related cost of sales were approximately ~~$6,747,000~~$7,298,000 and ~~$1,550,000,~~$1,846,000, respectively, for the three months ended ~~September 30, 2011,~~March 31, 2012, resulting in a gross profit for the Reis Services segment of approximately ~~$5,197,000.~~$5,452,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately ~~$601,000~~$655,000 during this period. Subscription revenues and related cost of sales were approximately ~~$6,013,000~~$6,617,000 and ~~$1,403,000,~~$1,550,000, respectively, for the three months ended ~~September 30, 2010,~~March 31, 2011, resulting in a gross profit for the Reis Services segment of approximately ~~$4,610,000.~~$5,067,000. Amortization expense included in cost of sales was approximately ~~$526,000~~$585,000 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 increase in cost of sales of ~~$147,000~~$296,000 is primarily a result of ~~increased database amortization expense and higher~~ employment related costs from hiring during ~~2010~~2011 and ~~2011,~~2012, coupled with ~~related benefits~~wage and ~~wage~~benefit increases over the ~~2010 period.~~
2011 period and an increase in amortization expense of $70,000 for additions to the database intangible asset.
Sales and marketing expenses were approximately ~~$1,656,000~~$1,729,000 and ~~$1,369,000~~$1,652,000 for the three months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ 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 ~~$247,000~~$246,000 and ~~$250,000~~$249,000 during the three months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively. The ~~expense~~ increase ~~for~~in sales and marketing expenses between the two periods of approximately ~~$287,000~~$77,000 generally reflects increased commissions and employment related costs from hiring during ~~2010~~2011 and ~~2011,~~2012, coupled with ~~related benefits~~wage and ~~wage~~benefit increases over the ~~2010~~2011 period.
Product development expenses were approximately ~~$574,000~~$514,000 and ~~$419,000~~$481,000 for the three months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ 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 ~~$308,000~~$295,000 and ~~$178,000~~$242,000 during the three months ended ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively. Product development costs increased ~~$155,000,~~$33,000, primarily due to a net increase in amortization expense ~~of $130,000 from~~for web site costs capitalized and amortization expense commencing in the ~~second quarter of 2011~~period for ~~the~~~~ReisReports~~~~web site and other~~ significant product introductions and improvements in ~~2010 and 2011, in excess of Merger related purchase price allocations becoming fully amortized in 2010.~~
2011.
General and administrative expenses of ~~$2,633,000~~approximately $2,952,000 for the three months ended ~~September 30, 2011~~March 31, 2012 include current period expenses of ~~$2,024,000,~~approximately $2,246,000, depreciation and amortization expense of ~~$163,000~~approximately $160,000 for lease value and furniture, fixtures and equipment, and approximately $446,000 of non-cash compensation expense. The non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately $522,000, offset by an approximate $76,000 decrease in the liability for option cancellations due to a decrease in the market price of the Company’s common stock from $9.93 per share at June 30, 2011 to $8.86 per share at September 30, 2011. General and administrative expenses of $2,560,000 for the three
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months ended September 30, 2010 include current period expenses of $1,985,000, depreciation and amortization expense of $159,000 for lease value and furniture, fixtures and equipment, and approximately $416,000$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 ~~$409,000 and~~$557,000, offset by an approximate ~~$7,000 increase~~$11,000 decrease in the liability for option cancellations due to ~~an increase~~a decrease in the market price of the Company’s common stock from ~~$6.31~~$9.12 per share at ~~June 30, 2010~~December 31, 2011 to ~~$6.39~~$8.91 per share at ~~September 30, 2010. Excluding the non-cash items, the modest net increase in general~~March 31, 2012. General and administrative expenses of ~~$39,000 is a result of increased rent related costs for additional office space and higher benefit costs and compensation increases over the 2010 period, offset by reduced professional fees.~~
~~Interest expense of $65,000~~approximately $2,775,000 for the three months ended September 30, 2011 primarily includes interest and cost amortization on the Reis Services debt, which we refer to as the Bank Loan. Interest expense of $96,000 for the three months ended September 30, 2010 includes interest and cost amortization on the Bank Loan of $94,000 and interest from other debt of $2,000. The lower expense in 2011 is the result of lower outstanding balances in the 2011 period.
The income tax benefit from continuing operations during the three months ended September 30, 2010 of $79,000 reflects deferred Federal tax expense of $63,000 and deferred state and local tax expense of $16,000 as a result of a pre-tax income from continuing operations in the period. No provision was recorded by the Company in 2011 as a result of the corresponding reduction in the Company’s allowance for deferred tax assets.
~~Comparison of the Results of Operations for the Nine Months Ended September 30, 2011 and 2010~~
Subscription revenues and related cost of sales were approximately $20,201,000 and $4,623,000, respectively, for the nine months ended September 30, 2011, resulting in a gross profit for the Reis Services segment of approximately $15,578,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $1,778,000 during this period. Subscription revenues and related cost of sales were approximately $18,031,000 and $4,402,000, respectively, for the nine months ended September 30, 2010, resulting in a gross profit for the Reis Services segment of approximately $13,629,000. Amortization expense included in cost of sales was approximately $1,681,000 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 increase in cost of sales of $221,000 is primarily a result of increased database amortization expense and higher employment related costs from hiring during 2010 and 2011, coupled with related benefits and wage increases over the 2010 period.
Sales and marketing expenses were approximately $4,989,000 and $4,360,000 for the nine months ended September 30, 2011 and 2010, 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 $744,000 and $751,000 during the nine months ended September 30, 2011 and 2010, respectively. The expense increase for sales and marketing expenses between the two periods of approximately $629,000 generally reflects increased commissions and employment related costs from hiring during 2010 and 2011, coupled with related benefits and wage increases over the 2010 period.
Product development expenses were approximately $1,562,000 and $1,353,000 for the nine months ended September 30, 2011 and 2010, 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 $800,000 and $638,000 during the nine months ended September 30, 2011 and 2010, respectively. Product development costs increased $209,000, primarily due to a net increase in amortization expense of $162,000 from web site costs capitalized and amortization expense commencing in the period for the~~ReisReportsweb site and other significant product introductions and improvements in 2010 and 2011, in excess of Merger related purchase price allocations becoming fully amortized in 2010.~~
~~General and administrative expenses of $8,385,000 for the nine months ended September 30,~~March 31, 2011 include current period expenses of ~~$6,236,000,~~approximately $2,070,000, depreciation and amortization expense of ~~$482,000~~approximately $159,000 for lease value and furniture, fixtures and equipment, and approximately ~~$1,667,000~~$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 ~~$1,537,000~~$485,000 and by an approximate ~~$130,000~~$61,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $7.03 per share at December 31, 2010 to ~~$8.86~~$7.89 per share at ~~September 30,~~March 31, 2011. General and administrative expenses of $7,862,000 for the nine months ended September 30, 2010 include current period expenses of $6,179,000, depreciation and amortization expense of $482,000 for lease value and furniture, fixtures and equipment, and approximately $1,201,000 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 $1,180,000 and by an approximate $21,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $6.15 per share at December 31, 2009 to $6.39 per share at September 30, 2010.
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Excluding the non-cash ~~items,~~expenses, the increase in general and administrative expenses of ~~$57,000~~$176,000 is primarily a result of increased rent related costs for additional office space, increased professional fees, compensation increases and higher benefit costs ~~and compensation increases~~ over the ~~2010~~2011 period.
Interest expense of ~~$215,000~~$53,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2012 is comprised of interest and cost amortization on the Reis Services debt, which we refer to as the Bank Loan. Interest expense of $78,000 for the three months ended March 31, 2011 includes interest and cost amortization on the Bank Loan of ~~$213,000~~$77,000 and interest from other debt of $2,000. Interest expense of $318,000 for the nine months ended September 30, 2010 includes interest and cost amortization on the Bank Loan of $309,000 and interest from other debt of $9,000. The lower expense in 2011 is the result of lower outstanding balances in the 2011 period.
$1,000.
The income tax ~~benefit from continuing operations~~expense of $84,000 during the ~~nine~~three months ended ~~September 30, 2010 of $63,000~~March 31, 2012 reflects a deferred Federal ~~benefit~~tax expense of ~~$51,000~~$74,000 and a deferred state and local tax expense of $10,000. There was no income tax expense recorded in the first quarter of 2011.
The loss from discontinued operations was $14,345,000 and $90,000 for the three months ended March 31, 2012 and 2011, respectively. 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 $12,000 as a result of the pre-tax loss from continuing operations in the first nine months of 2010. No provision was recorded by the Company in 2011 as a result of the corresponding reduction in the Company’s allowance for deferred tax assets.
~~Income from discontinued operations, net of income tax expense, was approximately $1,253,000 and $143,000 during the nine months ended September 30, 2011 and 2010, respectively.~~$79,000. The 2011 ~~net~~ amount primarily includes ~~the sale of~~operating expenses from the East Lyme ~~project in a bulk transaction in~~property, prior to its April 2011 for a gain of $1,242,000 and net other income of $11,000. The 2010 income from discontinued operations primarily reflects the sale of the Claverack project in a bulk transaction in February 2010 for a gain of $263,000, the sale of one home and two lots at East Lyme in 2010 and the reversal of certain employment related contractual obligations for amounts less than prior period accruals, offset by operating expenses and related general and administrative expenses and a $97,000 deferred tax provision.
sale.
Income Taxes
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 ~~liability~~asset was approximately ~~$67,000~~$4,003,000 and $4,008,000 at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, respectively, of which $189,000 and $323,000 is reflected as a net current asset and $3,814,000 and $3,685,000 is reflected as a net non-current ~~liability~~asset in the accompanying consolidated balance ~~sheets.~~sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) ~~the tax benefit of impairment charges before allowances at December 31, 2010; (2) net operating loss, or~~ NOL carryforwards; ~~(3)~~(2) Federal ~~alternative minimum tax (“AMT”)~~AMT credit carryforwards; (3) stock based compensation; and (4) ~~stock based compensation,~~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 $56,014,000 at March 31, 2012 and December 31, 2011. These NOLs include NOLs generated subsequent to the Merger, aslosses 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 $28,755,000 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 ~~relates to deferred tax liabilities.~~
is expected that the use of NOLs will not be limited by expiration.
A valuation allowance is required to reduce ~~the~~ deferred tax assets if, based on the weight of the evidence, it is ~~more-likely-than-not~~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 ~~$7,550,000~~$22,466,000 and ~~$8,254,000~~$17,092,000 at ~~September 30, 2011~~March 31, 2012 and December 31, ~~2010,~~2011, respectively, was necessary. The allowance ~~at September 30, 2011 and December 31, 2010~~ relates primarily to NOL carryforwards, AMT credits and ~~existing and expected NOL carryforwards, and in 2010, the excess of a portion of the tax basis of certain real estate development assets over their respective financial statement basis.~~liability reserves. The ~~reduction~~increase in the valuation allowance in the first quarter of 2012 is attributable to providing a full allowance for the Gold Peak litigation charge recorded during March 2012. The Company will continue to evaluate the ~~nine months ended September 30, 2011 results from the realization~~amount of ~~a portion~~valuation allowance on deferred tax assets during 2012 and subsequent years based on such factors as historic profitability levels and forecasts of ~~the excess tax basis upon the sale of the East Lyme project, which was used to offset the Company’s pre-tax income in this period.~~
future taxable income.
Liquidity and Capital Resources
Cash and cash equivalents aggregated approximately ~~$22,268,000~~$21,319,000 at ~~September 30, 2011, including approximately $18,227,000 in the Reis Services segment. Management considers such amounts to be adequate~~March 31, 2012, and expects its cash balances to continue to be adequate to meet operating, product development and enhancement initiatives and debt service requirements in both the short and long terms at both the Reis Services segment and on a consolidated basis. At September 30, 2011, the Company, on a consolidated basis and at the Reis Services segment level, was net cash positive (defined as cash and cash equivalents, minus total debt) by approximately ~~$15,188,000 and $11,147,000, respectively. At December 31, 2010,~~$17,525,000.
The significant liquidity requirement that the Company is currently addressing is related to the timing and amount of posting cash or a bond with the Colorado court related to the $18,200,000 Gold Peak judgment, plus other costs of approximately $756,000. The Company is evaluating its options with respect to cash, bonding and borrowing. The Company filed post-trial motions on ~~a consolidated basis~~April 12, 2012 and at the Reis Services segment level, was net cash positive by approximately $8,914,000 and $4,662,000, respectively. Net cash on a consolidated basis and at the Reis Services level grew by approximately $6,274,000 and $6,485,000, respectively, from December 31, 2010will have an additional period of time to ~~September 30, 2011, which management believes is a strong indicator~~file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash ~~generation power~~or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner. If Reis is required to pay all or substantially all of the ~~Reis Services business model.~~
~~At September 30, 2011,~~judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows. The Company is seeking recovery under all available insurance policies, including the ACE policy, and is pursuing appropriate additional actions, and will continue discussions to settle this matter on terms favorable to the Company. For additional information on the Gold Peak litigation, see Note 11 included in the unaudited financial statements in Item 1 of this quarterly report on Form 10-Q.
At March 31, 2012, the Company’s other short-term liquidity requirements include: current operating and capitalizable costs; near-term product development and enhancement of the web site and databases; the current portion of long-term debt ~~(comprised~~(solely comprised of scheduled principal payments of approximately ~~$7,074,000~~$3,794,000 on the Bank Loan, ~~payable~~which will be paid in full by its September 30, ~~2012)~~2012 maturity date); operating ~~and capital~~ leases; remaining warranty costs, ~~and~~ insurance deductibles and settlements or judgments related to real estate construction from our discontinued operations; other costs, including public company expenses not included in the Reis Services segment; ~~repurchases of shares of Reis common stock (of which~~
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~~$612,000 remained available at September 30, 2011 pursuant to the August 2011 Board authorization) and~~ the potential settlement of certain outstanding stock options in cash (the liability for which was approximately ~~$287,000~~$229,000 at ~~September 30, 2011~~March 31, 2012 based upon the closing stock price of the Company at ~~September 30, 2011~~March 31, 2012 of ~~$8.86~~$8.91 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.~~Services and, if a significant cash outflow is necessary to either bond or settle the Gold Peak judgment, through borrowings. There can be no assurance that the Company will be able to obtain sufficient financing, on terms
favorable to the Company, or at all. The Company expects that in the short term, it will be able to utilize its NOLs and that taxes to be paid will be for alternative state and local taxes, and possibly AMT, but not for Federal income taxes.
The Company’s long-term liquidity requirements include: future operating and capitalizable costs; long-term product development and enhancements of the web ~~site~~sites and databases; operating leases and other capital expenditures; remaining warranty costs and insurance deductibles related to real estate construction from our discontinued operations; other costs, including public company expenses not included in the Reis Services segment; 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.~~Services and, if a significant cash outflow is necessary to either bond or settle the Gold Peak judgment, through borrowings. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. The Company has NOLs that it expects to be able to use inbeyond the next few years against future ~~taxable income for~~ Federal, state and local ~~tax purposes (to the extent that~~ taxable income, ~~is generated).~~if any. Tax payments during the next few years are expected to be for alternative state and local taxes and AMT, but not for Federal income taxes.
~~Reis Services Bank Loan~~
In connection with the Merger agreement, Private Reis entered into a credit agreement, dated October 11, 2006, with the Bank of Montreal, Chicago Branch, as administrative agent, and BMO Capital Markets, as lead arranger, which provided for a term loan of up to an aggregate of $20,000,000 and revolving loans up to an aggregate of $7,000,000. Loan proceeds were used to finance $25,000,000 of the cash portion of the Merger consideration. The balance of the Bank Loan was $7,074,000 and $11,222,000 at September 30, 2011 and December 31, 2010, respectively. The interest rate was LIBOR + 1.50% at September 30, 2011 and December 31, 2010 (LIBOR was 0.24% and 0.26% at September 30, 2011 and December 31, 2010, respectively).
Reis Services is required to (1) make principal payments on the term loan on a quarterly basis commencing on June 30, 2007 in increasing amounts pursuant to the payment schedule provided in the credit agreement and (2) permanently reduce the revolving loan commitments on a quarterly basis, which commenced on March 31, 2010. Additional principal payments are payable if Reis Services’s annual cash flow exceeds certain amounts, or if certain defined operating ratios are not met, all of which are defined in the credit agreement. The final maturity date of all amounts borrowed pursuant to the credit agreement is September 30, 2012. At September 30, 2011 and December 31, 2010, the Company did not have the ability to borrow any additional amounts under the Bank Loan.
In accordance with the terms of the credit agreement, beginning January 1, 2010 and through the maturity of the Bank Loan, the required leverage ratio was reduced to a maximum of 2.00 to 1.00 from a maximum of 2.50 to 1.00. In order to be in compliance with the leverage ratio test, management made a payment of $3,000,000 at March 31, 2010 in addition to the contractual minimum repayment of $1,000,000 due at that time. Although not required to do so, the Company made additional prepayments of $500,000 at the end of the second, third and fourth quarters of 2010 (aggregating $1,500,000), each of which was in excess of the minimum repayments due at such dates. All of the 2010 prepayments ratably reduced Reis Services’s future quarterly contractual minimum payments through maturity. No additional prepayments, in excess of minimum repayments, were made during the nine months ended September 30, 2011.
~~Discontinued Operations Impact on Liquidity~~
Cash flows from discontinued operations during 2010 and in the nine months ended September 30, 2011 were primarily related to the sales of assets and the operating costs and related expenses through the dates of sales. Cash flows from discontinued operations were included in the consolidated statement of cash flows in the operating activities section in accordance with the applicable accounting literature. Future cash flows will be limited to the settlement of liabilities and real estate contingencies as described below.
~~East Lyme~~
Prior to its sale in April 2011, the Company’s last remaining residential development was The Orchards, a single family home development in East Lyme, Connecticut, zoned for 161 single family homes on 224 acres, which we refer to as East Lyme.
The East Lyme project was sold in a bulk transaction for a gross sales price of $1,800,000 for the remaining 119 lots in inventory, plus the release of approximately $792,000 of project-related deposits and escrows held as restricted cash. Net cash received at closing,
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after selling expenses and closing adjustments, and including the cash received upon release of the deposits and escrows, aggregated approximately $2,600,000. As a result of this transaction, the Company recorded a gain in the second quarter of 2011 of approximately $1,242,000, which is included in income from discontinued operations. The Company sold two lots during the three months ended September 30, 2010 and sold two lots and one home during the nine months ended September 30, 2010.
Certain of the lots at East Lyme required remediation of pesticides which were used on the property when it was an apple orchard. Remediation would have been required prior to the development of those lots. The remediation plan, the cost of which was estimated by management to be approximately $1,000,000, had been approved by the health inspector for the municipality and the town planner. The estimated remediation cost was recognized in prior years and was reflected in liabilities attributable to discontinued operations in the December 31, 2010 consolidated balance sheet. As a result of the sale, the Company was indemnified from any financial obligation related to the environmental remediation and reversed this liability, which amount is included in the gain reported in the second quarter of 2011, as referred to above.
~~Claverack~~
Prior to its sale in February 2010, the Company owned approximately 235 acres in Claverack, New York, which was subdivided into 48 developable single family home lots. In February 2010, the Company sold the Claverack project in a bulk transaction for a gross sales price of $2,750,000, which included two model homes, amenities, 46 additional lots and $450,000 of cash collateralizing certain road completion obligations. Net cash received at closing, after expenses, aggregated approximately $2,187,000. The remaining $450,000 of the purchase price was payable by the purchaser in February 2011 and had been secured by the outstanding road bond and a mortgage on the property. As a result of this transaction, the Company recorded a gain of approximately $263,000 in the first quarter of 2010, which is included in income from discontinued operations. In February 2011, the Company received cash of approximately $455,000 in full satisfaction of the mortgage note and accrued interest thereon.
~~Real Estate Contingencies~~
Reis has purchased insurance with respect to construction defect and completed operations at its past real estate projects, including those projects described above. Reis is, from time to time, exposed to various claims associated with the development, construction and sale of condominium units, single family homes or lots. The impact of these claims on the Company has not been material to date. However, 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.
In October 2010, the homeowners’ association at the Company’s former Gold Peak condominium project (located outside of Denver, Colorado), brought suit against the Company, two of its subsidiaries, and other contractors and individuals alleging design and construction defects. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19 million. Trial is scheduled for February 2012. In connection with the development of Gold Peak, the Company purchased a commercial general liability “wrap” insurance policy covering the Company, the general contractor and the subcontractors. The Company is taking action to ensure that all applicable insurance policies maintained by co-defendants or others are brought into the case. The Company believes that it and its co-defendants have valid defenses to some or all of the plaintiff’s allegations, that insurance (subject to limited self insurance retainage/deductibles (“SIRs”)) will cover some or all of any eventual settlement or judgment, and that the defendants other than the Company will likely be liable for some or all of any remaining settlement judgment amount.
At this time, based on advice of counsel and the Company’s experience with similar prior actions, the low end of the expected range of exposure is believed to be equal to the amount of the Company’s SIRs plus other costs. Accordingly, the Company is maintaining a reserve of approximately $280,000, which liability is included in liabilities attributable to discontinued operations on the September 30, 2011 balance sheet. Although the Company does not believe that it will be required to pay any amount above the reserved amount, it is possible that a settlement or judgment in this matter could involve the payment by the Company of an amount that could be material to the Company’s reportable discontinued operating income (loss), its consolidated financial position or cash flows. It would not have any effect on the Company’s income from continuing operations.
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Changes in Cash Flows

Comparison of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~
Cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~ are summarized as follows:

For the Nine Months Ended
September 30,
2011 2010
Net cash provided by operating activities $ 9,854,384 $ 6,005,930
Net cash (used in) investing activities (2,840,154 ) (1,919,177 )
Net cash (used in) financing activities (4,910,092 ) (7,190,804 )

Net increase (decrease) in cash and cash equivalents $ 2,104,138 $ (3,104,051 )

   For the Three Months Ended March 31,
   2012    2011
Net cash provided by operating activities
   $                 2,789,066            $               4,030,338
Net cash (used in) investing activities
   (974,643)           (802,135)
Net cash (used in) financing activities
   (2,648,356)           (1,643,772)




Net (decrease) increase in cash and cash equivalents
   $ (833,933)           $ 1,584,431




Cash flows provided by operating activities ~~increased $3,848,000~~decreased $1,241,000 from ~~$6,006,000 provided in the 2010 period to $9,854,000~~$4,030,000 provided in the 2011 period to $2,789,000 provided in the 2012 period. ~~The increase resulted~~This decrease was primarily the result of (1) decreased cash flow from ~~(1) increased cash flows from operating activities of~~ the Reis Services segment of ~~$2,380,000~~$597,000 from ~~$6,900,000 provided in the 2010 period to $9,280,000~~$4,651,000 provided in the 2011 period ~~primarily~~to $4,054,000 provided in the 2012 period due to ~~increased collections in~~ the ~~2011 period (on a higher~~timing of accounts receivable ~~balance at December 31, 2010 than~~collections, (2) the ~~December 31, 2009 amount)~~February 2011 collection of approximately $455,000 in satisfaction of a mortgage note and ~~(2) cash~~accrued interest thereon from the sale ~~proceeds~~ of property in Claverack, New York in February 2010, and (3) increased professional fees in the ~~East Lyme property, mortgage note receivable repayment and escrow releases in 2011 in excess of the 2010 real estate sales activities.~~
2012 period.
Cash flows used in investing activities increased ~~$921,000~~$173,000 from ~~$1,919,000 used in the 2010 period to $2,840,000~~$802,000 used in the 2011 period to $975,000 used in the 2012 period. This change ~~primarily~~ resulted from an increase of ~~$713,000 for~~ cash used in the ~~2011~~2012 period as compared to the ~~2010~~2011 period for web site and database development costs ~~from~~for continuing product development and enhancement ~~initiatives and $198,000 of furniture, fixture and equipment additions in 2011 in excess of 2010 additions.~~
initiatives.
Cash flows used in financing activities ~~decreased $2,281,000~~increased $1,004,000 from ~~$7,191,000 used in the 2010 period to $4,910,000~~$1,644,000 used in the 2011 period to $2,648,000 used in the 2012 period. During the ~~2010~~2012 period, ~~$6,506,000~~$1,897,000 was repaid on the Bank Loan whereas ~~$4,148,000~~$1,383,000 was repaid in the 2011 period. In the 2010 period, the Company repurchased 49,191 shares of its outstanding common stock for approximately $308,000 as compared to 43,249 shares being repurchased in the 2011 period for approximately $388,000. Other debt repayments in the ~~2010~~2011 period ~~exceeded the~~were $10,000, with no such payments in the ~~2011 period by $137,000.~~2012 period. Payments for restricted stock unit settlements were approximately ~~$352,000~~$751,000 and ~~$218,000~~$251,000 in the ~~2011~~2012 and ~~2010~~2011 periods, respectively.
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 future services and product development of the Reis Services segment;~~
• statements relating to future business prospects, potential acquisitions, 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.
statements relating to future 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 may be lower than expected;
32
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;
• ~~revenues may be lower than expected;~~
• ~~inability to retain and increase the Company’s subscriber base;~~
• ~~inability to execute properly on new product or service initiatives, or failure of subscribers to accept these products and services;~~
• ~~competition;~~
• ~~inability to attract and retain sales and senior management personnel;~~
• ~~difficulties in protecting the security, confidentiality, integrity and reliability of the Company’s data;~~
• ~~changes in accounting policies or practices;~~
• ~~legal and regulatory issues; and~~
• the risk factors listed under “Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2010, which was filed with the Securities and Exchange Commission on March 11, 2011.
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 (including difficulty or inability to finance any adverse judgments, bonding or settlement); and
the risk factors listed under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission on March 8, 2012.
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 ismay be generally managed by limiting the Company’s financing exposures, to the extent possible, by purchasing interest rate caps when ~~and if~~ deemed appropriate.
At ~~September 30, 2011,~~March 31, 2012, the Company’s only exposure to interest rates was variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. The interest rate cap on the Bank Loan expired at June 30, 2010. The following table presents the effect of a 1% increase in the applicable base rates of variable rate debt at ~~September 30, 2011:~~

(amounts in thousands) Balance at LIBOR at Additional
September 30, September 30, Interest
2011 2011 Incurred
Variable rate debt:
Bank Loan $ 7,074 0.24 % $ 71 (A)

March 31, 2012:
(amounts in thousands)    Balance at
March 31,
2012         LIBOR at
March 31,
2012 Additional
Interest
Incurred
Variable rate debt:

Bank Loan
   $                   3,794        0.24%    $                   38(A)


(A)
Reflects additional interest which could be incurred annually on the loan balance amount as a result of a 1% increase in LIBOR. It does not take into consideration future periodic repayments.
Although the interest rate cap expired at June 30, 2010, our interest rate exposure on the Bank Loan has been limited and will continue to diminish significantly as a result of ~~continuing~~increased scheduled principal repayments during ~~2011 and~~2012 through its maturity at September 30, 2012.
Management is assessing the need, if any, for replacement financing upon full repayment of the Bank Loan.
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 may 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.
33
Item 4.4T. Controls and Procedures.
As of ~~September 30, 2011,~~March 31, 2012, 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 ~~September 30, 2011~~March 31, 2012 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.
~~The Company~~
Reis, Inc. and two of its subsidiaries ~~are~~(Gold Peak at Palomino Park, LLC (“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 at the time) relating to ~~the~~ alleged design and construction defects at the Gold Peak project. ~~The construction manager/general contractor, the individual owner of~~Tri-Star Construction, the construction manager/general contractor ~~and the civil engineer~~ for the ~~Gold Peak~~ project ~~have~~(not affiliated with Reis) (“Tri-Star”) and two former
officers of Reis, Inc. (one of whom was also ~~been~~a director) were named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately ~~$19 million.~~$19,000,000. Trial ~~is scheduled~~commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012. The jury found Reis, jointly and severally with GP LLC and the former officers, liable for ~~February 2012.~~
an aggregate of $18,200,000.
In connection with the development of Gold Peak, the Company purchased a commercial general liability ~~“wrap”~~“WRAP” insurance policy ~~covering~~from ACE Westchester (“ACE”) that covers the Company ~~the general contractor~~(including its subsidiaries) and ~~the~~its former officers, Tri-Star and Tri-Star’s subcontractors. The Company, upon advice of counsel and based on a reading of the policy, ~~as written,~~ has taken the position that a total of ~~$9 million~~$9,000,000 (and possibly $12,000,000) of coverage is available for this claim. ~~The insurer~~ACE has taken the position that only ~~$3 million~~$3,000,000 of coverage is(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 ~~taking action~~liable for all additional damages stemming from this failure to ~~ensure that all applicable~~engage and settle. Additionally, the Company has added claims against multiple additional insurance companies under policies maintained by the Company, co-defendants or others, ~~are brought into the case.~~
including Reis’s directors’ and officers’ insurance policy. The Company ~~believes that it~~has also brought separate claims against the architect and ~~its co-defendants have valid defenses to some or all~~a third party inspector engaged at Gold Peak.
As a result of the plaintiff’s allegations, that insurance (subject to limited self insurance retainage/deductibles (“SIRs”)) will cover some or all of any eventual settlement or judgment, and that the defendants other thanverdict, the Company ~~will likely~~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 to be ~~liable for some or all~~recovered. As of ~~any remaining settlement judgment amount.~~
~~At this time,~~December 31, 2011, based on ~~advice~~the best available information at that time, the Company recorded a charge of ~~counsel and the Company’s experience with similar prior actions,~~approximately $4,460,000 in discontinued operations, representing the low end of the Company’s expected range of ~~exposure is believed~~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. These charges are reflected in discontinued operations and negatively impact net income (loss), but do not impact income from continuing operations.
On April 12, 2012, the Company, other defendants and the plaintiff homeowners’ association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court’s ruling on these post-trial motions, the Company will have an additional period of time to ~~be equal to the amount~~file an appeal of the ~~Company’s SIRs plus other costs. Accordingly,~~judgment. In order to appeal the ~~Company is maintaining a reserve of approximately $280,000, which liability is included in liabilities attributable to discontinued operations on~~judgment, the ~~September 30, 2011 balance sheet. Although the~~ Company ~~does not believe that it~~ will be required to ~~pay any amount above~~post cash or a bond with the ~~reserved amount, it is possible~~court and may need to obtain additional financing. There can be no assurance that ~~a settlement~~the Company will be able to obtain sufficient financing, on terms favorable to the Company, or ~~judgment in~~at all. If this matter ~~could involve the payment by~~is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of ~~an amount that could be~~this matter sooner.
If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material toimpact on the Company’s ~~reportable discontinued operating income (loss), its~~ consolidated financial position orand cash flows. ~~It would~~
The Company is not ~~have any effect on the Company’s income from continuing operations.~~
~~Neither the Company nor any of its subsidiaries is~~ 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, ~~2010,~~2011, which was filed with the SEC on March ~~11, 2011,~~8, 2012, 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.
34 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
~~Between December 2008 and June 2010,~~
During the ~~Board authorized~~first quarter of 2012, the Company did not repurchase of up to an aggregate amount of $4,000,000 of the Company’s common stock, which authorizations were fully utilized by December 2010. In August 2011, the Board authorized an additional $1,000,000 to make stock repurchases (of which $612,000 remained available as of September 30, 2011). 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~~shares of common stock during blackout periods consistent with the Company’s “Policies for Transactions in Reis Stock and Insider Trading and Tipping.” During the third quarter of 2011, the Company repurchased the following common shares:

Maximum Dollar
Total Number of Value of Shares
Shares Purchased That May Yet Be
as Part of Publicly Purchased Under
Total Number of Average Price Announced Plans the Plans or
Period Shares Purchased Paid per Share or Programs Programs
July 1, 2011 to July 31, 2011 — $ — — $ —
August 1, 2011 to August 31, 2011 1,249 $ 9.11 1,249 $ 989,000
September 1, 2011 to September 30, 2011 42,000 $ 8.98 42,000 $ 612,000
stock.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Reserved.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibits filed with this Form 10-Q:
Exhibit
No.
~~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.
35
*
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
~~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.
~~REIS, INC.~~

By:
~~By:~~
/s/   Mark P. Cantaluppi

Mark P. Cantaluppi

Vice President, Chief Financial Officer

Dated: ~~November~~May 3, ~~2011~~
2012
36
32

¨		~~For the quarterly period ended September 30, 2011~~

or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		~~For the transition period from~~to.


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

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


	September 30,			December 31,
	2011			2010

ASSETS
Current assets:
Cash and cash equivalents	$	22,267,925		$	20,163,787
Restricted cash and investments		215,190			214,298
Accounts receivable, net		4,489,892			8,961,623
Prepaid and other assets		443,937			384,384
Assets attributable to discontinued operations		—			2,438,240

Total current assets		27,416,944			32,162,332
Furniture, fixtures and equipment, net		945,938			958,505
Intangible assets, net of accumulated amortization of $18,198,744 and $14,891,406, respectively		17,625,641			18,576,606
Goodwill		54,824,648			54,824,648
Other assets		123,478			165,868

Total assets	$	100,936,649		$	106,687,959


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of Bank Loan	$	7,073,703		$	5,531,050
Current portion of other debt		6,055			27,851
Accrued expenses and other liabilities		2,770,188			2,818,496
Liability for option cancellations		287,483			157,744
Deferred revenue		12,368,132			15,446,248
Liabilities attributable to discontinued operations		845,753			1,963,530

Total current liabilities		23,351,314			25,944,919
Non-current portion of Bank Loan		—			5,690,940
Other long-term liabilities		686,656			693,092
Deferred tax liability, net		66,580			66,580

Total liabilities		24,104,550			32,395,531

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,562,570 and 10,472,010 shares issued and outstanding, respectively		211,251			209,440
Additional paid in capital		100,143,091			99,347,837
Retained earnings (deficit)		(23,522,243	)		(25,264,849	)

Total stockholders’ equity		76,832,099			74,292,428

Total liabilities and stockholders’ equity	$	100,936,649		$	106,687,959


	March 31,		December 31,
	2012		2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,318,869	$	22,152,802
Restricted cash and investments		215,619		215,405
Accounts receivable, net		5,249,225		8,597,464
Prepaid and other assets		510,741		625,451
Assets attributable to discontinued operations		—		3,000,000

Total current assets		27,294,454		34,591,122
Furniture, fixtures and equipment, net of accumulated depreciation of $1,621,115 and $1,556,022, respectively		814,700		863,309
Intangible assets, net of accumulated amortization of $20,710,377 and $19,437,856, respectively		16,821,195		17,155,195
Deferred tax asset, net		3,814,420		3,685,420
Goodwill		54,824,648		54,824,648
Other assets		77,442		98,412

Total assets	$	103,646,859	$	111,218,106


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of Bank Loan	$	3,793,961	$	5,690,940
Accrued expenses and other liabilities		1,733,439		3,352,445
Liability for option cancellations		229,349		240,515
Deferred revenue		14,757,772		15,706,851
Liabilities attributable to discontinued operations		19,374,447		8,048,568

Total current liabilities		39,888,968		33,039,319
Other long-term liabilities		650,256		668,456

Total liabilities		40,539,224		33,707,775

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,686,293 and 10,570,891 shares issued and outstanding, respectively		213,725		211,417
Additional paid in capital		100,481,208		100,677,336
Retained earnings (deficit)		(37,587,298)		(23,378,422)

Total stockholders’ equity		63,107,635		77,510,331

Total liabilities and stockholders’ equity	$	103,646,859	$	111,218,106


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



~~Maryland~~ (Exact Name of Registrant as Specified in Its Charter)		~~13-3926898~~


							Page	Number
							~~Number~~
PART I. FINANCIAL INFORMATION:


Item 1.	Financial Statements


~~Item 1.~~			~~Financial Statements~~

			Consolidated Balance Sheets ~~(unaudited)~~ at ~~September 30, 2011~~March 31, 2012 (unaudited) and December 31, ~~2010~~2011			3
			Consolidated Statements of Operations (unaudited) For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~			4
			Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the ~~Nine~~Three Months Ended ~~September 30, 2011~~March 31, 2012			5
			Consolidated Statements of Cash Flows (unaudited) For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2012 and 2011 ~~and 2010~~			6
			Notes to Consolidated Financial Statements (unaudited)			7

Item 2.
~~Item 2.~~			Management’s Discussion and Analysis of Financial Condition and Results of Operations			20	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			33	29
Item 4.4T.	Controls and Procedures			34	29

PART II. OTHER INFORMATION:


Item 1.	Legal Proceedings		29
Item 1A.
~~Item 1.~~Risk Factors			~~Legal Proceedings~~ 31
Item 2.		34
~~Item 1A.~~			~~Risk Factors~~			34
~~Item 2.~~			Unregistered Sales of Equity Securities and Use of Proceeds			35	31
Item 3.	Defaults Upon Senior Securities			35	31
Item 4.	Reserved			35	31
Item 5.	Other Information			35	31
Item 6.	Exhibits			35	31
	Signatures		~~Signatures~~			36
~~EX-31.1~~
~~EX-31.2~~
~~EX-32.1~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~
~~EX-101 DEFINITION LINKBASE DOCUMENT~~32


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Subscription revenue	$	6,747,585		$	6,013,122		$	20,201,463		$	18,031,664
Cost of sales of subscription revenue		1,550,435			1,402,455			4,623,673			4,402,204

Gross profit		5,197,150			4,610,667			15,577,790			13,629,460

Operating expenses:
Sales and marketing		1,656,187			1,369,201			4,988,681			4,360,152
Product development		574,066			419,015			1,562,224			1,353,046
General and administrative expenses		2,632,106			2,560,233			8,384,599			7,861,733

Total operating expenses		4,862,359			4,348,449			14,935,504			13,574,931

Other income (expenses):
Interest and other income		19,321			28,132			61,646			101,400
Interest expense		(65,145	)		(95,993	)		(214,807	)		(317,801	)

Total other income (expenses)		(45,824	)		(67,861	)		(153,161	)		(216,401	)

Income (loss) before income taxes and discontinued operations		288,967			194,357			489,125			(161,872	)
Income tax expense (benefit)		—			79,000			—			(63,000	)

Income (loss) from continuing operations		288,967			115,357			489,125			(98,872	)
Income (loss) from discontinued operations, net of income tax expense of $—, $—, $—, and $97,000, respectively		1,231			(319	)		1,253,481			143,237

Net income	$	290,198		$	115,038		$	1,742,606		$	44,365


Per share amounts – basic:
Income (loss) from continuing operations	$	0.03		$	0.01		$	0.05		$	(0.01	)

Net income	$	0.03		$	0.01		$	0.16		$	—


Per share amounts – diluted:
Income (loss) from continuing operations	$	0.02		$	0.01		$	0.05		$	(0.01	)

Net income	$	0.02		$	0.01		$	0.16		$	—


Weighted average number of common shares outstanding:
Basic		10,599,031			10,594,443			10,572,288			10,504,098

Diluted		10,997,157			10,815,890			10,835,602			10,504,098


	For the Three Months Ended March 31,
	2012		2011

Subscription revenue	$	7,298,372	$	6,617,368
Cost of sales of subscription revenue		1,845,714		1,550,384

Gross profit		5,452,658		5,066,984

Operating expenses:
Sales and marketing		1,729,319		1,652,414
Product development		513,594		481,097
General and administrative expenses		2,952,268		2,775,805

Total operating expenses		5,195,181		4,909,316

Other income (expenses):
Interest and other income		16,065		20,224
Interest expense		(53,163)		(78,363)

Total other income (expenses)		(37,098)		(58,139)

Income before income taxes and discontinued operations		220,379		99,529
Income tax expense		84,000		—

Income from continuing operations		136,379		99,529
(Loss) from discontinued operations, net of income tax (benefit) of $(79,000) and $—, respectively		(14,345,255)		(89,730)

Net (loss) income	$	(14,208,876)	$	9,799


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

Net (loss) income	$	(1.34)	$	—


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

Net (loss) income	$	(1.29)	$	—


Weighted average number of common shares outstanding:
Basic		10,623,575		10,529,141

Diluted		11,011,394		10,795,246


										Retained			Total
	Common Shares						Paid in			Earnings			Stockholders’
	Shares			Amount			Capital			(Deficit)			Equity
Balance, January 1, 2011		10,472,010		$	209,440		$	99,347,837		$	(25,264,849	)	$	74,292,428

Shares issued for vested employees restricted stock units		133,809			2,676			(2,676	)		—			—
Stock based compensation, net		—			—			1,185,454			—			1,185,454
Stock repurchases		(43,249	)		(865	)		(387,524	)		—			(388,389	)
Net income		—			—			—			1,742,606			1,742,606

Balance, September 30, 2011		10,562,570		$	211,251		$	100,143,091		$	(23,522,243	)	$	76,832,099


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

Balance, January 1, 2012		10,570,891	$	211,417	$	100,677,336	$	(23,378,422)	$	77,510,331

Shares issued for vested employees restricted stock units		115,402		2,308		(2,308)		—		—
Stock based compensation, net		—		—		(193,820)		—		(193,820)
Net (loss)		—		—		—		(14,208,876)		(14,208,876)

Balance, March 31, 2012		10,686,293	$	213,725	$	100,481,208	$	(37,587,298)	$	63,107,635

1.		*Organization and Business*

		Reis, Inc. (the “Company” or “Reis”) is a Maryland corporation. The Company’s primary business 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 and flex/research & development 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 new 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 evaluations. Depending on the product, users have access to trend and forecast analysis 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, and equity investors. 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.

		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.

		~~Discontinued Operations – Residential Development Activities~~

		The Company was originally formed on January 8, 1997. Reis acquired the Reis Services business by merger in May 2007 (the “Merger”). Prior to May 2007, Reis operated as Wellsford Real Properties, Inc. (“Wellsford”). Wellsford’s primary operating activities immediately prior to the Merger 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 and sold its remaining project in East Lyme, Connecticut in bulk in April 2011.

		~~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 significant inter-company accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation.

		*~~Summary of Significant Accounting Policies (continued)~~*

		~~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, 2010, as filed with the SEC on March 11, 2011. The consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010 and consolidated statements of changes in cash flows for the nine months ended September 30, 2011 and 2010 are not necessarily indicative of full year results.

		~~Discontinued Operations~~

		The Company has 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.

		~~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. Although the outcome of any litigation is uncertain, management does not believe that 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.

		~~Reclassification~~

		Amounts in certain accounts, as presented in the consolidated financial statements and footnotes, have been reclassified to reflect discontinued operations. These reclassifications do not result in a change to the previously reported net income for any of the periods presented to conform to the current period presentation; however, the computation of the denominator for determining net income per common share on a fully diluted basis for the nine months ended September 30, 2010 is different than previously presented. This difference, in conformity with existing accounting literature for the computation of earnings per share, is based upon the utilization of a different number of diluted shares as dictated by the loss from continuing operations.


		(Registrant’s Telephone Number, Including Area Code)


(amounts in thousands)
Condensed Balance Sheet Data March 31, 2012	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Assets
Current assets:
Cash and cash equivalents	$	19,688	$	—	$	1,631	$	21,319
Restricted cash and investments		216		—		—		216
Receivables, prepaid and other assets		5,486		—		274		5,760
Assets attributable to discontinued operations		—		—		—		—

Total current assets		25,390		—		1,905		27,295
Furniture, fixtures and equipment, net		775		—		40		815
Intangible assets, net		16,821		—		—		16,821
Deferred tax asset, net		—		—		3,814		3,814
Goodwill		57,203		—		(2,378)		54,825
Other assets		77		—		—		77

Total assets	$	100,266	$	—	$	3,381	$	103,647


Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	3,794	$	—	$	—	$	3,794
Accrued expenses and other liabilities		1,065		—		898		1,963
Deferred revenue		14,758		—		—		14,758
Liabilities attributable to discontinued operations		—		19,359		15		19,374

Total current liabilities		19,617		19,359		913		39,889
Other long-term liabilities		650		—		—		650
Deferred tax liability, net		13,729		—		(13,729)		—

Total liabilities		33,996		19,359		(12,816)		40,539
Total stockholders’ equity		66,270		(19,359)		16,197		63,108

Total liabilities and stockholders’ equity	$	100,266	$	—	$	3,381	$	103,647


Condensed Balance Sheet Data December 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Assets
Current assets:
Cash and cash equivalents	$	18,505	$	—	$	3,648	$	22,153
Restricted cash and investments		215		—		—		215
Receivables, prepaid and other assets		8,795		—		428		9,223
Assets attributable to discontinued operations		—		3,000		—		3,000

Total current assets		27,515		3,000		4,076		34,591
Furniture, fixtures and equipment, net		821		—		42		863
Intangible assets, net		17,155		—		—		17,155
Deferred tax asset, net		—		—		3,685		3,685
Goodwill		57,203		—		(2,378)		54,825
Other assets		99		—		—		99

Total assets	$	102,793	$	3,000	$	5,425	$	111,218


Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	5,691	$	—	$	—	$	5,691
Accrued expenses and other liabilities		2,257		—		1,336		3,593
Deferred revenue		15,707		—		—		15,707
Liabilities attributable to discontinued operations		—		8,032		17		8,049

Total current liabilities		23,655		8,032		1,353		33,040
Other long-term liabilities		668		—		—		668
Deferred tax liability, net		13,151		—		(13,151)		—

Total liabilities		37,474		8,032		(11,798)		33,708
Total stockholders’ equity		65,319		(5,032)		17,223		77,510

Total liabilities and stockholders’ equity	$	102,793	$	3,000	$	5,425	$	111,218


(amounts in thousands)

Condensed Balance Sheet Data	Reis			Discontinued
September 30, 2011	Services			Operations (A)			Other (B)			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	18,227		$	—		$	4,041		$	22,268
Restricted cash and investments		215			—			—			215
Receivables, prepaid and other assets		4,777			—			157			4,934
Assets attributable to discontinued operations		—			—			—			—

Total current assets		23,219			—			4,198			27,417
Furniture, fixtures and equipment, net		901			—			45			946
Intangible assets, net		17,626			—			—			17,626
Goodwill		57,203			—			(2,378	)		54,825
Other assets		123			—			—			123

Total assets	$	99,072		$	—		$	1,865		$	100,937


Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	7,080		$	—		$	—		$	7,080
Accrued expenses and other liabilities		1,837			—			1,221			3,058
Deferred revenue		12,368	��		—			—			12,368
Liabilities attributable to discontinued operations		—			846			—			846

Total current liabilities		21,285			846			1,221			23,352
Other long-term liabilities		687			—			—			687
Deferred tax liability, net		13,450			—			(13,384	)		66

Total liabilities		35,422			846			(12,163	)		24,105
Total stockholders’ equity		63,650			(846	)		14,028			76,832

Total liabilities and stockholders’ equity	$	99,072		$	—		$	1,865		$	100,937


Condensed Balance Sheet Data	Reis			Discontinued
December 31, 2010	Services			Operations (A)			Other (B)			Consolidated

Assets
Current assets:
Cash and cash equivalents	$	15,912		$	21		$	4,231		$	20,164
Restricted cash and investments		214			—			—			214
Receivables, prepaid and other assets		9,230			—			116			9,346
Assets attributable to discontinued operations		—			2,438			—			2,438

Total current assets		25,356			2,459			4,347			32,162
Furniture, fixtures and equipment, net		957			—			1			958
Intangible assets, net		18,577			—			—			18,577
Goodwill		57,203			—			(2,378	)		54,825
Other assets		166			—			—			166

Total assets	$	102,259		$	2,459		$	1,970		$	106,688


Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	5,559		$	—		$	—		$	5,559
Accrued expenses and other liabilities		1,900			—			1,077			2,977
Deferred revenue		15,446			—			—			15,446
Liabilities attributable to discontinued operations		—			1,964			—			1,964

Total current liabilities		22,905			1,964			1,077			25,946
Non-current portion of Bank Loan		5,691			—			—			5,691
Other long-term liabilities		693			—			—			693
Deferred tax liability, net		11,785			—			(11,719	)		66

Total liabilities		41,074			1,964			(10,642	)		32,396
Total stockholders’ equity		61,185			495			12,612			74,292

Total liabilities and stockholders’ equity	$	102,259		$	2,459		$	1,970		$	106,688


(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.


(amounts in thousands)

Condensed Operating Data for the	Reis			Discontinued
Three Months Ended September 30, 2011	Services			Operations (A)		Other (B)			Consolidated

Subscription revenue	$	6,747		$	—	$	—		$	6,747
Cost of sales of subscription revenue		1,550			—		—			1,550

Gross profit		5,197			—		—			5,197

Operating expenses:
Sales and marketing		1,656			—		—			1,656
Product development		574			—		—			574
General and administrative expenses		1,563			—		1,070			2,633

Total operating expenses		3,793			—		1,070			4,863
Other income (expenses):
Interest and other income		18			—		2			20
Interest expense		(65	)		—		—			(65	)

Total other income (expenses)		(47	)		—		2			(45	)

Income (loss) before income taxes and discontinued operations	$	1,357		$	—	$	(1,068	)	$	289


Income from discontinued operations, before income taxes	$	—		$	1	$	—		$	1


Condensed Operating Data for the	Reis			Discontinued
Three Months Ended September 30, 2010	Services			Operations (A)		Other (B)			Consolidated

Subscription revenue	$	6,013		$	—	$	—		$	6,013
Cost of sales of subscription revenue		1,403			—		—			1,403

Gross profit		4,610			—		—			4,610

Operating expenses:
Sales and marketing		1,369			—		—			1,369
Product development		419			—		—			419
General and administrative expenses		1,496			—		1,064			2,560

Total operating expenses		3,284			—		1,064			4,348
Other income (expenses):
Interest and other income		24			—		5			29
Interest expense		(96	)		—		—			(96	)

Total other income (expenses)		(72	)		—		5			(67	)

Income (loss) before income taxes and discontinued operations	$	1,254		$	—	$	(1,059	)	$	195


Income (loss) from discontinued operations, before income taxes	$	—		$	1	$	(2	)	$	(1	)


		Stated Interest Rate at	September 30,		December 31,
	Maturity Date	September 30, 2011	2011		2010

Reis Services Bank Loan	September 2012	LIBOR + 1.50%	$	7,074,000	$	11,222,000
Other Reis Services debt	Various	Fixed/Various		6,000		28,000

Total debt			$	7,080,000	$	11,250,000

Total assets of Reis Services as a security interest for the Bank Loan			$	99,072,000	$	102,259,000


	For the Nine Months Ended September 30,
	2011				2010
			Weighted-				Weighted-
			Average				Average
			Exercise				Exercise
	Options		Price		Options		Price

Outstanding at beginning of period		680,896	$	8.73		473,620	$	8.91
Granted		—	$	—		225,000	$	8.03
Cancelled through cash settlement		—	$	—		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—

Outstanding at end of period		680,896	$	8.73		698,620	$	8.63

Options exercisable at end of period		378,896	$	8.92		319,620	$	8.45

Options exercisable which can be settled in cash		70,896	$	4.81		88,620	$	4.73

		*~~Stock Plans and Other Incentives (continued)~~*

		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 September 30, 2011, the liability for option cancellations was approximately $287,000 based upon the difference in the closing stock price of the Company at September 30, 2011 of $8.86 per share and the individual exercise prices of the outstanding 70,896 “in-the-money” options that were accounted for as liability awards at that date. At December 31, 2010, the liability for option cancellations was approximately $158,000 based upon the difference in the closing stock price of the Company at December 31, 2010 of $7.03 per share and the individual exercise prices of the outstanding 70,896 “in-the-money” options that were accounted for as liability awards at that date. The Company recorded a reduction to compensation expense of approximately $76,000 for the three months ended September 30, 2011 and compensation expense of $7,000 for the three months ended September 30, 2010, and compensation expense of $130,000 and $21,000 for the nine months ended September 30, 2011 and 2010, respectively, in general and administrative expenses in the statements of operations related to the respective changes in the amount of the liability for option cancellations.

		~~RSU Awards~~

		~~The following table presents the changes in RSUs outstanding for the nine months ended September 30, 2011 and 2010:~~


(A)		Includes ~~(i)~~74,149 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $751,000 in the first quarter of 2012. A net of 115,402 shares of common stock were delivered in the first quarter of 2012.
(B)		Includes 33,758 shares which were used to settle minimum employee withholding tax obligations for 14 employees of approximately $251,000 in the first quarter of 2011 (ii) 9,054 shares which were used to settle minimum employee withholding tax obligations for two employees of approximately $90,000 in the second quarter of 2011 and (iii) 1,207 shares which were used to settle minimum employee withholding tax obligations for one employee of approximately $11,000 in the third quarter of 2011. A net of ~~2,126 and 133,809~~115,738 shares of common stock were delivered in the ~~three and nine months ended September 30, 2011, respectively.~~
~~(B)~~		~~Includes (i) 17,431 shares which were used to settle minimum employee withholding tax obligations for 12 employees of approximately $105,000 in the~~ first quarter of 2010, (ii) 16,870 shares which were used to settle minimum employee withholding tax obligations for 63 employees of approximately $105,000 in the second quarter of 2010 and (iii) 1,207 shares which were used to settle minimum employee withholding tax obligations for one employee of approximately $8,000 in the third quarter of 2010. A net of 2,126 and 240,051 shares of common stock were delivered in the three and nine months ended September 30, 2010, respectively.2011.
(C)		For purposes of this calculation, the Company’s closing stock prices were ~~$8.86~~$8.91 and ~~$6.39~~$7.89 per share on ~~September 30,~~March 31, 2012 and 2011, ~~and 2010,~~ respectively.

*10.*		*~~Stock Plans and Other Incentives (continued)~~Earnings Per Common Share*

		In March 2011, an aggregate of 214,135 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $7.41 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 and July 2010, an aggregate of 185,500 RSUs and 75,000 RSUs respectively, were granted to employees which vest one-third a year over three years and have a grant date fair value of $5.97 and $6.52 respectively, per RSU (which was determined based on the closing price of the Company’s common stock on the applicable date of grant). The awards granted in 2011 and 2010 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.

		During the nine months ended September 30, 2011, an aggregate of 29,364 RSUs were granted to non-employee directors (with an average grant date fair value of $8.09 per RSU) related to the equity component of their compensation for the three months ended December 31, 2010, March 31, 2011 and June 30, 2011. During the nine months ended September 30, 2010, an aggregate of 23,355 RSUs were granted to non-employee directors (with an average grant date fair value of $6.07 per RSU) related to the equity component of their compensation for the three months ended December 31, 2009, March 31, 2010 and June 30, 2010. 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 $522,000 and $409,000, including approximately $69,000 and $63,000 related to non-employee director equity compensation, for the three months ended September 30, 2011 and 2010, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statement of operations. For the nine months ended September 30, 2011 and 2010, the Company recorded non-cash compensation expense of approximately $1,537,000 and $1,180,000, respectively, including approximately $226,000 and $159,000, respectively, related to non-employee director equity compensation.

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

	•		~~invested in the analytical expertise to develop decision support systems around property valuation, 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.~~


Number of metropolitan markets:
Apartment			200
Retail			190
Office			132
Warehouse/distribution			47
Flex/research & development			47

	•		~~property comparables that allow users to identify buildings or new construction projects with similar characteristics (such as square footage, rents or sales price);~~

	•		~~quarterly “First Glance” reports that provide an early assessment of the apartment, office and retail sectors across the U.S. and preliminary commentary on new construction activity;~~

	•		“Quarterly Briefings” — two conference calls each quarter attended by hundreds of subscribers, during which Reis provides an overview of its latest high-level findings and forecasts for the commercial real estate space and capital markets;

	•		~~real estate news stories chosen by Reis analysts to provide information relevant to a particular market and property type; and~~

	•		~~customizable email alerts that let users receive proactive updates on only those reports and markets that they designate.~~


	For the Three Months Ended
	September 30,									Percentage
	2011			2010			Increase			Increase
Revenue	$	6,747		$	6,013		$	734			12.2	%
EBITDA	$	2,722		$	2,440		$	282			11.6	%
EBITDA margin		40.3	%		40.6	%

	For the Nine Months Ended
	September 30,									Percentage
	2011			2010			Increase			Increase
Revenue	$	20,201		$	18,031		$	2,170			12.0	%
EBITDA	$	8,089		$	7,096		$	993			14.0	%
EBITDA margin		40.0	%		39.4	%

	For the Three Months Ended
	September 30,			June 30,						Percentage
	2011			2011			(Decrease)			(Decrease)
Revenue	$	6,747		$	6,837		$	(90	)		(1.3	)%
EBITDA	$	2,722		$	2,748		$	(26	)		(0.9	)%
EBITDA margin		40.3	%		40.2	%


(amounts in thousands, excluding percentages)
	For the Three Months Ended March 31,				Increase		Percentage Increase
	2012		2011		Increase		Percentage Increase
Revenue	$	7,298	$	6,617	$	681		10.3%
EBITDA	$	2,921	$	2,619	$	302		11.5%
EBITDA margin		40.0%		39.6%

	For the Three Months Ended
	March 31, 2012		December 31, 2011		Increase		Percentage Increase
Revenue	$	7,298	$	6,979	$	319		4.6%
EBITDA	$	2,921	$	2,748	$	173		6.3%
EBITDA margin		40.0%		39.4%


							Percentage Increase (Decrease)
	March 31,				Increase (Decrease)
	2012		2011		Increase (Decrease)
Deferred revenue (GAAP basis)	$	14,758,000	$	13,407,000	$	1,351,000		10.1%
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)		11,212,000		11,656,000		(444,000)		(3.8)%

Aggregate Revenue Under Contract	$	25,970,000	$	25,063,000	$	907,000		3.6%


(A)		Amounts are billable ~~in the twelve month period~~ subsequent to ~~September 30~~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.

~~(B)~~		Included in Aggregate Revenue Under Contract at September 30, 2011 was approximately $18,508,000 related to amounts under contract for the forward twelve month period through September 30, 2012. The remainder reflects amounts under contract beyond September 30, 2012. The forward twelve month Aggregate Revenue Under Contract amount is approximately 70% of revenue on a trailing twelve month basis at September 30, 2011 of approximately $26,368,000.


(amounts in thousands)

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 March 31, 2011	By Segment
	Reis Services		Other (A)		Consolidated
Income from continuing operations					$	100
Income tax expense						—

Income (loss) before income taxes and discontinued operations	$	1,325	$	(1,225)		100
Add back:
Depreciation and amortization expense		1,234		1		1,235
Interest expense (income), net		60		(1)		59

EBITDA		2,619		(1,225)		1,394
Add back:
Stock based compensation expense, net		—		546		546

Adjusted EBITDA	$	2,619	$	(679)	$	1,940

Adjusted EBITDA margin – Reis Services and consolidated (B)		39.6%				29.3%


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended December 31, 2011	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	4,372
Income tax (benefit)						(4,075)

Income (loss) before income taxes and discontinued operations	$	1,370	$	(1,073)		297
Add back:
Depreciation and amortization expense		1,334		2		1,336
Interest expense, net		44		—		44

EBITDA		2,748		(1,071)		1,677
Add back:
Stock based compensation expense, net		—		537		537

Adjusted EBITDA	$	2,748	$	(534)	$	2,214

Adjusted EBITDA margin – Reis Services and consolidated (B)		39.4%				31.7%


Reconciliation of Income from Continuing Operations to EBITDA and	By Segment
Adjusted EBITDA for the Three Months Ended September 30, 2011	Reis Services		Other (A)			Consolidated
Income from continuing operations						$	289
Income tax expense							—

Income (loss) before income taxes	$	1,357	$	(1,068	)		289
Add back:
Depreciation and amortization expense		1,318		1			1,319
Interest expense (income), net		47		(2	)		45

EBITDA		2,722		(1,069	)		1,653
Add back:
Stock based compensation expense, net		—		446			446

Adjusted EBITDA	$	2,722	$	(623	)	$	2,099


Reconciliation of Income from Continuing Operations to EBITDA and	By Segment
Adjusted EBITDA for the Nine Months Ended September 30, 2011	Reis Services		Other (A)			Consolidated
Income from continuing operations						$	489
Income tax expense							—

Income (loss) before income taxes and discontinued operations	$	4,130	$	(3,641	)		489
Add back:
Depreciation and amortization expense		3,801		2			3,803
Interest expense, net		158		(5	)		153

EBITDA		8,089		(3,644	)		4,445
Add back:
Stock based compensation expense, net		—		1,667			1,667

Adjusted EBITDA	$	8,089	$	(1,977	)	$	6,112


Reconciliation of Income from Continuing Operations to EBITDA and	By Segment
Adjusted EBITDA for the Three Months Ended September 30, 2010	Reis Services		Other (A)			Consolidated
Income from continuing operations						$	116
Income tax expense							79

Income (loss) before income taxes	$	1,254	$	(1,059	)		195
Add back:
Depreciation and amortization expense		1,114		1			1,115
Interest expense (income), net		72		(5	)		67

EBITDA		2,440		(1,063	)		1,377
Add back:
Stock based compensation expense, net		—		416			416

Adjusted EBITDA	$	2,440	$	(647	)	$	1,793


Reconciliation of (Loss) from Continuing Operations to EBITDA and	By Segment
Adjusted EBITDA for the Nine Months Ended September 30, 2010	Reis Services		Other (A)			Consolidated
(Loss) from continuing operations						$	(99	)
Income tax (benefit)							(63	)

Income (loss) before income taxes	$	3,316	$	(3,478	)		(162	)
Add back:
Depreciation and amortization expense		3,549		4			3,553
Interest expense (income), net		231		(15	)		216

EBITDA		7,096		(3,489	)		3,607
Add back:
Stock based compensation expense, net		—		1,201			1,201

Adjusted EBITDA	$	7,096	$	(2,288	)	$	4,808

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

	•		statements relating to future business prospects, potential acquisitions, 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.

	•		~~revenues may be lower than expected;~~

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

	•		~~inability to execute properly on new product or service initiatives, or failure of subscribers to accept these products and services;~~

	•		~~competition;~~

	•		~~inability to attract and retain sales and senior management personnel;~~

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

	•		~~changes in accounting policies or practices;~~

	•		~~legal and regulatory issues; and~~

	•		the risk factors listed under “Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2010, which was filed with the Securities and Exchange Commission on March 11, 2011.

~~Represents the impact of~~

Includes income taxes attributable to income from discontinued operations.

~~This amount reflects~~
Reflects the tax expense ~~(benefit)~~ from continuing operations as reported on the consolidated ~~statement~~statements of ~~operations~~income for the periods presented.